Document:

exv10w2

 

Exhibit
10.2

POSSIS MEDICAL, INC.

CHANGE IN CONTROL

TERMINATION PAY PLAN

Amended Effective

February 10, 2008

 

 

POSSIS MEDICAL, INC.

CHANGE IN CONTROL

TERMINATION PAY PLAN

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 1.	 	INTRODUCTION	 	 	4	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 2.	 	PARTICIPATION	 	 	4	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 3.	 	TERMINATION OF EMPLOYMENT	 	 	4	 
	 
	 	 	 	 	 	 	 	 	 	 
	3.1.	 	Notice of Termination	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	3.2.	 	Participant’s Termination Rights	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 4.	 	TERMINATION PAYMENT	 	 	5	 
	 
	 	 	 	 	 	 	 	 	 	 
	4.1.	 	Qualification	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	4.2.	 	Amount	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	4.2.1.	 	 	Class I Participants	 	 	 	 
	 

	 	 	4.2.2.	 	 	Class II Participants	 	 	 	 
	 

	 	 	4.2.3.	 	 	Class III Participants	 	 	 	 
	 

	 	 	4.2.4.	 	 	Class IV Participants	 	 	 	 
	 

	 	 	4.2.5.	 	 	Class V Participants	 	 	 	 
	 

	 	 	4.2.6.	 	 	Sales Personnel Compensation	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	4.3.	 	Cash Transaction Bonus	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	4.4.	 	Certain Additional Payments by the Company	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	4.5	 	Legal Fees and Expenses	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 5.	 	28OG LIMITATON	 	 	12	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 6.	 	AMENDMENT OR TERMINATION OF THE PLAN	 	 	12	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 7.	 	MISCELLANEOUS PROVISIONS	 	 	12	 
	 
	 	 	 	 	 	 	 	 	 	 
	7.1.	 	Nonexclusivity of Rights	 	 	 	 
	7.2.	 	Successors	 	 	 	 
	7.3.	 	Payments as Compensation	 	 	 	 
	7.4.	 	Notice	 	 	 	 
	7.5.	 	Governing Law	 	 	 	 
	7.6.	 	Validity	 	 	 	 
	7.7.	 	Employment	 	 	 	 
	7.8.	 	Termination Prior to a Change in Control.	 	 	 	 

 

 

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 8.	 	CLAIMS PROCEDURE	 	 	15	 
	 
	 	 	 	 	 	 	 	 	 	 
	8.1.	 	General	 	 	 	 
	8.2.	 	Making a Claim	 	 	 	 
	8.3.	 	Requesting Review of a Denied Claim	 	 	 	 
	8.4.	 	Exhaustion of Administrative Remedies	 	 	 	 
	8.5.	 	Decisions	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 9.	 	DEFINITIONS	 	 	16	 
	 
	 	 	 	 	 	 	 	 	 	 
	9.1.	 	Cause	 	 	 	 
	9.2.	 	Change in Control	 	 	 	 
	9.3.	 	Code	 	 	 	 
	9.4.	 	Continuing Director	 	 	 	 
	9.5.	 	Date of Termination	 	 	 	 
	9.6.	 	Effective Date	 	 	 	 
	9.7.	 	Employer	 	 	 	 
	9.8.	 	Good Reason	 	 	 	 
	9.9.	 	Notice of Termination	 	 	 	 
	9.10.	 	Participant	 	 	 	 
	9.11.	 	Plan	 	 	 	 
	9.12.	 	Plan Year	 	 	 	 
	9.13.	 	Termination of Employment	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Schedule A: Participant List	 	 	 	 
	Exhibit B: Participants Eligible for Gross-Up	 	 	 	 
	Exhibit C: Cash Transaction Bonus	 	 	 	 

 

 

SECTION 1

INTRODUCTION

Effective September 15, 1999, Possis Medical, Inc., a Minnesota corporation (hereinafter sometimes
referred to as “Employer” or the “Company”), hereby creates a change in control termination pay
plan for the benefit of certain employees of the Employer in the event of a Change in Control.
Capitalized terms used herein shall have the meaning provided in Section 9.

The Board of Directors of the Company (the “Board), has determined that it is in the best interests
of the Company and its shareholders to assure that the Company will have the continued dedication
of its officers and other key management, sales and technical personnel, notwithstanding the
possibility, threat or occurrence of a Change in Control (as defined below) of the Company. The
Board believes it is essential to diminish the inevitable distraction of these employees by virtue
of the personal uncertainties and risks created by a pending or threatened Change in Control and to
encourage full attention and dedication to the Company currently and in the event of any threatened
or pending Change in Control, and to provide specified individuals with compensation and benefit
arrangements upon a Change in Control which ensure that the compensation and benefits expectations
of these individuals will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has adopted this Change in Control
Termination Pay Plan.

SECTION 2

PARTICIPATION

All Participants in the Plan shall be identified at the discretion of the Board. Participants shall
be classified as Class I, Class II, Class III, Class IV or Class V Participants. An employee who
has become a Participant shall be considered to continue as a Participant in the Plan until the
date of the Participant’s death or, if earlier, the date when the Participant is no longer employed
by the Employer or is removed as a Participant at the discretion of the Board; provided, however,
that a Participant who has a Termination of Employment within 24 months following the date of a
Change in Control will not cease to be a Participant.

SECTION 3

TERMINATION OF EMPLOYMENT

3.1. Notice of Termination. Any purported termination of a Participant’s employment by the Employer
or the Participant, including a Termination of Employment as defined herein, (other than by reason
of the Participant’s death) within twenty-four (24) months following the month in which a Change in
Control occurs, shall be communicated by a Notice of Termination to the other. No purported
termination by the Employer of a Participant’s employment shall be effective if it is not pursuant
to a Notice of Termination. Failure by a Participant to provide Notice of Termination shall not
limit any rights of the Participant under the Plan except to the extent the Employer can
demonstrate that it suffered actual damages by reason of such failure.

 

 

3.2. Participant’s Termination Rights. A Participant’s right to terminate his or her employment
pursuant to the terms of the Plan shall not be affected by the Participant’s incapacity due to
physical or mental illness. A Participant’s continued employment shall not constitute consent to,
or a waiver of rights with respect to, any circumstance constituting Good Reason pursuant to the
terms of the Plan. Termination by a Participant of the Participant’s employment for Good Reason
shall constitute termination for Good Reason for all purposes of the Plan, notwithstanding that the
Participant may also thereby be deemed to have “retired” under any applicable retirement programs
of the Employer.

SECTION 4

TERMINATION PAYMENT

4.1. Qualification. To qualify for a termination payment under the Plan, a Participant must (a) be
a Participant as of the date of the Change in Control, and (b) have a Termination of Employment
within 24 months following a Change in Control.

4.2. Amount. Subject to the eligibility requirement set forth in Section 4.1, and the limitations
set forth in Section 4.4 and Section 5, termination payments for Class I, Class II, Class III,
Class IV and Class V Participants shall be determined as follows:

     4.2.1. Class I Participants. Termination payments shall be made to a Class I Participant in an
amount equal to the sum of (a) thirty-six (36) times the Class I Participant’s highest monthly base
compensation during the six (6) months immediately before the Date of Termination; and (b) all
annual incentive payments that the Class I Participant would have received for the year in which
the Date of Termination occurs, had required performance targets been met, which shall be deemed to
have occurred on the Date of Termination, whether or not they have occurred or could possibly
occur. Said payments shall be paid in a single lump sum, discounted to present value, on the next
business day following the Class I Participant’s Termination.

     Additionally, the Class I Participant shall receive the following: (a) until the end of the
thirty-sixth (36th) month following the month in which occurs the Class I Participant’s Date of
Termination, the Employer will arrange to provide the Class I Participant with welfare benefits
(including life and health insurance benefits) and other employee benefits of substantially similar
design and cost (to the Class I Participant except as otherwise set forth below) as the welfare
benefits and other employee benefits available to the Class I Participant immediately prior to the
Notice of Termination or immediately prior to the date of the Change in Control, whichever is
greater; but benefits otherwise receivable by the Class I Participant pursuant to this clause (a)
shall be discontinued if the Class I Participant obtains full-time employment providing welfare
benefits during such period following such termination; and (b) group outplacement counseling
services up to $20,000 in value. Notwithstanding the foregoing, the health insurance benefits to
be provided to a Class I Participant following the Class I participant’s Date of Termination shall
be provided pursuant to Section 4980B of the Internal Revenue Code of 1986, as amended (“COBRA”),
except that the Corporation will continue to pay the employer portion of the premiums for such
coverage, until the end of the period of time provided under COBRA and

 

 

thereafter the Corporation’s obligation to provide health insurance benefits shall be limited to
the obligation to contribute to the purchase of a health insurance policy selected and obtained by
the Class I participant, by payment to the Class I participant of an amount up to but not exceeding
the Corporation’s cost of providing coverage under COBRA at the time the COBRA period expired (not
including any portion of such cost contributed by the Class I participant). Notwithstanding the
foregoing, the Employer shall not be required to continue to provide disability benefits following
a Class I Participant’s Date of Termination other than with respect to benefits to which the Class
I Participant became entitled prior to the Date of Termination and which are required to be paid
following such Date of Termination in accordance with the terms of applicable disability plans or
policies in effect prior to such Date of Termination. The Class I Participant shall not be required
to mitigate the amount of any payment provided for under the Plan by seeking other employment or
otherwise, nor shall the amount of any payment provided for under the Plan be reduced by any
compensation earned by the Class I Participant as the result of employment by another employer
after the Date of Termination, or otherwise, except as set forth in clause (a) of this paragraph.

     4.2.2. Class II Participants. Termination payments shall be made to a Class II Participant in
an amount equal to the sum of (a) twenty-four (24) times the Class II Participant’s highest monthly
base compensation during the six (6) months immediately before the Date of Termination; and (b) all
annual incentive payments that the Class II Participant would have received for the year in which
the Date of Termination occurs, had required performance targets been met, which shall be deemed to
have occurred on the Date of Termination, whether or not they have occurred or could possibly
occur. Said payments shall be paid in a single lump sum, discounted to present value, on the next
business day following the Class II Participant’s Termination.

     Additionally, the Class II Participant shall receive the following: (a) until the end of the
twenty-fourth (24th) month following the month in which occurs the Class II
Participant’s Date of Termination, the Employer will arrange to provide the Class II Participant
with welfare benefits (including life and health insurance benefits) and other employee benefits of
substantially similar design and cost (to the Class II Participant except as otherwise set forth
below) as the welfare benefits and other employee benefits available to the Class II Participant
immediately prior to the Notice of Termination or immediately prior to the date of the Change in
Control, whichever is greater; but benefits otherwise receivable by the Class II Participant
pursuant to this clause (a) shall be discontinued if the Class II Participant obtains full-time
employment providing welfare benefits during such period following such termination; and (b) group
outplacement counseling services up to $15,000 in value. Notwithstanding the foregoing, the health
insurance benefits to be provided to a Class II participant following the Class II participant’s
Date of Termination shall be provided pursuant to Section 4980B of the Internal Revenue Code of
1986, as amended (“COBRA”), except that the Corporation will continue to pay the employer portion
of the premiums for such coverage, until the end of the period of time provided under COBRA, and
thereafter the Corporation’s obligation to provide health insurance benefits shall be limited to
the obligation to contribute to the purchase of a health insurance policy selected and obtained by
the Class II participant, by payment to the Class II participant of an amount up to but not
exceeding the Corporation’s cost of providing coverage under COBRA at the time the COBRA period
expired (not including any portion of such cost contributed by the Class II participant).
Notwithstanding the foregoing, the Employer shall not be required to continue to provide disability
benefits following a Class II Participant’s Date of Termination other than with respect

 

 

to benefits to which the Class II Participant became entitled prior to the Date of Termination and
which are required to be paid following such Date of Termination in accordance with the terms of
applicable disability plans or policies in effect prior to such Date of Termination. The Class II
Participant shall not be required to mitigate the amount of any payment provided for under the Plan
by seeking other employment or otherwise, nor shall the amount of any payment provided for under
the Plan be reduced by any compensation earned by the Class II Participant as the result of
employment by another employer after the Date of Termination, or otherwise, except as set forth in
clause (a) of this paragraph.

     4.2.3. Class III Participants. Termination payments shall be made to a Class III Participant
in an amount equal to the sum of (a) twelve (12) times the Class III Participant’s highest monthly
base compensation during the six (6) months immediately before the Date of Termination; (b) all
annual incentive payments that the Class III Participant would have received for the year in which
the Date of Termination occurs, had required performance targets been met, which shall be deemed to
have occurred on the Date of Termination, whether or not they have occurred or could possibly
occur. Said payments shall be paid in a single lump sum, discounted to present value, on the next
business day following the Class III Participant’s Termination.

     Additionally, the Class III Participant shall receive the following: (a) until the end of the
twelfth (12th) month following the month in which occurs the Class III Participant’s
Date of Termination, the Employer will arrange to provide the Class III Participant with welfare
benefits (including life and health insurance benefits) and other employee benefits of
substantially similar design and cost (to the Class III Participant) as the welfare benefits and
other employee benefits available to the Class III Participant immediately prior to the Notice of
Termination or immediately prior to the date of the Change in Control, whichever is greater; but
benefits otherwise receivable by the Class III Participant pursuant to this clause (a) shall be
discontinued if the Class II Participant obtains full-time employment providing welfare benefits
during such period following such termination; and (b) group outplacement counseling services up to
$10,000 in value. Notwithstanding the foregoing, the Employer shall not be required to continue to
provide disability benefits following a Class III Participant’s Date of Termination other than with
respect to benefits to which the Class III Participant became entitled prior to the Date of
Termination and which are required to be paid following such Date of Termination in accordance with
the terms of applicable disability plans or policies in effect prior to such Date of Termination.
The Class III Participant shall not be required to mitigate the amount of any payment provided for
under the Plan by seeking other employment or otherwise, nor shall the amount of any payment
provided for under the Plan be reduced by any compensation earned by the Class III Participant as
the result of employment by another employer after the Date of Termination, or otherwise, except as
set forth in clause (a) of this paragraph.

     4.2.4. Class IV Participants. Termination payments shall be made to a Class IV Participant in
an amount equal to the sum of (a) Nine (9) times the Class IV Participant’s highest monthly base
compensation during the six (6) months immediately before the Date of Termination; (b) all annual
incentive payments that the Class IV Participant would have received for the year in which the Date
of Termination occurs, had required performance targets been met, which shall be deemed to have
occurred on the Date of Termination, whether or not they have occurred or could possibly occur.
Said payments shall be paid in a single lump sum, discounted to present value, on the next business
day following the Class IV Participant’s Termination.

 

 

     Additionally, the Class IV Participant shall receive the following: (a) until the end of the
ninth (9th) month following the month in which occurs the Class IV Participant’s Date of
Termination, the Employer will arrange to provide the Class IV Participant with welfare benefits
(including life and health insurance benefits) and other employee benefits of substantially similar
design and cost (to the Class IV Participant) as the welfare benefits and other employee benefits
available to the Class IV Participant immediately prior to the Notice of Termination or immediately
prior to the date of the Change in Control, whichever is greater; but benefits otherwise receivable
by the Class IV Participant pursuant to this clause (a) shall be discontinued if the Class IV
Participant obtains full-time employment providing welfare benefits during such period following
such termination; and (b) group outplacement counseling services up to $8,000 in value.
Notwithstanding the foregoing, the Employer shall not be required to continue to provide disability
benefits following a Class IV Participant’s Date of Termination other than with respect to benefits
to which the Class IV Participant became entitled prior to the Date of Termination and which are
required to be paid following such Date of Termination in accordance with the terms of applicable
disability plans or policies in effect prior to such Date of Termination. The Class IV Participant
shall not be required to mitigate the amount of any payment provided for under the Plan by seeking
other employment or otherwise, nor shall the amount of any payment provided for under the Plan be
reduced by any compensation earned by the Class IV Participant as the result of employment by
another employer after the Date of Termination, or otherwise, except as set forth in clause (a) of
this paragraph.

     4.2.5. Class V Participants. Termination payments shall be made to a Class V Participant in an
amount equal to the sum of (a) six (6) times the Class V Participant’s highest monthly base
compensation during the six (6) months immediately before the Date of Termination; (b) all annual
incentive payments that the Class V Participant would have received for the year in which the Date
of Termination occurs, had required performance targets been met, which shall be deemed to have
occurred on the Date of Termination, whether or not they have occurred or could possibly occur.
Said payments shall be paid in a single lump sum, discounted to present value, on the next business
day following the Class V Participant’s Termination.

     Additionally, the Class V Participant shall receive the following: (a) until the end of the
sixth (6th) month following the month in which occurs the Class V Participant’s Date of
Termination, the Employer will arrange to provide the Class V Participant with welfare benefits
(including life and health insurance benefits) and other employee benefits of substantially similar
design and cost (to the Class V Participant) as the welfare benefits and other employee benefits
available to the Class V Participant immediately prior to the Notice of Termination or immediately
prior to the date of the Change in Control, whichever is greater; but benefits otherwise receivable
by the Class V Participant pursuant to this clause (a) shall be discontinued if the Class V
Participant obtains full-time employment providing welfare benefits during such period following
such termination; and (b) group outplacement counseling services up to $5,000 in value.
Notwithstanding the foregoing, the Employer shall not be required to continue to provide disability
benefits following a Class V Participant’s Date of Termination other than with respect to benefits
to which the Class V Participant became entitled prior to the Date of Termination and which are
required to be paid following such Date of Termination in accordance with the terms of applicable
disability plans or policies in effect prior to such Date of Termination. The Class V Participant
shall not be required to mitigate the amount of any payment provided for under the Plan by seeking
other employment or otherwise, nor shall the

 

 

amount of any payment provided for under the Plan be reduced by any compensation earned by the
Class V Participant as the result of employment by another employer after the Date of Termination,
or otherwise, except as set forth in clause (a) of this paragraph.

4.2.6 Sales Personnel Compensation. Notwithstanding the provisions herein pertaining to the
calculation of termination payments to Participants under Sections 4.2.1 — 4.2.5 of the Plan,
payments to sales personnel identified as Participants shall be as follows: Termination payments
shall be made to sales personnel Participants in an amount equal to the number of months identified
in the Class to which each Participant is assigned times the average base salary plus commissions
earned on a monthly basis during the six (6) months immediately before the Date of Termination. No
additional incentive payments or bonuses shall be included in the calculation of termination
payments.

4.3 Cash Transaction Bonus. In the event of a Change in Control, and notwithstanding their
employment status following a Change in Control, Participants identified by the Board may receive a
Cash Bonus based on the value of the Employer at the time of a Change in Control and the premium,
if any, paid for the Company that is over and above the baseline initial value of the Company on
the date merger discussions are publicly disclosed. The formula for creating and calculating the
Cash Bonus Pool, as well as the identity of the Participants eligible for the Cash Transaction
Bonus, are specified in Exhibit ‘C’ hereto. To qualify for this Cash Bonus payment, the
Participant must be a Participant as of the date of the Change in Control and must hold the same
position, or have essentially the same or higher level of responsibility, as held when being named
as a Participant.

The Cash Bonus payments provided herein shall be paid to senior management and to such other key
management and technical personnel who, in the judgment of the Board, made significant
contributions to the growth and success of the Corporation and played a vital role in increasing
shareholder value, as measured by the value of the Corporation at the time of the Change in
Control. The list of intended beneficiaries shall be subject to change at the discretion of the
Board in the event that job responsibilities, employment status or other reasonable circumstances
support changes to the identity of name Participants or to the allocation of the bonus pool among
Participants.

4.4 Certain Additional Payments by the Company.

     4.4.1 Anything in this Agreement to the contrary notwithstanding and except as set forth
below, in the event it shall be determined that any payment or distribution by the Company to or
for the benefit of a Participant identified by the Board as eligible for the benefit provided in
this Section 4.4 (whether paid or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise, but determined without regard to any additional payments required
under this Section 4.4 (a “Payment”) would be subject to the excise tax imposed by Code Section
4999 or any interest or penalties are incurred by said Participant with respect to such excise tax
(such excise tax, together with any such interest and penalties, are hereinafter collectively
referred to as the “Excise Tax”), then said Participant shall be entitled to receive an additional
payment (a “Gross-Up Payment”) in an amount such that after payment of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without limitation, any
income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed
upon the Gross-Up Payment, said Participant retains an amount of the Gross-Up

 

 

Payment equal to the Excise Tax imposed upon the Payments.

     4.4.2 Subject to the provisions of Section 9(c), all determinations required to be made under
this Section 4.4, including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be
made by the Company, with the input of the Company’s certified public accounting firm, which shall provide detailed supporting calculations to the Participant within 15
business days of the receipt of notice that there has been a Payment. Any Gross-Up Payment, as
determined pursuant to this Section 9, shall be paid by the Company to said Participant within a
reasonable time. As a result of the uncertainty in the application of Code Section 4999, it is
possible that Gross-Up Payments which will not have been made by the Company should have been made
(“Underpayment”), consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 4.4.3 and said Participant thereafter is
required to make a payment of any Excise Tax, the Company shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company. In
all events, payment of the Gross-Up Payment or the Underpayment, as applicable, shall be made no
later than the end of the Participant’s taxable year following the taxable year in which the
Participant remits the related taxes.

     4.4.3 Said Participant shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Company of the Gross-Up
Payment. Such notification shall be given as soon as practicable but no later than ten business
days after said Participant is informed in writing of such claim and shall appraise the Company of
the nature of such claim and the date on which such claim is requested to be paid. Said
Participant shall not pay such claim prior to the expiration of the 30-day period following the
date on which he or she gives such notice to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If the Company notifies said
Participant in writing prior to the expiration of such period that it desires to contest such
claim, said participant shall:

	 	(i)	 	give the Company any information reasonably requested by the Company relating
to such claim;
	 
	 	(ii)	 	take such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney reasonably
selected by the Company;
	 
	 	(iii)	 	cooperate with the Company in good faith in order to effectively contest such
claim; and
	 
	 	(iv)	 	permit the Company to participate in any proceedings relating to such claim.

Provided, however, that the Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest and shall indemnify and
hold said Participant harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such representation and payment
of costs and expenses. Without limitation on the foregoing provisions of this Section 4.4.3, the
Company shall control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and

 

 

may, at its sole option, either direct the Participant to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and the said Participant agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of initial jurisdiction
and in one or more appellate courts, as the Company shall determine; provided, however, that if the
Company directs said Participant to pay such claim and sue for a refund, the Company shall advance the amount of such payment to said Participant, on an interest-free basis and shall
indemnify and hold said Participant harmless, on an after-tax basis, from any Excise Tax or income
tax (including interest or penalties with respect thereto) imposed with respect to such advance or
with respect to any imputed income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes for the taxable year of said
Participant with respect to which such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company’s control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and said Participant
shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.

     4.4.4 If, after the receipt by said Participant of an amount advanced by the Company pursuant
to Section 4.4.3, the said Participant becomes entitled to receive any refund with respect to such
claim said participant shall (subject to the Company’s complying with the requirements of Section
4.4.3) promptly pay to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by said Participant of an
amount advanced by the Company pursuant to Section 4.4.3, a determination is made the said
Participant shall not be entitled to any refund with respect to such claim and the Company does not
notify said Participant in writing of its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset, to the extent thereof, the
amount of Gross-Up Payment required to be paid.

4.5 Legal Fees and Expenses. The Employer will pay any legal fees and expenses incurred by a
Participant in connection with any dispute with any Federal, state or local governmental agency
with respect to benefits claimed under the Plan. If the Participant utilizes arbitration to resolve
any such dispute, the Employer will pay any legal fees and expenses incurred by the Participant in
connection therewith. Such payment will be made, in all events, no later than the end of the
Participant’s taxable year following the taxable year in which the expenses were incurred.

4.6 Compliance With Code Section 409A. Notwithstanding anything herein to the contrary, this Plan
is intended to be interpreted and operated so that the payment of the benefits set forth herein
either shall either be exempt from the requirements of Section 409A of the Code or shall comply
with the requirements of such provision; provided however that in no event shall the Employer be
liable to the Participant for or with respect to any taxes, penalties or interest which may be
imposed upon the Participant pursuant to Section 409A. To the extent that any amount payable
pursuant to this Section 4 constitutes a “deferral of compensation” subject to Section 409A (a
“409A Payment”), then, if on the date of the Participant’s “separation from service,” as such term
is defined in Treas. Reg. Section 1.409A-1(h)(1), from the Employer (his “Separation from
Service”), the Participant is a “specified employee,” as such term is defined in Treas. Reg.
Section 1.409-1(i), as determined from time to time by the Employer, then such 409A Payment shall
not be made to the Participant earlier than the earlier of (i) six (6) months

 

 

after the Participant’s Separation from Service; or (ii) the date of his death. The 409A Payments
under this Plan that would otherwise be made during such period shall be aggregated and paid in one
lump sum, without interest, on the first business day following the end of the six (6) month period
or following the date of the Participant’s death, whichever is earlier, and the balance of the 409A
Payments, if any, shall be paid in accordance with the applicable payment schedule provided in this
Section 4.

SECTION 5

280G LIMITATION

The amount of any cash payment to be received by a Participant, other than a Participant identified
by the Board as eligible for the benefits provided in Section 4.4, pursuant to the Plan shall be
reduced (but not below zero) by the amount, if any, necessary to prevent any part of any payment or
benefit received or to be received by the Participant in connection with a Change in Control
(whether payable pursuant to the terms of the Plan or any other plan, contract, agreement or
arrangement with the Employer, with any person whose actions result in a Change in Control of the
Employer or with any person constituting a member of an “affiliated group” (as defined in section
280G(d)(5) of the Code)) (such foregoing payments or benefits referred to collectively as the
“Total Payments”), from being treated as an “excess parachute payment” within the meaning of
section 280G(b) (l) of the Code, but only if and to the extent such reduction will also result in,
after taking into account all applicable state or federal taxes (computed at the highest marginal
rate), including any taxes payable pursuant to section 4999 of the Code, a greater after-tax
benefit to the Participant than the after-tax benefit to the Participant of the Total Payments
computed without regard to any such reduction. For purposes of the foregoing, (a) no portion of the
Total Payments shall be taken into account which in the opinion of tax counsel selected by the
Employer and acceptable to the Participant does not constitute a “parachute payment” within the
meaning of section 280G (b) (2) of the Code; (b) any reduction in payments pursuant to the Plan
shall be computed by taking into account that portion of Total Payments which constitute reasonable
compensation within the meaning of section 28OG(b)(4) of the Code in the opinion of such tax
counsel; (c) the value of any non-cash benefit or of any deferred cash payment included in the
Total Payments shall be determined by the Employer in accordance with the principles of section
28OG(d)(4) of the Code; and (d) in the event of any uncertainty as to whether a reduction in Total
Payments to the Participant is required pursuant to the Plan, the Employer shall initially make the
payment to the Participant and the Participant shall be required to refund to the Employer any
amounts ultimately determined not to have been payable under the terms of the Plan.

SECTION 6

AMENDMENT OR TERMINATION OF THE PLAN

6.1. The Plan may be terminated or amended at any time, at the discretion of the Board. Except to
the extent benefits have become payable but have not actually been paid, the Plan terminates
automatically on the second anniversary of the date of a Change in Control.

 

 

6.2. The Board expressly retains the authority and discretion to amend the Plan and adjust the
benefits specified for any or all of the five Classes of Participants listed in Section 4 of the
Plan to an amount above the current level of benefits if a review of peer group companies and
general industry practice, or other valid and reason, indicates that current benefits are below
industry norms.

SECTION 7

MISCELLANEOUS PROVISIONS

7.1. Non-exclusivity of Rights. Nothing in the Plan shall prevent or limit any Participant’s
continuing or future participation in any benefit, bonus, incentive, retirement or other plan or
program provided by the Employer and for which the Participant may qualify, nor shall anything in
the Plan limit or reduce such rights as any Participant may have under any other agreement with, or
plan, program, policy or practice of, the Employer. Amounts which are vested benefits or which a
Participant is otherwise entitled to receive under any agreement with, or plan, program, policy or
practice of, the Employer shall be payable in accordance with such agreement, plan, program, policy
or practice, except as explicitly modified by the Plan.

7.2. Successors. The Employer will require any successor (whether direct or indirect, by purchase,
merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of
the Employer or of any division or subsidiary thereof employing any Participant to expressly assume
and agree to perform under the terms of the Plan in the same manner and to the same extent that the
Employer would be required to perform if no such succession had taken place. Failure of the
Employer to obtain such assumption and agreement prior to the effectiveness of any such succession
shall entitle each affected Participant to compensation from the Employer in the same amount and on
the same terms as the Participant would be entitled under the Plan if the Participant terminated
employment for Good Reason following a Change in Control, except that for purposes of implementing
the foregoing, the date on which any such succession becomes effective shall be deemed the Date of
Termination and Notice of Termination shall be deemed to have been given on such date.

7.3 Payments as Compensation. Payments under the Plan shall not be deemed compensation for
purposes for any retirement or 401(k) Plan maintained by the Company.

7.4. Notice. Notices and all other communications provided for under the Plan shall be in writing
and shall be deemed to have been duly given when delivered or mailed by United States registered
mail, postage prepaid, addressed to the other party as follows:

If to the Employer, to:

Possis Medical, Inc.

Attention: General Counsel

9055 Evergreen Blvd. N.W.

Minneapolis, MN 55433

 

 

If to the Participant, to the address shown on the records of the Employer, which the Employer
shall keep up to date.

Either party may change its address for purposes of this Section 7.4 by giving appropriate notice
to the other party.

7.5. Governing Law. The validity, interpretation and construction of the Plan shall be governed by
the laws of the State of Minnesota, except to the extent that federal law controls.

7.6. Validity. The invalidity or unenforceability of any provision of the Plan shall not affect the
validity or enforceability of any other provision of the Plan, which shall remain in full force and
effect.

7.7. Employment. The Plan does not constitute a contract of employment or impose on the Employer
any obligation to retain any Participant as an employee, to continue any Participant’s current
employment status or to change any employment policies of the Employer.

7.8. Termination Prior to a Change in Control. Any termination of the Participant’s employment by
the Employer without Cause prior to a Change in Control, and which occurs at the request or
insistence of any person (other than the Employer) in connection with a Change in Control shall be
deemed to have occurred after the Change in Control for purposes of the Plan.

SECTION 8

CLAIMS PROCEDURE

8.1. General. If a Participant believes that he or she may be entitled to benefits, or the
Participant is in disagreement with any determination that has been made, the Participant may
present a claim to the Employer.

8.2. Making a Claim. A Participant’s claim must be written and must be delivered to the Employer.
Within 30 days after delivery of such claim, the Participant shall receive either: (a) a decision;
or (b) a notice describing special circumstances requiring a specified amount of additional time
(but no more than 60 days from the date of delivery of such claim) to reach a decision.

If such claim is wholly or partially denied, the Participant shall receive a written notice
specifying: (a) the reasons for denial; (b) the Plan provisions on which the denial is based; and
(c) any additional information needed from the Participant in connection with the claim and the
reason such information is needed. The Participant also shall receive a copy of Section 8.3 below
concerning the Participant’s right to request a review.

8.3 Requesting Review of a Denied Claim. A Participant may request that a denied claim be
reviewed. Such request for review must be written and must be delivered to the Employer within 30
days after the Participant receives the written notice that the participant’s claim was

 

 

denied. Such request for review may (but is not required to) include issues and comments the Participant
wants considered in the review. The Participant may examine pertinent Plan documents by asking the
Employer. Within 30 days after delivery by the Participant of the Participant’s request for review,
the Participant shall receive either: (a) a decision; or (b) a notice describing special
circumstances requiring a specified amount of additional time (but no more than 60 days from the
date of delivery of such request for review) to reach a decision. The decision shall be in writing
and shall specify the Plan provisions on which it is based.

8.4. Exhaustion of Administrative Remedies. No Participant (nor the estate of any deceased
Participant) may commence any legal action to recover Plan benefits or to enforce or clarify rights
under the Plan under Section 502 or Section 510 of ERISA, or under any other provision
of law, whether or not statutory, until the claims and review procedures set forth herein have been
exhausted in their entirety.

8.5. Decisions. All decisions on claims and on reviews of denied claims will be made by the
Employer. The Employer may, in its discretion, hold one or more hearings. If a Participant
does not receive a decision within the specified time, the Participant should assume that the
claim was denied or re-denied on the date the specified time expired. The Employer reserves
the right to delegate its authority to make decisions.

SECTION 9

DEFINITIONS

When the following terms are used in this document with initial capital letters, they shall have
the following meanings.

9.1. Cause — shall mean (i) the material breach by a Participant of any obligation to the Company
under the terms of this Plan; (ii) any acts of a Participant constituting gross negligence or
conduct which is demonstrably and materially injurious to the Employer, monetarily or otherwise;
(iii) Employees breach of any fiduciary duty to the Employer; or (iv) a Participant’s conviction or
the entry of a pleading of guilty or nolo contendere to any crime involving moral turpitude. For
purposes of this definition, no act, or failure to act, on a Participant’s part shall be deemed
“willful” unless done, or omitted to be done, by the Participant with reasonable belief that the
Participant’s action or omission was not in the best interest of the Employer. Failure by a
Participant to perform the Participant’s duties with the Employer during any period of disability
shall not constitute Cause.

9.2. Change in Control — shall mean:

	 	(a)	 	a change in control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not the
Employer is then subject to such reporting requirement; or
	 
	 	(b)	 	the public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) of the Exchange Act) 

 

 

	 	 	 	by the Employer or any “person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) that such person has become the “beneficial owner” (as defined in Rule
13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the
Employer (i) representing 25% or more, but not more than 50%, of the combined voting
power of the Employer’s then outstanding securities unless the transaction resulting in
such ownership has been approved in advance by the Continuing Directors (as hereinafter
defined) or (ii) representing more than 50% of the combined voting power of the
Employer’s then outstanding securities (regardless of any approval by the Continuing
Directors); provided, however, that notwithstanding the foregoing, no Change in Control
shall be deemed to have occurred for purposes of the Plan by reason of the ownership of
25% or more of the total voting capital stock of the Employer then issued and
outstanding by the Employer, any subsidiary of the Employer or any employee benefit
plan of the Employer or of any subsidiary of the Employer or any entity holding shares of the common stock organized, appointed or established for, or pursuant to
the terms of, any such plan (any such person or entity described in this clause is
referred to herein as a “Employer Entity”); or

	 	(c)	 	the announcement of a tender offer by any person or entity (other than an
Employer Entity) for 20% or more of the Employer’s voting capital stock then issued and
outstanding, which tender offer has not been approved by the Board, a majority of the
members of which are Continuing Directors, and recommended to the shareholders of the
Employer; or
	 
	 	(d)	 	the Continuing Directors cease to constitute a majority of the Employer’s Board
of Directors; or
	 
	 	(e)	 	the shareholders of the Employer approve (i) any consolidation or merger of the
Employer in which the Employer is not the continuing or surviving corporation or
pursuant to which shares of Employer stock would be converted into cash, securities or
other property, other than a merger of the Employer in which shareholders immediately
prior to the merger have the same proportionate ownership of stock of the surviving
corporation immediately after the merger; (ii) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or
substantially all of the assets of the Employer; or (iii) any plan of liquidation or
dissolution of the Employer.

9.3. Code — shall mean the Internal Revenue Code of 1986, as amended.

9.4. Continuing Director — shall mean any person who is a member of the Board of Directors of the
Employer, while such person is a member of the Board of Directors, who is not an Acquiring Person
(as hereinafter defined) or an Affiliate or Associate (as hereinafter defined) of an Acquiring
Person, or a representative of an Acquiring Person or of any such Affiliate or Associate, and who
(i) was a member of the Board of Directors as of the Effective Date or (ii) subsequently becomes a
member of the Board of Directors, if such person’s initial nomination for election or initial
election to the Board of Directors is recommended or approved by a majority of the Continuing
Directors for purposes of this definition. “Acquiring Person” shall mean any “person” (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act) who or which,

 

 

together with all Affiliates and Associates of such person, is the “beneficial owner” (as defined in Rule 13(d)-3 promulgated
under the Exchange Act), directly or indirectly, of securities of the Employer representing 20% or
more of the combined voting power of the Employer’s then outstanding securities, but shall not
include the Investors or any Employer Entity; and “Affiliate” and “Associate” shall have their
respective meanings ascribed to such terms in Rule 12(b)-2 promulgated under the Exchange Act.

9.5. Date of Termination — shall mean the date specified in the Notice of Termination (except in
the case of a Participant’s death, in which case Date of Termination shall be the date of death);
provided, however, that if the Participant’s employment is terminated by the Employer, the date
specified in the Notice of Termination shall be at least 30 days from the date the Notice of
Termination is given to the Participant and if the Participant’s employment is terminated by the
Participant for Good Reason, the date specified in the Notice of Termination shall not be more than
60 days from the date the Notice of Termination is given to the Employer.

9.6. Effective Date — shall mean September 15, 1999.

9.7. Employer — shall mean Possis Medical, Inc., a Minnesota corporation, or any successor thereto
pursuant to Section 7.2 hereof or by operation of law.

9.8. Good Reason — shall mean the occurrence, without a Participant’s express written consent,
within 24 months following a Change in Control of any one or more of the following:

	 	(a)	 	a material reduction by the Employer in the Participant’s base salary as in
effect immediately prior to the Change in Control or as the same shall be increased
from time to time;
	 
	 	(b)	 	the Employer’s requiring the Participant to be based at a location in excess of
thirty (30) miles from the location of the Participant’s office immediately prior to
the Change in Control:
	 
	 	(c)	 	a material reduction in aggregate benefits available to the Participant
immediately prior to the Change in Control (or as in effect following the Change in
Control, if greater);
	 
	 	(d)	 	the failure of the Employer to obtain a satisfactory agreement from any
Successor to the Employer to assume and agree to perform under the Plan, as
contemplated in Section 7.2 hereof;
	 
	 	(e)	 	any purported termination by the Employer of the Participant’s employment that
is not effected pursuant to a Notice of Termination (as hereinafter defined); and
	 
	 	(f)	 	any action of the Employer which results in a material diminution in the
Participant’s authority, duties, or responsibilities. .

For the avoidance of doubt, the failure of the Company to maintain equity based benefits after a
Change in Control in which the surviving company, or its parent company, does not generally offer
equity based benefits to its employees, will not be considered a material reduction in

 

 

aggregate benefits under Section 9.8(c) if such successor provides another benefit of reasonably equivalent
value. In order to be considered a resignation for Good Reason for purposes of this Plan, the
Participant must provide the Employer with written notice and description of the existence of the
Good Reason condition within 90 days of the existence of such Good Reason condition, and the
Employer shall have 30 days to cure such Good Reason condition.

9.9. Notice of Termination — shall mean a written notice which shall set forth the Date of
Termination and shall set forth in reasonable detail the facts and circumstances claimed to provide
a basis for termination of the Participant’s employment.

9.10. Participant — shall mean the employees of the Employer identified as such by the Board,
as the same may be modified by the Employer from time to time. Each Participant shall be assigned
to Class I, Class II, Class III, Class IV or Class V provided in Section 4 herein.

9.11. Plan — shall mean the termination pay plan of the Employer established for the benefit of the
Participants in the event of a Change in Control. The Plan shall be referred to as the “Possis
Medical, Inc. Change in Control Termination Pay Plan.”

9.12. Plan Year — the twelve consecutive month period ending on any December 31.

9.13. Termination of Employment — shall mean termination of a Participant’s employment (a) by the
Employer for any reason other than Cause or (b) by a Participant for Good Reason; but shall not
include termination by reason of a Participant’s death.

	 	 	 	 	 
	 	

Approved by action of the Executive Committee

of the Possis Medical, Inc. Board of Directors

by Action in Writing effective October 28, 1999

 	 
	 	/s/ Irving R. Colacci
 	 
	 	Irving R. Colacci, Secretary 	 
	 	 	 
	 
	 	Amended Effective December 6, 1999

 	 
	 	/s/ Irving R. Colacci
 	 
	 	Irving R. Colacci, Secretary 	 
	 	 	 
	 
	 	Amended Effective April 3, 2001

 	 
	 	/s/ Irving R. Colacci
 	 
	 	Irving R. Colacci, Secretary 	 
	 	 	 
	 
	 	Amended Effective December 12, 2001

 	 
	 	/s/ Irving R. Colacci
 	 
	 	Irving R. Colacci, Secretary 	 
	 	 	 
	 
	 	Amended Effective June 6, 2005

 	 
	 	/s/ Irving R. Colacci
 	 
	 	Irving R. Colacci, Secretary 	 
	 	 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	Amended Effective March 21, 2006

 	 
	 	/s/ Irving R. Colacci
 	 
	 	Irving R. Colacci, Secretary 	 
	 	 	 
	 
	 	Amended Effective February 19, 2007

 	 
	 	/s/ Irving R. Colacci
 	 
	 	Irving R. Colacci, Secretary 	 
	 	 	 
	 
	 	Amended Effective February 10, 2008

 	 
	 	/s/ Irving R. Colacci
 	 
	 	Irving R. Colacci, Secretary 	 
	 	 	 

 

 

	 	 	 	 	 

Schedule A to Possis Medical, Inc. Change in Control Termination Pay Plan
As Amended November 8, 2007

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Participants — Management	 	Class	 	 	 	Participants — Sales	 	Class	 
	1
	 	Robert G. Dutcher	 	I	 	 	 	 	 	 	 	 
	2
	 	Irving R. Colacci	 	II	 	 	 	 	 	 	 	 
	3
	 	Jules L. Fisher	 	II	 	 	 	 	 	 	 	 
	4
	 	James D. Gustafson	 	II	 	 	 	 	 	 	 	 
	5
	 	Shawn F. McCarrey	 	II	 	 	 	 	 	 	 	 
	6
	 	Robert J. Scott	 	II	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	7
	 	Michael Olson	 	III	 	36	 	Mark Deaver	 	III
	8
	 	John C. Riles	 	III	 	37	 	Rob Ledenham	 	III
	9
	 	Eric J. Thor	 	III	 	38	 	Dan Naples	 	III
	10
	 	Pete Valliant	 	III	 	39	 	Kevin Phelan	 	III
	11
	 	Timothy J. Anderson	 	III	 	40	 	Jim Ries	 	III
	12
	 	Cindy Galbraith	 	III	 	41	 	Alan Schuster	 	III
	13
	 	Mark D. Stenoien	 	III	 	42	 	Joseph Shokooh	 	III
	 
	 	 	 	 	 	43	 	Rohn Simon	 	III
	 
	 	 	 	 	 	44	 	Pamela Truhn	 	III
	 
	 	 	 	 	 	45	 	Barry Way	 	III
	14
	 	Cindy Kennedy	 	IV	 	46	 	Manos Protonotarious	 	IV
	15
	 	Michael J. Bonnette	 	IV	 	47	 	Phillip Wojahn	 	IV
	16
	 	Mark Hilse	 	IV	 	48	 	Bob Galant	 	IV
	17
	 	Hieu V. Le	 	IV	 	49	 	Dale Henke	 	IV
	18
	 	Dean Swanson	 	IV	 	50	 	Marty Jensen	 	IV
	19
	 	Trent Farago	 	IV	 	51	 	Brian Small	 	IV
	20
	 	Rick Prather	 	IV	 	52	 	David Hartzog	 	IV
	21
	 	Bonnie F. Carney	 	IV	 	53	 	Fred Smith	 	IV
	22
	 	Kyle Matson	 	IV	 	54	 	Gary Carlson	 	IV
	23
	 	Dan Janse	 	IV	 	55	 	Doug Wyciskalla	 	IV
	24
	 	Amy Deroiser	 	IV	 	56	 	Kurt Baumgartel	 	IV
	25
	 	Gary Jarvis	 	IV	 	 	 	 	 	 	 	 
	26
	 	Steve Yatckoske	 	IV	 	 	 	 	 	 	 	 
	27
	 	Brad Higginson	 	IV	 	 	 	 	 	 	 	 
	28
	 	Alan Kaeding	 	V	 	57	 	James Kuntz	 	V	 
	29
	 	Dale Horecka	 	V	 	 	 	 	 	 	 	 
	30
	 	Steve Timm	 	V	 	 	 	 	 	 	 	 
	31
	 	Rob Oveson	 	V	 	 	 	 	 	 	 	 
	32
	 	Rod Dupre	 	V	 	 	 	 	 	 	 	 
	33
	 	Joe Dutcher	 	V	 	 	 	 	 	 	 	 
	34
	 	John Hauck	 	V	 	 	 	 	 	 	 	 
	35
	 	Robert Lambert	 	V	 	 	 	 	 	 	 	 

 

 

Schedule B to Possis Medical, Inc. Change in Control Termination Pay Plan

Participants Eligible for Gross-Up

February 19, 2007

	 	 	 
	Participant	 	Title
	 
	 	 
	Robert G. Dutcher

	 	Chairman, CEO and President
	 
	 	 
	Robert J. Scott

	 	Vice President, Manufacturing and IT

 

 

Schedule C to Possis Medical, Inc. Change in Control Termination Pay Plan

Cash Transaction Bonus

November 8, 2007

The Cash Transaction Bonus Pool shall be created based on the baseline initial value on the date
merger discussions are publicly disclosed. The baseline amount would be equal to the 30 day
trailing (excluding the day of the announcement) closing stock price average multiplied by the
number of issued and outstanding shares on that date If the acquisition is closed for an amount
below the baseline, no bonus amount is paid. If the acquisition is closed for an amount above the
baseline, a pool is created that increases as the premium above the baseline increases, consistent
with the following schedule:

	 	 	 	 	 
	Deal Premium	 	Bonus Percent
	 
	11-20%
	 	 	2.0	%
	21-30%
	 	 	2.5	%
	31-40%
	 	 	3.0	%
	41-50%
	 	 	3.5	%
	50+%
	 	 	4.0	%

The Board shall maintain a schedule of intended beneficiaries under the bonus plan, which shall
include the anticipated allocation of the bonus pool among the named participants. This schedule,
however, shall be subject to change at the discretion of the Board in the event that job
responsibilities, employment status or other reasonable circumstances support changes to the
identity of named Participants or to the allocation of the bonus pool among Participants. The
current anticipated allocation is as follows:

	 	 	 
	Dutcher:
	 	30%
	Colacci:
	 	10%
	Scott:
	 	10%
	Riles:
	 	  5%
	Other
	 	13%
	McCarrey:
	 	10%
	Gustafson:
	 	10%
	Fisher:
	 	10%
	Olson:
	 	  2%Ex-10.1 Employment Agreement

 

Exhibit 10.1

EMPLOYMENT AGREEMENT

     This Employment Agreement (“Agreement”) is made and entered into on February 7, 2008 and
effective as of January 1, 2008 by and between TERREMARK WORLDWIDE, INC., a Delaware corporation
(the “Company”), and Manuel D. Medina (hereinafter, the “Executive”).

W I T N E S S E T H:

     WHEREAS, the Executive is currently employed as the President, Chief Executive Officer and
Chairman of the Company;

     WHEREAS, the Executive possesses intimate knowledge of the business and affairs of the
Company, its policies, methods and personnel;

     WHEREAS, the Board recognizes that the Executive has contributed to the growth and success of
the Company, and desires to assure the Company of the Executive’s continued employment and to
compensate him therefor;

     WHEREAS, the Board has determined that this Agreement will reinforce and encourage the
Executive’s continued attention and dedication to the Company; and

     WHEREAS, the Executive is willing to make his services available to the Company and on the
terms and conditions hereinafter set forth.

     NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which are mutually
acknowledged, the Company and the Executive hereby agree as follows:

     1. Definitions. When used in this Agreement, the following terms shall have the following meanings:

          (a) “Accrued Obligations” means:

               (i) all accrued but unpaid Base Salary through the end of the Term of Employment;

               (ii) any unpaid or unreimbursed expenses incurred in accordance with Company policy, including
amounts due under Section 5(a) hereof, to the extent incurred during the Term of Employment;

               (iii) any benefits provided under the Company’s employee benefit plans upon a termination of
employment, in accordance with the terms therein, including, without limitation, rights to equity
in the Company pursuant to any plan or grant and payment of compensation for accrued but unused
vacation days;

               (iv) any unpaid Bonus in respect to any completed fiscal year that has ended on or prior to
the end of the Term of Employment; and

 

 

               (v) rights to indemnification by virtue of the Executive’s position as an officer or director
of the Company or its subsidiaries and the benefits under any directors’ and officers’ liability
insurance policy maintained by the Company, in accordance with the terms thereof.

          (b) “Base Salary” means the salary provided for in Section 4(a) hereof or any increased salary
granted to Executive pursuant to Section 4(a) hereof.

          (c) “Beneficial Ownership” shall have the meaning ascribed to such term in Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended.

          (d) “Board” means the Board of Directors of the Company.

          (e) “Bonus” means any bonus payable to the Executive pursuant to Section 4(b) hereof.

          (f) “Bonus Period” means each period for which a Bonus is payable. Unless otherwise specified by the Compensation Committee of the Board, the Bonus Period
shall be the fiscal year of the Company.

          (g) “Cause” means:

               (i) a conviction of the Executive, or a plea of nolo contendere, to a felony involving
dishonesty or a breach of trust; or

               (ii) willful misconduct or gross negligence by the Executive resulting, in either case, in
material economic harm to the Company or any Related Entities; or

               (iii) a willful continued failure by the Executive to carry out the reasonable and lawful
directions of the Board; or

               (iv) fraud, embezzlement, theft or dishonesty of a material nature by the Executive against
the Company or any Related Entity, or a willful material violation by the Executive of a policy or
procedure of the Company or any Related Entity, resulting, in any case, in material economic harm
to the Company or any Related Entity; or

               (v) a willful material breach by the Executive of this Agreement.

An act or failure to act shall not be “willful” if (i) done by the Executive in good faith or (ii)
the Executive reasonably believed that such action or inaction was in the best interests of the
Company and the Related Entities, and Cause shall not include any act or failure to act otherwise
described in (ii), (iii), (iv) or (v) unless and until the Company shall have provided to the
Executive written notice of such act or failure to act and ten (10) business days from the date of
such notice to cure such matter and the Executive shall have failed to cure the same,

2

 

          (h) “Change in Control” means:

               (i) The acquisition by any Person of Beneficial Ownership of more than thirty percent (30%) of
either (A) the then outstanding shares of common stock of the Company (the “Outstanding Company
Common Stock”) or (B) the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the “Outstanding Company Voting
Securities) (the foregoing Beneficial Ownership hereinafter being referred to as a “Controlling
Interest”); provided, however, that for purposes of this definition, the following acquisitions
shall not constitute or result in a Change of Control: (x) any acquisition by the Company; (y) any
acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company
or any subsidiary of the Company; or (z) any acquisition by any corporation pursuant to a
transaction which complies with clauses (A) and (B) of subsection (iii) below; or

               (ii) During any period of two (2) consecutive years (not including any period prior to the
Commencement Date) individuals who constitute the Board on the Commencement Date (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the Commencement Date whose election, or
nomination for election by the Company’s shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the Board; or

               (iii) Consummation of a reorganization, merger, statutory share exchange or consolidation or
similar corporate transaction involving the Company or any of its subsidiaries, a sale or other
disposition of all or substantially all of the assets of the Company, or the acquisition of assets
or stock of another entity by the Company or any of its subsidiaries (each a “Business
Combination”), in each case, unless, following such Business Combination, (A) all or substantially
all of the individuals and entities who were the Beneficial Owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%)
of the then outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including, without limitation,
a corporation which as a result of such transaction owns the Company or all or substantially all of
the Company’s assets either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may be, and (B) at
least a majority of the members of the Board of Directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for such Business Combination; or

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               (iv) approval by the shareholders of the Company of a complete liquidation or dissolution of
the Company.

          (i) “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended from
time to time.

          (j) “Code” means the Internal Revenue Code of 1986, as amended.

          (k) “Commencement Date” means January 1, 2008.

          (l) “Common Stock” means the common stock of the Company, par value $0.001 per share.

          (m) “Competitive Activity” means an activity that is in material direct competition with the
Company in a business in which the Company was engaged while the Executive was employed by the
Company, in any of the States within the United States, or countries within the world, in which the
Company conducts business.

          (n) “Confidential Information” means all trade secrets and information disclosed to the
Executive or known by the Executive as a consequence of or through the unique position of his
employment with the Company or any Related Entity (including information conceived, originated,
discovered or developed by the Executive and information acquired by the Company or any Related
Entity from others) prior to or after the date hereof, and not generally or publicly known (other
than as a result of unauthorized disclosure by the Executive), about the Company or any Related
Entity or its business.

          (o) “Disability” means the Executive’s inability, or failure, to perform the essential
functions of his or her position, with or without reasonable accommodation, for any period of six
(6) months or more in any twelve (12) month period, by reason of any medically determinable
physical or mental impairment.

          (p) “Equity Awards” means any stock options, restricted stock, restricted stock units, stock
appreciation rights, phantom stock or other equity based awards granted by the Company to the
Executive.

          (q) “Equity Plan” means the Company’s 2005 Executive Incentive Compensation Plan, as amended
from time to time, and any successor plan thereto.

          (r) “Excise Tax” means any excise tax imposed by Section 4999 of the Code, together with any
interest and penalties imposed with respect thereto, or any interest or penalties are incurred by
the Executive with respect to any such excise tax.

          (s) “Expiration Date” means the date on which the Term of Employment, including any renewals
thereof under Section 3(b), shall expire.

          (t) “Good Reason” means

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               (i) the assignment to the Executive of any duties inconsistent in any material respect with
the Executive’s position (including status, titles and reporting requirements), authority, duties
or responsibilities as contemplated by Section 2(b) of this Agreement, or any other action by the
Company that results in a material diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof
given by the Executive;

               (ii) any failure by the Company to comply with any of the provisions of Section 4 of this
Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith
and that is remedied by the Company promptly after receipt of notice thereof given by the
Executive;

               (iii) the Company’s requiring the Executive to be based at any office or location outside of
Miami, Florida, except for travel reasonably required in the performance of the Executive’s
responsibilities;

               (iv) any purported termination by the Company of the Executive’s employment other than for
Cause pursuant to Section 6(b), or by reason of the Executive’s Disability pursuant to Section 6(c)
of this Agreement, prior to the Expiration Date;

               (v) the Executive is requested by the Company to engage in conduct that is reasonably likely
to result in a violation of law; or

               (vi) the withdrawal from the Executive of any authority described in Section 2(b) hereof.

     For purposes of this Agreement, any good faith determination made by the Board as to whether
the circumstances resulting in the Executive’s termination of his employment fulfills the
requirements set forth above to constitute “Good Reason” shall be binding and conclusive on all
interested parties.

          (u) “Group” shall have the meaning ascribed to such term in Section 13(d) of the Securities
Exchange Act of 1934.

          (v) “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Securities
Exchange Act of 1934 and used in Sections 13(d) and 14(d) thereof.

          (w) “Related
Entity” means any subsidiary or affiliate, and any business, corporation,
partnership, limited liability company or other entity designated by Board in which the Company or
a subsidiary holds a substantial ownership interest, directly or indirectly.

          (x) “Restricted Period” shall be the Term of Employment and the one (1) year period
immediately following termination of the Term of Employment.

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          (y) “Severance Amount” shall mean an amount equal to three (3) times the sum of (A) the
Executive’s annual Base Salary as in effect immediately prior to the Termination Date and (B) the
Executive’s Target Bonus for the Bonus Period in which termination occurs.

          (z) “Severance Term” means the one (1) year period following the date on which the Term of
Employment ends.

          (aa) “Target Bonus” means the target annual incentive award opportunity for the applicable
Bonus Period.

          (bb) “Term of Employment” means the period during which the Executive shall be employed by the
Company pursuant to the terms of this Agreement.

          (cc) “Termination Date” means the date on which the Term of Employment ends.

          (dd) “Termination Year Bonus” means Bonus payable under Section 4(b) hereof for the Bonus
Period in which the Executive’s employment with the Company terminates for any reason.

     2. Employment.

          (a) Employment and Term. The Company hereby agrees to employ the Executive and the Executive hereby agrees to serve
the Company during the Term of Employment on the terms and conditions set forth herein.

          (b) Duties of Executive. During the Term of Employment, the Executive shall be employed and serve as the President,
Chief Executive Officer and Chairman of the Company, and shall have such duties as are typically
associated with such title. The Executive shall faithfully and diligently perform all services as
may be assigned to him by the Board provided that such services are consistent with the Executive’s
position with the Company, and shall exercise such power and authority as may from time to time be
delegated to him by the Board. The Executive shall devote his full business time, attention and
efforts to the performance of his duties under this Agreement, render such services to the best of
his ability, and use his reasonable best efforts to promote the interests of the Company. The
Executive shall not engage in any other business or occupation during the Term of Employment,
including, without limitation, any activity that materially (i) conflicts with the interests of the
Company or its subsidiaries, (ii) interferes with the proper and efficient performance of his
duties for the Company, or (iii) interferes with the exercise of his judgment in the Company’s best
interests. Notwithstanding the foregoing or any other provision of this Agreement, it shall not be
a breach or violation of this Agreement for the Executive to (x) serve on corporate, civic or
charitable boards or committees, (y) deliver lectures, fulfill speaking engagements or teach at
educational institutions, or (z) manage personal investments, so long as such activities do not
significantly interfere with or significantly detract from the performance of the Executive’s
responsibilities to the Company in accordance with this Agreement.

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     3. Term.

          (a) Initial Term. The initial Term of Employment under this Agreement, and the employment of the Executive
hereunder, shall commence on the Commencement Date and shall expire on the third anniversary of the
Commencement Date (the “Initial Term”), unless sooner terminated in accordance with Section 6
hereof.

          (b) Renewal Terms. At the end of the Initial Term, the Term of Employment automatically shall renew for
successive one (1) year terms (subject to earlier termination as provided in Section 6 hereof),
unless the Company or the Executive delivers written notice to the other at least three (3) months
prior to the Expiration Date of its or his election not to renew the Term of Employment.

     4. Compensation.

          (a) Base Salary. The Executive shall receive a Base Salary at the annual rate of $425,000 during the Term of
Employment, with such Base Salary payable in installments consistent with the Company’s normal
payroll schedule, subject to applicable withholding and other taxes. The Base Salary shall be
reviewed, at least annually, for merit increases and may, by action and in the discretion of the
Compensation Committee of the Board, be increased at any time or from time to time, but may not be
decreased from the then current Base Salary.

          (b) Bonuses.

               (i) During the Term of Employment, the Executive shall participate in the Company’s annual
incentive compensation program pursuant to and under the Company’s 2005 Executive Incentive
Compensation Plan, or such other plan, program and/or arrangements applicable to senior-level
executives as established and modified from time to time by the Compensation Committee of the Board
in its sole discretion. During the Term of Employment, the Executive shall have a threshold bonus
opportunity under such plan or program equal to 80% of his current Base Salary, a Target Bonus
opportunity under such plan or program equal to 100% of his current Base Salary, and a maximum
bonus under such plan or program equal to 120% of his current Base Salary, in each case based on
satisfaction of performance criteria to be established by the Compensation Committee of the Board
at the beginning of each fiscal year that begins during the Term of Employment. Payment of annual
incentive compensation awards shall be made in the same manner and at the same time that other
senior-level executives receive their annual incentive compensation awards.

               (ii) For the Bonus Period in which the Executive’s employment with the Company terminates for
any reason other than by the Company for Cause under Section 6(b) hereof or by the Executive
without Good Reason under Section 6(g) hereof, the Company shall pay the Executive a pro rata
portion (based upon the period ending on the date on which the Executive’s employment with the
Company terminates) of the Target Bonus for the Bonus Period in which such termination of
employment occurs; provided, however, that (A) the Bonus Period shall be deemed to end on the last
day of the fiscal quarter of the Company in which the Executive’s employment so terminates, and (B)
the business criteria used to determine the bonus for this short Bonus Period shall be annualized
and shall be determined based upon unaudited
financial information prepared in accordance with generally accepted accounting principles,
applied consistently with prior periods, and reviewed and approved by the Compensation Committee of
the Board.

7

 

               (iii) The Executive may receive such additional bonuses, if any, as the Compensation Committee
of the Board may in its sole and absolute discretion determine.

               (iv) Any Bonus payable pursuant to this Section 4(b) shall be paid by the Company to the
Executive on the fifteenth day of the third month after the end of the Bonus Period for which it is
payable.

          (c) Repayment Provisions. If the Company is required to prepare an accounting restatement
due to its material noncompliance, as a result of the Executive’s misconduct, with any financial
reporting requirement under the United States securities laws, then, and only if Section 304 of the
Sarbanes-Oxley Act of 2002, or a successor provision, is then in effect, the Executive shall
reimburse the Company for (i) any bonus or other incentive-based or equity-based compensation
received by the Executive from the Company during the twelve (12) month period following the first
public issuance or filing with the Securities Exchange Commission (whichever first occurs) of the
financial documents embodying such financial reporting requirement and (ii) any profits realized
from the sale of securities of the Company during such twelve (12) month period.

     5. Expense Reimbursement and Other Benefits.

          (a) Reimbursement of Expenses. Upon the Executive’s submission of substantiation in accordance with, and otherwise subject
to, such rules and guidelines as the Company may from time to time adopt with respect to the
reimbursement of expenses of executive personnel, the Company shall reimburse the Executive for all
reasonable expenses actually paid or incurred by the Executive during the Term of Employment in the
course of and pursuant to the business of the Company. Notwithstanding anything herein to the
contrary, the Executive’s first class travel and accommodations shall be considered reasonable.
The Executive shall account to the Company in writing for all expenses for which reimbursement is
sought and shall supply to the Company copies of all relevant invoices, receipts or other evidence
reasonably requested by the Company.

          (b) Compensation/Benefit Programs. During the Term of Employment, the Executive shall be entitled to participate in all
medical, dental, hospitalization, accidental death and dismemberment, disability, travel and life
insurance plans, and any and all other plans as are presently and hereinafter offered by the
Company to its executive personnel, including savings, pension, profit-sharing and deferred
compensation plans, subject to the general eligibility and participation provisions set forth in
such plans. During the Term of Employment, the Company shall provide and/or pay for both a life
insurance policy on the Executive’s life with a $2 million death benefit and a travel insurance
policy with a $2 million death benefit. The Executive shall designate in his sole discretion the
beneficiary under such policies. If the life insurance cannot be purchased at standard rates, then
the Company shall provide and/or pay for that amount of insurance that can be purchased for
premiums equal to the coverage specified above at standard rates.

8

 

          (c) Working Facilities. During the Term of Employment, the Company shall furnish the Executive with an office,
secretarial help and such other facilities and services suitable to his position and adequate for
the performance of his duties hereunder.

          (d) Automobile. During the Term of Employment, the Company shall provide the Executive with an automobile
(or shall reimburse the Executive for the cost of obtaining such automobile), where such automobile
is at least comparable to the existing automobile provided by the Company to the Executive, and
transportation-related security. In addition, the Company shall reimburse the Executive for all
costs of gasoline, oil, repairs, maintenance, insurance and other expenses incurred by Executive by
reason of the use of Executive’s automobile for Company business from time to time.

          (e) Equity Awards. During the Term of Employment, the Executive shall be eligible to be granted Equity Awards
under (and therefore subject to all terms and conditions of) the Equity Plan or such other plans or
programs as the Company may from time to time adopt, and subject to all rules of regulation of the
Securities and Exchange Commission applicable thereto. The number and type of Equity Awards, and
the terms and conditions thereof, shall be determined by the Compensation Committee of the Board,
in its discretion and pursuant to the Equity Plan or the plan or arrangement pursuant to which they
are granted.

          (f) Vacation. The Executive shall be entitled to four (4) weeks of paid vacation each calendar year
during the Term of Employment, to be taken at such times as the Executive and the Company shall
mutually determine and provided that no vacation time shall significantly interfere with the duties
required to be rendered by the Executive hereunder. Any vacation time not taken by Executive
during any fiscal year may be carried forward into any succeeding calendar year.

          (g) Other Benefits. Regardless of anything herein to the contrary, if at any time during
the Term of Employment the Company or any Related Entity agrees to provide or provides any benefit
to any other employee of the Company or Related Entity which benefit is not otherwise provided to
the Executive hereunder, or which is greater than a similar benefit provided to the Executive
hereunder, the Company shall provide such benefit to the Executive or increase his benefit to be at
least equal to such benefit agreed to be provided or provided to such other employee.

     6. Termination.

          (a) General. The Term of Employment shall terminate upon the earliest to occur of (i) the Executive’s
death, (ii) a termination by the Company by reason of the Executive’s Disability, (iii) a
termination by the Company with or without Cause, or (iv) a termination by Executive with or
without Good Reason. Upon any termination of Executive’s employment for any reason, except as may
otherwise be requested by the Company in writing and agreed upon in writing by Executive, the
Executive shall resign from any and all directorships, committee memberships or any other positions
Executive holds with the Company or any of its subsidiaries.

9

 

          (b) Termination By Company for Cause. The Company shall at all times have the right, upon written notice to the Executive, to
terminate the Term of Employment, for Cause. Cause shall in no event be deemed to exist except
upon a decision made by the Board made at a special meeting of the Board to be called and held at a
time reasonably convenient to the Board and the Executive, but in no less than five (5) business
days or more than thirty (30) business days after the Executive’s receipt of notice from the
Company specifying such alleged “Cause.” Such notice from the Company to the Executive specifying
alleged “Cause” shall be in writing and shall set forth in detail all acts or omission constituting
such Cause. The Executive shall have not less than three (3) days prior written notice of the time
and place of, and shall have the right to appear before, such special meeting of the Board with
legal counsel of his choosing to refute any allegation of Cause specified in such notice. No
termination of the Executive’s employment by reason of Cause shall be effective until the Executive
is afforded such opportunity to appear and after such appearance (or failure of the Executive to
appear at the designated time), not less than a majority of the members of the entire Board
(excluding the Executive if he is so a member) shall concur that such Cause specified in such
notice exists. For purposes of this Section 6(b), any good faith determination by the Board of
Cause, made in accordance with the procedure described above, shall be binding and conclusive on
all interested parties. In the event that the Term of Employment is terminated by the Company for
Cause, Executive shall be entitled only to the Accrued Obligations.

          (c) Disability. The Company shall have the option, in accordance with applicable law, to terminate the Term
of Employment upon written notice to the Executive, at any time during which the Executive
continues to suffer after having suffered from a Disability. In the event that the Term of
Employment is terminated due to the Executive’s Disability, the Executive shall be entitled to:

               (i) The Accrued Obligations, payable as and when those amounts would have been payable had the
Term of Employment not ended;

               (ii) The Termination Year Bonus, payable within 2-1/2 months after the last day of the Bonus
Period in which the Termination Date occurs; and

               (iii) Vesting, immediately prior to such termination, in any Equity Awards that have not
previously vested, provided that the Executive shall only have six (6) months after the Termination
Date in order to exercise any stock options within such Equity Awards.

          (d) Death. In the event that the Term of Employment is terminated due to the Executive’s death, the
Executive shall be entitled to:

               (i) The Accrued Obligations, payable as and when those amounts would have been payable had the
Term of Employment not ended;

               (ii) The Termination Year Bonus, payable within 2-1/2 months after the last day of the Bonus
Period in which the Termination Date occurs; and

               (iii) Vesting, immediately prior to such termination, in any Equity Awards that have not
previously vested, provided that the Executive’s estate or beneficiary shall
only have six (6) months after the Termination Date in order to exercise any stock options
within such Equity Awards.

10

 

          (e) Termination Without Cause. The Company may terminate the Term of Employment at any time without Cause, by written
notice to the Executive not less than thirty (30) days prior to the effective date of such
termination. In the event that the Term of Employment is terminated by the Company without Cause
(other than due to the Executive’s death or Disability) the Executive shall be entitled to:

               (i) The Accrued Obligations, payable as and when those amounts would have been payable had the
Term of Employment not ended;

               (ii) The Termination Year Bonus, payable within 2 1/2 months after the last day of the Bonus
Period in which the Termination Date occurs;

               (iii) A lump sum payment equal to the Severance Amount, payable within the later of ten (10)
business days after the Termination Date or the expiration of the seven (7) day revocation period
for the general release described in Section 6(j);

               (iv) Continuation, at the Company’s expense, of the health benefits provided to Executive and
his covered dependents under the Company health plans as in effect from time to time after the date
of such termination at the same cost applicable to active employees until the earlier of: (A) the
expiration of the Severance Term, or (B) the date the Executive commences employment with any
person or entity and, thus, is eligible for health insurance benefits; provided, however, that as a
condition of continuation of such benefits, the Company may require the Executive to elect to
continue his health insurance pursuant to COBRA. In the event that the Company is unable to
provide the Executive and his covered dependents with any health benefits required pursuant to this
Section 6(e)(iv), then the Company shall pay the Executive cash equal to the value of the benefit
that otherwise would have accrued for the Executive’s benefit under the plan, for the period during
which such benefits could not be provided under the plans, said cash payments to be made monthly
until such time as the benefits would otherwise terminate pursuant to this Section 6(e)(iv); and

               (v) Vesting, immediately prior to such termination, in any Equity Awards that have not
previously vested.

          (f) Termination by Executive for Good Reason. The Executive may terminate the Term of Employment for Good Reason by providing the Company
fifteen (15) days’ written notice setting forth in reasonable specificity the event that
constitutes Good Reason, which written notice, to be effective, must be provided to the Company
within sixty (60) days of the Executive’s first knowledge of the occurrence of such event. During
such fifteen (15) day notice period, the Company shall have a cure right (if curable), and if not
cured within such period, the Executive’s termination shall be effective upon the date immediately
following the expiration of the fifteen (15) day notice period, and the Executive shall be entitled
to the same payments and benefits as provided in Section 6(e) above for a termination without
Cause.

          (g) Termination by Executive Without Good Reason. The Executive may terminate his employment without Good Reason by providing the Company
thirty (30) days’
written notice of such termination. In the event of a termination of employment by the
Executive under this Section 6(g), the Executive shall be entitled only to the Accrued Obligations.
In the event of termination of the Executive’s employment under this Section 6(g), the Company
may, in its sole and absolute discretion, by written notice, accelerate such date of termination
and still have it treated as a termination without Good Reason.

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          (h) Termination Upon Expiration Date. In the event that Executive’s employment with the Company terminates upon the expiration of
the Term of Employment, the Executive shall be entitled to:

               (i) The Accrued Obligations, payable as and when those amounts would have been payable had the
Term of Employment not ended;

               (ii) The Termination Year Bonus, payable within 2-1/2 months after the last day of the Bonus
Period in which the Termination Date occurs;

               (iii) A lump-sum payment equal to the Severance Amount, payable within the later of ten (10)
business days after the Termination Date or the expiration of the seven (7) day revocation period
for the general release described in Section 6(j); and

               (iv) Continuation, at the Company’s expense, of the health benefits provided to Executive and
his covered dependants under the Company health plans as in effect from time to time after the date
of such termination at the same cost applicable to active employees until the earlier of: (A) the
expiration of the Severance Term, or (B) the date Executive commences employment with any person or
entity and, thus, is eligible for health insurance benefits; provided, however, that as a condition
of continuation of such benefits, the Company may require the Executive to elect to continue his
health insurance pursuant to COBRA. In the event that the Company is unable to provide the
Executive and his covered dependents with any health benefits required pursuant to this Section
6(h)(iv), then the Company shall pay the Executive cash equal to the value of the benefit that
otherwise would have accrued for the Executive’s benefit under the plan, for the period during
which such benefits could not be provided under the plans, said cash payments to be made monthly
until such time as the benefits would otherwise terminate pursuant to this Section 6(h)(iv).

          (i) Change in Control of the Company. If the Executive’s employment is terminated by the Company without Cause or by the
Executive during (x) the 6-month period preceding the date of the Change in Control or (y) the two
(2) year period immediately following the Change in Control, then in lieu of any amounts otherwise
payable under 6(e) or 6(f) hereof, the Executive shall be entitled to:

               (i) The Accrued Obligations, payable as and when those amounts would have been payable had the
Term of Employment not ended;

               (ii) The Termination Year Bonus, payable within 2 1/2 months after the last day of the Bonus
Period in which the Termination Date occurs;

12

 

               (iii) The Severance Amount, payable within the later of ten (10) business days after the
Termination Date or the expiration of the seven (7) day revocation period for the general release
described in Section 6(j); and

               (iv) Continuation, at the Company’s expense, of the health benefits provided to Executive and
his covered dependants under the Company health plans as in effect from time to time after the date
of such termination at the same cost applicable to active employees until the earlier of: (A) the
expiration of the Severance Term, or (B) the date Executive commences employment with any person or
entity and, thus, is eligible for health insurance benefits; provided, however, that as a condition
of continuation of such benefits, the Company may require the Executive to elect to continue his
health insurance pursuant to COBRA. In the event that the Company is unable to provide the
Executive and his covered dependents with any health benefits required pursuant to this Section
6(i)(iv), then the Company shall pay the Executive cash equal to the value of the benefit that
otherwise would have accrued for the Executive’s benefit under the plan, for the period during
which such benefits could not be provided under the plans, said cash payments to be made monthly
until such time as the benefits would otherwise terminate pursuant to this Section 6(i)(iv); and

               (v) Vesting, immediately prior to such termination, in any Equity Awards that have not
previously vested.

          (j) Release. Any payments due to Executive under this Article 6 (other than the Accrued Obligations or
any payments due on account of the Executive’s death) shall be conditioned upon Executive’s
execution of a general release of claims in the form attached hereto as Exhibit A (subject to such
modifications as the Company reasonably may request).

          (k) Section 280G Reductions and Additional Payments by the Company.

               (i) Anything in this Agreement to the contrary notwithstanding, in the event that it shall be
determined that any payment, distribution, or other action by the Company to or for the benefit of
the Executive (whether paid or payable or distributed or distributable pursuant to the terms of the
Agreement or otherwise) (a “Payment”), would result in an “excess parachute payment” within the
meaning of Section 280G(b)(1) of the Code, but that no portion of the Payments would be treated as
excess parachute payments if the aggregate amount of the Payments pursuant to this Agreement (the
“Agreement Payments”) were reduced by not more 10% of the aggregate present value of all of the
Agreement Payments, then the Agreement Payments shall be reduced to the “Reduced Amount”. The
“Reduced Amount” shall be an amount expressed in present value which maximizes the aggregate
present value of Agreement Payments without causing any Payment to be an excess parachute payment
under Section 280G(b)(1) of the Code. For purposes of this Section 6(k), present value shall be
determined in accordance with Section 280G(d)(4) of the Code.

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               (ii) If and to the extent that Section 6(k)(i) is not applicable, then, anything in this
Agreement to the contrary notwithstanding, in the event that it shall be determined that any
Payment would be subject to an Excise Tax, the Company shall make a payment to the Executive (a
“Gross-Up Payment”) in an amount such that after payment by the Executive of all taxes (including
any Excise Tax) imposed upon the Gross-Up Payment, the
Executive retains (or has had paid to the Internal Revenue Service on his behalf) an amount of
the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the
product of any deductions disallowed because of the inclusion of the Gross-Up Payment in the
Executive’s adjusted gross income and the highest applicable marginal rate of federal income
taxation for the calendar year in which the Gross-Up Payment is to be made. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be deemed to (x) pay federal
income taxes at the highest marginal rates of federal income taxation for the calendar year in
which the Gross-Up Payment is to be made, and (y) pay applicable state and local income taxes at
the highest marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be
made, net of the maximum reduction in federal income taxes which could be obtained from deduction
of such state and local taxes.

               (iii) Subject to the provisions of paragraph (iv) of this Section 6(k), all determinations
required to be made under this Section 6(k), including the amount of any Reduced Amount and the
Payments that are to be reduced pursuant to Section 6(k)(i) and, whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment, and the assumptions (consistent with
the above) to be utilized in arriving at such determination, shall be made by KPMG LLP (the
“Accounting Firm”), which shall provide detailed supporting calculations both to the Company and
the Executive within 15 business days of the receipt of notice from the Executive that there has
been a Payment, or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting
the Change of Control, the Executive shall appoint another regionally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined pursuant to this Section 6(k), shall be paid by
the Company to the Executive within five days of the receipt of the Accounting Firm’s
determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive,
it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the
Executive’s applicable federal income tax return would not result in the imposition of a negligence
or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and
the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at
the time of the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been made
(“Underpayment”), consistent with the calculations required to be made hereunder. In the event
that the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.

               (iv) The Executive shall notify the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than ten business days after
the Executive is informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on which it gives such
notice to the Company (or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to contest such claim, the
Executive shall:

14

 

                    (A) give the Company any information reasonably requested by the Company relating to such
claim,

                    (B) take such action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the Company and approved by the
Executive,

                    (C) cooperate with the Company in good faith in order effectively to contest such claim, and

                    (D) permit the Company to participate in any proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section 6(k)(iii) and in a manner
reasonably acceptable to the Executive, and provided that the Company shall keep the Executive
informed of all matters in the proceedings, the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall determine; provided,
however, that if the Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an interest-free basis and
shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with respect to such
advance or with respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes for the taxable year
of the Executive with respect to which such contested amount is claimed to be due is limited solely
to such contested amount. Furthermore, the Company’s control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall
be entitled to settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.

               (v) If, after the receipt by the Executive of an amount advanced by the Company pursuant to
Section 6(k)(iii), the Executive becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company’s complying with the requirements of Section 6(k)(iii))
promptly pay to the Company the amount of such refund (together with any interest paid thereon
after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 6(k)(iii), a determination
is made that the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance shall be forgiven
and shall not be required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.

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          (l) Cooperation. Following the Term of Employment, the Executive shall give his assistance and cooperation
willingly, upon reasonable advance notice and with due consideration for his other business or
personal commitments, in any matter relating to his position with the Company, or his expertise or
experience as the Company may reasonably request, including his attendance and truthful testimony
where deemed appropriate by the Company, with respect to any investigation or the Company’s defense
or prosecution of any existing or future claims or litigations or other proceedings relating to
matters in which he was involved or potentially had knowledge by virtue of his employment with the
Company. In no event shall his cooperation materially interfere with his services for a subsequent
employer or other similar service recipient. To the extent permitted by law, the Company agrees
that (i) it shall promptly advance to the Executive (and reimburse him for any additional)
reasonable and documented expenses in connection with his rendering assistance and/or cooperation
under this Section 6(l) upon his presentation of documentation for such expenses and (ii) the
Executive shall be reasonably compensated for any assistance or cooperation pursuant to this
Section 6(l).

          (m) Return of Company Property. Following the Termination Date, the Executive or his personal representative shall return
all Company property in his possession, including but not limited to all computer equipment
(hardware and software), telephones, facsimile machines, palm pilots and other communication
devices, credit cards, office keys, security access cards, badges, identification cards and all
copies (including drafts) of any documentation or information (however stored) relating to the
business of the Company, its customers and clients or its prospective customers and clients
(provided that the Executive may retain a copy the addresses contained in his rolodex, his palm
pilot, his PDA and any similar device).

          (n) Section 409A.

               (i) To the extent that the Executive otherwise would be entitled to any payment (whether
pursuant to this Agreement or otherwise) during the six months beginning on the Termination Date
that would be subject to the additional tax imposed under Section 409A of the Code (“Section
409A”), (x) the payment shall not be made to the Executive during such six month period, and (y)
the payment shall be paid to the Executive on the earlier of the six-month anniversary of the
Termination Date or the Executive’s death or Disability. Similarly, to the extent that the
Executive otherwise would be entitled to any benefit (other than a payment) during the six months
beginning on the Termination Date that would be subject to the Section 409A additional tax, the
benefit shall be delayed and shall begin being provided (together, if applicable, with an
adjustment to compensate the Executive for the delay) on the earlier of the six-month anniversary
of the Termination Date, or the Executive’s death or Disability.

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               (ii) It is the Company’s intention that the benefits and rights to which the Executive could
become entitled in connection with termination of employment comply with
Section 409A. If the Executive or the Company believes, at any time, that any of such benefit
or right does not comply, it shall promptly advise the other and shall negotiate reasonably and in
good faith to amend the terms of such benefits and rights such that they comply with Section 409A
(with the most limited possible economic effect on the Executive and on the Company).

          (o) Clawback of Certain Compensation and Benefits. If, after the termination of the Executive’s employment with the Company for any reason
other than by the Company for Cause, a court of competent jurisdiction determines that the
Executive breached Sections 7 hereof and has issued an injunction against the Executive in
accordance with Section 7(i) hereof, then, in addition to any other remedy that may be available to
the Company in law or equity and/or pursuant to any other provisions of this Agreement, the
Executive’s employment shall be deemed to have been terminated for Cause retroactively to the
Termination Date and the Executive also shall be subject to the following provisions:

               (i) the Executive shall be required to pay to the Company, immediately upon written demand by
the Board, all amounts paid to him by the Company, whether or not pursuant to this Agreement, on or
after the Termination Date (including the pre-tax cost to the Company of any benefits (other than
those described in clause (iii) of this Section 6(o)) provided by the Company) that are in excess
of the total amount that the Company would have been required to pay (and the pre-tax cost of any
benefits (other than those described in clause (iii) of this Section 6(o)) that the Company would
have been required to provide) to the Executive if the Executive’s employment with the Company had
been terminated by the Company for Cause in accordance with Section 6(b) hereof;

               (ii) all vested and unvested Equity Awards then held by the Executive shall immediately
expire; and

               (iii) the Executive shall be required to pay to the Company, immediately upon written demand
by the Board, an amount equal to all Accelerated Equity Award Gains that the Executive has
received.

     For purposes of this Section, the following terms shall have the following meanings:

          “Accelerated Equity Award Gains” shall mean the sum of (x) the Accelerated Option and SAR
Gains and (y) the Accelerated Equity Award Gains.

          “Accelerated Options” shall mean those unvested stock options that become vested in accordance
with Section 6(i) hereof.

          “Accelerated Option and SAR Gain” shall mean:

               (i) in the case of any Accelerated Option, or any Accelerated SAR that is settled in shares of
the Company’s common stock, the product of:

               (ii) the number of shares of the Company’s common stock acquired by the Executive upon
exercise of any Accelerated Option or Accelerated SAR, multiplied by

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               (iii) the difference between (x) the fair market value per share of the Company’s common stock
underlying such Accelerated Option or Accelerated SAR as of the date on which the Executive
exercised the Accelerated Option or Accelerated SAR less (y) the exercise price or grant price (as
equitably adjusted) of such Accelerated Option or Accelerated SAR; and

               (iv) in the case of any Accelerated SAR that is settled in cash or in property, other than
shares of the Company’s common stock, the amount of cash and fair market value of any property paid
or transferred to the Executive with respect to the Accelerated Option or Accelerated SAR.

          “Accelerated Equity Award Gains” shall mean the aggregate value of the Accelerated Shares
based on the closing price the Company’s common stock value determined on whichever of the
following dates produces the greatest value:

               (i) the Termination Date;

               (ii) the date on which a court of competent jurisdiction determines that the Executive
breached Section 7 hereof and has issued an injunction against the Executive in accordance with
Section 7(i);

               (iii) the date on which the Executive transfers or otherwise disposes of the Accelerated
Shares.

          “Accelerated SARs” shall mean those unvested stock appreciation rights that become vested in
accordance with Section 6(i) hereof.

          “Accelerated Shares” shall mean those shares of the Company’s common stock granted by the
Company to the Executive as compensation for services that would have been forfeited in the event
that the Executive’s employment with the Company had been terminated by the Company for Cause in
accordance with Section 6(b) hereof.

     7. Restrictive Covenants.

          (a) Non-competition. At all times during the Restricted Period, the Executive shall not, without the prior
written consent of the Board, directly or indirectly (whether as a principal, agent, partner,
employee, officer, investor, owner, consultant, board member, security holder, creditor or
otherwise), engage in any Competitive Activity, or have any direct or indirect interest in any sole
proprietorship, corporation, company, partnership, association, venture or business or any other
person or entity that directly or indirectly (whether as a principal, agent, partner, employee,
officer, investor, owner, consultant, board member, security holder, creditor, or otherwise)
engages in a Competitive Activity; provided that the foregoing shall not apply to the Executive’s
ownership of Common Stock of the Company or the acquisition by the Executive, solely as an
investment, of securities of any issuer that is registered under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, and that are listed or admitted for trading on any United States
national securities exchange or that are quoted on the Nasdaq Stock Market, or any similar system
or automated dissemination of quotations of securities prices in common use, so long as the
Executive does not control, acquire a controlling interest in or become a
member of a group which exercises direct or indirect control of, more than five percent (5%)
of any class of capital stock of such corporation.

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          (b) Nonsolicitation of Employees and Certain Other Third Parties. At all times during the Restricted Period, the Executive shall not, without the prior
written consent of the Board, directly or indirectly, for himself or for any other person, firm,
corporation, partnership, association or other entity (i) employ or attempt to employ or enter into
any contractual arrangement with any employee, consultant or independent contractor performing
services for the Company, or any Related Entity, unless such employee, consultant or independent
contractor, has not been employed or engaged by the Company for a period in excess of six (6)
months, and/or (ii) call on or solicit any of the actual or targeted prospective customers or
clients of the Company or any Related Entity on behalf of any person or entity in connection with
any Competitive Activity, nor shall the Executive make known the names and addresses of such actual
or targeted prospective customers or clients, or any information relating in any manner to the
trade or business relationships of the Company or any Related Entities with such customers or
clients, other than in connection with the performance of the Executive’s duties under this
Agreement. This Section 7(b) shall only apply to employees who are vice presidents or more senior
employees of the Company or any Related Entity, and shall not apply with respect to those
consultants or independent contractors that receive aggregate remuneration from the Company or a
Related Entity that does not exceed $100,000 for any given fiscal year.

          (c) Confidential Information. At any time during the Restricted Period, the Executive shall not at any time divulge,
communicate, use to the detriment of the Company or for the benefit of any other person or persons,
or misuse in any way, any Confidential Information pertaining to the business of the Company. Any
Confidential Information or data now or hereafter acquired by the Executive with respect to the
business of the Company (which shall include, but not be limited to, information concerning the
Company’s financial condition, prospects, technology, customers, suppliers, sources of leads and
methods of doing business) shall be deemed a valuable, special and unique asset of the Company that
is received by the Executive in confidence and as a fiduciary, and the Executive shall remain a
fiduciary to the Company with respect to all of such information at all times during the Restricted
Period. Notwithstanding the foregoing, nothing herein shall be deemed to restrict the Executive
from disclosing Confidential Information as required to perform his duties under this Agreement or
to the extent required by law or order of any court, agency or other appropriate governing
authority. If any person or authority makes a demand on the Executive purporting to legally compel
him to divulge any Confidential Information, the Executive immediately shall give notice of the
demand to the Company so that the Company may first assess whether to challenge the demand prior to
the Executive’s divulging of such Confidential Information. The Executive shall not divulge such
Confidential Information until the Company either fails to respond to the Executive’s notice of
such demand on a timely basis, has concluded not to challenge the demand, or has exhausted its
challenge, including appeals, if any. Upon request by the Company, the Executive shall deliver
promptly to the Company upon termination of his services for the Company, or at any time thereafter
as the Company may request, all memoranda, notes, records, reports, manuals, drawings, designs,
computer files in any media and other documents (and all copies thereof) containing such
Confidential Information.

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          (d) Ownership of Developments. All processes, concepts, techniques, inventions and works of authorship, including new
contributions, improvements, formats, packages, programs, systems, machines, compositions of matter
manufactured, developments, applications and discoveries, and all copyrights, patents, trade
secrets, or other intellectual property rights associated therewith conceived, invented, made,
developed or created by the Executive during the Term of Employment either during the course of
performing work for the Companies or their clients or which are related in any manner to the
business (commercial or experimental) of the Company or its clients (collectively, the “Work
Product”) shall belong exclusively to the Company and shall, to the extent possible, be considered
a work made by the Executive for hire for the Company within the meaning of Title 17 of the United
States Code. To the extent the Work Product may not be considered work made by the Executive for
hire for the Company, the Executive agrees to assign, at the Company’s expense, and automatically
assign at the time of creation of the Work Product, without any requirement of further
consideration, any right, title, or interest the Executive may have in such Work Product. Upon the
request of the Company, and at its expense, the Executive shall take such further actions,
including execution and delivery of instruments of conveyance, as may be appropriate to give full
and proper effect to such assignment. The Executive shall further: (i) promptly disclose the Work
Product to the Company; (ii) assign to the Company, without additional compensation, all patent or
other rights to such Work Product for the United States and foreign countries; (iii) sign all
papers necessary to carry out the foregoing; and (iv) give testimony in support of his inventions,
all at the sole cost and expense of the Company.

          (e) Books and Records. All books, records, and accounts relating in any manner to the customers or clients of the
Company, whether prepared by the Executive or otherwise coming into the Executive’s possession,
shall be the exclusive property of the Company and shall be returned immediately to the Company on
termination of the Executive’s employment hereunder or on the Company’s request at any time.

          (f) Acknowledgment by Executive. The Executive acknowledges and confirms that the restrictive covenants contained in this
Article 7 (including without limitation the length of the term of the provisions of this Article 7)
are reasonably necessary to protect the legitimate business interests of the Company, and are not
overbroad, overlong, or unfair and are not the result of overreaching, duress or coercion of any
kind. The Executive further acknowledges and confirms that the compensation payable to the
Executive under this Agreement is in consideration for the duties and obligations of the Executive
hereunder, including the restrictive covenants contained in this Article 7, and that such
compensation is sufficient, fair and reasonable. The Executive further acknowledges and confirms
that his full, uninhibited and faithful observance of each of the covenants contained in this
Article 7 will not cause him any undue hardship, financial or otherwise, and that enforcement of
each of the covenants contained herein will not impair his ability to obtain employment
commensurate with his abilities and on terms fully acceptable to him or otherwise to obtain income
required for the comfortable support of him and his family and the satisfaction of the needs of his
creditors. The Executive acknowledges and confirms that his special knowledge of the business of
the Company is such as would cause the Company serious injury or loss if he were to use such
ability and knowledge to the benefit of a competitor or were to compete with the Company in
violation of the terms of this Article 7. The Executive further acknowledges that the restrictions
contained in this Article 7 are intended to be, and shall be, for the benefit of and shall be
enforceable by, the Company’s successors and assigns. The Executive expressly agrees that
upon any breach or violation of the provisions of this Article 6, the Company shall be entitled, as
a matter of right, in addition to any other rights or remedies it may have, to (i) temporary and/or
permanent injunctive relief in any court of competent jurisdiction as described in Section 7(i
hereof, and (ii) such damages as are provided at law or in equity.

20

 

          (g) Reformation by Court. In the event that a court of competent jurisdiction shall determine that any provision of
this Article 7 is invalid or more restrictive than permitted under the governing law of such
jurisdiction, then only as to enforcement of this Article 7 within the jurisdiction of such court,
such provision shall be interpreted or reformed and enforced as if it provided for the maximum
restriction permitted under such governing law.

          (h) Extension of Time. If the Executive shall be in violation of any provision of this Article 7, then each time
limitation set forth in this Article 7 shall be extended for a period of time equal to the period
of time during which such violation or violations occur. If the Company seeks injunctive relief
from such violation in any court of competent jurisdiction and if such court determines that such
violation by the Executive did occur, then the covenants set forth in this Article 7 shall be
extended for a period of time equal to the pendency of such proceeding including all appeals by the
Executive.

          (i) Injunction. It is recognized and hereby acknowledged by the parties hereto that a breach by the
Executive of any of the covenants contained in Article 7 of this Agreement will cause irreparable
harm and damage to the Company, for which monetary damages to the Company may be an inadequate
remedy. As a result, the Executive recognizes and hereby acknowledges that the Company shall be
entitled to an injunction from any court of competent jurisdiction enjoining and restraining any
violation of any or all of the covenants contained in Article 7 of this Agreement by the Executive
or any of his affiliates, associates, partners or agents, either directly or indirectly, and that
such right to injunction shall be cumulative and in addition to whatever other remedies the Company
may possess.

     8. Representations and Warranties of Executive. The Executive represents and warrants to the Company that:

          (a) The Executive’s employment will not conflict with or result in a material breach of any
agreement to which he is a party or otherwise may be bound;

          (b) The Executive has not violated, and in connection with his employment with the Company
will not violate, any non-solicitation, non-competition or other similar covenant or agreement of a
prior employer by which he is or may be bound; and

          (c) In connection with Executive’s employment with the Company, he will not use any
confidential or proprietary information that would violate the terms of any agreement between the
Executive and any prior employer; and

          (d) The Executive has not (i) been convicted of any felony; or (ii) committed any criminal act
with respect to Executive’s current or any prior employment.

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     9. Taxes. Anything in this Agreement to the contrary notwithstanding, all payments required to be
made by the Company hereunder to the Executive or his estate or beneficiaries shall be subject to
the withholding of such amounts relating to taxes as the Company may reasonably determine it should
withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, in
whole or in part, the Company may, in its sole discretion, accept other provisions for payment of
taxes and withholding as required by law, provided it is satisfied that all requirements of law
affecting its responsibilities to withhold have been satisfied.

     10. Arbitration.

          (a) Exclusive Remedy. The parties recognize that litigation in federal or state courts or before federal or state
administrative agencies of disputes arising out of the Executive’s employment with the Company or
out of this Agreement, or the Executive’s termination of employment or termination of this
Agreement, may not be in the best interests of either the Executive or the Company, and may result
in unnecessary costs, delays, complexities, and uncertainty. The parties agree that any dispute
between the parties arising out of or relating to the Executive’s employment, or to the
negotiation, execution, performance or termination of this Agreement or the Executive’s employment,
including, but not limited to, any claim arising out of this Agreement, claims under Title VII of
the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991, the Age Discrimination in
Employment Act of 1967, the Americans with Disabilities Act of 1990, Section 1981 of the Civil
Rights Act of 1966, as amended, the Family Medical Leave Act, the Employee Retirement Income
Security Act, and any similar federal, state or local law, statute, regulation, or any common law
doctrine, whether that dispute arises during or after employment shall be resolved by arbitration
in the Miami-Dade County, Florida area, in accordance with the National Employment Arbitration
Rules of the American Arbitration Association, as modified by the provisions of this Section 10.
Except as set forth below with respect to Section 7 of this Agreement, the parties each further
agree that the arbitration provisions of this Agreement shall provide each party with its exclusive
remedy, and each party expressly waives any right it might have to seek redress in any other forum,
except as otherwise expressly provided in this Agreement. Notwithstanding anything in this
Agreement to the contrary, the provisions of this Section 10 shall not apply to any injunctions
that may be sought with respect to disputes arising out of or relating to Section 7 of this
Agreement. The parties acknowledge and agree that their obligations under this arbitration
agreement survive the expiration or termination of this Agreement and continue after the
termination of the employment relationship between the Executive and the Company. By election of
arbitration as the means for final settlement of all claims, the parties hereby waive their
respective rights to, and agree not to, sue each other in any action in a Federal, State or local
court with respect to such claims, but may seek to enforce in court an arbitration award rendered
pursuant to this Agreement. The parties specifically agree to waive their respective rights to a
trial by jury, and further agree that no demand, request or motion will be made for trial by jury.

          (b) Arbitration Procedure and Arbitrator’s Authority. In the arbitration proceeding, each party shall be entitled to engage in any type of
discovery permitted by the Federal Rules of Civil Procedure, to retain its own counsel, to present
evidence and cross-examine witnesses, to purchase a stenographic record of the proceedings, and to
submit post-hearing briefs. In reaching his/her decision, the arbitrator shall have no authority
to add to,
detract from, or otherwise modify any provision of this Agreement. The arbitrator shall
submit with the award a written opinion which shall include findings of fact and conclusions of
law. Judgment upon the award rendered by the arbitrator may be entered in any court having
competent jurisdiction.

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          (c) Effect of Arbitrator’s Decision; Arbitrator’s Fees. The decision of the arbitrator shall
be final and binding between the parties as to all claims which were or could have been raised in
connection with the dispute, to the full extent permitted by law. In all cases in which applicable
federal law precludes a waiver of judicial remedies, the parties agree that the decision of the
arbitrator shall be a condition precedent to the institution or maintenance of any legal,
equitable, administrative, or other formal proceeding by the Executive in connection with the
dispute, and that the decision and opinion of the arbitrator may be presented in any other forum on
the merits of the dispute. If the arbitrator finds that the Executive was terminated in violation
of law or this Agreement, the parties agree that the arbitrator acting hereunder shall be empowered
to provide the Executive with any remedy available should the matter have been tried in a court,
including equitable and/or legal remedies, compensatory damages and back pay. The arbitrator’s fees
and expenses and all administrative fees and expenses associated with the filing of the arbitration
shall be borne by the non-prevailing party.

     11. Assignment. The Company shall have the right to assign this Agreement and its rights and obligations
hereunder in whole, but not in part, to any corporation or other entity with or into which the
Company may hereafter merge or consolidate or to which the Company may transfer all or
substantially all of its assets, and in any such case said corporation or other entity shall by
operation of law or expressly in writing assume all obligations of the Company hereunder as fully
as if it had been originally made a party hereto, but no assignment will release the Company from
this Agreement or any of its obligations hereunder. The Company may not otherwise assign this
Agreement or its rights and obligations hereunder. The Executive may not assign or transfer this
Agreement or any rights or obligations hereunder.

     12. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the
internal laws of the State of Florida, without regard to principles of conflict of laws.

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     13. Jurisdiction and Venue. The parties acknowledge that a substantial portion of the negotiations, anticipated
performance and execution of this Agreement occurred or shall occur in Miami-Dade County, Florida,
and that, therefore, without limiting the jurisdiction or venue of any other federal or state
courts, each of the parties irrevocably and unconditionally (i) agrees that any suit, action or
legal proceeding arising out of or relating to this Agreement which is expressly permitted by the
terms of this Agreement to be brought in a court of law, shall be brought in the courts of record
of the State of Florida in Miami-Dade County or the court of the United States, Southern District
of Florida; (ii) consents to the jurisdiction of each such court in any such suit, action or
proceeding; (iii) waives any objection which it or he may have to the laying of venue of any such
suit, action or proceeding in any of such courts; and (iv) agrees that service of any court papers
may be effected on such party by mail, as provided in this Agreement, or in such other manner as
may be provided under applicable laws or court rules in such courts.

     14. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to
the subject matter hereof and, upon its effectiveness, shall supersede all prior agreements,
understandings and arrangements, both oral and written, between the Executive and the Company (or
any of its affiliates) with respect to such subject matter. This Agreement may not be modified in
any way unless by a written instrument signed by both the Company and the Executive.

     15. Survival. The respective rights and obligations of the parties hereunder shall survive any
termination of the Executive’s employment hereunder, including without limitation, the Company’s
obligations under Section 6 and the Executive’s obligations under Section 7 above, and the
expiration of the Term of Employment, to the extent necessary to the intended preservation of such
rights and obligations.

     16. Notices. All notices required or permitted to be given hereunder shall be in writing and shall be
personally delivered by courier, sent by registered or certified mail, return receipt requested or
sent by confirmed facsimile transmission addressed as set forth herein. Notices personally
delivered, sent by facsimile or sent by overnight courier shall be deemed given on the date of
delivery and notices mailed in accordance with the foregoing shall be deemed given upon the earlier
of receipt by the addressee, as evidenced by the return receipt thereof, or three (3) days after
deposit in the U.S. mail. Notice shall be sent (i) if to the Company, addressed to 2601 S.
Bayshore Drive, Miami, Florida 33133, Attention: President, and (ii) if to the Executive, to his
address as reflected on the payroll records of the Company, or to such other address as either
party shall request by notice to the other in accordance with this provision.

     17. Benefits; Binding Effect. This Agreement shall be for the benefit of and binding upon the parties hereto and their
respective heirs, personal representatives, legal representatives, successors and, where permitted
and applicable, assigns, including, without limitation, any successor to the Company, whether by
merger, consolidation, sale of stock, sale of assets or otherwise.

     18. Right to Consult with Counsel; No Drafting Party. The Executive acknowledges having read and considered all of the provisions of this
Agreement carefully, and having had the
opportunity to consult with counsel of his own choosing, and, given this, the Executive agrees
that the obligations created hereby are not unreasonable. The Executive acknowledges that he has
had an opportunity to negotiate any and all of these provisions and no rule of construction shall
be used that would interpret any provision in favor of or against a party on the basis of who
drafted the Agreement.

24

 

     19. Severability. The invalidity of any one or more of the words, phrases, sentences, clauses, provisions,
sections or articles contained in this Agreement shall not affect the enforceability of the
remaining portions of this Agreement or any part thereof, all of which are inserted conditionally
on their being valid in law, and, in the event that any one or more of the words, phrases,
sentences, clauses, provisions, sections or articles contained in this Agreement shall be declared
invalid, this Agreement shall be construed as if such invalid word or words, phrase or phrases,
sentence or sentences, clause or clauses, provisions or provisions, section or sections or article
or articles had not been inserted. If such invalidity is caused by length of time or size of area,
or both, the otherwise invalid provision will be considered to be reduced to a period or area which
would cure such invalidity.

     20. Damages; Attorneys Fees. Nothing contained herein shall be construed to prevent the Company or the Executive from
seeking and recovering from the other damages sustained as a result of the other party’s breach of
any term or provision of this Agreement to the extent such breach results from, arises out of or is
otherwise in connection with the gross negligence or willful misconduct of such party. In the
event that either party hereto seeks to collect any damages resulting from, or the injunction of
any action constituting, a breach of any of the terms or provisions of this Agreement, then the
party found to be at fault shall pay all reasonable costs and attorneys’ fees incurred by the other
party in such action and any appeal thereof.

     21. Waivers. The waiver by either party hereto of a breach or violation of any term or provision of this
Agreement shall not operate nor be construed as a waiver of any subsequent breach or violation.

     22. No Set-off or Mitigation. The Company’s obligation to make the payments provided for in this Agreement and otherwise
to perform its obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement, and the amounts payable and the benefits to be provided by the
Company to the Executive shall not be mitigated in any way by reason of the Executive’s future
employment or otherwise.

     23. Section Headings. The article, section and paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

     24. No Third Party Beneficiary. Nothing expressed or implied in this Agreement is intended, or shall be construed, to
confer upon or give any person other than the Company, the
parties hereto and their respective heirs, personal representatives, legal representatives,
successors and permitted assigns, any rights or remedies under or by reason of this Agreement.

25

 

     25. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed
to be an original but all of which together shall constitute one and the same instrument and
agreement.

     26. Indemnification.

          (a) The Company shall indemnify and hold harmless the Executive to the fullest extent
permitted by law from and against any and all claims, damages, expenses (including attorneys’
fees), judgments, penalties, fines, settlements, and all other liabilities incurred or paid by him
in connection with the investigation, defense, prosecution, settlement or appeal of any threatened,
pending or completed action, suit or proceeding, whether civil, criminal, administrative or
investigative and to which the Executive was or is a party or is threatened to be made a party by
reason of the fact that the Executive is or was an officer, director, employee or agent of the
Company or any of its subsidiaries or affiliates, or by reason of anything done or not done by the
Executive in any such capacity or capacities, provided that the Executive acted in good faith, in a
manner that was not grossly negligent or constituted willful misconduct and in a manner he
reasonably believed to be in or not opposed to the best interests of the Company, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
The Company also shall pay any and all expenses (including attorney’s fees) incurred by the
Executive as a result of the Executive being called as a witness in connection with any matter
involving the Company, its subsidiaries or affiliates, and/or any of its officers or directors.

          (b) The Company shall pay any expenses (including attorneys’ fees), judgments, penalties,
fines, settlements, and other liabilities incurred by the Executive in investigating, defending,
settling or appealing any action, suit or proceeding described in this Section 26 in advance of the
final disposition of such action, suit or proceeding. The Company shall promptly pay the amount of
such expenses to the Executive, but in no event later than 10 days following the Executive’s
delivery to the Company of a written request for an advance pursuant to this Section 26, together
with a reasonable accounting of such expenses.

          (c) The Executive hereby undertakes and agrees to repay to the Company any advances made
pursuant to this Section 26 if and to the extent that it shall ultimately be found that the
Executive is not entitled to be indemnified by the Company for such amounts.

          (d) The Company shall make the advances contemplated by this Section 26 regardless of the
Executive’s financial ability to make repayment, and regardless whether indemnification of the
Executive by the Company will ultimately be required. Any advances and undertakings to repay
pursuant to this Section 26 shall be unsecured and interest-free.

          (e) The provisions of this Section 26 shall survive the termination of the Term of Employment
or expiration of the term of this Agreement.

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     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above
written.

	 	 	 	 	 
	 	COMPANY:

TERREMARK WORLDWIDE, INC., a Delaware corporation

 	 
	 	By:  	/s/ Miguel Rosenfeld
 	 
	 	 	Name:  	Miguel Rosenfeld 	 
	 	 	Title:  	Compensation Committee Chairman and
Authorized Signatory 	 
	 
	 	EXECUTIVE:

 	 
	 	/s/ Manuel D. Medina
 	 
	 	Manuel D. Medina 	 
	 	 	 

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EXHIBIT A

FORM OF RELEASE

GENERAL RELEASE OF CLAIMS

     1.                           (“Executive”), for himself and his family, heirs, executors,
administrators, legal representatives and their respective successors and assigns, in exchange for
the consideration received pursuant to Sections 6(c) (in the case of Disability), Sections 6(e) or
6.(f) (other than the Accrued Obligations) of the Employment Agreement to which this release is
attached as Exhibit A (the “Employment Agreement”), does hereby release and forever
discharge                           (the “Company”), its subsidiaries, affiliated companies,
successors and assigns, and its current or former directors, officers, employees, shareholders or
agents in such capacities (collectively with the Company, the “Released Parties”) from any
and all actions, causes of action, suits, controversies, claims and demands whatsoever, for or by
reason of any matter, cause or thing whatsoever, whether known or unknown including, but not
limited to, all claims under any applicable laws arising under or in connection with Executive’s
employment or termination thereof, whether for tort, breach of express or implied employment
contract, wrongful discharge, intentional infliction of emotional distress, or defamation or
injuries incurred on the job or incurred as a result of loss of employment. Executive acknowledges
that the Company encouraged him to consult with an attorney of his choosing, and through this
General Release of Claims encourages him to consult with his attorney with respect to possible
claims under the Age Discrimination in Employment Act (“ADEA”) and that he understands that
the ADEA is a Federal statute that, among other things, prohibits discrimination on the basis of
age in employment and employee benefits and benefit plans. Without limiting the generality of the
release provided above, Executive expressly waives any and all claims under ADEA that he may have
as of the date hereof. Executive further understands that by signing this General Release of
Claims he is in fact waiving, releasing and forever giving up any claim under the ADEA as well as
all other laws within the scope of this paragraph 1 that may have existed on or prior to the date
hereof. Notwithstanding anything in this paragraph 1 to the contrary, this General Release of
Claims shall not apply to (i) any actions to enforce rights arising under, or any claim for
benefits which may be due Executive pursuant to, the Employment Agreement, (ii) any rights or
claims that may arise as a result of events occurring after the date this General Release of Claims
is executed, (iii) any indemnification rights Executive may have as a former employee, officer or
director of the Company or its subsidiaries or affiliated companies, (iv) any claims for benefits
under any liability policy maintained by the Company or its subsidiaries or affiliated companies in
accordance with the terms of such policy, and (v) any rights as a holder of equity securities of
the Company.

     2. Executive represents that he has not filed against the Released Parties any complaints,
charges, or lawsuits arising out of his employment, or any other matter arising on or prior to the
date of this General Release of Claims, and covenants and agrees that he will never individually or
with any person file, or commence the filing of, any charges, lawsuits, complaints or proceedings
with any governmental agency, or against the Released Parties with respect to any of the matters
released by Executive pursuant to paragraph 1 hereof (a “Proceeding”); provided,
however, Executive shall not have relinquished his right to commence a Proceeding to
challenge whether Executive knowingly and voluntarily waived his rights under ADEA.

A-1

 

     3. Executive hereby acknowledges that the Company has informed him that he has up to
twenty-one (21) days to sign this General Release of Claims and he may knowingly and voluntarily
waive that twenty-one (21) day period by signing this General Release of Claims earlier. Executive
also understands that he shall have seven (7) days following the date on which he signs this
General Release of Claims within which to revoke it by providing a written notice of his revocation
to the Company.

     4. Executive acknowledges that this General Release of Claims will be governed by and
construed and enforced in accordance with the internal laws of the State of Florida applicable to
contracts made and to be performed entirely within such State.

     5. Executive acknowledges that he has read this General Release of Claims, that he has been
advised that he should consult with an attorney before he executes this general release of claims,
and that he understands all of its terms and executes it voluntarily and with full knowledge of its
significance and the consequences thereof.

     6. This General Release of Claims shall take effect on the eighth day following Executive’s
execution of this General Release of Claims unless Executive’s written revocation is delivered to
the Company within seven (7) days after such execution.

 

                                            , 20     

A-2

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