**EXHIBIT 10.22**

 

**EMPLOYMENT AGREEMENT**

 

ThisAgreement is entered into by and between August Technology Corporation (“August Technology“ or the “Company”), a Minnesota corporation, with its principal place ofbusiness at 4900 West 78th Street, Bloomington, Minnesota 55435, andJeffery Nelson of 456 Lester Point, Waconia, MN  55387, USA (“Employee”).

 

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

 

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

 

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

 

**NOW,THEREFORE,**in consideration of the foregoing and the mutualcovenants contained herein and for other good and valuable consideration thereceipt and sufficiency of which is specifically acknowledged by the parties, August Technologyand Employee agree as follows:

 

**1.****             Employment.**  August Technology agrees to employ orcontinue to employ Employee, effective January 17, 2005, and Employeeaccepts employment or continued employment, upon the terms and conditions setforth in this Agreement.

 

**2.**             **Term of Employment. **August Technology shall continue toemploy Employee for an indefinite duration until his/her employment isterminated 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/herposition, and to the business and affairs of August Technology.  Employee’s title shall be as set forth inExhibit A as “Employee’s Title”, reporting to the person or office as set forthin Exhibit A as “Manager”.  Employeeshall perform all duties and responsibilities of the position he/she holds withAugust Technology as those duties and responsibilities may change fromtime to time.  Employee shall comply withAugust Technology’s standards, policies and procedures in effect and asthey may change from time to time; provided that to the extent such policiesand procedures are inconsistent with this Agreement, the provisions of thisAgreement shall control.

 

**4.****             Compensation.**  August Technology shall pay Employee agross annual salary as set forth in Exhibit A as “Base Salary”, lessappropriate payroll deductions.  Employeemay also receive incentive compensation in accordance with the Annual IncentivePlan, as issued and as may change from time to time by the Company, or anyother similar plan authorized by the Board of Directors.  Employee’s compensation may be periodicallyincreased or adjusted as authorized by 

 

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the Board of Directors inthe case of the Chief Executive Officer, or, in the case of all others, asrecommended by the Chief Executive Officer and approved by the Board ofDirectors.

 

**5.**             **BusinessExpenses.**  August Technologywill, in accordance with its policies and practices as such may change fromtime to time, reimburse Employee for all ordinary and necessary businessexpenses after receipt of appropriate documentation of such expenses.

 

**6.****             Benefits.**  Employee shall be entitled to insurance andother benefits provided to key management employees in accordance withapplicable plan documents and commensurate with vice president and higherpositions within the Company.  Benefitsprovided to employees are subject to change in the discretion of August Technology.

 

**7.****             StockOptions. **At the discretion of August Technology, Employee may be grantedstock options from time to time, which options shall be subject to the termsand conditions of the August Technology Corporation 1997 Stock OptionPlan, as amended from time to time, or any successor plan, and the relatedstock option agreements.  Further,Employee shall be eligible to participate in the August TechnologyCorporation 2000 Employee Stock Purchase Plan, as amended from time to time, orany successor plan, subject to the terms and conditions contained therein.

 

**8.****             Termination.**  Employee’s employment under this Agreementmay be terminated:

 

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

 

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

 

(c)                                  ByAugust Technology immediately upon notice to Employee for cause whichshall be defined as:

 

(i)                                     Employee’smaterial failure or neglect, or refusal to perform, the duties andresponsibilities of his/her position and/or the reasonable direction of theBoard of Directors or his/her superiors;

 

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

 

(iii)          Employee’sconviction of a crime, or commission of any act involving moral turpitude;

 

(iv)                              Anymaterial default or nonperformance of the terms of this Agreement, or anyviolation of Paragraphs 10, 11, 12, 14 and/or 15 of this Employment Agreement;or

 

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

 

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

 

**9.****             Changein Control.**  If, within eighteen(18) months following a Change in Control (as defined below), Employee’semployment is terminated (as defined below), then:

 

(a)                                  Employeeshall be paid his/her last Base Salary on a regular payroll cycle as of theeffective date for the time period as set forth in Exhibit A as “SeverancePeriod” from the effective date of such termination;

 

(b)                                 Forthe same Severance Period from the effective date of such termination as setforth in Paragraph 9(b), the Company shall, if Employee elects to continuegroup health or other group benefits as allowed under COBRA, make the COBRApayments for the Change In Control Severance Period;

 

(c)                                  Theright to exercise all unexpired and non-vested stock options in favor ofEmployee shall immediately vest and accelerate; and

 

(d)                                 **Limitation on Change of Control Payments**.  Employee shall not be entitled to receive anyChange of Control Action, as defined below, which would constitute an “excessparachute payment” for purposes of Code Section 280G, or any successorprovision, and the regulations thereunder. In the event any Change of Control Action payable to Employee wouldconstitute an “excess parachute payment,” then the acceleration of theexercisability of such stock options and the payments to such Participantpursuant to this Paragraph 9 shall be reduced to the largest extent or amount

 

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aswill result in no portion of such payments being subject to the excise taximposed by Section 4999 of the Code. For purposes of this Paragraph 9, a “Change of Control Action” shallmean any payment, benefit or transfer of property in the nature of compensationpaid to or for the benefit of Employee under any arrangement which isconsidered contingent on a Change of Control for purposes of Code Section 280G,including, without limitation, any and all salary, bonus, incentive, restrictedstock, stock option, compensation or benefit plans, programs or otherarrangements, and shall include benefits payable under this Agreement.

 

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

 

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

 

(2)                                  Theacquisition of direct or indirect beneficial ownership (as defined in Rule13d-3 under the Securities Exchange Act of 1934) of securities of the Companyby any person or entity or by a group of associated persons or entities actingin concert in one or a series of transactions, which causes the aggregatebeneficial ownership of such person, entity or group to equal or exceed twentypercent (20%) or more of the total combined voting power of all classes of theCompany’s then issued and outstanding securities;

 

(3)                                  Thesale 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)                                  Thestockholders of the Company approve any plan or proposal for the liquidation ofthe Company; or

 

(5)                                  Achange in the composition of the Board of the Company at any time during anyconsecutive 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 ofthe 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 wasentered into less than twenty-four months prior to the change in composition ofthe Board; and (ii) any new director whose election to the Board of Directorsor nominations for election to the Board of Directors was approved by a vote ofat least two-thirds (2/3) of the directors identified in the immediatelypreceding clause (i).

 

(6)                                  TheCompany enters into a letter of intent, an agreement in principle or adefinitive 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 Changeof Control, or a tender or exchange offer or proxy contest is commenced thatultimately results in an event described in Paragraph 9(e)(2) or 9(e)(5).

 

(f)                                    **Termination**.  Forpurposes of this Paragraph 9, “Termination” shall mean any of the followingevents occurring within eighteen (18) months after a Change of Control:

 

(1)                                  The termination of Employee’s employment by theCompany for any reason, with or without cause, except for termination resultingfrom conduct by Employee constituting (a) a felony involving moral turpitudeunder either federal law or the law of the State of Minnesota, or (b) Employee’swillful failure to fulfill his/her employment duties with the Company;provided, however, that for purposes of this clause (c), an act or failure toact by Employee shall not be “willful” unless it is done, or omitted to bedone, in bad faith and without any reasonable belief that Employee’s action oromission were in the best interests of the Company; or

 

(2)                                  The termination of employment with the Company byEmployee for Good Reason.  Suchtermination shall be accomplished by, and effective upon, Employee givingwritten notice to Company of his/her decision to terminate.  “Good Reason” shall mean a good faithdetermination by Employee, in Employee’s sole and absolute judgment, that anyone or more of the following events has occurred, at any time during the termof this Agreement or after a Change of

 

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Control; provided, however, that such event shall notconstitute “Good Reason” if Employee has expressly consented to such event inwriting or if Employee fails to provide written notice of his/her decision toterminate within sixty (60) days of the occurrence of such event:

 

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

 

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

 

(c)                                  A requirement imposed by the Company on Employeethat results in Employee being based at a location that is outside of atwenty-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 orgreater 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, orany other employee compensation or benefit plan, program or arrangement, inwhich Employee is or has been participating;

 

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

 

(e)                                  Any action by the Company that would materiallyadversely affect the physical conditions in or under which Employee performs his/heremployment duties; or

 

(f)                                    Any material breach by the Company of thisEmployment 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 thanthe events specified in clauses (a) through (f) above.

 

**10.****          ConfidentialInformation.**  During the term ofthis Agreement and at all times thereafter, Employee shall not directly orindirectly use or disclose any trade secret, proprietary or confidentialinformation of August Technology or any subsidiary for the benefit of anyperson or entity other than August Technology or any subsidiary withoutprior written approval of August Technology’s Board of Directors.  For purposes of this Agreement, in additionto all materials and information protected by applicable statute or law, theparties acknowledge that confidential information shall include anyinformation, whether in print, on computer disc or tape or otherwise, which isnot public information and which relates to August Technology or anysubsidiary, or August Technology’s or any subsidiary’s existing orreasonably foreseeable business, including but not limited to informationrelating to research, development, technology, manufacturing processes,purchasing and sales, information relating to sales and other financialstrategies, plans and/or goals, information relating to proprietary rights anddata, ideas, know-how, and/or trade secrets, information regarding the identityand/or needs of clients or customers, client or customer lists and other clientor customer information, information regarding active and inactive accounts of August Technologyor any subsidiary, and information relating to August Technology’s or anysubsidiary’s methods of operation.

 

**11.****          NoncompetitionObligations.**  As a condition toand in consideration of his/her employment and continued employment, and inexchange for the severance and Change of Control provisions as set forth inParagraphs 8 and 9 of this Employment Agreement, and the mutual covenantsherein, Employee agrees that, during his/her employment and for a period of one(1) year following his/her voluntary or involuntary resignation or terminationfor any reason, the Employee will not, on behalf of himself/herself or anyother person or entity:

 

(a)                                  Directly or indirectly solicit, on Employee’s ownbehalf, or on behalf of another, any of August Technology’s or anysubsidiary’s customers or potential customers with whom Employee or Employee’ssupervisees had contact, either directly or indirectly, within the twelvemonths immediately preceding Employee’s resignation or termination ofemployment, for the purpose of providing, selling, or attempting to sell anyproducts or services competing with those provided or sold by August Technologyor any subsidiary, or clearly contemplated thereby due to research,development, engineering, applications, licensing, or other like projects inprocess, at the time of resignation or termination; or

 

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

 

**12.**          **Work Product and Inventions**.  August Technology shall be entitled toall of the benefits, profits, results and work product arising from or incidentto 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 ofhis/her employment by August Technology, be interested, directly orindirectly, in any manner, including, but not limited to, as partner, officer,advisor, or in any other capacity in any other business similar to, or incompetition with, August Technology’s or any subsidiary’s business.

 

Employeeagrees to communicate promptly and fully to August Technology allinventions, discoveries, improvements or designs conceived or reduced topractice 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 itsnominees all of the Employee’s right, title and interest in such inventions,discoveries, improvements or designs and all of his/her right, title andinterest in any patents, patent applications or copyrights based thereonwithout obligation on the part of August Technology or any subsidiary tomake any further compensation, royalty or payment to Employee.  Employee further agrees to assist August Technologyand/or its nominee (without charge but at no expense to Employee) at any timeand in every proper way to obtain and maintain for its and/or their ownbenefit, patents for all such inventions, discoveries and improvements andcopyrights for all such designs.

 

This Agreementdoes not obligate Employee to assign to August Technology any invention,discovery, improvement or design for which no equipment, supplies, facility ortrade secret information of August Technology or any subsidiary was usedand which was developed entirely on Employee’s own time, and (1) which does notrelate (a) directly to the business of August Technology or anysubsidiary, or (b) to August Technology’s or any subsidiary’s actual ordemonstrably anticipated research or development, or (2) which does not resultfrom any work performed by Employee for August Technology or anysubsidiary.

 

**13.****          ExemptInventions.** Identified underExempt Inventions in Exhibit A by descriptive title are all of the Inventions,if any, in which Employee possesses any right, title or interest prior toEmployee’s employment with August Technology or execution of thisEmployment 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 Employeewithin the scope of his/her employment is a “work made for hire” under U.S.copyright laws and that, accordingly, August Technology exclusively ownsall copyright rights in such works of authorship.  For purposes of this paragraph, “scope ofemployment” means that the work of authorship (a) relates to any subject matterpertaining to his/her employment, (b) relates to or is directly or indirectlyconnected with the existing or reasonably foreseeable business, products,projects or confidential information of August Technology or anysubsidiary, or (c) involves the use of any time, material or facility of August Technologyor any subsidiary.

 

**15.****          Returnof Property. **Employee shall,immediately upon his/her involuntary or voluntary resignation or terminationfrom employment for any reason, deliver to August Technology all documentsand other items, whether on computer disc or tape or otherwise, including allcopies thereof, belonging to August Technology or any subsidiary or in anyway related to the business of August Technology or any subsidiary or theservices Employee performed 

 

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for August Technologyor any subsidiary, including but not limited to any documents or itemscontaining trade secret, proprietary, or confidential information, documents inany way relating to any inventions or copyrights, client or customerinformation, information relating to August Technology’s or any subsidiary’sprocesses or procedures and any other materials or documents of any sortrelating to August Technology or any subsidiary.  Employee shall not retain any copies orsummaries of any kind of documents and materials covered by this Paragraph 15.

 

**16.****          Remedyupon Violation.**  Employee and August Technologyagree that a breach or threatened breach of Paragraphs 10, 11, 12, 14 or 15would 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 Technologyand any subsidiary shall be entitled, in addition to any other remedy it mayhave at law or in equity, to an injunction, without the posting of a bond ifallowed by applicable law or with the posting of a minimal bond if required, enjoiningor restraining Employee from any violation or violations or threatenedviolation or violations of Paragraphs 10, 11, 12, 14 and 15, and/or forspecific performance of duties and obligations under such paragraphs, andEmployee hereby consents to the issuance of such injunction.  If any rights or restrictions contained inParagraphs 10, 11, 12, 14 and 15 shall be deemed to be unenforceable by reasonof the extent, duration or geographic scope, or other provision thereof, theparties contemplate that the Court shall reduce such extent, duration orgeographic scope or other provision and enforce Paragraphs 10, 11, 12, 14 and15 in their reduced form for all purposes in the manner contemplated by suchParagraphs.

 

**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 wouldprevent or restrict the Employee in any way from accepting employment with August Technologyand fully performing his/her duties and responsibilities as described in thisAgreement.  Employee, by his/hersignature to this Agreement, further warrants that he/she has not taken andwill not take any trade secret, proprietary or confidential information of anyformer employer, and will not use or disclose any such information to anyone inthe performance of duties and responsibilities under this Agreement.

 

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

 

**19.****          Notices.**  All notices and other communications to begiven under this Agreement shall be in writing and shall be deemed to be givenwhen 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 lastknown address for that party or at such other address as the party may specifyby written notice.

 

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

 

GeneralCounsel

August TechnologyCorporation

4900West 78th Street

Bloomington,MN 55435

 

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

 

# **JefferyNelson**

# **456Lester Point**

# **Waconia,MN  55387**

# ** **

Eitherparty 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 onthe registered date or that stamped on the certified mail receipt, and shall bedeemed received within the fifth business day thereafter, or when it isactually received, whichever is sooner.

 

**20.**          **Survival of Provisions. **Employee acknowledges and agrees that therestrictions and obligations set forth in Paragraphs 10, 11, 12, 13, 14, 15 and16 of this Agreement are reasonable, shall survive his/her resignation from orthe termination of his/her employment, and shall apply to him/her whetherhis/her resignation or termination from employment is voluntary or involuntaryand regardless of the reason for such resignation or termination.

 

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

 

**22.****          GoverningLaw.**  This Agreement shall be construedand interpreted according to the laws of the State of Minnesota, withoutreference to its conflict of laws provisions.

 

**23.****          ParagraphHeadings.**  Paragraph headings areincluded in this Agreement for convenience of reference only, and are not intendedto be full or accurate descriptions of the contents hereof.

 

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

 

**25.****          EntireAgreement.**  This Agreement statesthe entire Agreement of the parties on the subjects set forth herein, andmerges and supersedes all prior agreements and understandings between theparties.  No modification, termination,or attempted waiver of any provision of this Agreement will be valid unless itis made in writing and signed by the party against whom the same is sought tobe 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 reasonbe adjudged invalid, unenforceable or void, the same shall not impair orinvalidate any of the other provisions contained herein, all of which shall beperformed 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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