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EXHIBIT
10.1
SEPARATION AND RELEASE OF CLAIMS
AGREEMENT
RECITALS
This Separation and Release
of Claims Agreement (" Agreement ") is made by and between
Loren L. McFarland (" Employee ") and Mentor Corporation ("
Company ") (collectively referred to as the " Parties
"):
WHEREAS, Employee was employed by the Company;
WHEREAS, the Company and Employee entered into an employment
agreement, dated as of August 25, 2005, relating to Employee's
employment with the Company (the " Employment Agreement
");
WHEREAS, the Company has granted Employee options to purchase
the Company's common stock (the " Options "), restricted
stock (the " Restricted Stock ") and performance stock units
(the " Performance Stock Units ") under one or several of
the Company's stock option plans (the " Plans ") and each
such Option, Restricted Stock and Performance Stock Units are
evidenced by an award agreement executed by Employee and the
Company (the " Award Agreements ");
WHEREAS, Employee resigned his employment with the Company, and
experienced a "separation from service" with the Company under
Internal Revenue Code (" Code ") Section 409A, effective as
of November 12, 2007 (the " Effective Date ");
WHEREAS, the Parties, and each of them, wish to resolve any and
all disputes, claims, complaints, grievances, charges, actions,
petitions and demands that either party may have against the other,
including, but not limited to, any and all claims arising or in any
way related to Employee's employment with, or separation from, the
Company;
NOW THEREFORE, in consideration of the promises made herein,
the Parties hereby agree as follows:
COVENANTS
Consideration .
Upon the Effective Date, Employee will be entitled to the
following:
Severance Pay .
Pursuant to Section 4.2.5.iv of the Employment Agreement, the
Company agrees to pay Employee severance pay in an amount equal to
thirty-six (36) months' base salary, at the rate in effect as of
the Effective Date. Due to Employee's status as a "key
employee" within the meaning of Code Section 409A, such severance
payment will be paid in one lump sum payment, less applicable
withholdings, payable on May 15, 2008.
Equity Compensation
. Employee's Options, Restricted Stock and Performance Stock
Units will be exercisable in accordance with the terms of the Plans
and the applicable Award Agreements. For the sake of clarity,
Employee's Performance Stock Units will continue to vest in
accordance with Sections 8 and 3 of the Performance Stock Unit
Award Agreement (Executive).
Cash Incentive Bonus
. In accordance with Section 4.2.5.iii of the Employment
Agreement, the Company agrees to pay Employee a pro-rated
amount of Employee's fiscal year 2008 eligible cash incentive bonus
percentage of base salary (such amount shall be for the period of
April 1, 2007 through the Effective Date), as described in Section
3.1.2 of the Employment Agreement. Due to Employee's status
as a "key employee" within the meaning of Code Section 409A, such
cash incentive bonus will be paid in one lump sum, less applicable
withholdings, payable on May 15, 2008.
Benefits .
Pursuant to Section 4.2.5.ii of the Employment Agreement, the
Company will pay the premiums otherwise payable by Employee and his
eligible dependents for health, dental and vision benefits coverage
for up to twenty-four (24) months beginning on the Effective Date,
provided Employee elects continuation coverage under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), within the time period prescribed under COBRA. If
Employee discontinues COBRA continuation coverage or elects
alternative coverage, a cash payment will not be provided in lieu
of the Company's payment of premiums above. The Company will
not reimburse Employee for any taxable income imputed to Employee
because the Company has paid Employee's COBRA premiums or those of
Employee's eligible dependents.
Additionally, the Company
will reimburse an aggregate amount not to exceed $8,000 for
continuing professional education from the date hereof through and
including April 30, 2009. Further, Employee will be entitled
to the following continued executive benefits for a period of
twelve (12) months from Effective Date: (a) health exam, (b)
financial and estate planning benefits, and (c) executive placement
benefits, or in the event the Employee declines such placement
benefits, the sum of twelve thousand dollars ($12,000.00).
Such payments or reimbursements are to be paid in one lump sum,
less applicable withholdings on May 15, 2008.
Payments Required by
Law . Employee shall be entitled to (a) all Base Salary
accrued up to the Effective Date, (b) all pay for accrued but
unused vacation that the Company is legally obligated to pay
Employee, if any, (c) all benefits or compensation accrued prior to
the Effective Date, as provided under the terms of any employee
benefit and compensation agreements or plans applicable to the
Employee, and (d) all business expenses required to be reimbursed
under the Company's expense reimbursement policy to Employee with
respect to business expenses incurred prior to the Effective
Date.
Tax and Related
Liabilities . Employee shall be solely responsible for
any and all of his tax and related liabilities which may arise out
of the payments or benefits provided under this Agreement, and
shall indemnify and hold harmless the Company from and against any
and all claims related thereto.
Section 409A
Compliance . Notwithstanding anything to the contrary in
this Agreement, to the extent required to comply with Section 409A
of the Internal Revenue Code of 1986, as amended (the "Code"), the
Parties agree to work in good faith to amend this Agreement if
necessary or appropriate to avoid the imposition of any additional
tax or income recognition under Section 409A of the Code in the
event that the Internal Revenue Service provides non-conforming
guidance.
Consulting Agreement
. While not required under the terms of the Employment
Agreement, the Company and Employee will enter into a consulting
agreement, (the "Consulting Agreement") effective immediately as of
the Effective Date, whereby Employee will perform consulting
services, as specified therein. The Consulting Agreement is
attached hereto as Exhibit A.
Confidential
Information . Employee will continue to maintain the
confidentiality of all confidential and proprietary information of
the Company. Employee will return all of the Company's
property and confidential and proprietary information in his
possession to the Company on the Effective Date of this Agreement,
except to the extent reasonably necessary to perform his
consultation services pursuant to the Consulting
Agreement.
Payment in Full
. Except as to any payment obligations that may arise under
the Consulting Agreement, Employee acknowledges and represents that
the Company has paid all salary, wages, cash incentive bonuses of
any kind, including but not limited to target milestone payments or
any other bonuses, accrued vacation, milestone payments and any and
all other compensation and benefits due to Employee once the above
noted payments and benefits are received.
Release of Claims
. Employee agrees that all of the foregoing consideration
represents settlement in full of all outstanding obligations owed
to Employee by the Company and its officers, directors, managers,
supervisors, agents and employees other than those obligations
arising under this agreement and the attached Consulting Agreement,
Awards Agreements, and Employee's Indemnification Agreement.
In consideration for the mutual covenants contained in this
Agreement, including but not limited to the severance compensation
provided hereunder, Employee and the Company, on behalf of
themselves, and their respective heirs, family members, executors,
officers, directors, employees, investors, shareholders,
administrators, affiliates, divisions, subsidiaries, predecessor
and successor corporations, and assigns, hereby fully and forever
release each other and their respective heirs, family members,
executors, officers, directors, employees, investors, shareholders,
administrators, affiliates, divisions, subsidiaries, predecessor
and successor corporations and assigns, from, and agree not to sue
concerning, any claim, duty, obligation or cause of action relating
to any matters of any kind, whether presently known or unknown,
suspected or unsuspected, that Employee or Company may possess
arising from any omissions, acts or facts that have occurred up
until and including the Effective Date including, without
limitation:
any and all claims relating
to or arising from Employee's employment relationship with the
Company and the termination of that relationship;
any and all claims relating
to, or arising from, Employee's right to purchase, or actual
purchase of shares of stock of the Company, including, without
limitation, any claims for fraud, misrepresentation, breach of
fiduciary duty, breach of duty under applicable state corporate
law, and securities fraud under any state or federal law; provided,
however that none of the foregoing shall be construed to modify or
waive Employee's rights under the Award Agreements;
any and all claims under the
law of any jurisdiction including, but not limited to, wrongful
discharge of employment, constructive discharge from employment,
termination in violation of public policy, discrimination,
harassment, retaliation, breach of contract, both express and
implied, breach of a covenant of
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