Document:

<PAGE>

                      [LOGO] MARQUETTE CAPITAL BANK, N. A.
                      AMENDED AND RESTATED LETTER AGREEMENT

August 10, 2000

To:      August Technology Corporation (the "Borrower")
         4900 West 78th Street
         Bloomington, Minnesota 55435

Gentlemen:

This letter agreement confirms the additional agreements between the Borrower
and Marquette Capital Bank, N. A. (the "Bank"). In consideration of the mutual
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by the parties, the
Borrower and the Bank agree as follows:

         1.       Subject to the provisions of this letter agreement, at the
Borrower's request, the Bank shall make loans to the Borrower during the period
from the date of this letter agreement to May 31, 2002 in an aggregate amount
not exceeding Five Million Dollars ($5,000,000) at any time outstanding (the
"Line of Credit"). The Line of Credit is a revolving line of credit, and the
Borrower may borrow, prepay and reborrow under the Line of Credit. The
Borrower's obligation to repay such loans and to pay interest and other charges,
fees and expenses thereon is evidenced by the Borrower's promissory note dated
August 3, 2000 payable to the order of the Bank in the principal amount of
exceeding Five Million Dollars ($5,000,000) (together with any amendments,
extensions, renewals and replacements thereof, called the "Revolving Note"). The
Bank shall have no obligation to make any such loan after the occurrence of any
Event of Default. In each period of 12 months ending on December 31st of each
year, the Borrower shall cause the unpaid principal balance of the Revolving
Note to be zero for 45 consecutive days. The Borrower shall use all proceeds of
such loans solely for the business purposes of the Borrower.

         2.       Subject to the provisions of this letter agreement, at the
Borrower's request, the Bank shall issue one or more standby or commercial
letters of credit for the account of the Borrower (each a "Letter of Credit")
from time to time during the period from the date hereof to and including the
expiration date in an aggregate amount at any time outstanding not to exceed the
amount of the line of credit less the sum of (A) all outstanding advances under
the line of credit and (B) the letter of credit amount. The Borrower
acknowledges and agrees that the Letter of Credit amount shall reduce the line
of credit amount available for advances. Each Letter of Credit request will be
further evidenced by an application and reimbursement agreement.

         3.       The Borrower shall pay the following fees to the Bank: (i)
With respect to each Letter of Credit, the Borrower shall pay to the Bank
annually and in advance a letter of credit fee equal to one percent (1.0%) per
annum on the face amount of such Letter of Credit, computed for the period
commencing on the date of issuance of such Letter of Credit and ending on the
expiration date thereof. In addition, the Borrower agrees to pay to the Bank, on
written demand by the Bank, the administrative fees charged by the Bank in the
ordinary course of business in connection with the honoring of drafts under any
Letter of Credit and for all other activity with respect to any Letter of Credit
at the then-current rates of the Bank; and (ii) an unused commitment fee of
0.25% per annum on the unused portion of the Revolving Note. This unused fee
will be paid in arrears following each fiscal quarter.

         4.       As long as any now existing or hereafter arising debt,
obligation or liability of the Borrower

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to the Bank (including but not limited to any debt, obligation or liability
relating to any letter of credit) shall remain outstanding, the Borrower shall
comply with the following requirements:

                  a.       The Borrower shall deliver to the Bank, in form and
substance acceptable to the Bank:

                           As soon as available, and in any event within 120
                           days after each fiscal year of the Borrower, the
                           annual audited financial statements (or SEC 10-K
                           report) of the Borrower for such fiscal year,
                           prepared in accordance with GAAP; and

                           As soon as available, and in any event within 45 days
                           after the end of each fiscal year of the Borrower,
                           the projected financial statements of the Borrower
                           for the next fiscal year; and

                           As soon as available, and in any event within 45 days
                           after the end of each fiscal quarter, the financial
                           statements (or SEC 10-Q report) of the Borrower for
                           such period, prepared by the Borrower in accordance
                           with GAAP; and

                           As soon as available, and in any event within 45 days
                           after the end of each fiscal quarter, a Covenant
                           Compliance Certificate in the form of Exhibit A
                           attached hereto, completed with amounts determined as
                           of the end of such period; and

                           Within 10 days after the Bank's request thereof, such
                           other information about the Borrower as the Bank may
                           reasonably request from time to time.

                  b.       The Borrower shall keep accurate books and records in
which true and complete entries will be made in accordance with GAAP. Upon
request of the Bank, the Borrower, during normal business hours, shall give any
representatives of the Bank access to and permit such representatives to examine
and copy all books, records and other writings in its possession, to inspect its
property and to discuss its finances, accounts, property and business with any
of its officers and directors.

                  c.       The Borrower shall file when due all required tax
returns, shall pay when due all taxes, assessments and other governmental
charges levied or imposed upon it or upon its income or profits or upon any of
its property, and shall pay when due all lawful claims for labor, materials and
supplies which, if unpaid, might become a lien or charge upon any property of
the Borrower; provided, that the Borrower shall not be required to pay any such
tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings.

                  d.       The Borrower shall keep and maintain its inventory,
equipment, real estate and other property necessary or useful in its business in
good condition and repair and shall pay when due all rental and mortgage
payments due on such property; provided, that nothing in this Section shall
prevent the Borrower from discontinuing the operation and maintenance of any
such property if such discontinuance is desirable in the conduct of the
Borrower's business and is not disadvantageous to the Bank.

                  e.       The Borrower shall obtain and maintain insurance with
insurers that are acceptable to the Bank, in such amounts and with such
coverages (including without limitation professional liability insurance, public
liability insurance, fire, hazard and extended coverage insurance on all of its
assets, necessary workers' compensation insurance, and all other coverages as
are consistent with industry practice) as are acceptable to the Bank.

                  f.       The Borrower shall not declare or pay any dividends
or other distributions on account of any shares of its stock or any of its other
ownership interests, or make any payment on account of any purchase, redemption
or other retirement of any shares of such stock or any such ownership interests,
or make any other payment or distribution on account of any shares of stock or
any ownership interests, or any warrant or option therefor, either directly or
indirectly which would create an Event of

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Page 3

Default.

                  g.       The Borrower shall preserve and maintain its
existence and all of its rights, privileges and franchises, and shall comply
with all applicable laws and regulations.

                  h.       The Borrower shall not create, incur or permit to
exist in favor of any person other than the Bank any mortgage, deed of trust,
assignment, security interest or other lien on any of its property now owned or
hereafter acquired, except purchase money security interests securing
indebtedness permitted by Section 3(h)(ii).

                  i.       The Borrower shall not incur, create, assume or
permit to exist any Funded Debt, except:

                           (i)      Indebtedness to the Bank;

                           (ii)     Indebtedness in an aggregate amount not to
                                    exceed at any time outstanding $500,000
                                    incurred in the purchase (or borrowing for
                                    the purchase) or lease of equipment.

                  j.       The Borrower shall maintain its primary operating
deposit account at the Bank.

                  k.       The Borrower shall comply with the following
requirements:

                           The Borrower shall not permit the Borrower's Tangible
                           Net Worth to be less than $30,000,000.

                           The Borrower shall not permit the ratio of Debt to
                           Tangible Net Worth of the Borrower to be more than
                           1.0 to 1.

                           The Borrower shall not permit the ratio of the
                           Borrower's Current Assets to Current Liabilities to
                           be less than 2.0 to 1.

                           The Borrower shall not permit the Borrower's
                           after-tax net income after adding back depreciation
                           and amortization expense in any fiscal year of the
                           Borrower to be less than $1.00.

         5.       In this letter agreement:

                  a.       "Current Assets" means the aggregate amount of assets
of the Borrower which, in accordance with GAAP, may be properly classified as
current assets, after deducting adequate reserves where proper, but in no event
including any real estate.

                  b.       "Current Liabilities" means (i) all Debt of the
Borrower due on demand or within one year from the date of determination
thereof, and (ii) all other items (including taxes accrued as estimated) which,
in accordance with GAAP, may be properly classified as current liabilities of
the Borrower.

                  c.       "Debt" means (i) all items of indebtedness or
liability of the Borrower which in accordance with GAAP would be included in
determining total liabilities as shown on the liabilities side of the Borrower's
balance sheet on the date as of which Debt is to be determined, plus (ii)
indebtedness secured by any mortgage, pledge, lien or security interest on
property of the Borrower, whether or not the indebtedness secured thereby shall
have been assumed, plus (iii) guaranties, endorsements (other than for purposes
of collection in the ordinary course of business) and other contingent
obligations of the Borrower in respect of, or to purchase or otherwise acquire
indebtedness of others.

                  d.       "Event of Default" means any default or event of
default under any existing or future note or other agreement of the Borrower
with the Bank.

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Page 4

                  e.       "GAAP" means generally accepted accounting principles
consistently applied. Except as otherwise approved by the Bank in writing, all
financial reporting, financial record keeping, and financial calculations in
connection with this letter agreement shall be made on the basis of accounting
principles, methods, elections and estimates that are consistent and that are
consistent with the accounting principles, methods, elections and estimates used
in the last annual financial statements of the Borrower delivered by the
Borrower to the Bank before or upon the execution of this letter agreement, and
that fairly present the financial condition or results of operations for the
period then ended.

                  f.       "Tangible Net Worth" means the difference of:

                           (i) the tangible assets of the Borrower which, in
                           accordance with GAAP, are tangible assets, after
                           deducting adequate reserves in each case where, in
                           accordance with GAAP, a reserve is proper, minus

                           (ii) all Debt of the Borrower;

provided, that (A) inventory shall be taken into account on the basis of the
cost or current market value, whichever is lower, (B) in no event shall there be
included as such tangible assets patents, trademarks, tradenames, copyrights,
licenses, good will, memberships, or treasury stock or any securities or debt of
the Borrower, or any officer, director, employee, agent, shareholder or
affiliate of the Borrower, or any officer, director, employee, agent,
shareholder or affiliate of any shareholder or affiliate of the Borrower, or any
other debt or securities unless the same are readily marketable in the United
States of America, (C) securities included as such tangible assets shall be
taken into account at their current market price or cost, whichever is lower,
and (D) any write-up in the book value of any assets shall not be taken into
account.

         6.       In addition to all other defaults and events of default, each
of the following events shall constitute a default and an event of default under
each of the Borrower's existing and future notes and other agreements with the
Bank: The Borrower's failure to comply with any provision of this letter
agreement.

         7.       The Borrower consents to the personal jurisdiction of the
state and federal courts located in the State of Minnesota in connection with
any controversy relating in any way to this letter agreement or to any
transaction or matter relating to this letter agreement, waives any argument
that venue in such forums is not convenient, and agrees that any litigation
initiated by the Borrower against the Bank relating in any way to this letter
agreement or to any transaction or matter relating to this letter agreement
shall be venued in either the Minnesota District Court of the county where the
Bank is located, or the United States District Court, District of Minnesota.

         8.       No provision of this letter agreement can be amended,
modified, waived or terminated, except by a writing executed by the Borrower and
the Bank. The Borrower shall pay to the Bank on demand all of the Bank's costs
and expenses, including but not limited to reasonable attorneys' fees and legal
expenses, in connection with this letter agreement, the writings executed
herewith, and the transactions described herein and therein. This letter
agreement shall bind and benefit the parties and their respective successors and
assigns; provided, the Borrower shall not assign any of its rights or
obligations under this letter agreement without the prior written consent of the
Bank, and any assignment in violation of this sentence shall be null and void.
This letter agreement shall be governed by and construed in accordance with the
laws of the State of Minnesota.

         9.       This letter agreement supersedes and replaces all prior
commitment letters, proposal letters, term sheets, letter agreements and other
statements of loan terms issued by the Bank to the Borrower, and all such
letters, term sheets and letter agreements are terminated.

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         10.      The Revolving Note continues to be secured by the Security
Agreement between the Borrower and the Bank dated December 29, 1998.

Sincerely,

MARQUETTE CAPITAL BANK, N. A.

By
  -----------------------------------------
     Ryan McKinney
     Title: Vice President

         The Borrower agrees to this letter agreement.

         THE BORROWER REPRESENTS AND WARRANTS TO THE BANK AND AGREES THAT THE
BORROWER HAS READ ALL OF THIS LETTER AGREEMENT AND UNDERSTANDS ALL OF THE
PROVISIONS OF THIS LETTER AGREEMENT.

         Executed as of August 10, 2000.

By
  -----------------------------------------
     Tom C. Velin
     Title: Chief Financial Officer

<PAGE>

MARQUETTE CAPITAL BANK, N. A. - LETTER AGREEMENT - EXHIBIT

                                    EXHIBIT A
                     BORROWER: AUGUST TECHNOLOGY CORPORATION
                         COVENANT COMPLIANCE CERTIFICATE

         I, _______________________________, the _______________________________
of August Technology Corporation, a corporation (the "Borrower"), pursuant to
the letter agreement dated August 10, 2000 (the "Agreement"), hereby certify to
Marquette Capital Bank, N. A. (the "Bank") as follows:

As of the close of business on ____________, the following amounts and ratios
were true and correct:

<TABLE>
<S><C>
1.       TANGIBLE NET WORTH

         a.       Actual Tangible Net Worth                                          $__________

         b.       Minimum Tangible Net Worth                                          $30,000,000

2.       RATIO OF DEBT TO TANGIBLE NET WORTH

         a.       Debt                                                               $__________

         b.       Tangible Net Worth                                                 $__________

         c.       Actual Ratio of Debt to Tangible Net Worth                          ______ to 1

         d.       Maximum Ratio                                                         1.00 to 1

3.       CURRENT RATIO

         a.       Current Assets                                                     $__________

         b.       Current Liabilities                                                $__________

         c.       Actual Ratio of Current Assets to Current Liabilities               ______ to 1

         d.       Minimum Ratio                                                          2.0 to 1

4.       MINIMUM AFTER TAX NET INCOME PLUS DEPRECIATION AND AMORTIZATION:

         a.   Actual After Tax Net Income for the Fiscal Year ended 12/31____        $__________

         b.   Actual Depreciation Expense                                            $__________

         c.   Actual Amortization Expense                                            $__________

         d.   Sum of a,b,c                                                                      $

         e.   Minimum required                                                                 $1
</TABLE>

         AS OF THE DATE OF THIS CERTIFICATE, NO EVENT HAS OCCURRED WHICH
CONSTITUTES AN EVENT OF DEFAULT AS DEFINED IN THE AGREEMENT.

Date of Certificate:
                    ---------------------------------------------

                                         ---------------------------------------
                                         Signature

<PAGE>

--------------------------------------------------------------------------------
[LOGO]   MARQUETTE CAPITAL BANK, N. A. - PROMISSORY NOTE
--------------------------------------------------------------------------------

$5,000,000.00

No.  _________________                                    Minneapolis, Minnesota
MAKER: AUGUST TECHNOLOGY CORPORATION                       Date: August 10, 2000

     FOR VALUE RECEIVED, the Maker promises to pay to the order of (the
"Bank"), at its office in Minneapolis, Minnesota, or at such other place as
any present or future holder of this Note may designate from time to time,
the principal amount of Five Million and No/100 dollars, ($5,000,000.00), or
so much thereof as is advanced and remains outstanding as shown in the
records of the holder of this Note, plus interest thereon from the date on
which the same is advanced until this Note is fully paid, computed on the
basis of the actual number of days elapsed and a 360-day year.

INTEREST: The interest rate under this Note is:

         A variable rate that shall always be 2.25% per annum than the prior
         month average of the 30 day LIBOR rate as published in The Wall Street
         Journal, as determined by the holder of this Note.

If the interest rate under this Note is a variable rate based on an index rate
that is no longer available, the holder of this Note may select a comparable
index rate for use under this Note. If this Note provides for a variable
interest rate based on an index rate, the Bank may lend to its other customers
at rates that are equal to, more than, or less than the index rate.

PAYMENTS: The Maker shall make the following payments of principal and interest
under this Note:

         Payments of accrued interest only on the last day of each month
         beginning August 31, 2000, and 1 final payment of the remaining unpaid
         balance of principal and accrued interest on May 31, 2002.

ADDITIONAL INTEREST:

         Notwithstanding the foregoing, after the occurrence of an Event of
         Default and until such Event of Default is cured, the interest rate
         under this Note shall automatically increase to a rate that is 1.0% per
         annum in excess of the rate otherwise in effect. If this Note provides
         for a variable interest rate, the increased rate shall continue to vary
         based on changes in the index rate.

LATE FEES:

         If any payment under this Note (including but not limited to any final
         payment, and any payment due by reason of default or acceleration) is
         more than 10 days past due, the Maker shall pay the holder of this Note
         a late fee equal to 5% of the past due amount.

PREPAYMENTS:

         All or any part of the unpaid balance of this Note may be prepaid at
         any time without penalty.

OTHER PROVISIONS:

         This Note evidences the Maker's obligation to repay one or more loans
         under a revolving line of credit.

         This Note is an amendment and extension of the Maker's $5,000,000.00
         promissory note to the Bank dated May 23, 2000.

         The extensions of credit under this Note are made under Section 47.59
         of the Minnesota Statutes.

     At the option of the holder of this Note, any payment under this Note may
be applied first to the payment of charges, fees and expenses (other than
principal and interest) under this Note and any other agreement or writing in
connection with this Note, second to the payment of interest accrued through the
date of payment, and third to the payments of principal under this Note in
inverse order of maturity. Also, at the option of the holder of this Note, if
there is any overpayment of interest under this Note, the holder may hold the
excess and apply it to future interest accruing under this Note. The Maker
represents, warrants, certifies to the Bank

<PAGE>

--------------------------------------------------------------------------------
and agrees that all advances under this Note shall be used solely for business
purposes.

The occurrence of any of the following events shall constitute an Event of
Default under this Note:

       (i)    any breach or default in the payment of this Note; or
       (ii)   any breach or default under the terms of any other note,
              obligation, mortgage, assignment, guaranty, other agreement, or
              other writing heretofore, herewith or hereafter existing to which
              the Maker or any endorser, guarantor or surety of this Note or any
              other person or entity providing security for this Note or for any
              guaranty of this Note is a party; or
       (iii)  the insolvency, death, dissolution, liquidation, merger or
              consolidation of any such Maker, endorser, guarantor, surety or
              other person or entity; or
       (iv)   any appointment of a receiver, trustee or similar officer of any
              property of any such Maker, endorser, guarantor, surety or other
              person or entity; or
       (v)    any assignment for the benefit of creditors of any such Maker,
              endorser, guarantor, surety or other person or entity; or
       (vi)   any commencement of any proceeding under any bankruptcy,
              insolvency, receivership, dissolution, liquidation or similar law
              by or against any such Maker, endorser, guarantor, surety or other
              person or entity; or
       (vii)  the sale, lease or other disposition (whether in one or more
              transactions) to one or more persons or entities of all or a
              substantial part of the assets of any such Maker, endorser,
              guarantor, surety or other person or entity; or
       (viii) any such Maker, endorser, guarantor, surety or other person or
              entity takes any action to go out of business, or to revoke or
              terminate any agreement, liability or security in favor of the
              holder of this Note; or
       (ix)   the entry of any judgment or other order for the payment of money
              in the amount of $100,000.00 or more against any such Maker,
              endorser, guarantor, surety or other person or entity; or
       (x)    the issuance or levy of any writ, warrant, attachment,
              garnishment, execution or other process against any property of
              any such Maker, endorser, guarantor, surety or other person or
              entity; or
       (xi)   the attachment of any tax lien to any property of any such Maker,
              endorser, guarantor, surety or other person orentity; or
       (xii)  any statement, representation or warranty made by any such Maker,
              endorser, guarantor, surety or other person or entity (or any
              representative of any such Maker, endorser, guarantor, surety or
              other person or entity) to the holder of this Note at any time
              shall be incorrect or misleading in any material respect when
              made; or
       (xiii) there is a material adverse change in the condition (financial or
              otherwise), business or property, of any such Maker, endorser,
              guarantor, surety or other person or entity; or
       (xiv)  the holder of this Note shall in good faith believe that the
              prospect of due and punctual payment or performance of this Note
              or the due and punctual payment or performance of any other note,
              obligation, mortgage, assignment, guaranty, or other agreement
              heretofore, herewith or hereafter given to or acquired by the
              holder of this Note in connection with this Note is impaired.

     Upon the commencement of any proceeding under any bankruptcy law by or
against any such Maker, endorser, guarantor, surety or other person or entity,
the unpaid principal balance of this Note plus accrued interest and all other
charges, fees and expenses under this Note shall automatically become
immediately due and payable in full, without any declaration, presentment,
demand, protest, or other notice of any kind. Upon the occurrence of any other
Event of Default and at any time thereafter, the then holder of this Note may,
at its option, declare this Note to be immediately due and payable and thereupon
the unpaid principal balance of this Note plus accrued interest and all other
charges, fees and expenses under this Note shall automatically become due and
payable in full, without any presentment, demand, protest or other notice of any
kind.

     The Maker: (i) waives demand, presentment, protest, notice of protest,
notice of dishonor and notice of nonpayment of this Note; (ii) agrees to
promptly provide the holder of this Note from time to time with the Maker's
financial statements and such other information respecting the financial
condition, business and property of the Maker as the holder of this Note may
request, in form and substance acceptable to the holder of this Note; (iii)
agrees that when or at any time after this Note becomes due the holder of this
Note may offset or charge the full amount owing on this Note against any account
then maintained by the Maker with the holder of this Note without notice; (iv)
agrees to pay on demand all fees, costs and expenses of the holder of this Note
in connection with this Note and any transactions and matters relating to this
Note, including but not limited to audit fees and expenses and reasonable
attorneys' fees and legal expenses, plus interest on such amounts at the rate
set forth in this Note; and (v) consents to the personal jurisdiction of the
state and federal courts located in the State of Minnesota in connection with
any controversy related in any way to this Note or any transaction or matter
relating to this Note, waives any argument that venue in such forums is not
convenient, and agrees that any litigation initiated by the Maker against the
Bank or any other holder of this Note relating in any way to this Note or any
transaction or matter relating to this Note, shall be venued in either the
Minnesota District Court of the county where the Bank is located, or the United
States District Court, District of Minnesota. Interest on any amount under this
Note shall continue to accrue, at the option of the holder of this Note, until
such holder receives final payment of such amount in collected funds in form and
substance acceptable to such holder.

<PAGE>

--------------------------------------------------------------------------------
     No waiver of any right or remedy under this Note shall be valid unless in
writing executed by the holder of this Note, and any such waiver shall be
effective only in the specific instance and for the specific purpose given. All
rights and remedies of the holder of this Note shall be cumulative and may be
exercised singly, concurrently or successively. The Maker, if more than one,
shall be jointly and severally liable under this Note, and the term "Maker",
wherever used in this Note, shall mean the Maker or any one or more of them. All
references in this Note to the holder of this Note shall mean the Bank and any
and all other present and future holders of this Note. This Note shall bind the
Maker and the heirs, representatives, successors and assigns of the Maker. This
Note shall benefit the holder of this Note and its successors and assigns. This
Note shall be governed by and construed in accordance with the internal laws of
the State of Minnesota (excluding conflict of law rules).

     THE MAKER REPRESENTS AND WARRANTS TO THE BANK AND AGREES THAT THE MAKER HAS
READ ALL OF THIS NOTE AND UNDERSTANDS ALL OF THE PROVISIONS OF THIS NOTE.

ADDRESS OF MAKER:                         MAKER:
4900 West 78th Street
Bloomington, Minnesota 55435              AUGUST TECHNOLOGY CORPORATION

TELEPHONE: (612) 820-0080

                                          By:
                                             -----------------------------------
                                             Tom C. Velin
                                             Title: Chief Financial Officer<PAGE>

                                     [LOGO]

                                    OVERVIEW
                                AUGUST TECHNOLOGY
                           ANNUAL INCENTIVE PLAN (AIP)
                       Effective for the Fiscal Year 2001

PURPOSE OF THE PLAN

August Technology's Annual Incentive Plan (AIP) is established to provide a
bonus to participants who meet annual corporate and individual performance
goals.

ELIGIBILITY FOR PLAN

-    The CEO will propose the eligible participants.

-    The Compensation Committee will review and approve the listing provided by
     the CEO.

-    Participant must be employed at the end of the plan year to receive their
     respective bonus.

-    Provisions are included in the plan to cover issues of death or disability.

DETERMINATION OF THE AWARD

The bonus will be calculated based upon two measures; (1) satisfaction of the
OPERATING MARGIN target; and (2) satisfaction of the REVENUE target, as
determined by the plan matrix (shown below).

         The bonus for VP'S, CTO, CHIEF ENGINEER, OFFICERS, AND THE
         CEO/PRESIDENT is calculated based on the following plan matrix:

                                    Revenue (millions)
<TABLE>
<CAPTION>
         ------------------- ------------------- --------- --------- --------- -----------
         Operating           GREATER THAN $44.0  $47.7     $51.8     $55.9     $59.6
         Margin.
         ------------------- ------------------- --------- --------- --------- -----------
<S>                          <C>                 <C>       <C>       <C>       <C>
         GREATER THAN 14.0%  70%                 80%       85%       90%       95%
         ------------------- ------------------- --------- --------- --------- -----------
         14.5%               75%                 85%       100%      110%      120%
         ------------------- ------------------- --------- --------- --------- -----------
         15.0%               80%                 90%       105%      115%      125%
         ------------------- ------------------- --------- --------- --------- -----------
         15.5%               85%                 95%       110%      120%      130%
         ------------------- ------------------- --------- --------- --------- -----------
</TABLE>

         The participant will receive a percent of the bonus based upon the
         satisfaction of the REVENUE and OPERATING MARGIN targets. There is no
         interpolation between the points on the plan matrix (i.e., each is
         defined as a distinct achievement).

         The bonus for DIRECTORS, MANAGERS AND INDIVIDUAL CONTRIBUTORS is
         calculated based on the following plan matrix:

<TABLE>
<CAPTION>
         ------------------- ------------------- --------- --------- --------- -----------
         Operating           GREATER THAN $44.0  $47.7     $51.8     $55.9     $59.6
         Margin.
         ------------------- ------------------- --------- --------- --------- -----------
<S>                          <C>                 <C>       <C>       <C>       <C>
         GREATER THAN 14.0%  70%                 80%       85%       90%       95%
         ------------------- ------------------- --------- --------- --------- -----------
         14.5%               75%                 85%       100%      120%      140%
         ------------------- ------------------- --------- --------- --------- -----------
         15.0%               80%                 90%       110%      130%      150%
         ------------------- ------------------- --------- --------- --------- -----------
         15.5%               85%                 95%       120%      140%      160%
         ------------------- ------------------- --------- --------- --------- -----------
</TABLE>

PAYMENT OF ANNUAL AWARD

     Participant's bonus will be equal to XX % of their annual base salary.
     Each participant will have the option to receive the bonus in the following
     manner:

<PAGE>

    (1)      100% stock options*
    (2)      50% cash and 50% stock options**
    (3)      Any participant with 5% or greater ownership will be awarded 100%
             cash

These stock options are fully vested at the time of grant. All stock option
grants are subject to Board of Director approval. Should the Board of Directors
decide not to grant the options, participants will receive 100% Cash.

*For 100% Incentive Stock Options, the number of Incentive Stock Options to be
granted is calculated by dividing the total dollar value of the bonus by the
closing stock price as of February 28, 2002, and then multiplying by three.

**The number of Incentive Stock Options to be granted is calculated by dividing
50% of the total bonus by the closing stock price as of February 28, 2002, and
then multiplying by three.

VALUATION OF STOCK OPTIONS AWARDED

-        Valuation will be based on the closing stock price on February 28,
         2002.

TAX AND CASH FLOW CONSIDERATION

-        Awards will be paid not later than 2 1/2 months after the close of
         August Technology's fiscal year.

CHANGE IN CONTROL  (FOR CEO/PRESIDENT, OFFICERS, CTO, CHIEF ENGINEER AND VP'S)

-        If GREATER THAN 50% of the Company is sold during the year, and the
         participant is negatively impacted by the change of control as outlined
         below, then all bonuses will be paid in full at 100% of target at the
         date of the change of control. Negative impacts include:

         o    Termination of employment
         o    Participant's status within the Company is adversely changed
         o    Or, the participant's salary is substantially reduced.

TIER STRUCTURE FOR ANNUAL INCENTIVE PLAN (AIP) PARTICIPANTS:

<TABLE>
<CAPTION>
 --------------------- -------- ------------------------ ---------------------- ----------------------
                        % OF     COMPONENTS OF ANNUAL    SELECTIONS AVAILABLE     CHANGE OF CONTROL
        TIER            BASE     INCENTIVE PLAN (AIP)                                PROVISION?
                       SALARY
 --------------------- -------- ------------------------ ---------------------- ----------------------
<S>                    <C>      <C>                      <C>                    <C>
        CEO              90%         75% Corporate             100% Cash                 Yes
    (co-founder)                    25% Individual
 --------------------- -------- ------------------------ ---------------------- ----------------------
      Officers           80%         75% Corporate        50%Cash/Options or             Yes
                                    25% Individual           100% Options
 --------------------- -------- ------------------------ ---------------------- ----------------------
        VP's             70%         75% Corporate        50%Cash/Options or             No
                                    25% Individual           100% Options
 --------------------- -------- ------------------------ ---------------------- ----------------------
  CTO, Chief Engr.       50%         75% Corporate             100% Cash                 Yes
   (co-founders)                    25% Individual
 --------------------- -------- ------------------------ ---------------------- ----------------------
     Directors           25%        100% Corporate        50%Cash/Options or             No
                                                              100% Options
 --------------------- -------- ------------------------ ---------------------- ----------------------
      Managers           15%        100% Corporate        50% Cash/Options or            No
                                                              100% Options
 --------------------- -------- ------------------------ ---------------------- ----------------------
</TABLE>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00021-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00021-of-00352.parquet"}]]