ex10_1.htm


    
      

    

     

    Exhibit
      10.1



    FIRST
      AMENDMENT TO CREDIT AGREEMENT

    


    


    THIS
      FIRST AMENDMENT TO CREDIT
      AGREEMENT (this "Amendment") is entered into as of December 21, 2007 by and
      between KEY TECHNOLOGY, INC., an Oregon corporation ("Borrower"), and WELLS
      FARGO HSBC TRADE BANK, NATIONAL ASSOCIATION ("Trade Bank").

    


    


    RECITALS

    


    WHEREAS,
      Borrower is currently indebted
      to Trade Bank pursuant to the terms and conditions of that certain Credit
      Agreement between Borrower and Trade Bank dated as of July 27, 2006, as amended
      from time to time ("Credit Agreement").

    


    WHEREAS,
      Trade Bank and Borrower have
      agreed to certain changes in the terms and conditions set forth in the Credit
      Agreement and have agreed to amend the Credit Agreement to reflect said
      changes.

    


    NOW,
      THEREFORE, for valuable
      consideration, the receipt and sufficiency of which are hereby acknowledged,
      the
      parties hereto agree that the Credit Agreement shall be amended as
      follows:

    


    
      	
              I.

            	
              Article
                I. CREDIT FACILITY, Section 1.1
                The Facility is hereby amended by deleting
                “June 30, 2008” as the Facility Termination Date, and by
                substituting “June 30, 2009”
                therefor.

            


    

    


    
      	
              II.

            	
              Article
                V. NEGATIVE COVENANTS,
                Sections 5.8 Dividends
                and Distributions of Capital of C Corporation, 5.10
                Capital Expenditures and 5.11 Lease
                Expenditures are hereby deleted in
                their entirety, without
                substitution.

            


    

    


    
      	
              III.

            	
              EXHIBIT
                A, ADDENDUM TO CREDIT AGREEMENT is hereby deleted in its
                entirety, and the attached EXHIBIT A, ADDENDUM TO CREDIT
                AGREEMENT, all terms of which are incorporated herein by this
                reference, shall be substituted
                therefor.

            


    

    


    
      	
              IV.

            	
              The
Non-Utilization
                Fee
                of
                the FEES
                section
                of EXHIBIT B, REVOLVING
                CREDIT FACILITY SUPPLEMENT is
                hereby deleted in its
                entirety, and the following substituted
                therefor:

            


    

    


    “Non-Utilization
      Fee: Borrower will pay the following Non-Utilization Fee payable in
      arrears on a fiscal quarter basis, computed at a rate
      per annum
      of 0.125% on the average daily amount of the unused portion of the Overall
      Credit Limit for each such fiscal quarter, commencing on
      ______________________.”

    


    Except
      as
      specifically provided herein, all terms and conditions of the Credit Agreement
      remain in full force and effect, without waiver or modification.  All
      terms defined in the Credit Agreement shall have the same meaning when used
      in
      this Amendment.  This Amendment and the Credit Agreement shall be read
      together, as one document.

    


    Borrower
      hereby remakes all
      representations and warranties contained in the Credit Agreement and reaffirms
      all covenants set forth therein.  Borrower further certifies that as
      of the date of this Amendment there exists no Event of Default as defined in
      the
      Credit Agreement, nor any condition, act or event which with the giving of
      notice or the passage of time or both would constitute any such Event of
      Default.

    


    
      
        
        

      

      
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      IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
      as of the day and year first written above.

    


          
      WELLS FARGO HSBC TRADE BANK,

    KEY
      TECHNOLOGY,
      INC.                                                                             NATIONAL
      ASSOCIATION

    


    By: /s/
      David M. Camp                                                                            By:
/s/ Heather Graham

    Heather
      Graham

    Title: President
      and
      CEO                                                                            
Relationship Manager


    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    



    
      EXHIBIT
        A

      
        
          	 WELLS
                  FARGO HSBC TRADE BANK	
                   ADDENDUM
                    TO CREDIT AGREEMENT

                


        

      

      
        

      

    

    


    THIS
      ADDENDUM IS ATTACHED TO THE CREDIT AGREEMENT ("CREDIT AGREEMENT") BETWEEN
WELLS
      FARGO HSBC TRADE BANK AND THE FOLLOWING BORROWER:

     

    NAME
      OF BORROWER:  KEY TECHNOLOGY,
      INC.

     

    ADDITIONAL
      AFFIRMATIVE COVENANTS

    


    
      	
              
                The
                  following covenants are part of Article IV of the Credit
                  Agreement:

              

            	
               

            


    

    


    REPORTS.  Borrower
      will furnish the
      following information or deliver the following reports to Trade Bank at the
      times indicated below:

    


    
      	
              ·  

            	
              Annual
                Financial Statements: Not later
                than one hundred twenty (120) calendar
                days after and
                as of the end of each of Borrower's fiscal years, an annual unqualified
                audited consolidated financial statement of Borrower prepared by
                a
                certified public accountant acceptable to Trade Bank and prepared
                in
                accordance with GAAP, to include balance sheet, income statement
                and
                statement of cash flow and an annual Borrower prepared consolidating
                financial statement prepared in accordance with GAAP to include balance
                sheet and income statement.

            


    

    


    
      	
              ·  

            	
              Quarterly
                Financial Statements: Not later than forty-five
                (45) calendar days after and as of the end of each of Borrower's
                fiscal
                quarters, a consolidated and consolidating financial statement of
                Borrower
                prepared by Borrower,
                to include balance sheet and income
                statement.

            


    

    


    Certificate
      of Compliance: At the time each financial statement of Borrower
      required above is delivered to Trade Bank, a certificate of the
      chief financial officer of Borrower that said financial statements are accurate
      and that there exists no Event of Default under the Agreement nor any condition,
      act or event which with the giving of notice or the passage of time or both
      would constitute an Event of Default.

    


    
      	
              ·  

            	
              Insurance:
                Borrower will maintain in full force and effect insurance coverage
                on all
                Borrower's property, including, but not limited to, the following
                types of
                insurance coverage:

            


    

               policies
      of fire
      insurance

                  
      business personal property insurance

    


    All
      the
      insurance referred to in the preceding sentence must be in form, substance
      and
      amounts, and issued by companies, satisfactory to Trade Bank, and cover risks
      required by Trade Bank and contain loss payable endorsements in favor of Trade
      Bank.

    


    FINANCIAL
      COVENANTS. Borrower will maintain the following (if Borrower has any
      Subsidiaries which must be consolidated under GAAP, the following applies to
      borrower and the consolidated Subsidiaries):

    


    
      	
              ·  

            	
              Total
                Liabilities divided by Tangible Net
                Worth. Not at any time greater than 1.0 to 1.0.
                ("Tangible Net Worth" means the aggregate of total
                shareholders' equity determined in accordance with GAAP plus
                indebtedness which is subordinated to the Obligations to Trade Bank
                under
                a subordination agreement in form and substance acceptable to Trade
                Bank
                or by subordination language acceptable to Trade Bank in the instrument
                evidencing such indebtedness less (i) all assets which would be
                classified as intangible assets under GAAP, including, but not limited
                to,
                goodwill, licenses, patents, trademarks, trade names, copyrights,
                capitalized software and organizational costs, licenses and franchises,
                and (ii) assets which Trade Bank determines in its business judgment
                would
                not be available or would be of relatively small value in a liquidation
                of
                Borrower's business, including, but not limited to, loans to officers
                or
                affiliates and other items), and "Total Liabilities"
                excludes indebtedness which is subordinated to the Obligations to
                Trade
                Bank under a subordination agreement in form and substance acceptable
                to
                Trade Bank or by subordination language acceptable to Trade Bank
                in the
                instrument evidencing such indebtedness.)

            


    

    


    
      
        
        

      

      
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              ·  

            	
              EBITDA
                Coverage
                Ratio. Not less than 1.2 to 1.0
                on a rolling four-quarter basis as
                of each fiscal quarter end, based on the sum of the results of four
                consecutive quarters consisting of the present quarter and the three
                preceding quarters. ("EBITDA Coverage Ratio" means EBITDA
                minus non-financed capital expenditures minus dividends divided by
                interest expense plus income tax expense plus prior period current
                portion
                of long term indebtedness, and "EBITDA" means net profit before tax
                plus
                interest expense (net of capitalized interest expense), depreciation
                expense and amortization expense.) In the event that the denominator
                is a
                negative number, Borrower will be considered compliant with this
                covenant.

            


    

    


    FINANCIAL
      COVENANTS. Borrower will maintain the following on unconsolidated
      quarterly basis (determined as of each fiscal quarter end):

    


    
      	
              ·  

            	
              Quick
                Asset Ratio.  Not at any time less than 1.0 to 1.0.  "Quick Asset Ratio"
                means "Quick Assets" divided by total current liabilities, and
                "Quick Assets" means cash on hand or on deposit in banks,
                readily marketable securities issued by the United States, readily
                marketable commercial paper rated “A-1” by Standard & Poor’s
                Corporation (or a similar rating by a similar rating organization),
                certificates of deposit and banker's acceptances, and accounts receivable
                (net of allowance for doubtful accounts), and with current liabilities
                to
                include the aggregate outstanding amount of all Credit Extensions,
                whether
                classified as a current or long-term liability per Borrower's financial
                statement.

            


    

    


    Borrower
      shall only be obligated to comply with financial covenants at the time an
      advance is requested under the credit facilities and at all times any amounts
      are outstanding under the facilities.

     

    BY
      SIGNING HERE BORROWER AGREES TO THE DESIGNATED PROVISIONS IN THIS
      ADDENDUM:

     

    KEY
      TECHNOLOGY, INC.

    


    By:
      /s/ David M. Camp

    


    Title:
      President and CEO

    


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