Document:

exv10w2

 

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 	 
	 	 	 
	 

11exv10w3

 

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

2

 

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

3

 

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

4

 

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

5

 

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,

6

 

               (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

7

 

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

8

 

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.

9

 

          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	 	 	 	 	 	 

10

 

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 	 
	 	 	 
	 

11

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