Exhibit 10.2
MENTOR CORPORATION
2005 LONG-TERM INCENTIVE PLAN
(as amended through September 17, 2007)
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
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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);
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(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.
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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 7,600,000 1 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) In no event will greater than ten percent (10%) of the
total shares of Common Stock available for award grant purposes
under this Plan be used for purposes of granting certain
“Special Full-Value Awards” referred to in Section
5.1.4.
(e) Additional limits with respect to Performance-Based Awards
are set forth in Section 5.2.3.
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The current aggregate Share Limit for this Plan is 6,000,000
shares. Shareholders are being asked to approve an amendment to
this Plan that would increase the aggregate share limit by an
additional 1,600,000 shares so that the new aggregate Share Limit
for this Plan would be 7,600,000 shares. |
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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
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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.
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5.1.4
Minimum Vesting Requirements . Except for any accelerated
vesting required or permitted pursuant to Section 7 and except
as otherwise provided in the following provisions of this
Section 5.1.4, and subject to such additional vesting
requirements or conditions as the Administrator may establish with
respect to the award, each award granted under this Plan that is a
Full-Value Award (as defined below) and payable in shares of Common
Stock shall be subject to the following minimum vesting
requirements: (a) if the award includes a performance-based
vesting condition, the award shall not vest earlier than the first
anniversary of the date of grant of the award and vesting shall
occur only if the award holder is employed by, a director of, or
otherwise providing services to the Corporation or one of its
Subsidiaries on such vesting date; and (b) if the award does
not include a performance-based vesting condition, the award shall
not vest more rapidly than in monthly installments over the
three-year period immediately following the date of grant of the
award and vesting of any vesting installment of the award shall
occur only if the award holder is employed by, a director of, or
otherwise providing services to the Corporation or one of its
Subsidiaries on the date such installment is scheduled to vest;
provided that the Administrator may accelerate or provide in the
applicable award agreement for the accelerated vesting of any
Full-Value Award in connection with a change in control of the
award holder’s employer (or a parent thereof) or of the
reportable segment of the Corporation that employs the award
holder, the termination of the award holder’s employment
(including a termination of employment due to the award
holder’s death, disability or retirement, but not including a
termination of employment by the award holder’s employer for
cause), or as consideration or partial consideration for a release
by the award holder of pending or threatened claims against the
Corporation, the award holder’s employer, or any of their
respective officers, directors or other affiliates (regardless of
whether the release is given in connection with a termination of
employment by the award holder’s employer for cause or other
circumstances). The Administrator may, however, accelerate or
provide in the applicable award agreement for the accelerated
vesting of any Full-Value Award in circumstances not contemplated
by the preceding sentence, and/or provide for a vesting schedule
that is shorter than the minimum schedule contemplated by the
preceding sentence, in such circumstances as the Administrator may
deem appropriate; provided, however, that the portion of any such
Full-Value Award that vests earlier than the minimum vesting dates
that would be applicable pursuant to the minimum vesting
requirements of the preceding sentence (or, as to any accelerated
vesting, provides for accelerated vesting other than in the
circumstances contemplated by the preceding sentence) shall count
against the applicable share limits of Section 4.2 as a
Special Full-Value Award. For purposes of this Plan that is neither
(1) a delivery of shares in respect of compensation earned but
deferred nor (2) a stock option.
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.
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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 ad
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