Exhibit
10.2


 


AUGUST TECHNOLOGY
CORPORATION


 


AMENDED 1998 BOARD
OF DIRECTOR COMPENSATION PLAN


 


(Amended as of July 29, 2003)


 


ARTICLE 1. 
ESTABLISHMENT AND PURPOSE


 


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


 


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


 


ARTICLE
2.  DEFINITIONS


 


The following terms shall
have the meanings set forth below, unless the context clearly otherwise
requires:


 


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


 


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


 


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


 


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


 


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


 


f.                                         “Incentive
Stock Option” means a right to purchase Common Stock granted to an Optionee
pursuant to the Company’s 1997 Stock Option Plan that qualifies as an incentive
stock option within the meaning of Section 422 of the Code.


 


g.                                      “Non-Employee
Director” means any member of the Board who is not an employee of the
Company or any Subsidiary.


 


h.                                      “Non-Statutory
Stock Option” means a right to purchase Common Stock granted to an Optionee
pursuant to the Company’s 1997 Stock Option Plan that does not qualify as an
Incentive Stock Option.


 

















 


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


 


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


 


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


 


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


 


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


 


ARTICLE 3. 
ADMINISTRATION


 


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


 


In accordance with the
provisions of the Plan, the Committee shall select the Optionees from Eligible
Persons; shall determine the number of shares of Common Stock to be subject to
Options granted pursuant to the Plan, the time at which such Options are
granted, the Option exercise price, Option period and the manner in which each
such Option vests or becomes exercisable; and shall fix such other provisions
of such Options as the Committee may deem necessary or desirable and as
consistent with the terms of the Plan. 
The Committee shall determine the form or forms of the agreements with
Optionees which shall evidence the particular terms, conditions, rights and
duties


 

















 


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


 


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


 


ARTICLE
4.  EFFECTIVE DATE OF THE BOARD
COMPENSATION PLAN


 


a.                                                                                       Effective
Date.  This Amended Board
Compensation Plan is effective as of July 1, 2003.  Options may be granted under the Plan prior
to shareholder approval if made subject to shareholder approval.


 


b.                                                                                      Priority
of the Board Compensation Plan.  The
Board Compensation Plan hereby supersedes and replaces any prior compensation
plan applicable to any Board member in his or her capacity as a Board member.


 


ARTICLE 5.  AWARDS UNDER THE BOARD COMPENSATION PLAN


 


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


 


ARTICLE
6.  MISCELLANEOUS


 


a.                                       Governing
Law.  The Board Compensation Plan
and all agreements hereunder shall be construed in accordance with and governed
by the laws of the State of Minnesota without regard to the conflict of laws
provisions of any jurisdictions.  All
parties agree to submit to the jurisdiction of the state and federal courts of
Minnesota with respect to matters relating to the Plan and agree not to raise
or assert the defense that such forum is not convenient for such party.


 


b.                                      Gender
and Number.  Except when otherwise
indicated by the context, reference to the masculine gender in the Plan shall
include, when used, the feminine gender and any term used in the singular shall
also include the plural.


 

















 


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


 


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


 


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


 

















 


Schedule
1 – effective July 1, 2003


 


Board
Compensation Plan


 


1.               External
Board members(1)


a.               Stock
Options:


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


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


b.              Cash:


i.                  At
appointment = $0


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


1.               $500/month
for guidance, telephone calls, etc.


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


3.               $500/meeting
for regularly scheduled committee meeting attendance


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


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


c.               Perquisites:


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


ii.               Life
Insurance – No


iii.            Other
- No


d.              Expense
Reimbursement:


i.                  Reasonable
“out of pocket” expenses – yes


ii.               Travel
– yes if necessary


 


2.               Internal
Board members


a.               Stock
Options:


i.                  At
appointment = none for directorship


ii.               Per
meeting on annual basis = none for directorship


b.              Cash:


i.                  At
appointment = $0 for directorship


ii.               Per
meeting on annual basis = $0 for directorship


c.               Perquisites:


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


ii.               Life
Insurance – none under directorship


iii.            Other
- none under directorship


d.              Expense
Reimbursement:


i.                  Reasonable
“out of pocket” expenses – yes


ii.               Travel
– yes if necessary


 












(1)          Terms
on Initial appointment grant and yearly participation grant:


a.               Exercise
price = market price on date of grant


b.              Vesting
= 


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


(ii) for yearly grants =
100% immediate


c.               Life = 7 years


d.              Termination: none
regardless of continuing Board service not to exceed expiration (life) of
option