EXHIBIT 10.9
MENTOR
CORPORATION
2005 LONG-TERM INCENTIVE
PLAN
1.
PURPOSE OF PLAN
The purpose of
this Mentor Corporation 2005 Long-Term Incentive Plan (this "
Plan ") of Mentor Corporation, a
Minnesota corporation (the " Corporation "), is to promote
the success of the Corporation and to increase
shareholder value by providing an additional means through the
grant of awards to attract, motivate, retain and
reward selected employees and other eligible persons. This
Plan amends and restates the Corporation's
Amended 2000 Long-Term Incentive Plan. The Share Limit set
forth in Section 4.2 applies to awards granted
under this Plan before and after this amendment and restatement of
this Plan. For purposes of clarity, no
additional shares are added to the Share Limit as a result of this
amendment and restatement.
2.
ELIGIBILITY
The Administrator
(as such term is defined in Section 3.1) may grant awards under
this Plan only to those persons
that the Administrator determines to be Eligible Persons. An
" Eligible Person " is any person who is either: (a) an
officer (whether or not a director) or employee of the Corporation
or one of its Subsidiaries; (b) a director of the
Corporation or one of its Subsidiaries; or (c) an individual
consultant or advisor who renders or has rendered bona
fide services (other than services in connection with the offering
or sale of securities of the Corporation or one of
its Subsidiaries in a capital-raising transaction or as a market
maker or promoter of securities of the Corporation
or one of its Subsidiaries) to the Corporation or one of its
Subsidiaries and who is selected to participate in this
Plan by the Administrator; provided, however, that a person who is
otherwise an Eligible Person under clause
(c) above may participate in this Plan only if such participation
would not adversely affect either the Corporation's
eligibility to use Form S-8 to register under the Securities Act of
1933, as amended (the " Securities Act "), the
offering and sale of shares issuable under this Plan by the
Corporation or the Corporation's compliance with any
other applicable laws. An Eligible Person who has been
granted an award (a "participant") may, if otherwise
eligible, be granted additional awards if the Administrator shall
so determine. As used herein, " Subsidiary "
means any corporation or other entity a majority of whose
outstanding voting stock or voting power is beneficially
owned directly or indirectly by the Corporation; and " Board
" means the Board of Directors of the Corporation.
3.
PLAN ADMINISTRATION
3.1 The Administrator
. This Plan
shall be administered by and all awards under this Plan shall be
authorized
by the Administrator. The " Administrator " means the
Board or one or more committees appointed
by the Board or another committee (within its delegated authority)
to administer all or certain aspects of this
Plan. Any such committee shall be comprised solely of one or
more directors or such number of directors as
may be required under applicable law. A committee may
delegate some or all of its authority to another
committee so constituted. The Board or a committee comprised
solely of directors may also delegate, to the
extent permitted by applicable law, to one or more officers of the
Corporation, its powers under this Plan (a)
to designate the officers and employees of the Corporation and its
Subsidiaries who will receive grants of
awards under this Plan, and (b) to determine the number of shares
subject to, and the other terms and
conditions of, such awards. The Board may delegate different
levels of authority to different committees
with administrative and grant authority under this Plan.
Unless otherwise provided in the Bylaws of the
Corporation or the applicable charter of any Administrator: (a) a
majority of the members of the acting
Administrator shall constitute a quorum, and (b) the vote of a
majority of the members present assuming
the presence of a quorum or the unanimous written consent of the
members of the Administrator shall
constitute action by the acting Administrator.
With respect to awards intended to satisfy the requirements for
performance-based compensation under
Section 162(m) of the Internal Revenue Code of 1986, as amended
(the " Code "), this Plan shall be
administered by a committee consisting solely of two or more
outside directors (as this requirement is
applied under Section 162(m) of the Code); provided, however, that
the failure to satisfy such
requirement shall not affect the validity of the action of any
committee otherwise duly authorized and
acting in the matter. Award grants, and transactions in or
involving awards, intended to be exempt
under Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the " Exchange Act "),
must be duly and timely authorized by the Board or a committee
consisting solely of two or more
non-employee directors (as this requirement is applied under Rule
16b-3 promulgated under the
Exchange Act). To the extent required by any applicable
listing agency, this Plan shall be
administered by a committee composed entirely of independent
directors (within the meaning of the
applicable listing agency).
3.2
Powers of the Administrator . Subject to the
express provisions of this Plan, the Administrator is
authorized and empowered to do all things necessary or desirable in
connection with the
authorization of awards and the administration of this Plan (in the
case of a committee or delegation
to one or more officers, within the authority delegated to that
committee or person(s)), including,
without limitation, the authority to:
(a) determine eligibility and, from among those
persons determined to be eligible, the particular
Eligible Persons who will receive an award under this
Plan;
(b) grant awards to Eligible Persons, determine
the price at which securities will be offered or
awarded and the number of securities to be offered or awarded to
any of such persons,
determine the other specific terms and conditions of such awards
consistent with the express
limits of this Plan, establish the installments (if any) in which
such awards shall become
exercisable or shall vest (which may include, without limitation,
performance and/or time-based
schedules), or determine that no delayed exercisability or vesting
is required, establish any
applicable performance targets, and establish the events of
termination or reversion of such
awards;
(c) approve the forms of award agreements (which
need not be identical either as to type of award or
among participants);
(d) construe and interpret this Plan and any
agreements defining the rights and obligations of the
Corporation, its Subsidiaries, and participants under this Plan,
further define the terms used in
this Plan, and prescribe, amend and rescind rules and regulations
relating to the administration
of this Plan or the awards granted under this Plan;
(e) cancel, modify, or waive the Corporation's
rights with respect to, or modify, discontinue,
suspend, or terminate any or all outstanding awards, subject to any
required consent under
Section 8.6.5;
(f) accelerate or extend the vesting
or exercisability or extend the term of any or all such
outstanding
awards (in the case of options, within the maximum ten-year term of
such awards) in such
circumstances as the Administrator may deem appropriate (including,
without limitation, in
connection with a termination of employment or services or other
events of a personal nature)
subject to any required consent under Section 8.6.5;
(g) adjust the number of shares of Common Stock
subject to any award, adjust the price of any or all
outstanding awards or otherwise change previously imposed terms and
conditions, in such
circumstances as the Administrator may deem appropriate, in each
case subject to Sections 4
and 8.6, and provided that in no case (except due to an adjustment
contemplated by Section 7
or any repricing that may be approved by shareholders) shall such
an adjustment constitute
a repricing (by amendment, cancellation and regrant, exchange or
other means) of the per
share exercise price of any option;
(h) determine the date of grant of an award,
which may be a designated date after but not before the
date of the Administrator's action (unless otherwise designated by
the Administrator, the date of
grant of an award shall be the date upon which the Administrator
took the action granting an award);
(i) determine whether, and the extent
to which, adjustments are required pursuant to Section 7 hereof
and authorize the termination, conversion, substitution or
succession of awards upon the
occurrence of an event of the type described in Section
7;
(j) acquire or settle (subject to
Sections 7 and 8.6) rights under awards in cash, stock of
equivalent
value, or other consideration; and
(k) determine the fair market value of the Common
Stock or awards under this Plan from time to time
and/or the manner in which such value will be
determined.
3.3 Binding Determinations
. Any action
taken by, or inaction of, the Corporation, any Subsidiary, or
the
Administrator relating or pursuant to this Plan and within its
authority hereunder or under applicable law
shall be within the absolute discretion of that entity or body and
shall be conclusive and binding upon
all persons. Neither the Board nor any Board committee, nor
any member thereof or person acting at
the direction thereof, shall be liable for any act, omission,
interpretation, construction or determination
made in good faith in connection with this Plan (or any award made
under this Plan), and all such persons
shall be entitled to indemnification and reimbursement by the
Corporation in respect of any claim, loss,
damage or expense (including, without limitation, attorneys' fees)
arising or resulting therefrom to the
fullest extent permitted by law and/or under any directors and
officers liability insurance coverage that
may be in effect from time to time.
3.4 Reliance on Experts
. In making
any determination or in taking or not taking any action under this
Plan, the
Board or a committee, as the case may be, may obtain and may rely
upon the advice of experts, including
employees and professional advisors to the Corporation. No
director, officer or agent of the Corporation or
any of its Subsidiaries shall be liable for any such action or
determination taken or made or omitted in
good faith.
3.5 Delegation . The Administrator may
delegate ministerial, non-discretionary functions to individuals
who are
officers or employees of the Corporation or any of its Subsidiaries
or to third parties.
4.
SHARES OF COMMON STOCK SUBJECT TO THE PLAN; SHARE
LIMITS
4.1 Shares Available
. Subject
to the provisions of Section 7.1, the capital stock that may be
delivered under
this Plan shall be shares of the Corporation's authorized but
unissued Common Stock and any shares of its
Common Stock held as treasury shares. For purposes of this
Plan, " Common Stock " shall mean the
common stock of the Corporation and such other securities or
property as may become the subject of
awards under this Plan, or may become subject to such awards,
pursuant to an adjustment made under
Section 7.1.
4.2 Share Limits
. The
maximum number of shares of Common Stock that may be delivered
pursuant to awards
granted to Eligible Persons under this Plan is 6,000,000 shares
(the " Share Limit "). The following limits
also apply with respect to awards granted under this
Plan:
(a) The maximum number of shares of Common Stock
that may be delivered pursuant to options qualified
as incentive stock options granted under this Plan is 6,000,000
shares.
(b) The maximum number of shares of Common
Stock subject to options that are granted during any
fiscal year to any individual under this Plan is 500,000
shares.
(c) The maximum number of shares of Common
Stock subject to all awards that are granted during any
fiscal year to any individual under this Plan is 500,000
shares. This limit does not apply, however, to
shares delivered in respect of compensation earned but
deferred.
(d) Additional limits with respect to
Performance-Based Awards are set forth in Section 5.2.3.
Each of the foregoing numerical limits is subject to adjustment as
contemplated by Section 4.3, Section 7.1,
and Section 8.10.
4.3 Awards Settled in Cash, Reissue of
Awards and Shares . To the extent that an award is
settled in cash
or a form other than shares of Common Stock, the shares that would
have been delivered had there been no
such cash or other settlement shall not be counted against the
shares available for issuance under this Plan.
In the event that shares of Common Stock are delivered in respect
of a dividend equivalent right, only the
actual number of shares delivered with respect to the award shall
be counted against the share limits of this
Plan. To the extent that shares of Common Stock are delivered
pursuant to the exercise of a stock option,
the number of underlying shares as to which the exercise related
shall be counted against the applicable
share limits under Section 4.2, as opposed to only counting the
shares actually issued. Shares that are
subject to or underlie awards which expire or for any reason are
cancelled or terminated, are forfeited, fail to
vest, or for any other reason are not paid or delivered under this
Plan shall again be available for subsequent
awards under this Plan. Refer to Section 8.10 for application
of the foregoing share limits with respect to
assumed awards. The foregoing adjustments to the share limits
of this Plan are subject to any applicable
limitations under Section 162(m) of the Code with respect to awards
intended as performance-based
compensation thereunder.
4.4 Reservation of Shares; No Fractional
Shares; Minimum Issue . The
Corporation shall at all times reserve
a number of shares of Common Stock sufficient to cover the
Corporation's obligations and contingent
obligations to deliver shares with respect to awards then
outstanding under this Plan (exclusive of any
dividend equivalent obligations to the extent the Corporation has
the right to settle such rights in cash).
No fractional shares shall be delivered under this Plan. The
Administrator may pay cash in lieu of any
fractional shares in settlements of awards under this Plan.
No fewer than 100 shares may be purchased on
exercise of any award (or, in the case of stock purchase rights, no
fewer than 100 rights may be exercised
at any one time) unless the total number purchased or exercised is
the total number at the time available
for purchase or exercise under the award.
5.
AWARDS
5.1 Type and Form of Awards
. The
Administrator shall determine the type or types of award(s) to be
made
to each selected Eligible Person. Awards may be granted
singly, in combination or in tandem. Awards
also may be made in combination or in tandem with, in replacement
of, as alternatives to, or as the
payment form for grants or rights under any other employee or
compensation plan of the Corporation or
one of its Subsidiaries. The types of awards that may be
granted under this Plan are:
5.1.1 Stock Options
. A stock
option is the grant of a right to purchase a specified number of
shares of
Common Stock during a specified period as determined by the
Administrator. An option may be
intended as an incentive stock option within the meaning of Section
422 of the Code (an " ISO ") or
a nonqualified stock option (an option not intended to be an
ISO). The award agreement for an
option will indicate if the option is intended as an ISO; otherwise
it will be deemed to be a
nonqualified stock option. The maximum term of each option
(ISO or nonqualified) shall be ten (10)
years. The per share exercise price for each option shall be
not less than 100% of the fair market
value of a share of Common Stock on the date of grant of the
option, except in the case of a stock
option granted retroactively in tandem with or as a substitution
for another award, the per share
exercise price may be no lower than the fair market value of a
share of Common Stock on the date
such other award was granted (to the extent consistent with
Sections 422 and 424 of the Code in
the case of options intended as incentive stock options).
When an option is exercised, the exercise
price for the shares to be purchased shall be paid in full in cash
or such other method permitted by
the Administrator consistent with Section 5.5.
5.1.2 Additional Rules Applicable to
ISOs . To the extent that the
aggregate fair market value
(determined at the time of grant of the applicable option) of stock
with respect to which ISOs first
become exercisable by a participant in any calendar year exceeds
$100,000, taking into account both
Common Stock subject to ISOs under this Plan and stock subject to
ISOs under all other plans of the
Corporation or one of its Subsidiaries (or any parent or
predecessor corporation to the extent required
by and within the meaning of Section 422 of the Code and the
regulations promulgated thereunder),
such options shall be treated as nonqualified stock options.
In reducing the number of options treated
as ISOs to meet the $100,000 limit, the most recently granted
options shall be reduced first. To the
extent a reduction of simultaneously granted options is necessary
to meet the $100,000 limit, the
Administrator may, in the manner and to the extent permitted by
law, designate which shares of
Common Stock are to be treated as shares acquired pursuant to the
exercise of an ISO. ISOs may
only be granted to employees of the Corporation or one of its
subsidiaries (for this purpose, the term
"subsidiary" is used as defined in Section 424(f) of the Code,
which generally requires an unbroken
chain of ownership of at least 50% of the total combined voting
power of all classes of stock of each
subsidiary in the chain beginning with the Corporation and ending
with the subsidiary in question).
There shall be imposed in any award agreement relating to ISOs such
other terms and conditions
as from time to time are required in order that the option be an
"incentive stock option" as that term
is defined in Section 422 of the Code. No ISO may be granted
to any person who, at the time the
option is granted, owns (or is deemed to own under Section 424(d)
of the Code) shares of
outstanding Common Stock possessing more than 10% of the total
combined voting power of all
classes of stock of the Corporation, unless the exercise price of
such option is at least 110% of
the fair market value of the stock subject to the option and such
option by its terms is not
exercisable after the expiration of five years from the date such
option is granted.
5.1.3 Other Awards . The other types of
awards that may be granted under this Plan include: (a) stock
bonuses, restricted stock, performance stock, stock units, phantom
stock, dividend equivalents, or
similar rights to purchase or acquire shares, whether at a fixed or
variable price or ratio related to the
Common Stock, upon the passage of time, the occurrence of one or
more events, or the satisfaction
of performance criteria or other conditions, or any combination
thereof; (b) any similar securities with
a value derived from the value of or related to the Common Stock
and/or returns thereon; or (c) cash
awards granted consistent with Section 5.2 below.
5.2 Section 162(m) Performance-Based Awards
. Without limiting the
generality of the foregoing, any of the
types of awards listed in Section 5.1.3 above may be, and options
granted with an exercise price not less
than the fair market value of a share of Common Stock at the date
of grant (" Qualifying Options ")
typically will be, granted as awards intended to satisfy the
requirements for "performance-based
compensation" within the meaning of Section 162(m) of the Code ("
Performance-Based Awards " ). The
grant, vesting, exercisability or payment of Performance-Based
Awards may depend (or, in the case of
Qualifying Options, may also depend) on the degree of achievement
of one or more performance goals
relative to a pre-established targeted level or level using one or
more of the Business Criteria set forth
below (on an absolute or relative basis) for the Corporation on a
consolidated basis or for one or more of
the Corporation's subsidiaries, segments, divisions or business
units, or any combination of the foregoing.
Any Qualifying Option shall be subject only to the requirements of
Sections 5.2.1 and 5.2.3 in order for
such award to satisfy the requirements for "performance-based
compensation" under Section 162(m) of the
Code. Any other Performance-Based Award shall be subject to
all of the following provisions of this
Section 5.2.
5.2.1 Class; Administrator
. The eligible class of persons
for Performance-Based Awards under this
Section 5.2 shall be officers and employees of the Corporation
or one of its Subsidiaries. The
Administrator approving Performance-Based Awards or making any
certification required pursuant
to Section 5.2.4 must be constituted as provided in Section 3.1 for
awards that are intended as
performance-based compensation under Section 162(m) of the
Code.
5.2.2 Performance Goals
. The specific performance goals
for Performance-Based Awards (other than
Qualifying Options) shall be, on an absolute or relative basis,
established based on one or more
of the following business criteria (" Business Criteria ")
as selected by the Administrator in its sole
discretion: earnings per share, cash flow (which means cash
and cash equivalents derived from
either net cash flow from operations or net cash flow from
operations, financing and investing
activities), total shareholder return, gross revenue, revenue
growth, operating income (before or
after taxes), net earnings (before or after interest, taxes,
depreciation and/or amortization), return
on equity or on assets or on net investment, cost containment or
reduction, or any combination
thereof. These terms are used as applied under generally
accepted accounting principles or in
the financial reporting of the Corporation or of its
Subsidiaries. To qualify awards as
performance-based under Section 162(m), the applicable Business
Criterion (or Business Criteria,
as the case may be) and specific performance goal or goals
("targets") must be established and
approved by the Administrator during the first 90 days of the
performance period (and, in the case
of performance periods of less than one year, in no event after 25%
or more of the performance
period has elapsed) and while performance relating to such
target(s) remains substantially
uncertain within the meaning of Section 162(m) of the Code.
Performance targets shall be
adjusted to mitigate the unbudgeted impact of material, unusual or
nonrecurring gains and losses,
accounting changes or other extraordinary events not foreseen at
the time the targets were set
unless the Administrator provides otherwise at the time of
establishing the targets. The applicable
performance measurement period may not be less than three months
nor more than 10 years.
5.2.3 Form of Payment; Maximum
Performance-Based Award . Grants or awards under
this
Section 5.2 may be paid in cash or shares of Common Stock or any
combination thereof. Grants
of Qualifying Options to any one participant in any one fiscal year
shall be subject to the limit set
forth in Section 4.2(b). The maximum number of shares of
Common Stock which may be delivered
pursuant to Performance-Based Awards (other than Qualifying Options
and other than cash awards
covered by the following sentence) that are granted to any one
participant in any one fiscal year
shall not exceed 100,000 shares, either individually or in the
aggregate, subject to adjustment as
provided in Section 7.1. In addition, the aggregate amount of
compensation to be paid to any one
participant in respect of all Performance-Based Awards payable only
in cash and not related to
shares of Common Stock and granted to that participant in any one
fiscal year shall not exceed
$1,000,000. Awards that are cancelled during the year shall
be counted against these limits to the
extent permitted by Section 162(m) of the Code.
5.2.4 Certification of Payment
. Before any Performance-Based
Award under this Section 5.2 (other than
Qualifying Options) is paid and to the extent required to qualify
the award as performance-based
compensation within the meaning of Section 162(m) of the Code, the
Administrator must certify in
writing that the performance target(s) and any other material terms
of the Performance-Based Award
were in fact timely satisfied.
5.2.5 Reservation of Discretion
. The Administrator will have
the discretion to determine the restrictions
or other limitations of the individual awards granted under this
Section 5.2 including the authority to
reduce awards, payouts or vesting or to pay no awards, in its sole
discretion, if the Administrator
preserves such authority at the time of grant by language to this
effect in its authorizing resolutions
or otherwise.
5.2.6 Expiration of Grant Authority
. As required pursuant to
Section 162(m) of the Code and the
regulations promulgated thereunder, the Administrator's authority
to grant new awards that are
intended to qualify as performance-based compensation within the
meaning of Section 162(m) of
the Code (other than Qualifying Options) shall terminate upon the
first meeting of the Corporation's
shareholders that occurs in the fifth year following the year in
which the Corporation's shareholders
first approve this restated Plan.
5.3 Award Agreements
. Each
award shall be evidenced by a written award agreement in the form
approved by
the Administrator and executed on behalf of the Corporation and, if
required by the Administrator, executed
by the recipient of the award. The Administrator may
authorize any officer of the Corporation (other than the
particular award recipient) to execute any or all award agreements
on behalf of the Corporation. The award
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