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 Person(s) Filing Proxy Statement if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/ / $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 LOGO
October 20, 1999
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
Friday, November 19, 1999, at 10:00 a.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/ JACK W. OEHLKE
Jack W. Oehlke
President and Chief Executive Officer
Member of the Board of Directors
KEY TRONIC LOGO
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 20, 1999
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 Friday, November 19, 1999, at 10:00
a.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 seven 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 2000; 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 October
4, 1999 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
October 20, 1999
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 OCTOBER 20, 1999.
KEY TRONIC LOGO
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 Friday, November 19, 1999 at 10:00
a.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 October 4, 1999
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting.
As of the Record Date, 9,634,830 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 2000. 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 seven nominees
for election as 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.
PROPOSAL 1
ELECTION OF DIRECTORS
Seven 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 seven 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. Two current members of the Board of
Directors, Michael R. Hallman and Kenneth F. Holtby have announced that they
will not stand for re-election at the Annual Meeting. The Board has, therefore,
in accordance with the By-Laws reduced the size of the Board from nine to seven,
effective at the time of the Annual Meeting. The following information has been
provided to the Company with respect to the nominees for election to the Board
of Directors:
Stanley Hiller, Jr., age 74, has been a director of the Company since February
1992 and Chairman of the Board since September 1, 1995. He served as Chief
Executive Officer of the Company from February 1992 through August 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).
Jack W. Oehlke, age 53, has been President and Chief Executive Officer of the
Company since June 1997. From October 1995, he served as Chief Operating
Officer. 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.
Dale F. Pilz, age 73, 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.
Wendell J. Satre, age 81, 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 Output Technology Corporation
and The Coeur d'Alenes Company.
Yacov A. Shamash, age 49, 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 74, 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 66, has been a director of the Company since August 1992.
Mr. Terry retired from Hewlett-Packard in November 1993 where he served in a
number of executive positions during the past 36 years. He is a member of the
Advisory Committee of the Santa Clara University Engineering School and, in
1983, was elected to the university's Board of Regents. Mr. Terry also serves
on the Boards of Directors of Altera Corporation and Phase Metrics.
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 four times during fiscal 1999. During
fiscal 1999, 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
Mr. Spangle who attended 50% of such meetings.
The Audit Committee, which currently consists of Messrs. Pilz (Chairman),
Holtby, Shamash and Terry met two times during fiscal 1999. 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. Hallman (Chairman), Satre and Spangle, met
two times during fiscal 1999. 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 Compensation Committee administers
the Company's stock option plans, including determining the individuals to
receive options and the terms of such options.
The Executive Committee, which currently consists of Messrs. Satre (Chairman),
Hiller, Oehlke and Terry did not meet during fiscal 1999. 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, Executive Vice President of Administration, CFO, Treasurer
and Secretary, at the Company's address listed above.
DIRECTOR COMPENSATION
Each director who is not an employee of the Company receives a quarterly
retainer of $1,875, a fee of $1,000 for each Board meeting attended in person
and a fee of $325 for each Board meeting attended by telephone. Directors also
receive a fee of $500 for each committee meeting attended (committee members
receive a fee of $250 if the Board meeting is held the same day), 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 $200 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 Amended and Restated 1990 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. An additional option to purchase 10,000 shares upon the
director's first re-election to the Board of Directors and an additional option
to purchase 7,500 shares upon each re-election to the Board of Directors after
the first re-election are also granted. The two 10,000 share option grants have
a three year vesting period and the subsequent 7,500 share option grants have a
two year vesting period.
EXECUTIVE OFFICERS
In addition to Mr. Oehlke, the following persons are the executive officers of
the Company:
Craig D. Gates, age 40, has been Executive Vice President of Marketing,
Engineering and Sales since July 1997. Previously he was Vice President and
General Manager of New Business Development from October 1995 to July 1997. He
joined the Company as Vice President of Engineering in October 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 47, has been Executive Vice President of
Administration, CFO, Treasurer and Secretary since July 1997. Previously he was
Vice President of Finance, Secretary and Treasurer of the Company since October
1995. He was Acting Secretary from November 1994 to October 1995 and Vice
President of Finance and Treasurer from 1992 to October 1995. From 1987 to
1992, Mr. Klawitter was Vice President, Finance at Baker Hughes Tubular Service,
a subsidiary of Baker Hughes, Inc.
Efren R. Perez, age 59, has served as Vice President of S.W. Operations since
July 1997. Previously he was the Managing Director of S.W. Operations from July
1996 to July 1997 and Director of S.W. Operations from July 1995 to June 1996.
Following the Company's acquisition of the Honeywell, Inc. Keyboard Division,
Mr. Perez served as Plant Manager in Juarez from July 1993 to July 1995. He
served as Plant Manager in Juarez for the Keyboard Division of Honeywell, Inc.
from February 1989 to July 1993. Mr. Perez is a graduate of the University of
Mexico with a B.S. in Physics.
All executive officers hold office until their successors are elected and have
qualified.
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) each of the executive officers of the Company
named in the Summary Compensation table; and (iv) all directors and executive
officers of the Company as a group.
NAME OF NUMBER OF SHARES PERCENT OF
BENEFICIAL OWNER* BENEFICIALLY OWNED CLASS(1)
(1)
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue, Suite 650 687,500(2), (3) 7.1%
Santa Monica, CA 90401
Hiller Key Tronic Partners, L.P. 875,122(4) 9.1%
Michael R. Hallman 30,352(5) **
Stanley Hiller, Jr. 694,251(6) 7.2%
Kenneth F. Holtby 44,352(7) **
Dale F. Pilz 27,802(8) **
Wendell J. Satre 51,250(9) **
Yacov A. Shamash 25,750(10) **
Clarence W. Spangle 26,602(11) **
William E. Terry 30,352(12) **
Craig D. Gates 264,242(13) 2.7%
Ronald F. Klawitter 288,943(14) 2.9%
Jack W. Oehlke 375,546(15) 3.8%
Efren R. Perez 76,245(16) **
All officers and directors as a
group (12 persons) 1,935,687(17) 18.1%
(5)-(16), (17)
_____________
* 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 9,634,830 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
June 30, 1999.
(3) 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.
(4) Represents 713,598 shares of restricted Common Stock subject to the
Restricted Stock Agreement (described on page 9) between the Company and Hiller
Key Tronic Partners, a Washington limited partnership ("HKT Partners") and
161,524 unrestricted shares of Common Stock held by HKT Partners. See textual
disclosure on page 9.
(5) Includes 21,250 shares issuable upon exercise of director stock options and
Mr. Hallman's pro rata interest (3,568 shares) in shares of restricted Common
Stock held by HKT Partners.
(6) Represents 529,059 shares of restricted Common Stock and 165,092
unrestricted shares of Common Stock, which shares represent the pro rata
interest of Mr. Hiller in the interest of entities controlled by Mr. Hiller in
shares held by those entities and HKT Partners. Also includes 100 shares owned
directly by Mr. Hiller. See textual disclosure on page 9.
(7) Includes 21,250 shares issuable upon exercise of director stock options and
Mr. Holtby's pro rata interest (3,568 shares) in shares of restricted Common
Stock held by HKT Partners.
(8) Includes 21,250 shares issuable upon exercise of director stock options and
Mr. Pilz's pro rata interest (3,568 shares) in shares of restricted Common Stock
held by HKT Partners.
(9) Includes 21,250 shares issuable upon exercise of director stock options.
(10) Includes 21,250 shares issuable upon exercise of director stock options.
(11) Includes 21,250 shares issuable upon exercise of director stock options and
Mr. Spangle's pro rata interest (3,568 shares) in shares of restricted Common
Stock held by HKT Partners.
(12) Includes 21,250 shares issuable upon exercise of director stock options and
Mr. Terry's pro rata interest (3568 shares) in shares of restricted Common Stock
held by HKT Partners.
(13) Includes 248,000 shares issuable upon exercise of employee stock options
and Mr. Gates' pro rata interest (5,494 shares) in shares of restricted Common
Stock held by HKT Partners. Also includes Common Stock allocated to Mr. Gates
as a participant in the Company's Variable Investment Plan (7,451 shares) as of
June 30, 1999.
(14) Includes 252,682 shares issuable upon exercise of employee stock options
and Mr. Klawitter's pro rata interest (12,274 shares) in shares of restricted
Common Stock held by HKT Partners. Also includes Common Stock allocated to Mr.
Klawitter as a participant in the Company's Variable Investment Plan (17,850
shares) as of June 30, 1999.
(15) Includes 324,500 shares issuable upon exercise of employee stock options,
Mr. Oehlke's pro rata interest (12,416 shares) in shares of restricted Common
Stock held by HKT Partners and 10,098 shares owned directly by Mr. Oehlke's
wife. Also includes Common Stock allocated to Mr. Oehlke as a participant in
the Company's Variable Investment Plan (18,332 shares) as of June 30, 1999.
(16) Represents 75,084 shares issuable upon exercise of employee stock options
and Common Stock allocated to Mr. Perez as a participant in the Company's
Variable Investment Plan (1,161 shares) as of June 30, 1999.
(17) Includes 996,516 shares subject to issuance pursuant to stock options held
by directors and executive officers which are currently exercisable or
exercisable within 60 days of July 3, 1999.
EXECUTIVE COMPENSATION
COMPENSATION TABLES
Set forth below is information on the annual and long-term compensation for
services rendered during fiscal years 1999, 1998 and 1997, by the Named
Executive Officers which include (i) Mr. Oehlke, the Chief Executive Officer and
President, and (ii) the three other persons who served as executive officers of
the Company during fiscal 1999. For information regarding the Company's current
executive officers, see EXECUTIVE OFFICERS, page 4.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
AWARDS PAYOUTS
OTHER RESTRICTED ALL
NAME AND SALARY BONUS ANNUAL STOCK SECURITIES PAYOUTS OTHER
PRINCIPAL FISCAL ($)(1) ($)(2) COMPENSA- AWARD(S) UNDERLYING ($) COMPEN-
POSITION YEAR TION ($)(4) OPTIONS SATION
($)(3) (#) ($)(5)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jack W. Oehlke 1999 298,846 147,173 -- -- 50,000 -- 4,298
Chief Executive 1998 232,856 -- -- -- 225,000 -- 3,714
Officer 1997 196,861 -- -- -- 75,000 -- 3,016
and President
Craig D. Gates 1999 222,168 87,359 -- -- 40,000 -- 4,716
Executive Vice 1998 198,100 -- -- -- 140,000 -- 3,881
President, 1997 164,938 -- -- -- 60,000 -- 3,799
Marketing,
Engineering and
Sales
Ronald F. 1999 222,168 87,359 -- -- 40,000 -- 4,506
Klawitter 1998 192,927 -- -- -- 140,000 -- 3,880
Executive Vice 1997 163,869 -- -- -- 60,000 -- 3,772
President of
Administration,
CFO, Treasurer
and Secretary
Efren R. Perez 1999 142,793 49,126 13,329 -- 20,000 -- 3,570
Vice President 1998 124,494 -- -- -- 30,000 -- 3,112
of SW
Operations
</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.
(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 $60,000 or ten percent of the total
of annual salary and bonus for the named executive officer for such year.
(4) Does not include shares of restricted Common Stock held by HKT Partners, a
partnership in which Messrs. Oehlke, Gates, and Klawitter, individually, hold
limited partnership interests. See notes (4), (13), (14) and (15) to "Principal
Shareholders and Security Ownership of Management."
(5) Represents Company matching payments in 1999, 1998 and 1997 under the
Company's Variable Investment Plan.
OPTION GRANTS IN 1999 FISCAL YEAR
The following table sets forth information concerning individual grants of stock
options made during fiscal 1999 to each of the individuals identified in the
Summary Compensation Table.
<TABLE>
<CAPTION>
% OF POTENTIAL
NUMBER OF TOTAL REALIZABLE VALUE
SECURITIES OPTIONS EXERCISE AT ASSUMED ANNUAL
NAME UNDERLYING GRANTED PRICE EXPIR- RATES OF STOCK
OPTIONS TO ($/SHARE) ATION PRICE APPRECIATION
GRANTED EMPLOYEES DATE FOR
(#)(1) IN OPTION TERM (2)
FISCAL 5% ($) 10% ($)
1999
<S> <C> <C> <C> <C> <C> <C>
Jack W. 50,000 31% 2.75 6/30/08 86,472 219,139
Oehlke
Craig D. 40,000 25% 2.75 6/30/08 69,178 175,311
Gates
Ronald F. 40,000 25% 2.75 6/30/08 69,178 175,311
Klawitter
Efren R. 20,000 13% 2.75 6/30/08 34,589 87,656
Perez
</TABLE>
__________
(1) Options which expire on 6/30/08 vest 100% on the first anniversary of the
grant date. Options which are not vested at the time of termination of
employment expire upon termination of employment.
(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 1999 and such officers'
unexercised options to purchase Common Stock at July 3, 1999.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SHARES
SHARES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED VALUE UNEXERCISED IN-THE-MONEY OPTIONS
ON REALIZED OPTIONS AT FISCAL AT FISCAL YEAR-
EXERCISED YEAR-END(#) END($)(1)
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Jack W. 0 N/A 324,500 87,500 239,313 104,813
Oehlke
Craig D. 0 N/A 248,000 55,000 173,275 68,825
Gates
Ronald F. 0 N/A 252,682 55,000 173,275 68,825
Klawitter
Efren R. 0 N/A 75,084 15,000 83,125 35,625
Perez
__________
</TABLE>
(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 July 2, 1999 and the exercise prices for the
relevant options.
EMPLOYMENT CONTRACTS AND TERMINATION AND CHANGE IN CONTROL ARRANGEMENTS
Hiller Restricted Stock Agreement. On February 1, 1992, the Company approved an
agreement with The Hiller Group, ("Hiller Agreement"), under which Stanley
Hiller and other members of The Hiller Group became involved in the Company's
management. Under the Hiller Agreement Mr. Hiller was appointed a director and
acquired the right to designate three additional persons to be appointed to the
Board of Directors. In connection with the Hiller Agreement, the Company
entered into an agreement ("Hiller Option Agreement"), which was approved by the
Company's shareholders in May 1992. The Hiller Option Agreement gave HKT
Partners the right to purchase from the Company up to 2,396,923 shares of Common
Stock ("Hiller Option"). The Hiller Option became fully exercisable in March
1994.
On May 28, 1997, the shareholders of the Company approved a Restricted Stock
Agreement between HKT Partners and the Company. Pursuant to the Restricted
Stock Agreement, the Company issued 1,070,396 shares of restricted Common Stock
to HKT Partners in exchange for, and in cancellation of, the Hiller Option. The
shares are subject to certain restrictions set forth in the Restricted Stock
Agreement that lapse over a three-year period or upon the happening of certain
events described below. The shares issued under the Restricted Stock Agreement
are subject to restrictions prohibiting resale of the shares by HKT Partners,
and to a risk of forfeiture, until the restrictions lapse or upon the happening
of certain events described below. As of February 28, 1998, 66 2/3% of the
total shares have become unrestricted.
The restrictions will lapse with respect to the remaining 33 1/3% of the shares
on February 29, 2000; provided that Mr. Hiller continues to serve the Company as
a director, officer or advisor until February 29, 2000, subject to certain
exceptions set forth in the Restricted Stock Agreement. The Company retains all
stock certificates representing shares of restricted Common Stock until the date
the restrictions on such shares have lapsed in accordance with the schedule
described above. Any shares of restricted Common Stock that fail to vest will
be deemed reconveyed to the Company without payment of any consideration by the
Company, and the Company will then cancel all such shares.
Hiller Key Tronic Partners. HKT Partners is a Washington limited partnership
created by The Hiller Group. 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 Restricted Stock to the extent of their respective partnership
interests. The following directors have received a .5% ownership interest in
HKT Partners: Dale F. Pilz; Clarence W. Spangle; and William E. Terry. Messrs.
Oehlke, Gates, and Klawitter, respectively have received 1.74%, .77% and 1.72%
ownership interests in HKT Partners.
Employment Contracts. The Company entered into employment contracts with
Messrs. Oehlke, Gates, Klawitter and Perez at the time each employee was first
elected an executive officer of the Company. Each of the four employment
contracts imposes upon the employee standard non-disclosure, confidentiality and
covenant not to compete provisions. Each of the employment contracts provides
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, the Company shall continue to pay employee's base salary in effect prior
to termination for a period of one year after termination. The employment
contacts entered into with Messrs. Oehlke and Klawitter also provide that 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.
Stock Option Plans. The executive stock option plans and non-employee directors
stock option plan provide that upon a change of control of the Company 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. Hallman, Satre and Spangle. Mr. Satre served as President, CEO and
Chairman of the Board of the Company from August 1991 through February 1992.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW. Key Tronic's compensation philosophy established by the Compensation
Committee ("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 including the Chief
Executive Officer ("CEO"), except as otherwise noted in this report, has three
primary elements: base salary, annual incentive bonus and annual stock option
grants. Base salaries are established following a review of competitive
information related to comparable companies, in similar industries, nationally
and 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 Committee. Annual stock option grants to
executive officers are made under the Company's employee stock option plan.
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, including the CEO, the Committee reviews
competitive information related to comparable companies, in similar industries,
nationally and 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 11. The Committee indexes base salary ranges to be at
average competitive levels. During fiscal 1999, executive officer pay ranges,
including the range for the CEO, were adjusted upward to be consistent with the
Committee's established index. Management recommendations (other than those of
the subject executive officer) are considered by the Committee in establishing
an individual executive officer's recommended salary. The Committee also
considers factors related to individual performance, individual responsibility,
Company performance based on net earnings and external competitive factors. The
Committee establishes each executive officer's annual salary, including the
CEO's salary.
ANNUAL BONUS. The Committee established a key employee incentive bonus plan for
fiscal 1999. 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 key employees, including all 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. Over-
achievement payments under the plan were intended to be comparable to industry
averages for annual incentive bonus plans. Payments were to be based upon a
percentage of the key employees fiscal 1999 base earnings. The payment
percentage ranges were established in descending order for the CEO, all other
officers and all other key employees. The payment percentage range for the CEO
ranged from 20% at threshold achievement up to 125% at overachievement level.
The expected level performance was achieved and the CEO therefore received an
annual incentive bonus for fiscal 1999 equal to 50% of his base earnings.
ANNUAL STOCK OPTION AWARDS. The 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 Committee believes that long-term incentive
compensation can best be implemented through the granting of annual stock
options. The 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 CEO 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 vesting periods for options range from one to three
years. The Committee granted options to all executive officers and certain
other key employees during fiscal 1999 in accordance with the Company's
compensation policies. During fiscal 1999 options to purchase 50,000 shares of
Common Stock were granted to the CEO.
Compensation payments in excess of $1 million in any taxable year to any
"covered employee" (defined as the CEO and the Company's other four most highly
compensated officers) is 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 Committee and the
Board of Directors to minimize executive compensation that is not deductible by
the Company for tax purposes.
COMPENSATION COMMITTEE
Michael R. Hallman, Chairman
Wendell J. Satre
Clarence W. Spangle
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 1999.
COMPARISON OF TOTAL RETURN(1) AMONG NASDAQ (U.S. AND FOREIGN) MARKET INDEX,
NASDAQ COMPUTER MANUFACTURER INDEX AND KEY TRONIC CORPORATION
KTC US&Fgn Computer Manufacturer Return
01-Jul-95 160.000 147.237 133.474
29-Jun-96 65.000 214.429 171.948
28-Jun-97 45.000 263.144 206.722
27-Jun-98 27.500 428.064 269.268
03-Jul-99 51.250 791.574 380.122
___________
(1) Assumes that the value of the investment in the Common Stock and each index
was $100 invested on July 2, 1994 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 RELATIONSHIPS AND RELATED TRANSACTIONS
See Compensation Committee Interlocks and Insider Participation in Compensation
Decisions, page 10.
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 July 1, 2000. 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 2000, a shareholder proposal must be received by Ronald F. Klawitter,
Secretary, Key Tronic Corporation, 4424 N. Sullivan Road, Spokane, Washington
99216, no later than June 22, 2000.
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 which 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 July 3, 1999 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.
By Order of the Board of Directors,
/S/ RONALD F. KLAWITTER
Ronald F. Klawitter, Secretary
Spokane, Washington
October 20, 1999
PROXY CARD
[side 1]
KEY TRONIC CORPORATION
4424 N. Sullivan Road, Spokane, Washington 99216
PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL MEETING
NOVEMBER 19, 1999
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 Friday, November 19, 1999, and any adjournment
or postponement thereof.
UNLESS OTHERWISE SPECIFIED THIS PROXY WILL BE VOTED IN FAVOR OF PROPOSAL 1
AND PROPOSAL 2.
1. 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 seven directors (or if any nominee is not available for
election, such substitute as the Board of Directors or the proxy holders may
designate). Nominees:
Stanley Hiller, Jr., Jack W. Oehlke, Dale F. Pilz, Wendell J. Satre,
Yacov A. Shamash, Clarence W. Spangle and William E. Terry
_______________________________________________________________
2. Ratification of the appointment of Deloitte & Touche LLP as the
Company's independent auditors
for fiscal year 2000.
/___/ FOR /___/ AGAINST /___/ ABSTAIN
_______________________________________________________________
(Continued and to be signed and dated on other side.)
[SIDE 2]
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.
KEY TRONIC CORPORATION
4424 N. SULLIVAN ROAD, SPOKANE, WA 99216
As a participant in the Key Tronic 401(k) Retirement Savings Plan (the "Plan"),
you have the right to direct United Missouri Bank ("UMB") (the "Plan Trustee"),
to vote the shares of Common Stock of Key Tronic Corporation (the "Company")
represented by your interest attributable to such shares held in the KTC Stock
Fund under the Plan at the annual meeting of shareholders of Key Tronic
Corporation to be held on November 19, 1999.
For your information, copies of the Notice of Annual Meeting, Proxy Statement,
and Annual Report are enclosed. In addition, a postage paid return envelope
addressed to ChaseMellon Shareholder Services is enclosed for your use in
returning your completed, signed, and dated proxy card to the Plan Trustee.
The Plan Trustee will hold your voting instructions in confidence and will not
divulge or release specific information regarding your instructions to any
person, including officers or employees of the Company, except to the extent
required by law.
If your completed proxy card is not received by November 19, 1999, the
Administrative Committee for the Plan may direct the Plan Trustee to vote your
shares. All unvoted shares will be voted in the same proportion as the voted
shares received.
UNITED MISSOURI BANK (UMB)
