Exhibit 10.2
SEVERANCE AGREEMENT
     THIS AMENDED AND RESTATED SEVERANCE AGREEMENT (this “Agreement”) is made
and entered into as of the 28th day of March, 2008 (the “Effective Date”), by
and between FSI International, Inc., a Minnesota corporation (hereinafter
“FSI”), and Benno G. Sand currently an officer and employee of FSI (hereinafter
“Employee”).
RECITALS
     FSI and Employee are parties to a Separation Agreement dated March 14, 2001
(the “Prior Agreement”), which the parties desire to amend and restate in its
entirety with this Agreement.
     FSI and Employee are parties to an Amended and Restated Management
Agreement of even date herewith (the “Management Agreement”).
     In October 2004, the American Jobs Creation Act of 2004 (the “Act”) was
enacted, Section 885 of which Act added new provisions to the Internal Revenue
Code pertaining to deferred compensation.
     The Treasury Department has issued final regulations regarding the deferred
compensation provisions of the Act, which permit service providers and service
recipients a transition period to modify existing deferred compensation
arrangements to bring them into compliance with the Act.
     The parties agree that it is in their mutual best interests to modify,
amend and clarify the terms and conditions of the Prior Agreement, as set forth
in this Agreement and that certain Management Agreement of even date herewith,
with the full intention of complying with the Act so as to avoid the excise
taxes and penalties imposed under the Act.
     NOW, THEREFORE, in consideration of the foregoing premises and the
respective agreements of FSI and Employee set forth below, FSI and Employee,
intending to be legally bound, agree as follows:
DEFINITIONS
     Specific terms used in this Agreement have the following meanings:
     A. “Base Annual Salary” shall mean the highest annual rate of the
Employee’s base salary with the Company during the twelve (12) months preceding
the date of termination of the Employee’s employment with the Company (without
reduction for any salary reduction or other deferral contribution to any
employee benefit plan sponsored by the Company).
     B. “Cause” shall mean and be limited to, (i) willful and gross neglect of
duties by the Employee or (ii) an act or acts committed by the Employee
constituting a felony under United States federal or applicable state law and
substantially detrimental to the Company or any

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Subsidiary or the reputation of the Company or any Subsidiary, so long as
Employee is given written notice thereof and fails to promptly cure (if such
“Cause” can be cured) and subsequently there is a determination by a resolution
duly adopted by the affirmative vote of not less than two-thirds of the entire
membership of the Board at a meeting thereof called and held for such purpose
(after reasonable notice is provided to the Employee and the Employee is given
an opportunity to be heard before the Board) finding that in the good faith
opinion of the Board the Employee is guilty of the conduct described above in
(i) or (ii).
     C. “Company” means, separately and collectively, FSI and any entity in
which FSI has an ownership interest, directly or indirectly, of at least twenty
percent (20%) of the outstanding shares of such entity.
     D. “Competing Product” means,
          a. for the period which Employee is an employee of the Company, any
product or service that competes with or will compete with any product, product
line, or service that is sold, marketed, produced, distributed, leased, or under
development by the Company with respect to which Employee performed services of
any kind or nature during the twenty-four (24) month period ending on the date
of the conduct at issue; and
          b. for the period after Employee’s employment with the Company has
ended, any product or service that competes with or will compete with any
product, product line, or service that is sold, marketed, produced, distributed,
leased, or under development by the Company with respect to which Employee
performed services of any kind or nature during the twenty-four (24) month
period ending on the date Employee’s employment with the Company ends.
     E. “Confidential Information” means certain proprietary information
maintained in confidence by the Company as intellectual property, trade secrets,
or otherwise, including but not limited to information relating to (i) the
Company’s finances, processes, products, services, research, and development,
and (ii) its manufacturing, purchasing, accounting, engineering, designing,
marketing, merchandising, selling, distributing, leasing, and servicing systems
and techniques; it also includes plans or proposals with regard to any of the
foregoing, whether implemented or not. All information originated by Employee,
or disclosed to Employee, or to which Employee otherwise gains access, during
the period of Employee’s employment with the Company that the Employee has
reason to believe is Confidential Information, or that is characterized or
treated by the Company as being Confidential Information, or that would be of
economic value to a third party, shall be presumed to be Confidential
Information.
     F. “Customer” means any firm, person, corporation, or other entity
          a. to whom or to which the Company has sold, distributed, or leased
its products or services, or
          b. whom or which the Company has solicited for sales, distribution, or
leasing of its products or services,

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whether directly or indirectly, and whether by or through employees of the
Company or through its affiliated sales organizations.
     G. “Customer Information” means information relating to Customers’
operations, processes, products, and research and development and to Customers’
manufacturing, purchasing, and engineering systems and techniques.
     H. “Restricted Country” means any nation or country in which the Company
had Customers, had business operations, or otherwise did business, directly or
indirectly, in the twenty-four (24) month period ending on the Termination Date.
     I. “Term” means the period of Employee’s employment with the under this
Agreement commencing on the Effective Date and continuing until March 28, 2009
(the “Original Term”), unless earlier terminated pursuant to Section 10 of this
Agreement, and for successive one-year periods thereafter (each an “Extended
Term”), unless earlier terminated pursuant to Section 10 of this Agreement;
except that either party may give written notice of at least 90 days prior to
the expiration of the Original Term or the Extended Term then in effect that
such party elects not to extend the term of this Agreement.
     J. “Termination Date” means the date on which Employee’s termination of
employment with the Company is effective. For purposes of Sections 4 and 5 of
this Agreement only, the Termination Date shall mean the date on which a
“separation from service” has occurred for purposes of Section 409A of the
Internal Revenue Code and the regulations and guidance thereunder (the “Code”).
Terms not specifically defined will be interpreted in light of the context in
which they appear.
AGREEMENT
In consideration of his employment by FSI, and the wages, salary, and employee
benefits to be provided to Employee by FSI, Employee and FSI hereby agree as
follows:
     1. Employee acknowledges and agrees:
          a. That in the course of his employment with the Company during and
after the Term, Employee may have access to Confidential Information; that the
Company has developed and established and will continue to develop and establish
a valuable and extensive trade in its products and services; and that the
Company would suffer great loss and irreparable injury if Employee were to
disclose any of the Confidential Information, or use it in the solicitation of
Customers or use it to compete with the Company.
          b. That in the course of his employment with the Company during and
after the Term, Employee may have access to Customer Information; that Customer
Information obtained by Employee during the course of his employment with the
Company is a valuable asset of the Company; and that the Company would suffer
great loss and irreparable injury if Employee were to use Customer Information
in the solicitation of Customers or to otherwise compete with the Company.

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     2. a. During his employment with the Company both during and after the
Term, and at all times thereafter, Employee shall maintain in strictest
confidence and shall not, without FSI’s express advance written consent,
directly or indirectly (whether through written or printed materials, electronic
media, or oral communications, and whether Employee’s source of information is
written or printed materials, electronic media, oral communications, or his own
memory),
               (i) copy, or
               (ii) transmit, publish, communicate, or otherwise disclose or
make available, or permit or cause to be transmitted, published, communicated or
otherwise disclosed or made available, to any other firm, person, corporation or
other entity, or
               (iii) use as owner, director, officer, manager, trustee, partner,
employee, independent contractor, agent, or consultant in any business venture
or other enterprise or endeavor,
any Confidential Information or Customer Information.
          b. An exception to the provisions of Paragraph 2(a), above, is that in
the scope and course of his employment with FSI, Employee may, in furtherance of
the Company’s business interests, communicate Confidential Information or
Customer Information to other responsible Company personnel, Customers, and
other persons or entities with whom or which the Company has dealings, who have
a need to know such information.
     3. During Employee’s employment with the Company during and after the Term
and for a period of one (1) year following termination of Employee’s employment,
whether voluntary or involuntary, and whether before or after expiration of the
Term:
          a. Employee will inform any new employer, prior to accepting
employment, of the existence of this Agreement and provide such employer with a
copy of this Agreement.
          b. (i) Except for ownership of one percent (1%) or less of the shares
of any company listed on a national or regional stock exchange, Employee will
not own any shares of stock or other ownership interest, either directly or
indirectly, or serve as a director, officer, manager, trustee, partner,
employee, independent contractor, agent, or consultant, or otherwise become
active or involved in the management, operation, or representation of a business
or other enterprise that is engaged in or about to engage in selling, marketing,
producing, distributing, leasing, designing, or developing a Competing Product
in any Restricted Country.
               (ii) Notwithstanding the provisions of Subparagraph b(i),
Employee may accept employment with a business organization that is engaged or
about to engage in selling, marketing, producing, distributing, leasing, or
developing a Competing Product in a Restricted Country if (x) such business
organization is diversified to the extent that it has significant operations
other than that portion of the business organization that is engaged or about to
engage in selling, marketing, producing, distributing, leasing, or developing a
Competing Product; (y) during the entire one year period following termination
of employment with the Company, such Employee will be rendering services to that
portion of the business

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organization that is not engaged or about to engage in selling, marketing,
producing, distributing, leasing, or developing a Competing Product; and (z)
prior to acceptance of employment by Employee with such business organization,
separate written assurances satisfactory to FSI shall be received and accepted
by FSI from both the Employee and the business organization, in each case
stating that during the entire one year period following termination of
employment with the Company, Employee will not be rendering services to any
portion of the business organization that, directly or indirectly, is engaged or
about to engage in selling, marketing, producing, distributing, leasing,
designing, or developing a Competing Product.
          c. Employee will not, on behalf of himself or any other person or
entity, directly or indirectly sell, distribute, or lease a Competing Product
to, or solicit sales, distribution, or leasing of a Competing Product to, any
Customer with whom Employee communicated, whether in person, through written or
printed materials, or by telephone, electronic mail, or other form of electronic
transmission, during the twenty-four (24) month period ending on the effective
date of the termination of Employee’s employment with the Company. This
Paragraph 3(c) shall not be interpreted to limit or restrict in any way the
commitments of Employee set forth in Paragraph 3(b), above.
          d. Employee will not, directly or indirectly, persuade, encourage, or
entice, or attempt to persuade, encourage or entice: employees of the Company to
terminate their employment relationship with the Company; manufacturers or
suppliers to adversely alter or modify, or to discontinue, their relationship
with the Company unless at the written request of FSI’s President or Chief
Financial Officer; or Customers to discontinue purchasing from the Company.
     4. After termination of Employee’s employment with FSI prior to the
expiration of the Term for any reason, Employee will conscientiously and
diligently seek other employment; and, if Employee is unable to obtain
employment consistent with his abilities and education solely because of the
provisions of Section 3 above, then FSI shall make income maintenance payments
to Employee, subject to the terms and conditions set forth below:
          a. Income Maintenance Amount. “Income Maintenance Amount” shall mean
an amount equal to 75% of the average monthly base pay that Employee received
during the twenty-four (24)-month period ending on the last day of the month
preceding the Termination Date, exclusive of bonuses and commissions.
          b. Time and Form of Payment. Subject to the limitations of
Paragraph 4(d), below:
               (i) On the first regularly scheduled payroll date of FSI in the
seventh month after the Termination Date, FSI shall make a lump sum payment to
Employee equal to six times the Income Maintenance Amount, provided that
Employee has not breached his obligations under Section 3 of this Agreement; and
               (ii) Thereafter, FSI shall pay Employee an amount equal to the
Income Maintenance Amount each month for the next six months, pursuant to FSI’s
normal payroll

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practices and procedures, provided that Employee has not breached his
obligations under Section 3 of this Agreement.
Amounts payable under Subparagraphs 4(b)(i) and 4(b)(ii) shall not exceed a
total of twelve (12) times the Income Maintenance Amount and shall be payable no
later than the twelfth month following the month in which the Termination Date
occurs.
          c. Notwithstanding the provisions of Paragraph 4(b) above, FSI’s
obligation to make Income Maintenance payments under this Agreement shall
immediately cease, and Employee shall have no right to any further payments
under this Section 4, if:
               (i) Employee breaches his obligations under Section 3 of this
Agreement;
               (ii) Employee fails to provide verification of his efforts to
seek employment as required by Paragraph 4(d) below;
               (iii) FSI reasonably and in good faith concludes that Employee
has not conscientiously and diligently sought other employment for any month for
which he seeks payment of the Income Maintenance Amount;
               (iv) FSI gives written notice to Employee by FSI’s Chief
Financial Officer providing Employee with written permission to accept available
employment or giving Employee a written release from the obligations of
Section 3 above; or
               (v) Employee obtains employment consistent with provisions of
this Agreement.
Employee shall promptly give written notice of employment under
Paragraph 4(c)(v) to FSI. If the condition set forth in Paragraph 4(c)(i) occurs
before the first regularly scheduled payroll date of FSI in the seventh month
following the Termination Date, then Employee shall not be entitled to any
payments under Paragraph 4(b)(i) or Paragraph 4(b)(ii). If any of the conditions
4(c)(ii) through 4(c)(v) occurs before the first regularly scheduled payroll
date of FSI in the seventh month following the Termination Date, then:
(A) Employee shall still be entitled to a lump sum payment under
Paragraph 4(b)(i), but for purposes of determining the amount of the lump sum
payment, the Income Maintenance Amount may be multiplied only by the number of
months that preceded the occurrence of the condition, and (B) Employee shall not
be entitled to any payments under Paragraph 4(b)(ii).
          d. Verification by Employee. Employee shall, during each month of
unemployment for which Employee claims payment of the Income Maintenance Amount,
give FSI a detailed written account of Employee’s efforts to obtain employment,
including a written description of all companies, business organizations, or
other entities contacted by Employee and the dates thereof, the positions
applied for (including a description of the responsibilities relating thereto)
and the anticipated salaries relating thereto, and the persons with whom such
contacts were made and the results of such contacts including but not limited to
any offers of employment extended to Employee. Such written account shall also
include a statement by Employee that,

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although Employee conscientiously and diligently sought employment, Employee was
unable to obtain employment solely because of the provisions of Section 3 of
this Agreement.
          e. Employee shall be bound by the provisions of Section 3, unless FSI
breaches its obligations under this Section 4.
     5. If Employee’s employment is terminated by the Company prior to the
expiration of the Term for reasons other than Cause or Employee’s death or
disability, or if Employee resigns prior to the expiration of the Term after
giving FSI at least ninety (90) days’ written notice, and provided that the
termination or resignation does not occur within the Transition Period as
defined by the Management Agreement, then FSI shall pay Employee an amount equal
to his Base Annual Salary (the “Severance Pay”), subject to the following terms
and conditions:
          a. Timing. Subject to the conditions of Paragraph 5(b), FSI shall pay
Employee an amount equal to six months of Employee’s Base Annual Salary, payable
in a lump sum on the first regularly scheduled payroll date of FSI that occurs
after the first day of the seventh month following the Termination Date.
Commencing on the next regularly scheduled payroll date and continuing for six
months thereafter, FSI shall pay an amount equal to six months of Employee’s
Base Annual Salary in accordance with FSI’s regular payroll schedule at the Base
Annual Salary rate. Any such payments made pursuant to this Paragraph 5(a) shall
be made at Employee’s last known address. The Company and Employee intend the
payments under this Section 5 to be deferred compensation payable in compliance
with the requirements of Section 409A of the Code.
          b. Release Requirement. Notwithstanding any other provisions of this
Agreement, FSI shall not be obligated to make any payments under this Section 5
unless Employee has signed and not rescinded a release of claims in favor of the
Company and its affiliates and its and their employees, directors, officers,
insurers, and agents in a form to be prescribed by FSI, all applicable
consideration periods and rescission periods provided by law shall have expired
and Employee is in strict compliance with the terms of this Agreement as of the
dates of the payments.
     6. If Employee’s employment is terminated prior to the expiration of the
Term due to Employee’s death, then FSI shall pay to Employee’s legal
representative an amount equal to his Base Annual Salary, payable in accordance
with FSI’s regular payroll schedule, at the Base Annual Salary payroll rate,
commencing on the first regularly scheduled payroll date after Employee’s death
and continuing for twelve (12) months.
     7. Employee hereby agrees to assign (and hereby does assign) to FSI all of
Employee’s right, title and interest to all discoveries, improvements,
processes, concepts, analyses, evaluations, methods, formulas, techniques and
ideas (whether or not shown or described in writing or reduced to practice) and
works of authorship, including any products, designs, studies and/or services
derived therefrom, whether or not patentable or copyrightable, and including any
applications for Letters Patent and to Letters Patent granted, including foreign
Letters Patent,

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               (i) which, at the time of conception or reduction to practice,
relate directly to FSI’s business or to FSI’s actual or demonstrably anticipated
research and development, or
               (ii) which result from any work performed by Employee for FSI, or
               (iii) for which equipment, supplies, facilities, or trade secret
information of FSI is used, or
               (iv) which are developed on FSI time (hereinafter “Inventions”).
Employee also hereby agrees to apply, at FSI’s request and expense, for the
United States and any foreign Letters Patent, or copyright, either in Employee’s
name or otherwise as FSI shall determine, relating to all such Inventions.
Employee agrees to promptly and fully disclose and describe all Inventions to
FSI and to keep accurate, complete and timely records of such Inventions, such
records to be the property of FSI and to be retained on its premises. Employee
further agrees to notify FSI promptly, in writing, of any application for United
States or foreign Letters Patent or copyright filed by him on his behalf, as
inventor, co-inventor, author, or co-author, within twelve months following
termination of Employee’s employment with FSI, whether such termination is
voluntary or involuntary, and whether or not such termination occurs before or
after expiration of the Term. Such written notification shall include a
description of the work that is the subject of the application that is
sufficient to allow FSI to determine whether it has any property interest in the
work. Failure to so notify FSI will create a presumption that the work that is
the subject of the Letters Patent or copyright is the property of FSI. FSI
agrees to maintain in confidence information supplied by Employee pursuant to
this Section 5, except that FSI reserves the right to disclose such information
to the extent necessary to protect its interests pursuant to this Agreement.
Nothing in this Section 5 shall apply to any Invention for which no equipment,
supplies, facility or trade secret information of FSI was used and which was
developed entirely on Employee’s own time, and (1) which does not relate at the
time of conception or reduction to practice (a) directly to the business of FSI
or (b) to FSI’s actual or demonstrably anticipated research and development, or
(2) which does not result from any work performed for FSI.
     8. Except as listed at the end of this Agreement in Exhibit A, Employee
will not assert any rights under any Inventions as having been made, authored,
or acquired by Employee prior to his being employed by FSI.
     9. Upon termination of his employment with FSI and upon termination of any
subsequent employment with the Company, whether before or after expiration of
the Term, Employee agrees to deliver promptly to FSI or its designee all
records, manuals, books, blank forms, documents, letters, memoranda, notes,
notebooks, reports, data, tables, photographs, videotapes, audio tapes, computer
disks or other form of computer storage, and calculations or copies thereof,
whether in written or printed materials or electronic media of any kind or
nature, which are the property of the Company or which relate in any way to the
business, products, practices, or techniques of the Company and all other
property, Confidential Information, and Customer Information including, but not
limited to, all documents and electronic media which in whole or in part contain
any Confidential Information or Customer Information, whether or not

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constituting intellectual property or trade secrets, which in any of these cases
are in his possession or under his control. Employee shall be permitted to
retain personal correspondence, documents and items which contain no
Confidential Information or Customer Information; prior to removing any such
personal materials, Employee will review them with a representative designated
by FSI.
     10. Employee’s employment is at-will. Either the Employee or FSI may
terminate Employee’s employment at any time for any reason, with or without
notice and with or without cause. Neither this Agreement, in whole or in part,
nor any action taken hereunder shall be construed as giving Employee any right
to be retained in the employ of the Company for any particular period of time
nor shall it otherwise limit FSI’s right to terminate the employment of Employee
at any time, with or without cause or reason, or the Employee’s right to resign.
     11. During his employment with the Company both during and after the Term,
and at all times thereafter, Employee will not malign, defame or disparage the
reputation, character, image, products or services of the Company, or the
reputation or character of the Company’s directors, officers, employees or
agents.
     12. Employee specifically acknowledges and agrees that the terms and
conditions of the above restrictive covenants are reasonable and necessary for
the protection of FSI’s business, Confidential Information, and Customer
Information, whether or not characterized as intellectual property or trade
secrets, and to prevent damage or loss to FSI as a result of any action taken by
Employee.
     13. Employee hereby acknowledges and agrees that any breach by Employee of
the foregoing provisions may cause FSI irreparable injury for which there is no
adequate remedy at law. Therefore, Employee expressly agrees that FSI shall be
entitled, in addition to any other remedies available, to injunctive and/or
other equitable relief to require specific performance or prevent a breach under
the provisions of this Agreement. Employee further agrees that any delay by the
Company in assertion of a right under this Agreement, or any failure by the
Company to assert a right under this Agreement, does not constitute a waiver by
the Company of any right hereunder, and the Company may subsequently assert any
or all of its rights hereunder as if the delay or failure to assert rights had
not occurred.
     14. In the event that any portion of this Agreement may be held to be
invalid or unenforceable for any reason, it is hereby agreed that said
invalidity or unenforceability shall not affect the other portions of this
Agreement and that the remaining terms and conditions or portions hereof shall
remain in full force and effect and any court of competent jurisdiction may so
modify the objectionable provision as to make it valid, reasonable, and
enforceable.
     15. No rights or obligations of Employee or FSI hereunder may be assigned,
pledged, disposed of or transferred by such party to any other person or entity
without the prior written consent of the other party, except that FSI may,
without the consent of Employee, assign its rights and obligations under this
Agreement to the Company or to any corporation or other business entity (i) with
which FSI may merge or consolidate, or (ii) to which the Company may sell or
transfer all or substantially all of its assets or capital stock. This Agreement
shall be binding upon and shall be enforceable by the parties hereto and their
respective, permitted

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successors and assignees. This Agreement shall be governed by the laws of the
State of Minnesota.
     16. Except for the Management Agreement, this Agreement supersedes any
previous agreement, written or oral, between FSI and Employee relating to the
same subject matter, including without limitation the Prior Agreement. This
Agreement may be otherwise amended or terminated only by a subsequent agreement
in writing signed by Employee and a director of FSI.
     17. The parties acknowledge and agree that certain provisions of this
Agreement, including but not limited to, Sections 2, 3, 4, 7, 8, and 9, impose
obligations that according to their terms survive termination of Employee’s
employment. All such provisions shall survive termination of Employee’s
employment.
     18. Notices. All notices, requests and demands given to or made pursuant
hereto shall be in writing and shall be delivered or mailed to any such party at
its address which:
          A. In the case of the Company shall be:
FSI International, Inc.
3455 Lyman Boulevard
Chaska, Minnesota 55318
Attention: Chief Financial Officer
          B. In the case of the Employee shall be:
Benno G. Sand
FSI International, Inc.
3455 Lyman Boulevard
Chaska, Minnesota 55318
Either party may, by notice hereunder, designate a changed address. Any notice,
if mailed properly addressed, postage prepaid, registered or certified mail,
shall be deemed to have been given on the registered date or that date stamped
on the certified mail receipt.
     19. This Agreement is intended to satisfy, or be exempt from, the
requirements of Section 409A(a)(2), (3), and (4) of the Code, including current
and future guidance and regulations interpreting such provisions, and should be
interpreted accordingly.
     IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first-above written.

                  FSI INTERNATIONAL, INC.       EMPLOYEE    
 
               
By:
  /s/ Donald S. Mitchell       /s/ Benno G. Sand    
 
 
 
Donald S. Mitchell      
 
Benno G. Sand    
Its:
 
 
Chief Executive Officer            

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EXHIBIT A
     The following are inventions or ideas, not covered by Section 5, in which I
have any right, title or interest, and which were previously conceived either
wholly or in part by me. If there are none, please indicate that below.
(Do not disclose any information you regard as being confidential. Please
provide in this space, pursuant to Section 5 above, a brief description of the
product or process, plus a list of source documents, such as patents, patent
applications, drawings, or written descriptions, identified by title, number and
date. Attach a separate sheet if necessary.)

                  /s/ Benno G. Sand       Employee Signature           

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