Key Technology (KTEC)

THE 2003 RESTATED EMPLOYEES’ STOCK INCENTIVE PLAN

The Company’s 2003 Restated Employees’ Stock Incentive Plan (the “Plan”) was originally adopted by the Board of Directors and approved by the shareholders of the Company in 1989, and has been subsequently amended and restated by the Board of Directors four times. The latest amendments to the Plan in 2003, approved by the shareholders in 2004, extend its term through December 15, 2013, authorize grants of restricted stock awards, and authorize the Compensation Committee of the Board of Directors to extend the exercise period of an option following the death or disability of an employee, as well as increase the number of shares authorized under the Plan by 100,000, bringing the aggregate total shares authorized under the Plan to 1,350,000.

The purpose of the Plan is to encourage officers, directors and employees of the Company to acquire or increase their proprietary interest in the Company and to promote a closer identity of interests between the Company’s officers, directors and employees and its shareholders. The Company believes the Plan provides incentives for the continued efforts of the participants and the continuity of their service to the Company. There are approximately five hundred employees and five directors who are eligible for participation in the Plan. The following summary of the amendment to the Plan is subject to the specific provisions contained in the full text of the Plan, as amended, set forth as Appendix A.