Corporate Compliance Program

Compensation and Administration Committee Charter

Governance and Nominating Committee Charter

Audit Committee Charter

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CORPORATE COMPLIANCE PROGRAM  

INTRODUCTION

Key Tronic Corporation ("KTC") has adopted this Corporate Compliance Program ("Program") to assist the Company and its personnel in maintaining full compliance with the requirements of all applicable laws. The Program also reflects KTC's intent to operate not only in a legal manner, but in accordance with sound business ethics. The Program applies to all KTC business operations and subsidiaries and to all employees, officers and directors of KTC and its subsidiaries ("personnel").

The Program consists of 1) a Code of Conduct ("Code") setting forth general standards for the conduct of business and operations, and 2) procedures for reporting and handling violations. All KTC personnel must be aware of the contents of the Code and perform their responsibilities in a manner which is fully consistent with the Code and the Program.

CODE OF CONDUCT

The following standards of conduct apply to KTC and KTC's subsidiaries' directors, officers and employees:

1. Compliance With Laws.  All KTC personnel shall act in full compliance with the requirements of all applicable governmental laws, rules, regulations and this Code and in a sound ethical manner when conducting KTC business and operations.

2. Responsibility of Managers. Each KTC supervisor and manager is responsible for ensuring compliance with applicable law and the Code by the personnel which he or she supervises or manages. All personnel are responsible for acquiring sufficient knowledge to recognize potential compliance issues applicable to their duties and for appropriately seeking advice regarding such issues.

3. Compliance With Specific Company Policies.  This Code sets forth general standards applicable to all of KTC business and operations. In addition, there are a number of more detailed and specific policies covering particular business units or subject matters. The Company will communicate those specific policies to personnel who are particularly affected by them and they must be complied with in the course of the Company's business. A current set of such policies is available at the Company's worksites. If you wish to review them, please contact your supervisor or the Human Resources Department.

4. Bribes, Payments & Gifts.  KTC personnel shall not offer or give any bribe, payment, gift or thing of value to any person or entity with whom the Company has or is seeking any business or regulatory relationship, except for gifts of a nominal value which are legal and given in the ordinary course of business.

5. Receipt of Bribes Payments or Gifts. KTC personnel shall not accept any bribe, payments, gift or item or thing of more than a nominal value from any person or entity with whom the Company has or is seeking any business or regulatory relationship. KTC personnel must promptly report the offering or receipt of gifts above a nominal value to their supervisor.

6. Public Company Reporting As a public company, it is of critical importance that KTC’s filings with the Securities and Exchange Commission be full, fair, accurate, timely and understandable.  Depending on their respective positions with KTC, employees, officers or directors may be called upon to provide information necessary to assure that KTC’s public reports meet these requirements.  KTC expects employees, officers and directors to take this responsibility very seriously and to provide prompt and accurate answers to inquiries related to KTC’s public disclosure requirements.  KTC has formed a disclosure committee to oversee the preparation and review of public disclosure documents.  You must be fully responsive to inquiries and requests from members of our disclosure committee.

7. Payments to Government Officials. KTC personnel shall not directly or indirectly\ authorize, pay, promise, deliver or solicit any payment, gratuity or favor for the purpose of influencing any political official or government employee in the discharge of that person's responsibilities. KTC personnel shall not entertain government employees in connection with KTC business.

8. Dealings With Government Agencies. KTC personnel shall be completely honest in all dealings with government agencies and representatives. No misrepresentations shall be made, and no false bills or requests for payment or other documents shall be submitted, to government agencies or representatives. KTC personnel certifying the correctness of records submitted to government agencies, including bills or requests for payment, shall have knowledge that the information is accurate and complete before giving such certification.

9. Political Contributions and Activities. All political activities relating to the Company shall be conducted in full compliance with applicable law. No Company funds or property shall be used for any political contribution or purpose unless first approved by the President & CEO and the Executive Vice President of Administration. KTC personnel may make direct contributions of their own money to political candidates and activities but these contributions will not be reimbursed by KTC.

10. Avoidance of Conflicts of Interest. All personnel shall act with honesty and integrity, avoiding actual or apparent conflicts of interest in personal and professional relationships.  Other than compensation from KTC and as consistent with KTC's conflict of interest policies, personnel shall not have a financial or other personal interest in a transaction between the Company or any of its business units and a vendor, supplier, provider or customer. KTC personnel shall not engage in financial, business or other activities which compete with business, which may interfere or appear to interfere with their performance of their duties for KTC or which involve the use of KTC property, facilities or resources, except to the extent consistent with KTC's conflict of interest policies.

11. Records and Information Management. All of the Company's business transactions shall be carried out in accordance with management's general or specific directives. All of KTC's books and records shall be kept in accordance with generally accepted accounting standards or other applicable standards. All transactions, payments, receipts, accounts and assets shall be completely and accurately recorded on the Company's books and records on a consistent basis. No payment shall be approved or made with the intention or understanding that it will be used for any purpose other than that described in the supporting documentation for the payment. All information recorded and submitted to other persons must not be used to mislead those who receive the information or to conceal anything that is improper. KTC books and records shall be created, maintained, retained or destroyed in accordance with the Company's record management policy.

12. Competitor Relations. KTC personnel shall comply with applicable antitrust laws. There shall be no discussions or agreements with competitors regarding price or other terms for product sales, prices paid to suppliers or providers, dividing up customers or geographic markets or joint action to boycott or coerce certain customers, suppliers or providers.

13. Unfair Competition and Deceptive Practices.  KTC and its personnel shall not engage  in unfair competition or  deceptive  trade  practices,  including misrepresentation of the Company's products or operations. KTC personnel shall not make false or disparaging statements about competitors or their products or attempt to coerce suppliers or providers into purchasing products or services from KTC.

14. Confidentiality Obligations. All KTC personnel shall maintain the confidentiality of the Company's business information and of information relating to the Company's vendors, suppliers, providers, customers, and persons covered by any of the Company's products. KTC personnel shall not use any such confidential or proprietary information except as is appropriate for KTC business. KTC personnel shall not seek to improperly obtain or to misuse confidential information of the Company's competitors.

15. Use of Inside Information. Personnel shall comply with KTC's policy on insider trading. Personnel with material non-public information relating to KTC or another entity with which KTC has done or is doing business shall not buy or sell securities of KTC or such other entity, as the case may be, or engage in any other action to take advantage of, or pass on to others, such information.

16. Health and Safety Regulations. All KTC personnel shall follow safe work practices and comply with all applicable safety standards and health regulations.

17. Discrimination and Harassment. All KTC personnel are responsible for ensuring that the work environment is free of discrimination or harassment due to race, sex, age, religion, national origin, sexual orientation, disability or "covered veteran" status. Any form of sexual harassment, including the creation of a hostile working environment, is completely prohibited.

18. Additional Obligations of Financial Personnel.  Because of the critical role of KTC’s Chief Executive Officer and all members of KTC’s finance and accounting functions (“financial personnel”) in ensuring the fair and timely reporting of KTC’s financial results and conditions, all financial personnel shall provide full, fair, accurate, timely and understandable disclosure in reports and documents that KTC files with, or submits to, the SEC and in other public communications made by KTC.  

 

REPORTING OF VIOLATIONS

1. Penalties. Illegal acts or improper conduct may subject the Company to severe civil and criminal penalties, including large fines and being barred from certain types of business. It is therefore very important that any illegal activity or violations of the Code be promptly brought to the Company's attention. In many cases if the Company discovers and reports illegal acts to the appropriate governmental authorities, the Company may be subject to lesser penalties.  

2. Report of Violations. Any KTC personnel who believes or becomes aware that any violation of this Code or any illegal activity has been engaged in by another KTC personnel or by non-personnel acting on behalf shall promptly report the violation or illegal activity in person, by phone, in writing or electronically, to one of the following persons:

            1. Supervisor

            2. Manager of Human Resources

            3. The General Counsel, or

            4. The Executive Vice President of Administration.

3.   Failure to Report. It is a violation of this Code for personnel not to promptly report a violation of the Code (including potential violations by others) or any illegal activity. If you have a question about whether particular acts or conduct may be illegal or violate the Code you should contact one of the persons listed above. It is a violation of this Code for personnel to whom a potential illegal act or violation of the Code is reported to not ensure that the illegal act or violation of the Code comes to the attention of those responsible for investigating such reports.

4.   Investigations. It is KTC's policy to promptly and thoroughly investigate reports of illegal activity or violations of this Code. KTC personnel must cooperate with these investigations. You must not take any actions to prevent, hinder or delay discovery and full investigation of illegal acts or violations of this Code. It is a violation of this Code for personnel to prevent, hinder or delay discovery and full investigation of illegal acts or violations of this Code.

5. Violators Subject to Discipline. Personnel who violate the Code or commit illegal acts are subject to discipline up to and including dismissal. Personnel who report their own illegal acts or improper conduct, however, will have such self-reporting taken into account in determining the appropriate disciplinary action.

NO RETALIATION

It is against KTC policy to retaliate against any employee for good faith reporting of violations of this Code of Conduct.

AMENDMENT, MODIFICATION AND WAIVER

This Code may be amended, modified or waived by the Board, subject to the disclosure and other provisions of the Securities Exchange Act of 1934, and the rules thereunder, and the applicable rules of the Nasdaq Stock Market.  Any amendment, modification or waiver of the provisions of this Code for executive officers or directors of the Company may only be made by the Board of Directors, and must be promptly disclosed to stockholders, along with the reasons for any such waiver, as required by the Securities Exchange Act of 1934, as amended, and the applicable rules of the Nasdaq Stock Market.

MAINTAINING PROGRAM COMPLIANCE

AND AWARENESS

All new employees will receive a copy of the Code and be requested to sign a form stating their agreement to and compliance with the Code. A copy of the Code including a description of the violation reporting procedure will be posted at each of the Company's major offices and on the Company's intranet site.

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THE BOARD OF DIRECTORS OF KEY TRONIC CORPORATION

COMPENSATION AND ADMINISTRATION

COMMITTEE CHARTER

PURPOSE

The purpose of the Compensation and Administration Committee ("Committee") is to assist the Board of Directors in meeting its oversight responsibilities with regard to executive compensation, employee incentive compensation plans and employee benefit plans to assure that appropriate incentives are in place, consistent with the Board's responsibility to maximize shareholder value. 

MEMBERSHIP

The Committee shall consist of two or more independent directors who are not members of management. The Chairman and the members of the Committee shall be appointed by the Board of Directors at the annual organizational meeting of the Board. Changes in Committee membership may be made at anytime during the year by majority vote of the Board. The Chairman of the Board, Chief Executive Officer and such other officers and Directors as the Chairman of the Committee may deem appropriate may attend committee meetings upon invitation by the Chairman of the Committee.

RESPONSIBILITIES AND AUTHORITY 

The Committee shall:

1. meet in executive session to review and recommend to the Board for determination the compensation of the Chief Executive Officer ("CEO") of the Company. In determining the amount, form, and terms of such compensation, the Committee shall consider the annual performance evaluation of the CEO conducted by the Board of Directors in light of company goals and objectives relevant to CEO compensation, competitive market data pertaining to CEO compensation at comparable companies, and such other factors as it shall deem relevant, and shall be guided by, and seek to maximize shareholder value;

2. review and recommend to the Board for determination the compensation of the other officers of the Company. In determining the amount, form and terms of such compensation, the Committee shall consider the officer's performance in light of company goals and objectives relevant to executive compensation, competitive market data pertaining to executive compensation at comparable companies, and such other factors as it shall deem relevant, and shall be guided by, and seek to maximize shareholder value. The CEO of the Company may be present at meetings during which such compensation is under review and consideration but may not vote;

3. review and make recommendations to the Board regarding management incentive compensation plans;

4. interpret and administer the Company's stock option plans, including the review and grant of stock options and other equity incentive grants to participants. Interpret and administer the Company's 401(K) Retirement Savings Plan and other employee benefit plans;

5. review and make recommendations from time to time on the adequacy and effectiveness of Board compensation in relation to other companies and with regard to trends and developments in director compensation;

6. review and discuss with management the disclosures under the caption "Compensation Discussion and Analysis" (the "CD&A") and make a recommendation to the Board as to whether such CD&A shall be included in the appropriate regulatory filing;

7. produce a Compensation Committee Report for inclusion in the Company's annual proxy statement;

8. when appropriate, be authorized to designate one or more of its members to perform certain of its duties on its behalf, subject to such reporting to or ratification by the Committee as the Committee shall direct;

9. annually review and reassess the adequacy of the Committee's Charter and recommend any changes to the Board of Directors; and

10. in fulfilling its responsibilities, the Committee shall have the authority, and shall be afforded resources sufficient, to engage independent compensation consultants or legal advisers when determined by the Committee to be necessary or appropriate. The Committee shall have sole authority to retain and terminate any such consultant or legal adviser, including sole authority to approve the fees and other retention terms.

MEETINGS

The Committee shall meet from time to time at the call of its Chairman or a majority of its members.

QUORUM

The majority of the members of the Committee shall constitute a quorum. The Committee shall act on the affirmative vote of a majority (but not less than two) of its members.

ACCOUNTABILITY

The Committee shall report to the Board of Directors at the Board's next regular meeting any and all action it has taken since its previous report to the Board.

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THE BOARD OF DIRECTORS OF KEY TRONIC CORPORATION

GOVERNANCE AND NOMINATING

COMMITTEE CHARTER

 

PURPOSE

The purpose of the Governance and Nominating Committee (“Committee”) is to make recommendations to the Board regarding corporate governance, recommend for selection by the Board of Directors nominees for election as directors and make recommendations to the Board with respect to the structure and composition of the Board of Directors.

MEMBERSHIP

The Committee shall consist of two or more independent directors.  The Chairman of the Committee and the members of the Committee shall be appointed by the Board of Directors (“Board”) at the annual organizational meeting of the Board.

FUNCTIONS

The Committee shall:

1.        review and report to and make recommendations to the Board of Directors periodically on matters of corporate governance;

  2.        periodically evaluate the size and composition of the Board and recommend to the Board criteria for selection of director nominees;

  3.        recommend to the Board for selection by the Board a slate of nominees for election to the Board at the Annual Meeting of Shareholders (“Annual Meeting”);

  4.        recommend to the Board for selection candidates to fill vacancies on the Board between Annual Meetings;

  5.        recommend for selection by the Board candidates for Board Committee membership to be appointed at the annual organizational meeting of the Board or to fill vacancies between organizational meetings.

  6.        consider written proposals from shareholders for nominees for directors to be elected at the Annual Meeting which are submitted to the Secretary of the Corporation, together with biographical information and references, at least six months prior to the Annual Meeting; and

7.        annually review and reassess the adequacy of the Committee’s charter and recommend any changes to the Board of Directors.

MEETINGS

The Committee shall meet from time to time at the call of its Chairman or a majority of its members.

QUORUM

The majority of the members of the Committee shall constitute a quorum.  The Committee shall act only on the affirmative vote of a majority (but not less than two) of its members.

ACCOUNTABILITY

The Committee shall report to the Board of Directors at the Board's next regular meeting any and all action it has taken since its previous report to the Board.

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THE BOARD OF DIRECTORS OF KEY TRONIC CORPORATION

AUDIT COMMITTEE CHARTER

 

PURPOSE

The purpose of the Audit Committee (“Committee”) is to represent and assist the Board in fulfilling its oversight responsibilities.  The Committee’s principal functions are to:

1.   monitor the integrity of the Company’s financial statements, financial reporting processes and systems of internal controls regarding finance, accounting and legal compliance;

  2.    select and appoint the Company’s independent auditors, pre-approve all audit and non-audit services to be provided to the Company by the Company’s independent auditors, and establish the fees and other compensation to be paid to the independent auditors;

  3.    monitor the qualifications, independence and performance of the Company’s independent auditors; and

4.    establish procedures for the receipt, retention, response to and treatment of complaints, including confidential, anonymous submissions by the Company’s employees, regarding accounting, internal controls or auditing matters, and provide an avenue of communication among the Board, the independent auditor and management.

MEMBERSHIP 

The Committee shall consist of three or more Directors.  The members of the Committee shall meet the independence and experience requirements of the Securities and Exchange Commission (“SEC”) and the NASDAQ Stock Market, Inc. (“NASDAQ”). The Chairman and the members of the Committee shall be appointed by the Board of Directors at the annual organizational meeting of the Board of Directors.  Changes in Committee membership may be made at anytime during the year by majority vote of the Board.  The Chairman of the Board, Chief Executive Officer and such other officers and Directors as the Chairman of the Committee may deem appropriate may attend Committee meetings upon invitation by the Chairman of the Committee.

RESPONSIBILITIES AND AUTHORITY

The Committee shall:

1.       be directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditor (including resolution of disagreements between management and the auditor regarding financial reporting).  The independent auditor shall report directly to the Committee;

2.       review and discuss with the independent auditor the written statement from the independent auditor concerning any relationship between the auditor and the Company or any other relationships that may adversely affect the independence of the auditor, and, based on such review, assess the independence of the auditor;

3.       establish policies and procedures for the review and pre-approval by the Committee of all auditing services and permissible non-audit services (including the fees and terms thereof) to be performed by the independent auditor;

4.       review and discuss with the independent auditor:  (a) its audit plans, and audit procedures, including the scope, fees and timing of the audit; (b) the results of the annual audit examination and accompanying management letters; and (c) the results of the independent auditor’s procedures with respect to interim periods;

5.       review and discuss reports from the independent auditors on: (a) all critical accounting policies and practices used by the Company; (b) alternative accounting treatments within generally accepted accounting principles (“GAAP”) related to material items that have been discussed with management, including the ramifications of the use of the alternative treatments and the treatment preferred by the independent auditor; and (c) other material written communications between the independent auditor and management;

6.       review and discuss with the independent auditor the independent auditor’s judgments as to the quality, not just the acceptability, of the Company’s accounting principles and such further matters as the independent auditors present the Committee under generally accepted auditing standards;

7.       review and discuss with management and the independent auditor quarterly earnings press releases, including the interim financial information included therein prior to release, Quarterly Reports on Form 10-Q prior to filing, the year-end audited financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and, if appropriate, recommend to the Board that the audited financial statements be included in the form 10-K for the fiscal year;

 

8.    review and discuss with management the Company’s major financial risk exposures (including risks relating to the security and back-up of information systems) and the steps management has taken to monitor and control such exposures;

 

9.       review and approve related-party transactions (as defined in the relevant NASDAQ requirements).

 

10.    review and discuss with management and the independent auditor (a) the adequacy and effectiveness of the Company’s internal controls (including any significant deficiencies and significant changes in internal controls reported to the Committee by the independent auditor or management; and (b) the adequacy and effectiveness of the Company’s disclosures controls and procedures, and management reports thereon;

 

11.    establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters;

 

12.    review matters related to the corporate compliance activities of the Company, including the review of reports from the company’s Compliance Committee;

 

13.    review and approve the report of the Committee required by SEC rules to be included in the Company’s annual proxy statement;

 

14.    when appropriate, designate one or more of its members to perform certain of its duties on its behalf, subject to such reporting to or ratification by the Committee as the Committee shall direct; and

 

15.    have the authority to engage independent legal, accounting and other advisers, as it determines necessary to carry out its duties.  The Committee shall have sole authority to approve related fees and retention terms, and

 

16.    annually review and reassess the adequacy of the Committee’s Charter and recommend any changes to the Board of Directors.

 

While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Company's financial statements are complete and accurate and are in accordance with GAAP.  This is the responsibility of management and the independent auditor. 

MEETINGS

The Committee shall meet from time to time at the call of its Chairman or a majority of its members.

QUORUM

The majority of the members of the Committee shall constitute a quorum.  The Committee shall act only on the affirmative vote of a majority (but not less than two) of its members.

ACCOUNTABILITY

The Committee shall report to the Board of Directors at the Board's next regular meeting any and all action it has taken since its previous report to the Board.