This Employment Agreement, effective as of
February 5, 2007 , is by and between MENTOR
Corporation (“COMPANY”), with its executive offices
at 201 Mentor Drive, Santa Barbara, California 93111, and EDWARD
S. NORTHUP (“EMPLOYEE”).
COMPANY is in the business of manufacturing,
distributing and selling medical devices and related products.
EMPLOYEE has experience in this business and possesses valuable
skills and experience, which will be used in advancing
COMPANY’s interests. EMPLOYEE is willing to be engaged by
COMPANY and COMPANY is willing to engage EMPLOYEE in an executive
capacity responsible for ALL OPERATING functions of COMPANY, upon
the terms and conditions set forth in this Agreement.
EMPLOYEE and
COMPANY, intending to be legally bound, agree as
follows:
1.1.1 COMPANY
shall employ EMPLOYEE as CHIEF OPERATING OFFICER. EMPLOYEE shall
have such duties, authorities and responsibilities commensurate
with the duties, authorities and responsibilities of persons in
similar capacities in similarly sized companies and such other
duties and responsibilities as the Board of Directors of the
COMPANY (the “Board”) shall designate that are
consistent with the EMPLOYEE’s position as CHIEF OPERATING
OFFICER of the COMPANY. To the extent that they do not materially
reduce the scope of the responsibilities described above,
EMPLOYEE’s duties may change from time to time on reasonable
notice, based on the needs of COMPANY and EMPLOYEE’s skills
as determined by COMPANY. These duties shall hereinafter be
referred to as “Services.” EMPLOYEE shall report
directly to the President/CEO of the COMPANY or, from time to time,
to a designee of the President/CEO, provided that
(i) EMPLOYEE’s Services, as described above, remain
materially unchanged and (ii) the changed reporting structure
is consistent with reporting and organizational structures that
exist from time to time in similarly sized companies.
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1.1.2 In the
event that EMPLOYEE shall from time to time serve COMPANY as a
director or shall serve in any other office during the term of this
Agreement; EMPLOYEE shall serve in such capacities without further
compensation.
1.1.3. EMPLOYEE
shall devote his entire working time, attention, and energies to
the business of COMPANY, and shall not, during the term of this
Agreement, be engaged in any other business activity whether or not
such business activity is pursued for gain, profit or other
pecuniary advantage, without the prior written consent of the Board
of Directors of COMPANY. This shall not be construed as preventing
EMPLOYEE from investing his assets in a form or manner that does
not require any services on the part of EMPLOYEE in the operation
or affairs of the entities in which such investments are made, or
from engaging in such civic, charitable, religious, or political
activities that do not interfere with the performance of
EMPLOYEE’s duties hereunder.
1.2 Best
Abilities. EMPLOYEE shall serve COMPANY faithfully and to the
best of EMPLOYEE’s ability. EMPLOYEE shall use
EMPLOYEE’s best abilities to perform the Services. EMPLOYEE
shall act at all times according to what EMPLOYEE reasonably
believes is in the best interests of COMPANY.
1.3
Corporate Authority. EMPLOYEE, as an executive officer,
shall comply with all laws and regulations applicable to EMPLOYEE
as a result of this Agreement, including, but not limited to, the
Securities Act of 1933 and Securities Act of 1934. Prior to the
execution of this Agreement, EMPLOYEE has received and reviewed
COMPANY’s Policies and Procedures and COMPANY’s
Employee Handbook. EMPLOYEE shall comply with COMPANY’s
Policies and Procedures, and practices now in effect or as later
amended or adopted by COMPANY, as required of similarly-situated
executives of COMPANY.
This Agreement shall commence upon the execution
of this Agreement (the “Effective Date”) and shall have
an initial term of three (3) years unless terminated as
provided in Section 4 of this Agreement. On the third
anniversary of the Effective Date, this Agreement automatically
will renew for an additional three-year term, unless either party
provides the other party with written notice of non-renewal at
least 120 days prior to the date of the automatic renewal. In
the event that the COMPANY provides written notice of non-renewal
to the EMPLOYEE as provided in the preceding sentence, then
EMPLOYEE shall be entitled to the payments described in
Section 4.2.5 below as of the date of the expiration of this
Agreement.
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3. COMPENSATION AND BENEFITS
3.1
Compensation. EMPLOYEE’s total compensation consists
of base salary, bonus potential, stock options, and medical and
other benefits generally provided to employees of COMPANY. Any
compensation paid to EMPLOYEE shall be pursuant to COMPANY’s
policies and practices for exempt employees and shall be subject to
all applicable laws and requirements regarding the withholding of
federal, state and/or local taxes. Compensation provided in this
Agreement is full payment for Services and EMPLOYEE shall receive
no additional compensation for extraordinary services unless
otherwise authorized. EMPLOYEE’s entire compensation package
will be reviewed annually by the Compensation Committee of the
Board of Directors, a practice which is consistent with
COMPANY’s Executive Compensation Program.
3.1.1 Base
Compensation. COMPANY agrees to pay EMPLOYEE an annualized base
salary of FOUR HUNDRED THOUSAND DOLLARS AND NO CENTS ($400,000.)
less applicable withholdings, payable in equal installments no less
frequently than semi-monthly.
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3.1.2
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Cash Incentive Bonus.
EMPLOYEE shall be
eligible to participate in the COMPANY’s Incentive Bonus
Plans, as in effect from time to time, for an annual or more
frequent cash incentive bonus, subject to applicable withholdings,
of SEVENTY-FIVE (75) Percent of EMPLOYEE’s annual base
salary, for achievement of target-level performance, and a maximum
bonus of not less than NINETY-SEVEN AND ONE-HALF (97.5) Percent of
EMPLOYEE’s base salary for achievement of extraordinary
performance thereunder, and subject to approval by COMPANY’s
[Compensation Committee of the Board/Chief Executive Officer]. Any
cash incentive bonus shall accrue and become payable to EMPLOYEE
only if EMPLOYEE is employed with COMPANY on the last day of the
fiscal year for which the cash incentive bonus is
calculated.
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3.1.3
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Stock Options.
Based upon satisfactory
performance, under the Plan, COMPANY expects that EMPLOYEE will
qualify for grants of options to acquire common stock of COMPANY
subject to determination by the Board of Directors, of an amount
which is consistent with COMPANY’s Executive Compensation
Program. Any such grants shall also be subject to performance
considerations as well as the determination of the Board of
Directors.
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3.2 Business
Expenses. COMPANY shall reimburse EMPLOYEE for business
expenses reasonably incurred in performing Services according to
COMPANY’s Expense Reimbursement Policy.
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3.3
Additional Benefits. COMPANY shall provide EMPLOYEE those
additional benefits normally granted by COMPANY to its employees
subject to eligibility requirements applicable to each benefit.
COMPANY has no obligation to provide any other benefits unless
provided for in this Agreement. Currently COMPANY provides major
medical, dental, life, salary continuation, long term disability
benefits and eligibility to participate in COMPANY’s 401(k)
plan.
3.4
Vacation. EMPLOYEE shall accrue vacation equal to TWENTY
(20) days per year, at the rate of approximately
1.67 days per month. The time or times for such vacation shall
be selected by EMPLOYEE and approved by the President and Chief
Executive Officer of COMPANY.
4.1
Circumstances Of Termination. This Agreement and the
employment relationship between COMPANY and EMPLOYEE may be
terminated as follows:
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4.1.1
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Death. This Agreement shall terminate upon
EMPLOYEE’s death, effective as of the date of
EMPLOYEE’s death.
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4.1.2
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Disability. COMPANY may, at its option, either
suspend compensation payments or terminate this Agreement due to
EMPLOYEE’s Disability if EMPLOYEE is incapable, even with
reasonable accommodation by COMPANY, of performing the Services
because of accident, injury, or physical or mental illness for ONE
HUNDRED EIGHTY (180) consecutive days, or is unable or shall
have failed to perform the Services for a total period of ONE
HUNDRED EIGHTY (180) within a TWELVE (12) month period,
regardless of whether such days are consecutive. If COMPANY
suspends compensation payments because of EMPLOYEE’s
Disability, COMPANY shall resume compensation payments when
EMPLOYEE resumes performance of the Services. If COMPANY elects to
terminate this Agreement due to EMPLOYEE’s Disability, it
must first give EMPLOYEE TEN (10) WORKING days advance written
notice.
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4.1.3
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Discontinuance Of
Business. If
COMPANY discontinues operating its business, this Agreement shall
terminate as of the last day of the month on which COMPANY ceases
its entire operations with the same effect as if that last date
were originally established as termination date of this
Agreement.
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4.1.4
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For Cause. COMPANY may terminate this Agreement
without advance notice for Cause. For the purpose of this
Agreement, “Cause” shall mean any failure to comply in
any material respect with this Agreement or any Agreement
incorporated herein; personal or professional misconduct by
EMPLOYEE (including, but not limited to, criminal activity or gross
or willful neglect of duty); breach of EMPLOYEE’s fiduciary
duty to the COMPANY; conduct which threatens public health or
safety, or threatens to do immediate or substantial harm to
COMPANY’s business or reputation; or any other misconduct,
deficiency, failure of performance, breach or default, reasonably
capable of being remedied or corrected by EMPLOYEE. To the extent
that a breach pursuant to this Section 4.1.4 is curable by
EMPLOYEE without harm to COMPANY and/or it’s reputation,
COMPANY shall, instead of immediately terminating EMPLOYEE pursuant
to this Agreement, provide EMPLOYEE with notice of such breach,
specifying the actions required to cure such breach, and EMPLOYEE
shall have ten (10) days to cure such breach by performing the
actions so specified. If EMPLOYEE fails to cure such breach within
the ten (10) day period COMPANY may terminate this Agreement
without further notice. COMPANY’s exercise of its right to
terminate under this section shall be without prejudice to any
other remedy to which COMPANY may be entitled at law, in equity, or
under this Agreement.
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4.1.5.
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Resignation by EMPLOYEE for Good
Reason. This
Agreement and employment relationship is terminable by either
party, with or without cause, including but not limited to
resignation by EMPLOYEE for Good Reason, at any time upon THIRTY
(30) days’ advance written notice to the other party.
For purposes of this Agreement, “Good Reason” shall
mean the occurrence of any of the following without
EMPLOYEE’s express written consent: (i) a significant
reduction of EMPLOYEE’s material duties, authorities or
responsibilities as provided in this Agreement; provided however,
except in the Change of Control context, EMPLOYEE’s reporting
structure may be realigned at any time, as described in
Section 1.1.1, without triggering this definition of Good
Reason; (ii) a reduction in Base Compensation or Cash
Incentive Bonus other than a one-time reduction of not more than
10% that also is applied to substantially all other senior
executives at the COMPANY; (iii) a material reduction in
EMPLOYEE’s benefits as compared to the benefits in effect on
the Effective Date; (iv) EMPLOYEE must perform a significant
portion of his duties at a location other than COMPANY
headquarters; or (v) COMPANY headquarters are relocated more
than 50 miles from the current location in Santa Barbara,
California.
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4.1.6.
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Change of Control
. If employment is
terminated within TWELVE (12) months after the occurrence of any of
the events described as a Change of Control under the provisions of
the Long-Term Incentive Plan as then defined at the time of such
Change of Control, EMPLOYEE shall be entitled to severance
compensation pursuant to Section 4.2.6 (i),(ii),(iii),(iv) and
(v).
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4.2
EMPLOYEE’s Rights Upon Termination
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4.2.1
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Death . Upon termination of this Agreement
because of death of EMPLOYEE pursuant to Section 4.1.1 above,
COMPANY shall have no further obligation to EMPLOYEE under the
Agreement except to distribute to EMPLOYEE’s estate or
designated beneficiary any unpaid compensation and reimbursable
expenses, less applicable withholdings, owed to EMPLOYEE prior to
the date of EMPLOYEE’s death.
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4.2.2
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Disability. Upon termination of this Agreement
because of Disability of EMPLOYEE pursuant to Sections 4.1.2
above, COMPANY shall have no further obligation to EMPLOYEE under
the Agreement except to distribute to EMPLOYEE’s estate or
designated beneficiary any unpaid compensation and reimbursable
expenses, less applicable withholdings, owed to EMPLOYEE prior to
the date of EMPLOYEE’s termination due to
Disability.
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4.2.3
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Discontinuance Of
Business. Upon termination of this Agreement
because of discontinuation of COMPANY’s business pursuant to
Section 4.1.3, COMPANY shall have no further obligation to
EMPLOYEE under the Agreement except to distribute to EMPLOYEE any
unpaid compensation and reimbursable expenses, less applicable
withholdings, owed to EMPLOYEE prior to the date of termination of
this Agreement.
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4.2.4
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Voluntary Termination without Good
Reason; Termination With Cause. Upon
voluntary termination of EMPLOYEE’s employment by EMPLOYEE
without Good Reason or termination of EMPLOYEE’s employment
for Cause pursuant to Section 4.1.4, COMPANY shall have no
further obligation to EMPLOYEE under this Agreement except to
distribute to EMPLOYEE:
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i. Any
compensation and reimbursable expenses owed to EMPLOYEE by COMPANY
through the termination date, less applicable withholdings;
and
ii. Severance
compensation as provided for in COMPANY’s Severance Policy,
if any, less applicable withholdings.
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4.2.5
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Termination Without Cause;
Resignation for Good Reason; Non-renewal of Agreement by
COMPANY. Upon
termination of EMPLOYEE’s employment by COMPANY without Cause
pursuant to Section 4.1.4, or if EMPLOYEE terminates this
Agreement at any time for Good Reason, or if Company does not renew
the term of the Agreement as provided in Section 2 above, then
COMPANY shall have no further obligation to EMPLOYEE under this
Agreement except to distribute to EMPLOYEE:
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i.
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Any
compensation then due EMPLOYEE in accordance with
Section 3.1.1 , and reimbursable expenses owed by COMPANY to
EMPLOYEE through the termination date, less applicable
withholdings; and
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ii.
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Reimbursement of full COBRA premium
for TWENTY-FOUR (24) months following termination. Should
EMPLOYEE discontinue COBRA coverage or elect alternative coverage,
a
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