MENTOR CORPORATION
201 Mentor Drive
Santa Barbara, California 93111
Telephone: (805) 879-6000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 19, 2000
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of
Shareholders of Mentor Corporation, a Minnesota corporation (the
"Company") will be held Tuesday, September 19, 2000 at 10:00
a.m. (Central Daylight Time) at the Minneapolis Hilton and
Towers, 1001 Marquette Avenue, Minneapolis, Minnesota, to
consider and take action upon the following matters:
1. To elect a Board of Directors to serve until the
next Annual Meeting, or until their successors are
elected;
2. To approve the Company's 2000 Long-Term Incentive
Plan;
3. To ratify the appointment of Ernst & Young LLP to
act as independent auditors of the Company for the
fiscal year ending March 31, 2001; and
4. To transact such other business that may properly
come before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on
July 24, 2000 as the record date for the determination of the
shareholders entitled to vote at the meeting or any adjournments
or postponements thereof. Only shareholders of record at the
close of business on that date will be entitled to notice of, and
to vote at, the Annual Meeting.
BY ORDER OF THE BOARD OF
DIRECTORS
Anthony R. Gette
Secretary
Dated: July 27, 2000
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. HOWEVER,
WHETHER OR NOT YOU PLAN TO BE PERSONALLY PRESENT AT THE MEETING,
PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE. YOU MAY REVOKE YOUR PROXY AT
ANY TIME PRIOR TO THE ANNUAL MEETING. IF YOU ATTEND THE ANNUAL
MEETING AND VOTE BY BALLOT, YOUR PROXY WILL BE REVOKED
AUTOMATICALLY AND ONLY YOUR VOTE AT THE ANNUAL MEETING WILL BE
COUNTED.
MENTOR CORPORATION
_____
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 19, 2000
______
SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished to the shareholders of
Mentor Corporation (the "Company"), in connection with the
solicitation by the Company's Board of Directors of the enclosed
proxy for use at the Annual Meeting of Shareholders to be held
Tuesday, September 19, 2000, at 10:00 a.m. (Central Daylight
Time) at the Minneapolis Hilton and Towers, 1001 Marquette
Avenue, Minneapolis, Minnesota, or at any adjournments or
postponements thereof (the "Annual Meeting") for the purposes
set forth in the Notice of Annual Meeting of Shareholders. All
Common Stock represented by proxies in the form solicited will
be voted in accordance with the instructions indicated therein,
but proxies may be revoked at any time before being exercised by
delivery to the Secretary of the Company a written notice of
revocation of the proxy's authority or a duly executed proxy
bearing a later date. You may also revoke your proxy by
attending the Annual Meeting and voting in person. A
shareholder who attends the Annual Meeting need not revoke his
or her proxy and vote in person, unless he or she wishes to do
so.
Expenses in connection with the solicitation of proxies
will be paid by the Company. Proxies are being solicited
primarily by mail, but, in addition, directors, officers and
regular employees of the Company may solicit proxies personally,
by telephone or by special letter.
So far as the management of the Company is aware, no
matters other than those described in this Proxy Statement will
be acted upon at the meeting. In the event that any other
matters calling for a vote of shareholders properly come before
the Annual Meeting, the persons named as proxies in the enclosed
form of proxy will vote in accordance with their judgment on
such other matters.
The Annual Report of the Company, including the Company's
Form 10-K, for the fiscal year ended March 31, 2000 is being
furnished to each shareholder with this Proxy Statement.
The principal executive offices of the Company are located
at 201 Mentor Drive, Santa Barbara, California 93111. The
approximate mailing date of this Proxy Statement and the
accompanying form of proxy is August 3, 2000.
RECORD DATE, QUORUM AND VOTING OF SECURITIES
The Common Stock of the Company, par value $.10 per share,
is the only authorized voting security of the Company. Only the
holders of the Company's Common Stock whose names appear of
record on the Company's books on July 24, 2000 will be entitled
to notice of, and to vote at, the 2000 Annual Meeting. At the
close of business on July 24, 2000, a total of 23,920,157 shares
of Common Stock were outstanding, each entitled to one vote.
Holders of Common Stock do not have cumulative voting rights.
The presence in person or by proxy of the holders of a majority
of the outstanding shares of Common Stock will constitute a
quorum for the transaction of business at the Annual Meeting.
Abstentions and broker non-votes are each included in the number
of shares present for quorum purposes. All votes will be
tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative
votes, abstentions and broker non-votes. Abstentions, which may
be specified on all proposals other than the election of
directors, are counted in tabulations of the votes cast on
proposals presented to shareholders and will have the same
effect as negative votes; whereas broker non-votes are not
counted for purposes of determining whether a proposal has been
approved. An affirmative vote of a majority of the shares
present and voting at the meeting is required for approval of
all items being submitted to the shareholders for their
consideration.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended
to be presented by such stockholders at the Company's 2001
Annual Meeting must be received no later than April 5, 2001, in
order that they may be included in the proxy statement and form
of proxy relating to that meeting.
MATTERS TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL 1: ELECTION OF DIRECTORS
The Company's By-Laws provide that the Board of Directors
must consist of not less than three directors, with the number
to be determined by a resolution of the shareholders. Currently
the Board of Directors consists of seven (7) directors as voted
on by the shareholders. The number as set by the Shareholders
shall continue in effect unless changed by the Board of
Directors pursuant to the By-Laws or by subsequent shareholder
resolution.
It is the intention of the proxy holders named in the
enclosed proxy to vote such proxies for the seven nominees named
below, all of which are currently directors, to hold office
until the 2001 Annual Meeting of Directors or until their
successors are elected and qualified.
Each nominee has indicated a willingness to serve, but in
case any nominee is not a candidate at the meeting, for reasons
not now known to the Company, the proxies named in the enclosed
form of proxy may vote for a substitute nominee in their
discretion. Information regarding these nominees is set forth
in the table below.
Director Principal Occupation
Name (Age) Since And Business Experience
Christopher J. 1969 Founder and Chairman of
Conway (61) the Board since 1969;
Chief Executive Officer
from 1969 to July 29,
1999.
Anthony R. Gette 1988 President and Chief
(44) Executive Officer since
July 29, 1999; President
and Chief Operating
Officer from April 1987
until July 29, 1999;
Secretary since March
1986.
Eugene G. Glover 1969 Private investor since
(57) October 1986; Founder &
Vice President,
Engineering of the
Company from 1969 to
October 1986.
Walter W. Faster 1980 Retired February 1997 as
(67) Vice President,
Corporate Growth and
Development for General
Mills, Inc.(1); held
various marketing and
finance capacities at
General Mills since
1963.
Michael Nakonechny 1980 President of NAK
(72) Associates Corp.(2)
since 1981; Chairman of
the Board and Secretary
of Transducer Systems,
Inc.(3) from November
1968 to January 1989.
Dr. Richard W. 1990 Private investor since
Young (73) April 1992; Consultant
to Mentor O & O, Inc.(4)
from April 1990 to 1992;
Chairman and Chief
Executive Officer of
Mentor O & O, Inc. from
April 1985 to 1990;
Employed as President of
Houghton Mifflin
Company(5) from 1982 to
1985; Executive Vice
President of Polaroid
Corporation from 1972 to
1982(6)
Ronald J. Rossi 1999 President of Oral-B
(60) Worldwide from 1998 to
2000.(7) President of
Gillette North America
Grooming Division from
1991 to 1998. Held
various executive and
sales and marketing
positions at The
Gillette Company for
over 30 years.
(1) General Mills, Inc. is a major manufacturer of packaged
foods and other consumer goods.
(2) NAK Associates Corp. is a closely-held company engaged in
consulting engineering.
(3) Transducer Systems, Inc. is a manufacturer of electro-
mechanical transducers.
(4) Mentor O & O, Inc. was acquired by the Company as a wholly-
owned subsidiary in April 1990. It was a manufacturer of
ophthalmic surgical and diagnostic equipment. During
fiscal 1997, Mentor O&O's name was changed to Mentor
Ophthalmics, Inc. In October 1999, the Company divested
the assets of Mentor Ophthalmics, Inc.
(5) Houghton Mifflin Company is a major publishing firm.
(6) Polaroid Corporation is the world's largest instant imaging
company.
(7) Oral-B Worldwide is a maker of oral personal care products.
It is a subsidiary of The Gillette Company, which manufactures
and sells a wide variety of consumer products throughout the
world.
The Board of Directors recommends that the shareholders
vote FOR the election of the nominees named above to serve as
directors of the Company until the next annual meeting following
the 2000 Annual Meeting or until their respective successors
have been elected and qualified.
Board Meetings and Committees
Board of Directors. During the fiscal year ended March 31,
2000, the Board of Directors met or adopted resolutions by
unanimous written consent on 10 occasions. No director attended
less than 75% of the aggregate number of Board of Directors
meetings and meetings of committees on which he served
(including actions taken by written consent).
Audit Committee. The Company has an Audit Committee,
currently consisting of Messrs. Faster, Glover, Nakonechny, and
Young. The principal functions of the Audit Committee are to
(i) recommend to the Board of Directors the independent public
accountants to act as the Company's independent auditors; (ii)
discuss with the independent auditors the scope of their audit;
(iii) discuss with the independent auditors and the Company's
executive officers the Company's accounting principles, policies
and practices; (iv) discuss with the independent auditors the
adequacy of the Company's accounting, financial and operating
controls; and (v) approve the internal audit department annual
audit schedule and review with the internal audit department the
results and recommendations of those audits.
The Audit Committee has adopted procedures providing for
its prior review and consideration of the effect of non-audit
services on the independence of Ernst & Young LLP and the
approval of the types of, and estimated fees for, professional
services which are expected to be performed by Ernst & Young LLP
during the forthcoming fiscal year.
The Audit Committee met two times during the fiscal year
ended March 31, 2000, with all committee members present.
Compensation Committee. The Company has a standing
Compensation Committee, currently consisting of Messrs. Faster,
Glover, Nakonechny, and Young. The principal functions of the
Compensation Committee are to review and recommend compensation
for executive personnel. The Compensation Committee met one
time during the fiscal year ended March 31, 2000, with all
committee members present.
Stock Option Committee. The Company has a Stock Option
Committee, currently consisting of Messrs. Faster, Glover,
Nakonechny, and Young. The principal function of the Stock
Option Committee is to administer the Company's stock option
plan. The Stock Option Committee met two times during the
fiscal year ended March 31, 2000, with all members present.
Nominating Procedures.
The Company does not have a separately constituted
committee to nominate candidates for election to the Board of
Directors of the Company. Such candidates are chosen by the
existing Board after taking into consideration the
recommendations of the Company's executive officers and
shareholders. Shareholders wishing to submit recommendations
for nomination should send them in writing to the attention of
the Company's Chairman at the Company's principal executive
office within sixty days after the end of the Company's fiscal
year.
Compensation of Directors.
Board members who are employees of the Company do not
receive compensation for their services as directors. During
the Company's fiscal year ended March 31, 2000 and currently,
individual non-employee Board members received an annual fee of
$20,000. In addition, each person who is a non-employee
director on the date of an annual meeting of shareholders is
entitled to receive an automatic option grant under the
Company's 1991 Stock Option Plan (the "1991 Plan") of options to
purchase 6,000 shares of Common Stock at an exercise price equal
to the fair market value per share of the Common Stock on the
date of such grant. These options have a term of ten years and
become exercisable in four equal annual installments over the
optionee's period of Board service, beginning one year after the
grant date. Under the 1991 Plan, each person who is newly
elected or appointed as a non-employee director will receive, on
the date of election or appointment, an automatic option grant
to purchase 20,000 shares of Common Stock. The maximum number
of shares of Common Stock that a non-employee director currently
may receive under the Option Plan is 60,000. The directors
received options to purchase 30,000 shares on May 17, 1994 and
30,000 shares on May 15, 1997, less the number of shares granted
to the director under any prior option plan of the Company.
Currently, all non-employee directors except Mr. Rossi have
received the maximum number of shares.
Upon stockholder approval of the Company's 2000 Long-Term
Incentive Plan, each non-employee director will be granted a one-
time option to purchase 30,000 shares of Common Stock. See
"2000 Plan Awards."
PROPOSAL 2: APPROVAL OF THE MENTOR CORPORATION 2000 LONG-TERM
INCENTIVE PLAN
The purpose of the Mentor Corporation 2000 Long-Term
Incentive Plan (the "Plan") is to assist the Company and its
subsidiaries in attracting, retaining and providing incentives to
key individuals who serve the Company and its subsidiaries by
offering them the opportunity to acquire or increase their
proprietary interest in the Company and to promote the
identification of their interests with those of the stockholders
of the Company.
The Company has had in effect a Stock Option Plan adopted in
1991 and amended in 1994 and 1997 (the "1991 Plan"). Under the
1991 Plan, 5,000,000 shares were reserved, 4,339,675 options
have been issued with 3,048,350 options granted and not yet
exercised. The 1991 Plan has a 10 year term. The Company
believes that the 1991 Plan has served the Company's best interests
and is proposing the new Plan tocontinue an option program in effect.
The Company is asking the stockholders to approve the Plan
as described below. The Board of Directors approved the Plan on
July 19, 2000, subject to the stockholder approval solicited by
this proxy.
Description of the Plan
The following summary of the material terms of the Plan is
qualified in its entirety by reference to the full text of the
Plan, a copy of which is available by writing the General
Counsel, Mentor Corporation, 201 Mentor Drive, Santa Barbara,
California 93111. Unless otherwise specified, capitalized terms
used herein have the meaning assigned to them in the Plan.
Eligibility; Shares Available for Grants and Awards. The
Plan provides for grants and awards of nonstatutory stock
options, incentive stock options, stock appreciation rights,
performance awards, restricted stock and incentive shares
(collectively, "Awards") to employees, directors, consultants and
independent contractors to the Company or an Affiliate who are
determined by the Committee to render key services to the Company
or an Affiliate. Non-employee directors are only eligible to
receive grants of nonstatutory stock options
The Plan provides for grants and awards of stock options,
stock appreciation rights, performance awards, restricted stock
and incentive shares covering 7,500,000 shares of Common Stock,
150,000 of which are subject to outstanding Awards leaving
7,350,000 shares available for Awards under the Plan.
Subject to the terms of the Plan, if an option or right
expires or terminates without having been fully exercised, or if
shares of restricted stock are forfeited, or if shares covered by
an incentive award or performance award are not issued or are
forfeited, the unissued or forfeited shares of Common Stock which
had been covered thereby will become available for the grant of
additional Awards under the Plan. Upon the exercise of a right
(regardless of whether such right is settled in cash or shares of
Common Stock), the number of shares of Common Stock with respect
to which the right is exercised will be charged against the
number of shares available for Awards under the Plan.
Administration. The Plan is administered by a Committee
appointed by the Board of Directors to administer the Plan.
Subject to the terms of the Plan, the Committee is authorized to
determine eligibility, to make Awards, and to otherwise
administer the Plan.
The Company's Board of Directors may terminate the Plan at
any time and may amend it in any respect, except that no
amendment, alteration or termination of the Plan, if approved by
the stockholders, may be made by the Board of Directors without
approval of (a) the Company's stockholders to the extent
stockholder approval of an amendment is required to comply with
the requirements of applicable law or regulation; and (b) each
affected Optionee if such amendment, alteration or termination
would impair the rights of an Optionee under any prior Award.
The Plan will terminate in July 2010. The Plan will remain in
effect after its termination for the purpose of administering
outstanding Awards.
Except as otherwise provided by the Committee, options and
rights under the Plan are not transferable other than by will or
by the laws of descent and distribution.
Limits on Aggregate Awards. The Plan limits the number of
shares of Common Stock with respect to which any employee may
receive Awards during each fiscal year to 250,000 shares. Under
current tax law requirements, to the extent that the aggregate
fair market value of stock with respect to which incentive stock
options granted under the Plan are exercisable for the first time
by an employee during any calendar year exceeds $100,000
(determined at the time of the grant of the option), the option
will not be treated as an incentive stock option for federal
income tax purposes.
Stock Options. The Plan authorizes the grant of
nonstatutory stock options and incentive stock options. The
exercise of an option permits the optionee to purchase shares of
Common Stock from the Company at a specified exercise price per
share. Options granted under the Plan are exercisable upon such
terms and conditions as the Committee shall determine.
The exercise price per share and manner of payment for
shares purchased pursuant to options are determined by the
Committee, subject to the terms of the Plan. The per share
exercise price of all options granted under the Plan may not be
less than the fair market value per share of the Common Stock at
the time of the grant, except that incentive stock options
granted to an employee who is a 10% shareholder (after applying
certain stock ownership attribution rules) may not have an
exercise price of less than 110% of such fair market value.
The Plan provides that the term during which options granted
may be exercised shall be determined by the Committee, except
that no option may be exercised after ten years (five years in
the case of incentive stock options granted to an employee who is
a 10% shareholder after applying certain stock ownership
attribution rules) following its date of grant.
Stock Appreciation Rights. The Plan authorizes the
Committee to grant stock appreciation rights in connection with,
and at the same time as, the grant of an option under the Plan or
by amendment of an outstanding option granted under the Plan
("related rights"). Stock appreciation rights may also be
granted independently of any option granted under the Plan
("nonrelated rights"). Subject to the terms of a particular
grant, a stock appreciation right entitles the grantee upon
exercise to elect to receive in cash, Common Stock or a
combination thereof, the excess of the fair market value of a
specified number of shares of Common Stock at the time of
exercise over the fair market value of such number of shares of
Common Stock at the date of grant, or, in the case of a related
right, the exercise price provided in the related option. The
period during which a right may be exercised is determined by the
Committee, but a right may not be exercised after ten years from
the date of grant or, in the case of a related right, the
expiration of the related option.
Restricted Stock. Restricted stock awards consist of shares
of Common Stock, awarded without payment of cash consideration by
the grantee unless otherwise specified in the agreement relating
thereto, that are restricted against transfer, subject to
forfeiture and subject to such other terms, conditions and
restrictions, for such period or periods, as shall be determined
by the Committee. Such terms may provide, in the discretion of
the Committee, for the vesting of restricted stock awards to be
contingent upon the achievement of one or more Performance Goals
established by the Committee and specified in the agreement. The
Performance Goals may be based on earnings or earnings growth,
sales, return on assets, equity or investment, regulatory
compliance, satisfactory internal or external audits, improvement
of financial ratings, achievement of balance sheet, income
statement or other financial statement objectives, or any other
objective goals established by the Committee and specified in the
agreement. The goals may be absolute in their terms or measured
against or in relationship to other companies similarly or
otherwise situated.
Restricted stock awarded under the Plan and the right to
vote shares of such restricted stock and to receive dividends
thereon may not be sold, assigned, transferred, exchanged,
pledged, hypothecated or encumbered during the restriction
period. With the exception of these restrictions upon transfer,
the recipient of a restricted stock award has all other rights of
a shareholder including, but not limited to, the right to receive
dividends and the right to vote shares awarded.
Incentive Shares. Incentive shares awarded under the Plan
are contingent awards of shares of Common Stock that may be
issued subject to achievement of such Performance Goals (as
described above with respect to restricted stock awards) or other
goals and on such other terms and conditions as the Committee
deems appropriate and specifies in the agreement relating
thereto. Unlike in the case of restricted stock, shares of
Common Stock would not be issued immediately pursuant to
incentive share awards, but instead would be issued upon the
achievement or satisfaction of such Performance Goals or other
goals or terms and conditions. Accordingly, a person who has
received an award of incentive shares may not vote or receive
dividends with respect to the shares of Common Stock subject to
the award until such shares are issued upon the achievement or
satisfaction of such Performance Goals or other goals or terms
and conditions. The grantee would not have to pay any cash
consideration to the Company upon the award of incentive shares
or upon the issuance of the shares of Common Stock pursuant to
the award.
Performance Awards. Performance awards granted under the
Plan become payable upon attainment of one or more Performance
Goals established by the Committee and specified in the agreement
relating thereto. Performance awards may be paid in cash, Common
Stock, or a combination thereof, as specified in the agreement
relating thereto.
Substitution of Awards. Options, rights, restricted stock,
incentive shares and performance awards may, at the discretion of
the Committee, be granted under the Plan in substitution for
options to purchase shares of capital stock of another
corporation which is merged into, consolidated with, or all or a
substantial portion of the property or stock of which is acquired
by, the Company or one of its Subsidiaries. The terms and
conditions of the substitute options, rights, restricted stock,
incentive shares and performance awards so granted may vary from
the terms and conditions set forth in the Plan to such extent as
the Committee may deem appropriate in order to conform, in whole
or part, to the provisions of the Awards in substitution for
which they are granted.
2000 Plan Awards
Subject to shareholder approval of the Plan, each non-
employee director will be granted a one-time option to purchase
30,000 shares of Common Stock. The options will have an exercise
price of $21.375 and will vest over a four year term. The
options will expire in July 2010. The number and type of other
Awards will be made in the discretion of the Committee.
The following table sets forth information on the stock
option grants to be made to non-employee directors under the
Plan.
NEW PLAN BENEFITS
MENTOR CORPORATION 2000 LONG-TERM INCENTIVE PLAN
Number of Shares
Name of Director Dollar Value ($) Subject to Option
Eugene G. Glover (1) 30,000
Walter W. Faster (1) 30,000
Michael Nakonechny (1) 30,000
Dr. Richard W. Young (1) 30,000
Ronald J. Rossi (1) 30,000
(1) Not presently determinable. The stock option grants to be
made to the above-named directors under the Plan have an exercise
price which was 100% of the fair market value of the underlying
shares as of the date of grant. Based on the closing price of
the Common Stock on the Nasdaq National Market, the fair market
value of the Company's Common Stock on July 19, 2000 was $21.375.
Summary of Certain Federal Income Tax Consequences.
The following discussion briefly summarizes certain federal
income tax aspects of stock options, stock appreciation rights,
restricted stock and incentive shares granted or awarded under
the Plan. State and local tax consequences may differ.
Incentive Stock Options. In general, an optionee is not
required to recognize income on the grant or exercise of an
incentive stock option. However, the difference between the
exercise price and the fair market value of the stock on the
exercise date is an adjustment item for purposes of the
alternative minimum tax. Further, if an optionee does not
exercise an incentive stock option within certain specified
periods of time after termination of employment, the option is
treated for federal income tax purposes in the same manner as a
nonstatutory stock option, as described below.
Nonstatutory Stock Options, Stock Appreciation Rights,
Incentive Shares and Performance Awards. An optionee or grantee
generally is not required to recognize income on the grant of a
nonstatutory stock option or a stock appreciation right, or on
the award of incentive shares or a performance award. Instead,
ordinary income generally is required to be recognized on the
date the nonstatutory stock option or stock appreciation right is
exercised, or in the case of an award of incentive shares or a
performance award, on the date such shares are issued. In
general, the amount of ordinary income required to be recognized,
(a) in the case of a nonstatutory stock option, is an amount
equal to the excess, if any, of the fair market value of the
shares on the exercise date over the exercise price, (b) in the
case of a stock appreciation right, the amount of cash and the
fair market value of any shares received on the exercise date,
and (c) in the case of an award of incentive shares or a
performance award, the fair market value of the shares on the
date of issue.
Restricted Stock. Shares of restricted stock awarded under
the Plan will be subject to a substantial risk of forfeiture for
the period of time specified in the award. Unless a grantee of
shares of restricted stock makes an election under Section 83(b)
of the Code as described below, the grantee generally is not
required to recognize ordinary income on the award of restricted
stock. Instead, on the date the substantial risk of forfeiture
lapses, the grantee will be required to recognize ordinary income
in an amount equal to the fair market value of the shares on such
date. If a grantee makes a Section 83(b) election to recognize
ordinary income on the date the shares are awarded, the amount of
ordinary income required to be recognized is an amount equal to
the fair market value of the shares on the date of award. In
such case, the grantee will not be required to recognize
additional ordinary income when the substantial risk of
forfeiture lapses.
Gain or Loss on Sale or Exchange of Plan Shares. In
general, gain or loss from the sale or exchange of shares granted
or awarded under the Plan will be treated as capital gain or
loss, provided that the shares are held as capital assets at the
time of the sale or exchange. However, if certain holding period
requirements are not satisfied at the time of a sale or exchange
of shares acquired upon exercise of an incentive stock option (a
"disqualifying disposition"), an optionee may be required to
recognize ordinary income upon such disposition.
Deductibility by Company. The Company generally is not
allowed a deduction in connection with the grant or exercise of
an incentive stock option. However, if an optionee is required
to recognize ordinary income as a result of a disqualifying
disposition, the Company will be entitled to a deduction equal to
the amount of ordinary income so recognized. In the case of a
nonstatutory stock option (including an incentive stock option
that is treated as a nonstatutory stock option, as described
above), a stock appreciation right, an award of incentive shares,
or a grant of restricted stock, at the same time the optionee or
grantee is required to recognize ordinary income, the Company
generally will be allowed a deduction in an amount equal to the
amount of ordinary income so recognized.
Subject to certain exceptions, Section 162(m) of the code
disallows federal income tax deductions for compensation paid by
a publicly-held corporation to certain executives to the extent
it exceeds $1 million for the taxable year. The Plan has been
designed to allow the Committee to make awards under the Plan
that qualify under an exception to the deduction limit for
"performance-based compensation."
Accounting Treatment
Under current accounting principles, neither the grant nor
the exercise of an incentive stock option or a nonstatutory stock
option under the Plan with an exercise price not less than the
fair market value of Common Stock at the date of grant requires
any charge against earnings. The Company is required to disclose
in a footnote to its financial statements the pro forma effects
of stock-based compensation arrangements on net income and
earnings per share, based on the estimated grant date fair value
of stock options that are expected to vest.
Stock appreciation rights require a charge against the
earnings of the Company each accounting period to reflect
appreciation in the value of such rights. The charge related to
stock appreciation rights will vary depending upon, among other
factors, the amount of stock appreciation rights granted, stock
price changes above the grant price, and the length of time that
stock appreciation rights have been outstanding. Such charge is
based, generally speaking, on the difference between the exercise
price specified in the related right, or the market value of
Common Stock on the date of grant, and the current market value
of Common Stock. In the event of a decline in the market value
of Common Stock subsequent to a charge against earnings related
to the estimated costs of stock appreciation rights, a reversal
of prior charges is made (but not to exceed aggregate prior
charges).
Restricted stock and incentive shares will require a charge
to earnings representing the value of the benefit conferred,
which, in the case of restricted stock, may be spread over the
restrictive period. Such charge is based on the market value of
the shares transferred at the time of issuance.
Approval of the Plan
Approval of the Plan requires the affirmative vote of the
holders of a majority of the votes cast at the meeting. An
abstention with respect to approving the Plan will not constitute
a vote cast and therefore will not affect the outcome of the
vote.
The Board of Directors recommends that the shareholders vote
FOR approval of the Plan.
PROPOSAL 3: RATIFICATION OF INDEPENDENT AUDITORS
Pursuant to authority delegated to the Audit Committee by
the Board of Directors, the Audit Committee has appointed the
firm of Ernst & Young LLP to act as principal independent
auditors for the Company for the fiscal year ending March 31,
2001. This appointment is being submitted to the Company's
shareholders for ratification. This firm has audited the
financial statements of the Company for the fiscal year ended
March, 31, 2000, and for prior years, and has advised the
Company that neither the firm nor any of its partners has any
direct or indirect material financial interests in the Company
or its subsidiaries, nor have they had any connection during the
past three years with the Company or its subsidiaries in any
capacity other than that of independent accountants and
auditors. A representative of Ernst & Young LLP will be present
at the 2000 Annual Meeting and will have an opportunity to make
a statement if he or she desires to do so. It is anticipated
that such representative will be available to respond to
appropriate questions from shareholders.
In the event the shareholders do not ratify the appointment
of Ernst & Young LLP, the selection of other independent
auditors will be considered by the Board of Directors.
The Board of Directors recommends that shareholders vote
FOR ratification of the appointment of Ernst & Young LLP to
serve as the Company's independent auditors for the fiscal year
ending March 31, 2001.
MANAGEMENT
Security Ownership of Certain Beneficial Owners and Management
The following table shows the ownership of the Common Stock
of the Company on July 24, 2000, (i) by each person who, to the
knowledge of the Company, owned beneficially more than five
percent (5%) of such stock, (ii) by each of the Company's
directors, (iii) by each of the executive officers named in the
Summary Compensation Table below, and (iv) by all directors and
executive officers who served as directors or executive officers
as of March 31, 2000 as a group:
Amount and Approximate
Nature of Percent of
Name of Beneficial Owner Beneficial Class
Ownership(1)
T. Rowe Price Associates, 2,527,600 10.1%
Inc. (2)
100 E. Pratt Street
Baltimore, MD 21202
Neuberger Berman, Inc. (3) 1,541,892 6.2%
Neuberger Berman, LLC
605 Third Ave.
New York, NY 10158-3698
Putnam Investment 1,615,389 6.5%
Management, Inc. (4)
One Post Office Square
Boston, MA 02109
Christopher J. Conway 949,566 3.8%
Anthony R. Gette 403,665 1.6%
Eugene G. Glover(5) 546,000 2.2%
Walter W. Faster 143,000 *
Michael Nakonechny 63,450 *
Ronald J. Rossi -- *
Richard W. Young 90,000 *
Malcolm Boddy 37,250 *
Trevor Pritchard 17,250 *
Bobby K. Purkait 113,500 *
Ramona Schwab 29,500 *
All directors and executive 2,400,431 9.6%
officers as a group (14
persons)
* Less than 1%
(1) These shares, unless noted below, are subject to the sole
voting and investment power of the indicated person. The
figures include options to purchase Common Stock exercisable
within sixty days and held by: Mr. Conway, 260,500 shares; Mr.
Gette, 266,000 shares, Mr. Glover, 60,000 shares; Mr. Faster,
60,000 shares; Mr. Nakonechny, 30,000 shares; Dr. Young,
61,500 shares; Mr. Boddy, 37,250 shares; Mr. Pritchard, 17,250
shares; Mr. Purkait, 113,500 shares; Ms. Schwab, 9,500 shares;
and all directors and executive officers as a group, 942,750
shares.
(2) T. Rowe Price Associates, Inc. has sole voting power with
respect to 385,400 shares and sole dispositive power with
respect to 2,527,600 shares based on Schedule 13G amendment
no. 2 filed February 14, 2000.
(3) Neuberger Berman, Inc. and Neuberger Berman, LLC have
sole voting power with respect to 656,592 shares and sole
dispositive power with respect to 1,541,892 shares based on
Schedule 13G amendment no. 2 filed on January 28, 2000.
(4) Putnam Investment Management, Inc. has sole voting power
with respect to 62,700 shares and sole dispositive power with
respect to 1,615,389 shares based on Schedule 13G filed
February 7, 2000.
(5) Includes 426,000 shares held by a trust of which Mr.
Glover is the sole trustee.
Executive Compensation and Related Information
Executive compensation is determined by the Board of
Directors based on the recommendations of the Compensation
Committee, which is composed entirely of independent, outside
directors. The following information relates to compensation
paid by the Company for services rendered during the three (3)
fiscal years ended March 31, 2000 for the Company's Chief
Executive Officers and each of the other four (4) most highly
compensated executive officers.
<TABLE>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards Payouts
Other Annual Restricted Securities LTIP All Other
Name and Principal Fiscal Salary Bonus Compensation Stock Underlying Payouts Compensation
Position(1) Year ($) (2)($) $ Awards($) SARs(#) ($) (4)($)
<S> <C> <C> <C> <C> <S> <C> <S> <C>
Anthony R. Gette 2000 $360,000 $189,000 -- -- 80,000 -- $ 4,049
President & CEO (3) 1999 $300,000 -- -- -- 24,000 -- $ 4,186
1998 $279,600 -- -- -- 40,000 -- $ 8,049
Christopher J. Conway 2000 $390,000 $204,750 -- -- 70,000 -- $ 4,256
Chairman (3) 1999 $380,000 -- -- -- 32,000 -- $ 5,430
1998 $372,600 -- -- -- 60,000 -- $ 9,835
Malcolm Boddy (5) 2000 $240,000 $140,000 -- -- 24,000 -- $ 1,154
President, 1999 $220,000 -- -- -- 10,000 -- --
Mentor Manufacturing 1998 $150,000 -- -- -- 40,000 -- $ 9,991
Bobby Purkait 2000 $200,000 $104,000 -- -- 24,000 -- $ 5,297
Sr.Vice President, 1999 $190,000 -- -- -- 10,000 -- $ 3,184
Science & Technology 1998 $175,000 -- -- -- 14,000 -- $ 5,159
Trevor Pritchard (6) 2000 $260,000 $106,438 -- -- 24,000 -- $ 4,500
President, 1999 $240,000 $ 40,000 -- -- 45,000 -- $ 55,739
Mentor Medical Inc. 1998 -- -- -- -- -- -- --
Ramona Schwab 2000 $160,000 $ 80,200 -- -- 20,000 -- $ 3,569
Vice President, 1999 $145,000 -- -- -- 8,000 -- $ 3,530
Human Resources 1998 $130,000 -- -- -- 14,000 -- $ 3,138
</TABLE>
(1) Mr. Adel Michael (the Company's Senior Vice President, Finance/Treasurer
and Chief Financial Officer) and Mr. Douglas Altschuler (the Company's Vice
President, General Counsel) were appointed as officers of the Company after
the end of fiscal year 2000, and therefore are not in the executive
compensation discussion.
(2) Bonuses are reflected in the fiscal year earned.
(3) Effective July 29, 1999, the Board of Directors elected Mr. Gette as CEO of
the Company, and Mr. Conway resigned as CEO.
(4) All other compensation is comprised of the Company's matching contribution
to its 401(k) Plan and payments for reimbursement of relocation expenses
described below.
(5) Mr. Boddy was hired July 1, 1997. His Other Compensation in 1998
represents $9,991 of relocation expenses.
(6) Mr. Pritchard was hired November 30, 1998. His Other Compensation in 1999
includes $52,989 of relocation expenses and $2,750 of matching amounts
contributed by the Company to its 401(k) Plan.
<TABLE>
OPTIONS GRANTED IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation For Option
Individual Grants Terms ($)(3)
% of Total
Number of Options
Securities Granted To
Underlying Employees Exercise or
Options In Fiscal Base Price Expiration
Name Granted (1) Year ($/share)(2) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Anthony R. Gette 80,000 13.1% $15.25 05/14/09 $767,251 $1,944,366
Christopher J. Conway 70,000 11.4% $15.25 05/14/09 $671,345 $1,701,320
Malcolm Boddy 24,000 3.9% $15.25 05/14/09 $230,175 $ 583,309
Bobby Purkait 24,000 3.9% $15.25 05/14/09 $230,175 $ 583,309
Trevor Pritchard 24,000 3.9% $15.25 05/14/09 $230,175 $ 583,309
Ramona Schwab 20,000 3.3% $15.25 05/14/09 $191,813 $ 486,091
</TABLE>
(1) All options were granted on May 14, 1999 under the 1991 Stock Option Plan.
Each option will become exercisable for the option shares in four equal and
successive annual installments over the optionee's period of service with the
Company, beginning one year after the grant date. Each option has a maximum
term of ten years, subject to earlier termination immediately prior to a Change
in Control (as defined in the 1991 Stock Option Plan); alternatively, the
administrator of the 1991 Stock Option Plan may provide for replacement of
outstanding options with options to purchase shares of the surviving
corporation, or for a cash payment in exchange for the cancellation of
outstanding options.
(2) The exercise price of each option is equal to the fair market value of the
Common Stock on the date of grant. The exercise price may be paid in cash, in
Common Stock, or pursuant to a cashless exercise procedure under which the
optionee provides irrevocable instructions to a brokerage firm to sell the
purchased shares and to remit to the Company, out of the sale proceeds, an
amount equal to the exercise price plus all applicable withholding taxes. The
administrator of the 1991 Stock Option Plan may authorize a loan or loan
guarantee from the Company to help the optionee pay the exercise price or the
administrator may permit the optionee to pay the option price in installments.
(3) Potential realizable value is based on an assumption that the market price
of the stock appreciates at the stated rate, compounded annually, from the
date of grant until the end of the ten year option term. These values are
calculated based on regulations promulgated by the Securities and Exchange
Commission and do not reflect the Company's estimate of future stock price
appreciation. There is no assurance that the actual stock price appreciation
over the ten year option term will be at the assumed 5% or 10% levels, or at
any other defined level.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE
Number of Securities Value of Unexercised In-
Underlying Unexercised The-Money Options At
Options at Fiscal Year-End Fiscal year End ($)(2)
Shares Value
Acquired on Realized
Name Exercise(#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Anthony R. Gette 66,666 $1,295,820 220,002 128,000 $ 3,343,289 $1,081,250
Christopher J. Conway 66,668 $1,362,527 305,000 139,000 $ 4,565,125 $1,034,375
Malcolm Boddy -- -- 22,500 51,500 $ 16,250 $ 330,750
Bobby Purkait 20,000 $ 343,373 98,000 42,000 $ 1,619,563 $ 380,187
Trevor Pritchard -- -- 11,250 57,750 $ 115,313 $ 627,938
Ramona Schwab -- -- 16,500 35,500 $ 77,938 $ 319,563
</TABLE>
(1) Value realized is based on the fair market value of the Company's Common
Stock on the date of exercise minus the exercise price and does not necessarily
indicate that the optionee sold such stock.
(2) An in-the-money option is an option which has an exercise price for the
Common Stock which is lower than the fair market value of the Common Stock on a
specified date. The fair market value of the Company's Common Stock at March
31, 2000 was $27.00 per share.
Employment Contracts and Severance Arrangements
The Company has previously entered into an Employment
Agreement with Mr. Gette, the President and Chief Executive
Officer of the Company. The Employment Agreement with Mr. Gette
provides for a base salary of $360,000 and customary benefits.
The Company may terminate the Employment Agreement upon
disability, discontinuation of the business (other than as part
of a defined Change in Control), or for Cause (as defined
therein), or at any time at the convenience of the Company. If
the Company terminates the Employment Agreement for convenience
or following a Change in Control, and the termination is not for
Cause, Mr. Gette would be entitled to receive 24 months base pay.
In addition, if the termination occurs subsequent to a Change in
Control, subject to meeting specified thresholds, the Company
would make additional "gross up" payments to Mr. Gette such that
the net amount of payment made to him would not be reduced by any
taxes imposed by Section 280G of the Internal Revenue Code, as
amended. For 90 days following a Change in Control, Mr. Gette
has the option, under certain circumstances, to terminate the
Employment Agreement. The effect of this termination would be to
cause the payment of the severance described above. Finally, the
Company may elect, upon termination of Mr. Gette for any reason
other than following a Change in Control, to exercise an option
to impose on Mr. Gette an agreement not to compete for a period
of two years, in which event Mr. Gette would receive an
additional payment of one year of base salary.
The Company has previously entered into a Transition
Agreement with Mr. Conway, the Chairman and former Chief
Executive Officer of the Company. The Transition Agreement with
Mr. Conway has one year remaining in its term, and provides for
compensation of $390,000 and certain benefits. If the Company
terminates the Transition Agreement, Mr. Conway will be entitled
to receive the remainder of his compensation payable during the
term. If the Transition Agreement is terminated within 12 months
after a Change in Control, and the termination is not for Cause
(as those terms are defined therein), Mr. Conway will be entitled
to the remainder of his compensation payable during the term.
Finally, the Company may elect, upon termination of Mr. Conway
for any reason, to exercise an option to impose on Mr. Conway an
agreement not to compete for a period of one year, in which event
Mr. Conway would receive an additional payment of six months of
compensation.
Subsequent to the end of the last fiscal year, the Company
entered into an Employment Agreement with Adel Michael to employ
him as Senior Vice President, Finance/Treasurer and Chief
Financial Officer. The agreement provides for Mr. Michael to
receive in fiscal 2001: (i) a base salary of $240,000, (ii) a
bonus of at least 20% and up to 40% of base salary based on
attainment of mutually designated objectives, (iii) options to
purchase 50,000 shares of Common Stock, with a vesting period of
four years, and (iv) a relocation package to defray his costs of
moving to Santa Barbara, California. Beginning in fiscal 2002,
Mr. Michael's base salary will increase to $265,000, and
thereafter will be fixed annually by the Compensation Committee.
The agreement also provides that upon termination of Mr.
Michael's employment by the Company without Cause (as defined
therein), Mr. Michael will be entitled to severance compensation
equal to twelve months of base salary plus one month of base
salary for each complete year of service with the Company. In
the event Mr. Michael is terminated without Cause prior to April
3, 2001, Mr. Michael will be entitled to additional severance
compensation equal to the base compensation to which he would
have been entitled has he remained employed by the Company until
April 3, 2001.
The Company has previously entered into an Employment
Agreement with Malcolm Boddy, the President of Mentor
Manufacturing Operations Division. The agreement provides for
Mr. Boddy's compensation to be fixed annually by the
Compensation Committee. The agreement also provides that upon
termination of Mr. Boddy's employment by the Company without
Cause (as defined therein), Mr. Boddy will be entitled to
severance compensation equal to three months of base salary plus
one month of base salary for each complete year of service with
the Company.
The Company has previously entered into an Employment
Agreement with Trevor Pritchard, the President of Mentor Medical
Inc., the Company's sales and marketing subsidiary. The
agreement provides that upon termination of Mr. Pritchard's
employment by the Company without Cause (as defined therein), Mr.
Pritchard will be entitled to severance compensation equal to
twelve months of base salary. The Company has also entered into
a Compensation Guarantee agreement with Mr. Pritchard. That
agreement provides that in fiscal 2000, Mr. Pritchard would
receive a base salary of $260,000 and a bonus of at least 50% of
base salary. Beginning in fiscal 2001, the agreement provides
that Mr. Pritchard's base salary will increase to not less than
$290,000. The Company has also entered into a Promissory Note
with Mr. Pritchard, under which he received $150,000, bearing
interest at 4% per annum. Mr. Pritchard must repay the principal
and all accrued interest upon the termination of his employment
with the Company, except that the Company will forgive the
principal and interest if Mr. Pritchard is still employed by the
Company on November 30, 2001 or upon a Change in Control (as
defined therein).
The Company has previously entered into an Employment
Agreement with Douglas Altschuler, who was promoted to Vice
President, General Counsel subsequent to the end of the last
fiscal year. The agreement provides that upon termination of
Mr. Altschuler's employment by the Company without Cause (as
defined therein), Mr. Altschuler will be entitled to severance
compensation equal to three months of base salary plus one month
of base salary for each complete year of service with the
Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Compensation Committee (the "Committee") was
established in 1980 and is composed entirely of independent,
outside members of the Company's Board of Directors. The
Committee reviews and approves each of the elements of the
executive compensation program and assesses the effectiveness
and competitiveness of the overall program.
Mentor's executive compensation program is designed to
accomplish several goals, including:
To attract, retain, and motivate employees of outstanding
ability
To link changes in employee compensation to individual and
corporate performance
To align the interests of management with the interests of
the Company's shareholders
Facilitate the development of a progressive high
performance culture
Strengthen the relationship between pay and performance
To provide levels of compensation that are competitive with
those provided in the markets in which the Company competes
for executives.
Key Provisions of the Executive Compensation Program
The Company's executive compensation plan consists of three
components: base salary, annual incentive bonus, and long-term
incentive in the form of stock options. The Company has
established a strong link between pay and performance by
emphasizing variable components of the plan, that is, annual
incentive bonus and stock options.
Base Salary. The Committee determines base salaries for
executive officers on the basis of a number of factors,
including an assessment of competitive compensation levels for
similar-size manufacturing companies performed by an independent
consulting firm, the Company's financial condition, any changes
in job responsibilities, and the performance of each executive.
Executive officer base salaries generally are set to be within a
competitive range of comparable compensation data.
Annual Incentive Bonus. Executive officers are eligible to
receive annual incentive compensation equivalent to a specified
percentage of their salaries under the Company's bonus plan.
The Company establishes bonus payout targets (ranging from 40%
to 60% of base salary) that are designed to bring the level of
total annual cash compensation (base salary plus annual
incentive bonus) within the range for comparable positions at
similar-size manufacturing companies when superior performance
is achieved. Performance is measured at the corporate,
functional unit, and individual level. The total potential
bonus for each executive is broken down into several factors as
appropriate for that executive's area of responsibility. Each
factor is then weighted with emphasis placed on profitability
measures. These factors, and the relative weight given to each
factor, vary with each executive officer in the Committee's sole
discretion. For each factor, the Committee establishes a
threshold, target and outstanding goal. No bonus is paid for
performance below threshold levels. Bonuses for threshold
performance are paid at 50% of the targeted levels. Bonuses for
outstanding performance are paid at 200% of targeted levels for
the Chief Executive Officer and President, and 150% of targeted
levels for all other executive officers. The total bonus paid
each executive is thus a weighted average of each factor,
adjusted for performance against a predefined target for that
factor.
Long-term Incentive (Stock Options). Generally, the
Company awards stock options to executive officers on an annual
basis. Each grant is designed to align the interests of
executive officer with those of the shareholders and provide
each individual with a significant incentive to manage the
Company from the perspective of an owner with an equity stake in
the business. Awards to specific employees, including the Chief
Executive Officer, are made on the basis of each employee's job
responsibilities and recommendations of the executive officers
of the Company concerning the individual's contributions (both
historical and potential) to the success of the Company, without
regard to prior awards of stock option grants. These
recommendations also take into consideration competitive
practice for stock option grants as determined by an independent
compensation consultant from survey information. The survey
information encompasses data on both competitive grant levels
for individual executives and total options granted as a
percentage of shares outstanding.
Compensation of Chief Executive Officer. Mr. Gette has
served as the Company's President and Chief Executive Officer
since July 29, 1999, the date upon which Mr. Conway retired as
Chief Executive Officer. Mr. Gette's base salary and annual
incentive bonus are set by the Committee using the same policies
and criteria used for other executive officers. In setting Mr.
Gette's salary for fiscal 2000, the Committee considered
competitive information for similar sized manufacturing
companies provided by an independent compensation consultant and
the Company's financial performance. Mr. Gette is currently
paid at the targeted competitive position base salary, which has
been set by the Committee to be within the range of the
comparable competitive compensation data.
Mr. Gette's annual bonus potential is designed to provide a
level of "at risk" pay which is tied directly to the Company's
performance. In fiscal 2000, Mr. Gette's targeted bonus
potential equated to 60% of his base salary as of March 31,
2000. Mr. Gette's fiscal 2000 bonus was based on the
achievement of targeted corporate profitability, which was set
at a level to encourage aggressive operating profit growth over
the prior year. The Company performed above its threshold
performance level in fiscal 2000. As a result, Mr. Gette
received a bonus for fiscal 2000.
Policy with Respect to Section 162(m) of the Internal
Revenue Code. Subject to certain exceptions, Section 162(m) of
the Code disallows a federal income tax deduction for
compensation over $1 million paid to certain executive officers
in a taxable year. One exception applies to compensation paid
pursuant to shareholder-approved plans that are performance-
based. At the 1994 Annual Meeting, the Company obtained
shareholder approval for certain amendments to the Company's 1991
Stock Option Plan which were designed to assure that any
compensation deemed paid in connection with the exercise of stock
options granted under that plan will qualify as performance-based
compensation. As a result, the Company believes that stock
options granted to its executives qualify for the performance-
based exception to the deduction limit. However, there can be no
assurance that the options will so qualify. The Committee
intends that awards made under the 2000 Plan, if approved by
shareholders, will be eligible for the performance-based
exception, and therefore eligible as a federal income tax
deduction for the Company.
The cash compensation paid to the Company's executive
officers for the 2000 fiscal year did not exceed the $1 million
limit per officer, nor is the cash compensation to be paid to the
Company's executive officers for the 2001 fiscal year expected to
reach that level. Because it is unlikely that the cash
compensation payable to any of the Company's executive officers
in the foreseeable future will approach the $1 million
limitation, the Committee has decided not to take action at this
time to limit or restructure the elements of cash compensation
payable to the Company's executive officers. The Committee
intends to continue to comply with Section 162(m) in the future
to the extent consistent with the best interests of the Company.
SUBMITTED BY THE
COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS
- Eugene G. Glover
- Walter W. Faster
- Michael Nakonechny
- Dr. Richard W. Young
Stock Performance Graph
The following graph compares the yearly percentage changes
in the cumulative total shareholder return on the Company's
Common Stock with the cumulative total return on the NASDAQ
Market Value Index and the Media General Financial Services
Medical Appliances and Equipment Index ("MG Index") during the
five fiscal years ended March 31, 2000. The comparison assumes
$100 was invested on March 31, 1995 in the Company's Common
Stock and in each of the foregoing indices and assumes
reinvestment of dividends.
LEGEND
INDEX 03/31/95 03/31/96 03/31/97 03/31/98 03/31/9903/31/00
Company 100.00 176.22 163.82 209.77 112.30 207.32
MG Index 100.00 151.68 139.08 198.57 227.20 294.56
NASDAQ 100.00 134.51 150.48 227.41 297.18 547.25
Index
Notwithstanding anything to the contrary set forth in any
of the Company's previous filings under the Securities Act of
1933 or the Securities Exchange Act of 1934 that might
incorporate future filings, including this Proxy Statement, in
whole or in part, the preceding Compensation Committee Report on
Executive Compensation and the preceding Company Stock
Performance Graph are not to be incorporated by reference into
any such filings; nor are such Report or Graph to be
incorporated by reference into any future filings.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee is a former officer
or employee of the Company or any of its subsidiaries, except
for Mr. Glover, who was Founder and Vice President, Engineering
of the Company from 1969 to October 1986.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's directors and executive officers, and
persons who own more than ten percent (10%) of a registered
class of the Company's equity securities, to file with the
Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of Common Stock and other
equity securities of the Company. Officers, directors and
greater than ten-percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely upon a review of
the copies of such reports furnished to the Company and written
representations that no other reports were required, during the
fiscal year ended March 31, 2000, all Section 16(a) filing
requirements applicable to its officers, directors and greater
than ten-percent beneficial owners were complied with, except
that Mr. Rossi and Mr. Altschuler were late in filing their
respective Initial Statement of Beneficial Ownership of
Securities (Form 3), and Mr. Purkait was late in filing one
report relating to the sale of 20,000 shares of Common Stock.
CERTAIN TRANSACTIONS
In 1991 the Company entered into an exclusive license
agreement with Rochester Medical Corporation ("Rochester") to
market and distribute certain external catheter products
developed by Rochester. The Company purchased $101,000 in
products under the agreement in fiscal year 2000. Certain
directors and executive officers of Rochester, a public company,
are siblings of Christopher J. Conway, the Chairman of Mentor
Corporation.
OTHER MATTERS
The Company knows of no other matters that will be
presented for consideration at the Annual Meeting. If any other
matters properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed form of Proxy to
vote the shares they represent as the Board of Directors may
recommend. Discretionary authority with respect to such other
matters is granted by the execution of the enclosed Proxy.
BY ORDER OF THE BOARD OF
DIRECTORS
Anthony R. Gette
Secretary
Dated: July 27, 2000
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED MARCH 31, 2000 AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS AVAILABLE WITHOUT CHARGE UPON WRITTEN
REQUEST TO: MENTOR CORPORATION, 201 MENTOR DRIVE, SANTA BARBARA,
CALIFORNIA, 93111. OUR SEC FILINGS ARE ALSO AVAILABLE ON THE
SEC's WEBSITE AT http://www.sec.gov.
EXHIBIT A
MENTOR CORPORATION
2000 LONG-TERM INCENTIVE PLAN
1. Definitions. In this Plan, except where the context
otherwise indicates, the following definitions shall apply:
1.1 "Affiliate" means a corporation, partnership, business
trust, limited liability company or other form of business
organization at least a majority of the total combined voting
power of all classes of stock or other equity interests of which
is owned by the Company, either directly or through one or more
other Affiliates.
1.2 "Agreement" means a written agreement evidencing an
Award.
1.3 "Award" means a grant of an Option, Right, Performance
Award or an award of Restricted Stock or Incentive Shares.
1.4 "Board" means the Board of Directors of the Company.
1.5 "Code" means the Internal Revenue Code of 1986, as
amended.
1.6 "Committee" means such committee(s), subcommittee(s) or
person(s) appointed by the Board to administer this Plan or to
make and/or administer specific Awards hereunder. If no such
appointment is in effect at any time, "Committee" shall mean the
Board.
1.7 "Common Stock" means the common stock, par value $.10
per share, of the Company.
1.8 "Company" means Mentor Corporation, and any successor
thereto.
1.9 "Date of Exercise" means the date on which the Company
receives notice of the exercise of an Option in accordance with
the terms of Section 8.1.
1.10 "Date of Grant" means the date on which an Option,
Right or Performance Award is granted or Restricted Stock or
Incentive Shares are awarded by the Committee under this Plan.
1.11 "Eligible Person" means any person who (a) is an
Employee; (b) has been offered and has accepted employment as an
Employee; (c) is a Non-Employee Director; or (d) is a consultant
or independent contractor to the Company or an Affiliate who is
determined by the Committee to render key services to the Company
or an Affiliate.
1.12 "Employee" means any person determined by the Committee
to be an employee of the Company or an Affiliate.
1.13 "Exchange Act" means the Securities Exchange Act of
1934, as amended.
1.14 "Fair Market Value" means an amount equal to the last
sale price for a Share in the over-the-counter market as reported
by such source as the Committee may select, or, if such price
quotations of the Common Stock are not then reported, then the
fair market value of a Share as determined by the Committee
pursuant to a reasonable method adopted in good faith for such
purpose.
1.15 "Incentive Shares" means an award providing for the
contingent grant of Shares pursuant to the provisions of Section
10.
1.16 "Incentive Stock Option" means an Option granted under
this Plan that the Company designates as an incentive stock
option under Section 422 of the Code.
1.17 "Non-Employee Director" means any member of the
Company's or an Affiliate's Board of Directors who is not an
Employee.
1.18 "Nonstatutory Stock Option" means an Option granted
under this Plan that is not an Incentive Stock Option.
1.19 "Option" means an option to purchase Shares granted
under this Plan in accordance with the terms of Section 6.
1.20 "Option Period" means the period during which an Option
may be exercised.
1.21 "Option Price" means the price per Share at which an
Option may be exercised. Subject to the terms of the Plan, the
Option Price shall be determined by the Committee.
1.22 "Participant" means any Eligible Person who has
received an Award hereunder.
1.23 "Performance Award" means a performance award granted
under the Plan in accordance with the terms of Section 11.
1.24 "Performance Goals" means performance goals established
by the Committee which may be based on earnings or earnings
growth, sales, return on assets, cash flow, total shareholder
return, equity or investment, regulatory compliance, satisfactory
internal or external audits, improvement of financial ratings,
achievement of balance sheet or income statement objectives, or
any other objective goals established by the Committee, and may
be absolute in their terms or measured against or in relationship
to other companies comparably, similarly or otherwise situated.
Such performance standards may be particular to an Eligible
Person or the department, branch, Affiliate or other division in
which he or she works, or may be based on the performance of the
Company or the Company and its Affiliates generally, and may
cover such period as may be specified by the Committee.
1.25 "Plan" means the Mentor Corporation 2000 Long-Term
Incentive Plan, as amended from time to time.
1.26 "Related Option" means an Option in connection with
which, or by amendment to which, a specified Right is granted.
1.27 "Related Right" means a Right granted in connection
with which, or by amendment to, a specified Option.
1.28 "Restricted Stock" means Shares awarded under the Plan
pursuant to the provisions of Section 9.
1.29 "Right" means a stock appreciation right granted under
the Plan in accordance with the terms of Section 7.
1.30 "Right Period" means the period during which a Right
may be exercised.
1.31 "Share" means a share of Common Stock.
1.32 "Ten-Percent Stockholder" means a Participant who
(applying the rules of Section 424(d) of the Code) owns stock
possessing more than 10% of the total combined voting power of
all classes of stock of the Company or an Affiliate.
2. Purpose. This Plan is intended to assist the Company and
its Affiliates in attracting and retaining Eligible Persons of
outstanding ability and to promote the identification of their
interests with those of the stockholders of the Company and its
Affiliates.
3. Administration. The Committee shall administer this Plan
and shall have plenary authority, in its discretion, to grant
Options, Rights, Restricted Stock, Incentive Shares and
Performance Awards to Eligible Persons, subject to the provisions
of this Plan. The Committee shall have plenary authority and
discretion, subject to the provisions of this Plan, to determine
the Eligible Persons to whom Awards shall be granted, the terms
(which terms need not be identical) of all Awards, including
without limitation the Option Price of Options, the time or times
at which Awards are made, the number of Shares covered by Awards,
whether an Option shall be an Incentive Stock Option or a
Nonstatutory Stock Option, any exceptions to non-transferability,
any Performance Goals applicable to Awards, any provisions
relating to vesting, and the period during which Options may be
exercised and Restricted Stock shall be subject to restrictions.
In making these determinations, the Committee may take into
account the nature of the services rendered or to be rendered by
the Award recipients, their present and potential contributions
to the success of the Company and its Affiliates, and such other
factors as the Committee in its discretion shall deem relevant.
Subject to the provisions of the Plan, the Committee shall have
plenary authority to interpret the Plan, prescribe, amend and
rescind rules and regulations relating to it, and make all other
determinations deemed necessary or advisable for the
administration of this Plan. The determinations of the Committee
on the matters referred to in this Section 3 shall be binding and
final.
4. Eligibility. Options, Rights, Restricted Stock, Incentive
Shares and Performance Awards may be granted only to Eligible
Persons; provided, however, that Incentive Stock Options may not
be granted to Eligible Persons who are not Employees.
5. Stock Subject to Plan.
5.1 Subject to adjustment as provided in Section 12, (a)
the maximum number of Shares that may be issued under this Plan
is 7,500,000 Shares and (b) the maximum number of Shares with
respect to which an Employee may be granted Options under this
Plan during a fiscal year is 250,000 Shares.
5.2 If an Option or Right expires or terminates for any
reason (other than termination by virtue of the exercise of a
Related Option or Related Right, as the case may be) without
having been fully exercised, if Shares of Restricted Stock are
forfeited or if Shares covered by an Incentive Share Award or
Performance Award are not issued or are forfeited, the unissued
or forfeited Shares that had been subject to the Award shall
become available for the grant of additional Awards. In no event
shall Shares which, under this Plan, are authorized to be used in
payment of any Incentive Shares or Performance Awards be deemed
to be unavailable for purposes of the Plan until such Shares have
been issued in payment of such Awards in accordance with the
provisions of Sections 10 and 11.
5.3 Upon exercise of a Right (regardless of whether the
Right is settled in cash or Shares), the number of Shares with
respect to which the Right is exercised shall be charged against
the number of Shares issuable under the Plan and shall not become
available for the grant of other Awards.
6. Options.
6.1 Options granted under this Plan to Eligible Persons
shall be either Incentive Stock Options or Nonstatutory Stock
Options, as designated by the Committee; provided, however, that
Incentive Stock Options may not be granted to Eligible persons
who are not Employees. Each Option granted under this Plan shall
be clearly identified either as a Nonstatutory Stock Option or an
Incentive Stock Option and shall be evidenced by an Agreement
that specifies the terms and conditions of the grant. Options
shall be subject to the terms and conditions set forth in this
Section 6 and such other terms and conditions not inconsistent
with this Plan as the Committee may specify.
6.2 Subject to the terms of the Plan, the Option Price
shall be determined by the Committee; provided, however, that in
no event shall the Option Price be less than one hundred percent
(100%) of the Fair Market Value of the Common Stock on the Date
of Grant. The price per share of Common Stock at which an
Incentive Stock Option granted under this Plan may be exercised
shall not be less than one hundred percent (100%) of the Fair
Market Value of the Common Stock on the Date of Grant; provided,
however, that in the case of an Incentive Stock Option granted to
an Employee who, at the time of grant, is a Ten Percent
Shareholder, the exercise price per share shall not be less than
one hundred and ten percent (110%) of the Fair Market Value of
the Common Stock on the date on which the Option is granted.
6.3 The Option Period shall be determined by the Committee
and specifically set forth in the Agreement; provided, however,
that an Option shall not be exercisable after ten years (five
years in the case of an Incentive Stock Option granted to a Ten-
Percent Stockholder) from its Date of Grant.
6.4 The Committee, in its discretion, may provide in an
Agreement for the right of a Participant to surrender to the
Company an Option (or a portion thereof) that has become
exercisable and to receive upon such surrender, without any
payment to the Company (other than required tax withholding
amounts) that number of Shares (equal to the highest whole number
of Shares) having an aggregate fair market value as of the date
of surrender equal to that number of Shares subject to the Option
(or portion thereof) being surrendered multiplied by an amount
equal to the excess of (i) the Fair Market Value on the date of
surrender over (ii) the Option Price, plus an amount of cash
equal to the fair market value of any fractional Share to which
the Participant would be entitled but for the parenthetical above
relating to whole number of Shares. Any such surrender shall be
treated as the exercise of the Option (or portion thereof)
surrendered.
7. Rights.
7.1 Rights granted under the Plan shall be evidenced by an
Agreement specifying the terms and conditions of the grant.
7.2 A Right may be granted under the Plan: (a) in
connection with, and at the same time as, the grant of an Option
under the Plan; (b) by amendment of an outstanding Option
granted under the Plan; or (c) independently of any Option
granted under the Plan. A Right described in clause (a) or (b)
of the preceding sentence is a Related Right. A Related Right
may, in the Committee's discretion, apply to all or any portion
of the Shares subject to the Related Option.
7.3 A Right may be exercised in whole or in part as
provided in the applicable Agreement, and, subject to the terms
of the Agreement, entitles a Participant to receive, without
payment to the Company (but subject to required tax withholding),
either cash or that number of Shares (equal to the highest whole
number of Shares), or a combination thereof, in an amount or
having a fair market value determined as of the Date of Exercise
not to exceed the number of Shares subject to the portion of the
Right exercised multiplied by an amount equal to the excess of
(a) the Fair Market Value on the Date of Exercise of the Right
over (b) either (i) the Fair Market Value on the Date of Grant of
the Right if it is not a Related Right (or such amount in excess
of such Fair Market Value as may be specified by the Committee),
or (ii) the Option Price as provided in the Related Option if the
Right is a Related Right.
7.4 The Right Period shall be determined by the Committee
as specifically set forth in the Agreement; provided, however,
that (a) a Right will expire no later than the earlier of (i) ten
years from the Date of Grant, or (ii) in the case of a Related
Right, the expiration of the Related Option; and (b) a Right that
is a Related Right to an Incentive Stock Option may be exercised
only when and to the extent the Related Option is exercisable.
7.5 The exercise, in whole or in part, of a Related Right
shall cause a reduction in the number of Shares subject to the
Related Option equal to the number of Shares with respect to
which the Related Right is exercised. Similarly, the exercise,
in whole or in part, of a Related Option shall cause a reduction
in the number of Shares subject to the Related Right equal to the
number of Shares with respect to which the Related Option is
exercised.
8. Exercise of Options and Rights.
8.1 An Option or Right may, subject to the terms of the
applicable Agreement under which it was granted, be exercised in
whole or in part by the delivery to the Company of written notice
of the exercise, in such form as the Committee may prescribe,
accompanied, in the case of an Option, by (a) a full payment for
the Shares with respect to which the Option is exercised or (b)
irrevocable instructions to a broker to deliver promptly to the
Company cash equal to the exercise price of the Option. To the
extent provided in the applicable Option Agreement, payment may
be made in whole or in part by delivery (including constructive
delivery) of Shares (provided that such Shares, if acquired
pursuant to an option granted hereunder or under any other plan
maintained by the Company or any Affiliate have been held by the
Participant for at least six (6) months) valued at Fair Market
Value on the Date of Exercise or by delivery of a promissory note
as provided in Section 8.2 hereof.
8.2 To the extent provided in an Agreement and permitted by
applicable law, the Committee may accept as partial payment of
the Option Price a promissory note executed by the Participant
evidencing his or her obligation to make future cash payment
thereof. Promissory notes made pursuant to this Section 8.2
shall be payable upon such terms as may be determined by the
Committee, shall be secured by a pledge of the Shares received
upon exercise of the Option, or other securities the Committee
may deem to be acceptable for such purposes, and shall bear
interest at a rate fixed by the Committee.
8.3 Awards granted under this Plan shall not be
transferable except by will, the laws of descent and
distribution, except to the extent provided in an Agreement.
9. Restricted Stock Awards.
9.1 Restricted Stock awards under this Plan shall consist
of Shares that are restricted as to transfer, subject to
forfeiture, and subject to such other terms and conditions as may
be determined by the Committee. Such terms and conditions may
provide, in the discretion of the Committee, for the lapse of
such transfer restrictions or forfeiture provisions to be
contingent upon the achievement of one or more specified
Performance Goals.
9.2 Restricted Stock awards under this Plan shall be
evidenced by Agreements specifying the terms and conditions of
the Award. Each Agreement evidencing an Award of Restricted
Stock shall contain the following:
(a) prohibitions against the sale, assignment,
transfer, exchange, pledge, hypothecation, or other encumbrance
of (i) the Shares awarded as Restricted Stock, (ii) the right to
vote the Shares, and (iii) the right to receive dividends
thereon, in each case during, the restriction period applicable
to the Shares; provided, however, that the Participant shall have
all the other rights of a stockholder including without
limitation the right to receive dividends and the right to vote
the Shares;
(b) a requirement that each certificate representing
Shares of Restricted Stock shall be deposited with the Company,
or its designee, and shall bear the following legend:
"This certificate and the shares of
stock represented hereby are subject to
the terms and conditions (including the
risks of forfeiture and restrictions
against transfer) contained in the
Mentor Corporation 2000 Long-Term
Incentive Plan, and an Agreement entered
into between the registered owner and
Mentor Corporation. Release from such
terms and conditions shall be made only
in accordance with the provisions of
this Plan and the Agreement, a copy of
each of which is on file in the office
of the Secretary of Mentor
Corporation.";
(c) the terms and conditions upon which any
restrictions applicable to Shares of Restricted Stock shall lapse
and new certificates free of the foregoing legend shall be issued
to the Participant or the Participant's legal representative; and
(d) such other terms, conditions and restrictions as
the Committee in its discretion may specify, including without
limitation terms that condition the lapse of forfeiture
provisions and transfer restrictions upon the achievement of one
or more specified Performance Goals.
10. Incentive Share Awards. Incentive Shares awarded under this
Plan shall be evidenced by an Agreement specifying the terms and
conditions of such Award. Incentive Share Awards shall provide
for the issuance of Shares to a Participant at such times and
subject to such terms and conditions as determined by the
Committee, including without limitation terms that condition the
issuance of Shares upon the achievement of one or more specified
Performance Goals.
11. Performance Awards. Performance Awards granted under this
Plan shall be evidenced by an Agreement specifying the terms and
conditions of such Award. Performance Awards shall become
payable on account of attainment of one or more specified
Performance Goals. Performance Awards may be paid by the
delivery of Common Stock or cash, or any combination of Common
Stock and cash, as specified in the Agreement. If a Performance
Award is paid in cash, the Award shall be deemed, for purposes of
Section 5.1 hereof, to cover a number of shares of Common Stock
equal to the quotient obtained by dividing the dollar amount of
the Award payment by the Fair Market Value of a Share as of the
date of payment, rounded to the next highest whole number.
12. Capital Adjustments. In the event of any change in the
outstanding Common Stock by reason of any stock dividend, split-
up, recapitalization, reclassification, combination or exchange
of shares, merger, consolidation, liquidation or the like, the
Committee may, in its discretion, provide for a substitution for
or adjustment in (a) the number and class of Shares subject to
outstanding Options, Rights and Awards of Restricted Stock,
Incentive Shares or Performance Awards, (b) the Option Price of
Options and the base price upon which payments under Rights that
are not Related Rights are determined, (c) the aggregate number
and class of Shares for which Awards thereafter may be made under
this Plan, and (d) the maximum number of Shares with respect to
which an Employee may be granted Options during the period
specified in Section 5.1(b).
13. Termination or Amendment. The Board may amend, alter or
terminate this Plan in any respect at any time; provided,
however, that, after this Plan has been approved by the
stockholders of the Company, no amendment, alteration or
termination of this Plan shall be made by the Board without
approval of (a) the Company's stockholders to the extent
stockholder approval of the amendment is required by applicable
law or regulations or the requirements of the principal exchange
or interdealer quotation system on which the Common Stock is
listed or quoted, if any, and (b) each affected Participant if
such amendment, alteration or termination would adversely affect
such Participant's rights or obligations under any Award made
prior to the date of such amendment, alteration or termination.
14. Modification, Extension, Renewal, Substitution.
14.1 Subject to the terms and conditions of this Plan, the
Committee may modify the terms of any outstanding Awards.
Notwithstanding the foregoing, however, no modification of an
Award shall, without the consent of the Participant, alter or
impair any of the Participant's rights or obligations under such
Award.
14.2 Anything contained herein to the contrary
notwithstanding, Options, Rights, Restricted Stock, Incentive
Shares and Performance Awards may, at the discretion of the
Committee, be granted under this Plan in substitution for options
and such other awards covering capital stock of another
corporation which is merged into, consolidated with, or all or a
substantial portion of the property or stock of which is acquired
by, the Company or one of its Affiliates. The terms and
conditions of the substitute Awards so granted may vary from the
terms and conditions set forth in this Plan to such extent as the
Committee may deem appropriate in order to conform, in whole or
part, to the provisions of the awards in substitution for which
they are granted. Such substitute Options granted hereunder
shall not be counted toward the Share limit imposed by clause (b)
of Section 5.1, except to the extent it is determined by the
Committee that counting such Options is required in order for
Options hereunder to be eligible to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code.
15. Effectiveness of this Plan. This Plan and any amendments
hereto requiring stockholder approval pursuant to Section 13 are
subject to approval by vote of the stockholders of the Company at
the next annual or special meeting of stockholders following
adoption by the Board. Subject to such stockholder approval,
this Plan and any amendments hereto are effective on the date on
which they are adopted by the Board.
16. Withholding. The Company's obligation to deliver Shares or
pay any amount pursuant to the terms of any Award hereunder shall
be subject to satisfaction of applicable federal, state and local
tax withholding requirements. To the extent provided in the
applicable Agreement and in accordance with rules prescribed by
the Committee, a Participant may satisfy any such withholding tax
obligation by any of the following means or by a combination of
such means: (a) tendering a cash payment, (b) authorizing the
Company to withhold Shares otherwise issuable to the Participant,
or (c) delivering to the Company already-owned and unencumbered
Shares.
17. Term of this Plan. Unless sooner terminated by the Board
pursuant to Section 13, this Plan shall terminate on July 19,
2010, and no Awards may be granted or awarded after such date.
The termination of this Plan shall not affect the validity of any
Award outstanding on the date of termination.
18. Indemnification of Committee. In addition to such other
rights of indemnification as they may have as Directors or as
members of the Committee, the members of the Committee shall be
indemnified by the Company against all reasonable expenses,
including attorneys' fees, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding, or
in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to
act under or in connection with this Plan or any Option, Right,
Restricted Stock, Incentive Shares or Performance Awards granted
hereunder, and against all amounts reasonably paid by them in
settlement thereof or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, if such members acted in
good faith and in a manner which they believed to be in, and not
opposed to, the best interests of the Company.
19. General Provisions.
19.1 The establishment of this Plan shall not confer upon
any Eligible Person any legal or equitable right against the
Company, any Affiliate or the Committee, except as expressly
provided in this Plan.
19.2 This Plan does not constitute inducement or
consideration for the employment or service of any Eligible
Person, nor is it a contract between the Company or any Affiliate
and any Eligible Person. Participation in this Plan shall not
give an Eligible Person any right to be retained in the service
of the Company or any Affiliate.
19.3 Neither the adoption of this Plan nor its submission to
the stockholders, shall be taken to impose any limitations on the
powers of the Company or its Affiliates to issue, grant, or
assume options, warrants, rights, restricted stock or other
awards otherwise than under this Plan, or to adopt other stock
option, restricted stock, or other plans or to impose any
requirement of stockholder approval upon the same.
19.4 The interests of any Eligible Person under this Plan
are not subject to the claims of creditors and may not, in any
way, be assigned, alienated or encumbered except to the extent
provided in an Agreement.
19.5 This Plan shall be governed, construed and administered
in accordance with the laws of the State of California.
19.6 The Committee may require each person acquiring Shares
pursuant to Awards hereunder to represent to and agree with the
Company in writing that such person is acquiring the Shares
without a view to distribution thereof. The certificates for
such Shares may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer. All
certificates for Shares issued pursuant to this Plan shall be
subject to such stock transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations and
other requirements of the Securities and Exchange Commission, any
stock exchange upon which the Common Stock is then listed or
interdealer quotation system upon which the Common Stock is then
quoted, and any applicable federal or state securities laws. The
Committee may place a legend or legends on any such certificates
to make appropriate reference to such restrictions.
19.7 The Company shall not be required to issue any
certificate or certificates for Shares with respect to Awards
under this Plan, or record any person as a holder of record of
such Shares, without obtaining, to the complete satisfaction of
the Committee, the approval of all regulatory bodies deemed
necessary by the Committee, and without complying to the Board's
or Committee's complete satisfaction, with all rules and
regulations, under federal, state or local law deemed applicable
by the Committee.
