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Exhibit 10.1
January 22, 2008
 
Dear Jack:
 
It gives me great pleasure to extend an employment offer to you as Sr. Vice
President and Chief Financial Officer (CFO) of Key Technology.  In this
capacity, you will report directly to me and be located at the company
headquarters in Walla Walla.
 
Everyone with whom you interacted at Key, including Board members, was
exceedingly impressed with your financial and operations experience and
maturity, your demonstrated capacity to grow global enterprises across diverse
markets, and your strong interest in the Key organization.  We believe your
contributions to the future of the company will be significant and we judge your
fit with the organization to be very good.
 
As Chief Financial Officer, you will be responsible for the corporation’s
overall financial plans and policies, accounting practices, and the conduct of
its relationships with external auditors, lending institutions, shareholders and
the investment community.  Through your staff, you will be responsible for
financial systems and controls, reporting, and analysis of operating
results.  You will recommend corporate objectives and long range plans to
achieve growth and financial profitability and you will be responsible for
providing guidance and analysis for all financial elements of the corporation,
including an annual budget and forecasts.   And you will participate as an
important member of an executive team charged with growing this business and
increasing shareholder value.
 
The elements of our offer package are detailed as follows:
 
Exempt Base Salary
 
$ 230,000 per year, paid bi-weekly at a rate of $8,846.15.  Your first
performance review and any associated merit adjustment to your salary will occur
in November of 2008.
 
Note: Your employment with Key Technology is contingent upon successfully
completing a drug screen, criminal history, social security, education and
reference check all scheduled for you by the Human Resources Department.
 
Annual Incentive Plan
 
Effective with the 2009 fiscal year, you will be eligible for full participation
in the Annual Executive Incentive Plan.  The potential payout under this
incentive plan is tied to achieving the Net Income target established in the
2009 operating plan.  Reward thresholds for over-plan performance on Net Income
will be communicated to you at a later time.   There will be no incentive payout
for the 2008 fiscal year.
 
Under the Executive Incentive Plan, your target 2009 bonus will be 50% of your
base salary.  Should achievement of the Net Income goal exceed the defined
performance target, there is upside earning potential that would allow you to
receive as much as an additional 50% of base salary.
 
Long-Term Incentive Plan
 
Key has a Long-Term Incentive Plan that takes the form of restricted stock
grants.  The restricted stock grants to Executive Staff are awarded on an annual
basis.  The number of shares awarded each individual is determined as a function
of their personal contribution and the stock price at point of grant.
 
I am pleased to offer you a restricted stock grant of roughly 7,000+ shares, the
current value of which will approximate your starting annual salary.  This grant
is effective on your start date, however, the market price (close) on the date
of your signed acceptance of this offer will determine the final number of
shares.  One third of the shares will vest over a three-year period (annually)
based on continuous employment (service). The remaining two thirds of the shares
will cliff-vest at the completion of the same three-year period, based on
meeting three-year performance

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targets (cumulative net income), to be defined in the near future.  You will be
eligible for additional annual grants, commencing in FY 2009.
 
The overall objective of the incentive plan for senior executives is to
structure a plan where we can earn incentive compensation, via the Executive
Incentive Plan and LTIP, equal to 100% of our respective base salaries.  The
plan design requires exceptional performance, but the rewards are substantial.
 
Benefits
 
Provided we receive your completed enrollment forms, your group health, life,
disability, and other standard benefit coverages will begin on your first day of
employment.  Beginning with your first pay period you will accrue vacation at
the rate of 6.15 hours (160 hours per year).  One week will be available to you
after six months of service.   Human Resources will forward a packet of
information to you about these benefit programs under separate cover.
 
You will be eligible to participate in the company’s 401K Plan on the first of
the month following hire.  The company matches 50% of up to an 8% employee
contribution to the plan.
 
You will also be eligible to participate in our Employee Stock Purchase Plan at
the first quarterly enrollment date following the first 30-days of employment,
in accordance with the plan document.  This plan allows employees to purchase
Key Technology stock at a 15% discount to market price and is administered
through payroll deduction.
 
Relocation
 
Human Resources will arrange for packing and transport of normal household goods
to Walla Walla through Corporate Relocation Services.  We will also pay for
house hunting trips and temporary housing in Walla Walla for you for up to three
months from your date of hire.  This temporary housing allowance will include
the cost of trips home on weekends, but excludes meals or other normal living
expenses.
 
This program does not cover expenses related to selling your current home or
expenses related to the purchase of a home in Walla Walla.  Key will also
provide an Incidental Relocation Expense Allowance in the amount of $50,000, to
be paid to you within 30 days of completing the relocation of your primary
residence to Walla Walla.  Relocation costs will be provided without tax
consequence to you.  Expenses viewed as taxable income under IRS guidelines will
be grossed up for tax purposes.
 
It’s our expectation that you and your family will move and establish residence
in Walla Walla.  However, we understand the importance of your son completing
his education in Lake Oswego and your family remaining there until that time in
late spring of this year.  We would therefore expect your move to Walla Walla to
be fully completed within twelve months of your hire date.  All elements of the
offered relocation support will remain in effect until that date.
 
Severance Agreement
 
You will be receiving a separate document formalizing the following severance
offer.  Should your employment be terminated by Key for reasons other than cause
at any time during your first twelve months of employment, you will receive
severance in an amount equal to six (6) months salary, payable over a six month
period and subject to withholding taxes.  The company will also pay in full all
COBRA contributions in order to continue your elected medical/dental coverages
for a period of twelve (12) months following termination of employment.

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I-9 Requirement

It is required by law that all persons working in the United States must provide
proof of their employment eligibility by furnishing their employer with
appropriate documentation on the first day of employment.  Therefore, should you
accept our offer; we will need to verify the appropriate identification detailed
in the lists attached (one from List A – or– one from List B and one from List
C).  Please let us know in advance of any complications.
 

 
LIST A
LIST B
LIST C
U.S. Passport
Driver License or I.D. Card
Social Security Card
Certificate of U.S. Citizenship
U.S. Military Card
Birth Certificate
Certificate of naturalizations
Other (must specify)
Unexpired INS Employment
Unexpired foreign passport
   
Alien Registration card with photograph
   

 
Jack, we look forward to your acceptance and to your joining the company at a
mutually agreed date in the early February timeframe.  Should you have questions
or need clarification about any of the terms in this offer, please don’t
hesitate to contact me.   In order to officially confirm your acceptance of
employment, please sign the attached confirmation page and return it to the
Human Resources department as soon as possible. The letter is yours to keep.
 

 
Sincerely,
 
/s/ David Camp
President and Chief Executive Officer
 

 
 
BE ADVISED: Only offers that are made in writing and signed by an authorized
Company representative will be considered valid and honorable by the
Company.  Verbal offers will not be acknowledged or honored for any reason or
from any person.
 
 
EMPLOYMENT CONFIRMATION

I, Jack Ehren, accept Key Technology, Inc.’s offer of employment for the
position of Sr. Vice President and Chief Financial Officer (CFO).  I understand
the terms and conditions of the employment offer as described in my offer
letter.  I also acknowledge that the employment is of an “at will” nature, which
means that I may resign at anytime and my Employer may discharge me at any time,
with or without cause.
 

/s/ John J.
Ehren                                                        1/22/2008
Jack
Ehren                                                                   Date
 
/s/ David M. Camp                                                    1/22/2008
David Camp                                                                Date
President and Chief Executive Officer

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