EXHIBIT
10.2


 


INCENTIVE
STOCK OPTION AGREEMENT


 


This AGREEMENT, entered
into and effective as of _________________________ (the “Date of Grant”), by
and between August_Technology Corporation (the “Company”) and ______________________
(the “Optionee”).


 


RECITALS


 


A.            The
Company has adopted the 1997 Stock Incentive Plan (the “Plan”) authorizing the
Board of Directors of the Company, or a committee as provided for in the Plan
(the Board or such a committee to be referred to as the “Committee”), to grant
incentive stock options to eligible employees of the Company, which options
will qualify as “incentive stock options” within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the “Code”).


 


B.            The
Company desires to give the Optionee an inducement to acquire a proprietary
interest in the Company and an added incentive to advance the interests of the
Company by granting to the Optionee an option to purchase shares of common
stock of the Company.


 


AGREEMENT


 


Accordingly, the parties
hereto agree as follows:


 


ARTICLE I.  GRANT OF OPTION


 


The Company hereby grants
to the Optionee the right, privilege, and option (the “Option”) to purchase _________________
(________) shares (the “Option Shares”) of the Company’s common stock, $.01 par
value (the “Common Stock”), according to the terms and subject to the
conditions hereinafter set forth and as set forth in the Plan.  The Option is intended to be an “incentive
stock option,” as that term is used in Section 422 of the Code.


 


ARTICLE II.  OPTION EXERCISE PRICE


 


The per share price to be
paid by Optionee in the event of an exercise of the Option shall be _____________________
1/1000ths dollars ($___________ ).


 


ARTICLE III.  DURATION OF OPTION AND TIME
OF EXERCISE


 


A.            Initial
Period of Exercisability.  The Option
shall become exercisable with respect to the Option Shares in ________________________
equal installments. The following table sets forth the initial dates of
exercisability of each installment and the cumulative number of Option Shares
as to which this Option shall become exercisable on such dates, provided that
this Option shall become so exercisable on such dates only if the Optionee has
continuously served as an employee of the Company since the Date of Grant.


 


	
  Initial
  Date of

  Exercisability

  	
   

  	
  Number of Option Shares

  Available for Exercise

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 


The foregoing rights to
exercise this Option shall be cumulative with respect to the Option Shares
becoming exercisable on each such date but in no event shall this Option be
exercisable after, and this Option shall become void and expire as to all
unexercised Option Shares at 5:00P.M. (CST) on ___________________ (the “Time
of Termination”), date which in no case shall exceed ten (10) years after DATE
of grant.


 





















 


B.            Termination
of Employment Due to Death, Disability or Retirement.  In the event the Optionee’s employment is
terminated with the Company and all of its Subsidiaries (within the meaning of Section 424(f)
of the Code) by reason of death, an event that constitutes permanent and total
disability within the meaning of Section 22(e)(3) of the Code (“Disability”),
or retirement pursuant to and in accordance with the regular retirement plan or
practice of the Company or the Subsidiary employing the Optionee (“Retirement”),
the Option may be exercised in whole or in part before (a) the expiration of
three months, in the case of Retirement, and one year, in the case of death or
Disability, after such date of termination, or (b) the Time of Termination,
whichever shall first occur.


 


C.            Termination
of Employment for Reasons Other Than Death, Disability or Retirement.  Except as provided in Section III. D.
below, in the event the Optionee’s employment is terminated with the Company
and all of its Subsidiaries for any reason other than death, Disability or
Retirement, all rights of the Optionee hereunder shall terminate at the close
of business on the _____________________ day after the date of termination of
Optionee’s employment, except under no circumstances shall this option be
exercisable after the Time of Termination.


 


D.            Change
in Control.


 


(i)            For purposes of this Section III.
D., the term “Change in Control” shall have the meaning set forth in Section 11
of the Plan.


 


(ii)           If any events
constituting a Change in Control of the Company shall occur, the terms of the
Plan govern any acceleration of the right to exercise this Option prior to the
anticipated effective date of any Change in Control, provided that should
acceleration not occur under the terms of the Plan, Optionee shall be entitled
to receive option rights covering shares of the surviving or acquiring entity
in the same proportion, at an equivalent price, and subject to the same
conditions as this Option; and provided, however, that if, with respect to the
Optionee, acceleration of the vesting of this Option as provided herein (which
acceleration could be deemed a payment within the meaning of Section 280G(b)(2)
of the Code) together with any other payments which the Optionee has the right
to receive from the Company or any corporation which is a member of an “affiliated
group” (as defined in Section 1504(a) of the Code without regard to Section 1504(b)
of the Code) of which the Company is a member, would constitute a “parachute
payment” (as defined in Section 280G(b)(2) of the Code), the payments to
the Optionee as set forth herein shall be reduced to the largest amount as will
result in no portion of such payments being subject to the excise tax imposed
by Section 4999 of the Code.


 


ARTICLE IV.  MANNER OF OPTION EXERCISE


 


A.            Notice.  This Option may be exercised by the Optionee
in whole or in part from time to time, subject to the conditions contained in
the Plan and herein, by delivery, in person, by registered mail, or by such
other means directed by the Company, including electronic delivery, to the
Company at its principal executive office (Attention: Chief Financial Officer),
of a written notice of exercise.  Such
notice shall be in a form satisfactory to the Committee, shall identify the
Option, shall specify the number of Option Shares with respect to which the
Option is being exercised, and if such notice is in written form, shall be
signed by the person or persons so exercising the Option.  Such notice shall be accompanied by payment
in full of the total purchase price of the Option Shares purchased, as provided
by Section IV. B. below.  In the
event that the Option is being exercised, as provided by the Plan and Section III.
B. above, by any person or persons other than the Optionee, the notice shall be
accompanied by appropriate proof of right of such person or persons to exercise
the Option.  As soon as practicable after
the effective exercise of the Option, the Optionee shall be recorded on the
stock transfer books of the Company as the owner of the Option Shares purchased,
and the Company shall deliver the Option Shares to the Optionee by electronic
means or by delivering one or more duly issued stock certificates evidencing
such ownership.


 


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B.            Payment.  At the time of exercise of this Option, the
Optionee may determine whether to pay the total purchase price of the Option
Shares to be purchased solely in cash (including a personal check, wire
transfer or a certified or bank cashier’s check, payable to the order of the
Company or a payee designated by the Company), or by transfer from the Optionee
to the Company of previously acquired shares of Common Stock of the Company
with a then current aggregate Fair Market Value equal to such total purchase
price, or by a combination of cash and such previously acquired shares of
Common Stock, or with the proceeds of a same day sale or sell to cover
transaction through the Optionee’s E*Trade OptionsLink account.  The Committee may reject the Optionee’s
election to pay all or part of the purchase price under this Option with
previously acquired shares of Common Stock and may require such purchase price
to be paid entirely in cash if, in the sole discretion of the Committee,
payment in previously acquired shares would cause the Company to be required to
recognize a charge to earnings in connection therewith.  For purposes of this Agreement, (a) “previously
acquired shares” shall include only those shares of Common Stock which the
Optionee has owned for at least six (6) months prior to the exercise of the
stock option, or for such other period of time as may be required by generally
accepted accounting principles, and (b) “Fair Market Value” will be determined
as set forth in the Plan.


 


C.            Investment
Purpose; Stock Transfer Restrictions. 
The Company shall not be required to issue or deliver any shares of
Common Stock under this Option unless (a)(1) such shares are covered by an
effective and current registration statement under the Securities Act of 1933
and applicable state securities laws or (2) if the Committee has determined not
to so register such shares, exemptions from registration under the Securities
Act of 1933 and applicable state securities laws are available for such
issuance (as determined by counsel to the Company) and the Company has received
from the Optionee (or, in the event of death or disability, the Optionee’s
heir(s) or legal representative(s)) any representations or agreements requested
by the Company in order to permit such issuance to be made pursuant to such exemptions,
and (b) the Company has obtained any other consent, approval or permit from any
state or federal governmental agency which the Committee shall, in its sole
discretion upon the advice of counsel, deem necessary or advisable.  Unless a registration statement under the
Securities Act of 1933 is in effect with respect to the issuance or transfer of
Option Shares, each certificate representing any such shares shall be endorsed
with a legend in substantially the following form, unless counsel for the Company
is of the opinion as to any such certificate that such legend is unnecessary:


 


THE SECURITIES EVIDENCED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“THE
ACT”), OR UNDER APPLICABLE STATE SECURITIES LAWS.  THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND SUCH STATE LAWS OR PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE ACT AND SUCH STATE LAWS, THE AVAILABILITY OF WHICH
IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY.


 


ARTICLE V.  NONTRANSFERABILITY


 


This Option shall not be
transferable by the Optionee, either voluntarily or involuntarily, or subject
to any lien, directly or indirectly, by operation of law or otherwise, except
as provided in Section 8.2 of the Plan. 
Any attempt to transfer or encumber this Option other than in accordance
with Section 8.2 of the Plan shall void this Option.


 


ARTICLE VI.  LIMITATION OF LIABILITY


 


Nothing in this Agreement
shall be construed to (a) limit in any way the right of the Company or any of
its Subsidiaries to terminate the status of the Optionee as an employee of the
Company at any time, or (b) be evidence of any agreement or understanding,
express or implied, that the Company or any of its Subsidiaries will employ the
Optionee in any particular position, at any particular rate of compensation or
for any particular period of time.


 


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ARTICLE VII.  DISPOSITION OF STOCK


 


Prior to making a
disposition (as defined in Section 424(c) of the Code) of any shares of
Common Stock acquired pursuant to the exercise of this Option before the
expiration of two years after the Date of Grant or before the expiration of one
year after the date on which such shares of Common Stock were transferred to
the Optionee pursuant to exercise of this Option, the Optionee shall send
written notice to the Company of the proposed date of such disposition, the
number of shares to be disposed of, the amount of proceeds to be received from
such disposition and any other information relating to such disposition that
the Company may reasonably request.  The
right of the Optionee to make such a disposition shall be conditioned on the
receipt by the Company of all amounts necessary to satisfy any federal, state
or local withholding tax requirements. 
The Committee shall have the right, in its sole discretion, to endorse
the certificates representing the Option Shares with a legend restricting
transfer and to cause a stop transfer order to be entered with the Company’s
transfer agent until such time as the Company receives the amounts necessary to
satisfy such withholding requirements or until the later of the expiration of
two years from the Date of Grant or one year from the date on which such shares
were transferred to the Optionee pursuant to the exercise of this Option.


 


ARTICLE VIII.  WITHHOLDING TAXES


 


A.            General
Obligation.  The Company is entitled
to (a) withhold and deduct from future payment to the Optionee, or make other
arrangements for the collection of, all legally required amounts necessary to
satisfy any federal, state or local withholding tax requirements attributable to
the Optionee’s exercise of this Option, including, without limitation, a
disposition of shares of Common Stock described in Article VII above, that
causes this Option to cease to qualify as an “incentive stock option” within
the meaning of Section 422 of the Code, or (b) require the Optionee
promptly to remit the amount of such withholding to the Company before acting
on any such disposition of shares of Common Stock.  In the event that the Company is unable to
withhold such amounts, for whatever reason, the Optionee hereby agrees to pay
to the Company an amount equal to the amount the Company would otherwise be
required to withhold under federal, state or local law.


 


B.            Use
of Shares.  The Committee may, in its
sole discretion and subject to such rules as the Committee may adopt, permit
the Optionee to satisfy, in whole or in part, any withholding tax obligation
which may arise in connection with the exercise of this Option either by
electing to have the Company withhold from the shares of Common Stock to be
issued upon the exercise of this Option that number of shares of Common Stock,
or by electing to deliver to the Company already-owned shares of Common Stock,
in either case having a Fair Market Value (determined as set forth in the Plan)
on the date such tax is determined under the Code (the “Tax Date”) equal to the
amount necessary to satisfy the statutory minimum withholding amount due.  The Optionee’s election to have the Company
withhold shares of Common Stock or to deliver already-owned shares of Common
Stock upon exercise is irrevocable and is subject to the consent or disapproval
of the Committee.  If the Optionee is an
officer, director or beneficial owner of more than 10% of the outstanding
Common Stock of the Company and at the time of exercise of this Option the
Company has a class of equity securities registered under Section 12 of
the Securities Exchange Act of 1934, such election may not be made within six
months of the Date of Grant (unless the death or Disability of the Optionee
occurs prior to the expiration of such six-month period), and must be made
either six months prior to the Tax Date or between the third and twelfth
business days following public release of any of the Company’s quarterly or
annual summary earnings statements.  To
the extent that shares of Common Stock may be issued prior to the Tax Date to
the Optionee making such an election, the Optionee hereby agrees to surrender
that number of shares on the Tax Date having an aggregate Fair Market Value
(determined as set forth in the Plan) equal to the amount of withholding tax
due.  In no event may the Company
withhold or accept shares having a Fair Market Value in excess of the statutory
minimum required tax withholding.


 


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ARTICLE IX.  CAPITAL ADJUSTMENTS


 


If the number of
outstanding shares of Common Stock is increased or decreased or changed into or
exchanged for a different number or kind of shares of stock or other securities
of the Company or of another corporation by reason of any reorganization,
merger, consolidation, recapitalization, reclassification, stock split, reverse
stock split, stock dividend, combination of shares, rights offering or any
other change in the corporate structure or shares of the Company, the Committee
(or, if the Company is not the surviving corporation in any such transaction,
the board of directors of the surviving corporation), in order to prevent
dilution or enlargement of the rights of the Optionee, shall make appropriate
adjustment as to the number and kind of securities subject to this Option.  Any such adjustment affecting this Option
shall be made without change in the aggregate purchase price applicable to the
unexercised portion of the Option but with an appropriate adjustment in the
price for each share or other unit of any security subject to the Option.  Without the consent of the Optionee, however,
no such change shall be made in the terms of the Option if such change would
disqualify the Option from treatment as an “incentive stock option” within the
meaning of Section 422 of the Code or would be considered a modification,
extension or renewal of an option under Section 425(h) of the Code.


 


ARTICLE X.  BINDING EFFECT


 


This Agreement shall be
binding upon the heirs, executors, administrators and successors of the parties
hereto.


 


ARTICLE XI.  SUBJECT TO PLAN


 


The Option represented by
this Agreement has been granted under, and is subject to the terms of, the
Plan.  The terms of the Plan are hereby
incorporated by reference herein in their entirety and the Optionee, by
execution hereof, acknowledges having received a copy of the Plan.  The provisions of this Agreement shall be
interpreted as to be consistent with the Plan and any ambiguities herein shall
be interpreted by reference to the Plan. 
In the event that any provision hereof is inconsistent with the terms of
the Plan, the Plan shall prevail.


 


ARTICLE XII.  GOVERNING LAW


 


This Agreement and all
rights and obligations hereunder shall be construed in accordance with the Plan
and governed by the laws of the State of Minnesota.


 


The parties hereto have
executed this Agreement effective the day and year first above written.


 


	
   

  	
  AUGUST TECHNOLOGY
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Its

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By execution hereof,
  the

  	
  OPTIONEE

  
	
  Optionee acknowledges
  having

  	
   

  
	
  received a copy of the
  Plan.

  	
   

  	
   

  
						



 


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NON-STATUTORY
STOCK OPTION AGREEMENT


 


This AGREEMENT, entered
into and effective as of ___________________ (the “Date of Grant”), by and
between August Technology Corporation (the “Company”) and ___________________________________
(the “Optionee”).


 


RECITALS:


 


A.            The
Company has adopted the 1997 Stock Incentive Plan (the “Plan”) authorizing the
Board of Directors of the Company, or a committee as provided for in the Plan
(the Board or such a committee to be referred to as the “Committee”), to grant
non-statutory stock options to eligible employees, non-employee directors and
consultants of the Company.


 


B.            The
Company desires to give the Optionee an inducement to acquire a proprietary
interest in the Company and an added incentive to advance the interests of the
Company by granting to the Optionee an option to purchase shares of common
stock of the Company.


 


AGREEMENT:


 


Accordingly, the parties
hereto agree as follows:


 


ARTICLE I.  GRANT OF OPTION.


 


The Company hereby grants
to the Optionee the right, privilege, and option (the “Option”) to purchase _________________
(____________) shares (the “Option Shares”) of the Company’s common stock, $.01
par value (the “Common Stock”), according to the terms and subject to the
conditions hereinafter set forth and as set forth in the Plan.  The Option is not intended to be an “incentive
stock option,” as that term is used in Section 422 of the Internal Revenue
Code of 1986, as amended (the “Code”).


 


ARTICLE II.  OPTION EXERCISE PRICE.


 


The per share price to be
paid by Optionee in the event of an exercise of the Option shall be__________________
1/1000ths dollars ($____________).


 


ARTICLE III.  DURATION OF OPTION


AND TIME
OF EXERCISE.


 


A.            Initial
Period of Exercisability.  The Option
shall become exercisable with respect to the Option Shares in __________ equal
installments.  The following table sets
forth the initial dates of exercisability of each installment and the
cumulative number of Option Shares as to which this Option shall become
exercisable on such dates, provided that this Option shall become so
exercisable on such dates only if the Optionee has continuously served as an
employee, non-employee director or consultant of the Company since the Date of
Grant.


 


	
  Initial
  Date of

  Exercisability

  	
   

  	
  Number of Option Shares

  Available for Exercise

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 


The foregoing rights to
exercise this Option shall be cumulative with respect to the Option Shares
becoming exercisable on each such date but in no event shall this Option be
exercisable after, and this Option shall become void and expire as to all
unexercised Option Shares at, 5:00P.M. (CST) on ________________ (the “Time of
Termination”), date which in no case shall exceed ten (10) years after DATE of
grant.


 


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B.            Termination
of Employment or Consulting Relationship Due to Death, Disability or Retirement.  In the event the Optionee’s employment or
consulting relationship is terminated with the Company and all of its
Subsidiaries (within the meaning of Section 424(f) of the Code) by reason
of death, an event that constitutes permanent and total disability within the
meaning of Section 22(e)(3) of the Code (“Disability”), or retirement
pursuant to and in accordance with the regular retirement plan or practice of
the Company or the Subsidiary employing the Optionee (“Retirement”), the Option
may be exercised in whole or in part before (a) the expiration of three months,
in the case of Retirement, and one year, in the case of death or Disability,
after such date of termination, or (b) the Time of Termination, whichever shall
first occur.


 


C.            Termination
of Employment or Consulting Relationship for Reasons Other Than Death, Disability
or Retirement.  Except as provided in
Section III. D. below, in the event the Optionee’s employment or
consulting relationship is terminated with the Company and all of its
Subsidiaries for any reason other than death, Disability or Retirement, all
rights of the Optionee hereunder shall terminate at the close of business ______________________
day after the date of termination of Optionee’s employment or consulting
relationship, except under no circumstances shall this option be exercisable
after the Time of Termination.


 


D.            Change
in Control.


 


(i)            For purposes of this Section III.D.,
the term “Change in Control” shall have the meaning set forth in Section 11
of the Plan.


 


(ii)           If any events
constituting a Change in Control of the Company shall occur, the terms of the
Plan govern any acceleration of the right to exercise this Option prior to the
anticipated effective date of any Change in Control, provided that should
acceleration not occur under the terms of the Plan, Optionee shall be entitled
to receive option rights covering shares of the surviving or acquiring entity
in the same proportion, at an equivalent price, and subject to the same
conditions as this Option; and provided, however, that if, with respect to the
Optionee, acceleration of the vesting of this Option as provided herein (which
acceleration could be deemed a payment within the meaning of Section 280G(b)(2)
of the Code) together with any other payments which the Optionee has the right
to receive from the Company or any corporation which is a member of an “affiliated
group” (as defined in Section 1504(a) of the Code without regard to Section 1504(b)
of the Code) of which the Company is a member, would constitute a “parachute
payment” (as defined in Section 280G(b)(2) of the Code), the payments to
the Optionee as set forth herein shall be reduced to the largest amount as will
result in no portion of such payments being subject to the excise tax imposed
by Section 4999 of the Code.


 


ARTICLE IV.  MANNER OF OPTION EXERCISE.


 


A.            Notice.  This Option may be exercised by the Optionee
in whole or in part from time to time, subject to the conditions contained in
the Plan and herein, by delivery, in person, by registered mail, or by such
other means directed by the Company, including electronic delivery, to the
Company at its principal executive office (Attention: Chief Financial Officer),
of a written notice of exercise.  Such
notice shall be in a form satisfactory to the Committee, shall identify the
Option, shall specify the number of Option Shares with respect to which the
Option is being exercised, and if such notice is in written form, shall be
signed by the person or persons so exercising the Option.  Such notice shall be accompanied by payment
in full of the total purchase price of the Option Shares purchased, as provided
by Section IV. B. below.  In the
event that the Option is being exercised, as provided by the Plan and Section III.
B. above, by any person or persons other than the Optionee, the notice shall be
accompanied by appropriate proof of right of such person or persons to exercise
the Option.  As soon as practicable after
the effective exercise of the Option, the Optionee shall be recorded on the
stock transfer books of the Company as the owner of the Option Shares
purchased, and the Company shall deliver the Option Shares to the Optionee by
electronic means or by delivering one or more duly issued stock certificates
evidencing such ownership.


 


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B.            Payment.  At the time of exercise of this Option, the
Optionee may determine whether to pay the total purchase price of the Option
Shares to be purchased solely in cash (including a personal check, wire
transfer or a certified or bank cashier’s check, payable to the order of the
Company or a payee designated by the Company), or by transfer from the Optionee
to the Company of previously acquired shares of Common Stock of the Company
with a then current aggregate Fair Market Value equal to such total purchase
price, or by a combination of cash and such previously acquired shares of
Common Stock, or with the proceeds of a same day sale or sell to cover
transaction through the Optionee’s E*Trade OptionsLink account.  The Committee may reject the Optionee’s
election to pay all or part of the purchase price under this Option with
previously acquired shares of Common Stock and may require such purchase price
to be paid entirely in cash if, in the sole discretion of the Committee,
payment in previously acquired shares would cause the Company to be required to
recognize a charge to earnings in connection therewith.  For purposes of this Agreement, (a) “previously
acquired shares” shall include only those shares of Common Stock which the
Optionee has owned for at least six (6) months prior to the exercise of the
stock option, or for such other period of time as may be required by generally
accepted accounting principles, and (b) “Fair Market Value” will be determined
as set forth in the Plan.


 


C.            Investment
Purpose; Stock Transfer Restrictions. 
The Company shall not be required to issue or deliver any shares of
Common Stock under this Option unless (a)(1) such shares are covered by an
effective and current registration statement under the Securities Act of 1933
and applicable state securities laws or (2) if the Committee has determined not
to so register such shares, exemptions from registration under the Securities
Act of 1933 and applicable state securities laws are available for such
issuance (as determined by counsel to the Company) and the Company has received
from the Optionee (or, in the event of death or disability, the Optionee’s
heir(s) or legal representative(s)) any representations or agreements requested
by the Company in order to permit such issuance to be made pursuant to such
exemptions, and (b) the Company has obtained any other consent, approval or
permit from any state or federal governmental agency which the Committee shall,
in its sole discretion upon the advice of counsel, deem necessary or
advisable.  Unless a registration
statement under the Securities Act of 1933 is in effect with respect to the
issuance or transfer of Option Shares, each certificate representing any such
shares shall be endorsed with a legend in substantially the following form,
unless counsel for the Company is of the opinion as to any such certificate
that such legend is unnecessary:


 


THE SECURITIES EVIDENCED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“THE
ACT”), OR UNDER APPLICABLE STATE SECURITIES LAWS.  THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND SUCH STATE LAWS OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE LAWS, THE AVAILABILITY
OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY.


 


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ARTICLE V.  NONTRANSFERABILITY.


 


This Option shall not be
transferable by the Optionee, either voluntarily or involuntarily, or subject
to any lien, directly or indirectly, by operation of law or otherwise, except
as provided in Section 8.2 of the Plan. 
Any attempt to transfer or encumber this Option other than in accordance
with Section 8.2 of the Plan shall void this Option.


 


ARTICLE VI.  LIMITATION OF LIABILITY.


 


Nothing in this Agreement
shall be construed to (a) limit in any way the right of the Company or any of
its Subsidiaries to terminate the status of the Optionee as an employee, non
employee director or consultant of the Company at any time, or (b) be evidence
of any agreement or understanding, express or implied, that the Company or any
of its Subsidiaries will employ the Optionee in any particular position, at any
particular rate of compensation or for any particular period of time.


 


ARTICLE VII.  WITHHOLDING TAXES.


 


A.            General
Obligation.  The Company is entitled
to (a) withhold and deduct from future payment to the Optionee, or make other
arrangements for the collection of, all legally required amounts necessary to
satisfy any federal, state or local withholding tax requirements attributable
to the Optionee’s exercise of this Option or otherwise incurred with respect to
this Option, or (b) require the Optionee promptly to remit the amount of such
withholding to the Company before acting on any such disposition of shares of
Common Stock.  In the event that the
Company is unable to withhold such amounts, for whatever reason, the Optionee
hereby agrees to pay to the Company an amount equal to the amount the Company
would otherwise be required to withhold under federal, state or local law.


 


B.            Use
of Shares.  The Committee may, in its
sole discretion and subject to such rules as the Committee may adopt, permit
the Optionee to satisfy, in whole or in part, any withholding tax obligation
which may arise in connection with the exercise of this Option either by
electing to have the Company withhold from the shares of Common Stock to be
issued upon the exercise of this Option that number of shares of Common Stock,
or by electing to deliver to the Company already-owned shares of Common Stock,
in either case having a Fair Market Value (determined as set forth in the Plan)
on the date such tax is determined under the Code (the “Tax Date”) equal to the
amount necessary to satisfy the statutory minimum withholding amount due.  The Optionee’s election to have the Company
withhold shares of Common Stock or to deliver already-owned shares of Common
Stock upon exercise is irrevocable and is subject to the consent or disapproval
of the Committee.  If the Optionee is an
officer, director or beneficial owner of more than 10% of the outstanding
Common Stock of the Company and at the time of exercise of this Option the
Company has a class of equity securities registered under Section 12 of
the Securities Exchange Act of 1934, such election may not be made within six
months of the Date of Grant (unless the death or Disability of the Optionee
occurs prior to the expiration of such six-month period), and must be made
either six months prior to the Tax Date or between the third and twelfth
business days following public release of any of the Company’s quarterly or
annual summary earnings statements.  To
the extent that shares of Common Stock may be issued prior to the Tax Date to
the Optionee making such an election, the Optionee hereby agrees to surrender
that number of shares on the Tax Date having an aggregate Fair Market Value
(determined as set forth in the Plan) equal to the amount of withholding tax due.  In no event may the Company withhold or
accept shares having a Fair Market Value in excess of the statutory minimum
required tax withholding.


 


ARTICLE VIII.  CAPITAL ADJUSTMENTS.


 


If the number of outstanding shares of Common Stock is
increased or decreased or changed into or exchanged for a different number or
kind of shares of stock or other securities of the Company or of another
corporation by reason of any reorganization, merger, consolidation,
recapitalization, reclassification, stock split, reverse stock split, stock
dividend, combination of shares, rights offering or any other change in the
corporate structure or shares of the Company, the Committee (or, if the Company
is not the surviving corporation in any such transaction, the board of directors
of the surviving corporation), in order to prevent dilution or enlargement of
the rights of the Optionee, shall make appropriate adjustment as to the number
and kind of securities subject to this Option. 
Any such adjustment affecting this Option shall be made without change
in the aggregate purchase price applicable to the unexercised portion of the
Option but with an appropriate adjustment in the price for each share or other
unit of any security subject to the Option. Without the consent of the Optionee,
however, no such change shall be made in the terms of the Option if such change
would disqualify the 


 


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Option from treatment as an “incentive stock option”
within the meaning of Section 422 of the Code or would be considered a
modification, extension or renewal of an option under Section 425(h) of
the Code.


 


ARTICLE IX.  BINDING EFFECT.


 


This Agreement shall be
binding upon the heirs, executors, administrators and successors of the parties
hereto.


 


ARTICLE X.  SUBJECT TO PLAN.


 


The Option represented by
this Agreement has been granted under, and is subject to the terms of, the
Plan.  The terms of the Plan are hereby
incorporated by reference herein in their entirety and the Optionee, by execution
hereof, acknowledges having received a copy of the Plan.  The provisions of this Agreement shall be
interpreted as to be consistent with the Plan and any ambiguities herein shall
be interpreted by reference to the Plan. 
In the event that any provision hereof is inconsistent with the terms of
the Plan, the Plan shall prevail.


 


ARTICLE XI.  GOVERNING LAW.


 


This Agreement and all
rights and obligations hereunder shall be construed in accordance with the Plan
and governed by the laws of the State of Minnesota.


 


The parties hereto have
executed this Agreement effective the day and year first above written.


 


	
   

  	
  AUGUST TECHNOLOGY
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Its

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By execution hereof,
  the

  	
  OPTIONEE

  
	
  Optionee acknowledges
  having

  	
   

  
	
  received a copy of the
  Plan.

  	
   

  	
   

  
						



 


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