SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934.
FILED BY THE REGISTRANT /X/
FILED BY A PARTY OTHER THAN THE REGISTRANT / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for the Use of the Commission Only (as permitted by
rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or
sec. 240.14a-12
KEY TRONIC CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Persons(s) Filing Proxy Statement if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount
on which the filing fee is calculated and state how it was
determined):
4) Proposed maximum aggregate value of transaction:
5) Total Fee Paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number or the Form or Schedule and the date of its filing:
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party
4) Date Filed:
- -----------------------------------------------------------------------------
(KEY TRONIC CORPORATION LOGO GOES HERE)
September 20, 1996
Dear Shareholder:
The attached Notice of Annual Meeting of Shareholders and Proxy Statement
relates to the Annual Meeting of Shareholders of Key Tronic Corporation, a
Washington corporation (the "Company"), to be held on Thursday, October 24,
1996, at 1:00 p.m. Pacific time at the principal executive offices of the
Company, 4424 N. Sullivan Road, Spokane, Washington 99216.
Whether or not you will attend the Annual Meeting in person and regardless of
the number of shares you own, we request that you complete, sign, date and
return the enclosed proxy card promptly in the accompanying postage-prepaid
envelope. You may, of course, attend the Annual Meeting and vote in person,
even if you have previously returned your proxy card.
Sincerely,
/s/ Fred W. Wenninger
Fred W. Wenninger
Chief Executive Officer and President
Member of the Board of Directors
(KEY TRONIC CORPORATION LOGO GOES HERE)
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 24, 1996
To the Shareholders of KEY TRONIC CORPORATION:
The Annual Meeting of Shareholders of Key Tronic Corporation, a Washington
corporation (the "Company") will be held on Thursday, October 24, 1996, at
1:00 p.m. Pacific time at the principal executive offices of the Company,
4424 N. Sullivan Road, Spokane, Washington 99216 (the "Annual Meeting"), for the
following purposes:
1. To elect eleven directors of the Company to hold office until the next
Annual Meeting of Shareholders and until their successors are elected and have
qualified;
2. To ratify the appointment of Deloitte & Touche LLP as independent auditors
for fiscal year 1997; and
3. To transact such other business as may properly come before the meeting and
any adjournments or postponements thereof.
Record holders of the Company's Common Stock at the close of business on
September 9, 1996 (the "Record Date") are entitled to notice of and to vote at
the Annual Meeting and any adjournments or postponements thereof.
Even if you will attend the Annual Meeting, please complete, sign, date and
return the enclosed proxy to the Company in the enclosed postage-prepaid
envelope in order to ensure that your shares will be voted at the Annual
Meeting. You may vote your shares in person at the Annual Meeting even if you
have previously returned your proxy card to the Company.
By Order of the Board of Directors,
/s/ Ronald F. Klawitter
Ronald F. Klawitter, Secretary
Spokane, Washington
September 20, 1996
YOUR VOTE IS IMPORTANT. PLEASE EXECUTE AND RETURN THE ENCLOSED CARD PROMPTLY,
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING.
FIRST MAILED TO SHAREHOLDERS ON OR ABOUT SEPTEMBER 20, 1996
(KEY TRONIC CORPORATION LOGO GOES HERE)
PROXY STATEMENT
INTRODUCTION
GENERAL
The preceding Notice of Annual Meeting of Shareholders, this Proxy Statement and
the enclosed proxy card are being furnished by Key Tronic Corporation, a
Washington corporation (the "Company"), to the holders of outstanding shares of
Common Stock, no par value, of the Company ("Common Stock") in connection with
the solicitation of proxies by the Board of Directors of the Company from
holders of such shares. The proxies are to be used at the Annual Meeting of
Shareholders of the Company to be held on Thursday, October 24, 1996, at
1:00 p.m. Pacific time at the principal executive offices of the Company,
4424 N. Sullivan Road, Spokane, Washington 99216, and any adjournments or
postponements thereof (the "Annual Meeting"). The proxies appoint Stanley
Hiller, Jr., Wendell J. Satre and Yacov A. Shamash, any of them and their
substitutes, as proxy to vote all shares represented at the Annual Meeting
pursuant to this proxy solicitation.
RECORD DATE, PROXIES, REVOCATION
Record holders of the Common Stock at the close of business on September 9, 1996
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting.
As of the Record Date, 8,540,034 shares of Common Stock were issued and
outstanding. A proxy card for use at the Annual Meeting is enclosed with this
Proxy Statement. All completed, signed and dated proxies returned to the
Company will be voted at the Annual Meeting in accordance with the instructions
thereon. If no instructions are given on an otherwise signed and dated proxy
card, the proxy will be voted FOR the election of nominees for director named
below and FOR the ratification of the appointment of Deloitte & Touche LLP as
the Company's independent auditors for fiscal 1997. Any proxy may be revoked at
any time before it has been voted by giving written notice of revocation to the
Secretary of the Company at the address set forth above; by delivering a
completed, signed proxy bearing a date later than any earlier proxy; or by
voting shares in person at the Annual Meeting. The mere presence at the Annual
Meeting of the shareholder who has given a proxy will not revoke such proxy.
VOTING
Each share of Common Stock outstanding is entitled to one vote on each matter
presented for a vote of the shareholders at the Annual Meeting. Under
applicable law and the Company's Restated Articles of Incorporation and Amended
and Restated By-Laws, if a quorum exists at a meeting: (i) the eleven nominees
for election of directors who receive the greatest number of votes cast for the
election of directors by the shares present in person or represented by proxy
and entitled to vote shall be elected directors and (ii) matter 2 listed in the
accompanying Notice of Annual Meeting of Shareholders will be approved if the
number of votes cast in favor of the proposal exceeds the number of votes cast
against it. In the election of directors, any action other than a vote for a
nominee will have the practical effect of voting against the nominee. An
abstention from voting or a broker nonvote will have no effect on the approval
of matter 2 since neither represents a vote cast. With respect to matter 2,
proxies marked "abstain" will be treated as a vote against the matter only for
the purpose of determining whether the matter has been approved for purposes of
Section 16 of the Securities Exchange Act of 1934, as amended, for all other
purposes proxies marked "abstain" will not be counted as voting with respect to
the matter.
<PAGE> 1
PROPOSAL 1
ELECTION OF DIRECTORS
Eleven directors are to be elected at the Annual Meeting to serve until the next
Annual Meeting of Shareholders and until their respective successors have been
elected and have qualified. The eleven nominees receiving the highest number of
affirmative votes will be elected as directors. In the event any nominee is
unable or unwilling to serve as a nominee or director, the proxies may be voted
for the balance of those nominees named and for any substitute nominee
designated by the present Board of Directors or the proxy holders to fill such
vacancy, or for the balance of those nominees named without nomination of a
substitute, or the size of the Board of Directors may be reduced in accordance
with the By-Laws of the Company. The Board of Directors has no reason to
believe that any of the persons named will be unable or unwilling to serve as a
nominee or as a director if elected. The following information has been
provided to the Company with respect to the nominees for election to the Board
of Directors:
Robert H. Cannon, Jr., age 72, has been a director of the Company since
September 1992. Professor Cannon has been Charles Lee Powell Professor at the
Department of Aeronautics and Astronautics, Stanford University since 1979.
From 1979 to 1990 he was also Chairman of the Department. Previously, Professor
Cannon served as Assistant Secretary of Transportation and as Chief Scientist of
the United States Air Force. Professor Cannon has served on the General Motors
Science Advisory Committee since 1975, serving as Chairman from 1980 to 1984.
He also serves on the Board of Directors of Parker Hannifin Corporation.
Thomas W. Cason, age 53, has been a director of the Company since February 1994.
He served as President and Chief Operating Officer of the Company from February
1994 through August 1995. Mr. Cason has been President of Progressive Tractor &
Implement Co., Inc., an agricultural equipment dealership, since 1991. He was
Senior Vice President and Chief Financial Officer of Baker Hughes Incorporated
from July 1989 to December 1990. Mr. Cason was President and Chief Executive
Officer of Milpark Drilling Fluids, a subsidiary of Baker Hughes Incorporated,
prior thereto. Mr. Cason also serves on the Board of Global Marine, Inc.
Michael R. Hallman, age 51, has been a director of the Company since July 1992.
Mr. Hallman served as Vice President, and later, President of Boeing Computer
Services from March 1987 to February 1990. He served as President and Chief
Operating Officer of Microsoft Corporation from March 1990 through March 1992.
Mr. Hallman has been with the Hallman Group, a consulting organization, since
April 1992. Mr. Hallman also serves on the Board of Directors of Intuit, Inc.,
Infocus Systems, Amdahl Corporation, Network Appliance and Timeline, Inc.
Stanley Hiller, Jr., age 71, has been a director of the Company and Chairman of
the Company's Executive Committee since February 1992. He served as Chief
Executive Officer of the Company from February 1992 through August 1995 and has
served as Chairman of the Board since September 1, 1995. Mr. Hiller is the
Senior Partner of Hiller Investment Company and Managing Partner of the Hiller
Group, a corporate management organization (the "Hiller Group"), and has served
as Chairman of the Board, Chief Executive Officer or Senior Officer of numerous
corporations over the last 50 years. Through the Hiller Group, which he founded
in the late 1960s, he has brought together groups of executives who become
actively involved in the direct management of companies, usually at the request
of its managers, directors or shareholders. During the past 20 years,
Mr. Hiller has concentrated his efforts in the area of restructuring troubled
companies, including G. W. Murphy Industries (diversified manufacturing and
services), Reed Tool Company (tool manufacturing), Baker International (Baker-
Hughes) (oil field service), The Bekins Company (moving and storage) and York
International (air conditioning manufacturing). Mr. Hiller also serves on the
Board of Directors of The Boeing Company (Boeing).
Kenneth F. Holtby, age 74, has been a director of the Company since March 1992.
He served in various positions in engineering, technology, product development
and program management for Boeing since 1947. He most recently served as Senior
Vice President of Engineering and as a member of the Corporate Executive Counsel
for Boeing until his retirement in 1987. Mr. Holtby currently serves as a
consultant to Boeing.
Dale F. Pilz, age 70, has been a director of the Company since April 1992. Mr.
Pilz was Chief Executive Officer of Flowind Corporation from 1986 to 1990. He
served as President of Omninet Corporation from 1985 to 1986. Prior to that,
Mr. Pilz was Chief Executive Officer and President of GTE Sprint Communications
from 1983 to 1985 and also served as Chief Executive Officer and President of
GTE Spacenet Corporation from 1983 to 1985.
<PAGE> 2
Wendell J. Satre, age 78, has been a director of the Company since 1988 and
served as Chairman of the Board of Directors from July 1991 through August 1995.
Mr. Satre also served as a director from 1983 through 1986 and served as Acting
President of the Company from August 1991 through February 1992. Mr. Satre is
the retired Chairman of the Board and Chief Executive Officer of the Washington
Water Power Company, a public utility headquartered in Spokane, Washington.
Mr. Satre also serves on the Boards of Directors of Alascom, a subsidiary of
Pacific Telephone, Inc., which is a subsidiary of Pacificorp, and Coeur d'Alene
Company.
Yacov A. Shamash, age 46, has been a director of the Company since 1989. He has
been the Dean of Engineering and Applied Sciences at the State University of
New York campus at Stony Brook since 1992. Professor Shamash developed and
directed the NSF Industry/University Cooperative Research Center for the Design
of Analog/Digital Integrated Circuits from 1989 to 1992 and also served as
Chairman of the Electrical and Computer Engineering Department at Washington
State University from 1985 until 1992.
Clarence W. Spangle, age 71, has been a director of the Company since July 1992.
A former Chairman of Memorex and President of Honeywell Information Systems,
Mr. Spangle has been an independent management consultant since 1985.
Mr. Spangle also serves on the Board of Directors of Apertus Technologies, Inc.
William E. Terry, age 63, has been a director of the Company since August 1992.
Mr. Terry retired from Hewlett Packard in December 1993 where he served in a
number of executive positions during the past 35 years. Mr. Terry also serves
on the Board of Directors of Altera Corporation.
Fred W. Wenninger, age 57, has been a director since September 1, 1995. He has
served as President and Chief Executive Officer of the Company since September
1, 1995. Mr. Wenninger served as President and Chief Executive Officer and a
director of Iomega Corporation, a computer mass storage company, from May 1989
until January 1994. From February 1986 until April 1989, he was President of
Bendix/King, an avionics division of Allied Signal Corporation. From 1963 to
1986 he was employed by Hewlett Packard, the last eight years in General Manager
positions at divisions which developed and produced computers and workstations.
Mr. Wenninger has a Ph.D. in Engineering from Oklahoma State University. He is
a director of Norand Corporation and Hach Corp.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES NAMED
ABOVE.
THE BOARD OF DIRECTORS AND COMMITTEES
All directors hold office until the next Annual Meeting of Shareholders and
until their successors have been elected and have qualified. There are no
family relationships among any of the directors or executive officers of the
Company.
The Company's Board of Directors met five times during fiscal 1996. During
fiscal 1996, each director attended 75% or more of the total number of Board of
Directors meetings and meetings of committees of the Board of Directors on which
the director served during the time he served on the Board or committee, except
Prof. Cannon who attended 40% of such meetings.
The Audit Committee, which currently consists of Dr. Shamash (chairman) and
Messrs. Cason, Holtby and Pilz met two times during fiscal 1996. The Audit
Committee recommends to the Board of Directors the independent auditors to be
selected to audit the financial statements of the Company for the fiscal year
for which they are appointed, reviews the fees of the independent auditors and
other terms of their engagement and monitors the adequacy of the audit effort
and the Company's financial and accounting organization, financial reporting and
internal controls.
The Compensation and Administration Committee (the "Compensation Committee"),
which currently consists of Messrs. Pilz (chairman), Cason, Satre and Spangle,
met two times during fiscal 1996. The Compensation Committee establishes and
reviews annually the Company's general compensation policies applicable to the
Company's executive officers and other key employees, reviews and approves the
level of compensation awarded to the Company's Chief Executive Officer and other
officers and key management employees, prepares and delivers annually to the
Board a report disclosing compensation policies applicable to the Company's
executive officers and the basis for the Chief Executive Officer's compensation
during the last fiscal year and makes recommendations to the Board regarding
changes to existing compensation plans. The Stock Option Sub-Committee of the
<PAGE> 3
Compensation Committee administers the Company's stock option plans, including
determining the individuals to receive options and the terms of such options.
The Stock Option Sub-Committee members are Messrs. Pilz and Spangle.
The Executive Committee, which currently consists of Messrs. Hiller (chairman),
Pilz, Satre and Wenninger held one meeting during fiscal 1996. The Executive
Committee generally exercises the authority of the Board of Directors with
respect to the management and operation of the Company between meetings of the
Board of Directors.
The Board of Directors does not have a Nominating Committee or a committee
performing the function of a Nominating Committee. Although there are no formal
procedures for shareholders to recommend nominations, the Board of Directors
will consider recommendations from shareholders, which should be addressed to
Ronald F. Klawitter, Vice President of Finance, Treasurer and Secretary, at the
Company's address listed above. See "Employment Contracts, Termination and
Change in Control Arrangements--The Hiller Agreement."
DIRECTOR COMPENSATION
Each director who is not an employee of the Company receives a quarterly
retainer of $1,500, a fee of $750 for each Board meeting attended in person and
a fee of $250 for each Board meeting attended by telephone. Directors also
receive a fee of $250 for each committee meeting attended, except that directors
receive a fee of $1,000 for each Executive Committee meeting attended (which
payment is in lieu of any payment for a Board meeting attended on the same day).
Committee chairmen receive an additional fee of $100 for each committee meeting
attended. Directors also receive payment of out-of-pocket expenses related to
their service as directors.
Each director who is not, upon election to the Board of Directors, an employee
of the Company participates in the Company's Stock Option Plan for Non-Employee
Directors. Each non-employee director is granted, upon initial election, an
option to purchase 10,000 shares of the Company's Common Stock and an additional
option to purchase 10,000 shares upon the directors first re-election to the
Board of Directors. All options granted pursuant to the plan have a three year
vesting period.
EXECUTIVE OFFICERS
In addition to Mr. Wenninger, the following persons are the executive officers
of the Company:
Craig D. Gates, age 37, has been Vice President and General Manager of New
Business Development since October 1995. He joined the Company as Vice
President of Engineering in October of 1994. Mr. Gates has a Bachelor of
Science Degree in Mechanical Engineering and a Masters in Business
Administration from the University of Illinois, Urbana. From 1982 he held
various engineering and management positions within the Microswitch Division of
Honeywell, Inc., in Freeport, Illinois and from 1991 to October 1994 he served
as Director of Operations, Electronics for Microswitch.
Ronald F. Klawitter, age 44, has been Vice President of Finance and Treasurer of
the Company since November 1992 and Secretary since October 1995. He was Acting
Secretary from November 1994 to October 1995. From 1987 to 1992, Mr. Klawitter
was Vice President, Finance at Baker Hughes Tubular Service, a subsidiary of
Baker Hughes, Inc.
Jack W. Oehlke, age 50, has been Chief Operating Officer of the Company since
October, 1995. Previously, he served as Senior Vice President of Operations
from January 1995 to October 1995 and Vice President of Manufacturing Operations
of the Company from December 1993 to January 1995. Mr. Oehlke served as
Director of Operations, Director of Quality and in various management positions
within manufacturing, engineering and quality functions of the Microswitch
Division of Honeywell, Inc. from 1968 to 1993.
Richard T. Tinsley, age 48, has been Vice President of Quality Assurance of the
Company since November 1993. Mr. Tinsley was the owner of Tinsley Associates
from May 1993 to September 1993 and served as Director of Manufacturing
Operations, Director of Quality and Quality Assurance Manager at Compaq Computer
Corporation from 1982 to 1993. From 1972 to 1982, Mr. Tinsley worked for Texas
Instruments, Inc., as Printer Manufacturing Manager and New Products Program
Manager.
All executive officers hold office until their successors are elected and have
qualified.
<PAGE> 4
PRINCIPAL SHAREHOLDERS AND SECURITY
OWNERSHIP OF MANAGEMENT
The following table provides certain information which has been furnished to the
Company regarding beneficial ownership of the Common Stock as of the Record
Date, with respect to (i) each person known by the Company to own beneficially
more than 5% of the Company's Common Stock; (ii) each director and nominee for
director of the Company; (iii) the Chief Executive Officer and each of the
executive officers of the Company other than the Chief Executive Officer named
in the Summary Compensation table (collectively, the "Named Executive
Officers"); and (iv) all directors and executive officers of the Company as a
group.
<TABLE>
<CAPTION?>
NAME OF NUMBER OF PERCENT OF
BENEFICIAL OWNER* SHARES CLASS (1)
BENEFICIALLY
OWNED (1)
<S> <C> <C>
Zesiger Capital Group LLC 1,065,800(2) 12.5%
320 Park Avenue
New York, NY 10022
BZW Barclays Global Investors, N.A. 584,376(3) 6.8%
420 Montgomery Street, Floor 3
San Francisco, CA 94162
Dimensional Fund Advisors, Inc. 538,300(4) 6.3%
1299 Ocean Avenue, Suite 650
Santa Monica, CA 90401
Hiller Key Tronic Partners 2,583,752(5) 23.6%
Robert H. Cannon, Jr. 25,318(6) **
Thomas W. Cason 202,865(7) 2.4%
Michael R. Hallman 29,068(8) **
Stanley Hiller, Jr. 1,767,452(9) 17.4%
Kenneth F. Holtby 43,068(10) **
Dale F. Pilz 26,518(11) **
Wendell J. Satre 27,333(12) **
Yacov A. Shamash 7,833(13) **
Clarence W. Spangle 25,318(14) **
William E. Terry 29,068(15) **
<PAGE> 5
Fred W. Wenninger 187,500(16) 2.2%
Craig D. Gates 45,267(17) **
Ronald F. Klawitter 83,288(18) **
Jack W. Oehlke 79,586(19) **
Richard T. Tinsley 64,018(20) **
All officers and directors as a 2,643,500(21) 24.3%
group (15 persons)(6)-(20),(21)
</TABLE>
* Unless otherwise noted, the address for each named shareholder is in care
of the Company at its principal executive offices.
** Less than 1%.
(1) Percentage beneficially owned is based on 8,540,034 shares of Common Stock
outstanding on the Record Date. A person or group of persons is deemed to
beneficially own as of the record date any shares which such person or
group of persons has the right to acquire within 60 days after the record
date. In computing, the percentage of outstanding shares held by each
person or group of persons, any shares which such person or persons have
the right to acquire within 60 days after the record date, are deemed to be
outstanding, but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person.
(2) Based on Form 13F filed with the Securities and Exchange Commission, dated
August 6, 1996.
(3) Based on Form 13F filed with the Securities and Exchange Commission, dated
April 14, 1996.
(4) Dimensional Fund Advisors Inc. ("DFA"), a registered investor advisor, is
deemed to have beneficial ownership of these shares all of which are held
in portfolios of DFA Investment Dimensions Group Inc., a registered open-
end investment company, or in series of the DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans, for all of
which DFA serves as investment manager. DFA disclaims beneficial ownership
of all shares.
(5) Represents 2,396,923 shares subject to presently exercisable options
pursuant to the Hiller Option Agreement (described on page 10) between the
Company and Hiller Key Tronic Partners, a Washington limited partnership
("HKT Partners") and 186,829 shares held by HKT Partners. Excludes 100
shares owned directly by Mr. Hiller, as to which HKT Partners disclaims
beneficial ownership. See textual disclosure on page 10.
(6) Represents 13,333 shares issuable upon exercise of director stock options
and Mr. Cannon's pro rata interest (11,985 shares) in shares issuable upon
the exercise of options held by HKT Partners.
(7) Represents Mr. Cason's pro rata interest in shares issuable upon the
exercise of options held by HKT Partners.
(8) Represents 13,333 shares issuable upon exercise of director stock options
and Mr. Hallman's pro rata interest (15,735 shares) in shares held and
shares issuable upon the exercise of options held by HKT Partners.
(9) Includes 1,767,352 shares held and shares issuable upon the exercise of
presently exercisable stock options, which shares represent the pro rata
interest of Mr. Hiller in the interest of entities controlled by Mr. Hiller
in shares held by HKT Partners and shares issuable upon the exercise of
options owned by HKT Partners. Also includes 100 shares owned directly by
Mr. Hiller, as to which HKT Partners disclaims beneficial ownership. See
textual disclosure on page 10.
(10) Includes 13,333 shares issuable upon exercise of director stock options and
Mr. Holtby's pro rata interest (15,735 shares) in shares held and shares
issuable upon the exercise of options held by HKT Partners.
<PAGE> 6
(11) Includes 13,333 shares issuable upon exercise of director stock options and
Mr. Pilz's pro rata interest (12,985 shares) in shares held and shares
issuable upon the exercise of options held by HKT Partners.
(12) Includes 3,333 shares issuable upon exercise of a director stock option.
Excludes 1,200 shares owned by Mr. Satre's grandchildren under the Uniform
Gifts to Minors Act. Mr. Satre disclaims beneficial ownership of these
shares.
(13) Includes 3,333 shares issuable upon exercise of a director stock option.
(14) Represents 13,333 shares issuable upon exercise of director stock options
and Mr. Spangle's pro rata interest (11,985 shares) in shares issuable upon
the exercise of options held by HKT Partners.
(15) Includes 13,333 shares issuable upon exercise of director stock options and
Mr. Terry's pro rata interest (14,735 shares) in shares held and shares
issuable upon the exercise of options held by HKT Partners.
(16) Includes 112,500 shares issuable upon exercise of employee stock options.
Excludes 6,500 shares owned by Mr. Wenninger's wife, as to which Mr.
Wenninger disclaims beneficial ownership.
(17) Includes 26,250 shares issuable upon exercise of employee stock options and
Mr. Gates' pro rata interest (18,467 shares) in shares held by HKT
Partners.
(18) Represents 42,182 shares issuable upon exercise of employee stock options
and Mr. Klawitter's pro rata interest (41,106 shares) in shares issuable
upon the exercise of options held by HKT Partners.
(19) Includes 36,500 shares issuable upon exercise of employee stock options and
Mr. Oehlke's pro rata interest (41,812 shares) in shares issuable upon the
exercise of options held by HKT Partners. Also includes Common Stock
allocated to Mr. Oehlke as a participant in the Company's Variable
Investment Plan (774 shares) as of June 29, 1996.
(20) Includes 39,750 shares issuable upon exercise of employee stock options and
Mr. Tinsley's pro rata interest (19,751 shares) in shares issuable upon
the exercise of options held by HKT Partners. Also includes Common Stock
allocated to Mr. Tinsley as a participant in the Company's Variable
Investment Plan (2,534 shares) as of June 29, 1996.
(21) Includes 257,182 shares subject to issuance pursuant to employee stock
options. Does not include Common Stock allocated to officers as
participants in the Company's Variable Investment, Stock Bonus or Employee
Stock Ownership Plans after June 29, 1996.
EXECUTIVE COMPENSATION
COMPENSATION TABLES
Set forth below is information on the annual and long-term compensation for
services rendered during fiscal years 1994, 1995 and 1996, by the Named
Executive Officers which include (i) Mr. Wenninger, the Company's Chief
Executive Officer, (ii) Mr. Hiller who served as the Company's Chief Executive
Officer from February 1992 through August 1995, and (iii) the four other most
highly paid executive officers of the Company. For information regarding the
Company's current executive officers, see EXECUTIVE OFFICERS, page 4.
<PAGE> 7
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
ANNUAL COMPENSATION PAY-
AWARDS OUTS
Restr- Secur-
Other icted Under- All
Name And Fiscal Salary Bonus Annual Stock lying Pay- Other
Principal Year ($)(1) ($)(2) Compen- Award(s) Options outs Compen-
Position sation ($)(4) (#)(5) ($) sation
($)(3) ($)(6)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stanley Hiller, 1996 -- -- -- -- -- -- --
Jr. (7) 1995 -- -- -- -- -- -- --
Chief Executive 1994 -- -- -- -- -- -- --
Officer
Fred W. 1996 $243,462 $150,000 $131,782 $762,500 225,000 -- $4,615
Wenninger 1995 -- -- -- -- -- -- --
Chief Executive 1994 -- -- -- -- -- -- --
Officer
and President
Jack W. Oehlke 1996 179,808 -- -- -- 33,000 -- 4,495
Chief Operating 1995 139,621 105,250 39,531 -- 9,000 -- 3,491
Officer 1994 61,251 8,000 26,044 -- 20,000 -- 777
Craig D. Gates
Vice President, 1996 149,808 -- -- -- 43,000 -- 3,745
General Manager 1995 93,159 88,500 20,448 -- 20,000 -- 1,664
of New Business 1994 -- -- -- -- -- -- --
Development
Ronald F. 1996 142,692 -- -- -- 33,000 -- 3,567
Klawitter 1995 120,910 73,500 -- -- 8,815 -- 3,023
Vice President 1994 90,938 -- -- -- 5,867 -- 2,273
of Finance,
Treasurer and
Secretary
Richard T. 1996 135,001 -- -- -- 12,500 -- 3,128
Tinsley 1995 135,025 65,651 38,698 -- 6,000 -- 3,376
Vice President, 1994 77,899 -- 46,819 -- 30,000 -- 650
Quality
</TABLE>
(1) Includes amounts deferred under the 401(k) component of the Company's
Variable Investment Plan.
(2) Represents dollar value of cash bonuses earned by the Named Executive
Officers during the fiscal year indicated. Includes cash signing bonus of
$24,000 ($16,000 paid in 1995 and $8,000 paid in 1994) to Jack W. Oehlke.
Also includes cash signing bonus of $15,000 paid in 1995 to Craig D. Gates.
(3) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted in those instances where such perquisites and other
personal benefits constituted less than the lesser of $50,000 or ten
percent of the total of annual salary and bonus for the named executive
officer for such year. Dollar amounts shown consist of relocation
expenses.
(4) On September 1, 1995 Mr. Wenninger was granted 50,000 phantom stock option
units, with no cost basis to Mr. Wenninger, and the value of which at any
time equals the market price of the Company's Common Stock multiplied by
the number of units. The units vest over a period of five years at 20% per
year. The market price of the Common Stock on September 1, 1995 was $15.25
per share.
(5) Does not include stock options granted to HKT Partners, a partnership in
which entities controlled by Mr. Hiller, and in which Messrs. Oehlke,
Tinsley, Klawitter and Gates, individually, hold limited partnership
interests. See notes (5) and (17) through (20) to "Principal Shareholders
and Security Ownership of Management."
(6) Represents Company matching payments in 1996, 1995 and 1994 under the
Company's Variable Investment Plan.
<PAGE> 8
(7) Mr. Hiller served as chief executive officer of the Company from February
1992 through August 1995. Pursuant to an agreement entered into in
February 1992 between the Company and the Hiller Group, a corporate
management organization, Mr. Hiller has received no salary for his services
as an executive officer and director of the Company. See the textual
disclosure on page 10.
OPTION GRANTS IN 1996 FISCAL YEAR
The following table sets forth information concerning individual grants of stock
options made during fiscal 1996 to each of the individuals identified in the
Summary Compensation Table.
<TABLE>
<CAPTION> Potential
Number of % of Total Realizable Value
Securities Options at Assumed Annual
Underlying Granted To Exercise Expir- Rates of Stock
Options Employees Price ation Price Appreciation
Granted In Fiscal ($/Share) Date for Option Term(2)
(#)(1) 1996 5% ($) 10%($)
NAME
<S> <C> <C> <C> <C> <C> <C>
Stanley Hiller, -- -- -- -- -- --
Jr.
Fred W. Wenninger 225,000 42.1 % $15.25 9/01/05 $5,589,128 $8,899,707
Jack W. Oehlke 15,000 2.8 % 16.25 7/27/05 397,042 632,224
18,000 3.4 % 8.34 6/18/06 244,529 389,372
Craig D. Gates 12,500 2.3 % 16.25 7/27/05 169,812 270,397
30,500 5.7 % 8.34 6/18/06 414,341 659,770
Ronald F. 15,000 2.8 % 16.25 7/27/05 397,042 632,224
Klawitter 18,000 3.4 % 8.34 6/18/06 244,529 389,372
Richard T. 7,500 1.4 % 16.25 7/27/05 198,521 316,112
Tinsley 5,000 .9 % 8.34 6/18/06 67,925 108,159
</TABLE>
(1) Options vest at the rate of 50% per year on the first and second
anniversaries of the grant date.
(2) The rates of appreciation shown in the table are for illustrative purposes
only pursuant to applicable Securities and Exchange Commission
requirements. Actual values realized on stock options are dependent on
actual future performance of the Company, among other factors. Accordingly
the amounts shown may not necessarily be realized.
The following table provides information on the exercise of options to purchase
Common Stock by the Named Executive Officers in fiscal 1996 and such officers'
unexercised options to purchase Common Stock at June 29, 1996.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996
AND FISCAL YEAR-END OPTION VALUES
SHARES NUMBER OF SHARES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXER- IN-THE-MONEY OPTIONS
ON VALUE CISED OPTIONS AT AT FISCAL YEAR-
EXERCISE REALIZED FISCAL YEAR-END(#) END($)(1)
NAME (#) ($) EXER- UNEXER- EXER- UNEXER-
CISABLE CISABLE CISABLE CISABLE
<S> <C> <C> <C> <C> <C> <C>
Stanley Hiller, Jr. 0 N/A 1,604,291 0 $3,208,582 N/A
Fred W. Wenninger 0 N/A 0 225,000 N/A N/A
Jack W. Oehlke 0 N/A 24,500 37,500 N/A N/A
Craig D. Gates 0 N/A 10,000 53,000 N/A N/A
Ronald F. Klawitter 0 N/A 30,274 37,405 N/A N/A
Richard T. Tinsley 0 N/A 33,000 15,500 N/A N/A
</TABLE>
<PAGE> 9
(1) This amount represents the aggregate of the number of in-the-money
options multiplied by the difference between the closing price of the
Common Stock on the Nasdaq National Market on June 29, 1996 and the
exercise prices for the relevant options.
EMPLOYMENT CONTRACTS AND TERMINATION AND CHANGE IN CONTROL ARRANGEMENTS
The Hiller Agreement. On February 1, 1992, the Company approved an agreement
with the Hiller Group, a corporate management organization (the "Hiller
Agreement"), under which Stanley Hiller and other members of the Hiller Group
would become involved in the management of the Company. Under the Hiller
Agreement, Mr. Hiller was appointed a director, Chief Executive Officer and
Chairman of the Company's Executive Committee in February 1992 and acquired the
right to designate three additional persons to be appointed to the Company's
Board of Directors. Under these arrangements, Mr. Hiller has received no salary
for his services as an executive officer and director of the Company, and no
such salary is currently anticipated to be paid in the foreseeable future.
The Hiller Option Agreement. In connection with the Hiller Agreement, the
Company entered into an agreement (the "Hiller Option Agreement"), which was
approved by the Company's shareholders in May 1992. The Hiller Option Agreement
provides that HKT Partners may purchase from the Company up to 2,396,923 shares
of Common Stock (which shares would represent approximately 20% of the
outstanding Common Stock on the Record Date on a fully diluted basis, including
all outstanding and unexercised options and warrants), at an exercise price of
$4.50 per share, subject to proportional adjustment in the number of shares and
the exercise price in the event of any recapitalization, stock split, stock
dividend or similar transaction (the "Hiller Option"). The last reported sale
price of the Common Stock on the last trading day prior to the Board's approval
of the Hiller Option was $3.125 per share. Pursuant to the Hiller Agreement,
the Company also approved the authorization of an additional 300,000 shares of
Common Stock issuable upon exercise of options to be granted under the Company's
Employee Stock Ownership Plan to senior officers of the Company, which increase
also was approved by the Company's shareholders in May 1992. The Hiller Option
became fully exercisable on March 1, 1994 and expires on March 1, 1997.
Hiller Key Tronic Partners. HKT Partners is a Washington limited partnership
created by the Hiller Group in connection with the Hiller Option Agreement and
related matters. Mr. Hiller, as the sole shareholder of HKT, Inc., a Washington
corporation, the General Partner of HKT Partners, and as a General Partner of
Hiller Investment Partners, a California general partnership and a limited
partner of HKT Partners, currently has a 66.73% interest in HKT Partners. Each
partner of HKT Partners will share in the economic benefit of the Hiller Option
(including any appreciation in the value of shares subject to the Hiller Option
above the exercise price of such options) to the extent of their respective
partnership interest. The following directors have received a .5% ownership
interest in HKT Partners: Robert H. Cannon, Jr.; Michael R. Hallman; Kenneth F.
Holtby; Dale F. Pilz; Clarence W. Spangle; and William E. Terry. Messrs. Cason,
Gates, Klawitter, Oehlke and Tinsley, respectively have received 8.46%, .77%,
1.72%, 1.74% and .82% ownership interests in HKT Partners. During fiscal year
1996, Messrs. Cason, Oehlke, Klawitter, Tinsley and Gates, respectively received
cash distributions of a portion of their limited partnership interests in HKT
Partners in the amounts of $548,843, $123,500, $119,700, $89,300, and $44,156.
Employment Contracts. Pursuant to an employment contract, effective September 1,
1995, Mr. Wenninger agreed to serve as the Company's President and Chief
Executive Officer. He received an initial base salary of $300,000 and
eligibility to participate in the Company's bonus incentive plan as offered to
its key employees from time to time, with a guaranteed minimum cash bonus of
$150,000 for 1996. The Company also granted to Mr. Wenninger, options to
purchase 225,000 shares of Common Stock at an exercise price of $15.25 per share
(the market price on the grant date) and 50,000 units of phantom stock at $15.25
per unit, with no cost basis to Mr. Wenninger. The Company also agreed to pay
Mr. Wenninger's relocation related expenses.
Pursuant to an employment contract, dated December 27, 1993, Mr. Oehlke
received an initial salary of $122,500 per year, a cash signing bonus of
$24,000 and eligibility to participate in the Company's bonus incentive plan as
offered to its key employees from time to time. In addition the Company
granted to Mr. Oehlke, options to purchase 20,000 shares of Common Stock at an
exercise price of $8.00 per share (the market price on the date of grant) and
agreed to pay Mr. Oehlke's relocation related expenses.
<PAGE> 10
Pursuant to an employment contract, dated November 11, 1993, Mr. Tinsley
received an initial base salary of $135,000 per year and eligibility to
participate in the Company's bonus incentive plan as offered to its key
employees from time to time. In addition the Company granted to Mr. Tinsley
options to purchase 30,000 shares of Common Stock at an exercise price of $7.25
per share (the market price on the date of grant) and agreed to pay Mr.
Tinsley's relocation related expenses.
Pursuant to an employment contract, executed December 9, 1992, Mr. Klawitter
received an initial base salary of $88,000 per year and eligibility to
participate in the Company's bonus incentive plan as offered to its key
employees from time to time. In addition the Company granted to Mr. Klawitter
options to purchase 20,000 shares of Common Stock at an exercise price of $8.25
per share (the market price on the date of grant) and agreed to pay Mr.
Klawitter's relocation related expenses.
Pursuant to an employment contract, executed October 27, 1994, Mr. Gates
received an initial base salary of $125,000 per year and eligibility to
participate in the Company's bonus incentive plan as offered to its key
employees from time to time. The Company also granted to Mr. Gates options to
purchase 20,000 shares of Common Stock at an exercise price of $10.75 per share
(the market price on the grant date) and agreed to pay Mr. Gates' relocation
related expenses.
Each of the employment contracts entered into described above imposes upon the
employee standard non-disclosure, confidentiality and covenant not to compete
provisions. The above employment contracts provide that the Company may
terminate employment at any time. The employment contracts provide that upon
termination of employment by the Company, other than for cause, or upon
termination by the employee in the event the Company changes the substantive
responsibilities and duties of the employee in such a way as to constitute a
demotion; the Company shall continue to pay employee's base salary in effect
prior to termination for a period of one year after termination in the case of
Messrs. Wenninger, Oehlke, Klawitter and Tinsley and nine months in the case of
Mr. Gates.
Stock Option Plans. The Company's executive stock option plans and non-employee
directors stock option plan provide that upon a change of control of the Company
the vesting of outstanding options will be accelerated.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Board of Directors has a Compensation Committee, presently consisting of
Messrs. Cason, Pilz, Satre and Spangle. Mr. Satre served as Acting President of
the Company from August 1991 through February 1992. Mr. Cason served as
President and Chief Operating Officer of the Company from February 1994 through
August 1995. During the portion of fiscal 1996 during which Mr. Cason served as
President and Chief Operating Officer he received salary payments totaling
$62,500, payment of his incentive bonus earned during fiscal 1995 in the amount
of $168,750 and other compensation and expense reimbursements, pursuant to his
employment arrangement totaling $28,326.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW
Key Tronic's compensation philosophy established by the Compensation Committee
is that annual total cash compensation should vary with the performance of the
Company and long-term incentives should be aligned with the interests of the
Company's shareholders. The Company's compensation plan is designed to allow
the Company to attract, motivate and retain highly qualified individuals and is
consistent with the short-term and long-term goals of the Company. Compensation
of the Company's executive officers, except as otherwise noted in this report
has three primary elements: base salary, annual incentive bonus and an annual
stock option grant.
Base salaries are established following a review of competitive information
related to comparable companies, in similar industries, located in the
Northwest. Annual incentive bonuses are tied to the profitability of the
Company and the key employee's contribution to the Company's performance.
Annual stock option incentive grants are based upon base salary and a stock
performance goal established by the Compensation Committee. Annual stock option
grants to executive officers are made under the Company's employee stock option
plan.
<PAGE> 11
BASE SALARIES
The Company's compensation philosophy emphasizes performance-based pay. The
goal is to have base salary represent a target percentage of an executive
officer's total annual compensation. Prior to setting compensation levels for
executive officers, the Compensation Committee reviews competitive information
related to comparable companies, in similar industries, located in the
Northwest. These companies include some but not all of the companies appearing
in the Nasdaq Computer Manufacturer Index in the performance graph on page 14.
The Compensation Committee indexes base salary ranges to be slightly below
average competitive levels in the Northwest. During fiscal 1996, executive
officer pay ranges were adjusted upward to be consistent with the Compensation
Committee's established index. Management recommendations (other than those of
the subject executive officer) are considered by the Compensation Committee in
establishing an individual executive officer's recommended salary. The
Compensation Committee also considers factors related to individual performance,
individual responsibility, Company performance based on net earnings and
external competitive factors. The Board as a whole establishes each executive
officer's annual salary. Executive officers who also serve as directors abstain
from voting when their own annual salary is determined.
ANNUAL BONUS
The Compensation Committee established a Key Employee incentive bonus plan for
fiscal 1996. The plan was based upon Company profit goals. A minimum Company
profit goal had to be achieved before any payment was to be made under the plan
to executive officers. Bonus payments under the plan were to be based on three
performance levels: threshold achievement, expected achievement, and over-
achievement of Company profit goals or a combination of Company profit goals and
other financial goals. Over-achievement payments under the plan were intended
to be higher than comparable industry averages for annual incentive bonus plans
by an amount approximately equal to the amount by which base salary was below
comparable industry averages. Payments were to be based upon a percentage of
the key employees fiscal 1996 base earnings. The payment percentage ranges were
established in descending order for the Chief Operating Officer, all other
officers and all other key employees. Mr. Wenninger, the Company's Chief
Executive Officer and President did not participate in the plan for fiscal 1996.
Mr. Wenninger was awarded a bonus for fiscal 1996, pursuant to his employment
agreement. The threshold achievement profit performance level was not met and
therefore no executive officer was awarded a bonus pursuant to the incentive
bonus plan for fiscal 1996. Certain non-officer key employees were paid bonuses
in accordance with the incentive bonus plan for fiscal 1996.
ANNUAL STOCK OPTION AWARDS
The Compensation Committee's policies make long-term incentive compensation an
important part of motivating and retaining key employees. Such long-term
incentive compensation is consistent with the interests of the Company's
shareholders in that it ties executive compensation to the performance of the
Company's stock. The Compensation Committee believes that long-term incentive
compensation can best be implemented through the granting of annual stock
options. The Stock Option Sub-Committee of the Compensation Committee makes the
determination to grant options to key employees based upon each key employee's
position in the Company, base salary and the recommendations of the President
and Chief Executive Officer and the Chief Operating Officer based on individual
performance. The exercise price of the options is equal to the closing price of
the Common Stock on the date of grant as quoted by the Nasdaq National Market,
as reported in The Wall Street Journal. The options vest 50% per year
commencing one year from the date of grant. As members of the Hiller Group with
rights to some portion of the value of the stock issuable upon exercise of the
stock option granted to HKT Partners pursuant to the Hiller Agreement,
Mr. Hiller and Mr. Cason did not participate in this plan during the 1996 fiscal
year. The Stock Option Sub-Committee granted options to all other executive
officers (other than Mr. Wenninger who was granted stock options during fiscal
1996 in accordance with his employment agreement) and certain other key
employees during fiscal 1996 in accordance with the Company's compensation
policies.
<PAGE> 12
CHIEF EXECUTIVE OFFICER
Effective September 1, 1995, Fred W. Wenninger became Chief Executive Officer
and President of the Company and a member of the Board of Directors. Pursuant
to an employment agreement, effective September 1, 1995, Mr. Wenninger received
an initial base salary of $300,000 per year. Pursuant to the agreement Mr.
Wenninger is also eligible to participate, beginning in fiscal year 1997, in the
Company's annual incentive bonus plan with his annual bonus targeted at 50% of
base salary, based upon meeting specific objectives for each fiscal year as
agreed to in advance with the Board. Higher annual bonuses can be achieved
based upon his exceeding these objectives with a maximum annual bonus of 75% of
his base salary. For fiscal year 1996, the Board recognizing that Mr. Wenninger
did not have the opportunity to participate in the determination of the
objectives which drive the fiscal 1996 incentive bonus plan, agreed to guarantee
him a minimum cash bonus of $150,000.
Mr. Wenninger was granted upon his employment 225,000 shares of non-qualified
stock options pursuant to the Company's 1995 Executive Stock Option Plan which
vest in two consecutive annual installments of 50% each. These options are
priced at market price as of September 1, 1995. Mr. Wenninger was also granted
on September 1, 1995, 50,000 phantom stock option units, with no cost basis to
Mr. Wenninger, the unit value of which at any time equals the market price of
the Company's Common Stock. The phantom stock option units vest and become
exercisable in five equal annual installments. Should the Company have a major
change of ownership (defined as 50% or more of its outstanding and issued Common
Stock being purchased by an individual, group of individuals, or corporate
entity) during Mr. Wenninger's employment, the vesting of his non-qualified
options and phantom stock option units will be accelerated immediately so that
both are 100% vested. If Mr. Wenninger elects to leave the Company after such a
change of control, he will be paid one year's annual base salary in a lump sum
payment. Should Mr. Wenninger's employment with the Company be terminated by
the Board for any reason(s) other than for cause he will receive a severance
payment equal to one year's annual base salary in a lump sum payment. Upon Mr.
Wenninger's termination, no bonus or portion thereof will be paid, except for
bonus earned for a prior year but not yet paid. As of the date of Mr.
Wenninger's termination of employment for other than "cause", he will receive
that amount of phantom stock option units which equates to that portion of the
five year vesting period that will have passed as of his date of termination.
No severance payment will occur if Mr. Wenninger's termination is voluntary
(unless it follows a change of control) or is for "cause."
Compensation payments in excess of $1 million to the Chief Executive Officer or
four other most highly compensated executive officers are subject to a
limitation on deductibility for the Company under Section 162(m) of the Internal
Revenue Code of 1986, as amended. Certain performance-based compensation is not
subject to the limitation on deductibility. To the extent that there is no
adverse effect on the Company's performance-related compensation philosophy or
on the Company's ability to provide competitive compensation, it is the policy
of the Compensation Committee and the Board of Directors to minimize executive
compensation that is not deductible by the Company for tax purposes.
COMPENSATION COMMITTEE STOCK OPTION SUB-COMMITTEE
Dale F. Pilz - Chairman Dale F. Pilz, Chairman
Thomas W. Cason Clarence W. Spangle
Wendell J. Satre
Clarence W. Spangle
<PAGE> 13
<TABLE>
<CAPTION>
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
SET FORTH BELOW IS A LINE GRAPH COMPARING THE CUMULATIVE TOTAL
SHAREHOLDER RETURN ON THE COMPANY'S COMMON STOCK WITH THE CUMULATIVE
TOTAL RETURN OF THE NASDAQ MARKET INDEX AND THE NASDAQ COMPUTER
MANUFACTURER INDEX IN FISCAL 1996.
COMPARISON OF TOTAL RETURN(1)
AMONG NASDAQ (U.S. AND FOREIGN) MARKET INDEX,
NASDAQ COMPUTER MANUFACTURER INDEX AND KEY TRONIC CORPORATION
<C> <C> <C> <C>
Measurement Period Key Tronic CRSP NASDAQ (US CRSP Com-
(Fiscal Year Covered) Corporation & Frgn) Index puter
06/30/91 $100.000 $100.000 $100.000
07/04/92 137.143 126.804 112.145
07/03/93 228.571 161.340 144.460
07/02/94 142.857 159.046 112.266
07/01/95 365.714 210.155 199.800
06/29/96 185.714 260.794 297.376
</TABLE>
(1) Assumes that the value of the investment in the Common Stock and each index
was $100 invested on June 30, 1991 and that all dividends, if any, were
reinvested. The Nasdaq (U.S. and Foreign) Market Index is composed of
companies included within all Standard Industrial Classification (SIC)
codes. The SIC code of all companies included in the Nasdaq Computer
Manufacturer Index is 357. The Company will provide a list of companies
included in the indexes to any shareholder upon written request to the
Company's Secretary.
CERTAIN TRANSACTIONS
Pursuant to an agreement approved by the Board of Directors in January 1993,
Hiller Investment Company ("Hiller Investment") is entitled to receive $24,000
per month in reimbursement for expenses incurred by Hiller Investment in
connection with the provision of clerical and other services to the Company.
Effective October 1, 1995 the agreement was amended to decrease the per month
reimbursement to $15,000. Hiller Investment received $221,000 pursuant to this
agreement in fiscal 1996. Mr. Hiller is Senior Partner of Hiller Investment.
Mr. Hiller does not receive any salary from the Company's reimbursement paid to
Hiller Investment.
During fiscal 1996, the Company made aggregate payments totaling $37,881 to
Bighawk Corp., Jayhawk Aviation, Inc. and Starhawk, Inc. for hanger fees and
aircraft rental fees. Mr. Wenninger is the sole stockholder of these
corporations. The Company believes that the terms of its business relationships
with these corporations are no less favorable to the Company than those which
could be obtained from an unrelated party.
<PAGE> 14
See COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS, page 11, for additional relationships and transactions.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF AUDITORS
Deloitte & Touche LLP has served as the Company's independent auditors since
1983 and has been appointed by the Board of Directors as the Company's
independent auditors for the fiscal year ending June 28, 1997. In the event
that ratification of this appointment of auditors is not approved by a majority
of the shares of Common Stock voting at the Annual Meeting in person or by
proxy, management will review its future selection of auditors. Representatives
of Deloitte & Touche LLP are expected to be present at the Annual Meeting with
the opportunity to make a statement, if they desire to do so, and they are
expected to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
SHAREHOLDER PROPOSALS
To be considered for presentation to the Annual Meeting of Shareholders to be
held in 1997, a shareholder proposal must be received by Ronald F. Klawitter,
Vice President of Finance, Treasurer and Secretary, Key Tronic Corporation,
4424 N. Sullivan Road, Spokane, Washington 99216, no later than May 23, 1997.
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of the
Securities Exchange Act of 1934, as amended, requires the Company's executive
officers and directors and persons who own more than 10% of the Company's Common
Stock (collectively, "Reporting Persons") to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC") and
Nasdaq. Reporting Persons are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on its
review of the copies of such forms received or written representations from
certain Reporting Persons that no Forms 5 were required, the Company believes
that with respect to the fiscal year ended June 29, 1996 all the Reporting
Persons complied with all applicable filing requirements.
Solicitation Expenses. The expense of printing and mailing proxy material will
be borne by the Company. In addition to the solicitation of proxies by mail,
solicitation may be made by certain directors, executive officers and other
employees of the Company by personal interview, telephone or facsimile. No
additional compensation will be paid for such solicitation. The Company will
request brokers and nominees who hold stock in their names to furnish proxy
material to beneficial owners of the shares and will reimburse such brokers and
nominees for their reasonable expenses incurred in forwarding solicitation
material to such beneficial owners.
Other Business. The Board of Directors knows of no other business that will be
presented to the Annual Meeting. If any other business is properly brought
before the Annual Meeting, it is intended that proxies in the enclosed form will
be voted in respect thereof in accordance with the judgment of the persons
voting the proxies.
It is important that the proxies be returned promptly and that your shares be
represented. Shareholders are urged to fill in, sign and promptly return the
accompanying form in the enclosed envelope.
By Order of the Board of Directors,
/s/ Ronald F. Klawitter
Ronald F. Klawitter, Secretary
Spokane, Washington
September 20, 1996
<PAGE> 15
KEY TRONIC CORPORATION
4424 N. Sullivan Road, Spokane, Washington 99216
PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL MEETING
OCTOBER 24, 1996
STANLEY HILLER, JR., WENDELL J. SATRE AND YACOV A. SHAMASH, or any of them, each
with the power of substitution, are hereby authorized to represent and vote all
shares of the undersigned, with all the powers which the undersigned would
possess if personally present, at the Annual Meeting of Shareholders of Key
Tronic Corporation to be held on Thursday, October 24, 1996, and any adjournment
or postponement thereof.
UNLESS OTHERWISE SPECIFIED THIS PROXY WILL BE VOTED IN FAVOR OF PROPOSAL 1 AND
PROPOSAL 2
Election of Directors: WITHHOLD AUTHORITY to vote
FOR all nominees listed below / / for all nominees listed below / /
FOR, except vote withheld from the following nominee(s):
Election of eleven directors (of if any nominee is not available for election,
such substitute as the Board of Directors or the proxy holders may designate).
Nominees:
Robert H. Cannon, Jr., Thomas W. Cason, Michael R. Hallman, Stanley Hiller,
Jr., Kenneth F. Holtby, Dale F. Pilz, Wendell J. Satre, Yacov A. Shamash,
Clarence W. Spangle, William E. Terry and Fred W. Wenninger
Ratification of the appointment of Deloitte & Touche LLP as the
Company's independent auditors for fiscal year 1997.
/ / FOR / / AGAINST / / ABSTAIN
(Continued and to be signed and dated on other side.)
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting and
accompanying proxy statement, ratifies all that said Proxies or their
substitutes may lawfully do by virtue hereof, and revokes all prior proxies.
Shares represented by this proxy will be voted as directed by the shareholder.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Annual Meeting and any adjournment or
postponement thereof.
If you wish to vote in accordance with the Board of Directors' recommendations,
just sign and date below. You need not mark any boxes.
PLEASE SIGN, DATE AND RETURN PROMPTLY. Mark / / for address change:
Please sign exactly as your name appears
herein. Joint owners should each sign. When
signing as attorney, executor, administrator,
trustee or guardian, please give full title as
such.
_____________________________________
Signature Date
_____________________________________
Signature Date
No postage is required if this proxy is returned in the enclosed envelope and
mailed in the United States.
