13D Filing: Harbert Discovery Fund, Lp and Key Technology Inc (NASDAQ:KTEC)

CUSIP No.

493143101

Item 1.

Security and Issuer.

The name of the issuer is Key Technology, Inc., an Oregon corporation (the “Issuer”).  The address of the Issuer’s principal executive offices is 150 Avery Street, Walla Walla, Washington 99362, United States of America.  This Schedule 13D relates to the Issuer’s common stock, no par value (the “Shares”).

Item 2.

Identity and Background.

(a), (f)

This Schedule 13D is being filed jointly by (i) Harbert Discovery Fund, LP, a Delaware limited partnership (the “Fund”), (ii) Harbert Discovery Fund GP, LLC, a Delaware limited liability company (the “Fund GP”), (iii) Harbert Fund Advisors, Inc., an Alabama corporation (“HFA”), (iv) Harbert Management Corporation, an Alabama corporation (“HMC”), (v) Jack Bryant, a United States citizen, (vi) Kenan Lucas, a United States citizen, and (vii) Raymond Harbert, a United States citizen (collectively, the “Reporting Persons”).

(b)

The principal business address for each of the Reporting Persons is 2100 Third Avenue North, Suite 600, Birmingham, Alabama 35203.

(c)

Jack Bryant and Kenan Lucas, are directors and co-portfolio managers of the Fund GP, which serves as general partner of the Fund.  Raymond Harbert is the controlling shareholder, Chairman and Chief Executive Officer of HMC, an alternative asset investment management firm that is the managing member of the Fund GP.  Mr. Harbert also serves as the Chairman, Chief Executive Officer and Director of HFA, an indirect, wholly owned subsidiary of HMC, which provides the Fund with certain operational and administrative services.  The principal business of the Fund is purchasing, holding and selling securities for investment purposes.

(d)

None of the Reporting Persons have, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).

(e)

Prior to March 2009, HMC was affiliated with the Harbinger Capital Partners Funds (“Harbinger”) managed by Philip Falcone.  On June 27, 2012, the Securities and Exchange Commission (the “SEC”) filed civil fraud charges against Mr. Falcone and Harbinger related to, among other things, their trading in the bonds of a small company known as MAAX Holdings in 2006-2008 that the SEC alleges to have been “manipulative” in violation of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”).  The SEC also sought to hold HMC derivatively liable as a “control person” under Section 20(A) of the Exchange Act.  Section 20(A) is a derivative liability provision that does not prohibit any specified conduct and cannot be independently violated by one’s own conduct, but imposes joint and several liability on certain persons who control another to the extent that such “controlled person” is independently liable for its own violations of the securities laws.  Except as set forth in this Item 2(e) none of the Reporting Persons have, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding were or are 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.

Item 3.

Source and Amount of Funds or Other Consideration.

The funds for the purchase of the Shares by the Fund came from the working capital of the Fund, over which HFA, HMC, the Fund GP, Jack Bryant, Kenan Lucas and Raymond Harbert, through their roles described above in Item 2(c), exercise investment discretion.  No borrowed funds were used to purchase the Shares, other than borrowed funds used for working capital purposes in the ordinary course of business.  The total costs of the Shares directly owned by Harbert Discovery Fund, LP is approximately $3,728,810.