Exhibit
10.20


 


AMENDMENT TO LOAN DOCUMENTS


 


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


 


RECITALS


 


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


 


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


 


NOW, THEREFORE, in
consideration of the foregoing, and for other good and valuable consideration
receipt of which is hereby acknowledged, Borrower and Lender hereby agree as
follows:


 


AGREEMENT


 


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


 


2.                                      Amendments to Loan Agreement.  The
Loan Agreement is amended as follows:


 


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


 


(i)               Eligible Accounts
Receivable.  Clauses (c) and (l) of
the definition of “Eligible Accounts Receivable” are amended and restated to
read as follows:


 


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


 


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


 


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


 

















 


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


 


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


 


“Revolving
Maturity Date” means July 31, 2004.


 


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


 


(c)
Amendment to Section 5.15.  Section 5.15 is
amended and restated to read as follows:


 


Section 5.15                Financial Covenants.


 


(a)  Debt to Tangible Net Worth
Ratio.  Borrower shall maintain as of the end of
each month, a ratio of Indebtedness to Tangible Net Worth equal to or less than
3.0 to 1.


 


(b) NCAO to
Debt Service Ratio. 
Borrower shall maintain as of the end of each month, for the period of
twelve (12) consecutive months then ended, a ratio of NCAO to Debt Service of
not less than 2.0 to 1.  As used herein,
“Debt Service” shall mean, for any Person, for any period, all regularly
scheduled principal payments required to be made by such Person during such
period on Long-Term Debt.


 


(c) Minimum
Net Income.  Borrower shall maintain as of the end of each
fiscal quarter of Borrower, net income of not less than Zero Dollars ($0) for
the for the period of four (4) consecutive fiscal quarters then ended, in each
case determined in accordance with GAAP for such period, excluding, to the
extent deducted in determining such net income, any write-offs of goodwill
during such period.


 


(d) Minimum
Working Capital.  Borrower shall maintain as of the end of
each month (i) an excess of current assets over current liabilities equal
to 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 greater
1.25 to 1, in each case determined in accordance with GAAP as of such date of
determination.


 


3.                                      Amendment to Revolving Note.  In
the 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, this
Amendment shall not become effective until each of the following conditions is
fully and simultaneously satisfied:


 


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


 


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


 


(c)
Corporate Authority.  Lender shall have received in form and
substance reasonably satisfactory to it such evidence of corporate authority as
Lender shall reasonably request;


 

















 


(d)
Representations True; No Default.  The representations of
Borrower as set forth in Article 4 of the Loan Agreement shall be
true on and as of the date of this Amendment with the same force and effect as
if made on and as of this date or, if any such representation or warranty is
stated to have been made as of or with respect to a specific date, as of or
with respect to such specific date.  No
Event 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 or
will occur as a result of the execution, delivery or performance of the
Amendment Documents; and


 


(e) Other
Documents.  Lender shall have received such other
documents, instruments, and undertakings as Lender may reasonably request.


 


5.                                      Representations and Warranties. 
Borrower hereby represents and warrants to Lender that each of the
representations and warranties set forth in Article 4 of the Loan
Agreement is true and correct in each case as if made on and as of the date of
this Amendment or, if any such representation or warranty is stated to have
been made as of or with respect to a specific date, as of or with respect to
such specific date.  Borrower expressly
agrees that it shall be an additional Event of Default under the Loan Agreement
if any representation or warranty made hereunder shall prove to have been
incorrect in any material respect when made.


 


6.                                      No Further Amendment.  Except as expressly modified
by this Amendment, the Loan Agreement and the other Loan Documents shall remain
unmodified and in full force and effect and the parties hereby ratify their
respective obligations thereunder.


 


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


 


8.                                      Miscellaneous.


 


(a) Entire
Agreement.  This Amendment and the other Amendment Documents
comprise the entire agreement of the parties with respect to the subject matter
hereof and supersedes all prior oral or written agreements, representations or
commitments.


 


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


 


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


 


(d) Oral
Agreements Not Enforceable.


 


ORAL AGREEMENTS OR ORAL COMMITMENTS
TO LOAN MONEY, EXTEND CREDIT, OR TO FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT
ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.


 

















 


IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be executed by their respective officers or agents thereunto
duly 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