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EXHIBIT 10
AGREEMENT
AGREEMENT made this 26th day of October 1994 between SPARTON CORPORATION,
an Ohio corporation (hereinafter call "Sparton"), and JOHN J. SMITH of
Jackson, Michigan (hereinafter called "Smith").
Smith has served as chairman and chief executive officer of Sparton
pursuant to the terms of an Employment Agreement dated as of August 30, 1991,
for a term which expired on June 30, 1994, having previously served as
president and general manager since November 3, 1950. Sparton desires to
retain his services as chief executive officer in the future and to renew his
Employment Agreement for an additional term of three (3) years beginning as of
July 1, 1994, upon the terms and conditions set forth herein.
In consideration of the foregoing and the mutual promises hereinafter set
forth, the parties hereto agree as follows:
1. Sparton hereby employs Smith as its chief executive officer for
the period commencing July 1, 1994, and ending June 30, 1997. Smith hereby
accepts such employment and, subject to the provisions of paragraph 2 hereof,
agrees to perform such services as shall from time to time be reasonably
assigned to him by the Board of Directors of Sparton, such services to be
substantially the same as the services which he has been performing under the
prior agreement. Smith agrees during the period of such employment to devote
his best efforts and, subject to the provisions of paragraph 2 hereof, his full
business time and attention to the performance of his duties hereunder except
during reasonable vacation periods and reasonable periods of illness or other
incapacity.
2. Smith's employment may be terminated by Sparton, at its option, if
Smith shall be unable to carry on its duties and responsibilities hereunder for
a period of six (6) consecutive months by reason of physical or mental
disability or incapacity. Smith shall have the right, upon six (6) months'
prior written notice to Sparton, to reduce his responsibilities and the time he
devotes to the performance of his duties hereunder, in which event his base
compensation and incentive compensation shall be reduced proportionately.
3. Smith shall receive as base compensation for his services the
following amounts each year, payable in equal semimonthly installments:
Smith's Base
For Twelve Months Ending: Compensation Shall Be
June 30, 1995 $274,802
June 30, 1996 288,542
June 30, 1997 302,969
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In addition to such base compensation, Smith shall also receive as
incentive compensation each fiscal year an amount equal to five percent (5%) of
the consolidated net income, before federal income taxes, of Sparton and its
subsidiaries for such fiscal year in excess of Five Million Dollars
($5,000,000), provided, however, that such additional incentive compensation
shall not exceed One Hundred Fifty Thousand Dollars ($150,000) for any fiscal
year. The amount of Smith's incentive compensation shall be paid to him each
year within ten (10) days after the audited balance sheet and profit and loss
statement for the fiscal year are available.
As of June 1, 1994, and continuing to the date hereof, Smith voluntarily
reduced his base compensation to the annual rate of One Hundred Twenty Thousand
Dollars ($120,000). Smith shall have the right at any time, in his discretion,
to increase his base compensation in any amount up to but not exceeding the
applicable base compensation set forth above in this paragraph 3.
By written notice to the Company, Smith shall also have the right,
voluntarily in his discretion, at any time and from time to time to reduce his
base compensation or his incentive compensation, or both, in such amount and
for such reason (or no reason) as he sees fit. Smith shall likewise have the
right at any time and from time to time to restore all or any part of any prior
voluntary reduction in his compensation (including the reduction referred to
above) so long as the resulting base compensation or incentive compensation
does not exceed respectively the base compensation or incentive compensation
set forth above in this paragraph 3. All such reduction and increases shall be
prospective and not retroactive. It is the intent of this paragraph that by
prior written notice to the Company Smith shall have the right to establish his
own base and incentive compensation from time to time up to but not exceeding
the applicable base and incentive compensation set forth above in this
paragraph 3.
4. In the same manner as provided in Smith's prior Employment
Agreement with Sparton, interest shall be credited to the balance in Smith's
deferred compensation account on a quarterly basis as of September 30, December
31, March 31, and June 30 of each year, at a rate equal to one and one-half
percent (1-1/2%) above the prime rate in effect at the National Bank of Detroit
at the beginning of each such quarter, with a maximum rate of interest of ten
percent (10%) per annum or the prime rate, whichever is greater, but in no
event greater than fourteen percent (14%) per annum. Upon termination of
Smith's employment, interest shall continue to accrue at the rate specified
above on the unpaid balance of Smith's account. Such interest shall be paid to
him, his beneficiary, or estate in quarterly installments or in such other
periodic installments as Sparton and Smith shall then agree.
5. Smith shall be entitled, upon termination of his employment
hereunder, to payment of the amount credited to his deferred compensation
account at the time of such termination of employment (which shall include
interest accrued to the date of termination) in equal monthly installments over
the period of eight (8) years beginning
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at that time. In the event Smith's employment shall be terminated by reason of
his death, the amount credited to his deferred compensation account at the time
of his death shall be paid in equal monthly installments over such eight- (8)
year period to such beneficiary or beneficiaries as he shall have designated in
writing, delivered to Sparton prior to his death or, in default of such
designation, to his estate. If Smith shall die after termination of his
employment but prior to receiving the full amount of deferred compensation to
which he is entitled, Sparton shall pay the remaining balance, if any, then
credited to his account to such beneficiary or beneficiaries as he shall have
so designated or, in default thereof, to his estate, in installments over the
balance of the eight- (8) year period.
In addition to the installment payment of such credits, interest on the
unpaid balance shall accrue and be paid as provided in paragraph 4.
Notwithstanding the foregoing, at any time before or after the termination
of his employment, and from time to time, Smith may request that a portion of
his deferred compensation account not to exceed Two Hundred Thousand Dollars
($200,000) in any twelve- (12) month period be paid to him. Each request shall
be submitted to Sparton's Board of Directors for approval or rejection. If
approved by the Board, Sparton shall pay the amount requested.
6. In the event Smith's employment shall be terminated other than at
the end of Sparton's fiscal year, his base compensation shall cease as of the
last day of the month in which such termination occurred. Smith's incentive
compensation shall be computed in the manner and at the time specified in
paragraph 3 and prorated to the end of the month in which termination occurred.
7. The determination by Sparton's independent certified public
accountants of the consolidated net income of Sparton and its subsidiaries, as
above defined, shall be binding upon Sparton and Smith.
8. The payments hereunder and the provisions hereof shall be in
addition to and shall not affect any rights or benefits which Smith may have
under Sparton's pension or retirement plans, group insurance program, or any
other employee benefit plans which may heretofore or hereafter be adopted, or
any stock options which shall heretofore or hereafter be granted to him.
9. In the event Sparton shall at any time be merged or consolidated
into or with any other corporation or corporations or in the event that
substantially all the assets of Sparton shall be sold or otherwise transferred
to another corporation, the provisions of this Agreement shall be binding upon
and shall inure to the benefit of the corporation resulting from such merger or
consolidation or the corporation to which such assets shall be sold or
transferred, but this Agreement shall not otherwise be assignable by Sparton or
by Smith without the consent of the other. This Agreement shall be binding
upon and inure to the benefit of the executors, administrators, heirs, and
successors of Smith.
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Executed in duplicate at Jackson, Michigan, this 26th day of October, 1994,
to be effective as of July 1, 1994.
SPARTON CORPORATION
/s/ John J. Smith By /s/ Marshall V. Noecker
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John J. Smith Marshall V. Noecker, a Director
For the Board of Directors
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