KEY TRONIC CORPORATION LONG-TERM INCENTIVE PLAN

EXHIBIT 10.1

KEY TRONIC CORPORATION

LONG-TERM INCENTIVE PLAN

SECTION 1. PURPOSES

The purposes of the Key Tronic Corporation (the Company) Long-Term Incentive Plan (the “Plan”) are:

(a) to enhance long-term shareholder value creation;

(b) to provide an increased incentive for eligible individuals to assert their best efforts by conferring benefits based on improved company performance; and

(c) to encourage such persons to remain in the service of the Company.

SECTION 2. DEFINITIONS

In the Plan:

2.1 “ Award ” means an issuance of performance units whose value will be tied to specific performance measures determined by the Board upon recommendation of the Committee.

2.2 “Beneficiary” means one or more persons, trusts, estates or other entities designated by the Participant that are entitled to receive benefits under the Plan upon the death of a Participant. The beneficiary designation last filed with the Company shall control.

2.3 “ Board ” means the Board of Directors of Key Tronic Corporation.

2.4 “ Change in Control ” shall be deemed to occur if any of the following shall occur: (A) any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act), other than the Company, any Subsidiary or any employee benefit plan of the Company or any Subsidiary, is or becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing forty percent (40%) or more of the combined voting power of the Company’s then-outstanding securities (other than as a result of an acquisition by any such person of securities directly from the Company); (B) the first purchase of Common Stock pursuant to a tender or exchange offer (other than a tender or exchange offer made by the Company or any Subsidiary); (C) the approval by the Company’s stockholders of a merger or consolidation, a statutory share exchange, a sale or disposition of all or substantially all the Company’s assets or a plan of liquidation or dissolution of the Company; or (D) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors cease for any reason to constitute at least a majority thereof, unless the election or nomination for the election by the Company’s stockholders of each new director was approved by a vote of at least two-thirds (2/3) of the directors then still in office who were directors at the beginning of the period.

2.5 “Committee” means the Compensation and Administration Committee of the Board of Directors of Key Tronic Corporation.

2.6 “ Company ” means Key Tronic Corporation, a Washington corporation, and its subsidiaries, either singly or together, as appropriate.

2.7 “ Disability , ” unless otherwise defined by the Committee from time to time for purposes of the Plan, means a period of disability during which an Eligible Employee qualifies for benefits or would qualify for benefits under Key Tronic Corporation’s current long-term disability plan, or in the case of a Non-employee Director, means a period of disability during which such Participant, if he or she were an employee of Key Tronic Corporation, would qualify for benefits under Key Tronic Corporation’s current long-term disability plan.

2.8 “ Effective Date ” means the date on which the Plan is adopted by the Board.

2.9 “ Eligible Employee ” means an employee of the Company who is also an officer of the Company.

2.10 “ Non-employee Director ” means a member of the Board of Directors of Key Tronic Corporation who is not also an employee of Key Tronic Corporation or any of its affiliates.

2.11 “ Participant ” means an Eligible Employee or a Non-employee Director who participates in the Plan.

2.12 “ Performance Period” means the three years following the date of the Award grant.

2.13 “ Performance Unit ” means a unit whose initial value is set at $1.00 and whose future value is dependent on performance against Board-established targets.

2.14 “Plan” means the Key Tronic Corporation Long-Term Incentive Plan, as it may be amended from time to time by the Board.

2.15 “ Reduction-in-Force ” means the elimination of an employment position or positions due to (a) adverse business conditions of the Company or (b) a reorganization, other than a Change in Control.

2.16 “ Retirement , ” unless otherwise defined by Key Tronic Corporation from time to time for purposes of the Plan, means with respect to Eligible Employees, that the Participant leaves active employment after having attained age 65.

2.17 “ Target Award ” has the meaning set forth in Section 5.2.

SECTION 3. ADMINISTRATION

The Plan shall be administered by the Committee. Notwithstanding the foregoing, the Board shall retain the authority to amend, suspend or terminate the Plan, approve Awards and approve performance matrices.

SECTION 4. ELIGIBILITY

Unless the Committee determines otherwise, Eligible Employees and Non-employee Directors are automatically eligible to participate in the Plan, provided such individuals are Eligible Employees or Non-employee Directors prior to the actual date of the grant.

SECTION 5. PLAN PARAMETERS

Each grant of Performance Units made under the Plan will vest at the end of three years following the date of the grant.

(a) For each grant, the Committee shall determine and recommend to the Board for approval Target Awards for Participants under the Plan, which Target Awards may be based on job responsibilities or such other criteria as the Committee may in its discretion select. Except as otherwise provided in the Plan, for Eligible Employees, Target Awards shall be a number of units related to competitive market practice for similar positions.

(b) Notwithstanding the foregoing, the Board may determine alternative methods of setting Target Awards for future Performance Periods.

Each Performance Unit will have a value determined by the performance matrix adopted by the Board, upon recommendation of the Committee, for the performance period associated with the grant of units. At the end of each performance period (three years), the value of each unit awarded will be determined by the matrix.

SECTION 6. WITHHOLDING