-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R8k4Gg15zYAd520fXWYntiN53cpvNf4NQDzPydaVig5Q9bI6JbDy5xgytsObR3Ht wzjf/gJBmfzODkGRrAmiEg== /in/edgar/work/20000721/0000950131-00-004434/0000950131-00-004434.txt : 20000920 0000950131-00-004434.hdr.sgml : 20000920 ACCESSION NUMBER: 0000950131-00-004434 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20000721 GROUP MEMBERS: FMC CORP GROUP MEMBERS: FMC CORPORATION SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: KEY TECHNOLOGY INC CENTRAL INDEX KEY: 0000906193 STANDARD INDUSTRIAL CLASSIFICATION: [3550 ] IRS NUMBER: 930822509 STATE OF INCORPORATION: OR FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-48007 FILM NUMBER: 676541 BUSINESS ADDRESS: STREET 1: 150 AVERY ST CITY: WALLA WALLA STATE: WA ZIP: 99362 BUSINESS PHONE: 5095292161 MAIL ADDRESS: STREET 1: 150 AVERY STREET CITY: WALLA WALLA STATE: WA ZIP: 99362 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: FMC CORP CENTRAL INDEX KEY: 0000037785 STANDARD INDUSTRIAL CLASSIFICATION: [2800 ] IRS NUMBER: 940479804 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 200 E RANDOLPH DR CITY: CHICAGO STATE: IL ZIP: 60601 BUSINESS PHONE: 3128616000 FORMER COMPANY: FORMER CONFORMED NAME: BEAN SPRAY PUMP CO DATE OF NAME CHANGE: 19670706 FORMER COMPANY: FORMER CONFORMED NAME: FOOD MACHINERY & CHEMICAL CORP DATE OF NAME CHANGE: 19670706 SC 13D 1 0001.txt SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ________________________ SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO 13d- 1(a) AND AMENDMENTS THERETO FILED PURSUANT TO 13d-2(a) (Amendment No. )/1/ Key Technology, Inc. (Name of Issuer) Common Stock, $0.01 par value Series B Preferred Stock, $10.00 par value Warrants to Purchase Common Stock (Title of Class of Securities) 493143 10 1 493143 20 0 493143 11 9 (CUSIP Number) Steven H. Shapiro FMC Corporation 200 East Randolph Drive Chicago, Illinois 60601 (312) 861-6783 With a copy to: Thomas A. Cole Sidley & Austin Bank One Plaza 10 South Dearborn Street Chicago, Illinois 60603 (312) 853-7000 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) July 12, 2000 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box: [_] Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent. (Continued on following pages) ________________________ /1/ The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). - ---------------------------------- ----------------------- Common Stock, $0.01 par value 13D Page 2 of 12 CUSIP No. 493143 10 1 - ---------------------------------- ----------------------- 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) FMC Corporation - -------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_] (b) [_] - -------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* SC; WC - -------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] - -------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------------------------------- 7 SOLE VOTING POWER 420,786 (Constituting 198,510 shares of Common Stock issuable upon conversion of Series C Preferred Stock, 140,000 shares of Common Stock issuable upon conversion of Series B Preferred Stock (which is subject to a warrant) and 82,276 shares of Common Stock issuable NUMBER OF upon exercise of Warrants) SHARES BENEFICIALLY ----------------------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH -0- REPORTING ----------------------------------------------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER 420,786 (Constituting 198,510 shares of Common Stock issuable upon conversion of Series C Preferred Stock, 140,000 shares of Common Stock issuable upon conversion of Series B Preferred Stock (which is subject to a warrant) and 82,276 shares of Common Stock issuable upon exercise of Warrants) ----------------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 420,786 - -------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] - -------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 8.17% - -------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - --------------------------------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT! SCHEDULE 13D - ------------------------------------------ ------------------- Series B Preferred Stock, $10.00 par value** Page 3 of 12 CUSIP NO. 493143 20 0 - ------------------------------------------ ------------------- - ------------------------------------------------------------------------------ NAMES OF REPORTING PERSONS 1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) FMC Corporation - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* 2 (a) [_] (b) [_] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------ SOURCE OF FUNDS* 4 SC; WC - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT 5 TO ITEMS 2(d) OR 2(e) [_] - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 Delaware - ------------------------------------------------------------------------------ SOLE VOTING POWER 7 NUMBER OF 140,000 SHARES ----------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 OWNED BY -0- ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING 140,000 PERSON ----------------------------------------------------------- SHARED DISPOSITIVE POWER WITH 10 -0- - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 140,000 - ------------------------------------------------------------------------------ CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 12 [_] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 11.9% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON* 14 CO - ------------------------------------------------------------------------------ *SEE INSTRUCTIONS BEFORE FILLING OUT! ** The Issuer is expected to list the Series B Preferred Stock within 120 days of July 12, 2000 at which time the Series B Preferred Stock will become an "equity security" registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended. -3- SCHEDULE 13D - ----------------------------------- --------------- Warrants to Purchase Common Stock** Page 4 of 12 CUSIP NO. 493143 11 9 - ----------------------------------- --------------- - ------------------------------------------------------------------------------ NAMES OF REPORTING PERSONS 1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) FMC Corporation - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* 2 (a) [_] (b) [_] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------ SOURCE OF FUNDS* 4 SC; WC - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT 5 TO ITEMS 2(d) OR 2(e) [_] - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 Delaware - ------------------------------------------------------------------------------ SOLE VOTING POWER 7 NUMBER OF 82,276 SHARES ----------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 OWNED BY -0- ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING 82,276 PERSON ----------------------------------------------------------- SHARED DISPOSITIVE POWER WITH 10 -0- - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 82,276 - ------------------------------------------------------------------------------ CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 12 [_] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 16.2% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON* 14 CO - ------------------------------------------------------------------------------ *SEE INSTRUCTIONS BEFORE FILLING OUT! ** The Issuer is expected to list the Warrants within 120 days of July 12, 2000 at which time the Warrants will become an "equity security" registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended. -4- ITEM 1. SECURITY AND ISSUER The Statement on Schedule 13D dated July 20, 2000 relates to the Common Stock, par value $0.01 per share (the "Common Stock"), of Key Technology, Inc., an Oregon corporation (the "Issuer"), the Series B Preferred Stock, par value $10.00 per share, of the Issuer and Warrants to purchase the Common Stock of the Issuer. The principal executive offices of the Issuer are located at 150 Avery Street, Walla Walla, Washington 99362. ITEM 2. IDENTITY AND BACKGROUND. (a)-(e). This Schedule 13D is being filed by FMC Corporation, a Delaware corporation ("FMC"). The address of FMC's principal business and principal office is 200 East Randolph Drive, Chicago, Illinois 60601. The principal business of FMC is the manufacture and sale of chemicals and machinery for industry and agriculture. During the last five years, FMC has not (i) been convicted in a criminal proceeding or (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or State securities laws or finding any violation with respect to such laws. The following sets forth as to each executive officer and director of FMC: (a) name; (b) residence or business address; (c) present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted; (d) whether or not, during the last five years, such person has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors); (e) whether or not, during the last five years, such person was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or State securities laws or finding any violation with respect to such laws; and (f) citizenship. 1. (a) Robert N. Burt -- executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Chairman of the Board and Chief Executive Officer of FMC (d) No (e) No (f) United States of America 2. (a) Joseph H. Netherland -- executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) President of FMC (d) No (e) No (f) United States of America 3. (a) William H. Schumann -- executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Senior Vice President and Chief Financial Officer (d) No (e) No (f) United States of America -5- 4. (a) Stephen F. Gates -- executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Senior Vice President, General Counsel and Corporate Secretary (d) No (e) No (f) United States of America 5. (a) Charles H. Cannon, Jr. -- executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Vice President and Group Manager of FMC Food Tech, a division of FMC (d) No (e) No (f) United States of America 6. (a) W. Kim Foster -- executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Vice President and General Manager-Agricultural Products Group of FMC (d) No (e) No (f) United States of America 7. (a) Robert I. Harries -- executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Vice President and Group Manager-Chemical Products Group of FMC (d) No (e) No (f) United States of America 8. (a) Peter D. Kinnear -- executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Vice President of FMC (d) No (e) No (f) United States of America 9. (a) Stephanie Kushner -- executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Vice President and Treasurer of FMC (d) No (e) No (f) United States of America 10. (a) Ronald D. Mambu -- executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Vice President and Controller of FMC (d) No (e) No (f) United States of America -6- 11. (a) James A. McClung -- executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Vice President-Worldwide Marketing of FMC (d) No (e) No (f) United States of America 12. (a) William G. Walter -- executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Vice President and General Manager-Specialty Chemicals Group of FMC (d) No (e) No (f) United States of America 13. (a) B.A. Bridgewater, Jr. -- director (b) Brown Group, Inc., 8300 Maryland Avenue, St. Louis, MO 63105 Chairman of the Board, President and Chief Executive Officer of Brown Group, Inc., a diversified marketer and retailer of footwear, 8300 Maryland Avenue, St. Louis, MO 63105 (c) No (d) No (e) No (f) United States of America 14. (a) Paul L. Davies, Jr. -- director (b) Lakeside Corporation, 50 Fremont Street, Suite 3520, San Francisco, CA 94105 (c) President of Lakeside Corporation, a real estate investment company, 50 Fremont Street, Suite 3520, San Francisco, CA 94105 (d) No (e) No (f) United States of America 15. (a) William F. Reilly -- director (b) PRIMEDIA Inc., 745 Fifth Avenue, Fl. 23, New York, NY 10151 (c) Chairman and Chief Executive Officer of PRIMEDIA Inc., a diversified media company, 745 Fifth Avenue, Fl. 23, New York, NY 10151 (d) No (e) No (f) United States of America 16. (a) James R. Thompson -- director (b) Winston & Strawn, 35 West Wacker Drive, Chicago, Illinois 60601 (c) Chairman, Chairman of the Executive Committee and Partner of Law firm of Winston & Strawn, 35 West Wacker Drive, Chicago, Illinois 60601 (d) No (e) No (f) United States of America 17. (a) Enrique Sosa -- director (b) c/o FMC Corporation, 200 East Randolph Drive, Chicago, Illinois 60601 (c) Retired (d) No -7- (e) No (f) United States of America 18. (a) Asbjorn Larsen -- director (b) Saga Petroleum ASA, P.O. Box 1345 VIKA, N-O113 Oslo, Norway (c) Retired President and Chief Executive Officer of Saga Petroleum ASA, a petroleum company, P.O. Box 1345 VIKA, N-O113 Oslo, Norway (d) No (e) No (f) Norway 19. (a) Edward J. Mooney -- director (b) Nalco Chemical Company, One Nalco Center, Naperville, IL 60563-1198 (c) Chairman and Chief Executive Officer of Nalco Chemical Company, a specialty chemicals company, One Nalco Center, Naperville, IL 60563-1198 (d) No (e) No (f) United States of America 20. (a) Patricia A. Buffler -- director (b) University of California at Berkeley, 140 Earl Warren Hall, Berkeley, CA 94720-7360 (c) Dean and Professor of Epidemiology at the University of California, Berkeley School of Health, 140 Earl Warren Hall, Berkeley, CA 94720-7360 (d) No (e) No (f) United States of America 21. (a) Albert J. Costello -- director (b) W.R. Grace & Co., 1750 Clint Moore Rd., Boca Raton, FL 33487 (c) Chairman, President and Chief Executive Officer of W.R. Grace & Co., a supplier of flexible packaging and specialty chemicals, 1750 Clint Moore Rd., Boca Raton, FL 33487 (d) No (e) No (f) United States of America 22. (a) Clayton Yeutter -- director (b) Hogan & Hartson, L.L.P., Columbia Square, 555 Thirteenth Street NW, Washington, D.C. 20004-1109 (c) Of Counsel, Law Firm of Hogan & Hartson L.L.P., Columbia Square, 555 Thirteenth Street NW, Washington, D.C. 20004-1109 (d) No (e) No (f) United States of America ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Pursuant to the terms of an Agreement and Plan of Merger dated February 15, 2000, as amended (the "Merger Agreement"), among the Issuer, KTC Acquisition Corp. ("Sub") and Advanced Machine Vision Corporation ("AMVC"), all of the Series B Preferred Stock of AMVC held by FMC converted into 119,106 shares of the Issuer's Series C Preferred Stock, par value $20 per share (the "Series C Preferred Stock"), and warrants to purchase 29,776 shares of Common Stock of the Issuer at an -8- exercise price of $15 per share (the "Series C Warrants"). Each share of Series C Preferred Stock is convertible at any time into 1 2/3 shares of Common Stock of the Issuer. In addition, pursuant to an Agreement dated April 24, 2000 (the "Key Agreement") among FMC, the Issuer, Sub and AMVC, concurrently with the consummation of the transactions contemplated by the Merger Agreement, an option held by FMC to purchase common stock of AMVC converted into an option (the "FMC Option"), exercisable for $2,520,000, to purchase 210,000 shares of the Issuer's Series B Preferred Stock, par value $10 per share (the "Series B Preferred Stock"), and warrants to purchase 52,500 shares of Common Stock of the Issuer at $15 per share (the "Series B Warrants" and, together with the Series C Warrants, the "Warrants"). Each share of Series B Preferred Stock is convertible at any time into 2/3 of a share of Common Stock of the Issuer. The FMC Option may be exercised at any time (in all or in part) by FMC until October 14, 2003, at which time the FMC Option terminates. The source of funds to be used in connection with the exercise of the FMC Option and the Warrants will be FMC's working capital. ITEM 4. PURPOSE OF TRANSACTION. FMC acquired the Series B Preferred Stock and the Series B Warrants pursuant to the Merger Agreement. FMC acquired the FMC Option pursuant to the Key Agreement. FMC currently intends to review its investment in the Issuer periodically and, depending on such review and factors including market conditions and share prices, the Issuer's business prospects and technology, future developments, applicable legal requirements and other factors that the management of FMC may deem material to its investment decision, FMC may seek to acquire additional securities of the Issuer or sell securities of the Issuer from time to time in the open market, in negotiated transactions, in transactions with the Issuer pursuant to the terms of the securities or otherwise or by any other permissible means. Except as set forth above, FMC has no present plans or proposals which may be related to or would result in: (a) The acquisition by any person of additional securities of the Issuer, or the disposition of securities of the Issuer; (b) An extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Issuer or any of its subsidiaries; (c) A sale or transfer of a material amount of assets of the Issuer or any of its subsidiaries; (d) Any change in the present board of directors or management of the Issuer, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the issuer's board of directors; (e) Any material change in the present capitalization or dividend policy of the Issuer; (f) Any other material change in the Issuer's business or corporate structure; (g) Changes in the Issuer's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Issuer by any person; (h) Causing a class of securities of the issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) A class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Act; or (j) Any action similar to any of those enumerated above. -9- ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. FMC beneficially owns 420,786 shares of Common Stock, constituting 8.17% of the outstanding shares of the Issuer's Common Stock as of May 31, 2000. Based upon filings by the Issuer with the Securities and Exchange Commission and in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended, FMC beneficially owns (i) 140,000 shares of Series B Preferred Stock, constituting 11.9% of the outstanding shares of the Series B Preferred Stock and (ii) Warrants to purchase 82,276 shares of Common Stock, constituting 16.2% of the outstanding Warrants. To the best knowledge of FMC, none of the other persons listed in Item 2 hereof owns any securities of the Issuer. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. As described in Items 3 and 4, FMC acquired the Series C Preferred Stock and the Series C Warrants pursuant to the Merger Agreement. FMC acquired the FMC Option pursuant to the Key Agreement. Series C Preferred Stock. Pursuant to the Certificate of Designation for the Series C Preferred Stock, each share of Series C Preferred Stock may be converted into 1 2/3 shares of Common Stock of the Issuer in two instances: - by FMC at any time; or - by the Issuer upon certain qualifying mergers, consolidations, share exchanges or sales of substantially all of the Issuer's assets. In the event of any liquidation, dissolution or winding up of the Issuer, each share of Series C Preferred Stock entitles the holder to a payment of $20.00 per share, plus all accrued but unpaid dividends before any amount is distributed to holders of Common Stock. If the assets are insufficient to permit this payment to the holders of Series C Preferred Stock, then the entire assets available for distribution to the holders of capital stock shall be distributed ratably among the holders of Series C Preferred Stock and Series B Preferred Stock. The Series C Preferred Stock entitles FMC to vote on all matters. FMC may vote the number of whole shares of Common Stock into which its Series C Preferred Stock could be converted. The Issuer must redeem the Series C Preferred Stock for $20.00 per share, plus accrued but unpaid dividends on the fifth anniversary of the first day shares of Series C Preferred Stock were issued. In addition, FMC has a put right requiring the Issuer to purchase at any time any or all of its Series C Preferred Stock at the redemption price of $20.00. Series B Preferred Stock. Pursuant to the Certificate of Designation for the Series B Preferred Stock, each share of Series B Preferred Stock may be converted into 2/3 of a share of Common Stock of the Issuer in two instances: - by the holders of such shares at any time; or - by the Issuer upon a merger, consolidation, share exchange or sale of substantially all of its assets. In the event of any liquidation, dissolution or winding up of the Issuer, the holders of Series B Preferred Stock are entitled to a payment of $10.00 per share, plus all accrued but unpaid dividends before any amount is distributed to holders of Common Stock. If the assets are insufficient to permit this -10- payment to the holders of Series B Preferred Stock, then the entire assets available for distribution to the holders of capital stock shall be distributed ratably among the holders of Series B Preferred Stock and Series C Preferred Stock. The holders of Series B Preferred Stock are entitled to vote on all matters. Series B Preferred Stock holders vote the number of whole shares of Common Stock into which the holder's Series B Preferred Stock could be converted. The Issuer must redeem the Series C Preferred Stock for $10.00 per share, plus accrued but unpaid dividends on the fifth anniversary of the first day shares of Series B Preferred Stock were issued. The redemption date may be accelerated if the average closing price of the Issuer's Common Stock, as listed on the Nasdaq National Market, is $15.00 or more for thirty consecutive trading days. In addition, holders of Series B Preferred Stock have a put right requiring the Issuer to purchase at any time after the second anniversary of the first date shares of Series B Preferred Stock were issued any or all of their Series B Preferred Stock at the redemption price of $10.00. Warrants. The Series C Warrants entitle FMC to purchase at any time, for a period of five years, 29,776 shares of Common Stock at $15.00 per share, subject to adjustment. Prior to the expiration date of the Series C Warrants, FMC may require the Issuer to redeem the Series C Warrants for cash at a price equal to $10.00 for each whole share of Common Stock that may be purchased under the Series C Warrants. FMC does not have the right to vote or participate in any other matters as a shareholder pursuant to the Warrants. The Series B Warrants have identical terms to the Series C Warrants, but will not be issued until such time, if any, that FMC exercises the FMC Option. General. The Key Agreement, the Key Option, the forms of the Certificate of Designation for the Series B Preferred Stock and the Series C Preferred Stock and the form of the Warrants are attached as exhibits hereto and the descriptions of the foregoing contained herein are qualified in their entirety to such exhibits, which are incorporated by reference. Except as described herein, neither FMC nor, to the best knowledge of FMC, any of the other persons listed in Item 2 hereof, has entered into any contracts, arrangements, understandings of relationships with any person with respect to any securities of the Issuer. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit 1 Agreement dated as of April 24, 2000 among FMC Corporation, Key Technology Inc., KTC Acquisition Corp. and Advanced Machine Vision Corporation. Incorporated by reference to Exhibit 10 to Amendment No. 3 to Schedule 13D filed by FMC Corporation with respect to Advanced Machine Vision Corporation on April 27, 2000. Exhibit 2 Form of Certificate of Designation for Series B Convertible Preferred Stock of Key Technology, Inc. Exhibit 3 Form of Certificate of Designation for Series C Convertible Preferred Stock of Key Technology, Inc. Exhibit 4 Form of Warrant to Purchase Shares of Common Stock of Key Technology, Inc. Exhibit 5 Form of Warrant Agreement Exhibit 6 Option Agreement dated as of July 12, 2000 between Key Technology, Inc. and FMC Corporation -11- SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: July 20, 2000 FMC CORPORATION By: /s/ Charles H. Cannon, Jr. -------------------------- Name: Charles H. Cannon, Jr. Title: Vice President -12- EX-99.2 2 0002.txt CERTIFICATE OF DESIGNATION FOR SERIES B STOCK FORM OF CERTIFICATE OF DESIGNATION SERIES B CONVERTIBLE PREFERRED STOCK KEY TECHNOLOGY, INC. Key Technology, Inc., an Oregon corporation (the "Corporation"), certifies that pursuant to the authority contained in Article II of its Restated Articles of Incorporation, and in accordance with the provisions of Section 60.134 of the Oregon Revised Statutes, its Board of Directors has adopted the following resolution creating a series of its $.0001 par Preferred Stock: RESOLVED, that, pursuant to authority conferred upon the Board of Directors by the Articles of Incorporation of the Corporation, the Board of Directors hereby authorizes the issuance of Series B Convertible Preferred Stock of the Corporation and hereby designates, pursuant to Section 60.134 of the Oregon Revised Statutes, the rights, preferences, privileges, restrictions and other matters relating to such Series B Preferred Stock as follows 1. DESIGNATION AND AMOUNT. [ ] shares of the Corporation's authorized Preferred Stock are hereby designated as the Series B Convertible Preferred Stock (the "Series B Preferred Stock"). 2. DIVIDENDS. No dividends shall be declared and set aside for any shares of the Series B Preferred Stock except in the event that the Board of Directors of the Corporation shall declare a dividend payable upon the then outstanding shares of the Common Stock of the Corporation, in which event the holders of the Series B Preferred Stock shall be entitled to the amount of dividends per share of Series B Preferred Stock as would be declared payable on the largest number of whole shares of Common Stock into which each share of Series B Preferred Stock held by each holder thereof could be converted pursuant to the provisions of Section 5 hereof (such number determined as of the record date for the determination of holders of Common Stock entitled to receive such dividend). 3. LIQUIDATION, DISSOLUTION OR WINDING UP 3.1 PREFERENCE. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, holders of each share of Series B Preferred Stock shall be entitled to be paid first out of the assets of the Corporation available for distribution to holders of the Corporation's capital stock of all classes (whether such assets are capital, surplus or earnings) before any sums shall be paid or any assets distributed among the holders of Common Stock, an amount equal to Ten dollars ($10) per share of Series B Preferred Stock plus an amount equal to all accrued and unpaid dividends thereon, if any, computed up to and including the date full payment shall be tendered to the holders of the Series B Preferred Stock with respect to such liquidation, dissolution or winding up. If the assets of the Corporation shall be insufficient to permit the payment in full to holders of the Series B Preferred Stock of the amount thus distributable, then the entire assets of the Corporation available for such distribution shall be distributed ratably among the holders of the Series B Preferred Stock. 3.2 DISTRIBUTIONS OTHER THAN CASH. Whenever the distribution provided for in this Section 3 shall be paid in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors of the Corporation. 4. VOTING POWER. Except as otherwise required by law, each holder of Series B Preferred Stock shall be entitled to vote on all matters and shall be entitled to that number of votes equal to the number of votes that would be accorded to the largest number of whole shares of Common Stock into which such holder's shares of Series B Preferred Stock could be converted, pursuant to the provisions of Section 5 of this Certificate, at the record date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, at the date such vote is taken or any written consent of shareholders is solicited. The holders of shares of Series B Preferred Stock and Common Stock shall be entitled to vote together as a single class on all matters. The holders of Series B Preferred Stock shall not be entitled to vote as a separate class or voting group on any plan of merger. 5. CONVERSION RIGHTS. The holders of the Series B Preferred Stock shall have the following conversion rights: 5.1 GENERAL. Subject to and in compliance with the provisions of this Section 5, any shares of Series B Preferred Stock may, at the option of the holder, be converted at any time or from time to time into fully paid and nonassessable shares (calculated as to each conversion to the largest whole share) of Common Stock. The number of shares of Common Stock to which a holder of Series B Preferred Stock shall be entitled upon conversion shall be the product obtained by multiplying the appropriate Applicable Conversion Rate (determined as provided in Sections 5.3, 5.4 and 5.5 by the number of shares of Series B Preferred Stock being converted. 5.2 MANDATORY CONVERSION. (a) Conversion Upon Merger, Consolidation, Share Exchange or Sale of Assets. All the outstanding shares of Series B Preferred Stock shall, at the option of the Corporation and upon written notice to the holders thereof given not less than 30 days prior to the closing of a merger or consolidation of the Corporation with or into another Corporation, share exchange or the sale of all or substantially all of the Corporation's assets to any other person, be converted, effective upon such closing, into the number of shares of Common Stock to which a holder of Series B Preferred Stock shall be entitled upon conversion pursuant to Section 5.1, unless redeemed by the holder as provided herein. Such conversion shall occur automatically on the effective date of such event without any further action by such holders and whether or not the certificates representing such shares are surrendered to the Corporation or its transfer agent for the Common Stock, except that any holder may elect to have such holder's Series B shares redeemed at the liquidation value by sending a notice of redemption to the Corporation at any time prior to the expiration of the 30 day notice. Nothing in this Section 5.2, however, shall limit or in any way restrict the rights of the holders of shares of Series B Preferred Stock to convert such shares into shares of Common Stock at any time pursuant to Section 5.1 immediately above. Notwithstanding any other provision of this subparagraph, the occurrence of a merger or consolidation of the Corporation with or into another corporation, share exchange or the sale of all or substantially all of the Corporation's assets to any other person, shall not be considered a liquidation, dissolution or winding up of the Corporation under Section 3 of this Certificate. (b) SURRENDER OF CERTIFICATES. Upon the occurrence of a conversion specified in this Section 5.2, the holders of such Series B Preferred Stock shall surrender the certificates representing such shares at the office of the Corporation or of its transfer agent for the Common Stock. Thereupon, the Corporation or its transfer agent shall issue and deliver to such holder a certificate or certificates for the number of shares of Common Stock into which the shares of the Series B Preferred Stock surrendered were convertible on the date on which such conversion occurred. The Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion unless certificates evidencing such shares of the Series B Preferred Stock being converted are either delivered to the Corporation or any such transfer agent or the holder notifies the Corporation or any such transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection therewith. 5.3 SERIES B APPLICABLE CONVERSION RATE. The conversion rate for each share of the Series B Preferred Stock in effect at any time (the "Series B Applicable Conversion Rate") shall be the quotient obtained by dividing Ten dollars ($10) by the Applicable Conversion Value, calculated as provided in Section 5.4. 5.4 APPLICABLE CONVERSION VALUE. The Applicable Conversion Value shall be fifteen dollars ($15) for the Series B Preferred Stock, except that such amount shall be adjusted from time to time in accordance with this Section 5. 5.5 ADJUSTMENTS TO APPLICABLE CONVERSION VALUE. Upon the happening of an Extraordinary Common Stock Event (as hereinafter defined), the Applicable Conversion Value shall, simultaneously with the happening of such Extraordinary Common Stock Event, be adjusted by multiplying the then effective Applicable Conversion Value by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such Extraordinary Common Stock Event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such Extraordinary Common Stock Event, and the product so obtained shall thereafter be the Applicable Conversion Value. The Applicable Conversion Value, as so adjusted, shall be readjusted in the same manner upon the happening of any successive Extraordinary Common Stock Event or Events. "Extraordinary Common Stock Event" shall mean (i) the issue of additional shares of the Common Stock as a dividend or other distribution on outstanding Common Stock, (ii) the subdivision of outstanding shares of Common Stock into a greater number of shares of the Common Stock or (iii) the combination of outstanding shares of Common Stock into a smaller number of shares of Common Stock. 5.6 DIVIDENDS. In the event the Corporation shall make, issue or fix a record date for the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in securities of the Corporation other than shares of Common Stock or in assets (excluding cash dividends or distributions), then and in each such event provision shall be made so that the holders of Series B Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon the number of securities or such other assets of the Corporation that they would have received had their Series B Preferred Stock been converted into Common Stock on the date of such event and had they thereafter, during the period from the date of such event to and including the Conversion Date (as that term is hereafter defined in Section 5.9, retained such securities or such other assets during such period, giving application to all adjustments called for during such period under this Section 5 with respect to the rights of the holders of Series B Preferred Stock. 5.7 RECAPITALIZATION OR RECLASSIFICATION. If the Common Stock issuable upon the conversion of the Series B Preferred Stock shall be changed into the same or different number of shares of any class or classes of stock of the Corporation, whether by recapitalization, reclassification or otherwise (other than a reorganization, merger, consolidation or sale of assets), then and in each such event the holder of each share of Series B Preferred Stock shall have the right thereafter to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification or other change by holders of the number of shares of Common Stock into which such share of Series B Preferred Stock might have been converted immediately prior to such reorganization, reclassification or change, all subject to further adjustment as provided herein. 5.8 CERTIFICATE AS TO ADJUSTMENTS. In each case of an adjustment or readjustment of the Applicable Conversion Rate, the Corporation will furnish each holder of Series B Preferred Stock with a certificate showing such adjustment or readjustment, and stating in reasonable detail the facts upon which such adjustment or readjustment is based. 5.9 EXERCISE OF CONVERSION PRIVILEGE. To exercise a conversion privilege, a holder of Series B Preferred Stock shall surrender the certificate or certificates representing the shares being converted to the Corporation at its principal office, and shall give written notice to the Corporation at the office that such holder elects to convert such shares. The certificate or certificates for shares of Series B Preferred Stock surrendered for conversion shall be accompanied by proper assignment thereof to the Corporation or in blank. The date when such written notice is received by the Corporation, together with the certificate or certificates representing the shares of Series B Preferred Stock being converted, is the "Conversion Date." As promptly as practicable after the Conversion Date, the Corporation shall issue and deliver to the holder of the shares of Series B Preferred Stock being converted (i) such certificate or certificates as it may request for the number of whole shares of Common Stock issuable upon the conversion of such shares of Series B Preferred Stock in accordance with the provisions of this Section 5, (ii) cash in the amount of all accrued and unpaid dividends on such shares of Series B Preferred Stock, if any, computed up to and including the Conversion Date and (iii) cash, as provided in Section 5.10 in respect of any fraction of a share of Common Stock issuable upon such conversion. Such conversion shall be deemed to have been effected immediately prior to the close of business on the Conversion Date, and at such time the rights of the holder as holder of the converted shares of Series B Preferred Stock shall cease and the person or person in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares of Common Stock represented thereby. 5.10 CASH IN LIEU OF FRACTIONAL SHARES. No fractional shares of Common Stock shall be issued upon the conversion of shares of Series B Preferred Stock. Instead of any fractional shares of Common Stock which would otherwise be issuable upon conversion of Series B Preferred Stock, the Corporation shall pay to the holder of the shares of Series B Preferred Stock which were converted a cash adjustment in respect of such fractional shares in an amount equal to the same fraction of the market price per share of the Common Stock (as determined in a reasonable manner prescribed by the Board of Directors) at the close of business on the Conversion Date. The determination as to whether or not any fractional shares are issuable shall be based upon the total number of shares of Series B Preferred Stock being converted at any one time by any holder thereof, not upon each share of Series B Preferred Stock being converted. 5.11 PARTIAL CONVERSION. In the event some but not all of the shares of Series B Preferred Stock represented by a certificate or certificates surrendered by a holder are converted, the Corporation shall execute and deliver to the holder a new certificate representing the number of shares of Series B Preferred Stock that were not converted. 5.12 RESERVATION OF COMMON STOCK. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series B Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series B Preferred Stock. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series B Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. 6. REDEMPTION RIGHTS 6.1 MANDATORY REDEMPTION. Except as otherwise provided in this Section 6, on the fifth anniversary of the first date on which shares of Series B Preferred Stock are issued (the "Mandatory Redemption Date"), the Corporation shall redeem, out of funds legally available therefor, all outstanding shares of Series B Preferred Stock, by paying therefor $10 per share, plus an amount equal to any declared and unpaid dividends, if any, to such date, in cash (the "Redemption Value"). 6.2 NOTICE OF REDEMPTION. Notice of any redemption of shares of Series B Preferred Stock pursuant to Section 6.1 shall be given by notice to the registered holders of the Series B Preferred Stock not less than 30, nor more than 60 days prior to the date fixed for redemption (a "Redemption Notice"), to each holder of Series B Preferred Stock to be redeemed, at such holder's address as it appears on the transfer books of the Corporation. In order to facilitate the redemption of Series B Preferred Stock, the Board of Directors may fix a record date for the determination of Series B Preferred Stock to be redeemed, or may cause the transfer books of the Corporation for the Series B Preferred Stock to be closed, not more than 60 days or less than 30 days prior to the date fixed for such redemption. At any time prior to the expiration of the Redemption Notice, any holder of the Series B shares may exercise the conversion rights pursuant to the provisions of Section 5.9 above. 6.3 CANCELLATION OF SERIES B PREFERRED STOCK. Notice of Redemption having been given as aforesaid in respect of shares of Series B Preferred Stock to be redeemed pursuant to Section 6.1, notwithstanding that any certificates for such shares shall not have been surrendered for cancellation, from and after the date of redemption designated in the notice of redemption (i) the shares represented thereby shall no longer be deemed outstanding, (ii) the rights to receive dividends thereon shall cease to accrue, and (iii) all rights of the holders of Series B Preferred Stock to be redeemed shall cease and terminate, excepting only the right to receive the $10 per share redemption price therefor, plus all accumulated and unpaid dividends (whether or not earned or declared) to the date of redemption. 6.4 ACCELERATION OF REDEMPTION DATE. If at any time after the first date on which shares of Series B Preferred Stock are issued (the "Issue Date") the average closing price of the Company's Common Stock as listed on the Nasdaq National Market is $15 or more for thirty consecutive trading days, then the Company will have the right to accelerate redemption of all of the Series B Preferred Stock at the Redemption Value per share by sending a Redemption Notice as provided in Section 6.2 above. At any time prior to the expiration of the Redemption Notice, any holder of the Series B shares may exercise the conversion rights pursuant to the provisions of Section 5.9 above. 7. PUT RIGHT 7.1 THE PUT. The Corporation hereby irrevocably grants and issues to each holder of Series B Preferred Stock the right to require the Corporation to purchase any time after the second anniversary of the Issue Date (hereinafter referred to as the "Put") any or all of such Series B Preferred Stock at the Redemption Value. 7.2 EXERCISE OF PUT. The holders of Series B Preferred Stock may exercise the Put any time after the second anniversary of the Issue Date (the "Exercise Period"). Any holder of Series B Preferred Stock may exercise the Put during the Exercise Period by delivery of a written notice to the Corporation specifying the number of Series B Preferred Stock as to which the Put is being exercised, together with delivery of one or more certificates representing the number of Series B shares as to which the Put is being exercised, duly endorsed in blank by the holders of Series B Preferred Stock or having attached thereto a stock power duly executed by the holder of Series B Preferred Stock in proper form for transfer. 7.3 PAYMENT AND DELIVERY OF SERIES B PREFERRED STOCK. The Corporation shall, within twenty (20) calendar days of the receipt of notice from a holder of Series B Preferred Stock of its exercise of the Put, pay to such holder of Series B Preferred Stock in cash or by check, the Redemption Value for each share of Series B Preferred Stock as to which such holder of Series B Preferred Stock has exercised the Put. Any residual Series B shares represented by the certificates surrendered but not included within the Put will be issued in the name of the holder by the Corporation. EX-99.3 3 0003.txt CERTIFICATE OF DESIGNATION FOR SERIES C STOCK FORM OF CERTIFICATE OF DESIGNATION SERIES C CONVERTIBLE PREFERRED STOCK KEY TECHNOLOGY, INC. Key Technology, Inc., an Oregon corporation (the "Corporation"), certifies that pursuant to the authority contained in Article II of its Restated Articles of Incorporation, and in accordance with the provisions of Section 60.134 of the Oregon Revised Statutes, its Board of Directors has adopted the following resolution creating a series of its $20.00 par value Preferred Stock: RESOLVED, that, pursuant to authority conferred upon the Board of Directors by the Articles of Incorporation of the Corporation, the Board of Directors hereby authorizes the issuance of Series C Convertible Preferred Stock of the Corporation and hereby designates, pursuant to Section 60.134 of the Oregon Revised Statutes, the rights, preferences, privileges, restrictions and other matters relating to such Series C Preferred Stock as follows 1. DESIGNATION AND AMOUNT. One Hundred Nineteen Thousand , One Hundred Six (119,106) shares of the Corporation's authorized Preferred Stock are hereby designated as the Series C Convertible Preferred Stock (the "Series C Preferred Stock"). 2. DIVIDENDS. No dividends shall be declared and set aside for any shares of the Series C Preferred Stock except in the event that the Board of Directors of the Corporation shall declare a dividend payable upon the then outstanding shares of the Common Stock of the Corporation, in which event the holders of the Series C Preferred Stock shall be entitled to the amount of dividends per share of Series C Preferred Stock as would be declared payable on the largest number of whole shares of Common Stock into which each share of Series C Preferred Stock held by each holder thereof could be converted pursuant to the provisions of Section 5 hereof (such number determined as of the record date for the determination of holders of Common Stock entitled to receive such dividend). 3. LIQUIDATION, DISSOLUTION OR WINDING UP 3.1 PREFERENCE. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, holders of each share of Series C Preferred Stock shall be entitled to be paid first out of the assets of the Corporation available for distribution to holders of the Corporation's capital stock of all classes (whether such assets are capital, surplus or earnings) before any sums shall be paid or any assets distributed among the holders of Common Stock, an amount equal to $20 per share of Series C Preferred Stock plus an amount equal to all accrued and unpaid dividends thereon, if any, computed up to and including the date full payment shall be tendered to the holders of the Series C Preferred Stock with respect to such liquidation, dissolution or winding up. If the assets of the Corporation shall be insufficient to permit the payment in full to holders of the Series C Preferred Stock of the amount thus distributable, then the entire assets of the Corporation available for such distribution shall be distributed ratably among the holders of the Series C Preferred Stock. 3.2 DISTRIBUTIONS OTHER THAN CASH. Whenever the distribution provided for in this Section 3 shall be paid in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors of the Corporation. 4. VOTING POWER. Except as otherwise required by law, each holder of Series C Preferred Stock shall be entitled to vote on all matters and shall be entitled to that number of votes equal to the number of votes that would be accorded to the largest number of whole shares of Common Stock into which such holder's shares of Series C Preferred Stock could be converted, pursuant to the provisions of Section 5 of this Certificate, at the record date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, at the date such vote is taken or any written consent of shareholders is solicited. The holders of shares of Series C Preferred Stock and Common Stock shall be entitled to vote together as a single class on all matters. The holders of Series C Preferred Stock shall not be entitled to vote as a separate class or voting group on any plan of merger. 5. CONVERSION RIGHTS. The holders of the Series C Preferred Stock shall have the following conversion rights: 5.1 GENERAL. Subject to and in compliance with the provisions of this Section 5, any shares of Series C Preferred Stock may, at the option of the holder, be converted at any time or from time to time into fully paid and nonassessable shares (calculated as to each conversion to the largest whole share) of Common Stock. The number of shares of Common Stock to which a holder of Series C Preferred Stock shall be entitled upon conversion shall be the product obtained by multiplying the appropriate Applicable Conversion Rate (determined as provided in Sections 5.3, 5.4 and 5.5) by the number of shares of Series C Preferred Stock being converted. 5.2 MANDATORY CONVERSION. (a) CONVERSION UPON MERGER, CONSOLIDATION, SHARE EXCHANGE OR SALE OF ASSETS. All the outstanding shares of Series C Preferred Stock shall, at the option of the Corporation and upon written notice to the holders thereof given not less than 30 days prior to the closing of a merger or consolidation of the Corporation with or into another Corporation, share exchange or the sale of all or substantially all of the Corporation's assets to any other person, be converted, effective upon such closing, into the number of shares of Common Stock to which a holder of Series C Preferred Stock shall be entitled upon conversion pursuant to Section 5.1, unless redeemed by the holder as provided herein. For purposes of the preceding sentence, a merger, consolidation or share exchange shall only be deemed to occur if, after giving effect to such merger, consolidation or share exchange, the holders of the Corporation's outstanding capital stock (determined on a fully diluted basis) immediately prior to the merger, consolidation or share exchange, will cease to own immediately following the merger, consolidation or share exchange the Corporation's (or the surviving corporation's) outstanding capital stock (on a fully diluted basis) representing at lest 50% of the equity value of the Corporation (or the surviving corporation) as reasonably determined by the Corporation's board of directors. Such conversion shall occur automatically on the effective date of such event without any further action by such holders and whether or not the certificates representing such shares are surrendered to the Corporation or its transfer agent for the Common Stock, except that any holder may elect to have such holder's Series C shares redeemed at the liquidation value by sending a notice of redemption to the Corporation at any time prior to the expiration of the 30 day notice. Nothing in this Section 5.2, however, shall limit or in any way restrict the rights of the holders of shares of Series C Preferred Stock to convert such shares into shares of Common Stock at any time pursuant to Section 5.1 immediately above. Notwithstanding any other provision of this subparagraph, the occurrence of a merger or consolidation of the Corporation with or into another corporation, share exchange or the sale of all or substantially all of the Corporation's assets to any other person, shall not be considered a liquidation, dissolution or winding up of the Corporation under Section 3 of this Certificate. (b) SURRENDER OF CERTIFICATES. Upon the occurrence of a conversion specified in this Section 5.2, the holders of such Series C Preferred Stock shall surrender the certificates representing such shares at the office of the Corporation or of its transfer agent for the Common Stock. Thereupon, the Corporation or its transfer agent shall issue and deliver to such holder a certificate or certificates for the number of shares of Common Stock into which the shares of the Series C Preferred Stock surrendered were convertible on the date on which such conversion occurred. The Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion unless certificates evidencing such shares of the Series C Preferred Stock being converted are either delivered to the Corporation or any such transfer agent or the holder notifies the Corporation or any such transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection therewith. 5.3 SERIES C APPLICABLE CONVERSION RATE. The conversion rate for each share of the Series C Preferred Stock in effect at any time (the "Series C Applicable Conversion Rate") shall be the quotient obtained by dividing $20 by the Applicable Conversion Value, calculated as provided in Section 5.4. 5.4 APPLICABLE CONVERSION VALUE. The Applicable Conversion Value shall be $12 for the Series C Preferred Stock, except that such amount shall be adjusted from time to time in accordance with this Section 5. 5.5 ADJUSTMENTS TO APPLICABLE CONVERSION VALUE. Upon the happening of an Extraordinary Common Stock Event (as hereinafter defined), the Applicable Conversion Value shall, simultaneously with the happening of such Extraordinary Common Stock Event, be adjusted by multiplying the then effective Applicable Conversion Value by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such Extraordinary Common Stock Event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such Extraordinary Common Stock Event, and the product so obtained shall thereafter be the Applicable Conversion Value. The Applicable Conversion Value, as so adjusted, shall be readjusted in the same manner upon the happening of any successive Extraordinary Common Stock Event or Events. "Extraordinary Common Stock Event" shall mean (i) the issue of additional shares of the Common Stock as a dividend or other distribution on outstanding Common Stock, (ii) the subdivision of outstanding shares of Common Stock into a greater number of shares of the Common Stock or (iii) the combination of outstanding shares of Common Stock into a smaller number of shares of Common Stock. 5.6 DIVIDENDS. In the event the Corporation shall make, issue or fix a record date for the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in securities of the Corporation other than shares of Common Stock or in assets, then and in each such event provision shall be made so that the holders of Series C Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon the number of securities or such other assets of the Corporation that they would have received had their Series C Preferred Stock been converted into Common Stock on the date of such event and had they thereafter, during the period from the date of such event to and including the Conversion Date (as that term is hereafter defined in Section 5.9, retained such securities or such other assets during such period, giving application to all adjustments called for during such period under this Section 5 with respect to the rights of the holders of Series C Preferred Stock. 5.7 RECAPITALIZATION OR RECLASSIFICATION. If the Common Stock issuable upon the conversion of the Series C Preferred Stock shall be changed into the same or different number of shares of any class or classes of stock of the Corporation, whether by recapitalization, reclassification or otherwise (other than a reorganization, merger, consolidation or sale of assets), then and in each such event the holder of each share of Series C Preferred Stock shall have the right thereafter to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification or other change by holders of the number of shares of Common Stock into which such share of Series C Preferred Stock might have been converted immediately prior to such reorganization, reclassification or change, all subject to further adjustment as provided herein. 5.8 CERTIFICATE AS TO ADJUSTMENTS. In each case of an adjustment or readjustment of the Applicable Conversion Rate, the Corporation will furnish each holder of Series C Preferred Stock with a certificate showing such adjustment or readjustment, and stating in reasonable detail the facts upon which such adjustment or readjustment is based. 5.9 EXERCISE OF CONVERSION PRIVILEGE. To exercise a conversion privilege, a holder of Series C Preferred Stock shall surrender the certificate or certificates representing the shares being converted to the Corporation at its principal office, and shall give written notice to the Corporation at the office that such holder elects to convert such shares. The certificate or certificates for shares of Series C Preferred Stock surrendered for conversion shall be accompanied by proper assignment thereof to the Corporation or in blank. The date when such written notice is received by the Corporation, together with the certificate or certificates representing the shares of Series C Preferred Stock being converted, is the "Conversion Date." As promptly as practicable after the Conversion Date, the Corporation shall issue and deliver to the holder of the shares of Series C Preferred Stock being converted (i) such certificate or certificates as it may request for the number of whole shares of Common Stock issuable upon the conversion of such shares of Series C Preferred Stock in accordance with the provisions of this Section 5, (ii) cash in the amount of all accrued and unpaid dividends on such shares of Series C Preferred Stock, if any, computed up to and including the Conversion Date and (iii) cash, as provided in Section 5.10 in respect of any fraction of a share of Common Stock issuable upon such conversion. Such conversion shall be deemed to have been effected immediately prior to the close of business on the Conversion Date, and at such time the rights of the holder as holder of the converted shares of Series C Preferred Stock shall cease and the person or person in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares of Common Stock represented thereby. 5.10 CASH IN LIEU OF FRACTIONAL SHARES. No fractional shares of Common Stock shall be issued upon the conversion of shares of Series C Preferred Stock. Instead of any fractional shares of Common Stock which would otherwise be issuable upon conversion of Series C Preferred Stock, the Corporation shall pay to the holder of the shares of Series C Preferred Stock which were converted a cash adjustment in respect of such fractional shares in an amount equal to the same fraction of the market price per share of the Common Stock (as determined in a reasonable manner prescribed by the Board of Directors) at the close of business on the Conversion Date. The determination as to whether or not any fractional shares are issuable shall be based upon the total number of shares of Series C Preferred Stock being converted at any one time by any holder thereof, not upon each share of Series C Preferred Stock being converted. 5.11 PARTIAL CONVERSION. In the event some but not all of the shares of Series C Preferred Stock represented by a certificate or certificates surrendered by a holder are converted, the Corporation shall execute and deliver to the holder a new certificate representing the number of shares of Series C Preferred Stock that were not converted. 5.12 RESERVATION OF COMMON STOCK. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series C Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series C Preferred Stock. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series C Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. 6. REDEMPTION RIGHTS 6.1 MANDATORY REDEMPTION. Except as otherwise provided in this Section 6, on the fifth anniversary of the first date on which shares of Series C Preferred Stock are issued (the "Mandatory Redemption Date"), the Corporation shall redeem, out of funds legally available therefor, all outstanding shares of Series C Preferred Stock, by paying therefor $20 per share, plus an amount equal to any declared and unpaid dividends, if any, to such date, in cash (the "Redemption Value"). 6.2 NOTICE OF REDEMPTION. Notice of any redemption of shares of Series C Preferred Stock pursuant to Section 6.1 shall be given by notice to the registered holders of the Series C Preferred Stock not less than 30, nor more than 60 days prior to the date fixed for redemption (a "Redemption Notice"), to each holder of Series C Preferred Stock to be redeemed, at such holder's address as it appears on the transfer books of the Corporation. In order to facilitate the redemption of Series C Preferred Stock, the Board of Directors may fix a record date for the determination of Series C Preferred Stock to be redeemed, or may cause the transfer books of the Corporation for the Series C Preferred Stock to be closed, not more than 60 days or less than 30 days prior to the date fixed for such redemption. At any time prior to the expiration of the Redemption Notice, any holder of the Series C shares may exercise the conversion rights pursuant to the provisions of Section 5.9 above. 6.3 CANCELLATION OF SERIES C PREFERRED STOCK. Notice of Redemption having been given as aforesaid in respect of shares of Series C Preferred Stock to be redeemed pursuant to Section 6.1, notwithstanding that any certificates for such shares shall not have been surrendered for cancellation, from and after the date of redemption designated in the notice of redemption (i) the shares represented thereby shall no longer be deemed outstanding, (ii) the rights to receive dividends thereon shall cease to accrue, and (iii) all rights of the holders of Series C Preferred Stock to be redeemed shall cease and terminate, excepting only the right to receive the $20 per share redemption price therefor, plus all accumulated and unpaid dividends (whether or not earned or declared) to the date of redemption. 7. PUT RIGHT 7.1 THE PUT. The Corporation hereby irrevocably grants and issues to each holder of Series C Preferred Stock the right to require the Corporation to purchase at any time (hereinafter referred to as the "Put") any or all of such Series C Preferred Stock at the Redemption Value. 7.2 EXERCISE OF PUT. The holders of Series C Preferred Stock may exercise the Put any time after the Issue Date (the "Exercise Period"). Any holder of Series C Preferred Stock may exercise the Put during the Exercise Period by delivery of a written notice to the Corporation specifying the number of Series C Preferred Stock as to which the Put is being exercised, together with delivery of one or more certificates representing the number of Series C shares as to which the Put is being exercised, duly endorsed in blank by the holders of Series C Preferred Stock or having attached thereto a stock power duly executed by the holder of Series C Preferred Stock in proper form for transfer. 7.3 PAYMENT AND DELIVERY OF SERIES C PREFERRED STOCK. The Corporation shall, within 20 calendar days of the receipt of notice from a holder of Series C Preferred Stock of its exercise of the Put, pay to such holder of Series C Preferred Stock in cash or by check, the Redemption Value for each share of Series C Preferred Stock as to which such holder of Series C Preferred Stock has exercised the Put. Any residual Series C shares represented by the certificates surrendered but not included within the Put will be issued in the name of the holder by the Corporation. EX-99.4 4 0004.txt FORM OF WARRANT TO PURCHASE SHARES OF COMMON STOCK WARRANT TO PURCHASE SHARES OF COMMON STOCK OF KEY TECHNOLOGY, INC. CUSIP ____________ This certifies that __________________________, the registered holder (the "Holder") is entitled to purchase from Key Technology, Inc., an Oregon corporation (the "Company"), _______ fully paid and nonassessable shares of the Company's Common Stock, subject to adjustment as provided herein, at any time or from time to time up to and including 5:00 p.m. (Pacific Time) on _____________, 2005, such date being referred to herein as the "Expiration Date," upon surrender to the Company's Transfer Agent (or at such other location as the Company may advise the Holder in writing) of this Warrant properly endorsed with the Form of Subscription attached hereto duly filled in and signed and upon payment of the purchase price for the number of shares for which this Warrant is being exercised times a per-share purchase price of $15.00 per share (referred to herein as the stock purchase price). The per-share stock purchase price and the number of shares purchasable hereunder are subject to adjustment as provided herein. This Warrant is subject to the following terms and conditions: 1. Exercise; Issuance of Certificates; Payment for Shares. 1.1 This Warrant is exercisable at the option of the holder of record hereof, at any time or from time to time, up to the Expiration Date for all or any part of the shares of Common Stock which may be purchased hereunder. Shares of Common Stock purchased under this Warrant shall be issued to the Holder hereof as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered, properly endorsed, together with the completed Form of Subscription attached hereto and payment for such shares. Certificates for the shares of Common Stock so purchased shall be delivered to the Holder hereof by the Company at the Company's expense within a reasonable time after this Warrant has been so exercised. In case of a purchase of less than all the shares which may be purchased under this Warrant, the Company shall cancel this Warrant and execute and deliver a new Warrant or Warrants of like tenor for the balance of the shares purchasable under the Warrant surrendered upon such purchase to the Holder hereof within a reasonable time. Each stock certificate so delivered shall be in such denominations of Common Stock as may be requested by the Holder hereof and shall be registered in the name of such Holder. 1.2 Net Issue Exercise. Notwithstanding any provisions herein to the contrary, if the fair market value of one share of the Company's Common Stock is greater than the stock purchase price (at the date of calculation as set forth below), in lieu of exercising this Warrant for cash, the Holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being cancelled) by surrender of this Warrant at the principal office of the company together with the properly endorsed Form of Subscription and notice of such election in which event the Company shall issue to the Holder a number of shares of Common computed using the following formula: X = Y (A-B) ------- A Where X = the number of shares of Common Stock to be issued to the Holder Y = the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being cancelled (at the date of such calculation) A = the fair market value of one share of the Company's Common Stock, as applicable (at the date of such calculation) B = stock purchase price (as adjusted to the date of such calculation) For purposes of this Warrant, including the above calculation, fair market value of one share of Common Stock shall be the closing price on Nasdaq on the date that this Warrant is surrendered for exercise. 2. Shares to be Fully Paid; Reservation of Shares. The Company covenants and agrees that all shares of Common Stock which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be duly authorized, validly issued, fully paid and nonassessable and free from all preemptive rights of any shareholder and free of all taxes, liens and charges with respect to the issue thereof. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, a sufficient number of shares of authorized but unissued Common Stock will be reserved to provide for the exercise of the rights represented by this Warrant. The Company will take all such action as may be necessary to assure that such shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any domestic securities exchange upon which the Company's Common Stock or this Warrant may be listed. 3. Adjustment of Stock Purchase Price and Number of Shares. In case the Company shall at any time split or subdivide its outstanding shares of Common Stock into a greater number of shares, the stock purchase price in effect immediately prior to such subdivisions shall be proportionately reduced, and conversely, in case the outstanding shares of the Common Stock of the Company shall be combined into a smaller number of shares, the stock purchase price in effect immediately prior to such combination shall be proportionately increased. Upon each adjustment of the stock purchase price, the Holder of this Warrant shall thereafter be entitled to purchase, at the stock purchase price resulting from such adjustment, the number of shares obtained by multiplying the stock purchase price in effect immediately prior to such adjustment by the number of shares purchasable pursuant hereto immediately prior to such adjustment, and dividing the product thereof by the stock purchase price resulting from such adjustment. 2 Upon any adjustment of the stock purchase price or any increase or decrease in the number of shares purchasable upon the exercise of this Warrant, the Company shall give written notice thereof, by first-class mail, postage prepaid, addressed to the registered Holder of this Warrant at the address of such Holder as shown on the books of the Company. The notice shall be signed by the Company's President or Chief Financial Officer and shall state the stock purchase price resulting from such adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. 4. Notice of Certain Events. If at any time: (a) the Company shall declare any dividend upon its Common Stock payable in stock or make any special dividend or other distribution to the holders of its Common Stock; (b) there shall be any capital reorganization or reclassification of the capital stock of the Company; or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation; or (c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in any one or more of said cases, the Company shall give, by first-class mail, postage prepaid, addressed to the Holder of this Warrant at the address of such Holder as shown on the books of the Company (i) at least 10 days' prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding up, at least 10 days' prior written notice of the date when the same shall take place. Any notice given in accordance with the foregoing clause (i) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which a shareholder shall be entitled thereto. Any notice given in accordance with the foregoing clause (ii) shall also specify the date on which shareholders shall be entitled to exchange their shares for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding up, conversion or public offering, as the case may be. 5. No Voting or Dividend Rights. Nothing contained in this Warrant shall be construed as conferring upon the Holder hereof the right to vote or to consent to receive notice as a shareholder of the Company or any other matters or any rights whatsoever as a shareholder of the Company. No dividends or interest shall be payable or accrued in respect of this Warrant or the interest represented hereby or the shares purchasable hereunder until, and only to the extent that, this Warrant shall have been exercised. 3 6. Fractional Shares. No fractional shares shall be issued upon exercise of this Warrant. The Company shall, in lieu of issuing any fractional share, pay the holder entitled to such fraction a sum in cash equal to such fraction multiplied by the then fair market value per share. 7. Right of Redemption. The Holder shall at all times prior to the Expiration Date and except to the extent exercised have the right to require the Company to redeem this Warrant for cash at a price equal to $10.00 for each whole share of Company Common Stock that may be purchased under this Warrant. Upon any surrender for redemption, any fractional share interests represented by this Warrant will be redeemed for cash. To exercise this right of redemption, the Holder shall surrender this Warrant, properly endorsed, to the Company's Transfer Agent, together with the completed form of Redemption Notice attached hereto. 8. Warrant Agreement. This Warrant Certificate is subject to all of the terms, provisions and conditions of the Warrant Agreement, dated as of ____________, 2000 (the "Warrant Agreement"), between the Company and the Warrant Agent, to all of which terms, provisions and conditions the registered holder of this Warrant Certificate consents by acceptance hereof. The Warrant Agreement is incorporated herein by reference and made a part hereof and reference is made to the Warrant Agreement for a full description of the rights, limitations of rights, obligations, duties and immunities of the Warrant Agent, the Company and the holders of the Warrant Certificates. Copies of the Warrant Agreement are available for inspection at the stock transfer office of the Warrant Agent or may be obtained upon written request addressed to the Company. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its officers, thereunto duly authorized, this ___ day of ___________, 2000. KEY TECHNOLOGY, INC. By --------------------------------- Thomas C. Madsen President 4 FORM OF SUBSCRIPTION (To be Signed Only Upon Exercise of Warrant) TO: Key Technology, Inc. The undersigned, the Holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, _____________ (________)(1) shares of the common Stock of Key Technology, Inc. (the "Company") and herewith (check applicable box): makes payment of _____________ Dollars ($_____) therefor; or surrenders the Warrant pursuant to the net exercise provisions contained therein and requests that the certificates for such shares be issued in the name of and delivered to: ------------------------ ------------------------ ------------------------ The undersigned represents that it is acquiring such stock for its own account for investment and not with a view to or for sale in connection with any distribution thereof. DATED: ______________________. ------------------------------------ (Signature must conform in all respects to name of Holder as specified on the face of the Warrant) - ---------- (1) Insert here the number of shares called for on the face of the Warrant (or, in the case of a partial exercise, the portion thereof as to which the Warrant is being exercised), in either case without making any adjustment for additional shares of Common Stock or other securities or property or cash which, pursuant to the adjustment provisions of the Warrant, may be deliverable upon exercise. EX-99.5 5 0005.txt FORM OF WARRANT AGREEMENT FORM OF KEY TECHNOLOGY, INC. AND CHASEMELLON SHAREHOLDER SERVICES, L.L.C. WARRANT AGREEMENT DATED __________________, 2000 WARRANT AGREEMENT WARRANT AGREEMENT, dated as of _____________________, 2000, by and between KEY TECHNOLOGY, INC., an Oregon corporation (the "Company"), and CHASEMELLON SHAREHOLDER SERVICES, L.L.C., a New Jersey limited liability company, as warrant and transfer agent (hereinafter called the "Warrant Agent"). WHEREAS, pursuant to the terms of an Agreement and Plan of Merger dated February 15, 2000 between the Company and Advanced Machine Vision Corporation ("AMVC") and KTC Acquisition Corp. ("Sub"), as amended on February 25, 2000 (the "Merger Agreement"), the parties have agreed that Sub shall merge into AMVC and in connection therewith the shareholders of AMVC shall receive in exchange cash, shares of the Company's Series B Convertible Preferred Stock, $0.01 par value and warrants to purchase Common Stock (the "Warrants"); WHEREAS, the Company desires to appoint the Warrant Agent to act on behalf of the Company in connection with the issuance, registration, transfer, exchange and exercise of the Warrants, and the Warrant Agent is willing to accept such appointment. NOW, THEREFORE, in consideration of the premises and mutual agreements herein set forth, the parties hereto agree as follows: 1. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the instructions set forth herein, and the Warrant Agent hereby accepts such appointment, upon the terms and conditions hereinafter set forth. 2. Certain Definitions. As used herein, the following terms shall have the following meanings: "BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of Washington or the State of New Jersey are authorized or obligated by law or executive order to close. "CLOSING PRICE" means the closing price per share of Common Stock on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if not listed or traded on any such exchange, on the Nasdaq National Market or if not listed or traded on any such exchange or the Nasdaq National Market, the average of the last bid and asked prices per share on the Nasdaq over-the-counter system or, if such quotations are not available, the fair market value as reasonably determined by the board of directors of the Company or any committee of such board. "COMMISSION" means the Securities and Exchange Commission or any successor governmental organization or entity responsible for administration of the Securities Act. "COMMON STOCK" means (i) the class of stock designated as the Common Stock, $0.01 par value per share, of the Company, on the date hereof or (ii) any other class of stock resulting from successive changes or reclassifications of such shares consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. Unless the context requires otherwise, all references to Common Stock and Warrant Shares in this Agreement and in the Warrant Certificates shall, in the event of an adjustment pursuant to Section 12 hereof, be deemed to refer also to any other securities or property then issuable upon exercise of the Warrants as a result of such adjustment. "ELIGIBLE INSTITUTION" shall have the meaning set forth in Section 8.2 hereof. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXERCISE PRICE" shall have the meaning set forth in Section 5.2 hereof. "EXERCISE PERIOD" means the period during which the Warrants may be exercised as set forth in Section 5.1 hereof. "EXPIRATION DATE" shall mean, as to each Warrant, 5:00 p.m., Pacific Standard Time, on _____________, 2005 or such earlier date as the Warrants shall be redeemed pursuant to Section 16 hereof; provided that if such date shall in the State of Oregon be a holiday or a day on which banks are authorized or required to close, then 5:00 p.m., Pacific Standard Time on the next following day which in the State of Oregon is neither a holiday nor a day on which banks are authorized or required to close. "HOLDERS" shall have the meaning set forth in Section 4.2 hereof. "NASD" means the National Association of Securities Dealers, Inc. "REDEMPTION DATE" shall have the meaning set forth in Section 16.3 hereof. "REDEMPTION NOTICE" shall have the meaning set forth in Section 16.2 hereof. "REDEMPTION PRICE" shall mean the price at which a Holder may, at its option in accordance with the terms hereof, require the Company to redeem the Warrants, or the Company, may at its option in accordance with the terms hereof, redeem the Warrants, which price, in each case, shall be $10.00 per whole share of Common Stock purchasable upon exercise of such Warrants. "SECURITIES ACT" means the Securities Act of 1933, as amended. "WARRANT CERTIFICATE" shall have the meaning set forth in Section 3.1 hereof. "WARRANT REGISTER" means the books and records kept by the Warrant Agent for the registration, and the registration of transfer, of the Warrant Certificates in which shall be registered the names and addresses of Holders of Warrants evidenced by Warrant Certificates in registered form and the certificate numbers and denominations of such Warrant Certificates. "WARRANT SHARES" means the shares of Common Stock issuable upon the exercise of a Warrant. 3. Form of Warrant Certificate. 3.1 The certificates evidencing the Warrants (the "Warrant Certificates"), and the forms of election to purchase Warrant Shares and of assignment to be printed on the reverse thereof, shall be substantially in the form set forth in Exhibit A hereto and may have such letters, numbers or other marks of identification or designation and such legends, summaries or endorsements printed, lithographed or engraved thereon as the Company reasonably deems appropriate (but which do not affect the rights or duties of the Warrant Agent) and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law, any rule or regulation related thereto, or with any rule or regulation of the NASD, the Nasdaq National Market or any securities exchange on which the Warrants may from time to time be listed. 3.2 Each Warrant shall entitle the Holder thereof to purchase the number of Warrant Shares set forth on the face of each Warrant Certificate upon the exercise thereof at the applicable Exercise Price, subject to adjustment as provided in Section 12 hereof, during the Exercise Period; provided, however, that the Warrants are exercisable only for whole shares; cash will be paid in lieu of fractional shares in accordance with Section 5.5 hereof. Each Warrant Certificate shall be executed on behalf of the Company by the manual or facsimile signature of the present or any future Chairman of the Board, Chief Executive Officer, President or any officer of the Company, under its corporate seal, affixed or in facsimile, attested by the manual or facsimile signature of the present or any future Secretary or Assistant Secretary of the Company. Warrants shall be dated as of the date of their initial issue. 4. Registration and Countersignature. 4.1 The Warrant Agent shall maintain the Warrant Register. The Warrant Certificates shall be countersigned by the Warrant Agent and shall not be valid for any purpose unless so countersigned. The Warrant Certificates shall be so countersigned, however, by the Warrant Agent and shall be delivered by the Warrant Agent, notwithstanding whether the persons whose manual or facsimile signatures appear thereon as proper officers of the Company shall have ceased to be such officers at the time of such countersignature or delivery. 4.2 Prior to due presentment for registration or transfer of the Warrant Certificates, the Company and the Warrant Agent may deem and treat the registered holder (a "Holder") thereof as the absolute owner of the Warrant Certificates (notwithstanding any notation of ownership or other writing made thereon by anyone other than the Company or the Warrant Agent), for the purpose of any exercise thereof and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. 5. Duration and Exercise of Warrants. 5.1 Each Warrant may be exercised by the Holder thereof at any time on or after the date hereof, but not after the Expiration Date, upon the terms and subject to the conditions set forth herein and in the applicable Warrant Certificate. Upon the Expiration Date, all rights evidenced by the Warrants shall cease and the Warrants shall become void. 5.2 Subject to the provisions of this Agreement, the Holder of each Warrant shall have the right to purchase from the Company (and the Company shall issue and sell to such Holder) the number (rounded down to the nearest whole number) of fully paid and nonassessable Warrant Shares set forth on such Holder's Warrant Certificate (or such number of Warrant Shares as may result from adjustments made from time to time as provided in this Agreement) at the price per share of $15.00 in lawful money of the United States of America (such exercise price per Warrant Share, as adjusted from time to time as provided herein, being referred to herein as the "Exercise Price"), upon (i) surrender of the Warrant Certificates to the Company at the office of the Warrant Agent designated by the Warrant Agent for such purpose with the exercise form on the reverse thereof duly and properly completed and signed by the Holder or Holders thereof or by a duly appointed legal representative thereof or by a duly authorized attorney, such signature to be guaranteed by an Eligible Institution (as defined in Section 8.2 hereof) and (ii) payment, in lawful money of the United States of America, of the Exercise Price for the Warrant Share or Warrant Shares in respect of which such Warrant is then exercised. The Exercise Price payable upon exercise of any Warrant may be paid only by certified or, at the option of the Holder, official bank check payable to the order of the Company, or, in the alternative, if the Closing Price of one share of the Company's Common Stock is greater than the Exercise Price on the date of surrender of the Warrant for exercise, in lieu of exercising the Warrant for cash, a Holder may exercise all or any part of the Warrant on a "cashless" basis by providing written notice to the Warrant Agent of its intention to do so, together with the properly endorsed Form of Subscription and stating the maximum number (the "Maximum Number") of shares of Common Stock the Holder desires to purchase in consideration of cancellation of Warrants in payment for such exercise. The number of shares of Common Stock the Holder shall receive upon such exercise pursuant to this Section 5.2 shall be equal to the number that is obtained when the product of the Maximum Number and the difference between the Closing Price per share on the date of surrender of the Warrant and the Exercise Price is divided by the Closing Price per share. Upon request of the Warrant Agent, the Company shall promptly inform in writing the Warrant Agent of the number of shares of Common Stock that may be delivered to a Holder upon a "cashless" exercise, and the Warrant Agent shall incur no liability and shall be fully protected in relying on such information provided to it by the Company. The Warrant Agent shall have no obligation to take any action under this Section with respect to a "cashless" exercise, nor shall it incur any liability for failing to take any such action, if it has not received all such relevant information requested regarding such "cashless" exercise from theCompany. Upon surrender of the Warrant Certificate, and payment of the Exercise Price, the Company shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the Holder of such Warrant and in such name or names as such Holder may designate, a certificate or certificates for the number of Warrant Shares so purchased upon the exercise of such Warrant, together with a check in the amount of the value of any fraction of a Warrant Share issuable upon such surrender pursuant to Section 5.5 hereof. The Warrant Agent shall deliver on a weekly basis all funds received upon exercise of the Warrants to the Company, 150 Avery Street, Walla Walla, Washington 99362, Attention: Thomas C. Madsen, President. 5.3 Each person in whose name any certificate for Warrant Shares is issued upon the exercise of Warrants shall for all purposes be deemed to have become the holder of record of the Warrant Shares represented thereby, and such certificate shall be dated the date upon which the Warrant Certificate evidencing such Warrants was duly surrendered and payment of the Exercise Price (and any applicable transfer taxes pursuant to Section 9 hereof) was made; provided, however, that if the date of such surrender and payment is a date upon which the Common Stock transfer books of the Company are closed, such person shall be deemed to have become the record holder of such Warrant Shares on, and such certificate shall be dated, the next succeeding Business Day on which the Common Stock transfer books of the Company are open. 5.4 In the event that, during the Exercise Period, fewer than all of the Warrants represented by a Warrant Certificate are exercised, a new Warrant Certificate, duly executed by the Company, will be issued for the remaining number of Warrant Shares purchasable pursuant to the Warrant Certificate so surrendered, and the Warrant Agent shall countersign and deliver such new Warrant Certificate to the Holder of such unexercised Warrants pursuant to the provisions of this Section 5 and of Section 4 hereof. 5.5 No fractional shares of Common Stock or scrip shall be issued to any Holder in connection with the exercise of a Warrant. Instead of any fractional shares of Common Stock that would otherwise be issuable to such Holder, the Company shall pay to such Holder a cash adjustment in respect of such fractional interest in an amount equal to that fractional interest multiplied by the sum of $10.00. The Warrant Agent shall have no duty or obligation with regard to the payment, calculation or valuation of fractional shares unless and until it has received written instructions from the Company regarding fractional shares and the Company has otherwise complied with Section 18.2.4(C) of this Agreement. 5.6 The number of Warrant Shares to be received upon the exercise of a Warrant and the price to be paid for a Warrant Share are subject to adjustment from time to time as hereinafter set forth. 5.7 Warrants not exercised on or prior to the Expiration Date shall become void and all rights in respect thereof shall cease as of such time. 6. Reservation of Warrant Shares; Stock Certificates. The Company shall at all times reserve, for issuance and delivery upon exercise of the Warrants, such number of Warrant Shares or other shares of capital stock of the Company as may be issuable from time to time upon exercise of the Warrants. All such shares shall be duly authorized and, when issued upon such exercise and receipt by the Company of payment in full of the Exercise Price, shall be validly issued, fully paid and nonassessable, free and clear of all liens, security interests, charges and other encumbrances or restrictions on sale and free and clear of all preemptive rights. The Warrant Agent is hereby irrevocably authorized to requisition, from time to time from the transfer agent for the Common Stock, stock certificates issuable upon exercise of outstanding Warrants. The Company will supply such transfer agent with duly executed stock certificates for such purpose. All Warrant Certificates surrendered upon exercise shall be cancelled by the Warrant Agent and shall thereafter be delivered to the Company or otherwise disposed of in a manner satisfactory to the Company. Unless all Warrants shall have been exercised prior to 5:00 p.m., Pacific Standard Time, on the Expiration Date, the Warrant Agent shall certify to the Company, as of the close of business on the Expiration Date, the total aggregate number of Warrants then outstanding, and thereafter no shares of Common Stock shall be subject to reservation in respect of such Warrants. The Company shall keep a copy of this Agreement on file with its transfer agent and with every transfer agent for any shares of Common Stock. 7. Transfer and Registration of the Warrants and Warrant Shares. 7.1 The Warrants and the Warrant Shares, and any interest in either, may be sold, assigned, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, only in accordance with Section 8 hereof and in compliance with applicable United States federal and state securities laws and the terms and conditions hereof. 7.2 The Warrants and the Warrant Shares have been registered under the Securities Act pursuant to a registration statement on Form S-4 (File No. 333-36920) declared effective under the Securities Act (the "Registration Statement"). The Company covenants and agrees: 7.2.1 it will prepare and file with the Commission such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to keep the Registration Statement effective through the termination of the Exercise Period or until such earlier time as no Warrants remain outstanding; 7.2.2 as expeditiously as possible, to register or qualify the Warrants and the Warrant Shares under the securities or "Blue Sky" laws of each jurisdiction in which such registration or qualification is necessary; and 7.2.3 to pay all expenses incurred by the Company in complying with this Section 7.2, including, without limitation (A) all registration and filing fees, (B) all printing expenses, (C) all fees and disbursements of counsel and independent public accountants for the Company, (D) all NASD and "Blue Sky" fees and expenses (including fees and expenses of counsel in connection with any "Blue Sky" surveys) and (E) the entire expense of any special audits incident to or required in connection with any such registration. 8. Exchange, Transfer of Assignment of Warrants. 8.1 Warrants may be exchanged, at the option of the Holder thereof, upon presentation and surrender to the Warrant Agent of the Warrant Certificate evidencing such Warrants, for other Warrant Certificates of different denominations, entitling the Holder or Holders thereof to purchase in the aggregate the same number of Warrant Shares as did such surrendered Warrant Certificate. Subject to the preceding sentence, a Warrant Certificate may be divided or combined with other Warrant Certificates that carry the same rights upon presentation thereof at the office of the Warrant Agent, together with written notice signed by the Holder or Holders thereof specifying the names and denominations in which new Warrant Certificates are to be issued. 8.2 Warrants may be assigned or transferred, at the option of the Holder thereof, upon surrender of the Warrant Certificates evidencing such Warrants to the Warrant Agent, accompanied (if so required by the Company or the Warrant Agent) by a written instrument or instruments of transfer in form satisfactory to the Company and the Warrant Agent, duly and properly executed by such Holder or by a duly authorized representative or attorney, such signature to be guaranteed by a commercial bank or trust company having an office in the United States, by a broker or a dealer that is a member of the NASD or by a member of a national securities exchange (any such entity, an "Eligible Institution"). Upon any such registration of transfer, a new Warrant Certificate shall be issued to the transferee and the surrendered Warrant Certificate shall be cancelled by the Warrant Agent. Warrant Certificates so cancelled shall be delivered by the Warrant Agent to the Company from time to time or otherwise disposed of by the Warrant Agent in a manner satisfactory to the Company. 8.3 Any transfer, exchange or assignment of Warrants (including any new Warrants issued pursuant to Section 10 hereof) shall be without charge (other than the cost of any transfer tax or governmental charge) to the Holder and any new Warrant or Warrants issued pursuant to this Section 8 shall be dated the date hereof. 9. Payment of Taxes. The Company shall pay all documentary stamp taxes attributable to the original issuance of the Warrants and of Warrant Shares; provided, however, that the Company shall not be required to (a) pay any tax or other governmental charge which may be payable in respect of any transfer involving the transfer and delivery of Warrant Certificates or the issuance or delivery of certificates for Warrant Shares in a name other than that of the Holder of the Warrant Certificate surrendered upon the exercise of a Warrant or (b) issue or deliver any certificate for Warrant Shares upon the exercise of any Warrants until any such tax or charge required to be paid under clause (a) shall have been paid, all such tax or charge being payable by the Holder of such Warrant at the time of surrender. 10. Mutilated or Missing Warrant Certificates. In the event that any Warrant Certificate shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, and the Warrant Agent may countersign and deliver, upon the request of the Holder of the Warrants evidenced by such Warrant Certificate, in exchange for and upon cancellation of any such mutilated Warrant Certificate, or in substitution for any such lost, stolen or destroyed Warrant Certificate, a new Warrant Certificate of like tenor and evidencing the same number of Warrant Shares as were evidenced by such mutilated, lost, stolen or destroyed Warrant Certificate, but only upon receipt of evidence satisfactory to the Company or the Warrant Agent of such loss, theft or destruction of such Warrant Certificate and an indemnity, if requested, satisfactory to the Company or the Warrant Agent, as the case may be. An applicant for such substitute Warrant Certificate shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company or the Warrant Agent may prescribe. Any such new Warrant Certificate shall constitute an original contractual obligation of the Company, whether or not the allegedly mutilated, lost, stolen or destroyed Warrant Certificate shall be enforceable by any person at any time thereafter. 11. No Stock Rights; Limitation of Liability. No Holder of any Warrant shall, by virtue thereof, be entitled to the rights of a shareholder of the Company, unless and until exercise of such Warrant has occurred. No provisions of any Warrant or of this Agreement, in the absence of affirmative action by the Holder of any such Warrant to exercise such Warrant, and no mere enumeration herein of the rights or privileges of such Holder, shall give rise to any liability of such Holder for the Exercise Price or as a shareholder of the Company, whether such liability is asserted by the Company or by its creditors. 12. Antidilution Provisions. 12.1 The Exercise Price and the number of Warrant Shares that may be purchased upon the exercise of a Warrant shall be subject to change or adjustment from time to time as follows: 12.1.1 Stock Splits. If at any time during the Exercise Period the number of outstanding shares of Common Stock shall have been increased by a subdivision or split-up of shares of Common Stock, then, on the record date fixed for the determination of holders of Common Stock immediately after the effective date of such subdivision or split-up, the number of shares to be delivered upon exercise of any Warrant will be appropriately increased so that each Holder thereafter will be entitled to receive the number of shares of Common Stock that such Holder would have owned immediately following such action had such Warrant been exercised immediately prior thereto, and the Exercise Price will be appropriately adjusted. The time of occurrence of an event giving rise to an adjustment made pursuant to this Section 12.1.1 shall be deemed to be the effective date thereof. 12.1.2 Combination of Stock. If the number of shares of Common Stock outstanding at any time during the Exercise Period is decreased by a combination of the outstanding shares of Common Stock, then, immediately after the effective date of such combination, the number of shares of Common Stock to be delivered upon exercise of any Warrant shall be appropriately decreased so that the Holder of such Warrant thereafter will be entitled to receive the number of shares of Common Stock that such Holder would have owned immediately following such action had such Warrant been exercised immediately prior thereto, and the Exercise Price shall be appropriately adjusted. 12.1.3 No Adjustments to Exercise Price. No adjustment of the Exercise Price in accordance with the provisions of paragraphs 12.1.1 or 12.1.2 above shall be made in an amount of less than $0.01; provided, however, that the amount by which any adjustment is not made by reason of the provisions of this Section shall be carried forward and taken into account at the time of any subsequent adjustment in the Exercise Price. 12.1.4 Readjustments, Etc. If an adjustment is made under paragraphs 12.1.1 or 12.1.2 above, and the event to which the adjustment relates does not occur, then any adjustments in the Exercise Price or Warrant Shares that were made in accordance with such paragraphs shall be adjusted back to the Exercise Price and the number of Warrant Shares that were in effect immediately prior to the record date for such event. 12.2 No Impairment; Certain Events. 12.2.1 The Company shall not, by amendment of its articles of incorporation or through any reorganization, reclassification, consolidation, merger, sale, lease or transfer of assets, issuance or sale of securities or any other action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Section 12 by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 12 and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holders against impairment. 12.2.2 If any event occurs as to which the provisions of Section 12.1 are not strictly applicable but with respect to which, in the reasonable, good faith opinion of the Company, an adjustment of the Exercise Price, and the number of Warrant Shares issuable upon the exercise of a Warrant, would fairly protect the exercise rights of the Holders in accordance with the basic intent and principles of such provisions or as to which an adjustment pursuant to such provisions, if strictly applied, would not fairly protect the purchase rights of the Holders in accordance with the basic intent and principles of such provisions, then the Company shall make any computation required under this Section 12.2.2 with respect to any such adjustment on a basis consistent with the basic intent and principles established by the provisions of this Section 12, necessary to preserve, without dilution, the exercise rights of the Holders. The Company shall appoint a firm of independent certified public accountants (which may be the regular auditors of the Company) of recognized national standing, which firm shall review the computation of the Company prepared pursuant to this Section 12.2.2 and prepare a report signed by such firm, which shall be provided to the Company and which shall acknowledge that the adjustment calculation prepared by the Company is arithmetically correct. Such report shall be conclusive evidence of the correctness of the computation made under this Section 12.2.2. Upon receipt of such report, the Company shall forthwith cause to be made, or shall act to prevent, the adjustments described in such calculation. 13. Officer's Certificate. Whenever the number of Warrant Shares that may be purchased upon exercise of the Warrant is adjusted as required by the provisions of this Agreement, the Company shall file forthwith with the Warrant Agent and with its Secretary or Assistant Secretary at its principal office an officer's certificate indicating the adjusted number of Warrant Shares that may be purchased upon exercise of a Warrant and the adjusted Exercise Price, determined as herein provided, and setting forth in reasonable detail the facts requiring such adjustment and the manner of computing such adjustment. Each such officer's certificate shall be made available at all reasonable times for inspection by the Holders. The Company shall, forthwith after each such adjustment, cause a copy of such officer's certificate to be mailed to the Holders. The Warrant Agent may rely on such certificate without further inquiry and shall not be deemed to have knowledge of any adjustment unless and until it shall have received such certificate. 14. Notice of Certain Events. In the event that, at any time during the Exercise Period: 14.1 The Company shall pay any dividend on Common Stock that is payable in stock, or make any distribution (other than regular cash dividends) to the holders of Common Stock; 14.2 There shall be any capital reorganization or reclassification of the capital stock of the Company; or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation; or 14.3 There shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; Then, the Company will cause to be mailed to the Holder by first-class mail, postage prepaid, addressed to such Holder at the address appearing in the Warrant Register, (i) at least 10 days' prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend or distribution or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding up, at least 10 days' prior written notice of the date when the same shall take place. Any notice given in accordance with the foregoing clause (i) shall also specify, in the case of any such dividend or distribution, the date on which a shareholder shall be entitled thereto. Any notice given in accordance with the foregoing clause (ii) shall also specify the date on which shareholders shall be entitled to exchange their shares for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding up or conversion, as the case may be. 15. Listing on Securities Exchanges. 15.1 Except as otherwise provided in Section 15.2, the Company will, within 120 days of the issue date of the Warrants, list on each national securities exchange or, if not so listed, will list for quotation on the Nasdaq National Market, or such other over-the-counter quotation system on which any Common Stock or Warrants may at any time be listed, all Warrants and shares of the Common Stock from time to time issuable upon the exercise of the Warrants, and will maintain such listing so long as any Warrants or other shares of Common Stock are so listed; and the Company shall so list on each national securities exchange or the Nasdaq National Market, or such other over-the-counter quotation system, and shall maintain such listing of, any other shares of capital stock of the Company issuable upon the exercise of the Warrants if and so long as any shares of capital stock of the same class are listed on such national securities exchange or are traded on the Nasdaq National Market or such over-the-counter quotation system. Any such listing or quotation will be at the Company's expense. 15.2 The Company shall not be obligated or required to maintain the listing or quotation of the Warrants under Section 15.1 above, and shall, in its sole discretion, withdraw such listing or quotation when the number of shares of Common Stock purchasable under all outstanding Warrants falls below 100,000 shares. 16. Rights of Redemption. 16.1 A Holder shall at all times prior to the Expiration Date, and except to the extent exercised, have the right to require the Company to redeem the Warrant at the Redemption Price. To exercise the right of redemption, a Holder must surrender the Warrant, duly and properly endorsed by such Holder or by a duly authorized representative or attorney, such signature to be guaranteed by an Eligible Institution, to the Company's Warrant Agent, together with the completed form of redemption notice attached thereto. 16.2 The Warrants shall be redeemable by and at the option of the Company at the Redemption Price at any time when the number of shares of Common Stock purchasable upon exercise of all outstanding Warrants is less than 100,000 shares, whether occurring by exercise or redemption, or both. If the Company desires to exercise its right to redeem the remaining outstanding Warrants, it shall instruct the Warrant Agent to mail, upon receipt by the Warrant Agent of such form of notice, a notice of redemption (the "Redemption Notice") to each of the Holders of the Warrants to be redeemed, by first class, postage prepaid, not later than the thirtieth Business Day before the date fixed for redemption, at his or its last address as it shall appear on the Warrant Register of the Warrant Agent. Any notice mailed in the manner provided herein shall be conclusively presumed to have been duly given whether or not the Holder receives such notice. 16.3 The Redemption Notice shall specify (i) the Redemption Price, (ii) the date fixed for redemption (the "Redemption Date"), (iii) the place where the Warrant Certificates shall be delivered and the Redemption Price paid, and (iv) that the right to exercise the Warrant shall terminate at 5:00 p.m., Pacific Standard Time on the Business Day immediately preceding the Redemption Date. No failure to mail such notice nor any defect therein or in the mailing thereof shall affect the validity of the proceedings for such redemption except as to a Holder (a) to whom notice was not mailed or (b) whose notice was defective. An affidavit of the Warrant Agent or of the Secretary or an Assistant Secretary of the Company that notice of redemption has been mailed shall, in the absence of fraud, be prima facie evidence of the facts stated therein. 16.4 Any right to exercise a Warrant shall terminate at 5:00 p.m., Pacific Standard Time on the Business Day immediately preceding the Redemption Date. On and after the Redemption Date, Holders of the Warrants shall have no further rights except to receive, upon surrender of the Warrant, the Redemption Price. 16.5 From and after the Redemption Date, the Company shall, at the place specified in the notice of redemption, upon presentation and surrender to the Company by or on behalf of the Holder thereof of one or more Warrant Certificates evidencing Warrants to be redeemed, deliver or cause to be delivered to or upon the written order of such Holder a sum in cash equal to the Redemption Price of such Warrants. From and after the Redemption Date and upon the deposit or setting aside by the Company of a sum sufficient to redeem all the Warrants called for redemption, such Warrants shall expire and become null and void and all rights hereunder and under the Warrant Certificates, except the right to receive payment of the Redemption Price, shall cease. If the Company shall purchase or acquire any Warrant or Warrants by redemption, the Warrant Certificate or Warrant Certificates evidencing the same shall thereupon be delivered to the Warrant Agent and canceled by it and retired. 17. Availability of Information. The Company will comply with all applicable periodic public information reporting requirements of the Commission to which it may from time to time be subject. 18. Warrant Agent. 18.1 Merger, Consolidation or Change of Name of Warrant Agent. 18.1.1 Any entity into which the Warrant Agent may be merged or with which it may be consolidated, or any entity resulting from any merger or consolidation to which the Warrant Agent shall be a party, or any entity succeeding to the business of the Warrant Agent, shall be the successor to the Warrant Agent hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided, however, that such successor entity must be otherwise eligible for appointment as a Warrant Agent hereunder. In the event that at the time such successor to the Warrant Agent shall succeed to the agency created by this Agreement any of the Warrant Certificates shall have been countersigned but not delivered, any such successor to the Warrant Agent may adopt the countersignature of such predecessor Warrant Agent and deliver such Warrant Certificates so countersigned; and in the event that at the time of such succession any of the Warrant Certificates shall not have been countersigned, any such successor to the Warrant Agent may countersign such Warrant Certificates either in the name of such predecessor Warrant Agent or in the name of such successor Warrant Agent; and in any event, all such Warrant Certificates shall have the full force and effect provided in such Warrant Certificates and in this Agreement. 18.1.2 In the case that at any time the name of the Warrant Agent shall be changed and at such time one or more of the Warrant Certificates shall have been countersigned but not delivered, the Warrant Agent may adopt the countersignature under its prior name and deliver Warrant Certificates so countersigned; in the event that at that time one or more of the Warrant Certificates shall not have been countersigned, the Warrant Agent may countersign such Warrant Certificates either in its prior name or in its changed name; and in all such cases such Warrant Certificates shall have the full force and effect provided in such Warrant Certificates and in this Agreement. 18.2 Duties of Warrant Agent. The Warrant Agent undertakes only the duties and obligations expressly imposed by this Agreement upon the following terms and conditions, by which the Holders, by their acceptance of Warrants, and the Company, shall be bound: 18.2.1 The Warrant Agent shall not be responsible for any failure of the Company to comply with any of the covenants to be complied with by the Company that are contained in this Agreement or in the Warrant Certificates. 18.2.2 The Warrant Agent may consult at any time with counsel satisfactory thereto, and the Warrant Agent shall incur no liability or responsibility to the Company or to any Holder in respect of any action taken, suffered or omitted by the Warrant Agent hereunder in accordance with the opinion or the advice of such counsel, provided that the Warrant Agent shall have exercised reasonable care in the selection and continued employment of such counsel. Whenever in the performance of its duties hereunder the Warrant Agent is unsure of or has questions as to what action it is required to take under this Warrant Agreement, the Warrant Agent shall promptly seek clarification thereof from the Company, and the Warrant Agent shall be fully protected and incur no liability in not taking any such action prior to receiving a written response from the Company. 18.2.3 The Warrant Agent shall incur no liability or responsibility to the Company or to any Holder for any action taken in reliance on any notice, resolution, waiver, consent, order, certificate or other paper, document or instrument believed by the Warrant Agent to be genuine and to have been signed, sent or presented by the party or parties thereto. 18.2.4 The Company shall (A) pay to the Warrant Agent reasonable compensation for all services rendered by the Warrant Agent in the preparation, execution, delivery, amendment and administration of this Agreement and the exercise and performance of its duties hereunder, (B) reimburse the Warrant Agent for all expenses, disbursements, counsel fees, taxes (other than taxes based on such Warrant Agent's net income), governmental charges, and other charges of any kind and nature, incurred by the Warrant Agent in the performance of this Agreement, (C) if the Warrant Agent has been instructed in writing to pay out fractional shares, advance to the Warrant Agent, upon request, funds to pay cash in lieu of fractional shares of Common Stock issuable upon exercise of Warrants and (D) indemnify the Warrant Agent and save it harmless against any and all losses, damages, judgments, fines, penalties, claims, demands, settlements, costs, expenses or liabilities, including counsel fees, arising out of or in connection with its agency under this Agreement, except as a result of its negligence or bad faith. In no case shall the Warrant Agent be liable for special, indirect, incidental or consequential loss or damage of any kind whatsoever (including, but not limited to, lost profits). The costs and expenses incurred in enforcing this right of indemnification shall be paid by the Company. Any liability of the Warrant Agent under this Warrant Agreement will be limited to the amount of fees paid by the Company to the Warrant Agent. 18.2.5 The Warrant Agent shall be under no obligation to institute any action, suit or legal proceeding or to take any other action likely to involve the incurrence by the Warrant Agent of expenses unless the Company or one or more Holders shall have furnished the Warrant Agent with security and indemnity for any costs and expenses which may be incurred. All rights of action under this Agreement or under any of the Warrants may be enforced by the 18.2.6 Warrant Agent without the possession of any of the Warrants or the production thereof at any trial or other proceeding relative thereto, and any such action, suit or proceeding instituted by the Warrant Agent shall be brought in its name as Warrant Agent, and any recovery of judgment shall be for the ratable benefit of the Holders, as their respective rights or interests may appear. 18.2.7 The Warrant Agent and any shareholder, affiliate, director, officer or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or other securities of the Company, or become interested in any transaction in which the Company may be interested or contract with or lend money or otherwise act as fully and freely as though it were not the Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity. 18.2.8 The Warrant Agent shall act hereunder solely as agent, and its duties shall be determined solely by the provisions hereof. The Warrant Agent shall not be liable for any actions which it may take, suffer or refrain from taking, in connection with this Agreement, except as result from its own gross negligence or bad faith. 18.2.9 The Warrant Agent shall make copies of this Agreement available for inspection at its offices at ____________ during normal business hours and shall provide copies to Holders upon their written request. 18.3 Change of Warrant Agent. The Warrant Agent may resign and be discharged from its duties under this Agreement by providing 45 days' written notice to the Company, and the Company upon 45 days' notice may discharge and terminate the Warrant Agent, and in either instance the Warrant Agent shall send written notice, sent at the Company's expense by first-class mail, postage prepaid, to each Holder at such Holder's address appearing in the Warrant Register, which notice shall specify a date when such termination of services shall take effect and which shall be sent at least two weeks prior to the date so specified. In all events that the Warrant Agent will cease to act as Warrant Agent hereunder, the Company shall appoint a successor thereto. If the Company shall fail to make such appointment within a period of 30 days after termination of services by the Warrant Agent or by any Holder (which Holder shall, with such notice, submit Warrant Certificates held thereby for inspection by the Company), then any Holder may apply to any court of competent jurisdiction for the appointment of a successor to the Warrant Agent. Pending appointment of a successor to the Warrant Agent, either by the Company or by a court, the duties of the Warrant Agent shall be carried out by the Company. After such appointment, the successor Warrant Agent shall be vested with such powers, rights, duties and responsibilities as such Warrant Agent would have been vested had such Warrant Agent been named originally as Warrant Agent hereunder, without further act or deed. Upon payment in full of all amounts owed to the former Warrant Agent, the former Warrant Agent shall deliver and transfer to the successor Warrant Agent any property at the time held by such former Warrant Agent hereunder and shall execute and deliver any further assurance, conveyance, act or deed necessary therefor. Failure to provide any notice called for in this Section 18, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Warrant Agent or the appointment of a successor Warrant Agent. 19. Identity of New Transfer Agent. Forthwith upon the appointment after the date hereof of any new transfer agent for the Common Stock, the Company will file with the Warrant Agent a statement setting forth the name and address of such transfer agent. 20. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company, the Warrant Agent or any of the Holders shall bind and inure to the benefit of their respective successors, assigns, heirs and personal representatives. 21. Termination. This Agreement shall terminate at 5 p.m., Pacific Standard Time, on the Expiration Date except that the Warrant Agent shall account to the Company for all cash held by it at 5 p.m., Pacific Standard Time, on such Expiration Date. 22. Headings. The headings of sections of this Agreement have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. 23. Amendments. This Agreement may be amended only by both (i) the written consent of the Company and (ii) the affirmative vote or the written consent of Holders holding not less than a majority in interest of the then outstanding Warrants; provided, however, that, except as expressly provided herein, this Agreement may not be amended to change (a) the Exercise Price, (b) the Exercise Period, (c) the number or type of securities to be issued upon the exercise of the Warrants, (d) the provisions of this Section 23, without the consent of each Holder, or (e) any provisions which affect the rights, duties or obligations of the Warrant Agent without the consent of the Warrant Agent. 24. Counterparts. This Agreement may be executed in any number of counterparts each of which when so executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. 25. Notices. Any notice required by the provisions of this Agreement to be provided to the Company by the Warrant Agent or by any Holder shall be deemed given if deposited in the United States mail, first class postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent) as follows: Key Technology, Inc. 150 Avery Street Walla Walla, WA 99362 Attention: Corporate Secretary Any notice required by the provisions of this Agreement to be provided to the Warrant Agent by the Company or by any Holder shall be deemed given if deposited in the United States mail, first class postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company or notice of the address of a successor Warrant Agent is provided pursuant to this Agreement) as follows: ChaseMellon Shareholder Services, L.L.C. 520 Pike Street, Suite 1220 Seattle, WA 98101 Attn: Relationship Manager Any notice required by the provisions of this Agreement to be provided to any Holder by the Company or by the Warrant Agent shall be deemed given if deposited in the United States mail, first class postage prepaid, addressed to such Holder at its address set forth in the Warrant Register. Any notice given in conformity with this Section 25 shall be deemed effective three days after mailing. 26. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any person or corporation, other than the Company, the Warrant Agent and the Holders, any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Warrant Agent and the Holders. 27. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Oregon, without reference to principles of conflict of laws; provided, however, that all provisions regarding the rights, duties and obligations of the Warrant Agent shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such state. IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to be signed by its duly authorized officers. KEY TECHNOLOGY, INC. By __________________________________ Name ________________________________ Title _______________________________ CHASEMELLON SHAREHOLDER SERVICES, L.L.C. as Warrant Agent By __________________________________ Name ________________________________ Title _______________________________ EX-99.6 6 0006.txt OPTION AGREEMENT DATED AS OF JULY 12, 2000 OPTION THE OPTION REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD IN THE ABSENCE OF SUCH REGISTRATION OR THE AVAILABILITY OF AN EXEMPTION FROM SUCH REGISTRATION. THIS OPTION MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT UPON COMPLIANCE WITH THE REQUIREMENTS FOR TRANSFER SET FORTH HEREIN. This is to certify that, for value received, FMC Corporation ("Holder"), is the registered owner of the Option set forth below, which entitles the Holder, subject to the terms and conditions set forth hereinafter, to purchase shares of Series B Convertible Preferred Stock of Key Technology, Inc., an Oregon corporation ("Key" or the "Company") with attached warrants to purchase Common Stock of the Company, at the "Option Exercise Price" (as defined below). This Option is the Option issued in connection with the Agreement between FMC, Key, Advanced Machine Vision Corporation ("AMVC") and KTC Acquisition Corp. ("Sub") dated April 24, 2000, and other good and valuable consideration (the receipt, adequacy and sufficiency of which are hereby acknowledged). This Option is subject to the following terms and provisions: 1. Option to Purchase Shares. ------------------------- This Option, effective at the Effective Time (as defined in the Agreement and Plan of Merger dated February 15, 2000 between AMVC, Sub and Key (the "Merger Agreement")), is issued in exchange for and replaces the Option dated October 14, 1998 granted to FMC by AMVC for the purchase of Class A Common Stock of AMVC, and represents an option to purchase 210,000 Shares of Series B Convertible Preferred Stock of the Company (the "Option Shares"), with an attached redeemable warrant to purchase 52,500 shares of the Company's Common Stock (the "Warrant"). The terms of the Option Shares and the Warrant are attached as Exhibits A and B. The Option Shares with the attached Warrant shall be purchasable during the Option Term (as defined below) for an aggregate exercise price of $2.52 million dollars, subject to adjustment as provided in Section 10 below (the "Option Exercise Price"). 2. Option Term. ----------- This Option is effective at the Effective Time and shall expire, unless previously exercised at the close of business on October 14, 2003, or if such day is not a Trading Day, on the immediately following Trading Day (the "Option Term"). This Option is exercisable by presentation and surrender of the original of this Option Certificate to the Company at its principal place of business (the "Option Office"), together with the Notice of Election to Exercise (the "Exercise Notice") attached hereto, duly executed and accompanied by payment to the Company of the Option Exercise Price. If this Option is not exercised on or prior to the expiration of the Option Term it shall become void and all rights in respect thereof shall cease as of such time. For purposes of this Option, "Trading Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on which securities are not traded on the exchange or market where the Company's Common Stock is listed or sold. 3. Manner of Exercising Option. --------------------------- This Option may only be exercised with respect to all or any portion of the Option Shares with the attached Warrant. In order to exercise this Option, the Holder must pay the proportionate amount of the Option Exercise Price for the purchased securities either by full payment in cash or check or wire transfer, or any other form approved by the Board of Directors of the Company at the time of exercise. If the Holder continues to have rights to purchase Option Shares hereunder, the Company shall, within 10 days of the Holder's delivery of this Agreement to the Company, either (i) mark this Agreement to indicate the extent to which the Option has expired or been exercised, cancelled or forfeited or (ii) issue to the Holder a substitute option agreement applicable to such rights, which agreement shall otherwise be substantially similar to this Agreement in form and substance. 4. Absolute Owner. -------------- Prior to due presentment for registration or transfer of this Option, the Company may deem and treat a Holder thereof as the absolute owner of the Option (notwithstanding any notation of ownership or other writing made thereon by anyone other than the Company), for the purpose of any exercise thereof and for all other purposes, and the Company shall not be affected by any notice to the contrary. 5. Issuance of Certificates. ------------------------ Upon surrender of the Notice of Election and payment of the Option Exercise Price, the Company shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate or certificates for the Options Shares with the attached Warrant. 6. Payment of Taxes and Other Governmental Charges. ----------------------------------------------- The Company shall pay all expenses, and any and all United States federal, state and local taxes and other charges that may be payable in connection with the preparation, issue and delivery of stock certificates under this Option; provided, however, that the Company shall not be required to (a) pay any tax or other governmental charge which may be payable in respect of any transfer involving the transfer and delivery of this Option or the issuance or delivery of certificates for Options Shares with the attached Warrant in a name other than that of FMC or (b) issue or deliver any certificate for Options Shares with the attached Warrant upon the exercise of this Option until any such tax or charge required to be paid under clause (a) shall have been paid, all such taxes or charges being payable by the Holder. 7. Reservation of Option Shares. ---------------------------- The Company shall at all times reserve for issuance and delivery upon exercise of this Option such number of Option Shares or other shares of capital stock of the Company as 2 may be issuable from time to time upon exercise of this Option. All such shares shall be duly authorized and, when issued upon such exercise and receipt by the Company of payment in full of the Option Exercise Price, shall be validly issued, fully paid and nonassessable, free and clear of all liens, security interests, charges and other encumbrances or restrictions on sale and free and clear of all preemptive rights. 8. Registration of the Option Shares and the Attached Warrant. ---------------------------------------------------------- The Option Shares and the attached Warrant have been registered under the Securities Act pursuant to a registration statement on Form S-4 (File No. 333-36920) declared effective under the Securities Act (the "Registration Statement"). The Company covenants and agrees: (a) it will prepare and file with the Commission such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to keep the Registration Statement effective through the termination of the Option Term or until such earlier time as no options remain outstanding; (b) as expeditiously as possible, to register or qualify the Option Shares and the attached Warrant under the securities or "Blue Sky" laws of each jurisdiction in which such registration or qualification is necessary; and (c) to pay all expenses incurred by the Company in complying with this Section 8, including, without limitation (A) all registration and filing fees, (B) all printing expenses, (C) all fees and disbursements of counsel and independent public accountants for the Company, (D) all NASD and "Blue Sky" fees and expenses (including fees and expenses of counsel in connection with any "Blue Sky" surveys) and (E) the entire expense of any special audits incident to or required in connection with any such registration. 9. Mutilated or Missing Option. --------------------------- In the event that this Option shall be mutilated, lost, stolen or destroyed, the Company may in its reasonable discretion issue upon the request of a Holder, in exchange for and upon cancellation of any such mutilated option, or in substitution for any such lost, stolen or destroyed option, a new option of like tenor and evidencing the same number of Option Shares with the attached Warrant as were evidenced by such mutilated, lost, stolen or destroyed option, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of such option and an indemnity, if requested, reasonably satisfactory to the Company. A Holder shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. Any such new option shall constitute an original contractual obligation of the Company, whether or not the allegedly mutilated, lost, stolen or destroyed option shall be enforceable by any person at any time thereafter. 10. Antidilution Provisions. ----------------------- The Option Exercise Price and the number of Option Shares that may be purchased upon the exercise of this Option shall be subject to change or adjustment from time to time as follows: 3 10.1 Stock Splits. If at any time during the Option Term the number of outstanding shares of Series B Convertible Preferred Stock shall have been increased by a subdivision or split-up of shares of such shares, then, on the record date fixed for the determination of holders of Series B Convertible Preferred Stock immediately after the effective date of such subdivision or split-up, the number of shares to be delivered upon exercise of the Option will be appropriately increased so that each Holder thereafter will be entitled to receive the number of shares of Series B Convertible Preferred Stock that such Holder would have owned immediately following such action had such option been exercised immediately prior thereto, and the Option Exercise Price will be appropriately adjusted. The time of occurrence of an event giving rise to an adjustment made pursuant to this Section 10.1 shall be deemed to be the effective date thereof. 10.2 Combination of Stock. If the number of shares of Series B Convertible Preferred Stock outstanding at any time during the Option Term is decreased by a combination of the outstanding shares of Series B Convertible Preferred Stock, then, immediately after the effective date of such combination, the number of shares of Series B Convertible Preferred Stock to be delivered upon exercise of this Option shall be appropriately decreased so that the Holder of such Option thereafter will be entitled to receive the number of shares of Series B Convertible Preferred Stock that such Holder would have owned immediately following such action had such option been exercised immediately prior thereto, and the Option Exercise Price shall be appropriately adjusted. 10.3 No Adjustments to Option Exercise Price. No adjustment of the Option Exercise Price in accordance with the provisions of paragraph (a) or (b) above shall be made in an amount of less than $0.01; provided, however, that the amount by which any adjustment is not made by reason of the provisions of this Section shall be carried forward and taken into account at the time of any subsequent adjustment in the Option Exercise Price. 10.4 Readjustments, Etc. If an adjustment is made under paragraph 10.1 or 10.2 above, and the event to which the adjustment relates does not occur, then any adjustments in the Option Exercise Price or Option Shares that were made in accordance with such paragraphs shall be adjusted back to the Option Exercise Price and the number of Option Shares that were in effect immediately prior to the record date for such event. 10.5 No Impairment; Certain Events. 10.5.1 The Company shall not, by amendment of its Articles of Incorporation or through any reorganization, reclassification, consolidation, merger, sale, lease or transfer of assets, issuance or sale of securities or any other action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Section 10 by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 10 and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment. 10.5.2 If any event occurs as to which the provisions of this Section 10 are not strictly applicable but with respect to which, in the reasonable good faith opinion of the 4 Company, an adjustment of the Exercise Price, and the number of Option Shares issuable upon the exercise of the Option, would fairly protect the exercise rights of the Holder in accordance with the basic intent and principles of such provisions or as to which an adjustment pursuant to such provisions, if strictly applied, would not fairly protect the purchase rights of the Holder in accordance with the basic intent and principles of such provisions, then the Company shall make any computation required under this Section 10.5.2 with respect to any such adjustment on a basis consistent with the basic intent and principles established by the provisions of this Section 10, necessary to preserve, without dilution, the exercise rights of the Holder. The Company shall appoint a firm of independent certified public accountants (which may be the regular auditors of the Company) of recognized national standing, which firm shall review the computation of the Company prepared pursuant to this Section 10.5.2 and prepare a report signed by such firm, which shall be provided to the Company and which shall acknowledge that the adjustment calculation prepared by the Company is arithmetically correct. Such report shall be conclusive evidence of the correctness of the computation made under this Section 10.5.2. Upon receipt of such report, the Company shall forthwith cause to be made, or shall act to prevent, the adjustments described in such calculation. 10.6 Officer's Certificate. Whenever the number of Option Shares that may be purchased upon exercise of the Option is adjusted as required by the provisions of this Option, the Company shall mail to the Holder of such option an officer's certificate indicating the adjusted number of Option Shares that may be purchased upon exercise of the Option and the adjusted Option Exercise Price, determined as herein provided, and setting forth in reasonable detail the facts requiring such adjustment and the manner of computing such adjustment. 11. Privilege of Stock Ownership. ---------------------------- The Holder of this Option shall not have any of the rights of a shareholder with respect to the Option Shares until such individual shall have exercised the Option and paid the Option Exercise Price. Upon exercise of this Option, such Holder shall for all purposes be deemed to have become the holder of record of the Option Shares and such certificate shall be dated the date upon which the Notice of Election was duly surrendered and payment of the Option Exercise Price (and any applicable transfer taxes or governmental charges pursuant to Section 6 hereof) was made; provided, however, that if the date of such surrender and payment is a date upon which the transfer books of the Company are closed, the Holder shall be deemed to have become the record holder of such Option Shares on, and such certificate shall be dated, the next succeeding Business Day on which the transfer books of the Company are open. For purposes of this Section, "Business Day" shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of Oregon or the city in which the office of the transfer agent of the Company is located are authorized or obligated by law or executive order to close. 12. Successors and Assigns. ---------------------- The provisions of this Option shall inure to the benefit of, and be binding upon, the successors and assigns of the Company. 5 13. Notices. ------- Any notice required to be given or delivered to the Company under the terms of this Option shall be in writing and addressed to the Company in care of the Corporate Secretary at its principal corporate offices. Any notice required to be given or delivered to a Holder shall be in writing and addressed to such Holder at the address indicated on the Company's records. Any notice or other communication required or which may be given hereunder shall be in writing and shall be delivered personally, telegraphed, telexed or sent by facsimile, or sent by certified, registered or express mail, postage prepaid and shall be deemed given when so delivered personally, telegraphed or telexed or sent by facsimile or computer transmission, or if mailed, three days after the date of mailing. In the event that at any time during the Exercise Period: 13.1 the Company shall pay any dividend on Common Stock that is payable in stock, or make any distribution (other than regular cash dividends) to the holders of Common Stock; 13.2 there shall be any capital reorganization or reclassification of the capital stock of the Company; or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation; or 13.3 there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, the Company will cause to be mailed to the Holder by first-class mail, postage prepaid, addressed to such Holder at the address indicated on the Company's records, (i) at least 10 days' prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend or distribution or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding up, at least 10 days' prior written notice of this date when the same shall take place. Any notice given in accordance with the foregoing clause (i) shall also specify, in the case of any such dividend or distribution, the date on which a shareholder shall be entitled thereto. Any notice given in accordance with the foregoing clause (ii) shall also specify the date on which shareholders shall be entitled to exchange their shares for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding up or conversion, as the case may be. 14. Governing Law. ------------- The interpretation, performance, and enforcement of this Option shall be governed by the laws of the State of Oregon. 6 15. Headings. -------- The headings of sections of this Option have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. 16. Amendments. ---------- This Option may be amended only by the written consent of the Company and the written consent of the Holder. 17. Severability. ------------ If any provision of this Option is held to be invalid, illegal or unenforceable in any respect, such provision will be enforced to the maximum extent possible and such invalidity, illegality or unenforceability will not affect any other provision of this Option. 18. Entire Agreement. ---------------- This Option constitutes the entire agreement of the parties with respect to the specific subject matter hereof and supersedes in their entirety all prior agreements or understandings between the parties hereto with respect to such subject matter. IN WITNESS WHEREOF, the Company has caused this Option Certificate to be duly executed by its Chief Executive Officer and President and its Secretary KEY TECHNOLOGY, INC. By /s/ Thomas C. Madsen ------------------------- Thomas C. Madsen Chief Executive Officer and President 7 NOTICE OF ELECTION TO EXERCISE OPTION Pursuant to the Option (the "Option ") dated __________, 2000 granted to FMC CORPORATION ("Optionee") by KEY TECHNOLOGY, INC., an Oregon corporation (the "Company"), and pursuant to which Optionee was granted an option to purchase up to 210,000 Shares of Series B Convertible Preferred Stock of the Company (the "Option Shares"), with an attached redeemable warrant to purchase 52,500 shares of the Company's Common Stock (the "Warrant"), Optionee hereby gives notice of its election to exercise the Option with respect to ______ Option Shares with the attached redeemable Warrant at an exercise price of $______. A check in the amount of the exercised price is enclosed. Dated: ______________, _____ Optionee: FMC CORPORATION By ____________________________ 8 -----END PRIVACY-ENHANCED MESSAGE-----