## **EXHIBIT 2.4**

 

## **ESCROW AGREEMENT**

 

**THIS ESCROW AGREEMENT** (this “**Agreement**”),dated as of April 16, 2003, is entered into by and amongAugust Technology Corporation, a Minnesota corporation (“**August**”), ASTI Holdings Limited, a companyincorporated in Singapore (“**ASTIHL**”), and Wells Fargo Bank Minnesota,National Association (“**Escrow Agent**”).

 

W I T N E S S E T H:

 

**WHEREAS**, August, ASTIHL and SemiconductorTechnologies & Instruments, Inc., a Delaware corporation (“**STI**”) entered into a Settlement andPurchase Agreement dated as of February 26, 2003 and amended as ofApril 16, 2003 (the “**Purchase Agreement**”); and

 

**WHEREAS**, August and ASTIHL have agreedto enter into this Agreement to secure ASTIHL’s performance of itsindemnification obligations under Article 9 of the Purchase Agreement withrespect to (i) any breach of covenants set forth in Sections 5.13, 5.21, 5.22and 8.5 of the Purchase Agreement; (ii) a misuse, misappropriation orinfringement by STI of Intellectual Property rights of Rudolph or ISOA or a breachof the STI-ISOA Development Agreement between ISOA and STI datedDecember 24, 1997.

 

**NOW, THEREFORE,** in consideration of theforegoing and the mutual covenants and agreements contained herein, and othergood and valuable consideration, the receipt and sufficiency of which is herebyacknowledged, the parties hereto agree as follows:

 

**ARTICLE 1**Definitions

 

1.1                                 Definitions.  Unless the context shall otherwise require,capitalized terms used herein shall have the following meanings (suchdefinitions to be equally applicable to both the singular and plural forms ofthe terms used):

 

“Business Day” means a day on which the Escrow Agent, at itsaddress set forth in Section 5.2, is open for the purpose ofconducting a corporate trust business.

 

“Final Resolution” meansthe a final, binding judgment from a court of law, arbitrator, or mediator ofall matters and claims relating to the misuse, misappropriation or infringementby STI of Intellectual Property rights of Rudolph or ISOA or a breach of theSTI-ISOA Development Agreement between ISOA and STI dated December 24,1997, where all appeals or like request for reconsideration have been exhaustedby all parties so that there may be no further change in any damages awarded.

 

“Final Settlement” meansthe a final, binding settlement with Rudolph/ISOA on all matters and claimsrelating to the misuse, misappropriation or infringement by STI of IntellectualProperty rights of Rudolph or ISOA or a breach of the STI-ISOA DevelopmentAgreement between ISOA and STI dated December 24, 1997.

 

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1.2                                 TermsDefined in Purchase Agreement.  Allcapitalized terms not defined herein shall have the respective meaningsascribed to such terms in the Purchase Agreement.

 

**ARTICLE 2The Escrow Shares**

 

2.1                                 Appointmentof Escrow Agent.  ASTIHL andAugust hereby jointly appoint the Escrow Agent as initial escrow agenthereunder, and the Escrow Agent hereby accepts such appointment.

 

2.2                                 Deliveryof Escrow Shares.  Pursuant to thePurchase Agreement, at the Closing August shall deliver to the EscrowAgent Two Hundred Fifteen Thousand (215,000) shares of August Common Stockvia stock certificates duly endorsed in blank, or accompanied by stock powersduly endorsed in blank (the “Escrow Shares”).  All dividends and distributions of cash or other property payable withrespect to the Escrow Shares shall be held in escrow and distributed along withthe Escrow Shares to which such dividend or distribution relates.  The Escrow Agent shall invest any cashproceeds in an interest bearing account. The Escrow Shares shall appear as issued and outstanding on the booksand records of August.

 

2.3                                 Releaseof First Pool of Escrow Shares .  Thirty-five Thousand (35,000) of the Escrow Shares (the “First Pool”)shall be allocated to secure ASTIHL’s compliance with Sections 5.13, 5.21, 5.22and 8.5 of the Purchase Agreement.  TheEscrow Agent shall distribute the First Pool of Escrow Shares as follows:

 

(a)                                  Distributionto August.    In the event ASTIHLfails to comply with Sections 5.13 and 8.5 of the Purchase Agreement regardingthe delivery of financial statements, August shall be deemed to havesuffered Indemnifiable Losses equal to the value of thirty-five Thousand(35,000) of the Escrow Shares and the Escrow Agent shall return or make adistribution to August of all thirty-five thousand (35,000) of the FirstPool Escrow Shares in satisfaction of ASTIHL’s indemnification obligations toAugust Affiliates for breach of Section 5.13 or Section 8.5 orboth.  In the event ASTIHL fails tocomply with either or both of Sections 5.21 and 5.22 of the Purchase Agreement,the Escrow Agent shall return or make a distribution to August of thatnumber of Escrow Shares which is equal to the value of the Indemnifiable Lossessuffered by August Affiliates as a result of such lack of compliance,valuing the Escrow Shares at a value of $6.50 per share, in satisfaction ofASTIHL’s indemnification obligations to August Affiliates.  Notwithstanding the foregoing, not more thanthirty-five thousand (35,000) Escrow Shares in the aggregate shall bedistributed pursuant to this Section 2.3(a).  The Escrow Agent shall make all distributions pursuant to thisSection 2.3(a) within seven days of receipt of joint written instructionsexecuted by August and ASTIHL in form substantially similar to ExhibitA attached hereto, setting forth the number of shares to be distributed.

 

(b)                                 Distributionto ASTIHL.  In the event ASTIHL hascomplied with each of Sections 5.13, 5.21, 5.22 and 8.5, August and ASTIHLshall provide to the Escrow Agent on or before                             jointwritten instructions in form substantially similar to Exhibit A attachedhereto authorizing the Escrow Agent to distribute the First Pool of

 

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Escrow Shares, orsuch number of Escrow Shares as remains in the First Pool, to ASTIHL withinseven days after such date.

 

2.4                                 Releaseof Second Pool of Escrow Shares .   One Hundred Eighty Thousand (180,000) of theEscrow Shares (the “Second Pool”) shall be allocated to secure ASTIHL’sindemnification obligations with respect to Rudolph/ISOA Losses.  The Escrow Agent shall distribute theSecond Pool of Escrow Shares as follows:

 

(a)                                  Distribution to August.  Inthe event August Affiliates incur Rudolph/ISOA Losses, the Escrow Agent shall return or make adistribution to August of that number of Escrow Shares (but not exceeding180,000 shares) which is equal to the value of the Rudolph/ISOA Losses sufferedby August Affiliates, valuing the Escrow Shares at the closing price pershare reported by Nasdaq on either the day of Final Resolution or FinalSettlement, in satisfaction of ASTIHL’s indemnification obligations toAugust Affiliates. TheEscrow Agent shall make all distributions pursuant to this Section 2.4(a)within seven days of receipt of joint written instructions executed byAugust and ASTIHL in form substantially similar to Exhibit Aattached hereto, setting forth the number of shares to be distributed.

 

(b)                                 Distributionto ASTIHL.  In the eventAugust Affiliates have incurred no Rudolph/ISOA Losses on or prior toOctober 15, 2003 and no legal proceedings involving Rudolph/ISOA Losseshave been initiated by such date, August and ASTIHL shall provide to theEscrow Agent joint written instructions in form substantially similar to ExhibitA attached hereto authorizing the Escrow Agent to distribute the SecondPool of Escrow Shares to ASTIHL within seven days after such date.  The Escrow Agent shall distribute the EscrowShares to ASTIHL in the manner instructed by such joint written instructions.  If August Affiliates have incurredRudolph/ISOA Losses on or prior to October 15, 2003 or legal proceedingsinvolving Rudolph/ISOA Losses have been initiated by such date, no EscrowShares from the Second Pool shall be distributed to ASTIHL until Rudolph andISOA, as one party, and August and STI, as the other party, shall havefinally resolved their Intellectual Property disputes via Final Resolution orFinal Settlement and August shall have received a distribution of EscrowShares from the Second Pool in accordance with Section 2.4(a) insatisfaction of its Rudolph/ISOA Losses. Thereafter, August and ASTIHL shall provide to the Escrow Agentjoint written instructions in form substantially similar to Exhibit A attachedhereto instructing the Escrow Agent to distribute any remaining Escrow Sharesfrom the Second Pool to ASTIHL and the Escrow Agent shall comply with suchinstructions.

 

2.5                                 DisputeResolution Procedures.  In the eventthat a party hereto has not entered into joint written instructions requestedin writing by another party hereto, August and ASTIHL will attemptamicably to resolve the matters that are the basis for such dispute and, uponsuch resolution, will deliver to the Escrow Agent written directions executedjointly by August and ASTIHL in the form substantially similar to ExhibitA attached hereto with respect to distribution of the Escrow Shares.

 

2.6                                 Arbitration.  If any dispute is not resolved pursuant toSection 2.5 within 30 days after the initial written request to providejoint written instructions, then either August or

 

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ASTIHLmay commence an arbitration proceeding pursuant to Article 12 of thePurchase Agreement to resolve such dispute.

 

2.7                                 PermittedInvestments.  From the date hereofuntil the date of disbursement of the entire amount held in escrow, the EscrowAgent is authorized and directed to invest and reinvest the cash portion, ifany, in any of the following investments (each a “**Permitted Investment”**) in each case pursuant to jointinstructions of August and ASTIHL: (i) readily marketable obligationsmaturing within six months after the date of acquisition thereof issued by theUnited States of America or any agency or instrumentality thereof; (ii) readilymarketable obligations maturing within six months after the date of acquisitionthereof issued by any state or municipality within the United States ofAmerica, or any political subdivision, agency or instrumentality thereof, rated“A” or better by either Standard & Poor’s Corporation or Moody’s InvestorsService Inc.; (iii) readily marketable commercial paper maturing within 180days after the date of issuance thereof which has the highest credit rating ofeither Standard & Poor’s Corporation or Moody’s Investors Service, Inc.; or(iv) six month certificates of deposit issued by any bank incorporated anddoing business pursuant to the laws of the United States of America or anystate thereof having combined capital and surplus of at least$500,000,000.  In the event the EscrowAgent does not receive joint instructions from August and ASTIHL to investor reinvest the cash portion, if any, the Escrow Agent agrees to invest andreinvest such funds in Wells Fargo Bank Cash Investment Money Market Funds, ora successor or similar fund agreed to by August and ASTIHL in writing,which invests in direct obligations of, or obligations fully guaranteed as toprincipal and interest by, the United States Government and repurchaseagreements with respect to such securities.

 

2.8                                 Taxes.  All dividends, distributions, interest andgains earned or realized on the cash portion, if any (“**Earnings**”), shall be treated as having beenreceived by ASTIHL.  The Escrow Agentannually shall file information returns with the United States Internal RevenueService and payee statements with ASTIHL, documenting such Earnings.  ASTIHL shall provide to the Escrow Agent allforms and information necessary to complete such information returns and payeestatements.  In the event the EscrowAgent becomes liable for the payment of taxes, including withholding taxes,relating to Earnings, the Escrow Agent may deduct such taxes from theescrow.  All Earnings on the EscrowShares shall be accounted for by the Escrow Agent separately and,notwithstanding any provisions of this Agreement, shall be treated as havingbeen received by ASTIHL.  The EscrowAgent annually shall file information returns with the United States InternalRevenue Service and payee statements with ASTIHL, documenting such Earnings onthe Escrow Shares.  ASTIHL shall provideto the Escrow Agent all forms and information necessary to complete suchinformation returns and payee statements. In the event the Escrow Agent becomes liable for the payment of taxes,including withholding taxes, relating to Earnings on the Escrow Shares, the EscrowAgent may deduct such taxes from such Earnings.

 

**ARTICLE 3Rights as Shareholder**

 

3.1                                 Rightsas Holder.  Nothing herein shall bedeemed to create in the Escrow Agent any rights as a shareholder ofAugust.  Unless and until the EscrowShares are delivered by the

 

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EscrowAgent to August in accordance herewith, ASTIHL shall possess all rights ofownership of a record shareholder of August (including the right to votesuch shares and receive dividends, subject to the terms hereof).  The Escrow Shares will appear as issued andoutstanding on August’s balance sheet.

 

**ARTICLE 4Escrow Agent**

 

4.1                                 Compensationof Escrow Agent; Indemnification.

 

(a)                                  TheEscrow Agent shall be entitled to an initial fee of $1,500 and an annual fee of$1,500, plus all out-of-pocket expenses incurred during the term of thisAgreement as set forth on Exhibit B hereto for its services under andpursuant to this Agreement. August and ASTIHL shall each pay one-half of: (i) the initialfee on the date hereof and (ii) the annual fee within five Business Days aftereach annual anniversary of the date hereof if the Escrow Shares remain inescrow on such annual anniversary date.

 

(b)                                 TheEscrow Agent acknowledges and agrees that it will provide the servicesdescribed herein in consideration of the fees described in Section 4.1(a) aboveand Exhibit B hereto and that the Escrow Agent shall not be entitled toreceive, and no other party hereto shall be obligated to pay, the Escrow Agentany other fees for services hereunder.

 

(c)                                  August andASTIHL will jointly and severally indemnify and hold harmless the Escrow Agentand its officers and employees from and against any and all losses, costs,charges, expenses, judgments and liabilities, including, without limitation,reasonable expenses of counsel and expenses of litigation incurred while actingin good faith to carry out the transactions contemplated by this Agreement;provided, however, that the Escrow Agent shall not be entitled to suchindemnification to the extent that any such losses, costs, changes, expenses,judgments or liabilities are caused by the gross negligence and/or willfulmisconduct of the Escrow Agent or its officers or employees.

 

(d)                                 Shouldany controversy arise between the parties with respect to this Agreement, orwith respect to the right to receive any of the Escrow Shares, the Escrow Agentshall have the right to institute a bill of interpleader in any court ofcompetent jurisdiction as specified in Section 5.10 of this Agreement todetermine the rights of the parties. Should a bill of interpleader be instituted, or should the Escrow Agentbecome involved in litigation in any manner whatsoever on account of thisAgreement or the Escrow Shares, August and ASTIHL will each pay one-halfof the Escrow Agent’s reasonable attorneys’ fees incurred by the Escrow Agent,and any other disbursements, expenses, losses, costs, and damages in connectionwith or resulting from such litigation.

 

4.2                                 EscrowAgent’s Performance; Duty of Care.

 

(a)                                  TheEscrow Agent accepts and agrees to hold the Escrow Shares and consents andagrees to perform and comply with all of the terms and provisions on its partcontained in this Agreement.  The EscrowAgent shall not be charged with knowledge of content or conditions of thePurchase Agreement.

 

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(b)                                 TheEscrow Agent shall take no action except as provided herein and shall have noresponsibilities to the parties hereto except those specifically provided forherein.  In performing its duties andobligations hereunder, the Escrow Agent shall exercise the same degree of skilland care as is ordinarily exercised by similar institutions in the holding ofnegotiable instruments under similar circumstances.

 

(c)                                  Noprovision of this Agreement shall be construed to relieve the Escrow Agent fromliability for its own failure to act in accordance with Section 4.2(b),its own gross negligence  or its ownwillful misconduct or that of its officers or employees; provided, however,that: (i) the duties and obligations of the Escrow Agent shall be determinedsolely by the express provisions of this Agreement; (ii) the Escrow Agent shallnot be liable except for the performance of such duties and obligations as arespecifically set forth in this Agreement; and (iii) in the absence of bad faithon the part of the Escrow Agent, the Escrow Agent may conclusively rely, as tothe truth of the statements expressed therein, upon any documents furnished tothe Escrow Agent and conforming to the requirements of this Agreement and theEscrow Agent may rely and shall be protected in acting upon any documentbelieved by it to be genuine and to have been signed or presented by the properparty or parties.

 

4.3                                 Resignationby the Escrow Agent.  The EscrowAgent may at any time resign from its appointment as escrow agent of the EscrowShares hereby created by giving at least 30 days written notice toAugust and ASTIHL, and such resignation shall take effect on the later ofthe date specified in such notice or upon the appointment of a successor escrowagent pursuant to the provisions of Section 4.5 of this Agreement andacceptance by the successor Escrow Agent of such appointment.   Should the Escrow Agent resign, the EscrowAgent shall return to August and ASTIHL a pro-rata portion of any feespreviously paid to the Escrow Agent for any periods following the effectivedate of the resignation.

 

4.4                                 Removalof the Escrow Agent.  The EscrowAgent may be removed at any time, by an instrument or concurrent instruments inwriting delivered to the Escrow Agent, duly executed by August and ASTIHL;provided, however, that such removal shall not take effect prior to theappointment of a successor Escrow Agent pursuant to the provisions ofSection 4.5 of this Agreement and acceptance by the successor Escrow Agentof the trusts hereby created.

 

4.5                                 Appointmentof Successor Escrow Agent.  In casethe Escrow Agent hereunder shall (a) resign pursuant to Section 4.3hereof; (b) be removed pursuant to Section 4.4 hereof; or (c) bedissolved, taken under the control of any public officer or officers or of areceiver appointed by the court, or otherwise become incapable of actinghereunder, a successor will be appointed by August, with the prior writtenconsent of ASTIHL.  If no successorEscrow Agent shall have been so appointed and have accepted appointment within30 days of the giving of written notice by the resigning Escrow Agent or within30 days of the giving of written notice of removal by August and ASTIHL orwithin 30 days of August’s or ASTIHL’s giving written notice of any of theevents specified in clause (c) of the preceding sentence, the Escrow Agent,ASTIHL, August or any of them may petition any court of competentjurisdiction for the appointment of a successor Escrow Agent.  Every such successor Escrow Agent appointedpursuant to the provisions of this Section 4.5 shall be willing to acceptthe trusteeship of the Escrow Shares under the terms and conditions of thisAgreement.  NotwithstandingSection 4.4

 

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orSection 4.5 or any other provision contained in this Agreement to thecontrary, no resignation or removal of an Escrow Agent shall take effect untila duly appointed successor Escrow Agent has received the full amount of theEscrow Shares.

 

4.6                                 Concerningany Successor Escrow Agent.  Everysuccessor Escrow Agent appointed hereunder shall execute, acknowledge anddeliver to its predecessor and also to ASTIHL and August an instrument inwriting accepting such appointment hereunder, and thereupon such successorshall become fully vested with all the trusts, powers, rights, obligations,duties, remedies, immunities and privileges of its predecessor as if originallynamed herein; but, nevertheless: (i) such predecessor shall, on the writtenrequest of ASTIHL or August, or such successor, execute and deliver aninstrument transferring to such successor Escrow Agent all the trusts, powers,rights, obligations, duties, remedies, immunities and privileges of suchpredecessor hereunder; and (ii) such predecessor shall deliver all of theEscrow Shares to its successor.  Shouldany instrument in writing from ASTIHL or August be required by anysuccessor Escrow Agent for more fully and certainly vesting in such successor,any and all such instruments in writing shall, on request, be executed,acknowledged and delivered by the Escrow Agent, ASTIHL or August at theexpense of August and the  ASTIHL.

 

4.7                                 Termof Escrow Agreement.  This Agreementshall remain in full force and effect until all the Escrow Shares have beendistributed to ASTIHL or August in accordance with Section 2.3 hereofand the Escrow Agent shall have received all fees and other sums owed to ithereunder.

 

4.8                                 Merger,Conversion, Consolidation, or Succession to Business.  Any corporation into which the Escrow Agentmay be merged or converted or with which it may be consolidated, or anycorporation resulting from any merger, conversion, or consolidation to whichthe Escrow Agent shall be a party, or any corporation succeeding to all orsubstantially all of the corporate trust business of the Escrow Agent, shall bethe successor of the Escrow Agent hereunder, provided such corporation shall beotherwise qualified and eligible under this Article, without the execution orfiling of any paper or any further act on the part of any of the partieshereto.

 

**ARTICLE 5Miscellaneous**

 

5.1                                 Waivers;Amendments.

 

(a)                                  Nofailure or delay by any party in exercising any power or right hereunder shalloperate as a waiver thereof, nor shall any single or partial exercise of anysuch right or power, or any abandonment or discontinuance of steps to enforcesuch a right or power, preclude any other or further exercise thereof or theexercise of any other right or power. No waiver of any provision of this Agreement or consent to any departuretherefrom shall in any event be effective unless the same shall be authorizedas provided in Section 5.1(b) below, and then such waiver or consent shallbe effective only in the specific instance for the purpose for whichgiven.  No notice or demand on any partyin any case shall entitle such party to any other or further notice or demandin similar or other circumstances.

 

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(b)                                 Noprovision of this Agreement may be waived, amended, supplemented, or modifiedexcept pursuant to an agreement in writing entered into by ASTIHL,August and the Escrow Agent.

 

5.2                                 Notices.All notices and other communications hereunder shall be in writing and shall besufficiently given if made by hand delivery, by telecopier, by recognizedovernight courier service, or by registered or certified mail with postageprepaid and return receipt requested (or a comparable delivery) to the parties atthe following addresses (or at such other address for a party as shall bespecified by it by like notice):

 

If toAugust, to:

 

August TechnologyCorporation

4900West 78th Street

Bloomington,Minnesota 55435

Attn:  John Vasuta, General Counsel

Fax:                           (952)820-0060

 

With acopy (which shall not constitute notice) to:

 

Fredrikson& Byron, P.A.

1100International Centre

900Second Avenue South

Minneapolis,MN 55402-3397

FAX:  612-347-7077

Attn:  Robert Ranum, Esq.

 

If toASTIHL, to:

 

ASTIHoldings Limited

Blk25, Kallang Avenue, #06-01

KallangBasin Industrial Estate

Singapore, 339416

 

Attention:Charles Cher, CEO

 

If toEscrow Agent, to:

 

WellsFargo Bank Minnesota, N.A.

Corporate Trust Services

MAC N9303-110

Sixth and Marquette

Minneapolis, MN 55479

FAX: 612-667-2160

Attention:                          

 

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Anyparty may change the above-specified recipient and/or mailing address by noticeto all other parties given in the manner herein prescribed.  All notices shall be deemed given on the daywhen actually delivered as provided above (if delivered personally or bytelecopy) or on the day shown on the return receipt (if delivered by mail).

 

5.3                                 GoverningLaw.  This Agreement shall begoverned by, and construed and enforced in accordance with, the laws of theState of Delaware, without regard to its conflicts of law doctrine.

 

5.4                                 Counterparts.  This Agreement may be executed in two ormore counterparts, and by the different parties hereto in separatecounterparts, each of which, when so executed and delivered, shall be anoriginal, but all of which together shall constitute one and the sameinstrument.

 

5.5                                 Severability.  If any term or provision of this Agreementor the application thereof to any circumstance shall, in any jurisdiction andto any extent, be invalid or unenforceable, such term or such provision shallbe ineffective as to such jurisdiction to the extent of such invalidity orunenforceability without invalidating or rendering unenforceable any remainingterms or provisions of this Agreement or the application of such term orprovision to circumstances other than those as to which it is held invalid orunenforceable.  To the extent permittedby applicable law, the parties hereto waive any provision of law that rendersany term or provision of this Agreement invalid or unenforceable in anyrespect.

 

5.6                                 Headings.  The headings of the Sections and subsectionsof this Agreement have been inserted for convenience of reference only andshall in no way restrict or otherwise modify any of the terms or provisionshereof.

 

5.7                                 EntireAgreement.  This Agreement and thePurchase Agreement supersede all prior agreements, written or oral, between oramong any of the parties hereto relating to the transactions contemplatedhereby or thereby and each of the parties hereto represents and warrants to theothers that this Agreement and the Purchase Agreement constitute the entireagreement among the parties relating to the transactions contemplated herebyand thereby.

 

5.8                                 Assignment.  Neither this Agreement nor any of therights, interests or obligations hereunder shall be assigned by any of theparties hereto without the prior written consent of the other parties, otherthan strictly in accordance with the provisions of Section 4.3 throughSection 4.6.

 

5.9                                 BindingEffect.  All agreements,representations, warranties and indemnities in this Agreement and in anyagreement, document or certificate delivered concurrently with the execution ofthis Agreement or from time to time hereafter shall bind the party making the sameand its successors and assigns and shall inure to the benefit of each party forwhom made and its permitted successors and assigns.

 

5.10                           Choiceof Forum.  Except as set forth inSection 2.5 above, the parties agree that any legal action or proceeding withrespect to or arising out of this Agreement shall be brought in any federal orstate court in the State of Delaware, which courts shall have exclusiveoriginal

 

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jurisdictionover any dispute or controversy with respect to or arising out of this Agreement.  The parties irrevocably consent to theservice of process out of any of such courts in any such action or proceedingby the mailing of copies thereof by registered or certified airmail, postageprepaid, to ASTIHL, August or the Escrow Agent, as the case may be, attheir respective addresses for notices as specified in Section 5.2 andthat such service shall be effective five Business Days after suchmailing.  Nothing herein shall affectthe right to serve process in any other manner permitted by law.

 

5.11                           Conflictswith Purchase Agreement.  In theevent the provisions of this Agreement are inconsistent with or contradict theterms of the Purchase Agreement, the terms of this  Agreement shall govern.

 

*****

 

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**IN WITNESS WHEREOF**,August, ASTIHL and the Escrow Agent have executed this Agreement as of the datefirst written above.

 
|   | **August Technology Corporation**         |
|--------|------------------------------------------------|
|   |                                           |
|   |                                           |
|   | By:                                            | /s/ John M. Vasuta |   |
|   | Name: John M.  Vasuta                          |
|   | Title: VP,  General Counsel, Secretary/Officer |

 

 

**[SignaturePage to Escrow Agreement]**

 

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|   | **Wells  Fargo Bank Minnesota, National  Association, as Escrow Agent** |
|--------|-------------------------------------------------------------------------|
|   |                                                                    |
|   |                                                                    |
|   | By:                                                                     | /s/ Marco X. Morales |   |
|   | Name:  Marco X. Morales                                            |
|   | Title: Corporate  Trust Officer                                         |

 

 

**[SignaturePage to Escrow Agreement]**

 

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|   | **ASTI Holdings Limited**         |
|--------|-----------------------------------|
|   |                              |
|   |                              |
|   | By:                               | /s/ Charles Cher |   |
|   | Name:  Charles Cher          |
|   | Title:    Director |

 

 

**[SignaturePage to Escrow Agreement]**

 

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**ExhibitA**

** **

**MUTUALLYAGREED DISTRIBUTION**

** **

To:                              WellsFargo Bank Minnesota, National Association

 

Thiscertificate is issued pursuant to Section 2.3 of the Escrow Agreement,dated as of                            ,200   (the “**Escrow Agreement**”), by and amongAugust Technology Corporation (“**August**”), ASTI Holdings Limited (“**ASTIHL**”)and Wells Fargo Bank Minnesota, National Association (the “**Escrow Agent**”).  Capitalized terms herein shall have themeaning ascribed to them in the Escrow Agreement.

 

Youare hereby instructed to deliver, on or before            , theEscrow Shares currently being held by you pursuant to the terms and conditionsof the Escrow to Agreement to                                  at the following address:                                                  .

** **

** **
|   | August Technology  Corporation |
|--------|-------------------------------------|
|   |                                |
|   | By:                                 |   |   |
|   |                                | Name: |   |   |
|   |                                | Its: |   |   |
|   |                                |
|   |                                |
|   | ASTI  Holdings Limited              |
|   |                                |
|   | By:                                 |   |   |
|   |                                | Name: |   |   |
|   |                                | Its: |   |   |
|        |                                     |  |  |  |  |  |  |  |  |

 

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**ExhibitB**

 

**FEESCHEDULE**

** **
| **ACCEPTANCE  FEE:** |   | **$  1,500.00** | ** ** |
|----------------------|--------|-----------------|------------|

For initial servicesincluding examination of the Escrow Agreement and all supporting documents thisis a one-time fee payable upon the *opening* of the account.

 
| **ADMINISTRATION  FEE:** |   | **$  1,500.00*** |   |
|--------------------------|--------|------------------|--------|

** **

An annual charge *or anyportion* of a 12-month period thereof.  This fee is payable upon the *opening* of the account and annuallythereafter.  This charge is not proratedfor the first year.  **There is anadditional $250 annual charge for each sub account opened.**

** **

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*Plus mailing expenses.

 

**TRANSACTION FEE:**

** **
| Wire transfer of funds                                                |   | $ | 25.00 |   |
|-----------------------------------------------------------------------|--------|---|-------|--------|
| Other transfer of funds (i.e. checks, internal  account transfers)    |   | $ | 15.00 |   |
| Asset transactions  (purchases/sales/calls/deposit/withdrawals, etc.) |   | $ | 20.00 |   |

 

No charge for Wells FargoShares transactions other than those disclosed in the Shares Prospectus.

 

**EXTRAORDINARY SERVICES:**

For any services otherthan those covered by the aforementioned, a special per hour charge will bemade commensurate with the character of the service, time required andresponsibility involved.  Such servicesinclude but are not limited to excessive administrative time, attendance atclosings, specialized reports (e.g. tax reporting) and record-keeping, unusualcertifications, etc.

 
| 1099-Tax reporting  |   | $               | 15.00 per report |   |
|---------------------|--------|-----------------|------------------|--------|
| Other Tax reporting |   | per hour charge |             |

 

**FEE SCHEDULE IS SUBJECT TOANNUAL REVIEW AND ADJUSTMENT.**

 

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**AMENDMENT NO. 1**

**TO**

**ESCROW AGREEMENT**

** **

**THIS AMENDMENT** is dated as ofAugust 28, 2003, and amends that certain Escrow Agreement datedApril 16, 2003 (the “Escrow Agreement”) by and among **August Technology Corporation**, aMinnesota corporation (“August”), **ASTIHoldings Limited**, a company incorporated in Singapore (“ASTIHL”) and**Wells Fargo Bank Minnesota, NationalAssociation** (“Escrow Agent”).

 

**WHEREAS**, the parties entered into theEscrow Agreement to secure ASTIHL’s performance of certain of itsindemnification obligations under Article 9 of the Settlement and PurchaseAgreement by and among August, ASTIHL and Semiconductor Technologies &Instruments, Inc. (“STI”) dated February 26, 2003 and amendedMarch 19, 2003 and April 16, 2003 (the “Purchase Agreement”) anddelivered two hundred fifteen thousand (215,000) shares of August commonstock (the “Escrow Shares”) to the Escrow Agent to be held pursuant to theterms of the Escrow Agreement.

 

**WHEREAS**, August proposes to registerwith the Securities and Exchange Commission shares of its common stock for salein an underwritten public offering (the “Offering”) and has offered to registerall or a portion of the Escrow Shares as well as the additional 385 shares ofAugust common stock owned by ASTIHL for sale by ASTIHL as a sellingshareholder in the Offering.

 

**WHEREAS**, in connection with itsparticipation as a selling shareholder in the Offering, ASTIHL has executed anddelivered a Power of Attorney naming Jeff O’Dell and Stan Piekos, and eitherone of them, as ASTIHL’s attorney-in-fact to enter into a Custody Agreement(the “Custody Agreement”) and an Underwriting Agreement (the “Underwriting Agreement”)with respect to the proposed sale of its shares.

 

**NOW, THEREFORE**, in consideration of theforegoing premises and the mutual representations, warranties, covenants andagreements contained herein, the parties hereto agree as follows:

 

1)                                      Definitions.  Except to the extent expressly modified bythis Amendment, all capitalized terms used in this Amendment shall have themeanings set forth in the Escrow Agreement.

 

2)                                      Deliveryto Custodian.  As soon as practicablefollowing the execution of this Amendment, August shall deliver to theEscrow Agent a copy of the Custody Agreement and the Escrow Agent shall placethe Escrow Shares and related stock powers in custody with the custodian namedin the Custody Agreement, for delivery under the Underwriting Agreement.  The Escrow Agent shall take any and allother actions necessary or appropriate to permit the sale of the Escrow Sharesin connection with the Offering.

 

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3)                                      Depositof Proceeds of Sale.  As soon aspracticable following the completion of the Offering, August shall causethe proceeds from the sale of the first 35,000 of the Escrow Shares sold, lessapplicable underwriting discounts, to be deposited with the Escrow Agent as allor part of the First Pool and the proceeds from any additional Escrow Sharessold (up to 180,000 shares), less applicable underwriting discounts, to bedeposited with the Escrow Agent as all or part of the Second Pool.  Any proceeds of the Offering deposited withthe Escrow Agent as all or part of the First or Second Pool shall be referredto as the Escrow Cash.  The Escrow Agentshall distribute the Escrow Cash in the First Pool at the same time and uponthe same conditions as the Escrow Agent would have distributed the EscrowShares held in the First Pool, subject to the last sentence of thisparagraph.  The Escrow Agent shalldistribute the Escrow Cash in the Second Pool at the same time and upon thesame conditions as the Escrow Agent would have distributed the Escrow Sharesheld in the Second Pool, subject to the last sentence of this paragraph.  If the First Pool or the Second Pool includeboth Escrow Cash and Escrow Shares, any distribution shall be made first fromthe Escrow Cash and to the extent any distribution remains unpaid, thereafterfrom the Escrow Shares, valued in the manner set forth in the Escrow Agreement.

 

4)                                      Effectivenessof Escrow Agreement.  Except to theextent otherwise provided herein, the Escrow Agreement shall remain in fullforce and effect.

 

INWITNESS WHEREOF, each of the parties has caused this Amendment to be executedin the manner appropriate for each, and to be dated as of the date first abovewritten.

 

 
|   | AUGUST TECHNOLOGY  CORPORATION                                 |
|--------|---------------------------------------------------------------------|
|   |                                                                |
|   | By:                                                                 |  /s/ John M.  Vasuta |   |
|   | Its: Vice  President Intellectual Property, General Counsel         |
|   |                                                                |
|   |                                                                |
|   | ASTI HOLDINGS  LIMITED                                              |
|   |                                                                |
|   | By:                                                                 |  /s/ Charles  Cher |   |
|   | Its: Chief  Executive Officer                                       |
|   |                                                                |
|   |                                                                |
|   | Wells Fargo Bank  Minnesota, National Association,  as Escrow Agent |
|   |                                                                |
|   | By:                                                                 |   | /s/ Steven  Gubrud |   |
|   | Name:                                                               | Steven Gubrud |   |
|   | Title:                                                              |   Assistant  Vice President |   |
|        |                                                                     |  |  |  |  |  |

 

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