Exhibit 10.3
EMPLOYMENT AGREEMENT
          THIS AMENDED AND RESTATED EMPLOYMENT 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 Donald S.
Mitchell, Chief Executive Officer and President of FSI (hereinafter “Employee”).
RECITALS
     FSI and Employee are parties to an Employment Agreement dated December 12,
1999 (the “Prior Agreement”), which the parties desire to amend and restate in
its entirety with this Agreement.
     FSI and Employee are parties to a Management Agreement of even date
herewith (the “Management Agreement”) and to a Summary of Terms of Employment of
even date herewith (the “Summary of Terms”).
     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:
“Base Annual Salary” shall mean the highest annual rate of the Employee’s base
salary with the Company during the 12 (twelve) 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).

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“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 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).
“Company” means, separately and collectively, FSI and any entity in which FSI
has an ownership interest, directly or indirectly, of at least 20% (twenty
percent) of the outstanding shares of such entity.
“Competing Product” means

  (a)   for the period 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 24 (twenty-four) 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 24 (twenty-four) month period ending on the date Employee’s employment with
the Company ends.

“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

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the Company as being Confidential Information, or that would be of economic
value to a third party, shall be presumed to be Confidential Information.
“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,

whether directly or indirectly, and whether by or through employees of the
Company or of affiliated sales organizations.
“Customer Information” means information relating to Customers’ operations,
processes, products, and research and development and to Customers’
manufacturing, purchasing, and engineering systems and techniques.
“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 24 (twenty-four) month period ending on the effective date of
the termination of Employee’s employment.
“Term” means the period of Employee’s employment with the Company under this
Agreement commencing on the Effective Date and continuing until March 28, 2009
(the “Original Term”), unless earlier terminated pursuant to Section 8 of this
Agreement, and for successive one-year periods thereafter (each an “Extended
Term”), unless earlier terminated pursuant to Section 8 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.
“Termination Date” means the date on which Employee’s termination of employment
with the Company is effective. For purposes of Section 4 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 in compensation for his services,
Employee hereby agrees 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

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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 the customers
of the Company 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 of the Company or to otherwise
Compete with the Company.
          2. (a) Employee during his employment with the Company both during and
after the Term and at all times thereafter 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, both 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 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

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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) It is provided, however, that 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
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/herself 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 24 (twenty-four) 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. If Employee’s employment is involuntarily terminated at the
initiative of the Company prior to the expiration of the Term for reasons other
than for Cause or Employee’s death or Employee’s disability, and provided the
termination does not occur within the Transition Period as defined by the
Management Agreement, then:
               (a) Base Annual Salary Continuation. Subject to the limitations
and conditions of Paragraph 4(c), FSI shall pay Employee an amount equal to six
months of

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Employee’s Base Annual Salary without right of offset, but not to exceed a
maximum amount under this Paragraph 4(a) of two times the lesser of:
                    (i) The Code § 401(a)(17) compensation limit for the year in
which the Termination Date occurs; or
                    (ii) Employee’s annualized compensation based upon the
annual rate of pay for services to the Company for the calendar year prior to
the calendar year in which the Termination Date occurs (adjusted for any
increase during that year that was expected to continue indefinitely if the
Employee had not separated from service).
Subject to the maximum limits of this Paragraph 4(a) and the limitations and
conditions of Paragraph 4(c), such Base Annual Salary continuation shall be paid
to Employee in accordance with FSI’s regular payroll schedule at the Base Annual
Salary rate, commencing on the first regular payroll date of FSI following the
Termination Date and continuing for six months. The Company and Employee intend
the payments under this Paragraph 4(a) to be a “separation pay plan due to
involuntary separation from service” under Treas. Reg. § 1.409A-1(b)(9)(iii).
               (b) Supplemental Salary Continuation. Subject to the limitations
and conditions of Paragraph 4(c), FSI shall pay Employee an amount equal to six
months of Employee’s Base Annual Salary without right of offset, payable in
accordance with FSI’s regular payroll schedule at the Base Annual Salary rate,
commencing on the first regular payroll date of FSI that occurs following
completion of all payments under Paragraph 4(a) and continuing for six months.
The Company and Employee intend the payments under this Paragraph 4(b) to be
deferred compensation payable in compliance with the requirements of
Section 409A of the Code.
               (c) Release Requirement. Notwithstanding any other provisions of
this Agreement, FSI shall not be obligated to make any payments under this
Section 4 (the “Severance Pay”) 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, and all applicable consideration periods and rescission periods provided
by law shall have expired. Further, no Severance Pay under this Section 4 shall
be required to be paid if Employee has materially breached (and failed to cure,
if such breach can be cured) any of Paragraphs 2, 3, 5, 6, 7 or 8 of the
Agreement (relating to Confidential Information, non-competition, Inventions,
return of Company property, and non-disparagement) as of the date of the
payments (as determined in the first instance by a majority of the outside
members of the Board of Directors after giving Employee notice and an
opportunity to be heard).
          5. 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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               (a) 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
               (b) which result from any work performed by Employee for FSI, or
               (c) for which equipment, supplies, facilities, or trade secret
information of FSI is used, or
               (d) 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.
          6. 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.
          7. 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

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whole or in part contain any Confidential Information or Customer Information,
whether or not 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.
          8. 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.
          9. 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.
          10. 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.
          11. 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 asserting 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.
          12. 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.
          13. 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

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binding upon and shall be enforceable by the parties hereto and their
respective, permitted successors and assignees.
          14. This Agreement shall be governed by the laws of the State of
Minnesota.
          15. Except for the Management Agreement between Employee and FSI, 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, but shall not supercede the Summary of Terms. This Agreement
may be otherwise amended or terminated only by a subsequent agreement in writing
signed by Employee and a director of FSI.
          16. Survival. The parties acknowledge and agree that certain
provisions of this Agreement, including but not limited to, Sections 2, 3, 5, 6,
7, and 8, impose obligations that according to their terms survive termination
of Employee’s employment. All such provisions shall survive termination of
Employee’s employment.
          17. 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:
Donald S. Mitchell
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.
          18. 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.

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          IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first-above written.

                  FSI INTERNATIONAL INC.       EMPLOYEE    
 
               
By:
  /s/ Patricia M. Hollister       /s/ Donald S. Mitchell    
 
  Patricia M. Hollister       Donald S. Mitchell      
Its:
  Chief Financial 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/ Donald S. Mitchell       Employee Signature           

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