Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This Agreement is entered into by and between August Technology Corporation
(“August Technology ” or the “Company”), a Minnesota corporation, with its
principal place of business at 4900 West 78th Street, Bloomington, Minnesota
55435, and Lynn Davis of 6405 Harold Woods Lane, Edina, MN 55436 (“Employee”).

 

WHEREAS, Employee desires employment with August Technology or has been employed
with August Technology and wishes to continue employment under the terms and
conditions set forth in this Agreement;

 

WHEREAS, Employee acknowledges and agrees that he has and will continue to have
access to confidential, proprietary and trade secret information in the course
of his/her employment and continued employment with August Technology, the
unauthorized use or disclosure of which would cause irreparable harm to August
Technology;

 

WHEREAS, August Technology and Employee wish to set forth the terms of their
agreement in writing;

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein and for other good and valuable consideration the receipt and
sufficiency of which is specifically acknowledged by the parties, August
Technology and Employee agree as follows:

 

1.             Employment.  August Technology agrees to employ or continue to
employ Employee, effective March 30, 2005, and Employee accepts employment or
continued employment, upon the terms and conditions set forth in this Agreement.

 

2.             Term of Employment.  August Technology shall continue to employ
Employee for an indefinite duration until his/her employment is terminated in
accordance with Paragraph 8 of this Agreement.

 

3.             Duties and Responsibilities.  Employee shall devote his/her time,
attention and best efforts to the duties and responsibilities of his/her
position, and to the business and affairs of August Technology.  Employee’s
title shall be as set forth in Exhibit A as “Employee’s Title”, reporting to the
person or office as set forth in Exhibit A as “Manager”.  Employee shall perform
all duties and responsibilities of the position he/she holds with August
Technology as those duties and responsibilities may change from time to time. 
Employee shall comply with August Technology’s standards, policies and
procedures in effect and as they may change from time to time; provided that to
the extent such policies and procedures are inconsistent with this Agreement,
the provisions of this Agreement shall control.

 

4.             Compensation.  August Technology shall pay Employee a gross
annual salary as set forth in Exhibit A as “Base Salary”, less appropriate
payroll deductions.  Employee may also receive incentive compensation in
accordance with the Annual Incentive Plan, as issued and as may change from time
to time by the Company, or any other similar plan authorized by the Board of
Directors.  Employee’s compensation may be periodically increased or adjusted as
authorized by

 

--------------------------------------------------------------------------------

 

the Board of Directors in the case of the Chief Executive Officer, or, in the
case of all others, as recommended by the Chief Executive Officer and approved
by the Board of Directors.

 

5.             Business Expenses.  August Technology will, in accordance with
its policies and practices as such may change from time to time, reimburse
Employee for all ordinary and necessary business expenses after receipt of
appropriate documentation of such expenses.

 

6.             Benefits.  Employee shall be entitled to insurance and other
benefits provided to key management employees in accordance with applicable plan
documents and commensurate with vice president and higher positions within the
Company.  Benefits provided to employees are subject to change in the discretion
of August Technology.

 

7.             Stock Options.  At the discretion of August Technology, Employee
may be granted stock options from time to time, which options shall be subject
to the terms and conditions of the August Technology Corporation 1997 Stock
Incentive Plan, as amended from time to time, or any successor plan, and the
related stock option agreements.  Further, Employee shall be eligible to
participate in the August Technology Corporation 2000 Employee Stock Purchase
Plan, as amended from time to time, or any successor plan, subject to the terms
and conditions contained therein.

 

8.             Termination.  Employee’s employment under this Agreement may be
terminated:

 

(a)           At any time upon mutual written agreement of the parties;

 

(b)                                 By either Employee or August Technology at
any time, with or without cause, upon thirty (30) days’ written notice to the
other;

 

(c)                                  By August Technology immediately upon
notice to Employee for cause which shall be defined as:

 

(i)                                     Employee’s material failure or neglect,
or refusal to perform, the duties and responsibilities of his/her position
and/or the reasonable direction of the Board of Directors or his/her superiors;

 

(ii)                                  Commission by Employee of any willful,
intentional or negligent act that has the effect of injuring the reputation,
business or performance of August Technology;

 

(iii)          Employee’s conviction of a crime, or commission

of any act involving moral turpitude;

 

(iv)                              Any material default or nonperformance of the
terms of this Agreement, or any violation of

 

2

--------------------------------------------------------------------------------

 

                                                Paragraphs 10, 11, 12, 14 and/or
15 of this Employment Agreement; or

 

(d)                                 Employee’s employment will terminate
immediately upon his/her death.

 

Upon Employee’s resignation or termination under this Paragraph 8 for any
reason, August Technology shall pay Employee his/her Base Salary through the
Employee’s last date of employment, and any accrued and unused vacation or other
paid time off through the Employee’s last date of employment.  Employee’s
entitlement to any vested pension, profit sharing or other benefits shall be
governed by applicable plan documents.  In the event Employee’s employment is
terminated either by Employee or August Technology under Paragraph 8 (b), August
Technology may elect, in its sole discretion, to pay Employee his/her salary for
the thirty (30) day notice period in lieu of Employee’s continued performance of
duties during the notice period.  In the event Employee is terminated by August
Technology in accordance with Paragraph 8 (b), August Technology shall, in
addition to the above, pay Employee a severance at his/her then current Base
Salary rate for the time period as set forth in Exhibit A as “Severance Period”,
to be paid according to the normal payroll schedule, directly following the
thirty (30) day notice period, and August Technology shall, if the Employee
elects to continue group health or other group benefits as allowed by COBRA,
make the COBRA payments for the  Severance Period.  Employee shall not be
entitled to any further or other payments or benefits of any kind upon the
Employee’s termination or resignation under this Paragraph 8.  In the event,
Employee is entitled to Change in Control benefits as set forth in Paragraph 9,
Employee shall not be entitled to any severance or notice rights under this
Paragraph 8.

 

9.             Change in Control.  If, within 12 months following a Change in
Control (as defined below), Employee’s employment is terminated (as defined
below), then:

 

(a)                                  Base Salary .Employee shall be paid his/her
last Base Salary on a regular payroll cycle as of the effective date for the
time period as set forth in Exhibit A as “Change In Control Severance Period”
from the effective date of such termination;

 

(b)                                 COBRA Payments. For the same Change In
Control Severance Period from the effective date of such termination as set
forth in Paragraph 9(b), the Company shall, if Employee elects to continue group
health or other group benefits as allowed under COBRA, make the COBRA payments
for the Change In Control Severance Period;

 

 

(c)                                  Option Acceleration. The right to exercise
all unexpired and non-vested stock options in favor of Employee shall
immediately vest and accelerate; and

 

3

--------------------------------------------------------------------------------

 

(d)                                 Limitation on Change of Control Payments. 
Employee shall not be entitled to receive any Change of Control Action, as
defined below, which would constitute an “excess parachute payment” for purposes
of Code Section 280G, or any successor provision, and the regulations
thereunder.  In the event any Change of Control Action payable to Employee would
constitute an “excess parachute payment,” then the acceleration of the
exercisability of such stock options and the payments to such Participant
pursuant to this Paragraph 9 shall be reduced to the largest extent or amount as
will result in no portion of such payments being subject to the excise tax
imposed by Section 4999 of the Code.  For purposes of this Paragraph 9, a
“Change of Control Action” shall mean any payment, benefit or transfer of
property in the nature of compensation paid to or for the benefit of Employee
under any arrangement which is considered contingent on a Change of Control for
purposes of Code Section 280G, including, without limitation, any and all
salary, bonus, incentive, restricted stock, stock option, compensation or
benefit plans, programs or other arrangements, and shall include benefits
payable under this Agreement.

 

(e)                                  Change of Control.  For purposes of this
Agreement, “Change of Control” shall mean any of the following events occurring
after the date of this Agreement:

 

(1)                                  A merger or consolidation to which the
Company is a party, an acquisition by the Company involving the issuance of the
Company’s securities as consideration for the acquired business, or any
combination of fully closed and completed mergers, consolidations or
acquisitions during any consecutive twenty-four (24) month period, if the
individuals and entities who were shareholders of the Company immediately prior
to the effective date of such merger, consolidation, or acquisition (or prior to
the effective date of the first of a combination of such transactions) have,
immediately following the effective date of such merger, consolidation or
acquisition (or following the effective date of the last of a combination of
such transactions), beneficial ownership (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of less than fifty percent (50%) of the total
combined voting power of all classes of securities issued by the surviving
corporation for the election of directors of the surviving corporation;

 

(2)                                  The acquisition of direct or indirect
beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934) of securities of the Company by any person or entity or by a group of
associated persons or entities acting in concert in one or a series of
transactions, which causes the aggregate beneficial ownership of such

 

4

--------------------------------------------------------------------------------

 

                                                person, entity or group to equal
or exceed twenty percent (20%) or more of the total combined voting power of all
classes of the Company’s then issued and outstanding securities;

 

(3)                                  The sale of the properties and assets of
the Company substantially as an entirety, to any person or entity which is not a
wholly-owned subsidiary of the Company;

 

(4)                                  The stockholders of the Company approve any
plan or proposal for the liquidation of the Company; or

 

(5)                                  A change in the composition of the Board of
the Company at any time during any consecutive twenty-four (24) month period
such that the “Continuity Directors” no longer constitute at least a seventy
percent (70%) majority of the Board. For purposes of this event, “Continuity
Directors” means (i) those members of the Board who were directors at the
beginning of such consecutive twenty-four (24) month period or at the date of
this Agreement if this Agreement was entered into less than twenty-four months
prior to the change in composition of the Board; and (ii) any new director whose
election to the Board of Directors or nominations for election to the Board of
Directors was approved by a vote of at least two-thirds (2/3) of the directors
identified in the immediately preceding clause (i).

 

(6)                                  The Company enters into a letter of intent,
an agreement in principle or a definitive agreement relating to an event
described in Paragraph 9(e)(1), 9(e)(2), 9(e)(3), 9(e)(4), or 9(e)(5) that
ultimately results in such a Change of Control, or a tender or exchange offer or
proxy contest is commenced that ultimately results in an event described in
Paragraph 9(e)(2) or 9(e)(5).

 

(f)                                    Termination.  For purposes of this
Paragraph 9, “Termination” shall mean any of the following events occurring
within 12 months after a Change of Control:

 

(1)                                  The termination of Employee’s employment by
the Company for any reason, with or without cause, except for termination
resulting from conduct by Employee constituting (a) a felony involving moral
turpitude under either federal law or the law of the State of Minnesota, or (b)
Employee’s willful failure to fulfill his/her employment duties with the
Company; provided, however, that for purposes of this clause (c), an act or
failure to act by Employee shall not be “willful” unless it is done, or omitted
to be done, in bad faith

 

5

--------------------------------------------------------------------------------

 

                                                and without any reasonable
belief that Employee’s action or omission were in the best interests of the
Company; or

 

(2)                                  The termination of employment with the
Company by Employee for Good Reason.  Such termination shall be accomplished by,
and effective upon, Employee giving written notice to Company of his/her
decision to terminate.  “Good Reason” shall mean a good faith determination by
Employee, in Employee’s sole and absolute judgment, that any one or more of the
following events has occurred, at any time during the term of this Agreement or
after a Change of Control; provided, however, that such event shall not
constitute “Good Reason” if Employee has expressly consented to such event in
writing or if Employee fails to provide written notice of his/her decision to
terminate within sixty (60) days of the occurrence of such event:

 

(a)                                  A material change in Employee’s reporting
responsibilities, titles or offices, or any removal of Employee from or any
failure to re-elect Employee to any of such positions, which has the effect of
materially diminishing Employee’s responsibility or authority;

 

(b)                                 A reduction by the Company in Employee’s
base salary (as increased from time to time);

 

(c)                                  A requirement imposed by the Company on
Employee that results in Employee being based at a location that is outside of a
twenty-five (25) mile radius of Employee’s prior job location;

 

(d)                                 Without the adoption of a replacement plan,
program or arrangement that provides benefits to Employee that are equal to or
greater than those benefits that are discontinued or adversely affected:

 

i.                                          A failure by the Company to continue
in effect, within its maximum stated term, any pension, bonus, incentive, stock
ownership, stock purchase, stock option, life insurance, health, accident,
disability, or any other employee compensation or benefit plan, program or
arrangement, in which Employee is or has been participating;

 

6

--------------------------------------------------------------------------------

 

ii.                                       The taking of any action by the
Company that would adversely affect Employee’s participation or materially
reduce Employee’s benefits under any of such plans, programs or arrangements; or

 

(e)                                  Any action by the Company that would
materially adversely affect the physical conditions in or under which Employee
performs his/her employment duties; or

 

(f)                                    Any material breach by the Company of
this Employment Agreement between Employee and the Company.

 

Termination for “Good Reason” shall not include Employee’s death or a
termination for any reason other than the events specified in clauses (a)
through (f) above.

 

10.          Confidential Information.  During the term of this Agreement and at
all times thereafter, Employee shall not directly or indirectly use or disclose
any trade secret, proprietary or confidential information of August Technology
or any subsidiary for the benefit of any person or entity other than August
Technology or any subsidiary without prior written approval of August
Technology’s Board of Directors.  For purposes of this Agreement, in addition to
all materials and information protected by applicable statute or law, the
parties acknowledge that confidential information shall include any information,
whether in print, on computer disc or tape or otherwise, which is not public
information and which relates to August Technology or any subsidiary, or August
Technology’s or any subsidiary’s existing or reasonably foreseeable business,
including but not limited to information relating to research, development,
technology, manufacturing processes, purchasing and sales, information relating
to sales and other financial strategies, plans and/or goals, information
relating to proprietary rights and data, ideas, know-how, and/or trade secrets,
information regarding the identity and/or needs of clients or customers, client
or customer lists and other client or customer information, information
regarding active and inactive accounts of August Technology or any subsidiary,
and information relating to August Technology’s or any subsidiary’s methods of
operation.

 

11.          Noncompetition Obligations.  As a condition to and in consideration
of his/her employment and continued employment, and in exchange for the
severance and Change of Control provisions as set forth in Paragraphs 8 and 9 of
this Employment Agreement, and the mutual covenants herein, Employee agrees
that, during his/her employment and for a period of one (1) year following
his/her voluntary or involuntary resignation or termination for any reason, the
Employee will not, on behalf of himself/herself or any other person or entity:

 

(a)                                  Directly or indirectly solicit, on
Employee’s own behalf, or on behalf of another, any of August Technology’s or
any subsidiary’s customers or potential customers with whom Employee or
Employee’s supervisees had contact, either directly or indirectly, within the
twelve months immediately

 

7

--------------------------------------------------------------------------------

 

                                                preceding Employee’s resignation
or termination of employment, for the purpose of providing, selling, or
attempting to sell any products or services competing with those provided or
sold by August Technology or any subsidiary, or clearly contemplated thereby due
to research, development, engineering, applications, licensing, or other like
projects in process, at the time of resignation or termination; or

 

(b)                                 hire or attempt to hire, or influence or
solicit, or attempt to influence or solicit, either directly or indirectly, any
employee of August Technology or any subsidiary to leave or terminate his/her or
her employment, or to work for any other person or entity.

 

12.          Work Product and Inventions.  August Technology shall be entitled
to all of the benefits, profits, results and work product arising from or
incident to all work, services, advice and activities of Employee, including
without limitation all rights in inventions (as set forth below), trademark or
trade name creations, and copyrightable materials.  Employee shall not, during
the term of his/her employment by August Technology, be interested, directly or
indirectly, in any manner, including, but not limited to, as partner, officer,
advisor, or in any other capacity in any other business similar to, or in
competition with, August Technology’s or any subsidiary’s business.

 

Employee agrees to communicate promptly and fully to August Technology all
inventions, discoveries, improvements or designs conceived or reduced to
practice by Employee during the period of his/her employment with August
Technology (alone or jointly with others), and, except as provided in this
Paragraph 12, Employee will and hereby does assign to August Technology and/or
its nominees all of the Employee’s right, title and interest in such inventions,
discoveries, improvements or designs and all of his/her right, title and
interest in any patents, patent applications or copyrights based thereon without
obligation on the part of August Technology or any subsidiary to make any
further compensation, royalty or payment to Employee.  Employee further agrees
to assist August Technology and/or its nominee (without charge but at no expense
to Employee) at any time and in every proper way to obtain and maintain for its
and/or their own benefit, patents for all such inventions, discoveries and
improvements and copyrights for all such designs.

 

This Agreement does not obligate Employee to assign to August Technology any
invention, discovery, improvement or design for which no equipment, supplies,
facility or trade secret information of August Technology or any subsidiary was
used and which was developed entirely on Employee’s own time, and (1) which does
not relate (a) directly to the business of August Technology or any subsidiary,
or (b) to August Technology’s or any subsidiary’s actual or demonstrably
anticipated research or development, or (2) which does not result from any work
performed by Employee for August Technology or any subsidiary.

 

13.          Exempt Inventions.  Identified under Exempt Inventions in Exhibit A
by descriptive title are all of the Inventions, if any, in which Employee
possesses any right, title or interest prior to Employee’s employment with
August Technology or execution of this Employment Agreement which are not
subject to the terms hereof.

 

8

--------------------------------------------------------------------------------

 

14.          Copyrights.  Employee acknowledges that any documents, drawings,
computer software or other work of authorship prepared by Employee within the
scope of his/her employment is a “work made for hire” under U.S. copyright laws
and that, accordingly, August Technology exclusively owns all copyright rights
in such works of authorship.  For purposes of this paragraph, “scope of
employment” means that the work of authorship (a) relates to any subject matter
pertaining to his/her employment, (b) relates to or is directly or indirectly
connected with the existing or reasonably foreseeable business, products,
projects or confidential information of August Technology or any subsidiary, or
(c) involves the use of any time, material or facility of August Technology or
any subsidiary.

 

15.          Return of Property.  Employee shall, immediately upon his/her
involuntary or voluntary resignation or termination from employment for any
reason, deliver to August Technology all documents and other items, whether on
computer disc or tape or otherwise, including all copies thereof, belonging to
August Technology or any subsidiary or in any way related to the business of
August Technology or any subsidiary or the services Employee performed for
August Technology or any subsidiary, including but not limited to any documents
or items containing trade secret, proprietary, or confidential information,
documents in any way relating to any inventions or copyrights, client or
customer information, information relating to August Technology’s or any
subsidiary’s processes or procedures and any other materials or documents of any
sort relating to August Technology or any subsidiary.  Employee shall not retain
any copies or summaries of any kind of documents and materials covered by this
Paragraph 15.

 

16.          Remedy upon Violation.  Employee and August Technology agree that a
breach or threatened breach of Paragraphs 10, 11, 12, 14 or 15 would cause
irreparable harm to August Technology and/or its subsidiaries, and that monetary
damages alone would not be an adequate remedy.  Employee agrees that August
Technology and any subsidiary shall be entitled, in addition to any other remedy
it may have at law or in equity, to an injunction, without the posting of a bond
if allowed by applicable law or with the posting of a minimal bond if required,
enjoining or restraining Employee from any violation or violations or threatened
violation or violations of Paragraphs 10, 11, 12, 14 and 15, and/or for specific
performance of duties and obligations under such paragraphs, and Employee hereby
consents to the issuance of such injunction.  If any rights or restrictions
contained in Paragraphs 10, 11, 12, 14 and 15 shall be deemed to be
unenforceable by reason of the extent, duration or geographic scope, or other
provision thereof, the parties contemplate that the Court shall reduce such
extent, duration or geographic scope or other provision and enforce Paragraphs
10, 11, 12, 14 and 15 in their reduced form for all purposes in the manner
contemplated by such Paragraphs.

 

17.          Other Agreements.  By Employee’s signature to this Agreement,
Employee warrants that he/she is not subject to any employment, noncompetition,
confidentiality, inventions or other obligations or agreements which would
prevent or restrict the Employee in any way from accepting employment with
August Technology and fully performing his/her duties and responsibilities as
described in this Agreement.  Employee, by his/her signature to this Agreement,
further warrants that he/she has not taken and will not take any trade secret,
proprietary or

 

9

--------------------------------------------------------------------------------

 

confidential information of any former employer, and will not use or disclose
any such information to anyone in the performance of duties and responsibilities
under this Agreement.

 

18.          Successors and Assigns.  This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of August Technology.

 

19.          Notices.  All notices and other communications to be given under
this Agreement shall be in writing and shall be deemed to be given when
delivered personally, or when mailed by registered or certified mail, addressed
to the party to whom such notice is intended to be given, at the last known
address for that party or at such other address as the party may specify by
written notice.

 

(a)           In the case of August Technology, the notice shall be provided to:

 

General Counsel

August Technology Corporation

4900 West 78th Street

Bloomington, MN 55435

 

(b)                                 In the case of Employee, the notice shall be
provided to:

 

Lynn Davis

6405 Harold Woods Lane

Edina, MN 55436

 

Either party may, by written notice hereunder, designate a change of address. 
Any notice, if mailed properly addressed, postage prepaid, registered or
certified mail, shall be deemed dispatched on the registered date or that
stamped on the certified mail receipt, and shall be deemed received within the
fifth business day thereafter, or when it is actually received, whichever is
sooner.

 

20.          Survival of Provisions.  Employee acknowledges and agrees that the
restrictions and obligations set forth in Paragraphs 10, 11, 12, 13, 14, 15 and
16 of this Agreement are reasonable, shall survive his/her resignation from or
the termination of his/her employment, and shall apply to him/her whether
his/her resignation or termination from employment is voluntary or involuntary
and regardless of the reason for such resignation or termination.

 

21.          Nonwaivers.  No failure on the part of either party to exercise,
and no delay in exercising, any right or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
right or remedy granted hereby or by any related document or by law.

 

22.          Governing Law.  This Agreement shall be construed and interpreted
according to the laws of the State of Minnesota, without reference to its
conflict of laws provisions.

 

10

--------------------------------------------------------------------------------

 

23.          Paragraph Headings.  Paragraph headings are included in this
Agreement for convenience of reference only, and are not intended to be full or
accurate descriptions of the contents hereof.

 

24.          Counterparts.  This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one (1) and the same instrument.

 

25.          Entire Agreement.  This Agreement states the entire Agreement of
the parties on the subjects set forth herein, and merges and supersedes all
prior agreements and understandings between the parties.  No modification,
termination, or attempted waiver of any provision of this Agreement will be
valid unless it is made in writing and signed by the party against whom the same
is sought to be enforced, and is specifically identified as a modification,
termination, release, waiver or discharge of this Agreement.  If any term,
clause or provision of this Agreement shall for any reason be adjudged invalid,
unenforceable or void, the same shall not impair or invalidate any of the other
provisions contained herein, all of which shall be performed in accordance with
their respective terms.

 

 

AUGUST TECHNOLOGY CORPORATION

 

 

 

 

 

 

 

 

 

Dated: March 24, 2005

By 

/s/ David Klenk

 

 

 

Its President

 

 

 

 

 

Dated: March 23, 2005

By 

/s/ Lynn J. Davis

 

 

 

Employee

 

 

11

--------------------------------------------------------------------------------

 

EXHIBIT A

 

 

Employee’s Name

=

Lynn Davis

 

 

 

Employee’s Title

=

President and Chief Operating Officer

 

 

 

Manager

=

Jeff O’Dell

 

 

 

Base Salary

=

$300,000

 

 

 

Severance Period

=

12 MONTHS

 

 

 

Change In Control Severance Period

=

9 MONTHS (if termination takes place during the first 12 months of employment)

 

=

18 MONTHS (if termination takes place after first 12 months of employment)

 

 

 

Exempted Inventions

=

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Initials of approval:

AUGUST TECHNOLOGY CORP.

/s/ DK

 

 

 

 

 

EMPLOYEE

/s/ LJD

 

 

12

--------------------------------------------------------------------------------