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EXHIBIT 10.19
MANAGEMENT AGREEMENT
AGREEMENT entered into as of January 2, 2001 by and between FSI
International, Inc., a Minnesota corporation (the "Company"), and Xxxxxx X.
Xxxxxxxx (the "Employee").
WITNESSETH
WHEREAS, the Employee is a new member of the management of the Company
and is expected to devote substantial skill and effort to the affairs of the
Company or a Subsidiary, and the Board of Directors of the Company desires to
recognize the significant personal contribution that the Employee has made
and/or is expected to make to further the best interests of the Company and its
shareholders; and
WHEREAS, it is desirable and in the best interests of the Company and
its shareholders to obtain or maintain the benefits of the Employee's services
and attention to the affairs of the Company or a Subsidiary; and
WHEREAS, it is desirable and in the best interests of the Company and
its shareholders to provide inducement for the Employee (a) to remain in the
service of the Company or a Subsidiary in the event of any proposed or
anticipated change in control of the Company and (b) to remain in the service of
the Company or a Subsidiary in order to facilitate an orderly transition in the
event of a change in control of the Company; and
WHEREAS, it is desirable and in the best interests of the Company and
its shareholders that the Employee be in a position to make judgments and advise
the Company or a Subsidiary with respect to proposed changes in control of the
Company without regard to the possibility that Employee's employment may be
terminated without appropriate compensation in the event of certain changes in
control of the Company; and
WHEREAS, the Employee desires to be protected in the event of certain
changes in control of the Company; and
WHEREAS, for the reasons set forth above, the Company and the Employee
desire to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, the Company and the Employee agree as
follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
A. "Accounting Firm" shall have the meaning set forth in
Paragraph 4(B).
B. "Base Annual Salary" shall mean the highest annual rate of
the Employee's base salary with whichever of the Company and one or
more of its Subsidiaries that shall have employed the Employee in
effect at any time during the period commencing as of twelve months
prior to the First Event and ending on the date of termination of the
Employee's employment with
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the Company and its Subsidiaries (without reduction for any salary
reduction or other deferral contribution to any employee benefit plan
sponsored by the Company or any Subsidiary).
C. "Board" shall mean the Board of Directors of the Company.
D. "Cause" shall mean and be limited to, (i) willful and gross
neglect of duties by the Employee or (ii) an act or acts committed by
the Employee constituting a felony under United States federal or
applicable state law and substantially detrimental to the Company or
any Subsidiary or the reputation of the Company or any Subsidiary,
following a determination to that effect by a resolution duly adopted
by the affirmative vote of not less than two-thirds of the entire
membership of the Board at a meeting thereof called and held for such
purpose (after reasonable notice is provided to the Employee and the
Employee is given an opportunity to be heard before the Board) finding
that in the good faith opinion of the Board the Employee is guilty of
the conduct described above in (i) or (ii).
E. "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor statute thereto.
F. "Commencement Date" shall mean the earliest to occur of an
Event described in clause (J)(i), (ii) or (iii) of this Paragraph 1.
G. "Company" shall mean the Company as defined in the first
sentence of this Agreement and any successor to its business and/or
assets which is required to execute and deliver the agreement provided
for in Paragraph 6(B) or which otherwise becomes bound by operation of
law to all the terms and provisions of this Agreement.
H. "Constructive Involuntary Termination" shall mean a
termination of employment with the Company and its Subsidiaries by the
Employee at any time from the date of the First Event until the end of
the Transition Period, if after the First Event and at or prior to the
time of such termination:
(i) the Employee is assigned duties materially
inconsistent with the Employee's authorities, duties,
responsibilities and status (including office, title and
reporting requirements) as an employee of the Company or there
is a reduction or alteration in the nature or status of the
Employee's title, authorities, duties, assignments or
responsibilities in each case as compared with the Employee's
title, authorities, duties, assignments and responsibilities
immediately prior to the First Event, other than a termination
for Cause or on account of Disability;
(ii) the Company or any Subsidiary shall have failed
to continue in effect the Employee's base salary at an
equivalent or greater level, as compared to immediately prior
to the First Event other than a termination for Cause or on
account of Disability or shall have failed to pay the Employee
any amounts due therefore;
(iii) there is a material reduction in the Employee's
level of participation in any of the Company's short- and/or
long-term incentive compensation plans, or employee benefit or
retirement plans, policies, practices, arrangements,
perquisites or fringe benefits in which the Employee
participates from the levels in place immediately prior to the
First Event, other than a Termination for Cause on account of
Disability; provided, however, that reductions in the
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levels of participation in any such plans, policies,
practices, arrangements, perquisites or fringe benefits shall
not be deemed to be a Constructive Involuntary Termination if
the Employee's reduced level of participation in each such
program remains substantially consistent with the average
level of participation of other executives who have positions
commensurate with the Employee's position;
(iv) the Company shall have failed to obtain
assumption of this Agreement by any successor as contemplated
by Paragraph 6(B) hereof;
(v) The Company or any Subsidiary shall fail to
reimburse the Employee for reasonable business expenses and
such failure shall have continued for at least seven days
after notice in accordance with Paragraph 8 hereof of such
failure is given by the Employee to the Company or the
Subsidiary, as the case may be;
(vi) the Company or any Subsidiary shall require the
Employee to relocate to any place other than a location within
twenty-five miles of the location at which the Employee
performed substantially all of his duties immediately prior to
the First Event or, if the Employee performed such duties at
the Company's or a Subsidiary's principal executive offices,
the Company or such Subsidiary shall relocate its principal
executive offices to any location other than a location within
twenty-five miles of the location of the principal executive
offices of the Company or the Subsidiary, as the case may be,
immediately prior to the First Event; or
(vii) the Company or a Subsidiary shall require that
the Employee travel on Company business to a substantially
greater extent than required immediately prior to the First
Event.
I. "Disability" shall mean the Employee's absence from his
duties with the Company and its Subsidiaries on a full time basis for
180 consecutive days, as a result of the Employee's incapacity due to
physical or mental illness, unless within 30 days after written notice
pursuant to Paragraph 8 is given following such absence, the Employee
shall have returned to the full time performance of his duties.
J. "Event" shall mean the occurrence of any one or more of the
following:
(i) less than a majority of the Board shall consist
of members of the Incumbent Board;
(ii) 30% or more of the then Outstanding Company
Common Stock or the combined voting power of the then
Outstanding Company Voting Securities of the Company is
acquired or beneficially owned (as defined in Exchange Act
Rule 13d-3) by any person or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act), provided,
however, that the following acquisitions and beneficial
ownership shall not constitute Events pursuant to this clause
(ii):
(a) any acquisition or beneficial ownership
by the Company or a Subsidiary of the Company,
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(b) any acquisition or beneficial ownership
by any employee benefit plan (or related trust)
sponsored or maintained by the Company or one or more
of its Subsidiaries,
(c) any acquisition or beneficial ownership
by the Employee or any group that includes the
Employee, or
(d) any acquisition or beneficial ownership
by any corporation (including without limitation an
acquisition of the nature described in clause
(J)(iii) of this Paragraph 1) with respect to which,
immediately following such acquisition, more than 70%
of, respectively, the then outstanding shares of
common stock of such corporation and the combined
voting power of the then outstanding voting
securities of such corporation entitled to vote
generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the persons who were the
beneficial owners, respectively, of the Outstanding
Company Common Stock and the Outstanding Company
Voting Securities immediately prior to such
acquisition in substantially the same proportions as
their ownership, immediately prior to such
acquisition, of the Outstanding Company Common Stock
and the Outstanding Company Voting Securities, as the
case may be;
(iii) Except as provided in (d) below, the
shareholders of the Company approve a definitive agreement or
plan to
(a) merge, consolidate or reorganize the
Company (other than (1) a merger or consolidation
with a Subsidiary of the Company or (2) a merger,
consolidation or reorganization in which all or
substantially all of the persons who were the
beneficial owners, respectively, of the Outstanding
Company Common Stock and the Outstanding Voting
Company Securities immediately prior to such merger,
consolidation or reorganization beneficially own,
directly or indirectly, immediately after the merger,
consolidation or reorganization, more than 70% of,
respectively, the then outstanding shares of common
stock and the combined voting power of the then
outstanding voting securities of such corporation
entitled to vote generally in the election of
directors, as the case may be, of the corporation
resulting from the merger, consolidation or
reorganization or its parent corporation, in
substantially the same proportions as their ownership
immediately prior to such merger, consolidation or
reorganization of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities,
as the case may be);
(b) exchange, pursuant to a statutory
exchange, Outstanding Company Common Stock or
Outstanding Company Voting Securities held by
shareholders of the Company immediately prior to the
exchange for cash, securities or other property,
unless all or substantially all of the persons who
were the beneficial owners, respectively, of the
Outstanding Company Common Stock and the Outstanding
Company Voting Securities immediately prior to such
statutory exchange beneficially own, directly or
indirectly, immediately after the statutory exchange,
more than 70% of, respectively, the then outstanding
shares of common stock and the combined voting power
of the then outstanding voting securities of the
parent corporation of the Company entitled to vote
generally in the election of directors, in
substantially the same proportions as their
ownership, immediately prior to the statutory
exchange, of the Outstanding Company Common Stock and
the Outstanding Company Voting Securities, as the
case may be; or
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(c) (x) completely liquidate or dissolve the
Company or (y) sell or otherwise dispose of all or
substantially all of the assets of the Company (in
one or a series of transactions), other than to a
corporation with respect to which, immediately
following such sale or other disposition, more than
70% of, respectively, the then outstanding shares of
common stock of such corporation and the combined
voting power of the then outstanding voting
securities of such corporation entitled to vote
generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the persons who were the
beneficial owners, respectively, of the Outstanding
Company Common Stock and the Outstanding Company
Voting Securities immediately prior to such sale or
other disposition in substantially the same
proportions as their ownership, immediately prior to
such sale or other disposition, of the Outstanding
Company Common Stock and the Outstanding Company
Voting Securities, as the case may be;
(d) unless at least 30% of the common stock
(or the combined voting power of the voting
securities entitled to vote generally in the election
of directors or voting equity interests) of the
surviving corporation or its parent corporation or of
any corporation (or other entity) acquiring all or
substantially all of the assets of the Company (in
the case of a merger, consolidation, reorganization
or disposition of assets) or the Company or its
parent corporation (in the case of a statutory
exchange) is, immediately following the merger,
consolidation, reorganization, statutory exchange or
disposition of assets, beneficially owned, directly
or indirectly, by the Employee or a group of
individuals and/or entities, including the Employee,
acting in concert, or
(iv) (a) the Company enters into a letter of
intent, an agreement in principle or a definitive agreement
relating to an Event described in clause (i), (ii) or (iii)
above which ultimately results in such an Event described in
clause (i), (ii) or (iii) hereof,
(b) a tender or exchange offer or proxy
contest is commenced which ultimately results in an
Event described in clause (i), (ii) or (iii) hereof,
or
(c) there shall be an involuntary
termination of the employment with the Company and
its Subsidiaries of the Employee or any of the events
which constitute a Constructive Involuntary
Termination of employment of the Employee has
occurred, and the Employee reasonably demonstrates
that such event (x) was requested by a party other
than the Board that has previously taken other steps
reasonably calculated to result in an Event described
in clause (i), (ii) or (iii) above and which
ultimately results in an Event described in clause
(i), (ii) or (iii) hereof or (y) otherwise arose in
connection with or in anticipation of an Event
described in clause (i), (ii) or (iii) above that
ultimately occurs.
K. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
L. "First Event" shall mean the first Event to occur.
M. "Excise Tax" shall have the meaning set forth in Paragraph
4.
N. "Gross-up Payment" shall have the meaning set forth in
Paragraph 4 and "Payment," as used in Paragraph 4, shall have the
meaning set forth in Paragraph 4.
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O. "Incumbent Board" shall mean individuals who are members of
the Board as of the date of this Agreement, individuals 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 or any individual elected or appointed by the Board to
fill vacancies on the Board caused by death or resignation (but not
removal) or to fill newly created directorships but excluding, for this
purpose, any such individual whose initial assumption of office occurs
as a result of an actual or threatened election contest which was (or,
if threatened, would have been) subject to Rule 14a-11 of the Exchange
Act.
P. "Outstanding Company Common Stock" shall mean the then
outstanding shares of common stock of the Company.
Q. "Outstanding Company Voting Securities" shall mean the then
outstanding securities of the Company entitled to vote generally in the
election of the Board.
R. "person" shall mean an individual, partnership,
corporation, limited liability company, estate, trust or other entity.
S. "Subsidiary" shall mean a corporation, a majority of the
outstanding voting power of the outstanding securities entitled to vote
generally in an election of directors of such corporation is beneficially owned
directly or indirectly by the Company.
T. "Term" shall have the meaning set forth in Paragraph 14
hereof.
U. "Transition Period" shall mean the two-year period
commencing on the Commencement Date and ending on the second
anniversary of the Commencement Date.
V. "Underpayment" shall have the meaning set forth in
Paragraph 4.
2. Employment. The Employee shall remain in the employ of the Company
or a Subsidiary for the Term of this Agreement, and during the Term the Employee
shall have such title, duties, responsibilities, assignments and authority, and
receive such remuneration and fringe benefits, as the Board or its committees or
the board of directors or a committee of the Subsidiary shall from time to time
provide for the Employee; provided, however, that either the Employee or the
Company or a Subsidiary may terminate the employment of the Employee at any time
prior to the expiration of the Term, with or without Cause and for any reason
whatever, subject to the right of the Employee to receive any payment and other
benefits that may be due pursuant to the terms and conditions of Paragraph 3 of
this Agreement (subject to Paragraph 5 of this Agreement) or, except as provided
in Paragraph 3(B), the terms of any other written employment agreement relating
to the employment of Employee by the Company or any Subsidiary.
3. Rights to Payments Following An Event. If any Event shall occur
during the Term of this Agreement, then the Employee shall be entitled to
receive from the Company cash payments and other benefits on the following basis
(unless the Employee's employment by the Company and its Subsidiaries is
terminated voluntarily or involuntarily prior to the First Event, in which case
the Employee shall be entitled to no payment or benefits under this Paragraph
3):
A. If at the time of, or at any time after, the occurrence of
the First Event and prior to the end of the Transition Period, the
employment of the Employee with the Company and
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its Subsidiaries is voluntarily or involuntarily terminated for any
reason (unless such termination is a voluntary termination by the
Employee other than a Constructive Involuntary Termination, is on
account of the death or Disability of the Employee, or is a termination
by the Company or a Subsidiary for Cause), the Employee (or the
Employee's legal representative, as the case may be) shall be entitled
to receive from the Company,
(i) (a) in the event of an involuntary termination,
at least 30 days prior written notice of termination and
compensation at the Employee's regular rate of compensation
for the 30-day period following receipt of notice of
termination of employment without regard to whether Employee
is required to perform services during such period and (b) a
lump sum cash payment in an amount equal to (x) two times the
Base Annual Salary, plus (y) in lieu of any incentive cash
bonus for any fiscal year or fiscal period of the Company or
any Subsidiary that shall not have ended prior to the
termination of employment of the Employee or has not commenced
as of the date of termination of employment of the Employee, a
lump sum cash payment in an amount equal to two times the
payment at "plan" for the Employee under the then current
incentive plan together with any amount equal to the payment
at "plan" for the Employee under the then current incentive
plan times the quotient of the number of days elapsed in the
current fiscal year through the Employee's date of termination
divided by 365.
(ii) in lieu of any further right to participate in
any health, dental, disability or life insurance plan or
program in which the Employee would otherwise be entitled to
participate (except, (a) to the extent required by law or (b)
with respect to life insurance coverage, for any coverage
pursuant to a split dollar insurance agreement between the
Employee and the Company, which split dollar insurance
agreement contains separate provisions applicable upon
termination of employment), a lump sum cash payment of
$18,000;
(iii) in lieu of any other perquisites, including
without limitation, fees for professional outplacement
services, secretarial support, office space or other
perquisites, a lump sum cash payment of $35,000; and
(iv) in lieu of any retirement contributions by the
Company or any Subsidiary under the FSI Pension Plan for the
year in which such termination occurs and for any future
years, a lump sum cash payment equal to 8% of the Employee's
Base Annual Salary unless such salary amount exceeds the cap
on Certified Earnings (as defined in the FSI Pension Plan)
contained in the FSI Pension Plan, in which case the cap
amount will be used.
B. The payments provided for in this Paragraph 3 shall be in
addition to any salary or other remuneration otherwise payable to the
Employee on account of employment by the Company or one or more of its
Subsidiaries (including any amounts received prior to such termination
of employment for personal services rendered after the occurrence of
the First Event) but shall be reduced by any severance pay which the
Employee receives from the Company or its Subsidiaries under any other
policy or agreement of the Company or its Subsidiaries in the event of
involuntary termination of the Employee's employment.
C. The Company also shall reimburse the Employee for all
previously unreimbursed reasonable business expenses incurred by the
Employee on or prior to such termination. In addition, the Company
shall promptly pay to the Employee, as incurred, all reasonable legal
fees and expenses incurred by the Employee as a result of such
termination, including, but not limited to, all such fees and expenses,
if any, incurred in contesting or disputing
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any such termination or in seeking to obtain or enforce any right or
benefit provided by this Agreement; provided, however, that the Company
may recover any such legal fees and expenses of the Employee which the
Company has paid, if it is finally judicially determined in such
proceeding that the Employee pursued such claim or claims in bad faith
(but in no event shall the Employee be responsible for any legal fees
and expenses of the Company).
D. 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 or any Subsidiary may
have against the Employee or others.
E. The Employee shall not be required to mitigate the amount
of any payment or other benefit provided for in Paragraph 3 or
Paragraph 4 by seeking other employment or otherwise, nor shall the
amount of any payment or other benefit provided for in Paragraph 3 or
Paragraph 4 be reduced by any compensation earned by the Employee as
the result of employment by another employer after termination, or
otherwise.
F. The obligations of the Company under this Paragraph 3 and
Paragraph 4 shall survive the termination of this Agreement and except
as provided in Paragraph 4 shall be paid in full within ten business
days after the Employee's termination of employment with the Company
and its Subsidiaries.
4. Certain Additional Payment by the Company.
A. Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that Paragraph 5 does not apply and
that any payment or distribution by the Company or any Subsidiary to or
for the benefit of the Employee (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement, any stock
option, restricted stock agreement or otherwise, but determined without
regard to any additional payments required under this Paragraph 4) (a
"Payment") would be subject to the excise tax imposed by Section 4999
of the Code or any interest or penalties are incurred by the Employee
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 the Employee shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that after
payment by the Employee 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,
the Employee retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payment.
B. Subject to the provisions of Paragraph 4(C), all
determinations required to be made under this Paragraph 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 KPMG Peat Marwick LLP ("KPMG") or such
other nationally recognized certified public accounting firm as may be
designated by the Employee and reasonably acceptable to the Company if
KPMG is unable to render such services (the "Accounting Firm"), which
Accounting Firm shall provide detailed supporting calculations both to
the Company and the Employee within 15 business days of the receipt by
the Accounting Firm of notice from the Employee 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 person effecting
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the Event, the Employee shall appoint another nationally recognized
accounting firm reasonably acceptable to the Company 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 Paragraph 4, shall be paid by
the Company to the Employee within ten business days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines
that no Excise Tax is payable by the Employee, it shall furnish the
Employee with a written opinion that failure to report the Excise Tax
on the Employee's applicable federal income tax return would not result
in the imposition of the negligence or similar penalty. Any
determination by the Accounting Firm shall be binding upon the Company
and the Employee. As 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 Company exhausts its remedies pursuant
to Paragraph 4(C) and the Employee thereafter is required to make a
payment of an Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment
together with all penalties and interest related thereto shall be
promptly paid by the Company to or for the benefit of the Employee.
C. The Employee 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 Employee is informed in writing of such
claim (provided that any delay in so informing the Company within such
ten business day period shall not affect the obligations of the Company
under this Paragraph 4 except to the extent that such delay materially
and adversely affects the Company) and shall apprise the Company of the
nature of such claim and the date on which such claim is required to be
paid. The Employee 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 Employee in writing prior to the expiration of such period that it
desires to contest such claim, the Employee 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
the Employee harmless, on an after-tax basis, for any Excise Tax or
income tax (including
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interest and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expenses including
reasonable attorneys' fees. Without limitation on the foregoing
provisions of this Paragraph 4(C), 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
Employee to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and the Employee 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 Employee to pay such claim and xxx for a refund, the
Company shall advance the amount of such payment to the Employee, on an
interest-free basis, and shall indemnify and hold the Employee
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 Employee 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 Employee 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.
D. If, after the receipt by the Employee of an amount advanced
by the Company pursuant to Paragraph 4(C), the Employee becomes
entitled to receive any refund with respect to such claim, the Employee
shall (subject to the Company's complying with the requirements of
Paragraph 4(C)) 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 the Employee of an amount
advanced by the Company pursuant to Paragraph 4(C), a determination is
made that the Employee shall not be entitled to any refund with respect
to such claim and the Company does not notify the Employee 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.
5. Possible Payment Reduction. Notwithstanding any provision to the
contrary contained herein except the last sentence of this Paragraph 5, if the
lump sum cash payments due and the other benefits to which the Employee shall
become entitled under Paragraph 3 hereof, either alone or together with other
payments in the nature of compensation to the Employee which are contingent on a
change in the ownership or effective control of the Company or in the ownership
of a substantial portion of the assets of the Company or otherwise, would equal
or exceed, by less than $25,000, three times the Employee's "base amount" as
defined in Section 280G of the Code or any successor provision thereto, then in
such case such lump sum payment and/or such other benefits and payments shall be
reduced to the largest aggregate amount as will result in no portion thereof
being subject to the excise tax imposed under Section 4999 of the Code (or any
successor provision thereto) or being non-deductible to the Company for federal
income tax purposes pursuant to Section 280G of the Code (or any successor
provision thereto). The Employee in good faith shall determine the amount of any
reduction to be made pursuant to this Paragraph 5 and shall select from among
the foregoing benefits and payments those which shall be reduced. No
modification of, or successor provision to, Section 280G or Section 4999
subsequent to the date of this Agreement shall, however, reduce
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the benefits to which the Employee would be entitled under this Agreement in the
absence of this Section 5 to a greater extent than they would have been reduced
if Section 280G and Section 4999 had not been modified or superseded subsequent
to the date of this Agreement, notwithstanding anything to the contrary provided
in the first sentence of this Paragraph 5.
6. Successors and Assigns.
A. This Agreement shall be binding upon and inure to the
benefit of the successors, legal representatives and assigns of the
parties hereto; provided, however, that the Employee shall not have any
right to assign, pledge or otherwise dispose of or transfer any
interest in this Agreement or any payments hereunder, whether directly
or indirectly or in whole or in part, without the written consent of
the Company.
B. The Company will require any successor (whether direct or
indirect, by purchase of a majority of the Outstanding Company Voting
Securities or all or substantially all of the assets of the Company, or
by merger, consolidation, reorganization or otherwise), by agreement in
form and substance satisfactory to the Employee, to assume expressly
and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such
agreement prior to the effectiveness of any such succession (other than
in the case of a merger or consolidation) shall be a breach of this
Agreement and shall entitle the Employee to compensation from the
Company in the same amount and on the same terms as the Employee would
be entitled hereunder if the Employee terminated his employment on
account of a Constructive Involuntary Termination, except that for
purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the date of termination.
7. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Minnesota without regard to conflict of laws
principles.
8. Notices. All notices, requests and demands given to or made pursuant
hereto shall be in writing and shall be delivered or mailed to any such party at
its address which:
A. In the case of the Company shall be:
FSI International, Inc.
000 Xxxx Xxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxx 00000-0000
Attention: Vice President, Administration
(B) In the case of the Employee shall be:
Xxxxxx X. Xxxxxxxx
FSI International, Inc.
000 Xxxx Xxxxxxxxx Xxxxx
Xxxxxx, XX 00000-0000
Either party may, by notice hereunder, designate a changed address. Any notice,
if mailed properly addressed, postage prepaid, registered or certified mail,
shall be deemed to have been given on the registered date or that date stamped
on the certified mail receipt.
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9. Severability; Severance. In the event that any portion of this
Agreement is held to be invalid or unenforceable for any reason, it is hereby
agreed that such invalidity or unenforceability shall not affect the other
portions of this Agreement and that the remaining covenants, terms and
conditions or portions hereof shall remain in full force and effect, and any
court of competent jurisdiction may so modify the objectionable provision as to
make it valid, reasonable and enforceable. If the payments under the Agreement
are deemed unavailable as a matter of law, the Employee is entitled to severance
benefits at least as favorable as those made available by the Company to
employees of comparable position and seniority during the twelve (12) months
prior to the occurrence of the Event triggering payment obligations under the
Agreement.
10. Employment Tax Withholding. The Company may withhold from any
compensation or benefits payable under this Agreement all federal, state, city
or other income and employment taxes that are required to be withheld pursuant
to any law or governmental regulation or ruling.
11. Non-Disposition of Payments. Employee may not encumber or dispose
of any payment under this Agreement, which payments and the rights to such
payments are expressly declared nonassignable or nontransferable, except as
otherwise specifically provided in this Agreement.
12. Titles. The titles and headings preceding the text of the
Paragraphs of this Agreement have been inserted solely for convenience of
reference and do not constitute a part of this Agreement or affect its meaning,
interpretation or effect.
13. Waiver. No provision hereof may be altered, amended, modified or
waived in any way whatsoever, except by written agreement executed by both the
Company and the Employee. The failure of either party to insist in any one or
more instances upon performance of any terms or conditions of this Agreement
will not be construed as a waiver of future performance of any such term,
covenant, or condition and the obligations of either party with respect to such
term, covenant or condition will continue in full force and effect.
14. Term. This Agreement shall commence on the date of this Agreement
and shall terminate, and the Term of this Agreement shall end, on the later of
(A) December 31, 2003, provided that such period shall be automatically extended
for one year and from year to year thereafter until notice of termination is
given by the Employer or the Employee to the other party hereto at least 90 days
prior to December 31, 2003 or the one-year extension period then in effect, as
the case may be, or (B) if the Commencement Date occurs on or prior to December
31, 2003 (or prior to the end of the extension year then in effect as provided
for in clause (A) hereof), the second anniversary of the Commencement Date.
15. Termination of Employment with the Company and its Subsidiaries.
References in this Agreement to "termination of employment with the Company and
its Subsidiaries" or words of similar import mean that the employment of the
Employee with whichever of the Company and one or more of the Subsidiaries that
shall have employed the Employee immediately prior to the termination shall have
been terminated.
16. Superseded Agreement. This Agreement supersedes in all respects the
Management Agreement between the Employee and the Company dated as December 13,
1999,
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(the "Superseded Change in Control Agreement"), which Superseded Change in
Control Agreement is hereby terminated and shall be of no further force.
17. Indemnification. All rights to indemnification, expense advancement
and exculpation existing in favor of the Employee at the time of the occurrence
of the First Event as provided in the Articles of Incorporation or Bylaws of the
Company or any Subsidiaries or by law shall continue until the end of the
Transition Period.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
EMPLOYEE FSI INTERNATIONAL, INC.
By: s/ Xxxx Xxxxxx
--------------------------------------
/s/ Xxxxxx X. Xxxxxxxx Its: VP of Administration
---------------------------- -------------------------------------
Xxxxxx X. Xxxxxxxx
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