**Exhibit10.20**

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**AMENDMENT TO LOAN DOCUMENTS**

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THIS AMENDMENT TO LOANDOCUMENTS (the “Amendment”) is made as of the 31st day of July, 2003, byand between KEY TECHNOLOGY, INC., an Oregon corporation (the “Borrower”),and BANNER BANK, a Washington banking corporation (the “Lender”).

 

**RECITALS**

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A.               Borrower and Lender are parties to thatcertain Loan Agreement dated as of August 9, 2002 as amended by thatcertain Amendment to Loan Documents dated as of December 11, 2002, by thatcertain Letter Agreement dated March 24, 2003 and by that certain ChangeIn Terms Agreement dated May 1, 2003 (as the same may be amended, modifiedor extended from time to time the “Loan Agreement”) and the related LoanDocuments described therein.

 

B.                 The revolving credit facility under the LoanAgreement is currently scheduled to expire on July 31, 2003, and Borrowerhas requested Lender to extend the expiration date of such revolving creditfacility until July 31, 2004, and to make certain other modifications tothe Loan Agreement which Lender has agreed to do, subject to, among otherthings, the execution and delivery of this Amendment.

 

NOW, THEREFORE, inconsideration of the foregoing, and for other good and valuable considerationreceipt of which is hereby acknowledged, Borrower and Lender hereby agree asfollows:

 

**AGREEMENT**

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**1.****                                     ****Definitions; Interpretation.** Capitalized terms used herein and not otherwise defined shall have themeaning given in the Loan Agreement. The rules of construction and interpretation specified in Section 1.2and Section 1.4 of the Loan Agreement also apply to thisAmendment and are incorporated herein by this reference.

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**2.****                                     ****Amendments to Loan Agreement.**  TheLoan Agreement is amended as follows:

 

**(a)Amendment to Definitions.**  In Section 1.1,amendments are made to the definitions as follows:

 

**(i)****               Eligible AccountsReceivable.**  Clauses (c) and (l) ofthe definition of “Eligible Accounts Receivable” are amended and restated toread as follows:

 

(c)             such Accounts with payment terms less thanthirty (30) days after the date of the original invoice do not remain unpaidfor more than sixty (60) days after the date of the original invoice; provided,however, that such of those Accounts that satisfy each of theeligibility criteria set forth in this definition other than this clause shallbe deemed eligible notwithstanding this clause until such Accounts remainunpaid for more than ninety (90) days after the date of the original invoice; provided,further, that the aggregate of all such Accounts deemed eligiblenotwithstanding this clause shall not exceed Five Hundred Thousand Dollars($500,000) at any time;

 

(l)                such Accounts of a single account debtor orits Affiliates do not constitute more than twenty-five percent (25%) of allotherwise Eligible Accounts (but the portion of the Accounts not in excess ofsuch percentage may be deemed Eligible Accounts), unless, with respect to anysingle account debtor and its Affiliates, Lender shall otherwise consent inwriting;

 

**(ii)****           NetAmount of****Eligible****Accounts.**  The definition of “Net Amount of EligibleAccounts” is amended and restated to read as follows:

 

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“NetAmount of Eligible Accounts” means the gross amount of Eligible Accounts less(i) the amount by which sales, excise or similar taxes included in theamount thereof exceeds One Hundred Thousand Dollars ($100,000) and(ii) returns, discounts, claims, credits and allowances of any nature atany time issued, owing, granted, outstanding, available or claimed with respectthereto.

 

**(iii)****       RevolvingMaturity Date.**  The definition of“Revolving Maturity Date” is amended and restated to read as follows:

 

“RevolvingMaturity Date” means July 31, 2004.

 

**(b)Amendment to Section 2.4.**  In clause (i) of the firstsentence of Section 2.4(a), the phrase “one percent (1%)above” is deleted.

 

**(c)Amendment to Section 5.15.**  Section 5.15 isamended and restated to read as follows:

 

**Section 5.15****               ****Financial Covenants.**

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**(a)**** ****Debt to Tangible Net WorthRatio.**  Borrower shall maintain as of the end ofeach month, a ratio of Indebtedness to Tangible Net Worth equal to or less than3.0 to 1.

 

**(b) NCAO toDebt Service Ratio.** Borrower shall maintain as of the end of each month, for the period oftwelve (12) consecutive months then ended, a ratio of NCAO to Debt Service ofnot less than 2.0 to 1.  As used herein,“Debt Service” shall mean, for any Person, for any period, all regularlyscheduled principal payments required to be made by such Person during suchperiod on Long-Term Debt.

 

**(c) MinimumNet Income.**  Borrower shall maintain as of the end of eachfiscal quarter of Borrower, net income of not less than Zero Dollars ($0) forthe for the period of four (4) consecutive fiscal quarters then ended, in eachcase determined in accordance with GAAP for such period, excluding, to theextent deducted in determining such net income, any write-offs of goodwillduring such period.

 

**(d) MinimumWorking Capital.**  Borrower shall maintain as of the end ofeach month (i) an excess of current assets over current liabilities equalto or greater than Four Million Five Hundred Thousand Dollars ($4,500,000) and(ii) a ratio of current assets to current liabilities equal to or greater1.25 to 1, in each case determined in accordance with GAAP as of such date ofdetermination.

 

**3.****                                     ****Amendment to Revolving Note.**  Inthe first paragraph of the Revolving Note, the phrase “one percent (1%)above” is deleted.

 

**4.****                                     ****Conditions to Effectiveness.** Notwithstanding anything contained herein to the contrary, thisAmendment shall not become effective until each of the following conditions isfully and simultaneously satisfied:

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**(a)Delivery of Amendment.**  Borrower and Lender shall have executed anddelivered counterparts of this Amendment to each other;

 

**(b) Paymentof Fees.**  Borrower shall have paid to Lender anamendment fee in the amount of Fifty Thousand Dollars ($50,000) in respect ofLender’s agreement to enter into this Amendment;

 

**(c)Corporate Authority.**  Lender shall have received in form andsubstance reasonably satisfactory to it such evidence of corporate authority asLender shall reasonably request;

 

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**(d)Representations True; No Default.**  The representations ofBorrower as set forth in Article 4 of the Loan Agreement shall betrue on and as of the date of this Amendment with the same force and effect asif made on and as of this date or, if any such representation or warranty isstated to have been made as of or with respect to a specific date, as of orwith respect to such specific date.  NoEvent of Default and no event which, with notice or lapse of time or both,would constitute an Event of Default, shall have occurred and be continuing orwill occur as a result of the execution, delivery or performance of theAmendment Documents; and

 

**(e) OtherDocuments.**  Lender shall have received such otherdocuments, instruments, and undertakings as Lender may reasonably request.

 

**5.****                                     ****Representations and Warranties.** Borrower hereby represents and warrants to Lender that each of therepresentations and warranties set forth in Article 4 of the LoanAgreement is true and correct in each case as if made on and as of the date ofthis Amendment or, if any such representation or warranty is stated to havebeen made as of or with respect to a specific date, as of or with respect tosuch specific date.  Borrower expresslyagrees that it shall be an additional Event of Default under the Loan Agreementif any representation or warranty made hereunder shall prove to have beenincorrect in any material respect when made.

 

**6.****                                     ****No Further Amendment.**  Except as expressly modifiedby this Amendment, the Loan Agreement and the other Loan Documents shall remainunmodified and in full force and effect and the parties hereby ratify theirrespective obligations thereunder.

 

**7.****                                     ****Reservation of Rights.**  Borrower acknowledges andagrees that the execution and delivery by Lender of this Amendment shall not bedeemed to create a course of dealing or otherwise obligate Lender to forbear orexecute similar amendments under the same or similar circumstances in thefuture.  Borrower further acknowledgesand agrees that the execution and delivery by Lender of this Amendment shallnot be deemed to obligate Lender to issue any standby or commercial letter ofcredit for Borrower’s account.

 

**8.****                                     ****Miscellaneous.**

 

**(a) EntireAgreement.**  This Amendment and the other Amendment Documentscomprise the entire agreement of the parties with respect to the subject matterhereof and supersedes all prior oral or written agreements, representations orcommitments.

 

**(b)Counterparts.**  This Amendment may be executed in any numberof counterparts and by different parties hereto in separate counterparts, eachof which when so executed shall be deemed to be an original, and all of whichtaken together shall constitute one and the same Amendment.  Delivery of an originally executed signaturepage or pages hereto, a counterpart signature page, or a photocopy thereoftransmitted by telephone facsimile transmission, shall be as effective asdelivery of a manually signed counterpart of this Amendment.

 

**(c)Governing Law.**  This Amendment and the other agreementsprovided for herein and the rights and obligations of the parties hereto andthereto shall be construed and interpreted in accordance with the laws of theState of Washington, excluding its conflicts of law rules.

 

**(d) OralAgreements Not Enforceable.**

 

**ORAL AGREEMENTS OR ORAL COMMITMENTSTO LOAN MONEY, EXTEND CREDIT, OR TO FOREBEAR FROM ENFORCING REPAYMENT OF A DEBTARE NOT ENFORCEABLE UNDER WASHINGTON LAW.**

 

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IN WITNESS WHEREOF, the parties hereto have causedthis Amendment to be executed by their respective officers or agents thereuntoduly authorized as of the date first above written.

 
| **BORROWER:** | KEY TECHNOLOGY, INC., an Oregon corporation   |
|---------------|-----------------------------------------------|
|          |                                          |
|          |                                          |
|          | By                                            | /s/ Phyllis C. Best |   |
|          |                                          |   |
|          | Its                                           | CFO |   |
|          |                                          |
|          |                                          |
| **LENDER:**   | BANNER BANK, a Washington banking corporation |
|          |                                          |
|          |                                          |
|          | By /s/                                        | Matt Tucker |   |
|          | Its                                           | Senior Vice President |   |
|               |                                               |  |  |  |  |  |  |

 

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