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<SEC-DOCUMENT>0001193125-09-180254.txt : 20090824
<SEC-HEADER>0001193125-09-180254.hdr.sgml : 20090824
<ACCEPTANCE-DATETIME>20090824134148
ACCESSION NUMBER:		0001193125-09-180254
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20090819
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20090824
DATE AS OF CHANGE:		20090824

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			KEY TRONIC CORP
		CENTRAL INDEX KEY:			0000719733
		STANDARD INDUSTRIAL CLASSIFICATION:	COMPUTER PERIPHERAL EQUIPMENT, NEC [3577]
		IRS NUMBER:				910849125
		STATE OF INCORPORATION:			WA
		FISCAL YEAR END:			0630

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-11559
		FILM NUMBER:		091030973

	BUSINESS ADDRESS:	
		STREET 1:		4424 N. SULLIVAN ROAD
		CITY:			SPOKANE
		STATE:			WA
		ZIP:			99216
		BUSINESS PHONE:		5099288000

	MAIL ADDRESS:	
		STREET 1:		P O BOX 14687
		CITY:			SPOKANE
		STATE:			WA
		ZIP:			99214
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>d8k.htm
<DESCRIPTION>FORM 8-K
<TEXT>
<HTML><HEAD>
<TITLE>Form 8-K</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="line-height:0px;margin-top:0px;margin-bottom:0px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:3px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B><U>EFFECTIVE AUGUST 19, 2009
</U></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="5"><B>UNITED STATES </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman"
SIZE="5"><B>SECURITIES AND EXCHANGE COMMISSION </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="3"><B>WASHINGTON, DC 20549 </B></FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:12px;margin-bottom:0px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="5"><B>FORM 8-K </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P
STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="3"><B>CURRENT REPORT
</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="3"><B>Pursuant to Section&nbsp;13 OR 15(d) of the Securities Exchange Act of 1934 </B></FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Date of report (Date of earliest event reported) August&nbsp;19, 2009 </B></FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:12px;margin-bottom:0px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="6"><B>Key Tronic Corporation </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Exact name of registrant as specified in its charter)
</B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="34%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="32%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="32%"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Washington</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>0-11559</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>91-0849123</B></FONT></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(State or other jurisdiction</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="1"><B>of incorporation)</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Commission File Number)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(IRS Employer</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT FACE="Times New Roman"
SIZE="1"><B>Identification No.)</B></FONT></P></TD></TR>
</TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="50%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="48%"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>4424 North Sullivan Road, Spokane Valley, Washington</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>99216</B></FONT></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Address of principal executive offices)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Zip Code)</B></FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Registrant&#146;s telephone number, including area code (509)&nbsp;928-8000 </B></FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Former name or former address, if changed since last report) </B></FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2">Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provision (see General Instruction A.2. below):
</FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><FONT FACE="WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><FONT FACE="WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) </FONT></TD></TR></TABLE> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><FONT FACE="WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) </FONT></TD></TR></TABLE> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><FONT FACE="WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) </FONT></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:3px;margin-top:0px;margin-bottom:0px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P>

<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>ITEM&nbsp;1.01 MATERIAL DEFINITIVE AGREEMENT </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2">On August&nbsp;19, 2009, Key Tronic Corporation (the &#147;Company&#148;) entered into a Credit Agreement and Revolving Line of Credit Note (the &#147;Note&#148;) each dated as of August&nbsp;19 2009, between the
Company and Wells Fargo Bank, N.A. (the &#147;Lender&#148;). The Credit Agreement replaces the Company&#146;s existing revolving line of credit facility with CIT Group/Business Credit, Inc. (&#147;CIT&#148;). The Credit Agreement provides a $20
million revolving line of credit facility (the &#147;Line of Credit&#148;) to provide for working capital and general corporate purpose needs. The Credit Agreement terminates on August&nbsp;18, 2011. The Line of Credit is secured by a first
priority, perfected security interest in all present and hereafter acquired accounts receivable, inventory and equipment of Company and its domestic subsidiaries and pledge of 65% of the stock of the Company&#146;s foreign subsidiaries. At the
Company&#146;s option, the Line of Credit bears interest at either the Base Rate or when a Fixed Rate Term is selected, at a fixed rate per annum of 2.10% above LIBOR. The Note provides that, if the Company&#146;s EBITDA falls below $3.75 million
measured quarterly on a trailing four quarter basis, the Fixed Rate Term margin shall be increased from 2.10% to 2.50%. The Base Rate is, for any day, a fluctuating rate equal to the highest of (i)&nbsp;the Prime Rate in effect on such day,
(ii)&nbsp;a rate determined by the Lender to be 1.50% above Daily One Month LIBOR in effect on such day, and (iii)&nbsp;the Federal Funds Rate plus 1.50%. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2">On the effective date of the Credit Agreement the Company used the Line of Credit to pay off the existing indebtedness in the amount of $2,112,225.19 owing to CIT under the existing facility. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">The financial covenants contained in the Credit Agreement include a maximum ratio of funded Debt to EBITDA and a minimum net profit, after payment of all applicable
taxes, of not less than $500,000 measured quarterly on a four quarter trailing basis. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">The Credit Agreement includes representations and warranties,
conditions, affirmative covenants, negative covenants and events of default customary for this type of transaction. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">The foregoing is only a summary of the
Credit Agreement and Note and is qualified by reference to the complete form of the Credit Agreement and form of The Note attached to this report as Exhibit 10.1 and Exhibit 10.2, respectively, which are incorporated herein by this reference.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>ITEM&nbsp;2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF BALANCE SHEET ARRANGEMENT OF A REGISTRANT </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Reference is made to Item&nbsp;1.01 of this report. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>ITEM&nbsp;9.01
FINANCIAL STATEMENTS AND EXHIBITS </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">(d) Exhibits </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="82%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="5%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD WIDTH="90%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:28pt"><FONT FACE="Times New Roman" SIZE="1"><B>Exhibit<BR>Number</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="border-bottom:1px solid #000000;width:39pt"><FONT FACE="Times New Roman" SIZE="1"><B>Description</B></FONT></P></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">10.1</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Credit Agreement</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">10.2</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Revolving Line of Credit Note</FONT></TD></TR>
</TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>SIGNATURES </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2">Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0">

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<TD WIDTH="4%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="2%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="45%"></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="3"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">KEY TRONIC CORPORATION</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="3" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">(Registrant)</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Date: August 21, 2009</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/&nbsp;&nbsp;&nbsp;&nbsp;Ronald F. Klawitter</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Ronald F. Klawitter, Executive Vice President<BR>of Administration, CFO and Treasurer</FONT></TD></TR>
</TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>EXHIBIT INDEX </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="6%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD WIDTH="90%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="1"><B>EXHIBIT</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000;width:35pt"><FONT
FACE="Times New Roman" SIZE="1"><B>NUMBER</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="border-bottom:1px solid #000000;width:55pt"><FONT FACE="Times New Roman" SIZE="1"><B>DESCRIPTION</B></FONT></P></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-left:1.00em; text-indent:-1.00em" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">10.1</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Credit Agreement</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-left:1.00em; text-indent:-1.00em" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">10.2</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Revolving Line of Credit Note</FONT></TD></TR>
</TABLE>
</BODY></HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>dex101.htm
<DESCRIPTION>CREDIT AGREEMENT
<TEXT>
<HTML><HEAD>
<TITLE>Credit Agreement</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>Exhibit 10.1 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2">CREDIT AGREEMENT </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">THIS CREDIT AGREEMENT (this &#147;Agreement&#148;) is entered into as of August&nbsp;19,
2009, by and between KEY TRONIC CORPORATION, a Washington corporation (&#147;Borrower&#148;), and WELLS FARGO BANK, NATIONAL ASSOCIATION (&#147;Bank&#148;). </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><U>RECITALS </U></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Borrower has requested that Bank extend or continue credit to Borrower as described below,
and Bank has agreed to provide such credit to Borrower on the terms and conditions contained herein. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">NOW, THEREFORE, for valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, Bank and Borrower hereby agree as follows: </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><U>ARTICLE I </U>
</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><U>CREDIT TERMS </U></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">1.1 LINE
OF CREDIT. Subject to the terms and conditions of this Agreement, Bank hereby agrees to make advances to Borrower from time to time up to and including August&nbsp;18, 2011, not to exceed at any time the aggregate principal amount of Twenty Million
and 00/100 Dollars ($20,000,000.00) (&#147;Line of Credit&#148;), the proceeds of which shall be used by Borrower to refinance certain indebtedness of Borrower, pay fees and expenses incurred in connection with the transaction contemplated hereby
and provide for working capital and general corporate purpose needs of the Borrower and subsidiaries. Concurrently with the execution of this Agreement, Borrower shall pay to Bank a fully earned non-refundable commitment fee for the Line of Credit
in the amount of Fifty Thousand and 00/100 Dollars ($50,000.00), plus one quarter of one percent (.25%) per annum on the total amount of the Line of Credit, regardless of usage, payable upon each anniversary date thereof. Borrower&#146;s obligation
to repay advances under the Line of Credit shall be evidenced by a promissory note dated as of the date hereof (&#147;Line of Credit Note&#148;), all terms of which are incorporated herein by this reference. All advances under the Line of Credit
shall bear interest at the rates provided for in the Line of Credit Note. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">1.2 LETTER OF CREDIT SUBFEATURE. As a subfeature under the Line
of Credit, Bank agrees from time to time during the term thereof to issue or cause an affiliate to issue standby letters of credit and commercial letters of credit for the account of Borrower (each, a &#147;Letter of Credit&#148; and collectively,
&#147;Letters of Credit&#148;); provided however, that the aggregate undrawn amount of all outstanding Letters of Credit shall not at any time exceed One Million and 00/100 Dollars ($1,000,000.00). The form and substance of each Letter of Credit
shall be subject to approval by Bank, in its sole discretion. A Commercial Letter of Credit shall be issued for a term not to exceed three hundred sixty (360)&nbsp;days, as designated by Borrower; provided however, that no Letter of Credit shall
have an expiration date later than the maturity date of the Line of Credit. The undrawn amount of all Letters of Credit shall be reserved under the Line of Credit and shall not be available for borrowings thereunder. Each Letter of Credit shall be
subject to the additional terms and conditions of the Letter of Credit agreements, applications and any related documents required by Bank in connection with the issuance thereof. Each drawing paid under a Letter of Credit shall be deemed an advance
under the Line of Credit and shall be repaid by Borrower in accordance with the terms and conditions of this Agreement applicable to such advances; provided however, that if advances under the Line of Credit are not available, for any reason, at the
time any drawing is paid, then Borrower shall immediately pay to Bank the full amount </FONT>
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<FONT FACE="Times New Roman" SIZE="2">drawn, together with interest thereon from the date such drawing is paid to the date such amount is fully repaid by Borrower, at the rate of interest
applicable to advances under the Line of Credit. In such event Borrower agrees that Bank, in its sole discretion, may debit any account maintained by Borrower with Bank for the amount of any such drawing. Borrower shall pay to Bank a&nbsp;fee upon
the issuance of each Letter of Credit equal to two and one tenth percent (2.10%)&nbsp;of the face amount thereof (the &#147;Letter of Credit Issuance Fee&#148;); provided, however, notwithstanding the forgoing, if Borrower&#146;s EDITDA (as defined
herein) is less than $3,750,000.00, measured quarterly on a trailing four (4)&nbsp;quarter basis, then the Letter of Credit Issuance Fee shall be increased to two and one half percent (2.50%)&nbsp;of the face amount of the Letter of Credit. In
addition to the Letter of Credit Issuance Fee, Borrower shall pay Bank (i)&nbsp;fees upon the payment or negotiation of each drawing under any Letter of Credit, and (ii)&nbsp;fees upon the occurrence of any other activity with respect to any Letter
of Credit (including without limitation, the transfer, amendment or cancellation of any Letter of Credit) determined in accordance with Bank&#146;s standard fees and charges then in effect for such activity. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">1.3 BORROWING AND REPAYMENT. Borrower may from time to time during the term of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and conditions contained herein or in the Line of Credit Note; provided however, that the total outstanding borrowings under the Line of Credit shall not at any time exceed the
maximum principal amount available thereunder, as set forth above. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">1.4 COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect
principal, interest and fees due under the Line of Credit Note or this Credit Agreement by charging Borrower&#146;s deposit account number 4020010104 with Bank, or any other deposit account maintained by Borrower with Bank, for the full amount
thereof. Should there be insufficient funds in any such deposit account to pay all such sums when due, the full amount of such deficiency shall be immediately due and payable by Borrower. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">1.5 COLLATERAL. As security for all indebtedness and other obligations of Borrower to Bank, including, without limitations, its obligations under the
Line of Credit, Line of Credit Note, this Agreement and the Loan Documents (as defined herein), Borrower hereby grants to Bank security interests of first priority in (a)&nbsp;all Borrower&#146;s inventory, accounts, equipment, general intangibles,
payment intangibles, and any and all cash and non-cash proceeds or products of the forgoing, including, without limitation, proceeds in deposit accounts or proceeds represented by insurance claims or policies related to pledged collateral; and
(b)&nbsp;a pledge of sixty five percent (65%)&nbsp;of the stock of its foreign subsidiaries listed on Schedule 1.5 attached hereto. All of the foregoing shall be evidenced by and subject to the terms of such security agreements, financing
statements, and other documents as Bank shall reasonably require, all in form and substance satisfactory to Bank. Borrower shall pay to Bank immediately upon demand the full amount of all charges, costs and expenses (to include fees paid to third
parties, including Bank&#146;s reasonable attorney&#146;s fees, and all allocated costs of Bank personnel, including Bank&#146;s in-house counsel), expended or incurred by Bank in connection with any of the foregoing security, including without
limitation, filing and recording fees and costs of appraisals, audits and title insurance. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">1.6 GUARANTIES. The payment and performance of
all indebtedness and other obligations of Borrower to Bank, including, without limitation, Borrower&#146;s obligations under the Line of Credit Note, this Agreement and the Loan Documents (as defined herein) shall be guaranteed jointly and severally
by any and all existing active domestic subsidiaries of Borrower and any subsidiary of Borrower hereafter formed, which guaranties shall be evidenced by and subject to the terms of guaranties in form and substance satisfactory to Bank. </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><U>ARTICLE II </U></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><U>REPRESENTATIONS AND WARRANTIES </U></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Borrower makes the following representations and warranties to Bank,
which representations and warranties shall survive the execution of this Agreement and shall continue in full force and effect until the full and final payment, and satisfaction and discharge, of all obligations of Borrower to Bank subject to this
Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">2.1. LEGAL STATUS. Borrower is a corporation, duly organized and existing and in good standing under the laws of the state of
Washington, and is qualified or licensed to do business (and is in good standing as a foreign corporation, if applicable) in all jurisdictions in which such qualification or licensing is required or in which the failure to so qualify or to be so
licensed could have a material adverse effect on Borrower. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">2.2. AUTHORIZATION AND VALIDITY. This Agreement and each promissory note,
contract, instrument and other document required hereby or at any time hereafter delivered to Bank in connection herewith (collectively, the &#147;Loan Documents&#148;) have been duly authorized, and upon their execution and delivery in accordance
with the provisions hereof will constitute legal, valid and binding agreements and obligations of Borrower or the party which executes the same, enforceable in accordance with their respective terms. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">2.3. NO VIOLATION. The execution, delivery and performance by Borrower of each of the Loan Documents do not violate any provision of any law or
regulation, or contravene any provision of the Articles of Incorporation, By-Laws, or any resolution of the Board of Directors of Borrower, or result in any breach of or default under any contract, obligation, indenture or other instrument to which
Borrower is a party or by which Borrower or its assets may be bound. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">2.4. LITIGATION. There are no pending, or to the best of
Borrower&#146;s knowledge threatened, actions, claims, investigations, suits or proceedings by or before any governmental authority, arbitrator, court or administrative agency which could have a material adverse effect on the financial condition or
operation of Borrower other than those disclosed by Borrower to Bank in writing prior to the date hereof. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">2.5. CORRECTNESS OF FINANCIAL
STATEMENT. The annual financial statement of Borrower dated June&nbsp;28, 2008, and all interim financial statements delivered to Bank since said date, true copies of which have been delivered by Borrower to Bank prior to the date hereof,
(a)&nbsp;are complete and correct and present fairly the financial condition of Borrower, (b)&nbsp;disclose all liabilities of Borrower that are required to be reflected or reserved against under generally accepted accounting principles, whether
liquidated or unliquidated, fixed or contingent, and (c)&nbsp;have been prepared in accordance with generally accepted accounting principles consistently applied. Since the dates of such financial statements there has been no material adverse change
in the financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a security interest in or otherwise encumbered any of its assets or properties except in favor of Bank or as otherwise permitted by Bank in writing. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">2.6. INCOME TAX RETURNS. Borrower has no knowledge of any pending assessments or adjustments of its income tax payable with respect to any year.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">2.7. NO SUBORDINATION. There is no agreement, indenture, contract or instrument to which Borrower is a party or by which Borrower may be
bound that requires the subordination in right of payment of any of Borrower&#146;s obligations subject to this Agreement to any other obligation of Borrower. </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">2.8. PERMITS, FRANCHISES. Borrower possesses, and will hereafter possess, all permits, consents,
approvals, franchises and licenses required and rights to all trademarks, trade names, patents, and fictitious names, if any, necessary to enable it to conduct the business in which it is now engaged in compliance with applicable law. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">2.9. ERISA. Borrower is in compliance in all material respects with all applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended or recodified from time to time (&#147;ERISA&#148;); Borrower has not violated any provision of any defined employee pension benefit plan (as defined in ERISA) maintained or contributed to by Borrower (each, a &#147;Plan&#148;); no
Reportable Event as defined in ERISA has occurred and is continuing with respect to any Plan initiated by Borrower; Borrower has met its minimum funding requirements under ERISA with respect to each Plan; and each Plan will be able to fulfill its
benefit obligations as they come due in accordance with the Plan documents and under generally accepted accounting principles. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">2.10. OTHER
OBLIGATIONS. Borrower is not in default on any obligation for borrowed money, any purchase money obligation or any other material lease, commitment, contract, instrument or obligation. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to Bank in writing prior to the date hereof, Borrower is in compliance in all material
respects with all applicable federal or state environmental, hazardous waste, health and safety statutes, and any rules or regulations adopted pursuant thereto, which govern or affect any of Borrower&#146;s operations and/or properties, including
without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act of 1976, and the Federal Toxic
Substances Control Act, as any of the same may be amended, modified or supplemented from time to time. None of the operations of Borrower is the subject of any federal or state investigation evaluating whether any remedial action involving a
material expenditure is needed to respond to a release of any toxic or hazardous waste or substance into the environment. Borrower has no material contingent liability in connection with any release of any toxic or hazardous waste or substance into
the environment. </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><U>ARTICLE III </U></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman"
SIZE="2"><U>CONDITIONS </U></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of Bank to extend any credit contemplated by
this Agreement is subject to the fulfillment to Bank&#146;s satisfaction of all of the following conditions: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(a) <U>Approval of Bank
Counsel</U>. All legal matters incidental to the extension of credit by Bank shall be satisfactory to Bank&#146;s counsel. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(b)
<U>Documentation</U>. Bank shall have received, in form and substance satisfactory to Bank, each of the following, duly executed: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">(i) This Agreement, the Revolving Line of Credit Note, the Security Agreement (Rights to Payment and Inventory), Security Agreement (Equipment), and Pledge Agreement, and each and every other instrument or document required thereby.
</FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(ii) A Borrowing Resolution, authorizing Borrower&#146;s entering into the Line of Credit and executing the Loan Documents.
</FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(iii) The guaranties of each of Borrower&#146;s active domestic subsidiaries. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(iv) A Resolution Authorizing Guaranty from each of Borrower&#146;s active domestic subsidiaries. </FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(v) Such other documents as Bank may require under any other Section of this Agreement. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(c) <U>Financial Condition</U>. There shall have been no material adverse change, as determined by Bank, in the financial condition or business of
Borrower or any guarantor hereunder, nor any material decline, as determined by Bank, in the market value of any collateral required hereunder or a substantial or material portion of the assets of Borrower or any such guarantor. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(d) <U>Insurance</U>. Borrower shall have delivered to Bank evidence of insurance coverage on all Borrower&#146;s property, in form, substance, amounts,
covering risks and issued by companies satisfactory to Bank, and where required by Bank, with loss payable endorsements in favor of Bank, including without limitation, policies of fire and extended coverage insurance covering all real property
collateral required hereby, with replacement cost and mortgagee loss payable endorsements, and such policies of insurance against specific hazards affecting any such real property as may be required by governmental regulation or Bank. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(e) <U>Lien Search</U>. Bank shall have received such lien searches as it may require to confirm that its lien on the collateral is in a first priority
position, subject only to such exceptions as are acceptable to bank, in its sole discretion. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">3.2. CONDITIONS OF EACH EXTENSION OF CREDIT.
The obligation of Bank to make each extension of credit requested by Borrower hereunder shall be subject to the fulfillment to Bank&#146;s satisfaction of each of the following conditions: </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(a) <U>Compliance</U>. The representations and warranties contained herein and in each of the other Loan Documents shall be true on and as of the date of
the signing of this Agreement and on the date of each extension of credit by Bank pursuant hereto, with the same effect as though such representations and warranties had been made on and as of each such date, and on each such date, no Event of
Default as defined herein, and no condition, event or act which with the giving of notice or the passage of time or both would constitute such an Event of Default, shall have occurred and be continuing or shall exist. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(b) <U>Documentation</U>. Bank shall have received all additional documents which may be required in connection with such extension of credit.
</FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><U>ARTICLE IV </U></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman"
SIZE="2"><U>AFFIRMATIVE COVENANTS </U></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Borrower covenants that so long as Bank remains committed to extend credit to Borrower pursuant
hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower shall,
unless Bank otherwise consents in writing: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest, fees or other liabilities due
under any of the Loan Documents at the times and place and in the manner specified therein, and immediately upon demand by Bank, the amount by which the outstanding principal balance of any credit subject hereto at any time exceeds any limitation on
borrowings applicable thereto. </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">4.2. ACCOUNTING RECORDS. Maintain adequate books and records in accordance with generally accepted
accounting principles consistently applied, and permit any representative of Bank, at any reasonable time, to inspect, audit and examine such books and records, to make copies of the same, and to inspect the properties of Borrower. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">4.3. FINANCIAL STATEMENTS. Provide to Bank all of the following, in form and detail satisfactory to Bank, which statements shall be in accordance with
generally accepted accounting principles consistently applied (and consistent with prior practices): </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(a) not later than 120 days after and
as of the end of each fiscal year, an audited consolidated financial statement of Borrower (including balance sheet and statements of income, retained earnings and cash flow), together with all notes to management, prepared by and including the
unqualified opinion of a recognized independent accounting firm acceptable to Bank; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(b) not later than 45 days after and as of the end of
each fiscal quarter, a financial statement of Borrower, prepared by Borrower, to include a balance sheet, statements of income, retained earnings and cash flow; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">(c) not later than 45 days after and as of the end of each calendar quarter, an aged listing of accounts receivable and accounts payable that reconciles to the financial statement, and immediately upon each request
from Bank, a list of the names and addresses of all Borrower&#146;s account debtors; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%;padding-bottom:3px;"><FONT FACE="Times New Roman" SIZE="2">(d) not later than August&nbsp;15
</FONT><FONT FACE="Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">th</SUP></FONT><FONT FACE="Times New Roman" SIZE="2"> of each year, consolidated projected financial statements for the coming fiscal
year, to include a balance sheet, statements of income and cash flows; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(e) contemporaneously with each annual and quarterly financial
statement of Borrower required hereby, a certificate of a senior financial officer of Borrower that said financial statements are accurate and that there exists no Event of Default nor any condition, act or event which with the giving of notice or
the passage of time or both would constitute an Event of Default, including the calculations confirming Borrower&#146;s compliance with all financial covenants required herein; </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(f) from time to time such other information as Bank may reasonably request. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">4.4. COMPLIANCE. Preserve and maintain all licenses, permits, governmental approvals, rights, privileges and franchises necessary for the conduct of its
business; and comply with the provisions of all documents pursuant to which Borrower is organized and/or which govern Borrower&#146;s continued existence and with the requirements of all laws, rules, regulations and orders of any governmental
authority applicable to Borrower and/or its business. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">4.5. INSURANCE. Maintain and keep in force, for each business in which Borrower is
engaged, insurance of the types and in amounts customarily carried in similar lines of business, including but not limited to fire, extended coverage, public liability, flood, property damage and workers&#146; compensation, with all such insurance
carried with companies and in amounts satisfactory to Bank, and deliver to Bank from time to time at Bank&#146;s request schedules setting forth all insurance then in effect. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">4.6. FACILITIES. Keep all properties useful or necessary to Borrower&#146;s business in good repair and condition, and from time to time make necessary
repairs, renewals and replacements thereto so that such properties shall be fully and efficiently preserved and maintained. </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any and all indebtedness, obligations,
assessments and taxes, both real or personal, including without limitation federal and state income taxes and state and local property taxes and assessments, except (a)&nbsp;such as Borrower may in good faith contest or as to which a bona fide
dispute may arise, and (b)&nbsp;for which Borrower has made provision in the financial statements, to Bank&#146;s satisfaction, for eventual payment thereof in the event Borrower is obligated to make such payment. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">4.8. LITIGATION. Promptly give notice in writing to Bank of any litigation pending or threatened against Borrower with a claim in excess of
$1,000,000.00. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">4.9. FINANCIAL CONDITION. Maintain Borrower&#146;s financial condition as follows using generally accepted accounting
principles consistently applied and used consistently with prior practices (except to the extent modified by the definitions herein), with compliance determined commencing with Borrower&#146;s financial statements for the period ending
September&nbsp;26, 2009: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(a) <U>Cash Flow Leverage Ratio</U>. Borrower will not allow the ratio of Funded Debt to EBITDA, measured
quarterly on a trailing four (4)&nbsp;quarter basis, to exceed 3.50 to 1.00, for quarters ending on or prior to April&nbsp;3, 2010, or 3.00 to 1.00, for quarters ending on or after July&nbsp;3, 2010. As used herein, (i)&nbsp;&#147;EBITDA&#148; is
defined as net profit before tax plus interest expense (net of capitalized interest expense), depreciation expense and amortization expense; and (ii)&nbsp;&#147;Funded Debt&#148; is defined as the sum of all obligations for borrowed money (including
subordinated debt) plus all capital lease obligations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(b) <U>Trading Ratio</U>. At all time, Borrower shall maintain a Trading Ratio of
not less than 1.50 to 1.00. &#147;Trading Ratio&#148; is defined as the sum of all domestic and foreign Accounts Receivable and Inventory divided by the sum of financial statement total of Accounts Payable plus the outstanding balance of the Line of
Credit Note (inclusive of outstanding letters of credit). As used herein, Accounts Receivable and Inventory shall have the meanings ascribed to such terms by Article 9 of the Uniform Commercial Code in effect in the State of Washington. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(c) <U>Minimum Profit</U>. Borrower&#146;s minimum net profit, after payment of all applicable taxes, will not be less than $500,000.00, measured
quarterly on a trailing four (4)&nbsp;quarter basis, expensed loan closing costs are excluded from this calculation. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">4.10. NOTICE TO BANK.
Promptly (but in no event more than five (5)&nbsp;days after the occurrence of each such event or matter) give written notice to Bank in reasonable detail of: (a)&nbsp;the occurrence of any Event of Default, or any condition, event or act which with
the giving of notice or the passage of time or both would constitute an Event of Default; (b)&nbsp;any change in the name or legal structure of Borrower; (c)&nbsp;the occurrence and nature of any Reportable Event or Prohibited Transaction, each as
defined in ERISA, or any funding deficiency with respect to any Plan; or (d)&nbsp;any termination or cancellation of any insurance policy which Borrower is required to maintain, or any uninsured or partially uninsured loss through liability or
property damage, or through fire, theft or any other cause affecting Borrower&#146;s property in excess of an aggregate of $1,000,000.00. </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman"
SIZE="2"><U>ARTICLE V </U></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><U>NEGATIVE COVENANTS </U></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">Borrower further covenants that so long as Bank remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of Borrower to Bank under
any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower will not without Bank&#146;s prior written consent: </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">5.1. USE OF FUNDS. Use any of the proceeds of any credit extended hereunder except for the purposes stated in Article I hereof. </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">5.2. LEASE EXPENDITURES. Incur operating lease expense in any fiscal year in excess of an aggregate of
$5,500,000.00. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">5.3. OTHER INDEBTEDNESS. Create, incur, assume or permit to exist any interest bearing indebtedness or liabilities
resulting from borrowings, loans or advances, whether secured or unsecured, matured or unmatured, liquidated or unliquidated, joint or several, except (a)&nbsp;the liabilities of Borrower to Bank, and (b)&nbsp;any other liabilities of Borrower
existing as of, and disclosed to Bank prior to, the date hereof, in an aggregate amount greater than $1,000,000.00. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">5.4. MERGER,
CONSOLIDATION, TRANSFER OF ASSETS. Merge into or consolidate with any other entity; make any substantial change in the nature of Borrower&#146;s business as conducted as of the date hereof; acquire all or substantially all of the assets of any other
entity; nor sell, lease, transfer or otherwise dispose of all or a substantial or material portion of Borrower&#146;s assets except in the ordinary course of its business. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">5.5. GUARANTIES. Except for its Foreign Subsidiaries, guarantee or become liable in any way as surety, endorser (other than as endorser of negotiable
instruments for deposit or collection in the ordinary course of business), accommodation endorser or otherwise for, nor pledge or hypothecate any assets of Borrower as security for, any liabilities or obligations of any other person or entity,
except any of the foregoing in favor of Bank. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">5.6. LOANS, ADVANCES, INVESTMENTS. Except for its Foreign Subsidiaries, make any loans or
advances to or investments in any person or entity, except any of the foregoing existing as of, and disclosed to Bank prior to, the date hereof. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">5.7. DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or distribution either in cash, stock or any other property on Borrower&#146;s stock now or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire any shares of
any class of Borrower&#146;s stock now or hereafter outstanding, except that Borrower may repurchase shares of any class of Borrower&#146;s stock in an amount not to exceed $4,000,000.00. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">5.8. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a security interest in, or lien upon, all or any portion of Borrower&#146;s assets now
owned or hereafter acquired, except any of the foregoing in favor of Bank or which is existing as of, and disclosed to Bank in writing prior to, the date hereof. </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><U>ARTICLE VI </U></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><U>EVENTS OF DEFAULT </U></FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">6.1. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute an &#147;Event of Default&#148; under this Agreement: </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(a) Borrower shall fail to pay when due any principal, interest, fees or other amounts payable under any of the Loan Documents. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(b) Any financial statement or certificate furnished to Bank in connection with, or any representation or warranty made by Borrower or any other party
under this Agreement or any other Loan Document shall prove to be incorrect, false or misleading in any material respect when furnished or made. </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(c) Any default in the performance of or compliance with any obligation, agreement or other provision
contained herein or in any other Loan Document (other than those specifically described as an &#147;Event of Default&#148; in this section 6.1), and with respect to any such default that by its nature can be cured, such default shall continue for a
period of twenty (20)&nbsp;days from its occurrence. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(d) Any default in the payment or performance of any obligation other than terms of
accounts payable, or any defined event of default, under the terms of any contract, instrument or document (other than any of the Loan Documents) pursuant to which Borrower, any guarantor hereunder (with each such guarantor, referred to herein as a
&#147;Third Party Obligor&#148;) has incurred any debt or other liability to any person or entity, including Bank. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(e) Borrower or any
Third Party Obligor shall become insolvent, or shall suffer or consent to or apply for the appointment of a receiver, trustee, custodian or liquidator of itself or any of its property, or shall generally fail to pay its debts as they become due, or
shall make a general assignment for the benefit of creditors; Borrower or any Third Party Obligor shall file a voluntary petition in bankruptcy, or seeking reorganization, in order to effect a plan or other arrangement with creditors or any other
relief under the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time (&#147;Bankruptcy Code&#148;), or under any state or federal law granting relief to debtors, whether now or hereafter in effect;
or Borrower or any Third Party Obligor shall file an answer admitting the jurisdiction of the court and the material allegations of any involuntary petition; or Borrower or any Third Party Obligor shall be adjudicated a bankrupt, or an order for
relief shall be entered against Borrower or any Third Party Obligor by any court of competent jurisdiction under the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(f) The filing of a notice of judgment lien against Borrower or any Third Party Obligor; or the recording of any abstract of judgment
against Borrower or any Third Party Obligor in any county in which Borrower or such Third Party Obligor has an interest in real property; or the service of a notice of levy and/or of a writ of attachment or execution, or other like process, against
the assets of Borrower or any Third Party Obligor; or the entry of a judgment against Borrower or any Third Party Obligor; or any involuntary petition or proceeding pursuant to the Bankruptcy Code or any other applicable state or federal law
relating to bankruptcy, reorganization or other relief for debtors is filed or commenced against Borrower or any Third Party Obligor; provided, however, that such judgment, liens, levies or other debts or claims against Borrower or its subsidiaries
are in excess of $500,000.00. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(g) There shall exist or occur any event or condition that Bank reasonably believes impairs, or will
substantially impair, the prospect of payment or performance by Borrower, any Third Party Obligor, of its obligations under any of the Loan Documents. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">(h) The dissolution or liquidation of Borrower or any Third Party Obligor, or any of its directors, stockholders or members, shall take action seeking to effect the dissolution or liquidation of Borrower or such Third
Party Obligor. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">6.2. REMEDIES. Upon the occurrence of any Event of Default: (a)&nbsp;all indebtedness of Borrower under each of the Loan
Documents, any term thereof to the contrary notwithstanding, shall at Bank&#146;s option and without notice become immediately due and payable without presentment, demand, protest or notice of dishonor, all of which are hereby expressly waived by
Borrower; (b)&nbsp;the obligation, if any, of Bank to extend any further credit under any of the Loan Documents shall immediately cease and terminate; and (c)&nbsp;Bank shall have all rights, powers and remedies available under each of the Loan
Documents, or accorded by law, including without limitation the right to resort to any or all security for any credit subject hereto and to exercise any or all of the rights of a beneficiary or secured party pursuant </FONT>
</P>

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 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">to applicable law. All rights, powers and remedies of Bank may be exercised at any time by Bank and from time to time after the occurrence of an Event of
Default, are cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies provided by law or equity. </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman"
SIZE="2"><U>ARTICLE VII </U></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><U>MISCELLANEOUS </U></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">7.1. NO WAIVER. No delay, failure or discontinuance of Bank in exercising any right, power or remedy under any of the Loan Documents shall affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by Bank
of any breach of or default under any of the Loan Documents must be in writing and shall be effective only to the extent set forth in such writing. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">7.2. NOTICES. All notices, requests and demands which any party is required or may desire to give to any other party under any provision of this Agreement must be in writing delivered to each party at the following address: </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="11%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD WIDTH="86%"></TD></TR>
<TR>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">BORROWER:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Ronald F. Klawitter</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Chief Financial Officer</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Key Tronic Corporation</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">4424 North Sullivan Road</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Spokane, WA 99216</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">BANK:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">WELLS FARGO BANK, NATIONAL ASSOCIATION</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Attn: Dave Menard, Vice President</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">601 W. 1</FONT><FONT FACE="Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">st</SUP></FONT><FONT FACE="Times New Roman" SIZE="2"> Avenue, Suite
900</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Spokane, WA 99201</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">or to such other address as any party may designate by written notice to all other parties. Each such notice,
request and demand shall be deemed given or made as follows: (a)&nbsp;if sent by hand delivery, upon delivery; (b)&nbsp;if sent by mail, upon the earlier of the date of receipt or three (3)&nbsp;days after deposit in the U.S. mail, first class and
postage prepaid; and (c)&nbsp;if sent by telecopy, upon receipt. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">7.3. COSTS, EXPENSES AND ATTORNEYS&#146; FEES. Borrower shall pay to Bank
immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys&#146; fees (to include outside counsel fees and all allocated costs of Bank&#146;s in-house counsel), expended or incurred
by Bank in connection with (a)&nbsp;the negotiation and preparation of this Agreement and the other Loan Documents, Bank&#146;s continued administration hereof and thereof, and the preparation of any amendments and waivers hereto and thereto,
(b)&nbsp;the enforcement of Bank&#146;s rights and/or the collection of any amounts which become due to Bank under any of the Loan Documents, and (c)&nbsp;the prosecution or defense of any action in any way related to any of the Loan Documents,
including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding
(including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Borrower or any other person or entity. </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the heirs,
executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Borrower may not assign or transfer its interests or rights hereunder without Bank&#146;s prior written consent. Bank reserves the right
to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, Bank&#146;s rights and benefits under each of the Loan Documents. In connection therewith, Bank may disclose all documents and information which
Bank now has or may hereafter acquire relating to any credit subject hereto, Borrower or its business, any guarantor hereunder or the business of such guarantor, or any collateral required hereunder. Any disclosure made by Bank will be subject to a
confidentiality agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan Documents constitute the entire agreement
between Borrower and Bank with respect to each credit subject hereto and supersede all prior negotiations, communications, discussions and correspondence concerning the subject matter hereof. This Agreement may be amended or modified only in writing
signed by each party hereto. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered into for the sole protection and
benefit of the parties hereto and their respective permitted successors and assigns, and no other person or entity shall be a third party beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or
any other of the Loan Documents to which it is not a party. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">7.7. TIME. Time is of the essence of each and every provision of this
Agreement and each other of the Loan Documents. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">7.8. SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be prohibited by
or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or any remaining provisions of this Agreement. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">7.9. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">7.10. GOVERNING LAW. This Agreement shall be
governed by and construed in accordance with the laws of the State of Washington. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">7.11. ARBITRATION. </FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(a) <U>Arbitration</U>. The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies
between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise in any way arising out of or relating to (i)&nbsp;any credit subject hereto, or any of the Loan
Documents, and their negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; or (ii)&nbsp;requests for additional credit. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(b) <U>Governing Rules</U>. Any arbitration proceeding will (i)&nbsp;proceed in a location in Washington selected by the American Arbitration Association
(&#147;AAA&#148;); (ii)&nbsp;be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii)&nbsp;be conducted by the AAA,
or such other administrator as the parties shall mutually agree upon, in accordance with the AAA&#146;s commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration
fees and costs in which case the arbitration shall be conducted in accordance with the </FONT>
</P>

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 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">AAA&#146;s optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large,
complex commercial disputes to be referred to herein as applicable, as the &#147;Rules&#148;). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails or
refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that
is a bank of the protections afforded to it under 12 U.S.C. &#167;91 or any similar applicable state law. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(c) <U>No Waiver of Provisional
Remedies, Self-Help and Foreclosure</U>. The arbitration requirement does not limit the right of any party to (i)&nbsp;foreclose against real or personal property collateral; (ii)&nbsp;exercise self-help remedies relating to collateral or proceeds
of collateral such as setoff or repossession; or (iii)&nbsp;obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding.
This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii)&nbsp;and
(iii)&nbsp;of this paragraph. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(d) <U>Arbitrator Qualifications and Powers</U>. Any arbitration proceeding in which the amount in
controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall
be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of Washington or a
neutral retired judge of the state or federal judiciary of Washington, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will determine
whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator&#146;s discretion)
any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes in accordance with the substantive law of Washington and may grant any remedy
or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose
sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the Washington Rules of Civil Procedure or other applicable law. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party,
including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">(e) <U>Discovery</U>. In any arbitration proceeding, discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no
later than 20 days before the hearing date. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for
the party&#146;s presentation and that no alternative means for obtaining information is available. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(f) <U>Class Proceedings and
Consolidations</U>. No party hereto shall be entitled to join or consolidate disputes by or against others in any arbitration, except parties who have executed any Loan Document, or to include in any arbitration any dispute as a representative or
member of a class, or to act in any arbitration in the interest of the general public or in a private attorney general capacity. </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(g) <U>Payment Of Arbitration Costs And Fees</U>. The arbitrator shall award all costs and expenses of
the arbitration proceeding. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(h) <U>Miscellaneous</U>. To the maximum extent practicable, the AAA, the arbitrators and the parties shall
take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for
disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration
provision most directly related to the Loan Documents or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the Loan Documents or any relationship between the
parties. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first written
above. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="35%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="18%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="4%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="35%"></TD></TR>
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<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2">WELLS FARGO BANK,</FONT></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2">KEY TRONIC CORPORATION</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2">NATIONAL ASSOCIATION</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
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<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/&nbsp;&nbsp;&nbsp;&nbsp;Ronald F. Klawitter</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/&nbsp;&nbsp;&nbsp;&nbsp;David Menard</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">CFO</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">VP</FONT></TD></TR>
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B><U>Schedule 1.5 </U></B></FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">1.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Key Tronic Juarez, S.A. de C.V. </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">2.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Key Tronic Reynosa, S.A. de C.V. </FONT></TD></TR></TABLE>
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>dex102.htm
<DESCRIPTION>REVOLVING LINE OF CREDIT NOTE
<TEXT>
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<TITLE>Revolving Line of Credit Note</TITLE>
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>Exhibit 10.2 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2">REVOLVING LINE OF CREDIT NOTE </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><B></B>$20,000,000.00<B></B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">Spokane, Washington</FONT></TD></TR>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">August&nbsp;19, 2009</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%;padding-bottom:3px;"><FONT FACE="Times New Roman" SIZE="2">FOR VALUE RECEIVED, the undersigned KEY TRONIC CORPORATION, a Washington
corporation (&#147;Borrower&#148;) promises to pay to the order of WELLS FARGO BANK, N.A., a national banking association (&#147;Bank&#148;), at its office at 601 West 1</FONT><FONT FACE="Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">st</SUP></FONT><FONT FACE="Times New Roman" SIZE="2"> Avenue, Suite 900, Spokane, Washington 99201, or at such other place as the holder hereof may designate, in lawful money of the
United States of America and in immediately available funds, the principal sum of Twenty Million and 00/100 Dollars ($20,000,000.00), or so much thereof as may be advanced and be outstanding, with interest thereon, to be computed on each advance
from the date of its disbursement as set forth herein. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">1. DEFINITIONS: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">As used herein, the following terms shall have the meanings set forth after each, and any other term defined in this Note shall have the meaning set forth at the place defined: </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(a) &#147;Base Rate&#148; means, for any day, a fluctuating rate equal to the highest of: (i)&nbsp;the&nbsp;Prime Rate in effect on such day, (ii)&nbsp;a
rate determined by Bank to be one and one-half percent (1.50%)&nbsp;above Daily One Month LIBOR in effect on such day, and (iii)&nbsp;the Federal Funds Rate plus one and one-half percent (1.50%). </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(b) &#147;Business Day&#148; means any day except a Saturday, Sunday or any other day on which commercial banks in Washington are authorized or required
by law to close. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(c) &#147;Daily One Month LIBOR Rate&#148; means, for any day, the rate of interest equal to LIBOR then in effect for
delivery for a one (1)&nbsp;month period. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(d) &#147;Federal Funds Rate&#148; means, for any day, the rate per annum equal to the weighted
average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers for the immediately preceding day, as published by the Federal Reserve Bank of New York; provided that if no
such rate is so published on any day, then the Federal Funds Rate for such day shall be the rate most recently published. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(e) &#147;Fixed
Rate Term&#148; means a period commencing on a Business Day and continuing for one (1)&nbsp;month, two (2)&nbsp;months, three (3) months or six (6)&nbsp;months, as designated by Borrower, during which all or a portion of the outstanding principal
balance of this Note bears interest determined in relation to LIBOR; provided however, that no Fixed Rate Term may be selected for a principal amount less than Five Hundred Thousand and 00/100 Dollars ($500,000.00); and provided further, that no
Fixed Rate Term shall extend beyond the scheduled maturity date hereof. If any Fixed Rate Term would end on a day which is not a Business Day, then such Fixed Rate Term shall be extended to the next succeeding Business Day. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(f) &#147;LIBOR&#148; means the rate per annum (rounded upward, if necessary, to the nearest whole 1/8 of 1%) and determined pursuant to the following
formula: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">LIBOR&nbsp;=</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><U>Base
LIBOR&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</FONT></TD></TR>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">100% - LIBOR Reserve Percentage</FONT></TD></TR>
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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(i) &#147;Base LIBOR&#148; means the rate per annum for United States dollar deposits quoted by Bank
(A)&nbsp;for the purpose of calculating effective rates of interest for loans making reference to LIBOR, as the Inter-Bank Market Offered Rate, with the understanding that such rate is quoted by Bank for the purpose of calculating effective rates of
interest for loans making reference thereto, on the first day of a Fixed Rate Term for delivery of funds on said date for a period of time approximately equal to the number of days in such Fixed Rate Term and in an amount approximately equal to the
principal amount to which such Fixed Rate Term applies, or (B)&nbsp;for the purpose of calculating effective rates of interest for loans making reference to the Daily One Month LIBOR Rate, as the Inter-Bank Market Offered Rate in effect from time to
time for delivery of funds for one (1)&nbsp;month in amounts approximately equal to the principal amount of such loans. Borrower understands and agrees that Bank may base its quotation of the Inter-Bank Market Offered Rate upon such offers or other
market indicators of the Inter-Bank Market as Bank in its discretion deems appropriate including, but not limited to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(ii) &#147;LIBOR Reserve Percentage&#148; means the reserve percentage prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for &#147;Eurocurrency Liabilities&#148; (as defined in Regulation D of the Federal Reserve Board, as amended), adjusted by Wells Fargo Bank for expected changes in such reserve percentage during the applicable term of this Note.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(g) &#147;Prime Rate&#148; means at any time the rate of interest most recently announced within Bank at its principal office as its Prime
Rate, with the understanding that the Prime Rate is one of Bank&#146;s base rates and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto, and is evidenced by the recording thereof after
its announcement in such internal publication or publications as Bank may designate. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">2. INTEREST: </FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(a) <U>Interest</U>. The outstanding principal balance of this Note shall bear interest (computed on the basis of a 365-day year (or, in a leap year,
366), actual days elapsed) at the (i)&nbsp;the Base Rate, or (ii)&nbsp;when a Fixed Rate Term is selected, at a fixed rate per annum determined by Bank to be two and one tenths percent (2.10%)&nbsp;above the applicable LIBOR in effect on the first
day of such Fixed Rate Term (the &#147;Fixed Rate Term Margin&#148;); provided, however, notwithstanding the forgoing, if Borrower&#146;s EBITDA (as defined in the Credit Agreement) falls below $3,750,000.00, measured quarterly on a trailing four
(4)&nbsp;quarter basis, the Fixed Rate Term Margin shall be increased to two and one half percent (2.50%). When interest is determined in relation to the Base Rate, each change in the rate of interest hereunder shall become effective on the date
each Base Rate change is announced within Bank. With respect to each LIBOR selection hereunder, Bank is hereby authorized to note the date, principal amount, interest rate and Fixed Rate Term applicable thereto and any payments made thereon on
Bank&#146;s books and records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(b) <U>Selection of Interest Rate Options</U>. At any time any portion of this Note bears interest determined in relation to LIBOR, it may be continued
by Borrower at the end of each Fixed Rate Term, so that all or a portion thereof bears interest determined in relation to the Base Rate or to LIBOR for a new Fixed Rate Term designated by Borrower. At any time any portion of this Note bears interest
determined in relation to the Base Rate, Borrower may convert all or a portion thereof so that it bears interest determined in relation to LIBOR with a thirty (30)&nbsp;day term. At such time as Borrower requests an advance hereunder or wishes to
select a LIBOR option for all or a portion of the outstanding principal balance hereof, and at the end of each Fixed Rate Term, Borrower shall give Bank notice specifying: (i)&nbsp;the interest rate option selected by Borrower; (ii)&nbsp;the
principal amount subject thereto; and (iii)&nbsp;for each LIBOR selection, the length of the applicable Fixed Rate Term. Any such notice may be given by telephone (or such other electronic method as Bank may permit) so long as, with respect to each
LIBOR </FONT>
</P>

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 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">selection, (A)&nbsp;if requested by Bank, Borrower provides to Bank written confirmation thereof not later than three (3)&nbsp;Business Days after such
notice is given, and (B)&nbsp;such notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate Term, or at a later time during any Business Day if Bank, at its sole option but without obligation to do so, accepts Borrower&#146;s
notice and quotes a fixed rate to Borrower. If Borrower does not immediately accept a fixed rate when quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request from Borrower shall be subject to a redetermination by Bank of the
applicable fixed rate. If no specific designation of interest is made at the time any advance is requested hereunder or at the end of any Fixed Rate Term, Borrower shall be deemed to have made a Base Rate interest selection (excluding a LIBOR Base
Rate) for such advance or the principal amount to which such Fixed Rate Term applied. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(c) <U>Taxes and Regulatory Costs</U>. Borrower
shall pay to Bank immediately upon demand, in addition to any other amounts due or to become due hereunder, any and all (i)&nbsp;withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any
domestic or foreign governmental authority and related in any manner to LIBOR, and (ii)&nbsp;future, supplemental, emergency or other changes in the LIBOR Reserve Percentage, assessment rates imposed by the Federal Deposit Insurance Corporation, or
similar requirements or costs imposed by any domestic or foreign governmental authority or resulting from compliance by Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority
and related in any manner to LIBOR to the extent they are not included in the calculation of LIBOR. In determining which of the foregoing are attributable to any LIBOR option available to Borrower hereunder, any reasonable allocation made by Bank
among its operations shall be conclusive and binding upon Borrower. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(d) <U>Payment of Interest</U>. When a Base Rate is selected, Interest
accrued on this Note shall be payable on the first Business Day of each calendar month, commencing on the first Business Day of September 2009. When a one (1), two (2)&nbsp;or three (3)&nbsp;month Fixed Rate Term is selected, interest shall be
payable at the end of each applicable Fixed Rate Term. When a six (6)&nbsp;month Fixed Rate Term is selected, interest shall be payable on the first Business Day that is three (3)&nbsp;months after the selection of such six (6)&nbsp;month Fixed Rate
Term and on the last day of such six (6)&nbsp;month Fixed Rate Term. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(e) <U>Default Interest</U>. From and after the maturity date of this
Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, or at Bank&#146;s option upon the occurrence, and during the continuance of an Event of Default, the outstanding principal balance of
this Note shall bear interest at an increased rate per annum (computed on the basis of a 365-day year (366 during any leap year), actual days elapsed) equal to four percent (4%)&nbsp;above the rate of interest from time to time applicable to this
Note. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">3. BORROWING AND REPAYMENT: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(a)
<U>Borrowing and Repayment</U>. Borrower may from time to time during the term of this Note borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions of this Note and of any
document executed in connection with or governing this Note; provided however, that the total outstanding borrowings under this Note shall not at any time exceed the principal amount stated above. The unpaid principal balance of this obligation at
any time shall be the total amounts advanced hereunder by the holder hereof less the amount of principal payments made hereon by or for Borrower, which balance may be endorsed hereon from time to time by the holder. The outstanding principal balance
of this Note shall be due and payable in full on August&nbsp;18, 2011. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(b) <U>Advances</U>. Advances hereunder, to the total amount of the
principal sum stated above, may be made by the holder at the oral or written request of (i)&nbsp;Gwen Nyberg, Penny Sol or Ron Klawitter, or (ii)&nbsp;any person, with respect to advances deposited to the credit of any deposit account of Borrower,
</FONT>
</P>

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 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">which advances, when so deposited, shall be conclusively presumed to have been made to or for the benefit of Borrower regardless of the fact that persons
other than those authorized to request advances may have authority to draw against such account. The holder shall have no obligation to determine whether any person requesting an advance is or has been authorized by Borrower. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(c) <U>Application of Payments</U>. Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding
principal balance hereof. All payments credited to principal shall be applied first, to the outstanding principal balance of this Note which bears interest determined in relation to the Base Rate, if any, and second, to the outstanding principal
balance of this Note which bears interest determined in relation to LIBOR, with such payments applied to the oldest Fixed Rate Term first. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">4. PREPAYMENT:
</FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(a) <U>Base Rate</U>. Borrower may prepay principal on any portion of this Note which bears interest determined in relation to the Base
Rate at any time, in any amount and without penalty. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(b) <U>LIBOR</U>. Borrower may prepay principal on any portion of this Note which
bears interest determined in relation to LIBOR at any time and in the minimum amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00); provided however, that if the outstanding principal balance of such portion of this Note is less than
said amount, the minimum prepayment amount shall be the entire outstanding principal balance thereof. In consideration of Bank providing this prepayment option to Borrower, or if any such portion of this Note shall become due and payable at any time
prior to the last day of the Fixed Rate Term applicable thereto by acceleration or otherwise, Borrower shall pay to Bank immediately upon demand a fee which is the sum of the discounted monthly differences for each month from the month of prepayment
through the month in which such Fixed Rate Term matures, calculated as follows for each such month: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(i)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><U>Determine</U> the amount of interest which would have accrued each month on the amount prepaid at the interest rate applicable to such amount had it remained outstanding until
the last day of the Fixed Rate Term applicable thereto. </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(ii)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><U>Subtract</U> from the amount determined in (i)&nbsp;above the amount of interest which would have accrued for the same month on the amount prepaid for the remaining term of such
Fixed Rate Term at LIBOR in effect on the date of prepayment for new loans made for such term and in a principal amount equal to the amount prepaid. </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(iii)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">If the result obtained in (ii)&nbsp;for any month is greater than zero, discount that difference by LIBOR used in (ii)&nbsp;above. </FONT></TD></TR></TABLE> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Borrower acknowledges that prepayment of such amount may result in Bank incurring additional costs, expenses and/or liabilities, and that it is difficult to ascertain
the full extent of such costs, expenses and/or liabilities. Borrower, therefore, agrees to pay the above-described prepayment fee and agrees that said amount represents a reasonable estimate of the prepayment costs, expenses and/or liabilities of
Bank. If Borrower fails to pay any prepayment fee when due, the amount of such prepayment fee shall thereafter bear interest until paid at a rate per annum four percent (4.0%)&nbsp;above the Prime Rate in effect from time to time (computed on the
basis of a 365-day year (366 in any leap year), actual days elapsed). </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">5. EVENTS OF DEFAULT: </FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">This Note is made pursuant to and is subject to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of the date
hereof, as amended from time to time (the &#147;Credit Agreement&#148;). Any default in the payment or performance of any obligation under this Note, or any defined event of default under the Credit Agreement, shall constitute an &#147;Event of
Default&#148; under this Note. </FONT></P>

<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">6. MISCELLANEOUS: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">(a) <U>Remedies</U>. Upon the occurrence of any Event of Default, the holder of this Note, at the holder&#146;s option, may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or notice of dishonor, all of which are expressly waived by Borrower, and the obligation, if any, of the holder to extend any further credit hereunder shall immediately cease
and terminate. Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys&#146; fees (to include outside counsel fees and all allocated costs of the
holder&#146;s in-house counsel), expended or incurred by the holder in connection with the enforcement of the holder&#146;s rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of
any action in any way related to this Note, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in
connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Borrower or any other person or entity. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(b) <U>Obligations Joint and Several</U>. Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall
be joint and several. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(c) <U>Governing Law</U>. This Note shall be governed by and construed in accordance with the laws of the State of
Washington. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
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<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="92%"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2">KEY TRONIC CORPORATION,</FONT></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2">a Washington corporation</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/&nbsp;&nbsp;&nbsp;&nbsp;Ronald F. Klawitter</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Its:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">CFO</FONT></TD></TR>
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