Table of Contents
The information in this proxy statement/prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
REORGANIZATION PROPOSED—YOUR VOTE IS VERY IMPORTANT
President and Chief Executive Officer
Table of Contents
Santa Barbara, California 93111
Telephone: (805) 879-6000
To Be Held September 15, 2008
1. | To consider and vote upon a proposal, which we refer to as the “reorganization proposal,” approving the Agreement and Plan of Merger, dated as of July 9, 2008, by and among Mentor Corporation, Mentor International Holdings, Inc. and MNT Merger Sub, Inc., which agreement is included in the accompanying proxy statement/prospectus as Annex I; | ||
2. | To elect a board of seven directors to serve until the next annual meeting, or until their successors are duly elected and qualified; | ||
3. | To approve the amendment and restatement of the Mentor Corporation 2005 Long-Term Incentive Plan such that, among other things, the aggregate number of shares of the Company’s common stock available for grant is increased by 2,500,000 shares; | ||
4. | To ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm of Mentor for the fiscal year ending March 31, 2009; and | ||
5. | To transact such other business as may properly come before the annual meeting or any adjournments or postponements thereof. |
BY ORDER OF THE BOARD OF DIRECTORS | ||||
/s/ Joseph A. Newcomb | ||||
Joseph A. Newcomb | ||||
Secretary | ||||
Table of Contents
Attn: Corporate Secretary
201 Mentor Drive
Santa Barbara, CA 93111
Telephone: (805) 879-6000
105 Madison Avenue
New York, NY 10016
Telephone: (800) 322-2885
1 | ||||
2 | ||||
4 | ||||
4 | ||||
4 | ||||
4 | ||||
5 | ||||
5 | ||||
5 | ||||
5 | ||||
6 | ||||
6 | ||||
6 | ||||
6 | ||||
6 | ||||
7 | ||||
8 | ||||
8 | ||||
9 | ||||
10 | ||||
10 | ||||
10 | ||||
10 | ||||
11 | ||||
11 | ||||
11 | ||||
11 | ||||
11 | ||||
11 | ||||
13 | ||||
13 | ||||
13 | ||||
13 | ||||
13 | ||||
13 | ||||
13 | ||||
14 | ||||
17 | ||||
20 | ||||
29 | ||||
34 | ||||
50 | ||||
56 | ||||
58 | ||||
60 | ||||
60 | ||||
60 | ||||
60 | ||||
62 | ||||
62 | ||||
62 | ||||
62 | ||||
63 | ||||
63 | ||||
63 | ||||
Annex I Agreement and Plan of Merger | ||||
Annex II Form of Amended and Restated Certificate of Incorporation of Mentor International Holdings, Inc. | ||||
Annex III Form of Bylaws of Mentor International Holdings, Inc. | ||||
Annex IV Mentor Corporation Amended and Restated 2005 Long Term Incentive Plan |
i
Table of Contents
1. | Consider and vote upon a proposal, which we refer to as the “reorganization proposal,” approving the Agreement and Plan of Merger, dated as of July 9, 2008, by and among Mentor Corporation, Mentor International Holdings, Inc. and MNT Merger Sub, Inc., which agreement is included in this proxy statement/prospectus as Annex I; | ||
2. | Elect a board of seven directors to serve until the next annual meeting, or until their successors are duly elected and qualified; | ||
3. | Approve the amendment and restatement of the Mentor Corporation 2005 Long-Term Incentive Plan such that, among other things, the aggregate number of shares of the Company’s common stock available for grant is increased by 2,500,000 shares; | ||
4. | Ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2009; and | ||
5. | Transact such other business as may properly come before the annual meeting or any adjournments or postponements thereof. |
MEETING OF SHAREHOLDERS TO BE HELD ON SEPTEMBER 15, 2008
1
Table of Contents
Q | What is the reorganization proposal? | |
A | We are asking you to approve a merger agreement that would result in our reorganization into a Delaware holding company structure. Under the merger agreement, Mentor Corporation, a Minnesota corporation, will become a wholly-owned subsidiary of Mentor International Holdings, Inc., a Delaware corporation, and the current shareholders of Mentor will become stockholders of Mentor Holdings with the same number and percentage of shares of Mentor Holdings as they hold of Mentor prior to the reorganization.The merger agreement, which sets forth the plan of merger and is the primary legal document that governs the merger, is attached as Annex I to this proxy statement/prospectus. You are encouraged to read the merger agreement carefully. | |
Q | Why are you forming a holding company? | |
A | We are forming a holding company in Delaware: |
• | to provide us with greater strategic, business and administrative flexibility, which may allow us to acquire or form other businesses, if and when appropriate and feasible, that may be owned and operated by us, but which could be separate from our current businesses; | ||
• | to enable us, if and when appropriate, to issue debt and equity at different corporate levels; and | ||
• | to take advantage of the benefits of Delaware corporate law. |
Q | What will happen to my stock? | |
A | In the reorganization, your shares of common stock will automatically convert into the same number of shares of common stock of Mentor Holdings. As a result, you will become a stockholder of Mentor Holdings and will own the same number and percentage of shares of Mentor Holdings common stock that you now own of Mentor common stock. We expect that Mentor Holdings common stock will be listed on the New York Stock Exchange under the symbol “MNT.” | |
Q | How will being a Mentor Holdings stockholder be different from being a Mentor shareholder? | |
A | After the reorganization, you will own the same number and percentage of shares of Mentor Holdings common stock that you owned of Mentor common stock immediately prior to the reorganization. However, you will own shares of a holding company that owns our operating business, instead of owning our operating business directly. In addition, as a stockholder of Mentor Holdings, your rights will be governed by Delaware corporate law and the charter documents of the Delaware corporation. These rights are different from, and depending on the circumstances may be more or less favorable to you than, the rights that you currently have as a shareholder of a Minnesota corporation. For more information, see “Description of Mentor Holdings Capital Stock,” “Description of Mentor Capital Stock” and “Comparative Rights of Holders of Mentor Holdings Capital Stock and Mentor Capital Stock.” | |
Q | Will the management or the business of the company change as a result of the reorganization? | |
A | No. The management and business of our company will remain the same after the reorganization. | |
Q | What will the name of the public company be following the reorganization? |
2
Table of Contents
A | The name of the public company following the reorganization will be “Mentor International Holdings, Inc.” | |
Q | Will the company’s CUSIP number change as a result of the reorganization? | |
A | Yes. Following the reorganization the company’s CUSIP number will be . | |
Q | Will I have to turn in my stock certificates? | |
A | No. Do not turn in your stock certificates. We will not require you to exchange your stock certificates as a result of the reorganization. After the reorganization, your Mentor common stock certificates will represent the same number of shares of Mentor Holdings common stock. | |
Q | Does formation of a holding company affect my federal income taxes? | |
A | The proposed reorganization is intended to be a tax-free transaction under U.S. federal income tax laws. We expect that you will not recognize any gain or loss for federal income tax purposes upon your receipt of Mentor Holdings common stock in exchange for your shares of Mentor stock in the reorganization. The tax consequences to you will depend on your own situation. You should consult your own tax advisors concerning the specific tax consequences of the reorganization to you, including any foreign, state, or local tax consequences of the reorganization. For further information, see “Material U.S. Federal Income Tax Consequences.” | |
Q | How will the reorganization be treated for accounting purposes? | |
A | For accounting purposes, our reorganization into a holding company structure will be treated as a merger of entities under common control. The accounting treatment for such events is similar to the former “pooling of interests method.” Accordingly, the financial position and results of operations of Mentor will be included in the consolidated financial statements of Mentor Holdings on the same basis as currently presented. | |
Q | What vote is required to approve the reorganization proposal? | |
A | The required vote is the affirmative vote of holders of a majority of the voting power of the outstanding shares present and entitled to vote on the reorganization proposal at the annual meeting. | |
Q | What percentage of the outstanding shares do directors and executive officers hold? | |
A | On June 27, 2008, directors, executive officers and their affiliates beneficially owned approximately 2.7% of our outstanding shares of common stock. | |
Q | If the shareholders approve the reorganization, when will it occur? | |
A | We plan to complete the reorganization on or prior to March 31, 2009, provided that our shareholders approve the reorganization and all other conditions to completion of the reorganization are satisfied. | |
Q | Do I have dissenters’ (or appraisal) rights? | |
A | No. Holders of Mentor common stock do not have dissenters’ rights under Minnesota law as a result of the reorganization even if the reorganization is approved by our shareholders. | |
Q | Whom do I contact if I have questions about the reorganization proposal? | |
A | You may contact our proxy solicitor: |
105 Madison Avenue
New York, NY 10016
Telephone: (800) 322-2885
Attn: Corporate Secretary
201 Mentor Drive
Santa Barbara, CA 93111
Telephone: (805) 879-6000
3
Table of Contents
201 Mentor Drive
Santa Barbara, CA 93111
Telephone: (805) 879-6000
201 Mentor Drive
Santa Barbara, CA 93111
Telephone: (805) 879-6000
• | approval of the merger agreement by Mentor’s shareholders; |
4
Table of Contents
• | absence of any stop order suspending the effectiveness of the registration statement relating to the shares of Mentor Holdings to be issued in the reorganization; | ||
• | receipt by Mentor of a legal opinion to the effect that the merger will constitute an exchange of common stock governed by section 351 of the Internal Revenue Code and/or a reorganization within the meaning of section 368(a) of the Internal Revenue Code; | ||
• | absence of any law or order that has a material adverse effect on Mentor or any legal prohibition or restraint that would prevent completion of the reorganization or any pending legal proceeding that seeks one of these results; | ||
• | receipt of necessary regulatory approvals and licenses and third party consents; and | ||
• | receipt of approval for listing on the New York Stock Exchange of the shares of Mentor Holdings common stock to be issued in the reorganization. |
5
Table of Contents
6
Table of Contents
7
Table of Contents
• | Possible Future Strategic and Business Flexibility of a Holding Company Structure. We believe the holding company structure could facilitate future expansion of our business by providing a more flexible structure for acquiring other businesses or entering into joint ventures while continuing to keep the operations and risks of our aesthetics business separate. Although we have no immediate plans to make any acquisitions or enter into any joint ventures, we may do so in the future. In addition, if the cash generated over time by our aesthetics business were determined by our board to be greater than the amount necessary for the operation or capital needs of the aesthetics business, this cash could be transferred to a separate corporate entity owned by the holding company and invested as our board believes to be appropriate. Furthermore, implementing the holding company structure may reduce the risk that liabilities of our core aesthetics business and other businesses, if any, that may be operated in the future by separate subsidiaries would be attributed to each other. In addition, this opportunity to separate businesses, if and when appropriate, could allow us to segregate the aesthetics business from other businesses that are not subject to the same regulations applicable to aesthetics. | ||
• | Possible Future Financing Flexibility of a Holding Company Structure.We believe that a holding company structure may be beneficial to stockholders in the future because it would permit the use of financing techniques that are more readily available to companies that hold a variety of diversified businesses under one corporate umbrella, without any impact on our capital structure. For example, Mentor Holdings, in addition to receiving dividends, as and when permitted, from Mentor and other future subsidiaries, if any, would be able to obtain funds through its own debt or equity financings, Mentor would be able to obtain funds through its own financings, which may include the issuance of debt or equity securities, and other entities within the holding company organization may obtain funds from Mentor Holdings, other affiliates or their own outside financings. However, we have no current plans to seek additional financing that would utilize this flexibility at this time. | ||
• | Predictability, Flexibility and Responsiveness of Delaware Law to Corporate Needs. For many years, Delaware has followed a policy of encouraging incorporation in that state and has adopted comprehensive, modern and flexible corporate laws, which are updated regularly to meet changing business needs. As a result of this deliberate policy to provide a hospitable climate for corporate development, many major public corporations have chosen Delaware for their domicile. In addition, the Delaware courts have developed considerable expertise in dealing with corporate issues relating to public companies. Thus, a substantial body of case law has developed construing Delaware corporate law and establishing legal principles and policies regarding publicly-held Delaware corporations. We believe that, for these reasons, Delaware law will provide greater legal predictability with respect to our corporate legal matters than we have under Minnesota law. We will, however, continue to operate our current business as a Minnesota corporation and a subsidiary of Mentor Holdings. Mentor Holdings |
8
Table of Contents
will be the public company. We believe that Delaware law will provide greater efficiency, predictability and flexibility in our public company’s legal affairs than is presently available under Minnesota law. | |||
• | Additional Benefits of Using a Holding Company Structure.We believe that reincorporating in Delaware is more appropriately accomplished by creating a holding company in Delaware. A direct reincorporation in Delaware without the creation of a holding company structure would have required Mentor to merge into a new Delaware corporation, as a result of which Mentor could not continue as a Minnesota corporation. In addition, the direct reincorporation method had the disadvantage of requiring a substantially greater number of consents from third parties because it would have required the new Delaware corporation to assume all the rights and obligations of Mentor. By preserving the corporate existence of Mentor after the reorganization, we avoid the potentially costly and burdensome process of obtaining these consents. | ||
• | Attractiveness of Delaware Law to Directors and Officers.We believe that organizing our company under Delaware law will enhance our ability to attract and retain qualified directors and officers. The corporate law of Delaware, including its extensive body of case law, offers directors and officers of public companies more certainty and stability. Under Delaware law, the parameters of director and officer liability are more clearly defined and better understood than under Minnesota law. To date, we have not experienced difficulty in retaining directors or officers, but directors of public companies are exposed to significant potential liability. We therefore believe that providing the benefits afforded directors by Delaware law will enable us to compete more effectively with other public companies in the recruitment of talented and experienced directors and officers. At the same time, we believe that Delaware law regarding corporate fiduciary duties provides appropriate protection for our stockholders from possible abuses by directors and officers. In addition, under Delaware law, directors’ personal liability cannot be eliminated for: |
• | any breach of the director’s duty of loyalty to the corporation or its stockholders, | ||
• | acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, | ||
• | unlawful payment of dividends or unlawful repurchases or redemptions of stock, or | ||
• | any transactions from which the director derived an improper personal benefit. |
• | Increased Costs and Expenses Associated with Implementing the Reorganization Proposal and Administering a Holding Company Structure. The reorganization may result in substantial direct costs. These costs and expenses are expected to consist primarily of attorney’s fees, accountants’ fees, filing fees and financial printing expenses and will be substantially incurred prior to the vote of our shareholders. The reorganization may also result in certain indirect costs by diverting the attention of our management and employees from our business and resulting in increased administrative costs and expenses. These administrative costs and expenses will include keeping separate records and in some cases making separate regulatory filings for each of Mentor Holdings, Mentor, and any future subsidiaries. |
9
Table of Contents
• | Mentor will be the surviving corporation, and the separate corporate existence of the merger subsidiary will cease. | ||
• | Each outstanding share of Mentor common stock will automatically convert into one share of Mentor Holdings common stock, as described below, and the current shareholders of Mentor will become the stockholders of Mentor Holdings. | ||
• | Mentor Holdings will own all of Mentor’s common stock and each share of Mentor Holdings common stock now held by Mentor will be cancelled. |
10
Table of Contents
• | the merger agreement has been duly approved by the affirmative votes required of the shareholders of Mentor common stock; | ||
• | no stop order suspending the effectiveness of the registration statement relating to the shares of Mentor Holdings to be issued in the reorganization is in existence; | ||
• | we have received a legal opinion to the effect that the merger will constitute an exchange of common stock governed by section 351 of the Internal Revenue Code and/or a reorganization within the meaning of section 368(a) of the Code; | ||
• | the absence of any law, temporary restraining order, preliminary or permanent injunction, writ or other order that has a material adverse effect on us or has the effect of making the reorganization illegal or otherwise prohibiting completion of the reorganization or any judicial or administrative proceeding that continues to be pending seeking any such result; | ||
• | all required regulatory and private third party consents and notifications have been obtained or made; and | ||
• | the Mentor Holdings common stock has been authorized for listing on the New York Stock Exchange. |
11
Table of Contents
• | No gain or loss will be recognized by Mentor Holdings or Mentor as a result of the merger; | ||
• | No gain or loss will be recognized by you upon your receipt of Mentor Holdings common stock solely in exchange for your Mentor common stock; | ||
• | The aggregate tax basis of the shares of Mentor Holdings common stock that you receive in exchange for your Mentor common stock in the merger will be the same as the aggregate tax basis of your Mentor common stock exchanged; and | ||
• | The holding period for shares of Mentor Holdings common stock that you receive in the merger will include the holding period of your Mentor common stock exchanged. |
12
Table of Contents
13
Table of Contents
14
Table of Contents
• | prior to such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; | ||
• | upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned by persons who are directors and also officers, and employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or | ||
• | on or subsequent to such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder. |
• | the authority of the board of directors to issue up to 25,000,000 shares of undesignated preferred stock and to determine the rights, preferences and privileges of these shares, without stockholder approval; | ||
• | all stockholder actions must be effected at a duly called meeting of stockholders and not by written consent; and | ||
• | the elimination of cumulative voting. |
Such provisions may have the effect of delaying or preventing a change in control. |
• | for any breach of the director’s duty of loyalty to us or our stockholders; | ||
• | for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; | ||
• | under Section 174 of the DGCL (governing distributions to stockholders); or | ||
• | for any transaction from which the director derived any improper personal benefit. |
15
Table of Contents
16
Table of Contents
17
Table of Contents
• | the authority of the board of directors to issue up to 25,000,000 shares of undesignated preferred stock and to determine the rights, preferences and privileges of these shares, without stockholder approval; and | ||
• | the elimination of cumulative voting. |
• | for any breach of the director’s duty of loyalty to the company or its shareholders, | ||
• | for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, | ||
• | under Sections 302A.559 or 80A.23 of the Minnesota Statutes, | ||
• | for any transaction from which the director derived an improper personal benefit, or | ||
• | for any act or omission occurring prior to the effective date of Article IX. |
18
Table of Contents
19
Table of Contents
Mentor | Mentor Holdings | |||
(Minnesota) | (Delaware) | |||
Authorized Shares | The total number of shares which Mentor is authorized to issue is 175,000,000 shares, consisting of 150,000,000 million shares of common stock, par value $0.10 per share, 33,758,085 of which were issued and outstanding as of June 27, 2008, and 25,000,000 million shares of preferred stock, par value $0.01 per share, none of which have been issued or are reserved for issuance. In addition, a total of 4,635,102 shares of common stock are reserved for issuance under outstanding stock options and 5,195,998 shares of common stock are reserved for issuance under outstanding warrants and upon conversion of outstanding 2.75% convertible subordinated notes due in 2024. The board of directors of Mentor has adopted a policy requiring that, unless approved by the vote of the shareholders, any designation of preferred stock in connection with the adoption of a shareholder rights plan include provisions effecting the termination of that plan within one year. The policy also requires that other uses of preferred stock be limited to bona fide capital raising or business acquisition transactions. The MBCA does not allow a corporation to hold treasury shares. | Following the filing of Mentor Holdings’ amended and restated certificate of incorporation prior to completion of the reorganization, the total number of shares which Mentor Holdings is authorized to issue will be 175,000,000 million shares, consisting of 150,000,000 shares of common stock, par value $0.001 per share, 1,000 of which will have been issued to Mentor, and 25,000,000 shares of preferred stock, par value $0.001 per share, none of which will have been issued or reserved for issuance. In addition, outstanding rights to receive Mentor common stock under Mentor’s equity incentive plans, amended and restated employee stock ownership plan, warrants and outstanding 2.75% convertible subordinated notes due in 2024 will be converted upon the reorganization into rights to receive shares of Mentor Holdings common stock on the same terms as were in effect prior to the reorganization. The board of directors of Mentor Holdings has adopted a policy requiring that, unless approved by the vote of the stockholders, any designation of preferred stock in connection with the adoption of a shareholder rights plan include provisions effecting the termination of that plan within one year. The policy also requires that other uses of preferred stock be limited to bona fide capital raising or business acquisition transactions. Under the DGCL, a corporation may hold treasury shares and such shares may be held, sold, loaned, pledged or exchanged by the corporation. However, treasury shares, if held by the corporation, are not outstanding and therefore do not receive dividends and |
20
Table of Contents
Mentor | Mentor Holdings | |||
(Minnesota) | (Delaware) | |||
do not have voting rights. | ||||
Voting | Pursuant to the MBCA and Mentor’s restated articles of incorporation, each Mentor shareholder has one vote for each share held. Under the MBCA, action on matters in general, other than the election of directors, must be approved by the holders of a majority of the voting power constituting a quorum, except where the MBCA or the articles of incorporation require a larger proportion or number. Under the MBCA, the holders of a majority of the voting power of the shares entitled to vote at a meeting are a quorum for the transaction of business, unless a larger or smaller proportion or number is provided in the articles of incorporation or bylaws. | Pursuant to the DGCL and Mentor Holdings’ amended and restated certificate of incorporation, each Mentor Holdings stockholder has one vote per share held. Under the DGCL, action on matters in general, other than the election of directors, must be approved by the holders of a majority of the voting power constituting a quorum, except where the DGCL or the certificate of incorporation specifies a different number. Under the DGCL, the holders of a majority of the voting power of the shares entitled to vote at a meeting are a quorum for the transaction of business, unless a different number is provided in the certificate of incorporation or bylaws; provided, however, that in no event shall a quorum consist of less than one-third of the shares entitled to vote at the meeting. | ||
Vote Required for Election of Directors | Pursuant to the MBCA, Mentor’s directors are elected by a plurality of the voting power of the shares present and entitled to vote on the election of directors at a meeting at which a quorum is present. The MBCA permits corporations to provide otherwise in their articles of incorporation, but Mentor has not done so. Mentor’s restated articles of incorporation do not allow cumulative voting for the election of directors. | Pursuant to the DGCL, Mentor Holdings’ directors are elected by a plurality of the voting power of the shares present and entitled to vote on the election of directors at a meeting at which a quorum is present. The DGCL permits corporations to provide otherwise in their certificates of incorporation or bylaws, but Mentor Holdings has not done so. Mentor Holdings’ amended and restated certificate of incorporation does not provide for cumulative voting for the election of directors. | ||
Classification of the Board of Directors | Mentor’s restated articles of incorporation and amended and restated bylaws do not provide for a classified board of directors. Accordingly, all Mentor directors are elected annually. | Mentor Holdings’ amended and restated certificate of incorporation and bylaws do not provide for a classified board of directors. Accordingly, all Mentor Holdings directors will be elected annually. | ||
Number of Directors | Under the MBCA, the number of directors shall be fixed by, or in the manner provided in, the articles of incorporation or bylaws, and may be increased or decreased at any time by amendment to or in the manner provided in the articles or | Under the DGCL, the number of directors shall be fixed by, or in the manner provided in, the bylaws, unless the certificate of incorporation fixes the number of directors, in which case a change in the number of directors shall be made only by amendment |
21
Table of Contents
Mentor | Mentor Holdings | |||
(Minnesota) | (Delaware) | |||
bylaws. Pursuant to Mentor’s restated articles of incorporation and amended and restated bylaws, the number of directors is established by resolution of the shareholders at a number not less than three, subject to the right of the board of directors to increase such number of directors by no more than two over the number last established by the shareholders. | of the certificate. Pursuant to Mentor Holdings’ bylaws, the number of directors shall be set from time to time by resolution of the board of directors. | |||
Removal of Directors | Pursuant to the MBCA and Mentor’s amended and restated bylaws, Mentor’s directors may be removed at any time, with or without cause, by the affirmative vote of the holders of a majority of the voting power of all shares entitled to vote at an election of directors. | Under the DGCL and Mentor Holdings’ bylaws, directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. | ||
Vacancies on the Board of Directors | Mentor’s amended and restated bylaws provide that director vacancies shall be filled for the unexpired term by a majority of the directors serving at that time, and each person so elected shall be a director until his successor is elected by the shareholders, who may make such election at their next annual meeting or at any meeting duly called for that purpose. | Mentor Holdings’ bylaws provide that director vacancies shall be filled for the unexpired term by a majority of the directors serving at that time, and each person so elected shall be a director until his successor is elected by the stockholders, who may make such election at their next annual meeting or at any meeting duly called for that purpose. | ||
Action Without a Meeting | Pursuant to the MBCA, Mentor’s amended and restated bylaws provide that an action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting by written consent by all of the shareholders entitled to vote on that action. | Mentor Holdings’ amended and restated certificate of incorporation and bylaws do not permit stockholder action without a meeting. | ||
Power to Call Annual and Special Meetings | Pursuant to the MBCA, Mentor’s amended and restated bylaws provide that if an annual meeting of shareholders has not been held during the immediately preceding 15 months, a shareholder or shareholders holding three percent or more of the voting power of all shares entitled to vote may demand a regular meeting of shareholders by written notice of demand to the corporation. Pursuant to the MBCA, Mentor’s amended and restated bylaws provide that a special shareholder meeting may be called for any purpose by any one or more shareholders | Under the DGCL, Delaware courts may order a stockholder meeting to be held upon application of any stockholder if 30 days has passed after the date designated for an annual meeting, or if no date has been designated, for a period of 13 months after the later to occur of the corporation’s incorporation, its last annual meeting or last action by written consent to elect directors in lieu of an annual meeting. Consistent with the DGCL, Mentor Holdings’ amended and restated certificate of incorporation and bylaws provide that only Mentor’s board of directors may call |
22
Table of Contents
Mentor | Mentor Holdings | |||
(Minnesota) | (Delaware) | |||
holding at least 10 percent of the voting power of all shares entitled to vote, who shall demand such special meeting by written notice given to the chief executive officer or the chief financial officer of the corporation specifying the purpose of such meeting, except that a special meeting for the purpose of considering any action to directly or indirectly facilitate or effect a business combination, including any action to change or otherwise affect the composition of the board of directors for that purpose, must be called by 25 percent or more of the voting power of all shares entitled to vote. | special stockholder meetings. | |||
Notice of Meetings | Consistent with the MBCA, Mentor’s amended and restated bylaws provide that unless a different minimum notice period has been fixed by applicable law, the restated articles of incorporation or the amended and restated bylaws, notice of any meeting shall be given not less 10 nor more than 60 days before the date of the meeting; provided, however, that in the event that a plan of merger or exchange is to be considered, notice shall be given to every shareholder, whether or not entitled to vote, not less than 14 nor more than 60 days before the date of the meeting. | Consistent with the DGCL, Mentor Holdings’ amended and restated bylaws provide that notice of any meeting shall be given to each stockholder entitled to vote thereat not less 10 nor more than 60 days before the date of the meeting. | ||
Notice of Meeting Business; Nomination of Directors | Consistent with the MBCA, Mentor’s amended and restated bylaws provide that at an annual or special meeting of the shareholders, business brought before the meeting by shareholders shall only be conducted at such meeting if the shareholder has given notice in writing to the corporation not less than 120 calendar days in advance of the date that the corporation’s proxy statement was released to shareholders for the previous year’s annual meeting, except that if no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than 30 calendar days from the date contemplated at the time of the previous year’s proxy statement, or in the event of a special meeting, such notice must be received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was delivered; provided that, in the case of a special | Consistent with the DCGL, Mentor Holdings’ bylaws provide that at an annual or special meeting of the stockholders, business brought before the meeting by stockholders shall only be conducted at such meeting if the stockholder has given notice in writing to the corporation not less than 120 calendar days in advance of the date that the corporation’s proxy statement was released to stockholders for the previous year’s annual meeting, except that if no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than 30 calendar days from the date contemplated at the time of the previous year’s proxy statement, or in the event of a special meeting, such notice must be received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was delivered; provided that, in the case of a special meeting, the notice by the corporation thereof calls for business to be brought before the meeting by its stockholders. |
23
Table of Contents
Mentor | Mentor Holdings | |||
(Minnesota) | (Delaware) | |||
meeting, the notice by the corporation thereof calls for business to be brought before the meeting by its shareholders. If a special meeting is called for the purpose of electing directors, any shareholder may nominate candidates by delivering notice to the corporation not earlier than the 90th day prior to such special meeting and not later than the 70th day prior to such special meeting or the 10th day following the day on which the date of the special meeting was first announced. A notice must include specified information concerning the business proposed to be conducted, the shareholder making the proposal and, if applicable, the persons nominated to be elected as directors. | If a special meeting is called for the purpose of electing directors, any stockholder may nominate candidates by delivering notice to the corporation not earlier than the 90th day prior to such special meeting and not later than the 70th day prior to such special meeting or the 10th day following the day on which the date of the special meeting was first announced. A notice must include specified information concerning the business proposed to be conducted, the stockholder making the proposal (including information about (i) any hedging transactions (e.g. any short position) the stockholder has entered with respect to Mentor Holdings’ stock, and (ii) whether and the extent to which the stockholder has direct or indirect beneficial ownership of any derivative instruments (e.g. any options or similar rights) related to Mentor Holdings’ stock) and, if applicable, the persons nominated to be elected as directors. | |||
Director Action Without a Meeting | Pursuant to the MBCA and Mentor’s amended and restated bylaws, an action required or permitted to be taken at a board meeting may be taken without a meeting by written action by all of the directors. | Under the DGCL, unless otherwise restricted by the certificate of incorporation or bylaws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting by the written consent of all directors. Mentor Holdings’ amended and restated certificate of incorporation and bylaws do not otherwise restrict the board of directors’ authority to act without a meeting. | ||
Limitation of Directors’ Personal Liability | Mentor’s restated articles of incorporation provide that, to the fullest extent permitted by the MBCA, a director shall not be personally liable to the corporation or its shareholders for monetary damages for breach of a director’s fiduciary duty. Under the MBCA, the personal liability of a director for breach of fiduciary duty may be eliminated or limited if the articles of incorporation so provide, but the articles may not limit or eliminate such liability for (a) any breach of the directors’ duty of loyalty to the corporation or its shareholders, (b) acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (c) the payment of unlawful dividends, stock repurchases or redemptions, (d) any transaction in which the director received an improper personal benefit, (e) | Mentor Holdings’ amended and restated certificate of incorporation contains a provision eliminating the personal liability of its directors for breach of a fiduciary duty, subject to the limitations provided below. Under the DGCL, if the certificate of incorporation so provides, the personal liability of a director for breach of a fiduciary duty as a director may be eliminated or limited, provided, however, that the liability of a director is not limited or eliminated for (a) any breach of the director’s duty of loyalty to the corporation or its stockholders, (b) acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law, (c) the payment of unlawful dividends, stock repurchases or redemptions, or (d) any |
24
Table of Contents
Mentor | Mentor Holdings | |||
(Minnesota) | (Delaware) | |||
certain violations of the Minnesota securities laws, and (f) any act or omission that occurs before the effective date of the provision in the articles eliminating or limiting liability. | transaction in which the director received an improper personal benefit. | |||
Indemnification | The MBCA provides for the mandatory indemnification of persons acting in an official capacity on behalf of the corporation if, generally speaking, such a person acted in good faith, did not receive any improper personal benefit, acted in a manner the person reasonably believed to be in, or not opposed to, the best interests of the corporation and, in the case of a criminal proceeding, had no reasonable cause to believe that the conduct was unlawful. | Mentor Holdings’ bylaws provide for indemnification to the fullest extent permitted by the DGCL. The DGCL permits indemnification against expenses and certain other liabilities arising out of legal actions brought or threatened against parties entitled to indemnification for their conduct on behalf of the corporation, provided that each such person acted in good faith and in a manner such person reasonably believed was in, or not opposed to, the best interests of the corporation. Under the DGCL, indemnification is available in a criminal action only if the person seeking indemnification had no reasonable cause to believe that his or her conduct was unlawful. The DGCL does not allow indemnification for directors in the case of an action by or in the right of the corporation (including stockholder derivative suits) as to which such director shall have been adjudged to be liable to the corporation unless indemnification (limited to expenses) is ordered by a court. | ||
Amendment to the Articles or Certificate of Incorporation | Pursuant to the MBCA, an amendment or restatement of Mentor’s restated articles of incorporation may be effected by shareholder approval of a resolution setting forth the proposed amendment or restatement either approved by the affirmative vote of a majority of the directors or proposed by a shareholder or shareholders holding three percent or more of the voting power of the shares entitled to vote. | Under the DGCL, a proposed amendment to a corporation’s certificate of incorporation may not be submitted to a vote of the stockholders without the approval of the board of directors. | ||
Amendment to the Bylaws | Under the MBCA, unless reserved by the articles of incorporation to the shareholders, the power to adopt, amend, or repeal the bylaws is vested in the board of directors. Mentor’s restated articles of incorporation do not reserve such power to the shareholders. Mentor’s amended and restated bylaws | Under the DGCL, the stockholders, and the board of directors if the certificate of incorporation so provides, have the power to make, alter or repeal the bylaws. Mentor Holdings’ amended and restated certificate of incorporation expressly authorizes the board of directors to make, alter or repeal the bylaws. |
25
Table of Contents
Mentor | Mentor Holdings | |||
(Minnesota) | (Delaware) | |||
provide that the board of directors have the power to adopt, amend or repeal the bylaws, subject to the power of the shareholders to change or repeal the same; provided, however, that the board shall not adopt, amend or repeal any bylaw fixing a quorum for meetings of shareholders, prescribing procedures for removing directors or filling vacancies in the board, or fixing the number of directors or their classifications, qualifications or terms of office, but may adopt or amend a bylaw that increases the number of directors. | ||||
Anti-takeover Legislation | Under the MBCA’s control share acquisition provisions, a public corporation with at least fifty shareholders (an “issuing public corporation”) is required to obtain disinterested shareholder approval for acquisitions of its shares resulting in the acquiring party owning more than a designated percentage of the corporation’s outstanding shares. Shareholders who acquire shares in excess of such designated percentage without disinterested shareholder approval will lose their voting rights and are subject to certain redemption privileges of the corporation. Under the MBCA, a corporation may opt out of these provisions in its articles of incorporation or bylaws, but Mentor has not elected to do so. The Minnesota business combination statute provides that an issuing public corporation may not engage in certain business combinations with any person that acquires beneficial ownership of 10% or more of the voting stock of that corporation (an “interested shareholder”) for a period of four years following the date on which the person became an interested shareholder (the “share acquisition date”) unless, before that share acquisition date, a committee of the corporation’s disinterested directors approve either the business combination or the acquisition of shares. In addition, the MBCA prohibits a publicly held corporation from entering into or amending agreements (commonly referred to as golden parachutes) that increase current or future compensation of any officer or | Section 203 of the DGCL provides for a three-year moratorium on certain business combination transactions with “interested stockholders” (generally, persons who beneficially own 15% or more of the corporation’s outstanding voting stock). Under the DGCL, a corporation may opt out of these provisions in its certificate of incorporation, but Mentor Holdings has not elected to do so. The DGCL does not provide any additional restrictions on control share transactions, business combinations or the like. |
26
Table of Contents
Mentor | Mentor Holdings | |||
(Minnesota) | (Delaware) | |||
director during any tender offer or request or invitation for tenders. | ||||
The MBCA also provides that a publicly held corporation is prohibited from purchasing or agreeing to purchase any shares from a person who beneficially owns more than 5% of the voting power of the corporation if the shares had been beneficially owned by that person for less than two years, and if the purchase price would exceed the market value of those shares, unless approved at a meeting of the shareholders by a majority of the voting power of all shares entitled to vote or the publicly held corporation makes an offer, of at least equal value per share, to all holders of shares of the class or series and to all holders of any class or series into which the securities may be converted. | ||||
Rights Plans (“Poison Pills”) | Mentor does not have a Poison Pill. | Mentor Holdings does not have a Poison Pill. | ||
Dividends and Stock Repurchases | Under the MBCA, a corporation may generally pay a dividend or acquire its own shares if its board of directors determines that the corporation will be able to pay its debts in the ordinary course of business after paying the dividend or acquiring the shares and if, among other things, the dividend payment does not reduce the remaining net assets of the corporation below the aggregate preferential amount payable in the event of liquidation to the holders of the shares having preferential rights, unless the payment is made to those shareholders in the order and to the extent of their respective priorities. | Under the DGCL, a corporation may pay dividends out of surplus or, if there is no surplus, out of net profits for the fiscal year in which the dividend is declared and/or for the preceding fiscal year, except that dividends may not be paid out of net profits if, after the payment of the dividend, capital is less than the capital represented by the outstanding stock of all classes having a preference upon the distribution of assets. Under the DGCL, a corporation may purchase or redeem shares of any class except when its capital is impaired or such purchase would cause impairment of capital, except that a corporation may purchase or redeem any of its preferred shares if such shares will be retired upon the acquisition and the capital of the corporation will be reduced by such retirement of shares. | ||
Dissenters’/Appraisal Rights | Under the MBCA, in some circumstances shareholders have the right to dissent from certain corporate transactions by demanding payment in cash for their shares equal to the fair value of the shares as determined by agreement with the corporation or by a court in an action timely brought by the dissenting shareholders. The MBCA, in general, | The DGCL allows for dissenters’ rights only in connection with certain mergers or consolidations. No such appraisal rights exist, however, for corporations whose shares are listed on a national securities exchange or held of record by more than 2,000 stockholders unless the certificate of incorporation provides otherwise (Mentor |
27
Table of Contents
Mentor | Mentor Holdings | |||
(Minnesota) | (Delaware) | |||
affords dissenters’ rights upon certain amendments to the articles of incorporation that materially and adversely affect the rights or preferences of the shares of the dissenting shareholders, upon the sale of substantially all corporate assets and upon merger or exchange by a corporation. | Holdings’ amended and restated certificate of incorporation does not provide otherwise) or the stockholders are to receive in the merger or consolidation anything other than (a) shares of stock of the corporation surviving or resulting from such merger or consolidation, (b) shares of stock of any other corporation which at the effective date of the merger or consolidation will be either listed on a national securities exchange or held of record by more than 2,000 stockholders, (c) cash in lieu of fractional shares of the corporation described in (a) and (b) above, or (d) any combination of (a), (b), or (c) above. | |||
Examination of Books and Records | Under the MBCA, any shareholder has an absolute right, upon written demand, to examine and copy, in person or by a legal representative, at any reasonable time, and the corporation shall make available within 10 days after receipt of the written demand, the corporation’s share register and certain books and records. | Under the DGCL, any stockholder, in person or by attorney or other agent, shall, upon written demand, have the right during the usual hours for business to inspect for any proper purpose, and to make copies and extracts from, the corporation’s stock ledger, a list of its stockholders, and its other books and records. Stockholders may apply to the Delaware Court of Chancery for an order to compel inspection if a demand is refused by the corporation or not replied to within five business days of the demand. | ||
Dissolution | Under the MBCA, a corporation may be dissolved by the voluntary action of the holders of a majority of a corporation’s shares entitled to vote at a meeting called for the purpose of considering such dissolution. In addition, the MBCA provides that a court may dissolve a corporation in an action by a shareholder where: (a) the situation involves a deadlock in the management of corporate affairs and the shareholders cannot break the deadlock; (b) the directors have acted fraudulently, illegally, or in a manner unfairly prejudicial to the corporation; (c) the shareholders are divided in voting power for two consecutive regular meetings to the point where successor directors are not elected; (d) there is a case of misapplication or waste of corporate assets; or (e) the duration of the corporation has expired. | The DGCL provides that a voluntary dissolution of a corporation first must be deemed advisable by a majority of the board of directors and then approved by a majority of the outstanding stock entitled to vote, or without action of the directors if all of the stockholders entitled to vote on such dissolution consent in writing to such dissolution. In addition, under the DGCL, the Delaware Court of Chancery may revoke or forfeit the charter of any corporation for abuse, misuse or nonuse of its powers, privileges or franchises. |
28
Table of Contents
Nominee | Age | Director Since | Positions and Offices Held with Mentor | |||
Joseph E. Whitters | 50 | 2004 | Chairman of the Board | |||
Michael L. Emmons | 67 | 2004 | Director | |||
Walter W. Faster | 75 | 1980 | Director | |||
Margaret H. Jordan | 65 | 2007 | Director | |||
Joshua H. Levine | 50 | 2004 | President, Chief Executive Officer and Director | |||
Katherine S. Napier | 53 | 2007 | Director | |||
Burt E. Rosen | 59 | 2007 | Director |
29
Table of Contents
30
Table of Contents
31
Table of Contents
32
Table of Contents
33
Table of Contents
• | attract, motivate, retain and reward employees of outstanding ability; | ||
• | link changes in employee compensation to individual and corporate performance; | ||
• | facilitate the development of a progressive, results-oriented high performance culture; | ||
• | provide opportunities for employee involvement, development and meaningful contribution; | ||
• | support the achievement of annual and long-term financial and strategic goals by rewarding employees for superior results; and | ||
• | align employees’ interests with those of the shareholders. |
• | evaluating each NEO’s performance; | ||
• | recommending business performance targets and establishing objectives; and | ||
• | recommending salary levels, bonuses and equity-based awards. |
34
Table of Contents
• | background information regarding our strategic objectives; | ||
• | his evaluation of the performance of the NEOs (other than himself); and | ||
• | compensation recommendations as to NEOs (other than himself). |
• | base salary; | ||
• | performance-based annual incentive bonus; | ||
• | long-term equity incentive compensation; and | ||
• | perquisites and other personal benefits. |
35
Table of Contents
• | individual performance compared to the operational and strategic goals established for the NEO at the beginning of the year; | ||
• | our financial results for the fiscal year; | ||
• | the nature, scope and level of responsibilities; | ||
• | contribution to our financial results, particularly with respect to key metrics such as cash flow, margins, revenue, operating income and earnings per share; and | ||
• | effectiveness in leading our initiatives. |
36
Table of Contents
Name | 2008 AIB Award | |||
Joshua H. Levine | $ | 658,125 | ||
Michael O’Neill | $ | 114,257 | ||
Loren L. McFarland | $ | 153,281 | ||
Joseph A. Newcomb | $ | 239,118 | ||
Edward S. Northup | $ | 303,469 |
37
Table of Contents
• | attract superior managerial and professional talent; | ||
• | retain key managerial and professional talent to support our continued growth and success; and | ||
• | align management incentives with goals of the shareholders. |
38
Table of Contents
Name | Sub-Plan Option Grants | |||
Joshua H. Levine | 350,000 | |||
Michael O’Neill | 100,000 | |||
Joseph A. Newcomb | 100,000 | |||
Edward S. Northup | 150,000 |
39
Table of Contents
40
Table of Contents
THE COMPENSATION COMMITTEE Joseph E. Whitters, Chair Katherine S. Napier Walter W. Faster | ||||
41
Table of Contents
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (i) | (j) | ||||||||||||||||||||||||
Non-Equity | All | |||||||||||||||||||||||||||||||
Name and Principal | Stock | Option | Incentive Plan | Other | Total | |||||||||||||||||||||||||||
Position | Year | Salary | Bonus | Awards | Awards | Compensation | Compensation | Compensation | ||||||||||||||||||||||||
($) | ($) | ($)(1) | ($)(2) | ($)(3) | ($)(4) | ($) | ||||||||||||||||||||||||||
Joshua H. Levine | 2008 | 533,846 | — | 1,584,263 | 329,676 | 658,125 | 19,710 | 3,125,620 | ||||||||||||||||||||||||
President, Chief Executive Officer | 2007 | 500,000 | 450,000 | 1,934,875 | 702,318 | 500,000 | 18,746 | 4,105,939 | ||||||||||||||||||||||||
Michael O’Neill | 2008 | 142,788 | — | 183,780 | 225,960 | 114,257 | 32,810 | 699,595 | ||||||||||||||||||||||||
Vice President, Chief Financial Officer | 2007 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Loren L. McFarland(5) | 2008 | 245,045 | — | 616,093 | 58,070 | 153,281 | 1,021,031 | 2,093,520 | ||||||||||||||||||||||||
Former Vice President, Chief Financial Officer | 2007 | 300,000 | 225,000 | 639,251 | 132,411 | 225,000 | 16,540 | 1,538,202 | ||||||||||||||||||||||||
Joseph A. Newcomb | 2008 | 322,846 | — | 635,005 | 587,590 | 239,118 | 21,435 | 1,805,994 | ||||||||||||||||||||||||
Vice President, General Counsel and Secretary | 2007 | 230,770 | — | 543,443 | 675,773 | 225,000 | 12,280 | 1,687,266 | ||||||||||||||||||||||||
Edward S. Northup | 2008 | 412,693 | — | 743,229 | 1,049,275 | 303,469 | 18,662 | 2,527,328 | ||||||||||||||||||||||||
Vice President, Chief Operations Officer | 2007 | — | — | — | — | — | — | — |
(1) | The amounts shown in column (e) reflect the dollar amount recognized for financial statement reporting purposes of awards, pursuant to our 2005 Long Term Incentive Plan for the fiscal years ended March 31, 2008 and March 31, 2007 in accordance with SFAS 123(R), and thus may include amounts from awards granted in and prior to fiscal year 2008 and fiscal year 2007. Assumptions used in the calculation of these amounts are included in footnote G to our consolidated financial statements for the fiscal year ended March 31, 2008, included in our Annual Report on Form 10-K. | |
(2) | The amounts shown in column (f) represent the compensation cost of stock options for financial reporting purposes for fiscal year 2008 and fiscal year 2007 under SFAS 123(R), rather than an amount paid to or realized by the named executive officer. The SFAS 123(R) value as of the grant date for options is spread over the number of months of service required for the grant to become non-forfeitable. Compensation costs shown in column (f) reflect ratable amounts expensed for grants that were made in fiscal years 2004 to 2008. The SFAS 123(R) amounts may never be realized. | |
(3) | The amounts in column (g) reflect the cash awards to named executive officers under our AIB plan. | |
(4) | The table below shows the components of column (i), which includes perquisites to the named executive officers. |
Financial | ||||||||||||||||||||||||||||||||||||||||||||
401k | Planning | Total | ||||||||||||||||||||||||||||||||||||||||||
Life Ins | Car | Auto | Commuting | Match | Reimburse- | Health | Consultant | Other | ||||||||||||||||||||||||||||||||||||
Premiums | Allowance | Lease | Expenses | Contributions | ment | Gifts | Exams | Severance | Fees | Compensation | ||||||||||||||||||||||||||||||||||
($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||||||||||||||||||
Joshua H. Levine | 926 | — | 3,954 | — | 12,619 | — | — | 2,211 | — | — | 19,710 | |||||||||||||||||||||||||||||||||
Michael O’Neill | 225 | — | 29,556 | 3,029 | — | — | — | — | — | 32,810 | ||||||||||||||||||||||||||||||||||
Loren L. McFarland | 260 | 1,846 | — | 4,780 | — | 15 | 1,930 | 981,000 | 31,200 | 1,021,031 | ||||||||||||||||||||||||||||||||||
Joseph A. Newcomb | 1,328 | 1,846 | — | 9,246 | 7,500 | 15 | 1,500 | — | — | 21,435 | ||||||||||||||||||||||||||||||||||
Edward S. Northup | 2,872 | 2,308 | — | 10,785 | — | 268 | 2,429 | — | — | 18,662 |
(5) | Mr. McFarland left the Company on November 12, 2007. |
42
Table of Contents
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | (l) | |||||||||||||||||||||||||||||||||
All Other | All Other | |||||||||||||||||||||||||||||||||||||||||||
Stock | Option | |||||||||||||||||||||||||||||||||||||||||||
Awards: | Awards: | Exercise | Grant | |||||||||||||||||||||||||||||||||||||||||
Estimated Possible Payouts Under | Estimated Future Payouts Under | Number of | Number of | or Base | Date Fair | |||||||||||||||||||||||||||||||||||||||
Non-Equity Incentive Plan | Equity Incentive Plan | Shares of | Securities | Price of | Value of | |||||||||||||||||||||||||||||||||||||||
Awards(1) | Awards(2) | Stock or | Underlying | Option | Option | |||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold | Target | Maximum | Threshold | Target | Maximum | Units(3) | Options(4) | Awards | Awards(5) | |||||||||||||||||||||||||||||||||
($) | ($) | ($) | (#) | (#) | (#) | (#) | (#) | ($/Sh) | ($) | |||||||||||||||||||||||||||||||||||
Joshua H. Levine | N/A | 21,600 | 675,000 | 810,000 | — | — | — | — | ||||||||||||||||||||||||||||||||||||
9/18/2007 | (6) | 35,000 | 350,000 | 350,000 | — | — | 53.76 | 3,924,970 | ||||||||||||||||||||||||||||||||||||
Michael O’Neill (9) | N/A | 15,000 | 281,250 | 337,500 | — | |||||||||||||||||||||||||||||||||||||||
12/03/2007 | (6) | 10,000 | 100,000 | 100,000 | — | — | 43.47 | 890,120 | ||||||||||||||||||||||||||||||||||||
12/03/2007 | (7) | — | 125,000 | 37.80 | 1,322,075 | |||||||||||||||||||||||||||||||||||||||
12/03/2007 | (8) | 27,500 | — | — | — | |||||||||||||||||||||||||||||||||||||||
Loren McFarland (10) | N/A | 13,080 | 245,250 | 294,300 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Joseph A. Newcomb | N/A | 13,080 | 245,250 | 294,300 | — | |||||||||||||||||||||||||||||||||||||||
9/18/2007 | (6) | 10,000 | 100,000 | 100,000 | — | — | 51.52 | 1,181,810 | ||||||||||||||||||||||||||||||||||||
Edward S. Northup | N/A | 16,600 | 311,250 | 373,500 | — | |||||||||||||||||||||||||||||||||||||||
9/18/2007 | (6) | 15,000 | 150,000 | 150,000 | — | — | 51.52 | 1,772,715 |
(1) | Amounts shown in columns (c), (d) and (e) are the estimated possible payouts for fiscal year 2008 under our AIB plan based on the achievement of certain identified objectives for the Company and the individual named executive officer. The actual bonuses awarded to the named executive officers are reported in the Fiscal Year 2008 Summary Compensation Table under the column “Non-Equity Incentive Plan Compensation.” The AIB plan includes various incentive levels based on the participant’s position, with the pay-out targets for executives ranging from 75% to 125% of base salary. The Committee sets minimum, target and maximum levels for our financial objectives each year and the payment and amount of any bonus is dependent upon whether we achieve those performance goals. | |
For fiscal year 2008, the amount that could have been received by Mr. Levine under the AIB plan ranged from between 0% (assuming the minimum objectives were not met) of annual base salary and 150% of annual base salary, with a targeted bonus amount of 125% of base salary at attainment of 100% of budgeted COI and strategic objectives. For executive officers other than Mr. Levine, the amount such officers could have received ranged from 0% to 90% of base salary, with targeted bonus amounts of 75% of annual base salary at attainment of 100% of budgeted COI and strategic objectives. The table sets forth the estimated range of cash payouts to executive officers under the AIB plan assuming threshold, target or maximum performance objectives were met for fiscal year 2008. | ||
(2) | Represents options that have been granted under the Sub-Plan. For options granted under the Sub-Plan, the executive officer may acquire shares of common stock at an exercise price set at a premium to the closing price of our common stock on the grant date. These options were granted on September 18, 2007 and vest at a rate of 10% on March 31, 2008 (the amount in column (f)), 20% on March 31, 2009, 30% on March 31, 2010 and 40% on March 31, 2011, if the Company achieves certain specified EPS targets. The specified EPS target for the fiscal year ended March 31, 2008 was not met and the 10% vesting did not occur. | |
(3) | Each grant of restricted stock vests in installments over a five year period. Apart from receiving dividends with respect to these shares, the shares of restricted stock will provide a positive return to the executive officer only if he or she remains employed by us during the vesting period. Additionally, the executive officer, by accepting the grant of shares of restricted stock, agrees to be bound by certain stock ownership guidelines as set forth in his/her restricted stock award agreement. Generally, the executive officer agrees to attain, by no later than the fifth anniversary of the award date, a level of stock ownership at least equal to two times the executive officer’s annual base salary (three times for the Chief Executive Officer), calculated by dividing (i) the product of the executive officer’s salary times two (or three, as the case may be) by (ii) the fair market value of a share of our common stock on the award date. Once attained, the officer must maintain this level of stock ownership throughout the remainder of his/her employment. Additional shares of restricted stock may be granted over time to executive officers in connection with performance and promotions. | |
(4) | Most stock option grants allow the executive officer to acquire shares of common stock at an exercise price equal to the closing price of our common stock on the grant date over a specified period of time not to exceed 10 years. Generally, shares subject to the option grant become exercisable in a series of installments over a four year period, contingent upon the executive officer’s continued employment. |
43
Table of Contents
(5) | The amounts shown in column (l) reflect the grant date fair value of each option award computed in accordance with FAS 123(R). | |
(6) | Represents grants of stock options approved under the Sub-Plan. | |
(7) | Represents grants of stock options under the 2005 Plan. | |
(8) | Represents shares of restricted stock under the 2005 Plan. | |
(9) | Upon his employment with us, Mr. O’Neill received an option to purchase 125,000 shares of common stock with an exercise price of $37.80 per share, 27,500 shares of restricted stock, and 100,000 options under the Sub-Plan with an exercise price of $43.47 per share. | |
(10) | Mr. McFarland’s employment with the Company terminated during fiscal year 2008. He received a percentage of the non-equity incentive award pursuant to the terms of his separation and release agreement, which is further described in “Potential Payments on Termination or Change of Control”. |
44
Table of Contents
Termination | ||||||||||||||||
Termination | For Cause or | |||||||||||||||
without Cause or | Resignation | Termination | Termination for | |||||||||||||
Resignation for | Other than for | Upon Change | Death or | |||||||||||||
Good Reason | Good Reason | in Control | Disability (2) | |||||||||||||
($) | ($) | ($) | ($) | |||||||||||||
Joshua H. Levine | ||||||||||||||||
Bonus | $ | 658,125 | $ | — | $ | 658,125 | $ | 658,125 | ||||||||
Severance Payment | 1,620,000 | — | 1,620,000 | — | ||||||||||||
Value of Accelerated Stock Options | — | — | — | — | ||||||||||||
Value of Accelerated Restricted Stock | — | — | 1,234,560 | 1,234,560 | ||||||||||||
Value of Accelerated PSUs | — | — | 1,157,400 | 1,157,400 | ||||||||||||
Value of Benefits Continuation | 33,072 | — | 33,072 | 33,072 | ||||||||||||
Total Payment Upon Termination | $ | 2,311,197 | $ | — | $ | 4,703,157 | $ | 3,083,157 | ||||||||
Michael O’Neill (1) | ||||||||||||||||
Bonus | 114,257 | — | 274,219 | 114,257 | ||||||||||||
Severance Payment | 750,000 | — | 750,000 | — | ||||||||||||
Value of Accelerated Stock Options | — | — | — | — | ||||||||||||
Value of Accelerated Restricted Stock | — | — | 707,300 | 707,300 | ||||||||||||
Value of Accelerated PSUs | — | — | — | — | ||||||||||||
Value of Benefits Continuation | 33,072 | — | 33,072 | 33,072 | ||||||||||||
Total Payment Upon Termination | $ | 897,329 | $ | — | $ | 1,764,591 | $ | 854,629 | ||||||||
Loren L. McFarland | ||||||||||||||||
Bonus | 153,281 | — | — | — | ||||||||||||
Severance | 981,000 | — | — | — | ||||||||||||
Value of Benefits Continuation | 51,072 | — | — | — | ||||||||||||
Outplacement Assistance | 12,000 | — | — | — | ||||||||||||
Total Payment Upon Termination | $ | 1,197,353 | $ | — | $ | — | $ | — | ||||||||
Joseph A. Newcomb | ||||||||||||||||
Bonus | 239,118 | — | 239,118 | 239,118 | ||||||||||||
Severance Payment | 654,000 | — | 654,000 | — | ||||||||||||
Value of Accelerated Stock Options | — | — | — | — | ||||||||||||
Value of Accelerated Restricted Stock | — | — | 411,520 | 411,520 | ||||||||||||
Value of Accelerated PSUs | — | — | 643,000 | 643,000 | ||||||||||||
Value of Benefits Continuation | 33,072 | — | 33,072 | 33,072 | ||||||||||||
Total Payment Upon Termination | $ | 926,190 | $ | — | $ | 1,980,710 | $ | 1,326,710 | ||||||||
Edward S. Northup | ||||||||||||||||
Bonus | 303,469 | — | 303,469 | 303,469 | ||||||||||||
Severance Payment | 830,000 | — | 830,000 | — | ||||||||||||
Value of Accelerated Stock Options | — | — | — | — | ||||||||||||
Value of Accelerated Restricted Stock | — | — | 679,008 | 679,008 | ||||||||||||
Value of Accelerated PSUs | — | — | — | — | ||||||||||||
Value of Benefits Continuation | 33,072 | — | 33,072 | 33,072 | ||||||||||||
Total Payment Upon Termination | $ | 1,166,541 | $ | — | $ | 1,845,549 | $ | 1,015,549 | ||||||||
(1) | Pursuant to Michael O’Neill’s employment agreement, termination through non-renewal of his employment agreement is treated the same as termination without cause or resignation for good reason. | |
(2) | Accelerated vesting for equity awards applies only to termination as a result of death. Termination as a result of disability would not have resulted in accelerated vesting as of March 31, 2008. |
45
Table of Contents
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||||||
Incentive | ||||||||||||||||||||||||||||||||||||
Equity | Plan | |||||||||||||||||||||||||||||||||||
Incentive | Awards: | |||||||||||||||||||||||||||||||||||
Plan | Market or | |||||||||||||||||||||||||||||||||||
Equity | Awards: | Payout | ||||||||||||||||||||||||||||||||||
Incentive | Number | Value of | ||||||||||||||||||||||||||||||||||
Plan Awards: | Number | Market | of | Unearned | ||||||||||||||||||||||||||||||||
Number of | Number of | Number of | of | Value of | Unearned | Shares, | ||||||||||||||||||||||||||||||
Securities | Securities | Securities | Shares or | Shares or | Shares, Units | Units or | ||||||||||||||||||||||||||||||
Underlying | Underlying | Underlying | Units of | Units of | or Other | Other | ||||||||||||||||||||||||||||||
Unexercised | Unexercised | Unexercised | Option | Option | Stock That | Stock That | Rights That | Rights That | ||||||||||||||||||||||||||||
Options | Options | Unearned | Exercise | Expiration | Have Not | Have Not | Have Not | Have Not | ||||||||||||||||||||||||||||
(Exercisable)(1) | (Unexercisable) | Options(2) | Price | Date | Vested(3) | Vested | Vested(4) | Vested | ||||||||||||||||||||||||||||
(#) | (#) | (#) | ($) | (#) | ($) | (#) | ($) | |||||||||||||||||||||||||||||
Joshua H. Levine | 20,000 | — | — | 19.0100 | 05/22/2012 | — | — | — | — | |||||||||||||||||||||||||||
35,000 | — | — | 21.0000 | 05/21/2013 | — | — | — | — | ||||||||||||||||||||||||||||
50,000 | — | — | 21.7000 | 11/19/2013 | — | — | — | — | ||||||||||||||||||||||||||||
75,000 | 25,000 | (5) | — | 32.4700 | 05/26/2014 | — | — | — | — | |||||||||||||||||||||||||||
75,000 | 75,000 | (6) | — | 37.7000 | 04/27/2015 | — | — | — | — | |||||||||||||||||||||||||||
— | — | 35,000 | (7) | 53.7600 | 09/18/2014 | — | — | — | — | |||||||||||||||||||||||||||
— | — | — | — | — | 48,000 | (16) | 1,234,560 | — | — | |||||||||||||||||||||||||||
— | — | — | — | — | — | 45,000 | 1,157,400 | |||||||||||||||||||||||||||||
Michael O’Neill (21) | — | 125,000 | (8) | — | 37.800 | 12/03/2017 | — | — | — | — | ||||||||||||||||||||||||||
— | — | 10,000 | (9) | 43.470 | 12/03/2014 | — | — | — | — | |||||||||||||||||||||||||||
— | — | — | — | — | 27,500 | (17) | 707,300 | — | — | |||||||||||||||||||||||||||
Loren L. McFarland(22) | 50,000 | — | — | 8.312 | 05/05/2010 | — | — | — | — | |||||||||||||||||||||||||||
20,000 | — | — | 13.3050 | 05/23/2011 | — | — | — | — | ||||||||||||||||||||||||||||
14,000 | — | — | 19.0100 | 05/22/2012 | — | — | — | — | ||||||||||||||||||||||||||||
20,000 | — | — | 21.0000 | 05/21/2013 | — | — | — | — | ||||||||||||||||||||||||||||
18,750 | 6,250 | (10) | — | 32.1500 | 06/09/2014 | — | — | — | — | |||||||||||||||||||||||||||
10,000 | 10,000 | (11) | — | 37.7000 | 04/27/2015 | — | — | — | — | |||||||||||||||||||||||||||
— | — | — | — | — | 12,000 | (18) | 308,640 | — | — | |||||||||||||||||||||||||||
— | — | — | — | — | — | — | 25,000 | 643,000 | ||||||||||||||||||||||||||||
Joseph A. Newcomb | 31,250 | 93,750 | (12) | — | 41.2200 | 06/26/2016 | — | — | — | — | ||||||||||||||||||||||||||
— | — | 10,000 | (13) | 51.5200 | 09/18/2014 | — | — | — | — | |||||||||||||||||||||||||||
— | — | — | — | — | 16,000 | (19) | 411,520 | — | — | |||||||||||||||||||||||||||
— | — | — | — | — | — | — | 25,000 | 643,000 | ||||||||||||||||||||||||||||
Edward S. Northup | 31,250 | 93,750 | (14) | — | 52.6800 | 02/05/2017 | — | — | — | — | ||||||||||||||||||||||||||
— | — | 15,000 | (15) | 51.5200 | 09/18/2014 | — | — | — | — | |||||||||||||||||||||||||||
— | — | — | — | — | 26,400 | (20) | 679,008 | — | — |
(1) | Most stock options vest ratably over a four year period commencing on the date of grant, with 25% vesting on each anniversary of the date of grant. | |
(2) | Options granted under the Sub-Plan vest at 10% on March 31, 2008, 20% on March 31, 2009, 30% on March 31, 2010 and 40% on March 31, 2011 if the Company achieves certain specified EPS targets. The specified EPS target was not met for March 31, 2008 and the initial 10% did not vest. | |
(3) | The restrictions with respect to restricted stock awards lapse ratably over a five year period commencing on the date of grant, with 20% vesting on each anniversary of the date of grant. | |
(4) | The unvested shares consist of Performance Stock Units that will vest on March 31, 2009 only if the Company achieves certain specified targets. | |
(5) | These options were granted on May 26, 2004 and vest ratably over a four year period commencing on the date of grant, with 25% vesting on each anniversary of the date of grant. | |
(6) | These options were granted on April 27, 2005 and vest ratably over a four year period commencing on the date of grant, with 25% vesting on each anniversary of the date of grant. | |
(7) | These options were granted on September 18, 2007 and vest at 10% on March 31, 2008, 20% on March 31, 2009, 30% on March 31, 2010 and 40% on March 31, 2011 if the Company achieves certain specified EPS targets. The specified EPS target was not met for March 31, 2008 and the initial 10% did not vest. |
46
Table of Contents
(8) | These options were granted on December 3, 2007 and vest ratably over a four year period commencing on the date of grant, with 25% vesting on each anniversary of the date of grant. | |
(9) | These options were granted on December 3, 2007 and vest at 10% on March 31, 2008, 20% on March 31, 2009, 30% on March 31, 2010 and 40% on March 31, 2011 if the Company achieves certain specified EPS targets. The specified EPS target was not met for March 31, 2008 and the initial 10% did not vest. | |
(10) | These options were granted on June 9, 2004 and vest ratably over a four year period commencing on the date of grant, with 25% vesting on each anniversary of the date of grant. | |
(11) | These options were granted on April 27, 2005 and vest ratably over a four year period commencing on the date of grant, with 25% vesting on each anniversary of the date of grant. | |
(12) | These options were granted on June 26, 2006 and vest ratably over a four year period commencing on the date of grant, with 25% vesting on each anniversary of the date of grant. | |
(13) | These options were granted on September 18, 2007 and vest at 10% on March 31, 2008, 20% on March 31, 2009, 30% on March 31, 2010 and 40% on March 31, 2011 if the Company achieves certain specified EPS targets. The specified EPS target was not met for March 31, 2008 and the initial 10% did not vest. | |
(14) | These options were granted on February 5, 2007 and vest ratably over a four year period commencing on the date of grant, with 25% vesting on each anniversary of the date of grant. | |
(15) | These options were granted on September 18, 2007 and vest at 10% on March 31, 2008, 20% on March 31, 2009, 30% on March 31, 2010 and 40% on March 31, 2011 if the Company achieves certain specified EPS targets. The specified EPS target was not met for March 31, 2008 and the initial 10% did not vest. | |
(16) | The unvested shares were awarded on October 5, 2005, and vest ratably over a five year period commencing on the date of grant, with 20% of the total grant vesting on each anniversary of the date of grant. | |
(17) | The unvested shares were awarded on December 3, 2007, and vest ratably over a five year period commencing on the date of grant, with 20% of the total grant vesting on each anniversary of the date of grant. | |
(18) | The unvested shares were awarded on October 5, 2005, and vest ratably over a five year period commencing on the date of grant, with 20% of the total grant vesting on each anniversary of the date of grant. | |
(19) | The unvested shares were awarded on June 26, 2006, and vest ratably over a five year period commencing on the date of grant, with 20% of the total grant vesting on each anniversary of the date of grant. | |
(20) | The unvested shares were awarded on February 5, 2007, and vest ratably over a five year period commencing on the date of grant, with 20% of the total grant vesting on each anniversary of the date of grant. | |
(21) | In connection with the commencement of Mr. O’Neill’s employment with us, he received options to purchase 125,000 shares of common stock with an exercise price of $37.80, which vest ratably over four years, 27,500 shares of restricted stock, which vest ratably over five years, and 100,000 options under the Sub-Plan which vest at 10% on March 31, 2008, 20% on March 31, 2009, 30% on March 31, 2010 and 40% on March 31, 2011 if the Company achieves certain specified EPS targets. The specified EPS target was not met for March 31, 2008 and the initial 10% did not vest. | |
(22) | Mr. McFarland left the Company on November 12, 2007. |
(a) | (b) | (c) | ||||||
Stock Awards | ||||||||
Number of Shares | ||||||||
Acquired on | Value Realized on | |||||||
Name | Vesting (#) | Vesting ($) | ||||||
Joshua H. Levine | 16,000 | 761,120 | ||||||
Michael O’Neill | — | — | ||||||
Loren L. McFarland | 4,000 | 190,280 | ||||||
Joseph A. Newcomb | 4,000 | 163,240 | ||||||
Edward S. Northup | 6,600 | 209,814 |
47
Table of Contents
• | board members who are employees of the Company receive no additional compensation for their services as directors; | ||
• | each non-employee member of the board of directors receives an annual base fee of $60,000; | ||
• | the Chairman of the board, who is a non-employee director, receives an annual fee of $75,000; | ||
• | the Chairman of the Audit Committee, who is a non-employee director, receives an annual fee of $25,000; | ||
• | the Chairman of each of the Compensation Committee and the Nominating and Governance Committees, each of whom is also a non-employee director, receives an annual fee of $10,000; | ||
• | each member of a committee of the board of directors receives a per meeting fee of $1,000 for attending any committee meetings other than those scheduled on the same day or the day following the quarterly board meeting; and | ||
• | each member of the board of directors receives a per meeting fee of $1,000 for attendance at board meetings other than quarterly board meetings. |
(a) | (b) | (c) | (d) | (h) | ||||||||||||
Fees Earned or | Stock | Option | ||||||||||||||
Name(1) | Paid in Cash | Awards(2) | Awards(3) | Total | ||||||||||||
($) | ($) | ($) | ($) | |||||||||||||
Michael L. Emmons | 87,500 | 96,697 | 37,799 | 221,996 | ||||||||||||
Walter W. Faster | 65,333 | 96,697 | 18,309 | 180,339 | ||||||||||||
Margaret H. Jordan | 58,333 | 165,286 | 18,309 | 241,928 | ||||||||||||
Michael Nakonechny(4) | 10,333 | 52,223 | — | 62,556 | ||||||||||||
Katherine S. Napier | 60,333 | 165,286 | 18,309 | 243,928 | ||||||||||||
Burt E. Rosen | 32,283 | 87,394 | 18,309 | 137,986 | ||||||||||||
Ronald J. Rossi(5) | 69,500 | 96,697 | 18,309 | 184,506 | ||||||||||||
Joseph E. Whitters | 148,667 | 96,697 | 63,947 | 309,311 |
(1) | Director Joshua Levine is our President and Chief Executive Officer. He is not included in this table, as he receives no compensation for his services as a director. The compensation received by Mr. Levine as our employee is shown in the Fiscal Year 2008 Summary Compensation Table. |
48
Table of Contents
(2) | The amounts shown in column (c) reflect the dollar amount recognized for financial statement reporting purposes in accordance with SFAS 123(R) for restricted stock awards made for the fiscal year ended March 31, 2008 pursuant to our 2005 Plan, and thus may include amounts from awards granted in and prior to fiscal year 2008. As of March 31, 2008, each of the above held the aggregate number of restricted shares shown in Note 3 below. | |
(3) | The amounts shown in column (d) represent the compensation costs of stock options for financial reporting purposes for fiscal year 2008 under SFAS 123(R), rather than an amount paid to or realized by the director. The SFAS 123(R) value for options as of the grant date is spread over the requisite service period (four years). As of March 31, 2008, each of the above held the following aggregate number of stock options and restricted shares: |
Stock | Restricted | |||||||
Name | Options | Shares | ||||||
Michael L. Emmons | 22,500 | 4,915 | ||||||
Walter W. Faster | 62,500 | 4,915 | ||||||
Margaret H. Jordan | 2,500 | 6,000 | ||||||
Michael Nakonechny | — | — | ||||||
Katherine S. Napier | 2,500 | 6,000 | ||||||
Burt E. Rosen | 2,500 | 7,500 | ||||||
Ronald L. Rossi | 2,500 | 4,915 | ||||||
Joseph E. Whitters | 42,500 | 4,915 |
(4) | Mr. Nakonechny resigned from our board of directors in May 2007. In connection with his resignation, vesting was accelerated for all of his unvested stock options and restricted shares. | |
(5) | Mr. Rossi resigned from our board of directors in May 2008. |
49
Table of Contents
MENTOR CORPORATION 2005 LONG-TERM INCENTIVE PLAN
• | to select participants and determine the type(s) of award(s) that they are to receive; | ||
• | to determine the number of shares that are to be subject to awards and the terms and conditions of awards, including the price (if any) to be paid for the shares or the award; |
50
Table of Contents
• | to cancel, modify, or waive the Company’s rights with respect to, or modify, discontinue, suspend, or terminate any or all outstanding awards, subject to any required consents; | ||
• | to accelerate, or extend the vesting or exercisability, or extend the term of any or all outstanding awards; | ||
• | subject to the other provisions of the 2005 Plan, to make certain adjustments to an outstanding award and to authorize the conversion, succession or substitution of an award; and | ||
• | to allow the purchase price of an award or shares of the Company’s common stock to be paid in the form of cash, check, or electronic funds transfer, by the delivery of already-owned shares of the Company’s common stock or by a reduction of the number of shares deliverable pursuant to the award, by services rendered by the recipient of the award, by notice and third party payment or cashless exercise on such terms as the Administrator may authorize, or any other form permitted by law. |
• | The maximum number of shares subject to those options that are granted during any calendar year to any individual under the 2005 Plan is 500,000 shares. | ||
• | The maximum number of shares subject to all awards that are granted during any fiscal year to any individual under the 2005 Plan is 500,000 shares. This limit does not apply, however, to shares delivered in respect of compensation earned but deferred. | ||
• | “Performance-Based Awards” under Section 5.2 of the 2005 Plan payable only in cash and not related to shares and granted to a participant in any one calendar year will not provide for payment of more than $1,000,000. |
51
Table of Contents
52
Table of Contents
53
Table of Contents
54
Table of Contents
RESTRICTED STOCK AND | ||||||||||||||||||||||||||||
STOCK OPTIONS | PERFORMANCE STOCK UNITS | |||||||||||||||||||||||||||
Number | Number | Number | Number of | |||||||||||||||||||||||||
of Shares | of | of Shares | Number of | Shares/Units | ||||||||||||||||||||||||
Subject | Shares | Number of Shares | Subject | Shares/ Units | Outstanding and | |||||||||||||||||||||||
to Past | Acquired | Underlying Options | to Past | Vested | Unvested | |||||||||||||||||||||||
Option | On | as of June 27, 2008 | Restricted | as of | as of | |||||||||||||||||||||||
Name and Position | Grants | Exercise | Exercisable | Unexercisable | Stock/Unit Grants | June 27, 2008 | June 27, 2008 | |||||||||||||||||||||
Named Executive Officers: | ||||||||||||||||||||||||||||
Joshua H. Levine | 727,000 | 22,000 | 317,500 | 387,500 | 125,000 | 32,000 | 93,000 | |||||||||||||||||||||
Michael O’Neill | 225,000 | — | — | 225,000 | 27,500 | — | 27,500 | |||||||||||||||||||||
Loren L. McFarland | 79,000 | — | 74,000 | 5,000 | 45,000 | 8,000 | 37,000 | |||||||||||||||||||||
Joseph A. Newcomb | 225,000 | — | 62,500 | 162,500 | 45,000 | 8,000 | 37,000 | |||||||||||||||||||||
Edward Northup | 275,000 | — | 31,250 | 243,750 | 33,000 | 6,600 | 26,400 | |||||||||||||||||||||
Total, Named Executive Officers | 1,531,000 | 22,000 | 485,250 | 1,023,750 | 275,500 | 54,600 | 220,900 | |||||||||||||||||||||
Non-Employee Directors | ||||||||||||||||||||||||||||
Michael L. Emmons | 22,500 | — | 15,000 | 7,500 | 7,357 | 2,442 | 4,915 | |||||||||||||||||||||
Walter W. Faster | 62,500 | — | 60,000 | 2,500 | 7,357 | 2,442 | 4,915 | |||||||||||||||||||||
Margaret H. Jordan | 2,500 | — | — | 2,500 | 7,500 | 1,500 | 6,000 | |||||||||||||||||||||
Katherine S. Napier | 2,500 | — | — | 2,500 | 7,500 | 1,500 | 6,000 | |||||||||||||||||||||
Burt E. Rosen | 2,500 | — | — | 2,500 | 7,500 | — | 7,500 | |||||||||||||||||||||
Joseph E. Whitters | 42,500 | — | 30,000 | 12,500 | 7,357 | 2,442 | 4,915 | |||||||||||||||||||||
Total for Non-Employee Directors | 135,000 | — | 105,000 | 30,000 | 44,571 | 10,326 | 34,245 | |||||||||||||||||||||
All employees, including all current officers who are not named executive officers or directors, as a group | 4,974,300 | 576,166 | 1,265,789 | 3,132,345 | 672,991 | 114,030 | 558,961 |
55
Table of Contents
Fiscal 2008 | Fiscal 2007 | |||||||
Audit Fees (1) | $ | 1,347,871 | $ | 1,035,976 | ||||
Audit-Related Fees (2) | 185,167 | 117,319 | ||||||
Tax Fees (3) | 37,200 | 104,315 | ||||||
All Other Fees (4) | — | 1,500 | ||||||
TOTAL | $ | 1,570,238 | $ | 1,259,110 | ||||
(1) | Audit Fees — Fees for professional services performed by Ernst & Young LLP for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s Form 10-Q filings, and the audit of our internal controls over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002, consents and comfort letters and services that are normally provided in connection with statutory and regulatory filings or engagements. | |
(2) | Audit-Related Fees — Fees for assurance and related services performed by Ernst & Young LLP. This includes professional services related to the audit of the financial statements for our urology business in conjunction with our divestiture of that business and assistance performing due diligence in connection with potential acquisitions and post-acquisition assistance. | |
(3) | Tax Fees — Fees for professional services performed by Ernst & Young LLP with respect to tax compliance. This includes preparation or review of original and amended tax returns for the Company and/or its subsidiaries and assistance in responses to various tax authorities. | |
(4) | All Other Fees — Fees related to the Ernst & Young LLP online subscription service. |
56
Table of Contents
BOARD OF DIRECTORS
Walter W. Faster
Joseph E. Whitters
57
Table of Contents
Percentage of Class | ||||||||
Shares of Common | of Shares | |||||||
Stock Beneficially | Beneficially | |||||||
Beneficial Owner | Owned | Owned(1) | ||||||
Fidelity Management & Research (US)(2) 82 Devonshire Street Boston, MA 02109 | 5,023,671 | 14.59 | % | |||||
Neuberger Berman, LLC(3) 605 Third Avenue New York, NY 10158 | 2,484,374 | 7.22 | % | |||||
HealthCor Management, L.P.(4) 152 West 57th Street, 57th Floor New York, NY 10019 | 2,200,000 | 6.39 | % | |||||
Kornitzer Capital Management, Inc.(5) P.O. Box 918 Shawnee Mission, KS 66201 | 2,061,400 | 5.99 | % | |||||
Directors | ||||||||
Michael L. Emmons(6) | 26,243 | * | ||||||
Walter W. Faster(7) | 204,755 | * | ||||||
Margaret H. Jordan | 7,800 | * | ||||||
Katherine S. Napier | 7,746 | * | ||||||
Burt E. Rosen | 7,500 | * | ||||||
Joseph E. Whitters(8) | 44,857 | * | ||||||
Named Executive Officers | ||||||||
Joshua H. Levine(9) | 469,987 | 1.38 | % | |||||
Michael O’Neill | 27,500 | * | ||||||
Joseph A. Newcomb(10) | 81,070 | * | ||||||
Edward S. Northup(11) | 58,108 | * | ||||||
Loren L. McFarland(12) | 163,872 | * | ||||||
All current directors and executive officers as a group (10 persons)(13) | 935,566 | 2.73 | % |
* | Less than 1%. | |
(1) | Applicable percentage ownership is based on 33,758,085 shares of our common stock outstanding as of June 27, 2008. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock issuable pursuant to options that are currently exercisable or exercisable within 60 days of June 27, 2008 are deemed to be outstanding and to be beneficially owned by the person holding such options for the purpose of computing the percentage ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Except in cases in which spouses share authority under applicable law or as indicated in the footnotes to this table, we believe that each shareholder identified in the table possesses sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by such shareholder. |
58
Table of Contents
(2) | According to a Schedule 13G/A filed by FMR LLC and Edward C. Johnson 3d with the SEC on February 14, 2008, FMR LLC and Edward C. Johnson, in his capacity as Chairman of FMR LLC, have sole power to dispose of 5,023,671 shares. The following affiliates of FMR LLC are also beneficial owners of such shares in the following amounts: Fidelity Mid Cap Stock Fund, 1,750,000 shares and Magellan Fund, 3,094,971 shares. | |
(3) | According to a Schedule 13G/A filed by Neuberger Berman Inc., Neuberger Berman LLC, Neuberger Berman Management Inc. and Neuberger Berman Equity Funds with the SEC on February 12, 2008, Neuberger Berman Inc. and Neuberger Berman LLC have sole voting power of 44,384 shares, shared voting power of 2,061,900 shares and shared dispositive power of 2,484,374 shares. Neuberger Berman Management Inc. has shared voting and dispositive power over 2,061,900 shares. Neuberger Berman Equity Funds has shared voting and dispositive power over 2,047,300 shares. | |
(4) | According to a Schedule 13G/A filed by HealthCor Management, L.P., HealthCor Associates, LLC, HealthCor Offshores, Ltd., HealthCor Hybrid Offshore, Ltd., HealthCor Group, LLC, HealthCor Capital, L.P., HealthCor, L.P., Joseph Healey, and Arthur Cohen with the SEC on February 13, 2008, HealthCor Management, L.P., HealthCor Associates, LLC, Joseph Healey, and Arthur Cohen have the shared power to vote and dispose of 2,200,000. HealthCor Offshores, Ltd. has the shares voting and dispositive power of 1,480,073 shares. HealthCor Hybrid Offshore, Ltd. has voting and dispositive power over 310,702 shares. HealthCor Group, LLC, HealthCor Capital, L.P., and HealthCor, L.P. have voting and dispositive power over 409,225 shares. | |
(5) | According to a Schedule 13G filed by Kornitzer Capital Management, Inc. with the SEC on March 5, 2008, Kornitzer Capital Management has sole power to vote 2,061,400 shares, sole power to dispose of 1,935,060 shares and shared power to dispose of 126,340 shares. | |
(6) | Includes options to purchase 15,000 shares exercisable within 60 days of June 27, 2008. | |
(7) | Includes options to purchase 60,000 shares exercisable within 60 days of June 27, 2008. | |
(8) | Includes options to purchase 30,000 shares exercisable within 60 days of June 27, 2008. | |
(9) | Includes options to purchase 317,500 shares exercisable within 60 days of June 27, 2008. | |
(10) | Includes options to purchase 62,500 shares exercisable within 60 days of June 27, 2008. | |
(11) | Includes options to purchase 31,250 shares exercisable within 60 days of June 27, 2008. | |
(12) | Includes options to purchase 144,000 shares exercisable within 60 days of June 27, 2008. | |
(13) | Does not include Loren McFarland, who is no longer employed by the Company. |
59
Table of Contents
( a ) | ( b ) | ( c ) | ||||||||||
Number of securities | ||||||||||||
Weighted-average | remaining available for | |||||||||||
Number of securities to | exercise price of | future issuance under | ||||||||||
be issued upon exercise | outstanding | equity compensation plans | ||||||||||
of outstanding options, | options, warrants | (excluding securities | ||||||||||
Plan Category | warrants and rights | and rights | reflected in column (a)) | |||||||||
Equity compensation plans approved by security holders | 4,637,946 | $ | 40.39 | 183,876 | ||||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
Total | 4,637,946 | $ | 40.39 | 183,876 |
60
Table of Contents
61
Table of Contents
Attention: Corporate Secretary
201 Mentor Drive
Santa Barbara, CA 93111
62
Table of Contents
• | Annual Report on Form 10-K for the year ended March 31, 2008; | ||
• | Current Report on Form 8-K filed on May 20, 2008; and | ||
• | All reports and definitive proxy or information statements filed by Mentor or Mentor Holdings pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this proxy statement/prospectus and before the date of the annual meeting. |
63
Table of Contents
Attn: Corporate Secretary
201 Mentor Drive
Santa Barbara, CA 93111
Telephone: (805) 879-6000
BY ORDER OF THE BOARD OF DIRECTORS | ||||
/s/ Joseph A. Newcomb | ||||
Joseph A. Newcomb | ||||
Secretary | ||||
64
Table of Contents
1
Table of Contents
2
Table of Contents
3
Table of Contents
4
Table of Contents
5
Table of Contents
MENTOR INTERNATIONAL HOLDINGS, INC. | ||||
By: | /s/ Joshua H. Levine | |||
Name: | Joshua H. Levine | |||
Title: | President and Chief Executive Officer | |||
MENTOR CORPORATION | ||||
By: | /s/ Joshua H. Levine | |||
Name: | Joshua H. Levine | |||
Title: | President and Chief Executive Officer | |||
MNT MERGER SUB, INC. | ||||
By: | /s/ Joshua H. Levine | |||
Name: | Joshua H. Levine | |||
Title: | President and Chief Executive Officer | |||
Table of Contents
Mentor International Holdings, Inc.
Table of Contents
OF MENTOR INTERNATIONAL HOLDINGS, INC.
1
Table of Contents
2
Table of Contents
By: | ||||
Joshua H. Levine, President and Chief Executive Officer |
3
Table of Contents
MENTOR INTERNATIONAL HOLDINGS, INC.
1
Table of Contents
2
Table of Contents
3
Table of Contents
4
Table of Contents
5
Table of Contents
6
Table of Contents
7
Table of Contents
8
Table of Contents
9
Table of Contents
10
Table of Contents
VOTING OF SECURITIES OWNED BY THE CORPORATION
11
Table of Contents
12
Table of Contents
13
Table of Contents
14
Table of Contents
15
Table of Contents
16
Table of Contents
Joseph A. Newcomb, Secretary | ||||
Table of Contents
1
Table of Contents
2
Table of Contents
3
Table of Contents
4
Table of Contents
5
Table of Contents
6
Table of Contents
• | services rendered by the recipient of such award; | ||
• | cash, check payable to the order of the Corporation, or electronic funds transfer; | ||
• | notice and third party payment in such manner as may be authorized by the Administrator; | ||
• | the delivery of previously owned shares of Common Stock; | ||
• | by a reduction in the number of shares otherwise deliverable pursuant to the award; or | ||
• | subject to such procedures as the Administrator may adopt, pursuant to a “cashless exercise” with a third party who provides financing for the purposes of (or who otherwise facilitates) the purchase or exercise of awards. |
7
Table of Contents
8
Table of Contents
9
Table of Contents
10
Table of Contents
11
Table of Contents
12
Table of Contents
13
Table of Contents
14
Table of Contents
15
Table of Contents
ANNUAL MEETING OF SHAREHOLDERS — SEPTEMBER 15, 2008
BOARD OF DIRECTORS OF MENTOR CORPORATION
1. | To approve and adopt the Agreement and Plan of Merger, dated as of July 9, 2008, by and among Mentor Corporation, Mentor International Holdings, Inc. and MNT Merger Sub, Inc. | ||
o FOR o AGAINST o ABSTAIN | |||
2. | To elect a board of seven directors to serve until the next annual meeting, or until their successors are duly elected and qualified. |
o FOR ALL nominees | o WITHHOLD AUTHORITY for | o EXCEPTIONS* | ||
listed below* | all nominees listed | |||
below* |
* | INSTRUCTION: To vote for or withhold authority to vote for all nominees, check the appropriate box above; to withhold authority to vote for an individual while voting for others, check the “Exceptions” box and line through or otherwise strike out the name of the nominee(s) for whom authority is withheld. |
3. | To approve the amendment and restatement of the Mentor Corporation 2005 Long-Term Incentive Plan such that, among other things, the aggregate number of shares of the Company’s common stock available for grant is increased by 2,500,000 shares. | ||
o FOR o AGAINST o ABSTAIN | |||
4. | To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending March 31, 2009. | ||
o FOR o AGAINST o ABSTAIN | |||
5. | In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the annual meeting. |
Table of Contents
Date: _____________________, 2008 | ||||
Date: _____________________, 2008 |