KEY TRONIC ANNOUNCES VERDICT IN LAWSUIT

         Spokane, WA, December 21, 2001. Key Tronic Corporation (KTCC) announced
today that a jury in Seattle federal court rendered a verdict yesterday
afternoon finding that Key Tronic misappropriated trade secrets and breached a
confidentiality agreement with Plaintiffs Fernando Falcon, Federico Gilligan and
their company, F&G Scrolling Mouse LLC. The jury awarded damages of $16.5
million. The jury also found that the misappropriation was not willful. The suit
alleged that secret information owned by Falcon, Gilligan and F&G was improperly
disclosed by Key Tronic to Microsoft Corporation, a former defendant in the
suit, and thereafter used by Microsoft in the Microsoft IntelliMouse(R)
products. Key Tronic intends to vigorously pursue post-trial motions seeking to
overturn the verdict, and an appeal if necessary. Key Tronic is evaluating all
options, including possible pursuit of a claim against Microsoft.

         As a result of the verdict, the Company expects that, as of December
29, 2001, it will be in default of certain financial covenants in its credit
facility maintained with a lender to the Company. The Company expects to seek a
waiver of the default from the lender.

         IntelliMouse(R) is a registered trademark of Microsoft Corporation.

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         Some of the statements in this press release are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements include all passages containing verbs such as
'aims, anticipates, believes, estimates, expects, hopes, intends, plans,
predicts, projects or targets' or nouns corresponding to such verbs.
Forward-looking statements also include any other passages that are primarily
relevant to expected future events or that can only be fully evaluated by events
that will occur in the future. Forward-looking statements in this release
include, without limitation, the Company's statements regarding its intentions
and plans with respect to the lawsuit, including the possible pursuit of a claim
against Microsoft, and its expectation that it will seek to obtain a waiver of
the default under its credit facility. There are many factors, risks and
uncertainties that could cause actual results to differ materially from those
predicted or projected in the forward-looking statements, including the inherent
uncertainties and risks of litigation that may cause the Company to review and
alter its litigation strategy, the risk of potential adverse rulings in the
litigation and the risk that the Company may be unable to obtain a waiver of the
default under its credit facility.