ex10_1.htm


    
      

    

     

    
      	
               
      

            	
              Exhibit
      10.1

            


    

    July 16,
2008

    


    


    Mr.
Edward A. Wagner

    


    


    Dear
Ed:

    


    It gives
me great pleasure to extend an employment offer to you as Sr. Vice President of Global
Operations for 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 general management and operations experience, 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 the
SVP Global Operations,
you will be responsible for the corporation’s operations strategy and execution,
and its alignment with the overall strategic vision.  This will
include accountability for key operational areas on a worldwide basis, including
manufacturing and delivery, manufacturing engineering, materials/supply chain,
project engineering, and manufacturing quality.  You will be
responsible for budgeting, forecasting, reporting, and analysis of operational
results.  And you will participate as an important member of an
executive team charged with growing this business and increasing shareholder
value.

    


    As we’ve
previously discussed, the elements of our offer package are as
follows:

    


    Exempt
Base Salary

    


    $ 210,000
per year, paid bi-weekly at a rate of $8,076.92.  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, as well as performance against other predefined metrics to
which we agree.  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 75% 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 120% of base salary bonus (maximum).

    


    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 hiring grant of 6,575 shares, the
current value of which will approximate your starting annual
salary.  This grant is effective on your start date.  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 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 substantial incentive compensation for exceptional
performance.

    


    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).  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.  You will receive a
housing allowance of $40,000, paid in 12 monthly payments of
$3,333.  This allowance is intended for your use in securing housing
in Walla Walla and will be grossed-up for tax purposes.  Separately,
the Company will pay for a suite at the Marcus Whitman from July 27th through
September 4th.

    


    For a
period of three months, the Company will reimburse the transportation costs for
trips home on weekends, or in the alternative, for your wife to venture to Walla
Walla for visits and/or house hunting.

    


    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 provide
you with 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 wife will move and establish residence in Walla
Walla.  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 through that date.

    


    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

            	 
      	 
      


    

    


    Ed, we
are exceedingly pleased with your acceptance of our offer and we look forward to
your joining the company on July 28th.  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

    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, Ed
Wagner, accept Key Technology, Inc.’s offer of employment for the position of
Sr. Vice President of Global
Operations.  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/ Ed
Wagner                                                          7/16/08                                

    Ed
Wagner                                                                Date

     

    /s/ David
Camp                                                        7/17/08                                

    David
Camp                                                              Date

    Chief
Executive Officer