**EXHIBIT 10.2**

 

[August Technology Letterhead]

 

May 5, 2005

 

***Via Hand Delivery***

 

David Klenk

9680 Laforet Drive

Eden Prairie, MN 55347

 

Re:          Separation Agreement andRelease

 

Dear David:

 

As you know, your employment with August Technology Corporation (“August Technology”)will terminate effective at the close of business on Monday, June 6,2005.  The purpose of this SeparationAgreement and Release letter (“Agreement”) is to set forth the specificseverance pay and benefits that August Technology will provide you inexchange for your agreement to the terms and conditions of this Agreement.  While this Agreement is being provided to younow for your review, you may not sign this Agreement until on or after June 6,2005.

 

By your signature below, you agree to the following terms andconditions:

 

1.             Endof Employment.  Your employment with August Technologywill end effective at the close of business on June 6, 2005.  Your last active day of employment with August Technologywill be May 19, 2005.  You willreceive a final paycheck for services through June 6, 2005 on the normalpayroll schedule.  With your finalpaycheck, you will also receive payment from August Technology for allaccrued and unused Paid Time Off (PTO) at your regular rate.  August Technology will provideinformation to you regarding your COBRA election rights under separate cover.

 

2.             Severancepay and Benefits.  Specifically inconsideration of your signing this Agreement and subject to the limitations,obligations, and other provisions contained in this Agreement, August Technologyagrees as follows:

 

a.             To payyou One Hundred Seven Thousand, Five Hundred and 00/100 Dollars ($107,500),less applicable withholding, which is the equivalent of six (6) months ofyour base salary, to be paid in substantially equal installments on August Technology’sregularly scheduled paydays beginning with the first regularly scheduled paydayfollowing the expiration of the rescission periods described in Section 5below.  The payment described in this Section 2.a.shall be considered timely if placed in the U.S. Mail, postage prepaid, andpostmarked on the date such payment is due. If the date such payment would be due falls on a weekend or holiday,

 

----

 

payment shall be considered timely if it is placed in the U.S. Mail,postage prepaid, on the next business day following such weekend or holiday.

 

b.             Providedyou timely elect COBRA, to continue to pay your COBRA premiums through December 31,2005, for health and dental insurance coverage under August Technology’sgroup health and dental insurance plans. August Technology will discontinue payments under this Section 2.b.before December 31, 2005 if, and at such time as, you (1) are coveredor eligible to be covered under the health and/or dental insurance policy of anew employer, or (2) cease to participate, for whatever reason, in August Technology’sgroup insurance plans.  By your signaturebelow, you acknowledge and agree that August Technology may modify orterminate its group insurance plans at any time and that you shall have thesame right to participate in August Technology’s group insurance plansonly as is provided on an equivalent basis to the company’s employees.  You further agree to promptly provide August Technologynotice if you become covered or eligible to be covered under the health and/ordental insurance policy of a new employer. Notwithstanding the foregoing, the COBRA period for continuation of yourinsurance coverage under August Technology’s group plans will begin on July 1,2005.

 

c.             To payLee Hecht Harrison up to $15,000 to provide you with outplacementservices.  (Additional informationregarding such outplacement services is attached to this Agreement.)  Such outplacement services will be madeavailable to you beginning on the date you sign this Agreement provided you donot rescind this Agreement.

 

d.             Yourunvested stock options will accelerate and become immediately exercisable as ofJune 6, 2005.

 

3.             Releaseof Claims.  Specifically inconsideration of the severance pay and benefits described in Section 2, towhich you would not otherwise be entitled, by signing this Agreement you, foryourself and anyone who has or obtains legal rights or claims through you,agree to the following:

 

a.             Youhereby do release, agree not to sue, and forever discharge August Technology(as defined below) of and from any and all manner of claims, demands, actions,causes of action, administrative claims, liability, damages, claims forpunitive or liquidated damages, claims for attorney’s fees, costs and disbursements,individual or class action claims, or demands of any kind whatsoever, you haveor might have against them or any of them, whether known or unknown, in law orequity, contract or tort, arising out of or in connection with your employmentwith August Technology, or the termination of that employment, orotherwise, and however originating or existing, from the beginning of timethrough the date of your signing this Agreement.

 

b.             Thisrelease includes, without limiting the generality of the foregoing, any claimsyou may have for wages, bonuses, commissions, penalties, compensation, deferredcompensation, vacation pay, paid time off, severance pay or benefits,defamation, invasion of

 

2

----

 

privacy, negligence, emotional distress, breach of contract, estoppel,improper discharge (based on contract, common law, or statute, including anyfederal, state or local statute or ordinance prohibiting discrimination orretaliation in employment), violation of the United States Constitution, theMinnesota Constitution, the Age Discrimination in Employment Act, 29 U.S.C. § 621etseq., the Minnesota Human Rights Act, Minn. Stat. § 363.01etseq., Title VII of the Civil Rights Act, 42 U.S.C. § 2000eetseq., the Americans with Disabilities Act, 42 U.S.C. § 12101etseq., the Employee Retirement Income Security Act of 1976, 29U.S.C. § 1001 etseq., the Family and Medical Leave Act, 29U.S.C. § 2601 etseq., the Worker Adjustment and RetrainingNotification Act, 29 U.S.C. 210l, etseq., any claim arisingunder Minn. Stat. Chapters 177 and 181, Minn. Stat. § 176.82, and anyclaim for retaliation, harassment or discrimination based on sex, race, color,creed, religion, age, national origin, marital status, sexual orientation, disability,status with regard to public assistance or any other protected class, or sexualor other harassment.  You hereby waiveany and all relief not provided for in this Agreement.  You understand and agree that, by signingthis Agreement, you waive and release any past or present claim to employmentwith August Technology.

 

c.             Youaffirm that you have not caused or permitted, and to the full extent permittedby law will not cause or permit to be filed, any charge, complaint, or actionof any nature or type against August Technology, including but not limitedto any action or proceeding raising claims arising in tort or contract, or anyclaims arising under federal, state, or local laws, including discriminationlaws.  If you file, or have filed on yourbehalf, a charge, complaint, or action, you agree that the payments andbenefits described above in Section 2 are in complete satisfaction of anyand all claims in connection with such charge, complaint, or action and youwaive, and agree not to take, any award of money or other damages from suchcharge, complaint, or action.

 

d.             You are not, by signing this Agreement,releasing or waiving (1) any vested benefits or claims for benefits under August Technology’semployee benefit plans, (2) any rights or claims that may arise after theAgreement is signed, (3) the post-employment benefits and paymentsspecifically promised to you under this Agreement or your Employment Agreement,as amended by the Amendment to Employment Agreement, (4) the right toinstitute legal action for the purpose of enforcing the provisions of thisAgreement, or (5) the right to apply for state unemployment compensationbenefits.

 

e.             August Technology,as used in this Section 3, shall mean August Technology Corporationand its parent, subsidiaries, divisions, affiliated entities, insurers, and itsand their present and former officers, directors, shareholders, trustees,employees, agents, attorneys, representatives and consultants, and thesuccessors and assigns of each, whether in their individual or officialcapacities, and the current and former trustees or administrators of anypension or other benefit plan applicable to the employees or former employeesof August Technology Corporation, in their official and individualcapacities.

 

3

----

 

3.5.          August Technology’sRelease of Claims.  Specifically inconsideration of your covenants as described in this Agreement, to which August Technologywould not otherwise be entitled, by signing this Agreement, August Technologyagrees to release, agrees not to sue, and forever discharges you of and fromany and all manner of claims, demands, actions, causes of action,administrative claims, liability, damages, claims for punitive or liquidateddamages, claims for attorney’s fees, costs and disbursements, individual orclass action claims, or demands of any kind whatsoever, it has or might haveagainst you, whether known or unknown,in law or equity, contract or tort, arising within the scope of your employmentwith August Technology, from the beginning of time through the date ofyour signing this Agreement.

 

3.6           Cooperation.  Youagree that you will cooperate with August Technology with respect to anyclaims, actions or proceedings brought or threatened that related to youremployment or any transactions, decisions or actions in which you were involvedwhile an employee of August Technology.  You agree to make yourselfreasonably available upon reasonable notice and at mutually agreeable times todiscuss such matters and to appear without subpoena for deposition or testimonyat the request of August Technology.  August Technology willcompensate you for any reasonable expenses incurred in connection with yourcooperation, including attorneys fees and travel expenses.

 

4.             Noticeof Right to Consult Attorney and Forty-Five (45) Day Consideration Period.  By signing this Agreement, you acknowledgeand agree that August Technology has informed you by this Agreement that (1) youhave the right to consult with an attorney of your choice prior to signing thisAgreement, and (2) you are entitled to forty-five (45) days from thereceipt of this Agreement to consider whether the terms are acceptable toyou.  August Technology encouragesyou to use the full 45-day period to consider this Agreement but you have theright, if you choose, to sign this Agreement prior to the expiration of theforty-five (45) day period.

 

5.             Notificationof Rights under the Minnesota Human Rights Act (Minn. Stat. Chapter 363) andthe Federal Age Discrimination in Employment Act (29 U.S.C. § 621 et seq.).  You are hereby notified of your right torescind the release of claims contained in Section 3 with regard to claimsarising under the Minnesota Human Rights Act, Minnesota Statutes Chapter 363, withinfifteen (15) calendar days of your signing this Agreement, and with regard toyour rights arising under the federal Age Discrimination in Employment Act, 29U.S.C. § 621 etseq., within seven (7) calendar days ofyour signing this Agreement.  The tworescission periods shall run concurrently. In order to be effective, the rescission must (a) be inwriting; (b) delivered to Susan Peattie, Director, Human Resources, August TechnologyCorporation, 4900 West 78th Street, Bloomington, MN 55435 by hand or mailwithin the required period; and (c) if delivered by mail, the rescissionmust be postmarked within the required period, properly addressed to SusanPeattie, as set forth above, and sent by certified mail, return receiptrequested.  This Agreement will beeffective upon the expiration of the 15-day period without rescission.  You understand that if you rescind any partof this Agreement in accordance with this Section 5, you will not receivethe severance pay and

 

4

----

 

other benefits described in Section 2 and you will be obligated toreturn any such benefits and payments under Section 2 if already received.

 

6.             Returnof Property.  By signing thisAgreement, you acknowledge and agree that all documents and materials relatingto the business of, or the services provided by, August Technology are thesole property of August Technology. By signing this Agreement you further agree and represent that you havereturned to August Technology all of its property, including but notlimited to, all customer records and other documents and materials, whether oncomputer disc, hard drive or other form, and all copies thereof, within yourpossession or control, which in any manner relate to the business of, or theduties and services you performed on behalf of August Technology.

 

7.             [intentionallyomitted]

 

8.             Confidentiality.  You promise and agree not to disparage August Technologyor disclose or discuss, directly or indirectly, in any manner whatsoever, anyinformation regarding either (1) the contents and terms of this Agreement,or (2) the substance and/or nature of any dispute between August Technologyand any employee or former employee, including yourself.  You agree that the only people with whom youmay discuss this confidential information are your legal and financial advisorsand your spouse, if applicable, provided they agree to keep the informationconfidential, or as otherwise required by law.

 

9.             Remedies.  If you breach any term of this Agreement, August Technologyshall be entitled to its available legal and equitable remedies, including butnot limited to suspending and recovering any and all payments and benefits madeor to be made under this Agreement.  If August Technologyseeks and/or obtains relief from an alleged breach of this Agreement, all ofthe provisions of this Agreement shall remain in full force and effect.

 

10.           Non-Admission.  It is expressly understood that thisAgreement does not constitute, nor shall it be construed as, an admission by August Technologyor you of any liability or unlawful conduct whatsoever.  August Technology and you specificallydeny any liability or unlawful conduct.

 

11.           Successorsand Assigns.  This Agreement ispersonal to you and may not be assigned by you without the written agreement ofAugust Technology.  The rights andobligations of this Agreement shall inure to the successors and assigns of August Technology.

 

11.5         Effect ofDeath.  In the event you die before allpayments under this Agreement have been made, the remaining payments shall bemade to your spouse, Julie Ann Klenk, or if she is no longer living, then toyour estate.

 

12.           Enforceability.  If a court finds any term of this Agreementto be invalid, unenforceable, or void, the parties agree that the court shallmodify such term to make it enforceable

 

5

----

 

to the maximum extent possible. If the term cannot be modified, the parties agree that the term shall besevered and all other terms of this Agreement shall remain in effect.

 

13.           LawGoverning.  This Agreement shall begoverned and construed in accordance with the laws of the State of Minnesota.

 

14.           FullAgreement.  This Agreement containsthe full agreement between you and August Technology and may not bemodified, altered, or changed in any way except by written agreement signed byboth parties.  The parties agree thatthis Agreement supersedes and terminates any and all other written and oralagreements and understandings between the parties, except for paragraphs 8, 10-16,and those paragraphs necessary for the enforcement of paragraphs 10-16, of yourEmployment Agreement signed by the parties on March 6, 2002, as amended bythe Amendment to Employment Agreement, which shall remain in full force andeffect.

 

15.           Acknowledgmentof Reading and Understanding.  Bysigning this Agreement, you acknowledge that you have read this Agreement,including the release of claims contained in Section 3, and understandthat the release of claims is a **full and final release ofall claims** you may have against August Technology and theother entities and individuals covered by the release.  By signing, you also acknowledge and agreethat you have entered into this Agreement knowingly and voluntarily.

 

The offer contained in this Agreement will remain ineffect until 5:00 p.m. on June 20, 2005, at which time it will expireif not accepted.  After you have reviewedthis Agreement and obtained whatever advice and counsel you considerappropriate regarding it, please evidence your agreement to the provisions setforth in this Agreement by dating and signing both copies of theAgreement.  Please then return one copyof this Agreement in the envelope provided by no later than 5:00 p.m. on June 20,2005.  You should keep the other copy foryour records.

 
| Sincerely,                         |
|------------------------------------|
|                               |
| August Technology Corporation |
|                               |
| /s/ Susan Peattie                  |   |
|                               |
| Susan Peattie                      |
| Director, Human Resources          |
|                               |
| Enclosure                          |

 

6

----

 

**ACKNOWLEDGMENT AND SIGNATURE**

 

By signing below, I, David Klenk, acknowledge andagree to the following:

 

•      I have had adequate time toconsider whether to sign this Separation Agreement and Release.

•      I have read this SeparationAgreement and Release carefully.

•      I understand and agree toall of the terms of the Separation Agreement and Release.

•      I am knowingly andvoluntarily releasing my claims against August Technology.

•      I have not, in signing thisAgreement, relied upon any statements or explanations made by August Technologyexcept as for those specifically set forth in this Separation Agreement andRelease.

•      I intend this SeparationAgreement and Release to be legally binding.

•      I am signing this SeparationAgreement and Release on or after my last day of employment with August Technology.

 

 

Accepted this 6th day of June, 2005.

 

 
| /s/ David Klenk |   |
|-----------------|--------|
| David Klenk     |

 

7

----