Document:

ex10_6.htm

    
      Exhibit
10.6

       

      RIDGEWOOD
RENEWABLE POWER LLC

      SENIOR
EXECUTIVE BONUS PLAN

       

       

      1.  Background.

       

      (a)
Ridgewood Renewable Power LLC (“RRP”) is a sponsor and managing shareholder of
the following investment vehicles (each, a “Trust” and collectively, the
“Trusts”):

       

                Ridgewood
Electric Power Trust I (“Trust I”)

                Ridgewood
Electric Power Trust II (“Trust II”)

                Ridgewood
Electric Power Trust III (“Trust III”)

                Ridgewood
Electric Power Trust IV (“Trust IV”)

                Ridgewood
Electric Power Trust V (“Trust V”)

                The
Ridgewood Power Growth Fund (“Growth”)

                Ridgewood/Egypt
Fund (“Egypt Fund”)

                Ridgewood
Power B Fund/Providence Expansion (“B Fund”)

       

      (b)  Under
the applicable organizational documents for each of the Trusts, RRP has the
right to participate in the ongoing distributions of the Trust after investors
in that Trust receive distributions equal to certain threshold amounts generally
when the investors’ original invested capital has in the aggregate been
returned.  RRP’s right to participate in such distributions of a Trust
is referred to herein as the “RRP Carried Interest.”

       

      (c)  Each
of the Trusts has made a variety of investments, is fully invested, and it is
not planned or expected that any of the Trusts will invest in any new ventures
other than the reorganization of the facilities located at Johnston, Rhode
Island.

       

      (d)  In
addition to the management of the businesses carried on by the Trusts, RRP has
developed or acquired for its own account using its own funds certain business
models, intellectual property, know-how, development rights, business
relationships and opportunities and other assets which are
unrelated to any of the projects or businesses of the Trusts (the “RRP
Assets”).

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        
          	 	
                  Senior
      Executive Bonus Plan

                
	 	
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      (e) Each
of Randall D. Holmes, Douglas R. Wilson and Stephen D. Galowitz (individually, a
“Participant” and collectively, “Participants”) serves as an officer of RRP and
shares responsibility for the operations of RRP as well as the operations of the
projects owned by each of the Trusts.

       

      
        (f)  RRP
has determined that it may be advantageous for each of the Trusts to sell or
otherwise dispose of the projects owned by such Trust (a “Trust Asset
Disposition”).  RRP may also determined to sell or otherwise dispose
of all of the RRP Assets (the “RRP Asset Disposition”).  For the
avoidance of doubt, it is not expected that any RRP Asset Disposition will
include the sale of RRP or the transfer of RRP’s name.

         

        (g)  Each
Participant has been and will be substantially involved in the planning for and
execution of any Trust Asset Dispositions and any RRP Asset Disposition, and RRP
anticipates that each Participant will continue to be substantially involved in
these activities.  RRP has determined to adopt and implement this RRP
Senior Executive Bonus Plan (this “Plan”) in order to provide a cash incentive
to each Participant in connection with successful consummations of one or more
of the Trust Asset Dispositions and/or the RRP Asset Disposition, in each case
on the terms and conditions set forth herein.

         

      

      2.  Creation
of Senior Executive Bonus Pool; General Rules.

       

      (a)  Amounts
Credited to Senior Executive Bonus Pool.  To the extent that
RRP hereafter receives (i) any amount of cash or other property from any Trust
with respect to the RRP Carried Interest in that Trust in connection with a
Qualified Transaction, or (ii) any proceeds in the form of cash or other
property from the RRP Asset Disposition (net of a pro-rata portion of any out-of
pocket-transaction expenses or costs directly related to the RRP Asset
Disposition) in connection with a Qualified Transaction, then a portion of the
amounts of such cash and a portion of the fair market value of such other
property as of the date of receipt by RRP, but in all cases in the form of cash
pursuant to Section 2(d) or Section 2 (f) as applicable, shall be notionally
credited to a senior executive bonus pool under this Plan (the “Senior Executive
Bonus Pool”). The portion of the RRP Carried Interest from each of the Trusts
and the portion of the proceeds from the RRP Asset Disposition in connection
with a Qualified Transaction to be credited to the Senior Executive Bonus Pool
will be credited according to the following schedule:

         

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        
          
            	 
      	
                    Senior
      Executive Bonus Plan

                  
	 
      	
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        	 SOURCE	
                 PERCENTAGE
      AMOUNT

              
	 	 
	
                Trust
      I

              	
                 30%

              
	
                Trust
      II

              	
                 25%

              
	
                Trust
      III

              	
                 25%

              
	
                Trust
      IV

              	
                 25%

              
	
                Trust
      V

              	
                 25%

              
	
                Growth

              	
                 25%

              
	
                Egypt
      Fund

              	
                 25%

              
	
                B
      Fund

              	
                 25%

              
	
                RRP
      Asset Disposition

              	
                 30%

              

      

       

      Except as
provided for below, the amounts to be notionally credited to the Senior
Executive Bonus Pool shall not be reduced by any amounts, including, without
limitation, back-end fees paid to brokers, registered representatives or others
who participated in the original placement of interests in any of the Trusts, or
bonuses paid pursuant to any bonus pool or other arrangements or agreements for
payments to officers and/or employees of RRP or Ridgewood Power Management LLC,
any internal reserves or any other expenses incurred or accrued by RRP (other
than the pro-rata portion of out-of-pocket transaction expenses or costs
incurred by RRP directly in connection with the RRP Asset Disposition as
described above).    For purposes of this Plan, a Qualified
Transaction means an RRP Asset Disposition or a Trust Asset Disposition that is
consummated pursuant to a definitive purchase and sale agreement executed and
delivered by all the parties thereto on or prior to June 30, 2009.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

          

      
        
          	 
      	
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      (b)  Payments
to Participants.  Subject to the limitations described in
Section 2(c), Section 2(d) and Section 2 (f) as applicable, and the satisfaction
of the Participant Conditions set forth in Section 3 (the “Limitations”), RRP
shall pay in cash an amount equal to the total of the amounts notionally
credited to the Senior Executive Bonus Pool.  Such notional credits
shall be paid out by RRP to Participants, in the percentage amounts set forth in
Exhibit A attached hereto (subject to adjustments for valuation disputes
provided for in Section 2 (d) and Section 2 (f)), immediately following the time
in which the notional credits are made pursuant to Section  2(a),
subject to satisfaction of the Limitations (if applicable) and with respect to
disputed notional amounts, the resolution of disputes over notional amounts
pursuant to Section 2 (d) or Section 2 (f) as applicable, and such payment shall
in all instances be made no later than the 15th day of the calendar year
following the calendar year in which the notional credits are made pursuant to
Section 2(a)  (or, if applicable, the 15th day of the calendar year
following the calendar year in which the Limitations are
satisfied).

       

       

      (c) 
Sale-Related
Third Party Restrictions Applicable to RRP.  Notwithstanding
the payment requirements of Section 2(b), in the event that RRP receives cash or
other property that would otherwise be notionally credited to the Senior
Executive Bonus Pool pursuant to Section 2(a) from a Trust Asset Disposition,
but such cash or property is subject to restrictions imposed solely by the terms
of the sale or other agreements setting out the terms of such Trust Asset
Dispositions  giving rise to the receipt of such cash or other
property which restrictions denies or restricts RRP’s unfettered ability to make
use of such cash or other property for its own use, then the amount of cash or
other property subject to such restrictions shall not be subject to the notional
crediting requirements of Section 2(a) and will not be subject to the payment
requirements of Section 2(b) unless and until, and only to the extent that such
restrictions lapse or are otherwise removed or RRP is otherwise able to make use
of such cash or other property as RRP sees fit

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        
          	 
      	
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      (d) 
Valuation
of Property Received by RRP.  To the extent that RRP receives
non-cash property with respect to Section 2(a) from a Trust Asset Disposition,
then RRP shall make a good faith determination of the fair market value of such
property as of the date received by RRP (whether or not such property is subject
to restrictions), and shall notionally credit the amount of such fair market
value to the Senior Executive Bonus Pool as provided in this Plan and shall
notify Participant of such valuation within 10 days of such
determination.  If any one or more of Participants disputes the
valuation determination made by RRP, such Participant(s) shall notify RRP in
writing of such dispute within 20 days after notification of the valuation by
RRP, which notice shall include an alternative valuation proposed
by  Participant(s) and such disputed notional amount shall be removed
from the Senior Executive Bonus Pool with respect to such Participant and such
Participant shall be entitled receive the notional amount in dispute pursuant to
the terms of this Plan when the dispute is resolved by settlement or
arbitration.  To the extent that such dispute is not resolved within
30 days after such notice to RRP from Participant, then such dispute shall be
submitted to arbitration as provided in Section 8(c). A dispute by one
Participant shall not affect any other Participant or the notional value of such
others Participant’s account or delay distribution under this Plan to such other
Participant.

       

      (e) 
Receipt
by RRP of Restricted Securities.  If and to the extent that RRP
receives securities that are subject to resale restrictions pursuant to Federal
or state securities laws or are otherwise restricted with respect to resale or
transfer for reasons unrelated to any holdback or similar
provision  pursuant to the terms of the Trust Asset Disposition
transactions (“Restricted Securities), these Restricted Securities will be
treated as if such restrictions did not exist for purposes of valuation pursuant
to Section 2(d), the value of such Restricted Securities shall be notionally
credited to the Senior Executive Bonus Pool as provided in Section 2(a) and will
not be subject to the provisions of Section 2(c) solely as a result of such
resale and transfer restrictions.  If such Restricted Securities are
subject to holdback or similar restrictions imposed solely by the terms of the
sale or other agreements setting out the terms of such Trust Asset Dispositions
giving rise to the receipt of such Restricted Securities (“Other Restrictions”),
then the provisions
of Section 2(c) will apply but only to the extent of the Other
Restrictions.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        
          	 
      	
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      (f) 
RRP
Asset Disposition Property.   If and to the extent that
RRP receives securities or other property excluding cash in an RRP Asset
Disposition and such securities or other non-cash property is subject to resale
or transfer restrictions or are subject to any holdback or similar restrictions
imposed by the agreement(s) setting out the terms of such RRP Asset Disposition
(“RRP Disposition Restricted Property”), then the RRP Disposition Restricted
Property shall be valued on the date when, and notionally credited to the Senior
Executive Bonus Pool as provided in Section 2 (a) on, the first date that the
restrictions are no longer applicable to RRP.  RRP shall notify
Participants of the valuation of the RRP Disposition Restricted Property and a
Participant shall have the right to contest such valuation in the same manner
applicable to a Trust Asset Disposition in Section 2 (d) and Section 2 (d) shall
otherwise apply. If cash is received in an RRP Asset Disposition and it is
subject to a holdback or other restriction imposed by the sale agreement(s)
related thereto, then the Senior Executive Bonus Pool shall not be notionally
credited with respect to such cash until such restrictions have expired with
respect to RRP and then the Senior Executive Bonus Pool shall be notionally
credited as provided in Section 2 (a) on the date of the expiration
thereof.

       

      (g) 
Computation
Methodology.  Attached hereto as Exhibit B is a sample
spreadsheet setting forth the computation methodology of amounts of
distributions payable to the Participants under this Plan.  RRP and
each  Participant has reviewed these spreadsheets and confirm that
such spreadsheets accurately set forth the calculation methodology of this
Plan.  The actual computation will use this methodology along with the
actual amounts of the RRP Carried Interest and the proceeds from the RRP Asset
Disposition at such time as they are known.

       

      3.  Participant
Conditions.

       

      The right
of any Participant to receive distributions from this Plan shall be subject to
the following conditions (the “Participant Conditions”):

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        
          	 
      	
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      (a) 
Subject to the other provisions of this Section 3 such Participant remains an
employee of RRP through the date of the closing of any Trust Asset Disposition
or RRP Asset Disposition that results in the receipt by RRP of any cash or other
property as described in Section 2(a);

       

      (b) 
If such Participant’s employment is terminated other than by death or
incapacitating disability, such Participant shall execute, as of the date of
such termination, an Agreement, Release and Confidentiality Agreement
substantially in the form of Exhibit C attached hereto.

       

      (c)  For purposes of
this Section 3, if a Participant voluntarily terminates his employment with RRP
in order to provide continued assistance to any purchaser in a Trust Asset
Disposition transaction or RRP Asset Disposition transaction, then such
Participant will forfeit 50% of such Participant’s interest in the Senior
Executive Bonus Pool attributable to the RRP Carried Interest or proceeds from
any RRP Asset Disposition transactions subsequent to the sale resulting in such
voluntary termination. For the avoidance of doubt, such Participant will not, as
a result of such voluntary termination, forfeit any payments attributable to
transactions giving rise to RRP Carried Interests or RRP Asset Disposition
proceeds (i) contracted for prior to such voluntary termination and subsequently
completed with the same counterparty or (ii) representing amounts subject to the
provisions of Section 2(c) or Section 2 (f) or a dispute as provided in Section
2(d) or Section 2 (f) at the time of the voluntary
termination.

       

      (d)  If a
Participant’s employment is terminated by RRP for cause, then such Participant
shall forfeit any right to receive any further distributions under this Plan
relating to Trust Asset Dispositions or RRP Asset Dispositions the sales
contracts for which are entered into subsequent to such
termination.  To the extent sales contracts for Trust Asset
Dispositions that give rise to RRP Carried Interests or for RRP Asset
Disposition have been entered into prior to such termination for cause and such
transactions are completed on substantially the same terms, such Participant
will be eligible to receive payments pursuant to Section 2(b) as if no
termination had taken place.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        
          	 
      	
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      Executive Bonus Plan

                
	 
      	
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      Notwithstanding
the foregoing provisions of this Section 3, if a Participant’s employment with
RRP is terminated by death, by reason of disability, or otherwise by RRP without
cause, then such Participant (or his legal representatives or his estate, as the
case may be) shall continue to have the right to receive all distributions under
this Plan made after the date of such termination, without limitation except as
provided in Section 3(c) and to the extent applicable Section 3(b).

       

      4.  Shortfall/Buyer
Employment Obligation.

       

      RRP
believes that one or more of the purchasers in a Trust Asset Disposition
transaction or an RRP Asset Disposition transaction may wish to secure the
services of one or more of  Participants during a transition period,
but there can be no assurance that any such purchaser will offer to continue any
or all of any Participant’s employment arrangements on the same terms and
conditions as Participant’s employment arrangements with RRP.  If RRP
reasonably requests that a Participant provide continued assistance in the New
York metropolitan area to a reputable purchaser in a Trust Asset Disposition
transaction or an RRP Asset Disposition transaction, in order to secure a
successful transition of operations to such purchaser, then each Participant
agrees to provide such requested assistance to the purchaser for a period not to
exceed one year after the closing of the applicable Trust Asset Disposition
transaction or RRP Asset Disposition transaction, as the case may be, so long as
RRP makes payments to such Participant at regular RRP payroll intervals of an
amount equal to 75% of the amount by which the total compensation (ignoring for
this purpose payments under this Plan) provided by RRP to such Participant as of
the relevant closing date is greater than the total compensation provided from
time to time thereafter by the purchaser to such
Participant.   Such payments by RRP pursuant to this Section 4
shall be made for a period of one year from the date Participant joins the
employment of such purchaser in an Trust Asset Disposition or RRP Asset
Disposition whether or not Participant remains in such purchaser’s employ or not
for such one year period except if termination is as a result of Participant’s
death or disability then such payments shall cease on such date.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        
          	 
      	
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      5.  Assignment
of Payments From This Plan.

       

      Except
for payments to an estate of a Participant in the event of his death, or
personal representative in the event of incapacitating disability, any rights
that a Participant has to receive distributions under this Plan shall not be
subject to voluntary or involuntary transfer, alienation, or assignment and, to
the fullest extent permitted by law, shall not be subject to attachment,
execution, garnishment, sequestration, or other legal or equitable
process.  In the event that a Participant attempts to assign,
transfer, or dispose of such right or if an attempt is made to subject said
right to such process, such assignment, transfer or disposition shall be null
and void.

       

      6.  Adjustment
of Participation Percentages.

       

      In the
event that a Participant ceases to be entitled to further distributions from
this Plan or is to receive reduced distributions as provided in Section 3(c) and
if such Participant is Randall D. Holmes or his heirs, then the portion of the
Senior Executive Bonus Pool allocated to him which is not to be received by him
or his heirs shall be reallocated to RRP and if such Participant is not Randall
D. Holmes or his heirs, then the percentage amount (or portions of the
percentage amount in the case of Section 3(c)) attributable to such Participant
set forth in Exhibit A attached hereto shall be reallocated, pro-rata based on
the then existing participation percentages, among those Participants that
remain eligible to participate in subsequent distributions.  Such
remaining Participants may admit additional Participants to the Plan subject to
the approval of each Participant then existing, such approval to be in the
absolute discretion of each such Participant.

       

      7.  Execution
of Release.

       

      If a
Participant fails to execute or revokes his signature on his Agreement, Release
and Confidentiality Agreement, Participant agrees to return to RRP and RRP shall
have the right to recover, all of the distributions made to such Participant
under this Plan, and RRP will have no further obligation to pay such Participant
any further distributions hereunder.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        
          	 
      	
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        8.  Miscellaneous.

         

      

      (a)    
Participation
Agreement.  A Participant shall become entitled to the benefits
of this Plan and shall agree to abide by its terms and conditions upon execution
of a participation agreement (the “Participation Agreement”) substantially in
the form attached as Exhibit D hereto.

       

      (b)    
Illegality.  If
any provision of this Plan or the Participation Agreement,  is held to
be illegal, void, or unenforceable, that holding shall have no effect upon, and
shall not impair the legality or enforceability of, any other provision of this
Plan or the Participation Agreement; provided, however, that, upon any finding
that any provision is illegal, void or unenforceable, RRP will promptly execute
an amendment to this Plan with a provision of comparable scope and effect that
has been revised only to the extent needed to render it legal and enforceable
which amendment shall be binding on all Participants except as provided in
Section 8(n).

       

      (c)    
Arbitration.  It
is agreed that any claim or dispute arising out of or relating to this Plan or a
Participation Agreement will be settled by private and binding arbitration to be
conducted before a single arbitrator in the State of New
Jersey.  Unless otherwise mutually agreed by RRP and Participant or
Participants involved, the arbitration proceeding shall be conducted pursuant to
the American Arbitration Association Rules for the Resolution of Employment
Disputes.  Arbitration may be invoked by written notice to the
American Arbitration Association, served upon the opposing party by registered
mail, stating with particularity the issue(s) posed for arbitration; provided,
however, that no request for arbitration may be made until thirty (30) days
after written notice of the claim or dispute has first been forwarded by
certified mail to the other party.  The arbitration proceedings shall
be private and confidential and all information disclosed in the course of the
arbitration, as well as the arbitration award, shall be
confidential.  Judgment may be entered upon any award rendered by the
arbitrator.

       

      (d)    
Additional
Documents.  At any time and from time to time, RRP will execute
and deliver such documents as may be reasonably necessary to effectuate the
purposes of this Plan.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

         

      
        
          	 
      	
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      (e) Entire
Agreement.  This Plan and the Exhibits hereto set forth the
entire understanding of RRP and Participants with respect to the subject matter
hereof and supersedes all existing agreements among them concerning such subject
matter.

       

      (f) 
Notices.  Any
notice or other communication required or permitted to be given hereunder shall
be in writing and shall be given by Federal Express, Express Mail, or similar
overnight delivery or courier service or delivered (in person or by telecopy,
telex, or
similar telecommunications equipment) against receipt to the party to
whom it is to be given at the address of such party set forth below (or to such
other address as the party shall have furnished in writing in accordance with
the provisions of this section.  Any notice or other communication
shall be deemed given at the time of receipt thereof.

       

      
         

        
          	 	
                  If
      to RRP:

                	Ridgewood
      Renewable Power LLC
	 	947
      Linwood Avenue
	 	Ridgewood,
      NJ 07450
	 	Attention:
      Robert Swanson
	 	 
	 	Fax:
      (201) 447-0474
	 	 
	 	
                  If
      to any Participant:

                	To
      such Participant’s home address as reflected on RRP’s books.
      

        

                                           

      

      (g)  Waiver,
etc.  Any waiver by a Participant or RRP of a breach of any
term of this Plan shall not operate as or be construed to be a waiver of any
other breach of that term or of any breach of any other term of this
Plan.  The failure of a Participant or RRP to insist upon strict
adherence to any term of this Plan on one or more occasions will not be
considered a waiver or deprive that person of the right thereafter to insist
upon strict adherence to that term of any other term of this
Plan.  Any waiver must be in writing signed by the person granting the
waiver.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        
          	 
      	
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      (h) Successors.  The
provisions of this Plan shall be binding upon and inure to the benefit of RRP
and its respective successors and assigns and each Participant and his assigns,
heirs, and personal representatives.

       

      (i) 
No
Third Party Beneficiaries.  This Plan does not create, and
shall not be construed as creating, any rights enforceable by any person, except
Participants and their heirs and personal representatives.  This Plan
does not create a right in any Participant to continued employment by RRP or any
of its affiliates.

       

      (j) 
Governing
Law; Litigation.  This Plan shall be governed by, and construed
in accordance with, the laws of the State of New Jersey, without giving effect
to conflicts of laws.  Except for arbitration of disputes required by
this Plan, any action, suit, or proceeding arising out of, based on, or in
connection with this Plan or the transactions contemplated hereby may be brought
only in the United States District Court for the District of New Jersey or any
court of the State of New Jersey located in the County of Bergen, and RRP and
each Participant shall not assert, by way of motion, as a defense, or otherwise,
in any such action, suit, or proceeding, any claim that RRP or a Participant is
not subject personally to the jurisdiction of such court, that RRP’s or such
Participant’s property is exempt or immune from attachment or execution, that
the action, suit or proceeding is brought in an inconvenient forum, that the
venue of the action, suit, or proceeding is improper, or that this Plan or the
subject matter hereof may not be enforced in or by such court.

       

      (k) Additional
Compensation.  The distributions made under this Plan are in
addition to any other compensation arrangements of  Participants
including but not limited to any amounts that Participants may receive under
ongoing “at-will” employment arrangements by Participants with RRP; provided,
however that no Participant shall be eligible for any severance payment upon
termination of employment by RRP or any affiliate of RRP as a result of any
other plan of RRP or any of its affiliates or participation in any stay bonus or
similar arrangement of RRP or any affiliate of RRP.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	 
      	
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      (l)  Unfunded
Obligations. The right to receive distributions under this Plan is an
unsecured promise by RRP to pay to Participant a cash amount on the terms of
this Plan and Participant shall have no security interest in any of the assets
or rights of RRP.

       

      (m) Tax
Matters.  All distributions to be made to Participants under
this Plan are subject to appropriate tax withholding and other deductions
required by law.

       

      (n) Amendment,
Administration and Interpretation of the Plan.  No amendment to
this Plan that materially adversely affects a Participant may be made without
such Participant’s approval; provided that, RRP may amend this Plan without such
approval to comply with applicable law, including without limitation the
provisions of Section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”).  Any payment hereunder may be deferred by RRP to the extent
such deferral would avoid the application of a tax liability under Section 409A
of the Code, including to the dates of a Participant’s separation from
service. This
Plan will be administered and interpreted by Robert Swanson or his designee and
his determinations shall be final and binding on Participants in the absence of
manifest error or bad faith.

       

      (o) Termination.  This
Plan shall terminate upon the earlier to occur of (i) the complete distribution
to each of the Participants of all amounts due under this Plan and (ii) December
31, 2015.

       

      (p) Exhibits.  The
following Exhibits are included as a part of this Plan:

       

      
        	
                 
      

              	
                i.

              	
                Exhibit
      A

              	
                -

              	
                Applicable
      Participant Percentages

              

      

      
        	
                 
      

              	
                ii.

              	
                Exhibit
      B

              	
                -

              	
                Computation
      methodology and Sample calculation of the distributions to
      Participants

              

      

      
        	
                 
      

              	
                iii.

              	
                Exhibit
      C

              	
                -

              	
                Form
      of  Agreement, Release and Confidentiality
    Agreement

              

      

      
        	
                 
      

              	
                iv.

              	
                Exhibit
      D

              	
                -

              	
                Form
      of Participation Agreement

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        
          	 
      	
                  Senior
      Executive Bonus Plan

                
	 
      	
                  Page
      14

                

        

         

         

      

      EXHIBIT
A

       

       

       

       

      
        	
                Randall
      D. Holmes

              	 50%	 
	Douglas
      R. Wilson	 25%	 
	Stephen
      D. Galowitz	 25%EX-10.1

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”), dated as of November 6, 2008, is made between
Home Diagnostics, Inc., a Delaware corporation with offices (the “Offices”) at 2400 NW
55th Court, Fort Lauderdale, Florida (the “Company”), and J. Richard Damron, Jr., an
individual residing at 2120 NW 25th Street, Boca Raton, Florida 33431 (“Executive”), currently the
President and Chief Executive Officer (CEO) of the Company.

The Company desires to assure itself of the continued services of Executive as an executive of
the Company for the Term set forth herein and, to that end, desires to enter into this new contract
of employment with Executive, upon the terms and conditions herein set forth, and Executive is
desirous of entering into this contract of employment. This Agreement supersedes the Employment
Agreement between the Company and Executive dated January 1, 2006, which Employment Agreement, upon
execution of this Agreement, shall be null and void and have no further force or effect.

The parties, intending to be legally bound and in consideration of the provisions hereof,
agree as follows:

1. EMPLOYMENT:

(a) Executive will continue to be employed by the Company as President and Chief Executive
Officer through the Term, to perform the duties and services generally associated with the
direction and supervision of the day to day operations of the Company and as may be assigned to him
from time to time by the Board of Directors of the Company (the “Board”) consistent herewith.

(b) Executive agrees to cooperate in the search for a new CEO as directed by the Company. In
the event the Company is successful in its said CEO search during the Term, Executive agrees to
aide and assist in the transition from Executive to the new CEO of Executive’s responsibilities,
stepping aside from the day-to-day operations of the Company during the transition as CEO is
directed by the Board, consistent with the provisions of this Agreement.

(c) Executive agrees to his continuing employment and agrees to perform such duties to the
best of his ability, and shall use his best efforts, skill and ability to promote the interest of
the Company and otherwise to assist the Company in such matters as to which his knowledge and
expertise may be particularly relevant. During the Term, Executive shall, except during customary
vacation periods and periods of illness, devote all of Executive’s business time, attention and
energies to the performance of Executive duties and to the business and affairs of the Company and
to promoting the best interests of the Company, and shall not, either during or outside of such
normal business hours, directly or indirectly, engage in any activity inimical to such best
interests, provided, however, that Executive may reasonably alter his Company commitments
commensurate with any diminution of his day-to-day responsibilities after the hiring of a new CEO
by the Board as set forth in paragraph (b) above, without such reduction negatively affecting
Executive’s continuing entitlement to the compensation and benefits as set froth herein.

2. TERM: The term of this Agreement (the “Term”) shall commence on the date hereof and end,
unless earlier terminated as provided herein, on the earlier of (i) June 30, 2009, or (ii) any date
specified by the Board in a written notice to Executive given on or after February 28, 2009, and no
less than thirty (30) days prior to the date of termination. By agreement of the Company and
Executive, this Agreement and the Term may be extended.

3. COMPENSATION AND BENEFITS: In consideration of his services during the Term, Executive
shall be paid compensation and receive benefits from the Company as follows:

(a) Executive shall receive a salary (“Base Salary”) at an annual rate of Five Hundred
Forty-Six Thousand Dollars ($546,000), payable in bi-weekly installments or in such other
installments as may be agreed upon. Executive’s salary rate may be increased by the Board from
time to time in its sole discretion, but not decreased.

(b) On termination of the employment of Executive at the end of the Term, the Company shall
pay Executive a severance payment (the “Severance Payment”) of one full year’s Base Salary
($546,000), allocated one-half to the Company’s deferred compensation plan for the benefit of
Executive, and one-half to Executive in a lump sum. Notwithstanding any other provision in this
Agreement to the contrary, as a condition precedent to receiving the Severance Payment pursuant to
this paragraph 3(b), subject to his receipt of all salary, compensation and benefits through the
date of termination owed him by the Company, Executive agrees to execute (and not revoke) a
Separation Agreement and Release in the form attached hereto as Addendum “A” (the “Release”). If
Executive fails to execute and deliver the Release, other then for Company’s failure to pay
Executive all salary, compensation and benefits through the date of termination owed Executive
hereunder, or revokes the Release, Executive agrees that he shall not be entitled to receive the
Severance Payment. For purposes of this Agreement, the Release shall be considered to have been
executed by Executive if it is signed by his legal representative in the case of legal incompetence
or on behalf of Executive’s estate in the case of his death.

(c) Executive shall be entitled to receive an annual bonus for calendar year 2008, determined
by the Board in accordance with the 2008 Management Bonus Program, of up to 50% of Executive’s Base
Salary in paragraph (a) above, payable no later than March 15, 2009. Executive shall not be
entitled to receive any bonus with respect to 2009 or any part thereof.

(d) Executive shall continue to be entitled to participate in the Company’s benefit plans that
are generally available to the Company’s executives and employees, all in accordance with the
normal policies and practices of the Company, including, without limitation, health insurance, life
insurance, disability insurance, 401-K plan and stock option plans. The Company reserves the right
to make such modifications in its benefit plans at any time as it, in its sole discretion, deems
appropriate, provided, however, that no such modification(s) shall be made to the terms set forth
herein that would adversely affect Executive hereunder, it being the intention of the Company and
Executive to preserve all benefits and rights previously and currently afforded Executive, as by
way of example but not limitation, Executive’s stock option grants and rights, as more fully
documented by letter of July 8, 2008, to Executive from the Company, signed by Ronald Rubin, CFO,
including Schedule A referenced and attached thereto, a copy of which is attached as Addendum “B”
hereto and incorporated herein as though set forth fully. Further, to the extent possible, if
desired by Executive, the Company shall cooperate in transitioning any current benefits provide by
the Company to Executive on departure, as for example disability insurance and any life insurance
policy on Executive’s life.

(e) Executive shall be entitled to receive three (3) weeks of paid vacation per annum plus
U.S. holidays applicable to all Company employees.

(f) Executive’s principal place of service shall not be changed from the present offices,
without Executive’s consent, which may be withheld for any or no reason, except that such principal
place of service may be changed without Executive’s consent to any comparable office space within
15 miles of the residence of Executive.

(g) All compensation shall be subject to withholding and other applicable taxes.

4. TERMINATION:

(a) Executive’s employment under this Agreement shall terminate:

(i) upon written notice from the Company to Executive, for Cause (“Cause” being defined for
this purpose as Executive’s dishonesty, willful or intentional harm to the Company or failure to
comply with a reasonable request of the Board, material breach of this Agreement, excessive
absence, conviction of a felony under U.S. Federal, state or local laws or any applicable foreign
laws, misconduct in connection with or affecting the business of the Company, negligence in
performing Executive’s duties hereunder, failure to perform Executive duties hereunder after
delivery to Executive by the Company of written notice identifying the duties not being performed
by Executive or illegal drug use by Employee; provided, however, that “Cause” shall
not include the refusal of Executive to accept a material, unconsented reduction in
responsibilities and duties or to accept relocation from the offices, in each case other than as
provided herein (any such reduction or relocation being hereinafter referred to as a “Just Cause
Event”).

(ii) upon the death of Executive; or

(iii) upon 30 days’ advance written notice from either the Company or Executive to the other
in the event Executive acquires a Permanent Disability (“Permanent Disability”), being defined for
this purpose as it is defined in the Company’s long-term disability insurance policy in effect at
such time, by reason of physical or mental disability, and Executive is incapable of performing
Executive’s principal duties for a period of two consecutive months or 60 days’ in the aggregate in
any 12 month period.

(b) Executive’s employment under this Agreement shall terminate upon written notice from the
Company to Executive without Cause at any time.

(c) In the event that this Agreement is terminated by the Company for Cause pursuant to
subparagraph 4(a)(i) hereof, Executive shall be entitled to receive, after termination, all unpaid
compensation earned and payable under Section 3 hereof through the date of termination, but shall
not be entitled to any Severance Payment pursuant to paragraph 3(b) hereof.

(d) In the event that this Agreement is terminated by the Company upon Executive’s death or
Permanent Disability pursuant to subparagraphs 4(a)(ii) or (iii) hereof, Executive shall be
entitled to receive, after termination, all unpaid compensation earned and payable under Section 3
hereof through the date of termination (including accrued and unused vacation), and shall also be
entitled to the Severance Payment pursuant to paragraph 3(b) hereof.

(e) In the event that this Agreement is terminated pursuant to Section 4(b) hereof or by
Executive upon the occurrence of a Just Cause Event, Executive shall be entitled to continue to
receive, after such termination, all unpaid compensation earned and payable under Section 3 hereof
through the date of termination (including accrued and unused vacation), and shall also be entitled
to the Severance Payment pursuant to paragraph 3(b) hereof.

(f) When this Agreement is terminated, Executive shall be allowed to continue to participate
in the Company’s health insurance plan as set forth in paragraph (g) below.

(g) Notwithstanding anything herein to the contrary, in the event that this Agreement is
terminated or expires by its terms, Executive and his spouse shall be entitled to continue
participation in the Company’s health insurance plan at the Company’s expense until the earlier of
the first day of full Medicare benefits eligibility or August 21, 2019, which health insurance plan
will continue to provide Executive and his spouse with benefits that are comparable to those
existing at the time of such termination or expiration of this Agreement.

5. COMPANY’S TRADE SECRETS: Executive acknowledges that he understands that in the
performance of his duties with the Company he will be exposed to the Company’s trade secrets and
confidential information. For purposes of this Agreement, “Trade Secrets” and/or “Confidential
Information” means information or material that is commercially valuable to the Company and not
generally known in the industry. This includes, but is not limited to, the following:

(a) any and all versions of the Company’s proprietary computer software (including source code
and object code), hardware, firmware and documentation;

(b) technical information concerning the Company’s products and services, including training
programs, product data and specifications, diagrams, flow charts, drawings, test results, know-how,
processes, inventions, research projects and product development;

(c) information concerning the Company’s business, including cost information, profits, sales
information, accounting and unpublished financial information, business plans, markets and
marketing methods, customer lists and customer information, purchasing techniques, supplier lists
and supplier information and advertising strategies;

(d) information concerning the Company’s employees, including their salaries, strengths,
weaknesses and skills;

(e) non-public information submitted by the Company’s customers, suppliers, employees,
consultants or co-venturers with the Company for study, evaluation or use; and

(f) any other information not generally known to the public which, if misused or disclosed,
could reasonably be expected to adversely affect the Company’s business.

6. NONDISCLOSURE OF TRADE SECRETS AND CONFIDENTIAL INFORMATION: Executive agrees that he will
keep the Company’s Trade Secrets and Confidential Information, whether or not prepared or developed
by him, in the strictest of confidence at all times, both during and after the Term. Executive
will not use or disclose such secrets or information to others without the Company’s written
consent, except when necessary to perform his duties with the Company.

7. CONFIDENTIAL INFORMATION OF OTHERS: Executive agrees that he will not disclose to the
Company, use in the Company’s business, or cause the Company to use any information or material
that is a trade secret of others. Executive hereby represents and warrants that his performance
of this Agreement will not breach any agreement to keep confidential any proprietary information
acquired by him prior to his employment by the Company.

8. NO CONFLICTING OBLIGATIONS: Executive represents and warrants that he has no current or
prior agreements, relationships or commitments that conflict with this Agreement or with his
relationship with the Company.

9. RETURN OF MATERIALS: When Executive’s employment with the Company terminates, for whatever
reason, he will promptly deliver to the Company all originals and copies of all documents, records,
software code and programs, media and other materials containing any of the Company’s Trade Secrets
or Confidential Information and all other property belonging to the Company. Executive will also
return to the Company all equipment, files, software programs and other personal property or
intellectual property belonging to the Company. The foregoing notwithstanding, Executive and the
Company may agree in writing to exceptions to the foregoing, in which event said agreed exceptions
shall be deemed approved and amending hereto.

10. CONFIDENTIALITY OBLIGATION SURVIVES EMPLOYMENT: Executive acknowledges that he
understands that his obligation to maintain the confidentiality and security of the Company’s Trade
Secrets and Confidential Information remains with him even after his employment with the Company
terminates and continues for so long as such material remains a trade secret or confidential.

11. WORKS MADE FOR HIRE: Executive acknowledges that he understands that, as part of his
duties to the Company, he may be asked to create or contribute to the creation of documentation and
other copyrightable works. Executive agrees that any and all documentation and other copyrightable
materials that he is asked to prepare or work on as part of his employment with the Company or that
he otherwise works on or creates while employed by the Company and within the scope of his
employment and duties for the Company shall be “works made for hire,” as that term is used and
defined by U.S. copyright law, and that the Company shall own all the copyright and other property
rights in such works. IF AND TO THE EXTENT ANY SUCH MATERIAL DOES NOT SATISFY THE LEGAL
REQUIREMENTS TO CONSTITUTE A “WORK MADE FOR HIRE,” EXECUTIVE HEREBY ASSIGNS ALL HIS RIGHT, TITLE
AND INTEREST IN ANY COPYRIGHT OR OTHER RIGHTS OR INTEREST IN SAID WORKS TO THE COMPANY.

12. DISCLOSURE OF DEVELOPMENTS: Executive agrees that while he is employed by the Company, he
will promptly inform the Company of the full details of all his inventions, discoveries,
improvements, innovations and ideas (collectively called “Developments”)—whether or not patentable,
copyrightable or otherwise protectible—that he conceives, completes or reduces to practice (whether
jointly or with others) and which:

(a) relate to the Company’s present or prospective business, or actual or demonstrably
anticipated research and development; or

(b) result from any work he does using any equipment, facilities, materials, Trade Secrets,
Confidential Information or personnel of the Company; or

(c) result from or are suggested by any work that he may do for the Company.

13. ASSIGNMENT OF DEVELOPMENTS: Executive hereby assigns to the Company, or the Company’s
designee, his entire right, title and interest in all of the following that he conceives or makes
(whether alone or with others) while employed by the Company:

(a) all Developments;

(b) all copyrights, trade secrets, trademarks and mask work rights in Developments; and

(c) all patent applications filed and patents granted in respect of any Developments,
including those in foreign countries.

14. POST-EMPLOYMENT ASSIGNMENT: Executive agrees that he will fully disclose to the Company
any and all inventions, improvements or discoveries actually made, or copyright registrations or
patent applications filed within six months after his employment with the Company terminates.
Executive hereby assigns to the Company his entire right, title and interest in such inventions,
improvements and discoveries, whether made individually or jointly, which relate to the business of
the Company during the entire period of his employment preceding the termination of his employment.

15. EXECUTION OF DOCUMENTS: Both while employed by the Company and afterwards, Executive
agrees to execute and aid in the preparation of any papers or filings that the Company may consider
necessary or helpful to obtaining or maintaining any patents, copyrights, trademarks or other
proprietary rights covering work and Developments for which he has or had responsibility for and/or
involvement with during his term of employment at the Company at no charge to the Company, but at
its expense. If the Company is unable to secure Executive’s signature on any document necessary to
obtain or maintain any patent, copyright, trademark or other proprietary rights, whether due to his
mental or physical capacity or any other cause, Executive hereby irrevocably designates and
appoints the Company and its duly authorized officers and agents as his agents and
attorneys-in-fact to execute and file such documents and do all other lawfully permitted acts to
further the prosecution, issuance and enforcement of patents, copyrights and other proprietary
rights with the same force and effect as if executed by Executive.

16. PRIOR DEVELOPMENTS: As a matter of record, Executive must identify at the time of signing
this Agreement all prior developments relevant to the subject matter of his employment by the
Company (“Prior Developments”) that have been conceived or reduced to practice or learned by him,
alone or jointly with others, before his employment with the Company, which he desires to remove
from the operation of this Agreement. Executive represents that he has made no such Prior
Developments at the time of signing this Agreement which he desires to remove from the operation of
this Agreement. Executive further represents and warrants that he is under no prior contractual or
other obligation that in any way impedes his ability to perform this Agreement or carry out his
duties and responsibilities for the Company, including any non-compete obligations and that, in
providing the services contemplated herein, he will not make any improper or unauthorized use of
any property rights, or trade secrets or property belonging to his previous employer or anyone
else.

17. CONFLICT OF INTEREST: During Executive’s employment by the Company, he agrees that he
will not engage in any business activity competitive with or adverse to the Company’s business
activities Executive also agrees that he will not engage in any other activities that conflict
with the Company’s best interests.

18. POST-EMPLOYMENT NON-COMPETITION AGREEMENT: Executive acknowledges that he understands
that, during his employment by the Company, he may become familiar with Confidential Information of
the Company. Therefore, it is possible that Executive could cause grave harm to the Company if he
worked for a competitor. Accordingly, Executive agrees for twelve (12) months after the
termination of his employment with the Company not to engage in, or contribute his knowledge to,
any business entity or activity that is in competition with or adverse to the Company’s business
activities, including, without limitation, with respect to the blood glucose monitoring business.

(a) Diversion of Company Business: For a period of one year from the date Executive’s
employment terminates, he will not divert or attempt to divert from the Company any business the
Company enjoyed or solicited from its customers during the period two years prior to the
termination of his employment.

(b) Geographic Restrictions: Executive acknowledges and agrees that the restrictions
on his post-employment competitive activity shall apply throughout the entire United States.

19. ADDITIONAL POST-EMPLOYMENT NON-COMPETITION TERMS: During any period in which Executive is
not receiving compensation payments from the Company only (and for this purpose, any lump sum
payment shall be deemed to be paid over the period to which such lump sum payment relates), the
following post-employment non-competition term(s) shall apply:

(a) Written Consent: Executive acknowledges that he understands that he will be
permitted to engage in the work or activity described in Section 18 of this Agreement if he
provides the Company with clear and convincing written evidence, including assurances from his new
employer and him, that the contribution of his knowledge to that work or activity will not cause
him to disclose, base judgment upon or use any of the Company’s Confidential Information. The
Company will furnish Executive a written consent to that effect if he provides the required written
evidence. Executive agrees not to engage in such work or activity until he receives such written
consent from the Company, which consent will not be unreasonably withheld.

(b) Inability to Secure Employment: If, solely as a result of this non-competition
agreement, Executive is unable to secure employment appropriate to his abilities and training,
despite his diligent efforts to do so, the Company shall release him from his non-competition
obligations, but only to the extent necessary to allow him to obtain such employment. In all other
respects, the non-competition and confidentiality restrictions herein shall continue to apply.

20. NONINTERFERENCE WITH NON-SOLICITATION OF COMPANY EMPLOYEES: While employed by the
Company, and for one year after, Executive agrees that he will not directly or through the use of
agents induce, or attempt to induce, any Company employees to quit the Company’s employ.

21. ENFORCEMENT: Executive agrees that in the event of a breach or threatened breach of this
Agreement by Executive, money damages would be an inadequate remedy and extremely difficult to
measure. Executive agrees, therefore, that the Company shall be entitled to an injunction to
restrain him from such breach or threatened breach. Nothing in this Agreement shall be construed
as preventing the Company from pursuing any remedy at law or in equity for any breach or threatened
breach.

22. GENERAL PROVISIONS:

(a) Successors: The rights and obligations under this Agreement shall survive the
termination of Executive’s service to the Company in any capacity and shall inure to the benefit
and shall be binding upon: (i) his heirs and personal representatives, and (ii) the successors and
assigns of the Company.

(b) Governing Law: This Agreement shall be construed and enforced in accordance with
the laws of the State of Florida.

(c) Severability: If any provision of this Agreement is determined to be invalid or
unenforceable, the remainder shall be unaffected and shall be enforceable against both the Company
and Executive.

(d) Entire Agreement: This Agreement supercedes and replaces all former agreements or
understandings, oral or written, between the Company and Executive, including without limitation
the Employment Agreement between the Company and Executive dated January 1, 2006.

(e) Modification: This Agreement may not be modified except by a writing signed both
by the Company and Executive.

(f) Assignment: This Agreement may be assigned by the Company to any affiliate of the
Company. Executive may not assign or delegate his duties under this Agreement without the
Company’s prior written approval.

(g) Notices: Any notice required to be given hereunder shall be deemed to have been
sufficiently given either when served personally, by facsimile transmission or when served by first
class mail addressed to either party at the applicable address set forth on the first page of this
Agreement.

(h) Counterparts. This Agreement may be executed in several identical counterparts,
each of which when so executed shall be deemed an original, but all such counterparts shall
constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto duly executed this Agreement as of the day and year
first above written.

HOME DIAGNOSTICS, INC.

By: /s/ George H. Holley

Title: Chairman

/s/ J. Richard Damron, Jr.

ADDENDUM A

FORM OF SEPARATION AGREEMENT AND RELEASE OF ALL CLAIMS

THIS SEPARATION AGREEMENT AND RELEASE OF ALL CLAIMS (the “Agreement”) is entered into
between HOME DIAGNOSTICS, INC., a Delaware corporation (“Employer”), and J. RICHARD DAMRON
(“Employee”).

WHEREAS, Employee’s employment by Employer [was terminated] [will terminate] as of
     , 2009;

WHEREAS, Employer and Employee desire to settle all issues relating to the termination of
Employee’s employment with Employer, and to establish all other rights, responsibilities and
obligations owed by the parties in connection with Employee’s employment and separation from
employment;

NOW, THEREFORE, in consideration of mutual promises and other good and valuable consideration,
the receipt of which is hereby acknowledged, it is agreed as follows:

Definitions

Affiliate: As used herein, the term “Affiliate” shall mean and refer to any officer,
director, shareholder, employee, and/or agent of Employer; and/or any subsidiary, division, or
affiliate of Employer (including without limitation any officer, director, shareholder, employee,
and/or agent of any such subsidiary, division, or affiliate); and/or any entity (including without
limitation any officer, director, shareholder, employee, and/or agent of such entity) in which
Employer owns, directly or indirectly, a legal or beneficial interest (whether in whole or in
part); and/or any individual or entity including without limitation any officer, director,
shareholder, employee, and/or agent of such entity that owns, directly or indirectly, a legal or
beneficial interest (whether in whole or in part) in Employer.

Agreement

1. Consideration to Employee. As consideration for Employee’s execution and non-revocation of
this Agreement and the covenants and promises contained in Paragraphs 3, 4 and 5 hereof, Employer
agrees to pay to the Employee the Severance Payment, as defined in the Employment Agreement between
Employee and Employer dated November      , 2008.

2. Review and Revocation. Employer has delivered to Employee two copies of this Agreement,
signed by Employer. Employee understands and agrees that he has 21 days from the date Employee
receives this Agreement (not counting the day Employee receives the Agreement) to consider the
terms of and to sign this Agreement. Employee understands that, in Employee’s sole and absolute
discretion, Employee may sign this Agreement prior to the expiration of the 21-day period. If
Employee elects to sign this Agreement, he shall sign both copies and deliver one fully executed
copy to Employer at 2400 NW 55th Ct., Fort Lauderdale, Florida 33309,
Attention: Human Resources Department. The second copy may be retained by Employee.

Employee further acknowledges and understands that he may revoke this Agreement for a period
of up to 7 days after he signs it (not counting the day Employee signed the Agreement) and that the
Agreement shall not become effective or enforceable until the 7-day revocation period has expired.
To revoke this Agreement, Employee must give written notice stating that Employee wishes to revoke
the Agreement to Employer (fax: (954) 739-8506). If Employee mails a notice of revocation to
Employer, it must be postmarked no later than 7 days following the date on which Employee signed
this Agreement (not counting the day Employee signed the Agreement) or the revocation shall not be
effective.

3. Release of All Claims; Further Action.

(a) In consideration for the consideration provided for in Paragraph 1, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Employee, for
Employee and or Employee’s heirs, assigns, and all persons and entities claiming by, through, or
under Employee, hereby irrevocably, unconditionally, and completely releases, discharges, and
agrees to hold Employer and its Affiliates, individually or in any combination thereof, harmless of
and from any and all claims, liabilities, charges, demands, grievances, and causes of action of any
kind or nature whatsoever, including without limitation claims for contribution, subrogation, or
indemnification, whether direct or indirect, liquidated or unliquidated, known or
unknown, which Employee had, has, or may claim to have against Employer or against any Affiliate,
whether as an employee or otherwise (hereinafter collectively referred to as “Claim(s)”).

(b) The release set forth in this Paragraph 3 includes without limitation any Claim(s) that
Employee has, had, or may claim to have against Employer or any Affiliate (a) for wrongful
termination or discharge, emotional distress, breach of express or implied contract of employment,
employment related torts, or personal injury (whether physical or mental); (b) for any Claim(s)
arising under federal or state law, including without limitation Title VII of the Civil Rights Act
of 1964, the Age Discrimination in Employment Act of 1967, the Florida Civil Rights Act, Florida
Statutes § 760.01, et. seq., or any other federal, state, or local law prohibiting discrimination
on the basis of race, color, religion, sex, age, national origin, disability, or any other
protected group status; (c) any Claim(s) arising under the Age Discrimination in Employment Act,
which prohibits discrimination against employees age 40 and above; (d) any Claim(s) arising under
the Family and Medical Leave Act, (e) any Claim(s) arising under the Employee Retirement Income
Security Act, (f) any Claim(s) for attorney’s fees or costs, and (g) for any other Claim(s) in any
way related to or arising out of Employee’s employment with Employer or the termination of that
employment.

(c) Nothing in this Agreement waives Employee’s rights, if any, to continue Employee’s
participation in Employer’s employee welfare benefit plan, as allowed by COBRA and the terms,
conditions, and limitations of the plan, or any vested rights that Employee may have under any
employee pension or welfare benefit in which Employee participated as an employee of Employer.

4. Full and Complete Release. Employee understands and agrees that he is releasing and waiving
any and all Claim(s), including but not limited to Claims that Employee does not know exist in
Employee’s favor at the time Employee signs this Agreement which, if known by Employee, would
materially affect Employee’s decision to sign this Agreement. For the purpose of implementing a
full and complete release and discharge of Employer and each and every Affiliate, Employee
expressly acknowledges that the release set forth in Paragraph 3 is intended to include in its
effect, without limitation, all Claim(s) which Employee does not know or suspect to exist in
Employee’s favor at the time of execution hereof and that the release set forth in Paragraph 3
contemplates the extinguishment of any such Claim(s).

5. Covenant Not to Sue. Employee promises not to file, or permit to be filed on Employee’s
behalf, any lawsuit, charge, or complaint against Employer or any Affiliate with any administrative
agency (unless prohibited by applicable statute of agency regulation) or with any state or federal
court asserting any Claim(s) released in Paragraphs 3 and/or 4. In addition, Employee waives any
right to recover damages, costs, and attorney’s fees in any action brought by Employee or by any
other person or entity (including without limitation the Equal Employment Opportunity Commission or
the Florida Commission on Human Relations) on Employee’s behalf asserting any Claim(s) released by
Paragraphs 3 and 4.

6. Wages and Commissions Paid in Full. Employee acknowledges that, except for the Severance
Payment, he has received all monies due and owing to Employee from Employer, including without
limitation any monies due and owing to Employee for wages, accrued but unused vacation benefits,
commissions, or otherwise and that he has no claim against Employer whatsoever for the payment of
any further wages, commissions, vacation benefits, or other monies.

7. Non-Disparagement. Employee agrees to avoid making disparaging remarks or taking any
action now, and at any time in the future, which could be considered detrimental to Employer.

8. Return of Employer Property. Employee agrees to promptly deliver to Employer any property
of Employer in Employee’s possession or under his control.

9. Confidential Information. Employee represents that he has returned to Employer all copies
of any secret or confidential information, knowledge or data relating to Employer or any of its
affiliated companies and their respective businesses that shall have been obtained by Employee
during his employment by Employer, and further agrees not to communicate or divulge any such
information, knowledge or data to anyone other than Employer or persons designated by Employer, nor
use any such information, knowledge or data in any manner.

10. Remedies. Employee hereby acknowledges that if he breaches the restrictive covenants
contained in Paragraph 9 of this Agreement, the damages to Employer will result in irreparable harm
to Employer, and Employee agrees that, in addition to any other remedies provided for herein or
otherwise available at law, Employer shall be entitled in any court of equity having jurisdiction
to an injunction restraining Employee in the event of a breach, actual or threatened, of the
agreements and covenants contained in Paragraph 9 of this Agreement.

11. Future Cooperation. Employee agrees to cooperate with Employer in connection with any
matter with which he was involved as an employee of Employer or any existing or potential claim,
investigation, administrative proceeding, lawsuit or other legal or business matter, including
assigning all patent rights to Employer on existing or future patent applications on which Employee
is listed as an inventor, which arose during Employee’s employment by Employer, all as reasonably
requested by Employer.

12. Not an Admission. This Agreement does not constitute an admission by Employer or by any
Affiliate, and Employer and each and every Affiliate specifically deny, that Employer or any
Affiliate has violated any contract, law, or regulation or that it or he has discriminated against
Employee or otherwise infringed on Employee’s rights and privileges or done any other wrongful act.
This Agreement does not constitute an admission by Employee, and Employee specifically denies,
that Employee has violated any contract, law, or regulation or that he has infringed on Employer’s
rights and privileges or done any other wrongful act.

13. Entire Agreement. This Agreement constitutes the entire understanding between the parties
and supersedes all negotiations, representations, prior discussions, and preliminary agreements
between the parties. No promise, representation, warranty, or covenant not included in this
Agreement has been or is relied upon by either party. Notwithstanding any statute or case law to
the contrary, this Agreement may not be modified except by a written instrument signed by each of
the parties, whether or not such modification is supported by separate consideration.

14. Miscellaneous. Notwithstanding any conflict of laws provisions to the contrary, this
Agreement shall be governed by the laws of the State of Florida and the parties consent to the
jurisdiction and venue of Florida State and Federal courts and waive any defenses based on
jurisdiction or venue. Employee warrants that he has not assigned any Claim(s) released by this
Agreement, or any interest therein, to any third party. Any waiver by any party hereto of any
breach of any kind or character whatsoever by any other party, whether such waiver be direct or
implied, shall not be construed as a continuing waiver of, or consent to, any subsequent breach of
this Agreement on the part of the other party. In addition, no course of dealing between the
parties, nor any delay in exercising any rights or remedies hereunder or otherwise, shall operate
as a waiver of any of the rights or remedies of the parties. The provisions of the Agreement are
severable. If any part of this Agreement is found to be unenforceable, the other provisions shall
remain fully valid and enforceable. It is the intention and agreement of the parties that all of
the terms and conditions hereof be enforced to the fullest extent permitted by law. This Agreement
shall inure to and bind the heirs, devisees, executors, administrators, personal representatives,
successors, and assigns of the respective parties hereto.

15. Attorneys’ Fees. If a civil action or other proceeding is brought to enforce this
Agreement, the prevailing party shall be entitled to recover reasonable attorney’s fees, costs, and
expenses incurred, in addition to any other relief to which such party may be entitled.

16. Knowing and Voluntary Execution. Employee acknowledges that he has read this Agreement
carefully and fully understands the meaning of the terms of this Agreement. Employee acknowledges
that he has signed this Agreement voluntarily and of Employee’s own free will and that he is
knowingly and voluntarily releasing and waiving all Claim(s) that he has or may have against
Employer or any Affiliate.

17. Opportunity to Consult with Counsel. Employee further acknowledges that he has been
encouraged by Employer to consult with an attorney, and has had the opportunity if he so chooses,
to do so prior to signing this Agreement. Each party agrees that he or it shall be solely
responsible for any attorney’s fees incurred by that party in the negotiation and execution of this
Agreement.

EMPLOYEE

	 	 	DATED:

EMPLOYER

HOME DIAGNOSTICS, INC.

	 	 	 
	DATED:

	 	By:
	
 
	 	Name:
	
 
	 	Title:

1

ADDENDUM B

July 8, 2008

J. Richard Damron, Jr.

2120 NW 25th Street

Boca Raton, Florida 33431

Re: Optionee Under Stock Option and Equity Plans of Home Diagnostics, Inc.

	 	 	 	Re: Notice of Extension of Option Exercise Period following
Retirement re NSO Options Granted under the 1992 Stock Option Plan, the
2002 Stock Option Plan, and the 2006 Equity Incentive Plan of Home
Diagnostics, Inc.	 

Dear Richard:

Reference is made to each of the (i) Home Diagnostics, Inc. 1992 Incentive Stock Option Plan
(the “1992 Plan”) and the stock option agreement or agreements (individually, a “1992 Plan
Agreement” and collectively, the “1992 Plan Agreements”) entered into between Home Diagnostics,
Inc. (the “Company”) and you, as an optionee (“Optionee”), under the 1992 Plan, (ii) Home
Diagnostics, Inc. 2002 Stock Option Plan (the “2002 Plan”), and the stock option agreement or
agreements (individually, a “2002 Plan Agreement” and collectively, the “2002 Plan Agreements”)
entered into between the Company and you, as an optionee, under the 2002 Plan, (iii) Home
Diagnostics, Inc. 2006 Equity Incentive Plan (the “2006 Plan”), and the stock option agreement or
agreements (individually, a “2006 Plan Agreement” and collectively, the “2006 Plan Agreements”)
entered into between the Company and you, as an optionee, under the 2006 Plan, and (iv) certain
other stock option agreements (the “Other Agreements”) substantially similar to either the 1992
Plan Agreements or the 2002 Plan Agreements and evidencing options to purchase shares of Common
Stock other than pursuant to the 1992 Plan, the 2002 Plan and/or the 2006 Plan (collectively, the
“Plans”) entered into between the Company and you, as optionee, in each case, pursuant to which the
non-qualified stock options (“NSOs”) more fully identified on Schedule A attached hereto
(collectively, the “Modified NSOs”) to purchase an aggregate of 403,806 shares of the Common Stock,
par value $0.01 per share of the Company, were granted to you under the terms and conditions set
forth in the 1992 Plan, 2002 Plan and/or 2006 Plan (individually, a “Plan” and collectively, the
“Plans”) and/or pursuant to the 1992 Plan Agreements, 2002 Plan Agreements, 2006 Plan Agreements
and/or Other Agreements (individually, an “Option Agreement” and collectively, the “Option
Agreements”). Capitalized terms used herein without definition shall have the respective meanings
ascribed to them in the appropriate Plan and/or Option Agreement.

You are hereby notified that effective as of July 9, 2008, the terms of each of the
outstanding NSOs granted to you under the Plans and Option Agreements, all as more fully set forth
on Schedule A attached hereto, are amended to provide that any option (or portion thereof)
that has vested on or prior to the date that the employment of the Optionee terminates for any
reason (other than any termination for “cause,” as such term is defined in the applicable Plan or
Option Agreement evidencing such NSO), shall remain exercisable and shall not expire until the end
of the exercise period otherwise provided for in the applicable Plan and/or Option Agreement (as
more fully set forth in the column entitled “Expiration Date” on Schedule A attached
hereto), notwithstanding any provision contained in the applicable Plan and/or Option Agreement to
the contrary, provided that the Optionee shall have satisfied both of the following criteria, at or
prior his termination of employment date: (i) the Optionee’s age at the time of his termination of
employment shall be at least 55; and (ii) the sum of (A) the Optionee’s age at the time of his
termination of employment and (B) his years of service with the Corporation, any parent or any
subsidiary, shall total at least 65 years.

Very truly yours,

HOME DIAGNOSTICS, INC.

By: /s/ Ronald L. Rubin

Title: Chief Financial Officer

AGREED TO AND ACCEPTED BY:

/s/ J. Richard Damron, Jr.

2

Schedule A

Home Diagnostics, Inc.

Outstanding NSOs Being Amended

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	Original Grant	 	 	 	 	 	 	 	 	 	 	 	 
	Name
	 	Plan/Other Agreement	 	Date________	 	Expiration Date_____	 	Modified NSOs___	 	Exercise Price
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dick Damron
	 	Other Agreement	 	 	08/16/2001	 	 	 	08/16/2011	 	 	 	63,516	 	 	$	2.99	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dick Damron
	 	Other Agreement	 	 	12/13/2001	 	 	 	12/13/2011	 	 	 	46,800	 	 	$	2.99	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dick Damron
	 	Other Agreement	 	 	01/01/2002	 	 	 	01/01/2012	 	 	 	49,140	 	 	$	2.99	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dick Damron
	 	 	2002	 	 	 	12/10/2002	 	 	 	12/10/2012	 	 	 	35,978	 	 	$	3.42	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dick Damron
	 	 	2002	 	 	 	12/10/2003	 	 	 	12/10/2013	 	 	 	49,140	 	 	$	3.63	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dick Damron
	 	 	2002	 	 	 	05/01/2004	 	 	 	05/01/2014	 	 	 	43,031	 	 	$	3.85	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dick Damron
	 	 	2002	 	 	 	04/01/2005	 	 	 	04/01/2015	 	 	 	44,201	 	 	$	3.85	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dick Damron
	 	 	2006	 	 	 	09/26/2006	 	 	 	09/26/2016	 	 	 	30,000	 	 	$	12.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dick Damron
	 	 	2006	 	 	 	06/05/2007	 	 	 	06/05/2014	 	 	 	42,000	 	 	$	11.20	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	403,806	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

3

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