Storrs - Jeff Hathaway's tenure as the athletic director at the University of Connecticut ended Friday when he signed a separation agreement with the school.

A statement from the athletic department announced Hathaway's retirement, effective immediately, although he will remain employed by UConn through Sept. 15 to assist in the transition process for the next athletic director.

Paul McCarthy, a senior associate director of athletics, will serve as interim athletic director while a search is performed.

According to the separation agreement, Hathaway will receive the equivalent of one year's pay, $531,717, distributed in biweekly payments. If Hathaway should pursue another job in athletics, the payments would be reduced by the amount of his new salary. The payments will cease on Sept. 15, 2013, whether the amount has reached $531,717 or not.

Other terms of the deal include Hathaway's keeping his health insurance, being allowed to receive tuition remission for one student to attend UConn for the next two academic years and letting him keep his position as the NCAA men's basketball committee chairman.

UConn also agreed to stop the pending "360 evaluation" of Hathaway's job performance being conducted by an outside firm and to not disclose any of the information contained in the report.

Hathaway agreed not to make any derogatory statements about the university or to pursue legal action.

"I've been proud to serve the University of Connecticut for nearly two decades, including the last eight years as director of athletics," Hathaway said in a statement. "It's an honor and a privilege to have led this outstanding division of athletics."

Earlier Friday, sources told The Day it would be Hathaway's final day as athletic director. The sources said Hathaway would have until the end of the day to accept a buyout plan. If Hathaway did not accept one, he would have been terminated.

The sources said Hathaway asked for $3 million plus other bonuses. Hathaway works under a six-year contract that rolls over yearly. His base pay, according to the university, is $351,717 with another $179,860 annually for speaking engagements and other duties.

New UConn President Susan Herbst recently subjected Hathaway's job performance to the "360 evaluation" by MGT of America, a Florida-based firm. The report, which was due Friday, reveals mostly unflattering opinions about Hathaway from more than 30 people interviewed, according to sources.

The sources said that university officials have discussed buyout options for a few weeks.

Hathaway, 52, has been the athletic director at UConn since 2003, when he replaced Lew Perkins. Hathaway spent from 1990-2001 as Perkins' assistant at UConn.

Hathaway's most serious deficiencies as athletic director, the sources said, centered primarily on a decline in fundraising revenues and a lack of attention paid to NCAA compliance. In both cases, the sources said, Hathaway failed to hire experienced replacements for former athletic fundraiser Paul Pendergast and former compliance director Bill Shults.

Schults left UConn in 2007 to become Florida International University's Special Assistant to the General Counsel for NCAA Compliance.

Pendergast raised as much as $18 million in 2006 before leaving for a similar fundraising post at St. Francis Hospital and Medical Center in Hartford. The position at UConn was not filled until Herbst wrested all fundraising duties from Hathaway, hiring Zachary Goines as senior director of development of athletics, with the understanding that Goines would report to the UConn Foundation.

The sources said that Herbst is taking NCAA compliance with the utmost seriousness, given the recent transgressions of the men's basketball program.

The new athletic director's performance will be graded heavily on compliance, the sources said.

During Hathaway's tenure, UConn has won several national championships in men's and women's basketball, including both in the same season (2004).

Moreover, the football program earned its first Bowl Championship Series berth, while the baseball team made the NCAA Super Regionals this past spring.

Hathaway also helped the school reach an agreement with multimedia giant IMG Worldwide that is worth a reported $80 million over 10 years.

m.dimauro@theday.com

Chuck Banning also contributed to this report.