Exhibit 10.1


 


Key Technology, Inc.


2003 RESTATED EMPLOYEES’ STOCK INCENTIVE PLAN


(1996
Plan as amended and restated as of December 15, 2003)


 


1.             Purpose.


 


This Restated
Employees’ Stock Incentive Plan (the “Plan”) is designed to encourage key
employees of Key Technology, Inc. (the “Company”) and any subsidiary
corporations to acquire or increase a proprietary interest in the Company, and
thus to share in the future success of the Company’s business.  Subsidiary corporation means any corporation
in which 50% or more of the outstanding shares of capital stock are owned by
the Company.  The Plan is intended to
attract and retain outstanding personnel who are in a position to make
important and direct contributions to the success of the Company and to promote
a closer identity of interests between the Company’s key employees and its
shareholders.  The Plan was initially
adopted in 1996 and was subsequently amended and was restated in 2000.  The Plan is amended and restated as of
December 15, 2003 in part to provide for an extended termination date, a
reauthorized number of shares reserved for issuance hereunder, and the award of
restricted stock grants in addition to the award of stock options.


 


2.             Scope and Duration of
the Plan.


 


There will be reserved for issuance to
eligible participants a total of 1,350,000 shares of the Company’s authorized
Common Stock pursuant to the exercise of options presently outstanding and
previously granted under this Plan prior to restatement and exercises of new
options granted and restricted stock grants awarded under the Plan after the
date hereof.  If an option expires or
terminates for any reason without having been fully exercised, the unpurchased
shares will be available for other options awarded under the Plan.  If a restricted stock award is forfeited, in
part or in full, the forfeited shares will again be available for issuance
under the Plan.  Unless the Plan is
terminated earlier pursuant to Section 0, it shall terminate on November 11,
2013 and no option or restricted stock award shall be granted under the Plan
after that date.


 


3.             Administration.


 


The Plan is administered by the Compensation
Committee of the Board of Directors (the “Board”), which shall be comprised
solely of “Non-Employee Directors” as defined in Rule 16b-3(b)(3)(i) of the
Securities Exchange Act of 1934 (the “Committee”).


 


The Committee has the responsibility to
construe and interpret the Plan and to establish and amend such rules and
regulations as it deems necessary or desirable for the proper administration of
the Plan.  Any decision or action taken
or to be taken by the Committee, arising out of or in connection with the
construction, interpretation and administration of the Plan, shall, to the
extent permitted by law, be within its absolute discretion, but subject to the
express provisions of the Plan. 
Decisions of the Committee shall be conclusive and binding upon all
recipients of options and restricted stock awards and any person claiming under
or through any recipient of an option or restricted stock award.


 


The Committee
has the authority, subject to the terms of the Plan, to determine which persons
are eligible for options and restricted stock awards and those to whom options
or restricted stock awards shall be granted, the type of grant to be awarded,
the number of shares to be covered by each option or


 

















 


restricted stock award, the time or times at which options or
restricted stock awards shall be granted, the fair market value of shares under
option or restricted stock award from time to time, and the terms and
provisions of the instruments evidencing options and restricted stock awards,
including any conditions to exercise, repurchase rights, or any restrictions
which may be imposed applicable to the transfer of the shares to be acquired upon
exercise of options or pursuant to restricted stock awards.


 


4.             Eligible Employees.


 


4.1          Awards Generally.  Options and restricted stock awards may be granted to
employees and to directors of the Company and any present or future subsidiary
corporations.  In determining the
employees to whom options and restricted stock awards shall be granted, and the
number of shares to be issued on the exercise of an option or the number of
shares of restricted stock to be granted, the Committee shall take into account
the duties of the employees, their present and potential contributions to the
success of the Company, and such other factors as the Committee deems relevant
to accomplish the purposes of the Plan.


 


4.2          Incentive Stock Options.   Incentive Stock Options may be granted only to employees of
the Company or any subsidiary corporation. 
An Incentive Stock Option cannot be granted to an employee who, at the
time such option is granted, owns directly or beneficially more than 10% of the
total combined voting power of all classes of stock of the employer corporation
or its parent or any subsidiary.  This
limitation shall not apply if, at the time such Incentive Stock Option is
granted, the option price is at least 110% of the fair market value of the
stock subject to the option and such option by its terms is not exercisable
after the expiration of five years from the date such option is granted.


 


5.             Stock Options.


 


5.1          Types of Grants.  The Committee may grant either Incentive Stock Options,
as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
“Code”) or Nonstatutory Stock Options. 
The Committee has the sole discretion in deciding which options, if any,
shall constitute Incentive Stock Options. 
For options granted under this Plan, the Committee shall clearly
identify each such option as an Incentive Stock Option or Nonstatutory Stock
Option.  Any option not clearly
identified as an Incentive Stock Option shall be deemed a Nonstatutory Stock
Option.  For purposes of the Plan (i)
the term “Nonstatutory Stock Option” means an option other than an Incentive
Stock Option and (ii) the term “employer corporation” means the
corporation of which an individual granted an Incentive Stock Option is an
employee.


 


5.2          Committee Member Option Grants.


 


(a)           Automatic Grants.  On the date of
each annual shareholder meeting, each director then serving on the Committee
shall automatically be granted a Nonstatutory Stock Option to purchase five
thousand (5,000) shares of the Company’s Common Stock.


 


(b)           Terms of Options.  The exercise price for options granted under this Section 5.2 shall be
the fair market value of the Company’s Common Stock at the close of business on
the date of grant.  Fair market value
shall be the closing price of the Company’s Common Stock on such date as quoted
on NASDAQ.  If a price is not available
on the date of grant, the fair market value shall be determined on the first
succeeding day that a price is available. 
The options granted under this Section 5.2 shall have a ten-year term from
the date of grant, unless earlier terminated as provided in Section 5.10 or
Section 5.11 of the Plan, and shall become exercisable at the rate of 25% per
year, beginning on the


 

















 


first anniversary of the date of grant and
continuing on each subsequent anniversary until fully exercisable, subject to
earlier exercise pursuant to Section 8 of the Plan or as otherwise determined
by the Committee.


 


5.3          Option Price.  The price of the shares of Common Stock to be issued on
exercise of an option shall be determined by the Committee, and in the case of
an Incentive Stock Option, shall be not less than the fair market value of the
shares on the date the option is granted. 
Fair market value of the shares under option shall be determined by the
Committee at the time of each grant of stock options under the Plan.


 


5.4          Term of Options.  The term of
each option shall be determined by the Committee, but shall not be for more
than ten years from the date the option is granted and may be subject to
earlier expiration as provided in Sections 5.10 and 5.11.  Each option shall recite the date on which
the exercise period expires.


 


5.5          Limitation on Amount of Incentive
Stock Options.  In no event shall the aggregate fair market
value (determined at the time such options are granted) of the shares with
respect to which the employee’s Incentive Stock Options first become
exercisable during any calendar year under the Plan or under any other stock
option plan of the employee’s employer corporation and its parent and subsidiary
corporations exceed $100,000.


 


5.6          Exercise of Options.  Subject to
Section 8, an option held by an employee may be exercised only after an
employee has remained in the continuous employment of the Company or a
subsidiary corporation for one year after the date the option is granted.  Thereafter, an option may be exercised at
any time, or from time to time, in whole or in part, except that if an option
by its terms is exercisable in installments, then the provisions of the option
shall control.  After becoming
exercisable, if exercisable in installments, then each installment shall remain
exercisable until termination or expiration of the option.  The price of the shares shall be paid in
full at the time of exercise in cash or, with the consent of the Committee, in
whole or in part in shares of Common Stock of the Company, valued at fair
market value.  Fair market value shall
be determined by the Committee.  Except
as provided in Sections 5.10 or 5.11, no option granted to an employee may
be exercised unless the holder is then an employee of the Company or a
subsidiary corporation.  An employee
shall not have any of the rights of a shareholder with respect to the shares to
be issued on the exercise of an option until the shares are paid for and the
stock certificate is delivered.  Upon
any exercise, prior to issuance and as a condition thereof the person
exercising the option may be required to sign any form of subscription
agreement then authorized by the Board for use in connection with shares
purchased under this Plan.  Such
agreement may impose such restrictions and repurchase rights as the Board may
determine.


 


5.7          Nontransferability of Nonstatutory
Stock Options.  Nonstatutory Stock Options granted under the
Plan are not transferable, except by will or by the laws of descent and
distribution, and may be exercised during the employee’s life only by the
employee or, if incapacitated, by his guardian or legal representative.  This section does not apply to Incentive Stock
Options granted under the Plan.


 


5.8          Nontransferability of Incentive
Stock Options.  Incentive Stock Options granted under the
Plan are not transferable by the optionee otherwise than by will or by the laws
of descent and distribution, and are exercisable during the optionee’s lifetime
only by the optionee.  Each Incentive
Stock Option shall recite this restriction. 
This section does not apply to Nonstatutory Stock Options granted under
the Plan.


 

















 


5.9          Instruments Evidencing Options and
Plan Log.  The Committee, in granting options hereunder, may use such
instruments and agreements to evidence such options as it may determine.  All options to purchase shares of the
Company which are granted under the Plan must be evidenced by an agreement
signed by the employee to whom the option is awarded, all terms of which, to
the extent not inconsistent with the terms of the Plan, shall be as determined
by the Committee in awarding any such option. 
The Secretary of the Company shall keep with the Plan an official Plan
Log listing the names of all employees to whom options have been granted, the
date of the award, the number of shares covered by the option, the purchase
price, the vesting schedule, if applicable, and the number of remaining
eligible shares covered by the Plan.


 


5.10        Termination of Employment.  If the
employment of an employee to whom an option has been granted terminates for any
reason other than death or physical disability, any option unexercised at the
date of termination of employment shall expire except to the extent otherwise
expressly authorized by the Committee. 
Whether an authorized leave of absence, military or governmental
service, disability or temporary absence from employment for any other reason
constitutes the termination of employment for purposes of the Plan shall be
conclusively determined by the Committee.


 


5.11        Death or Disability of an Employee.  If an employee
to whom an option has been granted dies or becomes physically disabled while
employed by the Company or by a subsidiary corporation, the option may only be
exercised (to the extent that the employee was entitled to do so on the date of
his death or disability) by his personal representative or beneficiary within
90 days after the date of death or termination of employment due to disability,
and the option shall expire to the extent unexercised after such 90-day period
except to the extent otherwise determined by the Committee.


 


6.             Restricted Stock
Awards.


 


6.1          General.  The Committee may
grant restricted stock awards to eligible employees under the Plan.  Each grant of restricted stock shall be
evidenced by a Restricted Stock Agreement between the recipient and the Company
in such form as may be approved by the Committee from time to time.  Shares of restricted stock awarded under the
Plan shall be subject to all applicable terms of the Plan and may be subject to
any other terms and conditions that are not inconsistent with the Plan as the
Committee may determine and as set forth in the respective Restricted Stock
Agreements.  The provisions of the
individual Restricted Stock Agreements entered into with recipients of
restricted stock awards under the Plan need not be identical.


 


6.2          Payment for Awards.  Shares of
restricted stock may be sold or awarded under the Plan for such consideration
as the Committee may determine at the time of each award including without
limitation past services, future services or cash.


 


6.3          Vesting Conditions.             Shares of restricted stock awarded under the Plan may
be subject to vesting.  Vesting shall
occur, in full or in installments, upon satisfaction of the conditions
specified in the Restricted Stock Agreement. 
A Restricted Stock Agreement may provide for accelerated vesting in
event of the employee’s death, disability, retirement or other events.


 


6.4          Voting and Dividend Rights.  The holders of
shares of restricted stock awarded under the Plan shall have the same voting,
dividend and other rights as the Company’s other shareholders.  A Restricted Stock Agreement, however, may
require that the holders of the shares of restricted stock invest any cash
dividends received with respect to such shares in the purchase of additional
shares of restricted


 

















 


stock.  Such additional shares of any restricted stock so purchased shall
be subject to the same conditions and restrictions as the award with respect to
which the dividends were paid.


 


7.             Adjustments for
Changes in Capitalization.


 


Notwithstanding any other provision of the Plan, in the event of
changes in the outstanding shares of Common Stock of the Company by reason of
stock dividends, split-ups, recapitalizations, mergers, consolidations,
reorganizations or liquidations, each instrument evidencing an option and each
Restricted Stock Agreement may contain such provisions as the Committee
determines to be appropriate for the adjustment of the number and class of
shares covered by such option or restricted stock award, and as applicable the
option exercise price.  In the event of
any such change in the outstanding shares of Common Stock of the Company, the
aggregate number of shares available under the Plan shall be appropriately
adjusted.


 


8.             Events Accelerating
Exercise of Options or Vesting of Restricted Stock.


 


If the shares of Common Stock of the Company are changed into or
exchanged for shares of stock of another corporation or are converted to cash
pursuant to a plan of merger, partial or complete liquidation, or dissolution,
the Board may in its discretion determine to make each option then outstanding
be exercisable with respect to all or any portion of the shares of Common Stock
covered thereby and without regard to the time the option has been outstanding,
beginning with the date the Board approves or authorizes such change or
conversion and ending two days prior to the effective date of such change or
conversion.  The Board may also, in its
discretion, determine to make each share of restricted stock then subject to
forfeiture be fully vested without regard to the satisfaction of the conditions
specified in the Restricted Stock Agreement. 
If, after December 15, 2003, any of the shares of Common Stock of the
Company becomes the subject of an acquisition requiring reporting under
Sections 13(d)(1) or 14(d) of the Securities Act of 1934, the Board may at its
discretion determine to make each option then outstanding be exercisable with respect
to all or any portion of the shares of Common Stock covered thereby and without
regard to the time the option has been outstanding, at any time thereafter, and
may determine to make each share of restricted stock then subject to forfeiture
be fully vested without regard to the satisfaction of the conditions specified
in the Restricted Stock Agreement.


 


9.             Time of Granting
Options and Restricted Stock Awards.


 


Nothing contained in the Plan or in any resolution adopted or to be
adopted by the Board, the Committee, or shareholders of the Company shall
constitute the granting of an option or the award of a restricted stock
grant.  The granting of an option or
award of restricted stock pursuant to the Plan shall take place only when an
instrument evidencing the option or restricted stock award has been duly
executed on behalf of the Company and delivered to the employee to whom such
option or restricted stock award is to be granted.


 


10.          Employment Rights.


 


Nothing in the Plan or any instrument evidencing an option or
restricted stock award shall confer upon any employee any right to continue in
the employment of the Company or any subsidiary corporation or shall be
construed to interfere in any way with the right of the Company or any
subsidiary corporation to terminate his employment at any time for any reason.


 

















 


11.          Withholding Taxes.


 


To the extent required by applicable federal, state or local law, an
employee or his or her successor shall make arrangements satisfactory to the
Company for the satisfaction of any withholding tax obligations that arise in
connection with the Plan.  The Company
shall not be required to issue any shares of Common Stock under the Plan until
such obligations are satisfied.  To the
extent that applicable law subjects an employee to tax withholding obligations,
the Committee may permit such employee to satisfy all or part of such
obligations by having the Company withhold all or a portion of any shares of
Common Stock that otherwise would be issued to him or her or by surrendering
all or a portion of any shares of Common Stock that he or she previously
acquired.  Such shares of Common Stock
shall be valued at their fair market value on the date when they are withheld
or surrendered.


 


12.          Amendment.


 


The Board has the right at any time to amend, modify or discontinue the
Plan.  An amendment of the Plan shall be
subject to the approval of the Company’s shareholders only to the extent
required by applicable laws, regulations, rules or requirements of any
applicable governmental authority or listing organization governing the trading
of the Company’s Stock.  No amendment,
modification or discontinuance adopted by the Board shall revoke or alter the
terms of any valid option or restricted stock award previously granted in
accordance with the Plan without the consent of the recipient of such award.


 


The Plan may also be amended or modified in any respect or discontinued
with the approval of a majority of the shares present and entitled to vote at a
shareholder meeting duly called for such purpose.  However, no amendment, modification or discontinuance of the Plan
may, without the consent of the employee to whom a valid option or restricted
stock award has previously been granted, affect the rights of such employee
under any outstanding option or restricted stock award.


 


The Plan, the grant and exercise of options, and the grant of
restricted stock awards shall be subject to all applicable laws, regulations,
rules and requirements of applicable authorities and organizations.  Notwithstanding any provision of the Plan to
the contrary, the Board may in its discretion make such changes in the Plan as
may be required to conform the Plan to such laws, regulations, rules and
requirements of applicable authorities and organizations, subject to the provisions
of the first paragraph of this Section 12.


 


13.          Effectiveness of the
Plan.


 


The Plan shall become effective only after it has been approved by the
Board of Directors and subsequently approved, within one year from the date of
adoption by the Board, at a shareholders meeting duly called for such purpose.


 


This Restated Employees’ Stock Incentive Plan was approved by the Board
of Directors of Key Technology, Inc. on December 15, 2003 and by the
shareholders on February 4, 2004.


 


	
   

  	
  /s/  Gordon Wicher

  
	
   

  	
  Gordon
  Wicher

  
	
   

  	
   

  
	
   

  	
  Corporate Secretary