EXHIBIT 10.4

MENTOR CORPORATION

2005 LONG-TERM INCENTIVE PLAN

PERFORMANCE STOCK UNIT AWARD AGREEMENT

THIS PERFORMANCE STOCK UNIT AWARD AGREEMENT (this "Agreement") is dated as of
[_________, 2006] by and between Mentor Corporation, a Minnesota corporation
(the "Corporation"), and [_____________] (the "Participant").

W I T N E S S E T H

WHEREAS, pursuant to the Mentor Corporation 2005 Long-Term Incentive Plan (the
"Plan"), the Corporation has granted to the Participant effective as of the date
hereof (the "Award Date"), an award of performance stock units under the Plan
(the "Award"), upon the terms and conditions set forth herein and in the Plan.

NOW THEREFORE, in consideration of services rendered and to be rendered by the
Participant, and the mutual promises made herein and the mutual benefits to be
derived therefrom, the parties agree as follows:

1.             Defined Terms.  Capitalized terms used herein and not otherwise
defined herein shall have the meaning assigned to such terms in the Plan.

2.             Grant.  Subject to the terms of this Agreement, the Corporation
hereby grants to the Participant an Award with respect to an aggregate of
[___________] performance stock units (subject to adjustment as provided in
Section 7.1 of the Plan) (the "Stock Units").  As used herein, the term "stock
unit" shall mean a non-voting unit of measurement which is deemed for
bookkeeping purposes to be equivalent to one outstanding share of the
Corporation's Common Stock (subject to adjustment as provided in Section 7.1 of
the Plan) solely for purposes of the Plan and this Agreement.  The Stock Units
shall be used solely as a device for the determination of the payment to
eventually be made to the Participant if such Stock Units vest pursuant to
Section 3.  The Stock Units shall not be treated as property or as a trust fund
of any kind.

3.             Vesting.  Subject to Section 8 below, the Award shall vest and
become nonforfeitable with respect to the Applicable Percentage of the total
number of Stock Units (subject to adjustment under Section 7.1 of the Plan) set
forth in the chart below based on the Corporation's Actual TSR Performance for
the Performance Period (as each such term is defined below); provided, however,
that in no event shall the Applicable Percentage exceed two hundred percent
(200%):

Actual TSR Performance

Applicable Percentage

150% or more

200%

140%

175%

130%

150%

120%

125%

110%

100%

100%

75%

95%

50%

90%

25%

85% or less

0%

If the Corporation's Actual TSR Performance for the Performance Period is
between two of the performance levels indicated above, the Applicable Percentage
of the Stock Units that will vest will be determined on a linear basis.  For
example, if the Actual TSR Performance for the Performance Period were 115%,
then 112.5% of the Stock Units would vest.  Any Stock Units that do not vest
based on the performance requirements set forth in this Section 3 will
automatically terminate as of the last day of the Performance Period.

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For purposes of the Award, the following definitions shall apply:

•               "TSR" means, with respect to the Corporation or any other
entity: (a) the change in the market price of its common stock (as quoted on the
principal market on which it is traded as of the beginning of the period and
ending of the period (as determined by the 20 day average closing price of the
common stock ending on the last day of the Performance Period) plus dividends
and other distributions paid, divided by (b) the beginning quoted market price
for the common stock on the first trading day of the Performance Period, all of
which is subject to adjustment as provided in Section 9;

•               "Actual TSR Performance" means (a) the Corporation's total TSR
for the Performance Period, divided by (b) the total TSR calculated in a similar
fashion as the Corporation's total TSR for the Russell 2500 Growth Index for the
Performance Period; and

•               "Performance Period" means the period commencing on the close of
business on June 23, 2006 and ending on March 31, 2009, subject to earlier
termination as provided in Section 10 hereof.

4.             Continuance of Employment.  The vesting schedule requires
continued employment or service through each applicable vesting date as a
condition to the vesting of the applicable installment of the Award and the
rights and benefits under this Agreement.  Employment or service for only a
portion of a vesting period, even if substantial portion, will not entitle the
Participant to any proportionate vesting or avoid or mitigate a termination of
rights and benefits upon or following a termination of employment or services as
provided in Section 8 below or under the Plan.

                Nothing contained in this Agreement or the Plan constitutes an
employment or service commitment by the Corporation, affects the Participant's
status as an employee at will who is subject to termination without cause,
confers upon the Participant any right to remain employed by or in service to
the Corporation or any Subsidiary, interferes in any way with the right of the
Corporation or any Subsidiary at any time to terminate such employment or
services, or affects the right of the Corporation or any Subsidiary to increase
or decrease the Participant's other compensation or benefits.  Nothing in this
paragraph, however, is intended to adversely affect any independent contractual
right of the Participant without his consent thereto.

5.             Dividend and Voting Rights.

(a)            Limitations on Rights Associated with Units.  The Participant
shall have no rights as a stockholder of the Corporation, no dividend rights
(except as expressly provided in Section 5(b) with respect to Dividend
Equivalent Rights) and no voting rights, with respect to the Stock Units and any
shares of Common Stock underlying or issuable in respect of such Stock Units
until such shares of Common Stock are actually issued to and held of record by
the Participant.  No adjustments will be made for dividends or other rights of a
holder for which the record date is prior to the date of issuance of the stock
certificate.

(b)           Dividend Equivalent Rights Distributions.  If the Corporation pays
one or more ordinary cash dividends on its Common Stock for which the related
record date(s) occurs during the Performance Period, the Corporation shall pay
the Participant in cash (without interest) an amount equal to (i) the aggregate
amount of the per-share ordinary cash dividends paid by the Corporation on its
Common Stock during the Performance Period, multiplied by (ii) the number of
Stock Units subject to the Award (if any) that vest in accordance with Section
3.  Such payment shall be made as soon as practicable after the end of the
Performance Period.  No such payment shall be made with respect to any Stock
Units which terminate during the Performance Period pursuant to Section 8
(regardless of whether such Stock Units terminate before or after the record
date of any such ordinary cash dividend).

6.             Restrictions on Transfer.  Neither the Award, nor any interest
therein or amount or shares payable in respect thereof may be sold, assigned,
transferred, pledged or otherwise disposed of, alienated or encumbered, either
voluntarily or involuntarily.  The transfer restrictions in the preceding
sentence shall not apply to (a) transfers to the Corporation, or (b) transfers
by will or the laws of descent and distribution.

 

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7.             Timing and Manner of Payment of Stock Units.  On or as soon as
administratively practicable following the last day of the Performance Period,
the Corporation shall deliver to the Participant a number of shares of Common
Stock (either by delivering one or more certificates for such shares or by
entering such shares in book entry form, as determined by the Corporation in its
discretion) equal to the number of Stock Units subject to the Award (if any)
that vest in accordance with Section 3, unless such Stock Units terminate prior
to the given vesting date pursuant to Section 8 and in any event subject to
Section 9.  The Corporation's obligation to deliver shares of Common Stock with
respect to vested Stock Units is subject to the condition precedent that the
Participant or other person entitled under the Plan to receive any shares with
respect to the vested Stock Units deliver to the Corporation any representations
or other documents or assurances required pursuant to Section 8.1 of the Plan. 
The Participant shall have no further rights with respect to any Stock Units
that are paid or that are terminated pursuant to Section 8.

8.             Effect of Termination of Employment.  The Participant's Stock
Units shall terminate to the extent such units have not become vested prior to
the date the Participant is no longer employed by the Corporation or one of its
Subsidiaries, regardless of the reason for the termination of the Participant's
employment by the Corporation or a Subsidiary; provided, however, that in the
event that such termination is a due to the Participant's death or Total
Disability or pursuant to a termination of the Participant's employment by the
Corporation or a Subsidiary without Cause , resignation  by the Participant for
Good Reason, the Stock Units shall remain eligible to vest pursuant to Section 3
hereof and any Stock Units that become vested pursuant to Section 3 shall be
paid to the Participant (or the Participant's beneficiary or personal
representative, as the case may be) in accordance with Section 7.  If the
Participant is employed by a Subsidiary and that entity ceases to be a
Subsidiary, such event shall be deemed to be a termination of employment of the
Participant for purposes of this Agreement, unless the Participant otherwise
continues to be employed by the Corporation or another of its Subsidiaries
following such event.  If any Stock Units are terminated hereunder, such Stock
Units shall automatically terminate and be cancelled as of the applicable
termination date without payment of any consideration by the Company and without
any other action by the Participant, or the Participant's beneficiary or
personal representative, as the case may be.

For purposes of the Award, "Total Disability" means a "permanent and total
disability" (within the meaning of Section 22(e)(3) of the Code or as otherwise
determined by the Administrator).

For purposes of the Award, "Cause" has the meaning ascribed to such term or a
similar term in any employment or similar agreement between the Corporation (or
a Subsidiary) and the Participant then in effect that defines such term with
respect to the Participant's employment by the Corporation or a Subsidiary.  In
the event that there is no such agreement then in effect (or that any such
agreement includes no such definition), "Cause" means (1) personal or
professional misconduct by the Participant (including, but not limited to,
criminal activity or gross or willful neglect of duty); (2) breach of the
Participant's fiduciary duty to the Corporation; (3) conduct which threatens
public health or safety, or threatens to do immediate or substantial harm to the
Corporation's business or reputation; or (4) any other misconduct, deficiency,
failure of performance, breach or default, reasonably capable of being remedied
or corrected by the Participant.

For purposes of the Award, "Good Reason" shall have the meaning ascribed to such
term or a similar term in any employment or similar agreement between the
Corporation (or a Subsidiary) and the Participant then in effect that defines
such term with respect to the Participant's employment by the Corporation or a
Subsidiary.  In the event that there is no such agreement then in effect (or
that any such agreement includes no such definition), "Good Reason" means the
occurrence of any of the following without the Participant's express written
consent: (1) if the Participant is a party to an employment or similar agreement
with the Corporation then in effect, a significant reduction of the
Participant's material duties, position or responsibilities, or the removal of
the Participant from such duties, position or responsibilities, as specified in
such agreement; (2) a reduction in the Participant's base salary or cash
incentive bonus other than a one-time reduction of not more than ten percent
(10%) that is also applied to substantially all employees of the Corporation
holding similar positions as the Participant; (3) a material reduction in the
Participant's benefits as compared to the benefits in effect on the Award Date;
(4) a requirement by the Corporation that the Participant perform a significant
portion of his or her duties at a location other than the Participant's
principal place of employment as of the Award Date; or (5) if the Participant's
principal place of employment is the Corporation's headquarters, a relocation of
the Corporation's headquarters more than fifty (50) miles from the current
location in Santa Barbara, California.

 

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9.             Adjustments Upon Specified Events.  Upon the occurrence of
certain events relating to the Corporation's stock contemplated by Section 7.1
of the Plan (including, without limitation, an extraordinary cash dividend on
such stock), the Administrator shall make adjustments if appropriate in the
number of Stock Units then outstanding and the number and kind of securities
that may be issued in respect of the Stock Unit Award.  No such adjustment shall
be made with respect to any ordinary cash dividend for which dividend
equivalents are paid pursuant to Section 5(b).  Furthermore, the Administrator
shall adjust the performance measures and performance goals referenced in
Section 3 hereof to the extent (if any) it determines that the adjustment is
necessary or advisable to preserve the intended incentives and benefits to
reflect (1) any material change in corporate capitalization, any material
corporate transaction (such as a reorganization, combination, separation,
merger, acquisition, or any combination of the foregoing), or any complete or
partial liquidation of the Corporation, (2) any change in accounting policies or
practices, (3) the effects of any special charges to the Corporation's earnings,
or (4) any other similar special circumstances.

10.           Change in Control Event.  If a Change in Control Event occurs at
any time after the Award Date and prior to March 31, 2009, the Performance
Period shall terminate immediately prior to such Change in Control Event, and
the Applicable Percentage used to determine the number of Stock Units subject to
the Award that shall vest upon such Change in Control Event shall be the greater
of (i) 100%, or (ii) the Applicable Percentage determined in accordance with
Section 3 hereof based on the Corporation's Actual TSR Performance for the
shortened Performance Period.  Any Stock Units subject to the Award that do not
vest after giving effect to the preceding sentence shall terminate as of the
Change in Control Event.

11.           Tax Withholding.  Upon any payment of dividend equivalents and/or
the distribution of shares of the Common Stock in respect of the Stock Units,
the Corporation (or the Subsidiary last employing the Participant) shall have
the right at its option to (a) require the Participant to pay or provide for
payment in cash of the amount of any taxes that the Corporation or the
Subsidiary may be required to withhold with respect to such payment and/or
distribution, or (b) deduct from any amount payable to the Participant the
amount of any taxes which the Corporation or the Subsidiary may be required to
withhold with respect to such payment and/or distribution.  In any case where a
tax is required to be withheld in connection with the delivery of shares of
Common Stock under this Agreement, the Administrator may, in its sole
discretion, direct the Corporation or the Subsidiary to reduce the number of
shares to be delivered by (or otherwise reacquire) the appropriate number of
shares, valued at their then fair market value (with the "fair market value" of
such shares determined in accordance with the applicable provisions of the
Plan), to satisfy such withholding obligation.

12.           Notices.  Any notice to be given under the terms of this Agreement
shall be in writing and addressed to the Corporation at its principal office to
the attention of the Secretary, and to the Participant at the Participant's last
address reflected on the Corporation's records, or at such other address as
either party may hereafter designate in writing to the other.  Any such notice
shall be given only when received, but if the Participant is no longer an
employee of the Corporation, shall be deemed to have been duly given by the
Corporation when enclosed in a properly sealed envelope addressed as aforesaid,
registered or certified, and deposited (postage and registry or certification
fee prepaid) in a post office or branch post office regularly maintained by the
United States Government.

13.           Plan.  The Award and all rights of the Participant under this
Agreement are subject to, and the Participant agrees to be bound by, all of the
terms and conditions of the provisions of the Plan, incorporated herein by
reference.  In the event of a conflict or inconsistency between the terms and
conditions of this Agreement and of the Plan, the terms and conditions of the
Plan shall govern.  The Participant acknowledges having read and understanding
the Plan, the Prospectus for the Plan, and this Agreement.  Unless otherwise
expressly provided in other sections of this Agreement, provisions of the Plan
that confer discretionary authority on the Administrator do not (and shall not
be deemed to) create any rights in the Participant unless such rights are
expressly set forth herein or are otherwise in the sole discretion of the
Administrator so conferred by appropriate action of the Administrator under the
Plan after the date hereof.

14.           Entire Agreement.  This Agreement and the Plan together constitute
the entire agreement and supersede all prior understandings and agreements,
written or oral, of the parties hereto with respect to the subject matter
hereof.  The Plan and this Agreement may be amended pursuant to Section 8.6 of
the Plan.  Such amendment must be in writing and signed by the Corporation.  The
Corporation may, however, unilaterally waive any provision hereof in writing to
the extent such waiver does not adversely affect the interests of the
Participant hereunder, but no such waiver shall operate as or be construed to be
a subsequent waiver of the same provision or a waiver of any other provision
hereof.

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15.           Limitation on Participant's Rights.  Participation in this Plan
confers no rights or interests other than as herein provided.  This Agreement
creates only a contractual obligation on the part of the Company as to amounts
payable and shall not be construed as creating a trust.  Neither the Plan nor
any underlying program, in and of itself, has any assets.  The Participant shall
have only the rights of a general unsecured creditor of the Corporation (or
applicable Subsidiary) with respect to amounts credited and benefits payable in
cash, if any, with respect to the Stock Units, and rights no greater than the
right to receive the Common Stock (or equivalent value) as a general unsecured
creditor with respect to Stock Units, as and when payable thereunder. 

16.           Counterparts.  This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. 

17.           Section Headings.  The section headings of this Agreement are for
convenience of reference only and shall not be deemed to alter or affect any
provision hereof.

18.           Governing Law.  This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Minnesota without
regard to conflict of law principles thereunder.

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IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed on
its behalf by a duly authorized officer and the Participant has hereunto set his
or her hand as of the date and year first above written.

 

MENTOR CORPORATION
a Minnesota corporation  

 

PARTICIPANT

     

By:                                                                         
               

 

                                                                               

   

Signature

Print Name:                                                           
               

         

Its:                                                                         
               

 

                                                                               

 

 

 

 

 

 

 

 

 

 

Print Name

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CONSENT OF SPOUSE

In consideration of the execution of the foregoing Performance Stock Unit Award
Agreement by Mentor Corporation, I, _____________________________, the spouse of
the Participant therein named, do hereby join with my spouse in executing the
foregoing Performance Stock Unit Award Agreement and do hereby agree to be bound
by all of the terms and provisions thereof and of the Plan.

Dated:    ____________, 2006

                                                                                                       
Signature of Spouse

                                                                                                       
Print Name

 

 

 

 

 

 

 

 

 

 

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