EXHIBIT 10.22


 


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
Jeffery Nelson of 456 Lester Point, Waconia, MN  55387, USA (“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 January 17, 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 Option
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 Paragraphs 10, 11, 12, 14 and/or 15 of this Employment Agreement;
or


 


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(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 eighteen
(18) months following a Change in Control (as defined below), Employee’s
employment is terminated (as defined below), then:


 


(a)                                  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 “Severance
Period” from the effective date of such termination;


 


(b)                                 For
the same 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)                                  The
right to exercise all unexpired and non-vested stock options in favor of
Employee shall immediately vest and accelerate; and


 


(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


 


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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 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;


 


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(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 eighteen (18) 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 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


 


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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;


 


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.


 


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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 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 


 


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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.


 


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 


 


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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 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


 


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


 


Jeffery
Nelson


456
Lester Point


Waconia,
MN  55387


 


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.


 


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.


 


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  AUGUST TECHNOLOGY
  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   January 18

  	
  , 2005

  	
   

  	
  By

  	
  /s/ David Klenk

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Its

  	
   President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   January 18

  	
  , 2005

  	
   

  	
  By

  	
  /s/ Jeffrey T.
  Nelson

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Employee

  
										



 


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EXHIBIT A


 


	
  Employee’s Name

  	
  =

  	
  Jeff Nelson

  
	
   

  	
   

  	
   

  
	
  Employee’s Title

  	
  =

  	
  V.P.
  Manufacturing

  
	
   

  	
   

  	
   

  
	
  Manager

  	
  =

  	
  Chief Operating
  Officer

  
	
   

  	
   

  	
   

  
	
  Base Salary

  	
  =

  	
  $165,000

  
	
   

  	
   

  	
   

  
	
  Severance Period

  	
  =

  	
  three (3) months

  
	
   

  	
   

  	
   

  
	
  Exempted
  Inventions

  	
  =

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  



 


 


	
  Initials of
  approval of Exhibit:

  	
   

  	
  AUGUST TECHNOLOGY
  CORP.

  	
  DK

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EMPLOYEE 

  	
  JTN

  	
   

  



 


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