**Exhibit10.2**

 

**AUGUST TECHNOLOGYCORPORATION**

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**AMENDED 1998 BOARDOF DIRECTOR COMPENSATION PLAN**

 

**(Amended as of July 29, 2003)**

 

## **ARTICLE 1. ESTABLISHMENT AND PURPOSE**

 

a.                                       Establishment.  August Technology Corporation (the“Company”) hereby establishes a plan providing for the compensation of certaineligible directors of the Company and its subsidiaries.  This plan shall be known as the 1998 BoardCompensation Plan (the “Board Compensation Plan”).

 

b.                                      Purpose.  The purpose of this Board Compensation Planis to advance the interests of the Company and its shareholders by enabling theCompany to attract and retain persons of ability as directors, by providing anincentive to such individuals through cash and/or equity participation in theCompany and by rewarding such individuals who contribute to the achievement bythe Company of its long-term economic objectives.

 

## **ARTICLE2.  DEFINITIONS**

 

The following terms shallhave the meanings set forth below, unless the context clearly otherwiserequires:

 

a.                                       “Board”means the Board of Directors of the Company.

 

b.                                      “Code”means the Internal Revenue Code of 1986, as amended.

 

c.                                       “CommonStock” means the common stock of the Company, par value $.01 per share, orthe number and kind of shares of stock or other securities into which suchCommon Stock may be changed in accordance with Section 4.3 below.

 

d.                                      “EligiblePersons” means individuals who are Non-Employee Directors of the Company.

 

e.                                       “ExchangeAct” means the Securities Exchange Act of 1934, as amended.

 

f.                                         “IncentiveStock Option” means a right to purchase Common Stock granted to an Optioneepursuant to the Company’s 1997 Stock Option Plan that qualifies as an incentivestock option within the meaning of Section 422 of the Code.

 

g.                                      “Non-EmployeeDirector” means any member of the Board who is not an employee of theCompany or any Subsidiary.

 

h.                                      “Non-StatutoryStock Option” means a right to purchase Common Stock granted to an Optioneepursuant to the Company’s 1997 Stock Option Plan that does not qualify as anIncentive Stock Option.

 

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i.                                          “Option”means an Incentive Stock Option or a Non-Statutory Stock Option.

 

j.                                          “Optionee”means an Eligible Person who receives one or more Incentive Stock Optionsor Non-Statutory Stock Options under the Company’s 1997 Stock Option Plan.

 

k.                                       “Person”means any individual, corporation, partnership, group, association or other“person” (as such term is used in Section 14(d) of the Exchange Act),other than the Company, a wholly owned subsidiary of the Company or anyemployee benefit plan sponsored by the Company.

 

l.                                          “SecuritiesAct” means the Securities Act of 1933, as amended.

 

m.                                    “Subsidiary”means any corporation that is a subsidiary corporation of the Company (withinthe meaning of Section 424(f) of the Code).

 

## **ARTICLE 3. ADMINISTRATION**

 

The Plan shall beadministered by the Board or by a Committee of the Board consisting of not lessthan three persons; provided, however, that from and after the date on whichthe Company first registers a class of its equity securities under Section 12of the Exchange Act Plan shall be administered by the Board, majority of whomacting on any matter under the Plan shall be “disinterested persons” as definedby Rule 16b-3 of the Rules and Regulations of the Securities and ExchangeCommission, as amended (“Rule 16b-3”) or by a Committee consisting solely ofnot less than three members of the Board who are “disinterested persons” withinthe meaning of Rule 16b-3.  Members of aCommittee, if established, shall be appointed from time to time by the Board,shall serve at the pleasure of the Board and may resign at any time uponwritten notice to the Board.  A majorityof the members of the Committee shall constitute a quorum.  The Committee shall act by majority approvalof its members, shall keep minutes of its meetings and shall provide copies ofsuch minutes to the Board.  Action ofthe Committee may be taken without a meeting if unanimous written consentthereto is given.  Copies of minutes ofthe Committee’s meetings and of its actions by written consent shall beprovided to the Board and kept with the corporate records of the Company.  As used in this Plan, the term “Committee”will refer either to the Board or to such a Committee, if established.  From and after the date on which the Companyfirst registers a class of its equity securities under Section 12 of theExchange Act, no member of the Committee shall be eligible, or shall have beeneligible at any time within the lesser of one year or the period since theCompany first registered a class of its equity securities under Section 12 ofthe Exchange Act, to receive an Incentive Stock Option or a Non-Statutory StockOption under the Plan.

 

In accordance with theprovisions of the Plan, the Committee shall select the Optionees from EligiblePersons; shall determine the number of shares of Common Stock to be subject toOptions granted pursuant to the Plan, the time at which such Options aregranted, the Option exercise price, Option period and the manner in which eachsuch Option vests or becomes exercisable; and shall fix such other provisionsof such Options as the Committee may deem necessary or desirable and asconsistent with the terms of the Plan. The Committee shall determine the form or forms of the agreements withOptionees which shall evidence the particular terms, conditions, rights andduties

 

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of the Company and the Optionees under Options granted pursuant to thePlan.  The Committee shall have theauthority, subject to the provisions of the Plan, to establish, adopt andrevise such rules and regulations relating to the Plan as it may deem necessaryor advisable for the administration of the Plan.  With the consent of the Optionee affected thereby, the Committeemay amend or modify the terms of any outstanding Incentive Stock Option orNon-Statutory Stock Option, to the extent not previously exercised, and theCommittee may authorize the grant of new Options in substitution therefore tothe extent not previously exercised.

 

Each determination,interpretation or other action made or taken by the Committee pursuant to theprovisions of the Plan shall be conclusive and binding for all purposes and onall persons, including, without limitation, the Company and its Subsidiaries,the shareholders of the Company, the Committee and each of the members thereof,the directors, officers and employees of the Company and its Subsidiaries, andthe Optionees and their respective successors in interest.  No member of the Committee shall be liablefor any action or determination made in good faith with respect to the Plan orany Option granted under the Plan.

 

## **ARTICLE4.  EFFECTIVE DATE OF THE BOARDCOMPENSATION PLAN**

 

a.                                                                                       EffectiveDate.  This Amended BoardCompensation Plan is effective as of July 1, 2003.  Options may be granted under the Plan priorto shareholder approval if made subject to shareholder approval.

 

b.                                                                                      Priorityof the Board Compensation Plan.  TheBoard Compensation Plan hereby supersedes and replaces any prior compensationplan applicable to any Board member in his or her capacity as a Board member.

 

## **ARTICLE 5.  AWARDS UNDER THE BOARD COMPENSATION PLAN**

 

Compensation awards tomembers of the Company’s Board of Directors shall be as stated on Schedule 1attached hereto as may be amended and/or supplemented from time to time.  Any Incentive Stock Options or Non-StatutoryStock Options awarded pursuant to this Board Compensation Plan shall begoverned by the terms of the Company’s 1997 Stock Option Plan and any Optionagreement issued in accordance therewith.

 

## **ARTICLE6.  MISCELLANEOUS**

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a.                                       GoverningLaw.  The Board Compensation Planand all agreements hereunder shall be construed in accordance with and governedby the laws of the State of Minnesota without regard to the conflict of lawsprovisions of any jurisdictions.  Allparties agree to submit to the jurisdiction of the state and federal courts ofMinnesota with respect to matters relating to the Plan and agree not to raiseor assert the defense that such forum is not convenient for such party.

 

b.                                      Genderand Number.  Except when otherwiseindicated by the context, reference to the masculine gender in the Plan shallinclude, when used, the feminine gender and any term used in the singular shallalso include the plural.

 

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c.                                       Construction.  Wherever possible, each provision of thisBoard Compensation Plan shall be interpreted in such a manner as to beeffective and valid under applicable law, but if any provision of this BoardCompensation Plan shall be prohibited by or invalid under applicable law, suchprovision shall be ineffective only to the extent of such prohibition orinvalidity without invalidating the remainder of such provision or theremaining provisions of this Board Compensation Plan.

 

d.                                      Successorsand Assigns.  This Plan shall bebinding upon and inure to the benefit of the successors and permitted assignsof the Company, including, without limitation, whether by way of merger,consolidation, operation of law, assignment, purchase or other acquisition ofsubstantially all of the assets or business of the Company, and any and allsuch successors and assigns shall absolutely and unconditionally assume all ofthe Company’s obligations under the Board Compensation Plan.

 

e.                                       Survivalof Provisions.  The rights,remedies, agreements, obligations and covenants contained in or made pursuantto the Board Compensation Plan, any agreement evidencing an Award and any othernotices or agreements in connection therewith, including, without limitation,any notice of exercise of an Option, shall survive the execution and deliveryof such notices and agreements and the delivery and receipt of shares of CommonStock and shall remain in full force and effect.

 

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## **Schedule1 – effective July 1, 2003**

 

# **BoardCompensation Plan**

 

1.               ExternalBoard members(1)

a.               StockOptions:

i.                  Atappointment (initial grant) = 20,000 one time grant at time of appointment

ii.               Annually(yearly grant) = 6,500 (paid out at end of the year)

b.              Cash:

i.                  Atappointment = $0

ii.               Retainer(paid out at the end of the year) = see below

1.               $500/monthfor guidance, telephone calls, etc.

2.               $1,000/meetingfor regularly scheduled Board meeting attendance

3.               $500/meetingfor regularly scheduled committee meeting attendance

4.               $500/meetingof additional compensation for chairing any Board or committee meeting – onlypaid for meetings attendance fee is paid at

5.               $500for any special meeting attendance – compensation not to exceed 4 specialmeetings per year

c.               Perquisites:

i.                  Director’sLiability Insurance = Yes (paid by August Technology)

ii.               LifeInsurance – No

iii.            Other- No

d.              ExpenseReimbursement:

i.                  Reasonable“out of pocket” expenses – yes

ii.               Travel– yes if necessary

 

2.               InternalBoard members

a.               StockOptions:

i.                  Atappointment = none for directorship

ii.               Permeeting on annual basis = none for directorship

b.              Cash:

i.                  Atappointment = $0 for directorship

ii.               Permeeting on annual basis = $0 for directorship

c.               Perquisites:

i.                  Director’sLiability Insurance = Yes (paid by August Technology)

ii.               LifeInsurance – none under directorship

iii.            Other- none under directorship

d.              ExpenseReimbursement:

i.                  Reasonable“out of pocket” expenses – yes

ii.               Travel– yes if necessary

 

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(1)          Termson Initial appointment grant and yearly participation grant:

a.               Exerciseprice = market price on date of grant

b.              Vesting= 

(i) for initial grant = 33.3% immediate, 33.3% in oneyear, and 33.3% in two years

(ii) for yearly grants =100% immediate

c.               Life = 7 years

d.              Termination: noneregardless of continuing Board service not to exceed expiration (life) ofoption

 

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