Exhibit 10.1

Sparton Corporation

425 North Martingale Road

Suite 1000

Schaumburg, Illinois 60173

800.772.7866

www.sparton.com

 

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EXECUTIVE EMPLOYMENT AGREEMENT

THIS AGREEMENT will be effective as of the first day of employment which will be
agreed upon by both parties (“the Effective Date”), and is made between SPARTON
CORPORATION, an Ohio corporation, whose headquarters are located at 425 N.
Martingale Road, Suite 1000, Schaumburg, IL 60173, hereafter called “the
Corporation,” as the employer, and Joseph McCormack, hereafter called “the
Executive,” as the employee.

WHEREAS:

 

  (a) The Corporation wishes to retain the services of the Executive in the
capacity of Senior Vice President, Chief Financial Officer; and

 

  (b) The Executive wishes to be employed by the Corporation in that capacity;
and

 

  (c) The parties desire to set forth the terms and conditions of the employment
of the Executive by the Corporation in writing;

NOW THEREFORE, in consideration of the mutual covenants and agreements contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:

ARTICLE I

EMPLOYMENT AND DUTIES

1.1 The Corporation hereby agrees to employ the Executive as Senior Vice
President, Chief Financial Officer, and the Executive agrees to such employment,
all in accordance with the express terms, conditions, duties and obligations set
forth in this Agreement. The parties agree that the relationship between the
Corporation and the Executive created by this Agreement is that of employer and
employee.

1.2 The Executive will be based at the Corporation’s headquarters located in
Schaumburg, IL although travel may be required during the course of performing
assigned job duties. However, it is agreed upon by both parties that the
Executive’s main place of employment will be the headquarters in Schaumburg, IL.

1.3 The Executive will, during the term of this Agreement:

 

  (a)

Perform all duties and responsibilities assigned to him as Senior Vice
President, Chief Financial, and will report directly to the President/CEO or
their designee.

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  The Executive also will be required to perform such other related duties and
responsibilities as may be assigned to the Executive by the President/CEO or
their designee, from time to time, which related duties and responsibilities
will be in keeping with the general nature of the duties of Senior Vice
President, Chief Financial Officer or other leadership responsibilities as
assigned.

 

  (b) Devote the whole of his working time, attention and ability to the
performance of his employment duties and responsibilities as set out herein, and
truly and faithfully serve the best interests of the Corporation at all times.
Executive’s duties may include providing services for both the Corporation and
its affiliates.

 

  (c) The Executive understands and agrees that his duties will include his
providing personal services to customers of the Corporation and the affiliates.
The Executive understands and agrees that, as a condition of performing services
for such customers, it may be necessary to agree to reasonable restrictions
imposed for the protection of the customer (including, without limitation,
confidentiality restrictions), and agrees to abide by such reasonable
restrictions.

 

  (d) The Executive acknowledges and agrees that he owes a duty of loyalty,
fidelity, and allegiance under the laws of Ohio and applicable federal law to
act at all times in the best interests of the Corporation. In keeping with these
duties, the Executive shall make full disclosure to the Corporation of all
business opportunities pertaining to the Corporation’s business and shall not
appropriate for the Executive’s own benefit any such opportunities.

1.4 The Executive agrees to comply with all applicable laws and the
Corporation’s written policies or rules, exercise the utmost degree of
integrity, honesty, fidelity and good faith, and perform his duties with the
utmost degree of expertise, care and ability that may be expected of a person
having the education, training and experience equivalent to the education,
training and experience of the Executive.

ARTICLE II

TERM

2.1 The Executive’s employment will be “at will” employment, with no set term.
The employment relationship may be terminated by either the Executive or the
Corporation at any time, for any reason or for no reason, as is further set
forth herein.

ARTICLE III

COMPENSATION

3.1 The Executive will be paid a base salary of Three Hundred Thirty Five
Thousand ($335,000) Dollars per year, (the “Base Salary”) subject to all
applicable statutory withholding of which will be paid in accordance with the
Corporation’s regular payroll periods. The compensation payable to the Executive
as contemplated by this Agreement will be subject to annual review by the
President/CEO, or their designee.

 

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3.2 In addition to the Base Salary provided for in Article 3.1 above, the
Executive will be eligible for:

 

  (a) An annual performance bonus based upon the Corporation’s Short Term
Incentive Plan (STIP) program provided certain target objectives, which will be
established by the President/CEO, or their designee, have been attained. The
Executive will have a performance bonus target of forty five (45%) percent of
base salary with threshold and maximum targets established within the STIP. The
bonus will be paid after a determination has been made regarding whether the
required objectives were met, but in any event not later than ninety (90) days
after the end of the particular fiscal year for which the bonus is being paid.
No bonus will be due or payable to Executive if he is not continuously employed
by the Corporation through and on the payment date of the bonus.

 

  (b) Participation in the Corporation’s annual Long Term Incentive Plan (LTIP)
with an annual grant award target of Four Hundred Thousand Dollars ($400,000).
This grant award shall be subject to the terms and conditions contained in the
Corporation’s standard Award Agreement and the Amended and Restated Sparton
Corporation Stock Incentive Plan. The grant of equity is expressly conditioned
upon the Executive’s execution of the Award Agreement.

3.3 The Corporation agrees before, during and after the Agreement Term to
indemnify and hold harmless Executive (and advance him expenses) to the fullest
extent permitted by the Corporation’s articles of incorporation and/or code of
regulations (by-laws), or if greater, in accordance with applicable law for
actions or inactions of the Executive as an officer, director, employee or agent
of the Corporation or any affiliate or as a fiduciary of any benefit plan of any
of the foregoing or as otherwise set forth in the applicable document.
Notwithstanding the foregoing, however, the Corporation’s obligation to defend,
indemnify and hold harmless contained in this Section 3.3 shall not apply to
claims between the Corporation and the Executive (including the Executive’s
heirs, estate, executors and administrators) including, without limitation,
disputes arising out of Article VII Confidentiality and Covenant-Not-To-Compete.
The Corporation also agrees to provide the Executive with directors’ and
officers’ liability insurance coverage both during and, with regard to matters
occurring during, employment or while serving as a director of the Corporation
or any affiliate, which coverage will be at a level at least equal to the level
being maintained at such time for the then current officers and directors and
shall continue until such time as suits can no longer be brought against the
Executive as a matter of law; provided, however, that the Corporation shall not
be required to maintain such insurance coverage unless the Board determines that
it is obtainable at reasonable cost. Further, the Corporation and Executive
shall execute and be subject to the Corporation’s standard Director and Officer
Indemnification Agreement.

3.4 The provisions of this Agreement relating to compensation will be subject to
the recovery policies established by the Board, consistent with and pursuant to
applicable

 

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federal law, the rules of the Securities and Exchange Commission (“SEC”) and any
stock exchange on which stock of the of the Corporation is traded, and the
requirements of section 954 of the Dodd–Frank Wall Street Reform and Consumer
Protection Act and final rules issued by the SEC thereunder (or implementing
such provisions).

ARTICLE IV

BENEFITS

4.1 The Executive will be entitled to receive or to participate in all employee
benefits offered to the salaried employees of the Corporation for which he
qualifies, under the same terms and subject to the same conditions as are then
in effect for other salaried employees, and as such benefits may exist from time
to time during the period of his employment, including, without limitation, the
Corporation’s medical, dental, vision, life/AD&D, disability plans, employee
assistant programs, 401K plan, and any applicable incentive programs.

4.2 The Executive will also be eligible to participate in the Corporation’s
executive Non-Qualified Deferred Compensation Plan (NQDC) which will be
introduced to him through a customized one-on-one orientation meeting within his
first 30 days of employment.

4.3 The Executive shall be reimbursed for all travel, meals, entertainment and
other out-of-pocket expenses reasonably incurred by him on behalf of or in
connection with performance of his duties and the business of the Corporation or
any subsidiary, pursuant to the reasonable standards and guidelines established
from time to time by the Corporation, provided that an expense reimbursement
shall under no circumstances occur if the Executive submits the request for
reimbursement later than ninety days after the date on which he incurred the
expense. The Corporation, in its sole discretion, shall determine whether
business expenses were reasonably incurred. Reimbursement shall be made within
ninety days after request for reimbursement is submitted in accordance with the
Corporation’s policy. No expense reimbursement during one taxable year shall
affect the expenses that are eligible for reimbursement in another taxable year,
no expense reimbursement shall be exchangeable for another benefit, and no
expense shall be reimbursed later than the end of the taxable year following the
taxable year in which the expense was incurred.

ARTICLE V

PAID TIME OFF

5.1 The Executive is eligible for nineteen (19) days of Paid Time Off (PTO)
annually, which may be increased from time to time, provided that such PTO will
be subject to the Corporation’s PTO policy.

 

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ARTICLE VI

TERMINATION

6.1.1 Either the Executive or the Corporation will be entitled, upon written
notice to the other party, to terminate this Agreement at any time, for any
reason or for no reason, as the Executive’s employment is “at will.”

The Executive’s employment with the Corporation also may be terminated by the
Corporation at any time for “Cause.” For the purposes of this Agreement, “Cause”
will mean any of the following: (a) Executive’s personal dishonesty; (b) gross
negligence; (c) violation of any law, rule or regulation; (c) breach of
applicable confidentiality, nonsolicitation or noncompetition provisions to
which he is subject, including such provisions under this Agreement; (d) a
breach of any material provision of the Corporation’s Code of Business Conduct
and Ethics or other policies and procedures; (e) use of alcohol or drugs to the
extent such use adversely affects the Executive’s ability to perform his duties
or adversely affects the business reputation of the Executive or the
Corporation; (f) use of illegal drugs; or (g) failure or refusal to
substantially perform Executive’s duties and responsibilities to the Corporation
as reasonably determined from time to time by the President/CEO or their
designee.

For any termination pursuant to subsections (d) or (g) above, the Corporation
shall first give written notice of the breach to the Executive, and if the
breach is susceptible to a cure, the Corporation shall give the Executive a
reasonable opportunity to promptly (within 30 days) cure the breach.

The Executive may also terminate his employment with Corporation for “Good
Reason.” “Good Reason” means either of the following: (a) a material adverse
change in Executive’s title, duties or responsibilities, including reporting
responsibilities, other than temporarily while disabled or otherwise
incapacitated; or (b) a material breach of the Agreement. Good Reason will not
exist unless and until (i) Executive provides Corporation with written notice of
the acts alleged to constitute good reason no more than ninety (90) days after
the initial existence of such acts, and (ii) Corporation fails to cure such acts
within thirty (30) days of receipt of such notice. If Corporation fails to cure,
Executive must terminate his employment within thirty (30) days following the
expiration of such cure period for the termination to be for Good Reason.

6.1.2 In the event of the death or Disability of the Executive, the Corporation
will be entitled to terminate Executive’s employment. Disability shall be
defined as the inability of the Executive to effectively perform his duties due
to physical or mental illness or injury, in the sole judgment of the
Corporation, for a total of ninety (90) days out of any one hundred eighty
(180) day period. Upon such termination, the Corporation will pay to the
Executive, or in the event termination is due to death, to his legal personal
representative, that portion of the Executive’s Base Salary owed up to and
including the date of termination. This payment will be made within thirty days
following termination of employment. Except for the obligation(s) to Executive
from any applicable benefit plan, following such payment, the Corporation will
have no further obligation to the Executive or his heirs and beneficiaries,
under this Agreement.

 

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6.2 If the Corporation terminates the Executive’s employment for any reason
other than “Cause” (as defined above), death, or disability, or if the Executive
terminates his employment for “Good Reason” (as defined above), the Corporation
will provide Executive with the following Separation Benefits:

 

  (a) A one-time, severance payment equal to nine (9) months of current Base
Salary. If, however, Executive is involuntarily terminated within twelve
(12) months of a “Change in Control,” the severance payment will instead equal
One Hundred Forty-Five Percent (145%) of the greater of Executive’s Base Salary
at the time of the Change in Control or at the time Executive’s employment
terminates. This severance payment will be made as a part of Corporation’s
standard payroll over the applicable nine (9) or twelve (12) month period and
will be subject to standard payroll deductions and all other legal requirements.
The Severance Payment will commence on the first pay period after the expiration
of any applicable revocation period following Executive’s date of termination.

 

  (b) Payment of nine (9) months of COBRA premiums or, in the event of an
involuntary termination within twelve (12) months of a Change in Control only,
twelve (12) months of COBRA premiums for medical insurance for Executive and/or
his dependents if, and only if, Executive timely elects coverage for COBRA
continuation.

 

  (c) Payment of outplacement services in an amount not to exceed twenty-five
thousand dollars ($25,000).

 

  (d) Executive agrees that in order to receive the Separation Benefits,
Executive must execute a separation agreement and general waiver and release of
claims in a form satisfactory to the Corporation and he must return to the
Corporation any property belonging to the Corporation which is in the
Executive’s possession or under his control. If Executive fails to return the
Release to Corporation in sufficient time so that it becomes irrevocable after
the date of termination as provided under applicable law or the separation
agreement and general waiver and release of claims, Executive will forfeit his
right to the Separation Benefits. Executive further agrees that in the event he
violates Article VII, the Corporation may terminate the Separation Benefits and
Executive will repay any Separation Benefits in excess of one (1) month he has
received.

 

  (e)

For purpose of Article VI, the term “Change in Control” means: (i) any one
person, or more than one person acting as a group, acquires ownership of stock
of the Corporation that, together with stock held by such person or group,
constitutes more than fifty percent (50%) of the total fair market

 

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  value or total voting power of the stock of the Corporation; (ii) any one
person, or more than one person acting as a group, acquires (or has acquired
during any twelve (12) month period) ownership of stock of the Corporation
possessing thirty percent (30%) or more of the total voting power of the stock
of the Corporation; (iii) a majority of the members of the Board of Directors is
replaced during any twelve (12) month period by directors whose appointment is
not endorsed by a majority of the members of the Board of Directors before the
date of appointment or election; or (iv) any one person, or more than one person
acting as a group, acquires (or has acquired during any twelve (12) month
period) assets from the Corporation that have a total gross fair market value
equal to or more than forty percent (40%) of the total gross fair market value
of all of the assets of the Corporation immediately before such acquisition or
acquisitions.

 

  (f) This Section 6.3 is intended to satisfy the requirements of the exemption
from the application of Code Section 409A for separation pay plans under
Treasury Regulation Section 1.409A-1(b)(9). To the extent the aggregate payments
due hereunder do not satisfy such exception or exceed two (2) times the lesser
of (i) the Executive’s compensation for the Executive’s taxable year preceding
the taxable year in which his Date of Termination occurs, or (ii) the Code
Section 401(a)(17) limit for the taxable year in which the Executive’s Date of
Termination of employment, such excess payments shall be subject to the
provisions of Article X.

6.3 Unless otherwise consented to by the Corporation in writing, the Executive
will be entitled, upon thirty (30) days written notice to the Corporation, to
terminate this Agreement and his employment with the Corporation for any reason
or for no reason, and in the event of such termination the Corporation will only
be required to pay the Executive, on a pro-rata basis, his Base Salary which has
accrued up to the date of termination.

6.4 Upon termination of this Agreement for whatever reason, the Executive will
immediately deliver to the Corporation, all property of the Corporation which
the Executive has in his possession or under his control.

ARTICLE VII

CONFIDENTIALITY AND COVENANT-NOT-TO-COMPETE

7.1 The Executive will execute the confidentiality agreement(s) and any such
other agreements as are normally required to be executed by other Corporation
salaried employees. During the period of his employment and thereafter, the
Executive will abide by the terms of the said agreements and keep confidential
all confidential information pertaining to the Corporation which the Executive
learned while employed by the Corporation, as such confidential information is
defined in the applicable confidentiality agreement(s). The promises, rights and
obligations stated in Article VII will survive the termination of this
Agreement.

 

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7.2 Unless approved in advance in writing by Corporation’s Senior Vice President
of Human Resources, the Executive will not, directly or indirectly, within the
territory comprising the United States and Canada, for a period of eighteen
(18) months following the date of termination of his employment for whatever
reason, either individually or in partnership or jointly or in conjunction with
any person or persons, firm, association, joint venture, syndicate, company or
corporation as principal, agent, shareholder, employee, or consultant, engage in
any business activity that directly involves any product or service similar to
or competitive with any product or service of Corporation (including
subsidiaries), or:

 

  (a) induce or attempt to influence or induce any of the employees of the
Corporation (including its subsidiaries) to leave their employment;

 

  (b) hire, employ or utilize the services of any employee of the Corporation
(including its subsidiaries); or

 

  (c) contact any Corporation customer (or prospective customer that Corporation
is actively soliciting) for the purposes of: (i) inducing them to terminate
their business relationship with Corporation, (ii) discouraging them from doing
business with Corporation, or (iii) offering products or services that are
similar to or competitive with those of Corporation. “Contact” with any customer
includes responding to contact initiated by the customer

7.3 It is agreed between the parties that the terms of this Article are
reasonable and that the Executive has received adequate consideration for the
covenants and obligations undertaken by him, as contained herein. Executive
further agrees that this Article is reasonably necessary for the protection of
the Corporation’s confidential information as defined in the applicable
confidentiality agreement(s). The Executive acknowledges that a breach or
threatened breach by the Executive of the provisions of this Article may result
in the Corporation suffering irreparable harm which cannot be calculated or
fully or adequately compensated by recovery of damages alone. Accordingly, the
Executive agrees that the Corporation will be entitled to interim or permanent
injunctive relief without having to prove damages or post a bond or other
security, specific performance and other equitable remedies, in addition to any
other relief to which the Corporation may become entitled, in the event of any
such breach. Additionally, if Executive violates this Article, in addition to
all other remedies available to the Corporation at law, in equity, and under
contract, Executive agrees that he is obligated to pay all the Corporation’s
costs of enforcement of this Article, including attorneys’ fees and expenses.

ARTICLE VIII

COOPERATION

8.1 Executive agrees that after the termination of his employment, Executive may
have to cooperate with Corporation with respect to matters of which Executive
may have knowledge due to Executive’s employment, including but not limited to
any transition of

 

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Executive’s work responsibilities and any defense of any claims, causes of
action, or charges brought against Corporation. Executive agrees to cooperate
fully with Corporation, including talking to and/or meeting with Corporation
representatives, employees, agents and attorneys and providing, if necessary,
testimony in any forum. Corporation in turn agrees to provide reasonable notice
to Executive should Executive’s cooperation in any matter be required. Executive
agrees that any failure to provide such cooperation as may be required shall be
a breach of a material term of this Agreement.

ARTICLE IX

NOTICE

9.1 Any notice required to be given hereunder will be in writing and may be
delivered personally or sent by facsimile transmission or other means of
recorded electronic communications or sent by registered mail to the parties
hereto at the following addresses:

To the Corporation:

Sparton Corporation

425 N. Martingale Road

Suite 1000

Schaumburg, IL 60173

 

  Attention: Larry Brand

           Senior Vice President, Human Resources

To the Executive:

Joseph McCormack

4721 Grand Avenue

Western Springs, IL 60558

Any notice given will be deemed to have been given and received on the business
day on which it was so delivered, and if not a business day, then on the
business day next following the day of delivery, and, if sent by electronic
communications or facsimile will be deemed to have been received on the next
business day following the date of transmission and if mailed, will be deemed to
have been given and received on the fifth day following the day on which it was
so mailed.

9.2 Either party may change their address for notice in the aforesaid manner.

 

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ARTICLE X

CODE SECTION 409A

10.1 To the extent a payment hereunder is, or shall become, subject to the
application of Code Section 409A, the following shall apply:

 

  (a) The Corporation may delay payment hereunder only upon such events and
conditions as the IRS may permit in generally applicable published regulatory or
other guidance under Code Section 409A, including, without limitation, payments
that the Corporation reasonably anticipates will be subject to the application
of Code Section 162(m), or will violate Federal securities laws or other
applicable law; provided that any such delayed payment will be made at the
earliest date at which the Corporation reasonably anticipates that the making of
the payment would not cause such a violation;

 

  (b) The time or schedule of payment hereunder may be accelerated only upon
such events and conditions as the IRS may permit in generally applicable
published regulatory or other guidance under Code Section 409A, including,
without limitation, payment to a person other than the Executive to the extent
necessary to fulfill the terms of a domestic relations order (as defined in Code
Section 414(p)(1)(B)) or payment of the amount required to be included in income
for the Executive as a result of failure of this Agreement at any time to meet
the requirements of Code Section 409A with respect to the Executive;

 

  (c) If, as of the date Executive’s employment terminates, (1) any stock of the
Corporation is publicly traded on an established securities market or otherwise;
and (2) a payment is payable under this Agreement due to a termination of
employment which is considered to be a “separation from service” for purposes of
the rules under Treasury Regulation Section 1.409A-3(i)(2) (payments to
specified employees upon a separation from service); and (3) the Executive is
determined to be a “specified employee” (as determined under Treasury Regulation
Section 1.409A-1(i)), then the payment shall be delayed until a date that is six
(6) months after the date Executive’s employment terminates to the extent
necessary to comply with the requirements of Code Section 409A and related
Treasury Regulations; provided, however, that the payments to which the
Executive would have been entitled during such six (6) month period, but for
this Section 10.1(c), shall be accumulated and paid to the Executive on the
first (1st) day of the seventh (7th) month following the date Executive’s
employment terminates; and

 

  (d) This Agreement is intended to comply with the requirements of Code
Section 409A and the Treasury Regulations and other guidance issued thereunder,
as in effect from time to time. To the extent a provision of this Agreement is
contrary to or fails to address the requirements of Code Section 409A and
related Treasury Regulations, this Agreement shall be construed and administered
as necessary to comply with such requirements to the extent allowed under
applicable Treasury Regulations until this Agreement is appropriately amended to
comply with such requirements.

 

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ARTICLE XI

DISPUTES

11.1 In any action or proceeding relating to this Agreement or otherwise arising
out of or in connection with the Executive’s employment by the Corporation, the
parties agree that they shall be resolved by a bench trial and not a jury trial,
and the parties agree that no damages other than compensatory damages shall be
sought or claimed by either party and each party waives any right to a jury
trial and any claim, right or entitlement to punitive, exemplary, statutory or
consequential damages, or any other damages.

ARTICLE XII

GENERAL

12.1 Time will be of the essence in the performance of this Agreement.

12.2 This Agreement constitutes the entire agreement between the parties hereto
with respect to the matters contained herein and supersedes and replaces any
previous agreements, contracts, oral understandings or discussions. This
Agreement may not be amended or modified in any respect except by written
instrument signed by the parties hereto.

12.3 This Agreement will be construed and enforced in accordance with the laws
of the Illinois, without regard to choice of law or conflicts of laws
principles, and the parties hereby irrevocably consent to the jurisdiction of
the Courts of the County of Cook County, Illinois, or for those matters which
would be properly brought in federal court, to the jurisdiction of the U.S.
District Court for the Northern District of Illinois.

12.4 This language of this Agreement reflects the mutual intent of the parties
and will not be strictly construed against either party; therefore no rule of
strict construction will apply in construing the terms of this Agreement.

12.5 This Agreement will be for the benefit of and will be binding upon
Corporation, its successors and assigns and, at the discretion of the
Corporation, upon any person, firm or corporation with which Corporation may be
merged or consolidated or which may acquire all or substantially all of
Corporation’s assets through sale, lease, liquidation or otherwise. The rights
and benefits of Executive are personal to him and no such rights or benefits
will be subject to assignment or transfer by Executive.

12.6 This Agreement will inure to the benefit of and be binding upon the parties
hereto and their respective heirs, legal personal representatives, successors
and permitted assigns.

 

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12.7 If for any reason, any provision or part of this Agreement will be held to
be invalid, illegal or unenforceable, the validity, legality or enforceability
of the remaining provisions or part provisions of this Agreement will not in any
way be affected or impaired thereby.

12.8 The waiver by either party of any breach of the provisions of this
Agreement will not operate or be construed as a waiver by that party of any
other breach of the same or any other provision of this Agreement.

12.9 Except as specifically altered in this Agreement, nothing in this Agreement
will detract from, alter, modify or amend any obligations or duties owed by the
Executive to the Corporation, pursuant to any statute, regulation, or at common
law or equity.

12.10 This Agreement may be executed in any number of counter-parts, all of
which when taken together, will constitute one original Agreement.

IN WITNESS WHEREOF the parties hereto acknowledge and agree that they have read
and understand the terms of this Agreement, and that they have executed this
Agreement of their own free act, on the dates set forth below, to be effective
as of the Effective Date set forth herein.

 

  SPARTON CORPORATION:   By:  

/s/ Larry Brand

  Larry Brand Date:    9/4/15   Senior Vice President, Human Resources  
EXECUTIVE:  

/s/ Joseph McCormack

  Joseph McCormack Date:    9/4/15  

 

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