Exhibit 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement (“Agreement”) by and between Sparton Corporation, an
Ohio corporation (the “Company”) and Cary B. Wood (the “Executive”), is signed
by the parties on this June 30, 2014 (the “Signing Date”), and is effective on
October 31, 2014 (the “Effective Date”).

WHEREAS, the Executive is a member of the Board of Directors of the Company (the
“Board”), and is currently employed as its President and Chief Executive
Officer;

WHEREAS, the employment of the Executive by the Company is currently subject to
an employment agreement dated August 24, 2011 (the “Prior Agreement”);

WHEREAS, the Company desires to continue the services of the Executive as a
member of the Board and the employment of the Executive with the Company and to
enter into a new agreement embodying the terms of those continued relationships;

WHEREAS, the Executive desires to continue to serve as a member of the Board and
desires to continue employment by the Company on the terms set forth herein;

NOW, THEREFORE, in consideration of the mutual promises contained herein, the
Company and the Executive agree as follows:

1. Employment. The Company employs the Executive as its President and Chief
Executive Officer, and the Executive accepts such employment, upon the terms and
conditions set forth in this Agreement. During the Term (as defined below),
Executive will be re-nominated for election to the Board at the expiration of
each term of office as a member of the Board.

2. Performance of Services. The Executive’s employment with the Company shall be
subject to the following:

 

  (a) The Executive shall perform and discharge well and faithfully such duties
for the Company as may be lawfully assigned to the Executive from time to time
by the Board. The Executive’s duties may include providing services for both the
Company and the Affiliates (as defined below), as determined by the Board;
provided that the Executive shall not, without his consent, be assigned tasks
that would be inconsistent with those of the President and Chief Executive
Officer. The Executive shall comply with the Company’s written policies or rules
adopted by the Board or an authorized committee thereof.

 

  (b)

The Executive shall devote his full business time, attention and energies to the
business of the Company. Notwithstanding the foregoing provisions of this
Paragraph 2, during the Term, the Executive may devote reasonable time to
activities other than those required under this Agreement, including the
supervision of his personal investments, and activities involving professional,
charitable, community, educational, religious and similar types of
organizations,

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  speaking engagements, membership on the boards of directors of organizations
other than business organizations, and similar types of activities, to the
extent that such other activities do not, in the judgment of the Board, inhibit
or prohibit the performance of the Executive’s duties under this Agreement, or
conflict in any material way with the business of the Company or any Affiliate.
The Executive shall not serve on the board of any business, or hold any other
position with any business, or otherwise engage in any business activity,
without the prior written consent of the Board, which consent shall not be
unreasonably withheld.

 

  (c) The Executive understands and agrees that his duties will include his
providing personal services to customers of the Company 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 and
fidelity under the laws of Ohio and applicable federal law to act at all times
in the best interests of the Company. In keeping with these duties, the
Executive shall make full disclosure to the Company of all business
opportunities pertaining to the Company’s business and shall not appropriate for
the Executive’s own benefit any such opportunities.

 

  (e) Subject to the terms of this Agreement, the Executive shall not be
required to perform services under this Agreement during any period in which he
has a physical or mental disability which renders him incapable, after
reasonable accommodation by the Company, of performing his duties under the
Agreement (whether the Executive’s incapacity is temporary or as a result of
Executive becoming Permanently Disabled). In the event of a dispute as to
whether the Executive is incapable of performing his duties, the Company may
refer the same to a licensed practicing physician selected by the Company and
reasonably approved by the Executive, and the Executive agrees to submit to such
tests and examinations as such physician shall deem appropriate. During the
period in which the Executive is disabled, the Company may appoint a temporary
replacement to assume the Executive’s responsibilities. For purposes of this
Agreement, the Executive shall be considered “Permanently Disabled” if, during
any consecutive period of 120 days or more, the Executive has a physical or
mental disability which renders the Executive incapable, after reasonable
accommodation by the Company, of performing the Executive’s duties on a
permanent, full-time basis, and such disability is reasonably expected by the
Board to be of a long-term nature. In the event of Executive’s being considered
“Permanently Disabled,” the Company may terminate Executive’s employment and the
Term pursuant to Section 5(b) of this Agreement.

 

  (f)

For purposes of this Agreement, the term “Affiliate” means any entity which
would be treated as the “employer” pursuant to Treasury Regulation
Section 1.409A-1(h)(3), which generally includes (i) any entity which owns at
least a fifty percent interest in the Company, or (ii) any entity in which at
least a fifty percent interest is owned, directly or indirectly, by the Company,

 

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  by any entity that is a Successor to the Company (as defined in Paragraph 20),
or by any entity that is an Affiliate by reason of clause (i) next above. For
purposes of the covenants contained in Paragraph 13 (relating to assistance with
claims), the Protective Covenants, and the Executive Release, the term
“Affiliate” shall also include any entity that would have been an “Affiliate” by
reason of the preceding sentence (including any entity that would be treated as
a Successor to any such Affiliate in accordance with Paragraph 20) at any time
during the period of the Executive’s employment by the Company (and shall
include any predecessor to any entity described in clause (i) or (ii)). The term
“Protective Covenants” means the covenants contained in Paragraph 8 (relating to
confidentiality), Paragraph 9 (relating to disparagement), Paragraph 10
(relating to competition), and Paragraph 11 (relating to solicitation).

3. Term. The term of employment under this Agreement shall commence on the
Effective Date provided that the Executive is then employed by the Company, and
shall expire on the three-year anniversary of the Effective Date (“Term”).
Neither the Company nor the Executive is under any obligation to renew or extend
the Executive’s employment beyond the Term of this Agreement.

4. Compensation.

 

  (a) Salary. During the Term, while the Executive is employed by the Company,
the Company shall pay him a salary at the rate of Five Hundred Seventy-Five
Thousand Dollars ($575,000) per year, payable on the same payroll schedule as
other executives of the Company. The Executive is liable for any taxes on
compensation payable to him and shall be subject to applicable withholding tax
obligations.

 

  (b) Benefits. During the Term, while the Executive is employed by the Company,
the Company will provide the Executive with benefits no less favorable than
those generally provided to other executives of the Company during the Term,
including but not limited to, nineteen (19) days of paid time off annually
(vacation, personal, sick, which may be increased from time to time, provided
that such vacation, personal and sick days shall be subject to the policies of
the Company as in effect from time to time), health, disability, and life
insurance, and 401(k) Savings Plan. However, the Company shall not be required
to provide a benefit under this Paragraph (b) if such benefit would duplicate
(or otherwise be of the same type as) a benefit specifically required to be
provided under another provision of this Agreement. Nothing in this Paragraph
(b) shall be construed to prevent the Company from revising the benefits
generally provided to executives from time to time. The Executive shall complete
all forms and physical examinations, and otherwise take all other similar
actions to secure coverage and benefits described in this Paragraph 4, to the
extent determined to be necessary or appropriate by the Company.

 

  (c)

Reimbursement of Expenses. During the Term, while the Executive is employed by
the Company, he 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 the performance of his duties and the business of the Company,
pursuant to the reasonable standards and guidelines

 

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  established from time to time by the Company; provided that an expense
reimbursement shall under no circumstances occur later than ninety (90) days
after the date on which an expense is incurred or, if later, ninety (90) days
after the date a request for such reimbursement is submitted in accordance with
the Company’s reimbursement policy. The Company will reimburse the Executive for
the reasonable attorney fees, not exceeding $10,000, actually incurred by
Executive in connection with the negotiation of this Agreement, payable within
ninety (90) days of the Signing Date upon presentation of proper documentation
from the Executive. In no event shall any reimbursement of expenses during one
taxable year affect the expenses that are eligible for reimbursement in any
other taxable year and in no event shall the right to reimbursement be subject
to liquidation or exchange for any other benefit.

 

  (d) Performance Bonuses. Subject to Paragraph 5 below, the Executive will be
eligible for participation in an annual bonus program to the same extent and on
the same terms as that program is generally provided by the Company from time to
time to the Company’s other officers; provided, however, that the eligibility
for and amount of the bonus opportunity shall be adjusted in a manner
commensurate with the Executive’s position, and the Executive shall have annual
threshold, target and maximum bonus payout opportunities of not less than 42.5%,
85% and 170% of Base Salary, respectively. The performance goals shall be
established by the Compensation Committee of the Board (the “Compensation
Committee”), and approved by the Board of Directors after consultation with the
Executive. In the case of a bonus that does not constitute “deferred
compensation” for purposes of Code Section 409A, such bonus will be paid, in
accordance with the terms of the applicable bonus plan, within the applicable
short-term deferral period described in Treas. Regs. §1.409A-2(b) as soon as the
financial books for each fiscal year are closed and a determination regarding
performance has been made by the Compensation Committee. In the case of a bonus
that constitutes “deferred compensation” for purposes of Code Section 409A, such
bonus will be paid in accordance with the terms of the applicable bonus plan
after a determination regarding performance has been made by the Compensation
Committee and in accordance with the requirements for payments of deferred
compensation of Code Section 409A and the regulations thereunder.

 

  (e) Long Term Incentive Grants. The Executive will be eligible for awards
under the long term incentive program to the same extent and on the same terms
as those awards are generally provided by the Company from time to time to the
Company’s other officers, as determined by the Compensation Committee of the
Board; provided, however, that the eligibility for and amount of such awards
shall be adjusted in a manner commensurate with the Executive’s position.

 

  (f)

Indemnification. Except as otherwise provided herein, the Company will, to the
maximum extent permitted by law, defend, indemnify and hold harmless the
Executive and the Executive’s heirs, estate, executors, administrators, and
other legal representatives of his estate or property against any costs, losses,
claims, suits, proceedings, damages or liabilities to which the Executive may
become subject which arise out of, are based upon or relate to the Executive’s
employment

 

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  by the Company (and employment by any predecessor company to the Company or
Successor to or Affiliate of the Company which succeeds to this Agreement) or
the Executive’s service as an officer or member of the Board of Directors of the
Company (or any predecessor company to the Company), Successor or any Affiliate,
including without limitation reimbursement for any legal or other expenses
reasonably incurred by the Executive in connection with investigation and
defending against any such costs, losses, claims, suits, proceedings, damages or
liabilities. Notwithstanding the foregoing, however, the Company’s obligation to
defend, indemnify and hold harmless contained in this Paragraph (f) shall not
apply to claims between the Company and the Executive (including the Executive’s
heirs, estate, executors, administrators, and other legal representatives of his
estate or property) including, without limitation, disputes arising out of the
Protective Covenants. The Company shall maintain directors and officers
liability insurance in commercially reasonable amounts (as reasonably determined
by the Board), and the Executive shall be covered under such insurance to the
same extent as other officers and directors of the Company; provided, however,
that the Company shall not be required to maintain such insurance coverage
unless the Board determines that it is obtainable at reasonable cost.

 

  (g) Recovery. 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 federal law, the rules of the Securities and Exchange
Commission (“SEC”) and any stock exchange on which stock of the of the Company
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).

 

  (h) Annual Benefits Statement. During the Term, the Company shall, during the
first quarter of each calendar year, provide the Executive with a statement
listing the employee benefit programs in which Executive participated as of
January 1 of such year. Such statement shall also include a list of all
Executive’s outstanding equity grants and other long-term incentive grants, if
any.

5. Termination.

 

  (a) General. If the Executive’s Date of Termination occurs during the Term for
any reason, the Company shall pay or provide to the Executive:

 

  i. The Executive’s salary for the period ending on the Date of Termination
(which shall be paid within the time required under applicable law).

 

  ii. Payment for unused vacation days, as determined in accordance with the
Company policy as in effect from time to time (which shall be paid within the
time required under applicable law).

 

  iii. Payment for unpaid reimbursable expenses outstanding.

 

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  iv. If the Date of Termination occurs after the end of a performance period
and prior to the payment of the performance bonus (as described in Paragraph
4(d)) for the period, the Executive shall be paid such bonus amount at the
regularly scheduled time (but, for the avoidance of doubt, not including a bonus
for the performance period in which the Date of Termination occurs, except as
otherwise expressly provided in this Agreement or the applicable bonus plan).

 

  v. The Executive and any of his dependents shall be eligible for COBRA
continuation coverage (as described in Section 4980B of the Internal Revenue
Code of 1986, as amended (the “Code”)) to the extent required by applicable law.

 

  vi. Any amounts that are due pursuant to the right of the Executive and the
Executive’s heirs, estate, executors administrators and other legal
representatives of his estate or property to indemnification from the Company or
its Affiliates (or from a third-party insurer for directors and officers
liability coverage) with respect to any costs, losses, claims, suits,
proceedings, damages or liabilities to which the Executive may become subject
which arise out of, are based upon or relate to the Executive’s employment by
the Company or the Executive’s service as an officer or member of the Board of
Directors of the Company or any Successor or Affiliate, to the extent such
amounts are due from the Company in accordance with the terms of this Agreement
or such coverage.

 

  vii. Any benefits to which the Executive or his beneficiaries may be entitled
under the plans and programs described above or any other Company plans or
programs under which the Executive is otherwise entitled to benefits as of his
Date of Termination as determined in accordance with the terms of such plans and
programs. Following the Executive’s Date of Termination, and except as otherwise
expressly provided in this Agreement:

(A) The Company shall have no liability to the Executive or the Executive’s
heirs, beneficiaries or estate for damages, compensation, benefits, severance,
indemnities or other amounts of whatever nature.

(B) All rights to any unvested restricted stock, stock options, or incentive
grants or bonuses of any kind, shall be forfeited except as otherwise expressly
provided in this Agreement or an applicable award agreement or equity incentive
plan.

(C) Except as may otherwise be expressly provided to the contrary in this
Agreement, nothing in this Agreement shall be construed as requiring the
Executive to be treated as employed by the Company for purposes of any employee
benefit plan or arrangement following the Executive’s Date of Termination.

 

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  (b) Disability; Death. The Company may terminate the Executive’s employment
and the Term during any period in which he is Permanently Disabled. If the
Executive’s Date of Termination occurs during the Term by reason of the
Executive’s death or while Permanently Disabled then, in addition to the amounts
payable in accordance with Paragraph (a) above, the Executive shall receive
payment of the bonus for the performance period in which his Date of Termination
occurs, based on actual performance for the entire period, and payable at the
same time as it is payable for other participants in the bonus plan; provided,
however, that it shall be subject to a pro-rata reduction for the portion of the
performance period following the Date of Termination. If the Executive’s
employment is terminated by reason of his death, or while he is Permanently
Disabled, then, except as otherwise specifically provided above in this
Paragraph (b) and in Paragraph (a) above, the Company shall have no obligation
to make payments or provide benefits under the Agreement for periods after the
Executive’s Date of Termination.

 

  (c) With Cause. The Company, by direction of the Board, shall be entitled to
terminate the Term and to discharge the Executive at any time for Cause upon
written notice. The term “Cause” shall be limited to the following grounds:

 

  i. The Executive’s failure or refusal to materially perform his duties and
responsibilities, or the failure of the Executive to devote substantially all of
his business time and attention exclusively to the business and affairs of the
Company in accordance with the terms of this Agreement;

 

  ii. The willful misappropriation of the funds or property of the Company;

 

  iii. Use of alcohol, to the extent that such use interferes with the
performance of the Executive’s obligations under this Agreement, continuing
after written warning, or use of illegal drugs, with or without previous
warning;

 

  iv. Conviction of, or plea of guilty or “no contest”, to a felony or of any
crime involving moral turpitude, dishonesty, theft, unethical or unlawful
conduct;

 

  v. A material breach by the Executive of this or any other written agreement
between the Executive and the Company;

 

  vi. A material failure by the Executive to comply with the Company’s written
policies or rules adopted by the Board or an authorized committee thereof; or

 

  vii. The commission by the Executive of any willful or intentional act which
could reasonably be expected to injure the reputation, business or business
relationships of the Company or which could reasonably be expected to bring the
Executive or the Company into disrepute, or the commission of any act which is a
breach of the Executive’s fiduciary duties to the Company.

 

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For any termination pursuant to Paragraphs (i), (v), or (vi) above, the Company
shall first give written notice of the breach to the Executive, and if the
breach is susceptible to a cure, the Company shall give the Executive a
reasonable opportunity to promptly (within 30 days) cure the breach. If the
Executive’s employment is terminated for Cause, then, except as otherwise
specifically provided in Paragraph (a) above, the Company shall have no
obligation to make payments or provide benefits under the Agreement for periods
after the Executive’s Date of Termination.

 

  (d) Without Cause. At any time during the Term, (I) the Company shall be
entitled to terminate the Term and discharge the Executive without Cause, upon
delivery of written notice to the Executive, and (II) the Executive shall be
entitled to resign for Good Reason as described in Paragraph (e) below. If the
Date of Termination occurs during the Term by reason of termination by the
Company without Cause, or resignation by the Executive for Good Reason, then, in
addition to amounts required under Paragraph (a) above, the Company shall pay to
the Executive:

 

  i. At the beginning of each of eighteen (18) consecutive calendar months,
beginning with the calendar month following the month in which the Date of
Termination occurs, an amount equal to the sum of the Executive’s monthly salary
as in effect immediately prior to such Date of Termination. If the Executive
fails to be in compliance with Paragraph 13 (relating to assistance with claims)
and the Protective Covenants before the eighteen (18) month anniversary of the
Date of Termination, the Executive’s eligibility for the Company’s payment of
payments set forth in this Paragraph (i) shall cease on the date of such
non-compliance. For the avoidance of doubt, monthly installments under this
Paragraph (i) shall be excluded in the calculation of pensionable earnings while
the duration on the non-active payroll shall be included, to the extent legally
permitted, as service for calculating years of service under the Company’s
pension plans.

 

  ii. If the Executive’s Date of Termination occurs prior to the last day of an
annual performance period relating to a performance bonus (as described in
Paragraph 4(d)) and at least six months after the first day of such annual
performance period, the Executive shall receive payment of the bonus for the
performance period in which his Date of Termination occurs, based on actual
performance for the entire period, and payable at the same time as it is payable
for other participants in the bonus plan; provided, however, that it shall be
subject to a pro-rata reduction for the portion of the performance period
following the Date of Termination.

 

  iii.

During the period beginning on the Date of Termination and ending on the
eighteen (18) month anniversary of the Date of Termination, but in no event for
longer than the period of time during which the Executive or any of his
dependents is eligible for and

 

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  elects COBRA continuation coverage (as described in Section 4980B of the
Code), the Company shall pay 100% of the premiums necessary to maintain such
COBRA continuation coverage. If the Executive fails to be in compliance with
Paragraph 13 (relating to assistance with claims) or the Protective Covenants
before the eighteen (18) month anniversary of the Date of Termination, the
Executive’s eligibility for the Company’s payment of premiums as set forth in
this Paragraph (iii) shall cease on the date of such non-compliance. However,
the preceding sentence shall not be construed to permit cessation of the right
to continue COBRA coverage at the required COBRA premium rate to the extent that
the Company is required by law to offer such coverage. The period of medical
benefit coverage provided in accordance with this Paragraph (iii) shall be
counted toward the Company’s obligation to provide COBRA coverage. During any
period after the Executive’s Date of Termination during which he is eligible to
obtain medical benefit coverage (with respect to the Executive or his family)
from his employer, or other person to whom he provides service, he will file
such an application, and take such other steps as may be necessary to obtain
such coverage (including the payment of premiums), and to the extent permitted
by applicable law, coverage obtained in accordance with this sentence shall be
primary.

The Executive shall be eligible for payments and benefits under this Paragraph
(d) (including amounts otherwise due because of a Good Reason termination) only
if the release prepared by the Company in substantially the form attached as
Exhibit 1 to this Agreement (the “Executive Release”) is returned to the Company
and becomes irrevocable within sixty (60) days after the Date of Termination,
and no payments or benefits shall be provided under this Paragraph (d) unless
the foregoing requirement in this sentence is timely satisfied. To the extent
payments and benefits provided pursuant to this Paragraph (d) would constitute
nonqualified deferred compensation under Code Section 409A, such benefits shall
be paid to the Executive on the 65th day following the Date of Termination,
subject to the six (6) month delay requirements for specified employees, as
provided in Paragraph 24. If the Executive fails to return the Executive Release
to the Company in sufficient time so that it becomes irrevocable within sixty
(60) days after the Date of Termination, the Executive’s rights to amounts
described in Paragraphs (i), (ii) and (iii) above shall be forfeited. For
purposes of Code Section 409A, each such installment payment shall be treated as
a separate payment under Treasury Regulation Section 1.409A-2(b)(2)(iii).

This Paragraph (d) 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 either 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 ($260,000 for 2014), such excess payments shall be
subject to the provisions of Paragraph 24. For purposes of the preceding
sentence, the calculation of

 

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“aggregate payments” shall exclude any bonus payment due under a bonus
arrangement that satisfies the requirements of the exemption from the
application of Code Section 409A for short-term deferrals under Treasury
Regulation Section 1.409A-1(b)(4).

For purposes of this Paragraph (d), if the Company has not, at least sixty
(60) days before the end of the Term, offered to extend the Term for at least
one year under substantially the same provisions as the provisions in this
Agreement as in effect ninety (90) days prior to the end of the Term, and the
Executive’s Date of Termination has not occurred prior to the end of the Term,
then the Executive’s Date of Termination on or after the end of the Term for any
reason other than Termination for Cause shall be treated in the same manner as
having occurred during the Term by reason of termination by the Company without
Cause.

If the Executive’s employment is terminated by the Company without Cause or by
the Executive’s resignation for Good Reason, then, except as otherwise
specifically provided above in this Paragraph (d) and in Paragraph (a) above,
the Company shall have no obligation to make payments or provide benefits under
the Agreement for periods after the Executive’s Date of Termination.

 

  (e) Executive Termination—For Good Reason. The Executive shall be entitled to
terminate the Term and resign for Good Reason to the extent provided in this
Paragraph (e). Good Reason is defined as the occurrence of any of the following:
(1) a material change by the Company in the Executive’s authority, duties or
responsibilities which would cause the Executive’s position with the Company to
become of materially less responsibility and importance; including but not
limited to (i) the removal of the Executive from his position as President
and/or Chief Executive Officer, (ii) the Executive ceases to be the Company’s
“principal executive officer” for proxy reporting purposes during any period in
which the Company is required to file a proxy under the federal securities laws,
or (iii) his removal from the Board; or, (2) the Company otherwise materially
breaches this Agreement, provided that (a) the Executive shall provide written
notice to the Company of the Good Reason no more than ninety (90) days after the
initial existence of the Good Reason, and (b) the Company is afforded thirty
(30) days to remedy the material change or breach, and (c) the Executive
terminates within one-hundred-fifty (150) days following the initial existence
of any Good Reason. Notwithstanding any other provision of this Agreement, the
occurrence of the events described in clauses (i) and (ii) below will not
constitute a material breach of this Agreement and will not constitute a
material change by the Company in the Executive’s authority, duties or
responsibilities which would cause the Executive’s position with the Company to
become of materially less responsibility and importance: (i) responsibility for
one or more of the Company’s or Affiliates’ operations is delegated to a person
or persons (each, a “Delegate Officer”) by the Board with the written agreement
of the Executive, or by the Executive, regardless of whether the Executive at
one time performed some or all of the job responsibilities assigned to such
Delegate Officer, provided that such Delegate Officer reports, directly or
indirectly, to the Executive, and (ii) the size of the Company including the
Affiliates changes.

 

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  (f) Executive Termination—Without Good Reason. The Executive may terminate his
employment hereunder at any time for any reason by giving the Company prior
written notice of termination, which notice of termination shall be effective
not less than 30 days after it is given to the Company, provided that nothing in
this Agreement shall require the Executive to specify a reason for any such
termination. However, to the extent that the procedures specified in Paragraph
(d) or (e) are required, the procedures of this Paragraph (f) may not be used in
lieu of the procedures required under Paragraph (d) or (e). Following the
Company’s receipt of a notice of termination under this Paragraph (f), the
Company may, by written notice to the Executive, designate an earlier date (not
earlier than the date of such notice to the Executive) as of which the
Executive’s Date of Termination shall occur; provided that such Date of
Termination shall be considered to have occurred under this Paragraph
(f) regardless of the acceleration of the Date of Termination under this
Paragraph (f). If the Executive terminates his employment without Good Reason
(as described in this Paragraph (f)), then, except as otherwise specifically
provided in Paragraph (a) above, the Company shall have no obligation to make
payments or provide benefits under the Agreement for periods after the
Executive’s Date of Termination.

 

  (g) Date of Termination. “Date of Termination” means the last day the
Executive is employed by the Company (including any Successor to the Company).
If the Executive becomes employed by a Successor to the Company, the Executive
shall not be treated as having terminated employment for purposes of this
Agreement until such time as the Executive terminates employment with the
Successor.

 

  (h) Effect of Termination. If, on the Date of Termination, the Executive is a
member of the Board of Directors of the Company or any of the Affiliates, or
holds any other position with the Company and the Affiliates, the Executive
shall be deemed to have resigned from all such positions as of the Date of
Termination.

6. Duties on Termination.

 

  (a)

Subject to the terms and conditions of this Agreement, during the period
beginning on the date of delivery of a notice of termination, and ending on the
Date of Termination, the Executive shall continue to perform his duties as set
forth in this Agreement, and shall also perform such services for the Company as
are necessary and appropriate for a smooth transition to the Executive’s
successor. Notwithstanding the foregoing provisions of this Paragraph 6, the
Company may suspend the Executive from performing his duties under this
Agreement (including, without limitation, his duties as a member of the Board of
Directors of the Company or any Affiliate) following the delivery of a notice of
termination providing for the Executive’s resignation, or delivery by the
Company of a notice of termination providing for the Executive’s termination of
employment for any reason; provided, however, that during the period of
suspension (which shall end on the Date of Termination), the Executive shall
continue to be treated as employed by the Company and his rights to compensation
or benefits and other rights under this Agreement shall not be reduced or
otherwise adversely affected by reason of

 

11

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  the suspension; and further provided that any such suspension shall not affect
the determination of whether the resignation was for Good Reason or without Good
Reason. Executive acknowledges and agrees that the legal rules and regulations
applicable to qualified plans under Code Section 401(a), the legal rules and
regulations applicable to nonqualified deferred compensation plans under Code
Section 409A, and other legal rules and regulations applicable to other benefit
plans and arrangements (including equity arrangements) may require that the
commencement of a period of suspension of Executive under this Section 6(e) be
treated as Executive’s “separation of service” (or other equivalent status) for
purposes of such plans and arrangements, and that the Company will administer
and interpret any such affected benefit plans and arrangements in compliance
with such legal and regulatory requirements, which such compliance Executive
acknowledges and agrees will inure to the benefit of Executive.

 

  (b) Following the Date of Termination, the Executive agrees to return to the
Company any keys, credit cards, passes, confidential documents or material, or
other property belonging to the Company, and to return all writings, files,
records, correspondence, notebooks, notes and other documents and things
(including any copies thereof) containing any trade secrets relating to the
Company, provided however, the foregoing provision shall not require the return
of any item that Executive lawfully possessed prior to his employ with Company,
provided that the retention of said item shall not be in violation of this
Section 6(b). For purposes of the preceding sentence, the term “trade secrets”
shall have the meaning ascribed to it under the Illinois Trade Secrets Act or,
if such act is repealed, the Uniform Trade Secrets Act (on which the Illinois
Trade Secrets Act is based). The Executive agrees to represent in writing to the
Company upon termination of employment that he has complied with the foregoing
provisions of this Paragraph (b) and that he will comply with the Protective
Covenants. If any property belonging to the Company subsequently comes into the
Executive’s possession, custody or power, the Executive agrees to return it to
the Company immediately.

7. Mitigation. The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise
or for any reason except as provided for in this Paragraph 7 and Paragraph 14.
Subject to Code Section 409A, the Company shall be entitled to set off against
amounts payable to the Executive any amounts owed to the Company by the
Executive, but the Company shall not be entitled to set off against the amounts
payable to the Executive under this Agreement any amounts earned by the
Executive in other employment after his Date of Termination, or any amounts
which might have been earned by the Executive in other employment had he sought
such other employment.

8. Confidentiality. The Executive agrees that, during the Term, and at all times
thereafter:

 

  (a)

Except as may be required by the lawful order of a court or agency of competent
jurisdiction, and except as necessary to carry out his duties to the Company and
its Affiliates, the Executive agrees to keep all Confidential Information secret
and confidential indefinitely and not to

 

12

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  disclose the same, either directly or indirectly, to any other person, firm,
or business entity, or to use it in any way. The Executive shall, during the
continuance of the Executive’s employment, use the Executive’s best endeavors to
prevent the unauthorized publication or misuse of any Confidential Information.

 

  (b) To the extent that any court or agency seeks to have the Executive
disclose Confidential Information, he shall promptly inform the Company, and he
shall take reasonable steps to prevent disclosure of Confidential Information
until the Company has been informed of such requested disclosure, and the
Company has an opportunity to respond to such court or agency. To the extent
that the Executive obtains information on behalf of the Company or any of the
Affiliates that may be subject to attorney-client privilege as to the Company’s
attorneys, the Executive shall take reasonable steps to maintain the
confidentiality of such information and to preserve such privilege.

 

  (c) This Paragraph 8 shall not be construed to unreasonably restrict the
Executive’s ability to disclose Confidential Information in a court proceeding
in connection with the assertion of, or defense against a claim of breach of
this Agreement. If there is a dispute between the Company and the Executive as
to whether information may be disclosed in accordance with this Paragraph (c),
the matter shall be submitted to the court for decision.

 

  (d) Nothing in the foregoing provisions of this Paragraph 8 shall be construed
so as to prevent the Executive from using, in connection with his employment for
himself or an employer other than the Company or any of the Affiliates,
knowledge which was acquired by him during the course of his employment with the
Company and the Affiliates which is generally known to persons of his experience
in other companies in the same industry.

 

  (e) The Executive may disclose so much of Confidential Information to
personal, legal, tax or financial advisors as may be required to enable such
advisors to render appropriate advice to the Executive, provided that the
Executive takes reasonable steps to assure that such advisors maintain the
confidentiality of the information.

 

  (f) For purposes of this Agreement, the term “Confidential Information” shall
include all non-public information relating to the business of the Company and
its Affiliates, including, without limitation, the customer lists of the Company
and its Affiliates, their respective trade secrets, any confidential information
about or provided by any customer, supplier, or investor, or prospective or
former customer or supplier, of the Company or any of its Affiliates,
information concerning the business or financial affairs of the Company or any
of its Affiliates, including books and records, commitments, procedures, plans,
strategies, current or prospective transactions or business, information
regarding litigation and pending litigation that was acquired by or disclosed to
the Executive during the course of his employment with the Company, or during
the course of his consultation with the Company prior to the commencement of his
employment and following his Date of Termination. For the avoidance of doubt,
the term “Confidential Information” shall include all non-public information
concerning any other person or company that was shared with the Company or an
Affiliate subject to an agreement to maintain the confidentiality of such
information.

 

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9. Disparagement. The Executive agrees that, while he is employed by the
Company, and after his Date of Termination, he shall not make any false,
defamatory or disparaging statements about the Company, the Affiliates, or the
officers or directors of the Company or the Affiliates. The Company agrees that,
while the Executive is employed by the Company and after his Date of
Termination, it and its Affiliates, officers, and directors shall not make any
false, defamatory or disparaging statements about the Executive. The provisions
of this Paragraph 9: (i) shall not apply to testimony as a witness, compliance
with other legal obligations, the Executive’s or the Company’s, as applicable,
assertion of or defense against any claim of breach of this Agreement (including
the Exhibits thereto and the referenced plans and arrangements), or the
Executive’s statements or disclosures to officers or directors of the Company or
its Affiliates, and (ii) shall not require the Executive or an officer or
director of the Company or its Affiliates to make false statements or
disclosures.

10. Non-Competition

 

  (a) The Executive acknowledges that (i) the businesses of the Company and the
Affiliates are highly competitive in nature, (ii) in the course of the
Executive’s involvement in the Company’s and the Affiliates’ activities, the
Executive will have access to the Company’s and Affiliates’ Confidential
Information and customer base and have the potential to profit from the goodwill
associated with the Company and the Affiliates, (iii) if the Executive violates
the Protective Covenants, the Company and the Affiliates will likely suffer
significant harm, (iv) complying with this Paragraph 10 will not result in
severe economic hardship for the Executive or his family, (v) the Company would
not have entered into this Agreement if the Executive did not agree to abide by
the Protective Covenants and (vi) the restrictions set forth above are
reasonable and necessary to protect the goodwill of the Company’s and the
Affiliates’ businesses.

 

  (b)

While he is employed by the Company, and if the Executive’s Date of Termination
occurs during the Term or during the 30-day period immediately after the end of
the Term for any reason, then for a period of eighteen (18) months after the
Executive’s Date of Termination (the “Restricted Period”), the Executive shall
not be employed by, serve as a consultant to, or otherwise assist or directly or
indirectly provide services to a Competitor (defined below) if: (i) the services
that the Executive is to provide to the Competitor are the same as, or
substantially similar to, any of the services that the Executive provided to the
Company or the Affiliates, and such services are to be provided with respect to
any location in which the Company or an Affiliate had material operations during
the twelve (12) month period prior to the Date of Termination, or with respect
to any location in which the Company or an Affiliate had devoted material
resources to establishing operations during the twelve (12) month period prior
to the Date of Termination; or (ii) the trade secrets, Confidential Information,
or proprietary information (including, without limitation, confidential or
proprietary methods) of the Company

 

14

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  and the Affiliates to which the Executive had access could reasonably be
expected to benefit the Competitor if the Competitor were to obtain access to
such secrets or information. For purposes of this Paragraph 10, services
provided by others shall be deemed to have been provided by the Executive to
Competitor if the Executive had material supervisory responsibilities with
respect to the provision of such services.

 

  (c) Nothing herein shall prohibit passive ownership of not more than 2% of the
stock of a publicly-held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market so long as the Executive
does not have any active participation in the business of the corporation.

 

  (d) While he is employed by the Company, he shall not provide consultation or
cooperation to any person or entity whose interests are adverse to the interests
of the Company or the Affiliates. If the Executive’s Date of Termination occurs
during the Term for any reason or during the 30-day period immediately after the
end of the Term for any reason, then for a period of eighteen (18) months after
the Executive’s Date of Termination, with respect to any matter or transaction
as to which the Executive was materially involved while employed by the Company
or other similar matter or transaction, the Executive shall not provide
consultation or cooperation to any person or entity whose interests are adverse
to the interests of the Company or the Affiliates.

The term “Competitor” means any enterprise (including a person, firm, business,
division, or other unit, whether or not incorporated) during any period in which
a material portion of its business is (and during any period in which it intends
to enter into business activities that would be) materially competitive in any
way with any business in which the Company or any of the Affiliates was engaged
during the twelve (12) month period prior to the Executive’s Date of Termination
(including, without limitation, any business if the Company devoted material
resources to entering into such business during such twelve (12) month period),
but for purposes of clause (b)(i) above, the term “Competitor” shall be limited
to those businesses to which the Executive devoted more than an insignificant
amount of time while employed by the Company. Notwithstanding the foregoing, the
term “Competitor shall not include a business of a Competitor if such business
would not, as a stand alone enterprise, constitute a “Competitor” under the
forgoing definition, provided that Executive does not render any services to, or
otherwise assist the portion of the business that competes with the Company and
its Affiliates. For the avoidance of doubt, the Company’s and Affiliates’
businesses shall include, without limitation, the lines of business set forth in
the Company’s annual report (Form 10-K), provided that nothing in this sentence
shall be construed to limit the type of businesses of the Company and the
Affiliates or the restrictions with respect to such businesses in the future.

11. Solicitation. While he is employed by the Company, and if the Executive’s
Date of Termination occurs during the Term for any reason or during the 30-day
period immediately after the end of the Term for any reason, then for a period
of eighteen (18) months after the Executive’s Date of Termination, the Executive
shall not:

 

15

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  (a) Solicit, entice, persuade or induce any individual who is employed by or
otherwise provides service to the Company or the Affiliates (or was so employed
or providing services within ninety (90) days prior to the Executive’s action
described under this subparagraph (a)) to terminate or refrain from renewing or
extending such employment or provision of services or to become employed by or
enter into contractual relations with any other individual or entity other than
the Company or the Affiliates, and the Executive shall not approach any such
employee or other service provider for any such purpose or authorize or
knowingly cooperate with the taking of any such actions by any other individual
or entity.

 

  (b) Solicit or induce, or attempt to solicit or induce any Direct Customer to
materially alter, terminate or otherwise cease its relationship with the Company
or an Affiliate, or solicit or induce any Indirect Customer to materially alter,
terminate or otherwise cease its relationship with the Direct Customer with
respect to goods and/or services purchased from the Direct Customer that are
directly or indirectly provided to the Direct Customer by the Company or any of
the Affiliates. For purposes of this Paragraph (b), the term “Direct Customer”
means any person purchasing goods and/or services from the Company or any of the
Affiliates, and the term “Indirect Customer” means any person purchasing goods
and/or services from a Direct Customer, to the extent that the goods and/or
services that are directly or indirectly purchased by the Direct Customer are
directly or indirectly provided to the Direct Customer by the Company or any of
the Affiliates. For periods after the Date of Termination, a person shall be
considered an Indirect Customer for purposes of this Paragraph 11 only if the
Executive is aware (as a result of his prior employment, information provided to
him by the Company or otherwise) that the person is an Indirect Customer.

 

  (c) Solicit or induce, or attempt to solicit or induce any Direct Supplier to
materially alter, terminate or otherwise cease its relationship with the Company
or an Affiliate, or to solicit or induce any Indirect Supplier to materially
alter, terminate or otherwise cease its relationship with the any Direct
Supplier with respect to goods and/or services are directly or indirectly
provided to the Company or any of the Affiliates. For purposes of this Paragraph
(c), the term “Direct Supplier” means any person providing goods and/or services
to the Company or any of the Affiliates, and the term “Indirect Supplier” means
any person supplying goods and/or services to persons supplying goods
and/services to a Direct Customer, to the extent that such goods and/or services
are directly or indirectly provided to the Company or any of the Affiliates. For
periods after the Date of Termination, a person shall be considered an Indirect
Supplier for purposes of this Paragraph 11 only if the Executive is aware (as a
result of his prior employment, information provided to him by the Company or
otherwise) that the person is an Indirect Supplier.

 

  (d) Notwithstanding the forgoing, the terms “Direct Customer,” “Indirect
Customer,” “Direct Supplier,” “Indirect Supplier,” shall not include the portion
of any customer or supplier that is not otherwise providing or being provided
goods and services that relate directly or indirectly to the business of the
Company or any of its Affiliates.

 

16

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12. Other Obligations. Nothing in the Protective Covenants shall be construed as
limiting the Executive’s duty of loyalty to the Company, or any other duty he
may otherwise have to the Company, while he is employed by the Company. The
Executive agrees that if the Executive acts in violation of Paragraphs 10 and
11, the number of days the Executive is in such violation will be added to any
periods of limitation on the Executive’s specified activities.

13. Assistance with Claims. The Executive agrees that, during the Term and
continuing for a reasonable period after the Executive’s Date of Termination
(but for a period of not more than twenty-four (24) months after the Executive’s
Date of Termination), the Executive will reasonably assist the Company and the
Affiliates in the defense of any third-party claims that may be made against the
Company and the Affiliates, and will reasonably assist the Company and the
Affiliates in the prosecution of any claims that may be made by the Company or
the Affiliates, to the extent that such claims may relate to services performed
by the Executive for the Company and the Affiliates against third parties. The
Executive agrees, unless precluded by law or court order, to promptly inform the
Company in writing if the Executive is asked to participate (or otherwise become
involved) in any lawsuits (whether governmental or private) involving such
claims that may be filed against the Company or any Affiliate. The Executive
also agrees, unless precluded by law or court order, to promptly inform the
Company if he is asked to assist in any investigation (whether governmental or
private) of the Company or the Affiliates (or their actions) that may relate to
services performed by the Executive for the Company or the Affiliates,
regardless of whether a lawsuit has then been filed against the Company or the
Affiliates with respect to such investigation. The Company agrees to reimburse
the Executive for all of the Executive’s reasonable out-of-pocket expenses
associated with such assistance, including travel expenses, and if, after the
Date of Termination, such assistance is required, the Company shall pay the
Executive a per diem equal to one day’s base salary (determined as of the Date
of Termination) for each day or partial day of assistance. Nothing in this
Paragraph 13 shall prevent the Executive from honestly testifying at a legal
proceeding in response to a lawful and properly served subpoena in a proceeding
involving the Company or its Affiliates or from cooperating with any
governmental investigation.

14. Enforcement.

 

  (a)

If, at the time of enforcement of the Protective Covenants, a court shall hold
that the duration, scope or area restrictions stated are unreasonable under the
circumstances then existing, the parties agree that the maximum duration, scope
or area reasonable under such circumstances shall be substituted for the stated
duration, scope or area and that the court shall be allowed to revise the
Protective Covenants to cover the maximum duration, scope and area permitted by
law. Notwithstanding the foregoing, (i) if (x) during the Restricted Period,
Executive becomes employed by, serves as a consultant to, or otherwise assists
directly or indirectly provides services to a Competitor, and (y) one or more
provisions of the Protective Covenants is invalid or unenforceable, the Company
shall be entitled to set off against amounts payable to the Executive any
amounts earned by Executive in employment with the Competitor (other than any
amount that is required to be paid to Executive without set off under applicable
law), and (ii) if one or more provisions of the Executive Release is invalid or
unenforceable, the Company may, in it sole discretion, cease payment of all or a
portion of the release consideration and may

 

17

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  elect, in its sole discretion, to recover from Executive some or all of the
amounts paid by the Company to Executive as consideration for the Executive
Release. The Executive has consulted with legal counsel regarding the Protective
Covenants and based on such consultation has determined and agrees that the
Protective Covenants are reasonable in terms of duration, scope and area
restrictions and are necessary to protect the goodwill of the Company’s
businesses and agrees not to challenge the validity or enforceability of the
Protective Covenants.

 

  (b) If the Executive breaches, or threatens to commit a breach of any of the
Protective Covenants, the Company and the Affiliates shall have the following
rights and remedies, each of which rights and remedies shall be independent of
the others and severally enforceable, and each of which is in addition to, and
not in lieu of, any other rights and remedies available to the Company or
Affiliates at law or in equity:

 

  i. the right and remedy to have the Protective Covenants specifically enforced
by any court of competent jurisdiction, it being agreed that any breach or
threatened breach of the Protective Covenants would cause irreparable injury to
the Company and the Affiliates and that money damages would not provide an
adequate remedy to the Company or the Affiliates; and

 

  ii. the right and remedy to require the Executive to account for and pay over
to the Company or the Affiliates any profits, monies or other benefits derived
or received by the Executive as the result of any transactions constituting a
breach of the Protective Covenants.

If a bond is required to be posted in order for the Company to secure an
injunction or other equitable remedy, the parties agree that said bond need not
be more than a nominal sum. For the avoidance of doubt, the Executive shall be
entitled to the payments set forth in Paragraph 5(d)(i) and (ii) only so long as
he is in compliance with Paragraph 13 (relating to assistance with claims) and
in compliance with the Protective Covenants. For the avoidance of doubt, if the
Executive fails to be in compliance with Paragraph 13 (relating to assistance
with claims) or the Protective Covenants before the eighteen (18) month
anniversary of the Date of Termination, the Executive’s eligibility for the
Company’s payment of continuing salary and payment of premiums in accordance
with Paragraph 5(d) shall cease on the date of such non-compliance.

15. Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be delivered personally or sent by registered or certified
mail, return receipt requested, postage prepaid (provided that international
mail shall be sent via overnight or two-day delivery), or sent by prepaid
overnight courier to the parties at the addresses set forth below (or such other
addresses as shall be specified by the parties by like notice). Notices shall be
deemed to have been given when delivered personally to the recipient, one day
after being sent to the recipient by reputable overnight courier service
(charges prepaid), upon machine-generated acknowledgment of receipt by certified
or registered mail, return receipt requested and postage prepaid. Such notices,
demands and other communications shall be sent to the Executive and the Company
at the addresses indicated below.

 

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Notice to the Executive

At the address most recently contained in the Company records

Notice to the Company

Sparton Corporation

Attention: Chairman of the Board

425 North Martingale Road

Suite 2050

Schaumburg, IL 60173

All notices to the Company shall be directed to the attention of Chairman of the
Board of the Company, with a copy to the Secretary of the Company. Each party,
by written notice furnished to the other party, may modify the applicable
delivery address, except that notice of change of address shall be effective
only upon receipt.

16. Entire Agreement. Upon the Effective Date, this Agreement will constitute
the entire agreement between the parties concerning the subject matter hereof
and will supersede all prior agreements (including without limitation the Prior
Agreement), understandings, discussions, negotiations and undertakings, whether
written or oral, between the parties with respect to the subject matter hereof.
Nothing in this Agreement shall be construed to limit the Company’s ability to
establish and maintain policies (or require the Executive to enter into an
agreement) relating to confidentiality, rights to inventions, copyrightable
material, business and/or technical information, trade secrets, and other
similar policies or agreement for the protection of the business and operations
of the Company and the Affiliates.

17. No Strict Construction. The language used in this Agreement shall be deemed
to be the language chosen by the parties to express their mutual intent, and no
rule of strict construction shall be applied against any party.

18. Counterparts. This Agreement may be executed in separate counterparts, each
of which is deemed to be an original and all of which taken together constitute
one and the same agreement.

19. Survival of Agreement. The rights and obligations of the parties under the
provisions of this Agreement shall survive, and remain binding and enforceable,
notwithstanding the expiration of the Term, the termination of this Agreement,
the termination of Executive’s employment hereunder or any settlement of the
financial rights and obligations arising from Executive’s employment hereunder,
to the extent necessary to preserve the intended benefits of such provisions.

 

19

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20. Successors to Company and Assignment by Company. This Agreement shall be
binding upon and inure to the benefit of the Company and any Successor to the
Company, subject to the following:

 

  (a) The Company may assign its rights and obligations under this Agreement to
any Affiliate. The Company will require that any assignee (pursuant to the
preceding sentence), and will require any Successor to the Company, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such assignment or
succession had taken place. The term “Successor” shall mean, with respect to the
Company or any Affiliate, any entity (or a company which is part of an
affiliated group of entities) that acquires all or substantially all of the
business or assets of the Company or Affiliate, respectively, regardless of
whether such acquisition is direct or indirect, and regardless of whether such
acquisition is by purchase, merger, consolidation or otherwise; provided that an
assignee of this Agreement in accordance with this Paragraph (a) also shall be
treated as a Successor. An assumption by a Successor shall not constitute a Date
of Termination.

 

  (b) Subject to Paragraph (c) below, after a Successor to the Company assumes
this Agreement in accordance with this Paragraph 20 (and except for liabilities
assumed by entities that are not the Executive’s employer at the time of such
assumption), only such Successor shall be liable for amounts payable after such
assumption, and no other companies shall have liability for amounts payable
after such assumption.

 

  (c) Notwithstanding the foregoing provisions of this Paragraph 20, if a
Successor is required to assume the obligations of this Agreement under
Paragraph (a) above, and fails to execute and deliver to the Executive a written
acknowledgment of the assumption at that time or, if later, promptly following
demand by the Executive for execution and delivery of such an acknowledgment,
then such failure will constitute a material breach of this Agreement described
in clause 1 of Paragraph 5(e), and the Successor shall not be substituted as the
Company.

 

  (d) The Company’s rights and obligations under this Agreement may not be
assigned to an entity that is (or immediately prior to the assignment was) not
an Affiliate without the Executive’s consent.

 

  (e) To the extent that rights are expressly granted to an Affiliate under this
Agreement, the Affiliate and its Successors may enforce such rights.

21. Assignment by Executive. Except as otherwise provided in this Paragraph 21,
the interests of the Executive under this Agreement are personal to the
Executive, and are not subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or garnishment by the
Executive or the Executive’s beneficiary, or by creditors of the Executive or
the Executive’s

 

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beneficiary. However, to the extent that rights or benefits under this Agreement
otherwise survive the Executive’s death or incapacity, the Executive’s heirs,
estate, executors, administrators and other legal representatives of his estate
or property shall succeed to such rights and benefits pursuant to the
Executive’s will or the laws of descent, distribution, or otherwise.

22. Choice of Law and Disputes. All issues concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed in accordance with the laws of the State of Illinois, without
giving effect to any choice of law or conflict of law rules or provisions
(whether of the State of Illinois or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Illinois. In any action or proceeding relating to this Agreement or otherwise
arising out of or in connection with the Executive’s employment by the Company,
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.

23. Amendments and Waiver. No provision of this Agreement may be modified,
waived or discharged by either party unless such waiver, modification or
discharge is agreed to in writing and signed by the Executive and such officer
or director as may be specifically designated by the Board. No course of conduct
or failure or delay in enforcing the provisions of this Agreement shall affect
the validity, binding effect or enforceability of this Agreement.

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

 

  (a) Delay of Payment. The Company 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 Company 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 Company reasonably anticipates that the making of
the payment would not cause such a violation.

 

  (b) Acceleration of Payment. 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.

 

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  (c) Specified Employee. If, as of the Date of Termination, (1) any stock of
the Company 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 of Termination 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 Paragraph (c), shall be
accumulated and paid to the Executive on the first (1st) day of the seventh
(7th) month following the Executive’s Date of Termination.

 

  (d) Code Section 409A Compliance. 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.

25. Change in Control. If any payment or benefit to which the Executive is
entitled from the Company, any affiliate, or trusts established by the Company
or by any affiliate (the “Payments,” which shall include, without limitation,
the vesting of an option or other non-cash benefit or property) are more likely
than not to result in a loss of a deduction to the Company by reason of Code
Section 280G, the Payments shall be reduced to the extent required to avoid such
loss of deduction, in the following order:

 

  (a) First, by reducing the Payments that would not constitute deferred
compensation, excluding welfare benefits (with the Payments subject to such
reduction to be determined by the Executive), to the extent necessary to
decrease such Payments to avoid the loss of deduction.

 

  (b) Next, if after the reduction to zero of the amounts described in Paragraph
(a) above, the remaining scheduled Payments are greater than the amount
necessary to avoid the loss of deduction, then by reducing the Payments
(excluding welfare benefits) that constitute deferred compensation subject to
Code Section 409A, with the reductions to be applied first to the Payments
scheduled for the latest distribution date (or, if vesting is to be canceled to
satisfy this Paragraph (b), with the cancellation to be applied first to the
latest scheduled vesting date), and then applied to distributions or vesting
scheduled for progressively earlier distribution or vesting dates, to the extent
necessary to decrease the Payments to avoid the loss of deduction.

 

  (c) Next, if after the reduction to zero of the amounts described in
Paragraphs (a) and (b) above, the remaining scheduled Payments are greater than
the amount necessary to avoid the loss of deduction, then by reducing the
welfare benefit portion of the Payments that does not constitute deferred
compensation subject to Code Section 409A (with the Payments subject to such
reduction to be determined by the Executive), to the extent necessary to avoid
the loss of deduction.

 

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  (d) Next, if after the reduction to zero of the amounts described in
Paragraphs (a), (b), and (c) above, the remaining scheduled Payments are greater
than the amount necessary to avoid the loss of deduction, then by reducing the
welfare benefit portion of the Payments that constitute deferred compensation,
with the reductions to be applied first to the Payments scheduled for the latest
distribution date, and then applied to distributions scheduled for progressively
earlier distribution dates, to the extent necessary to avoid the loss of
deduction.

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
Signing Date.

 

Sparton Corporation By:   /s/ James R. Swartwout  

James R. Swartwout

Chairman of the Board of Directors

  /s/ Cary B. Wood   Cary B. Wood

 

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EXHIBIT 1

EXECUTIVE RELEASE

1. This document is attached to, is incorporated into, and forms a part of, the
employment agreement having a signing date of June 30, 2014 (the “Agreement”) by
and between Cary B. Wood (the “Executive”) and Sparton Corporation (the
“Company”). The Executive, on behalf of himself and the other Executive
Releasors, knowingly and voluntarily releases and forever discharges the Company
and the other Company Releasees from any and all Claims which the Executive now
has or claims, or might hereafter have or claim (or the other Executive
Releasors may have, to the extent that it is derived from a Claim which the
Executive may have), against the Company Releasees based upon or arising out of
any matter or thing whatsoever, occurring or arising on or before the date of
this Release, to the extent that the Claim arises out of or relates to the
Executive’s employment by the Company and its Affiliates (including his service
as a director of the Company and its Affiliates) and/or the Executive’s
termination or resignation therefrom. However, nothing in this Release shall
constitute a release of any Claims of the Executive (or other Executive
Releasors) that may arise from claims for breach of this Agreement under
Paragraph 4(f) of the Agreement (relating to indemnification). In addition,
nothing in this Release releases the Company from its payment and other
obligations under the Agreement that by their terms are to be performed by the
Company on or after Executive’s Date of Termination. Nothing in this Release
shall constitute a release of Claims of the Executive (or other Executive
Releasors) of payments or benefits to which Executive or an Executive Releasor
may be entitled following Executive’s Date of Termination under the terms of one
or more of the Company’s employee benefit plans. Finally, nothing in this
Release shall constitute a release of Claims of the Executive (or other
Executive Releasors) of amounts or other compensation to which Executive may
become entitled under the terms of one or more long-term incentive awards
granted to Executive prior to the Date of Termination.

For purposes of this Release, the terms set forth below shall have the following
meanings:

 

  (a) The term “Agreement” shall include the Agreement and the Exhibits thereto,
and include the plans and arrangements under which the Executive is entitled to
benefits in accordance with the Agreement and the Exhibits.

 

  (b)

The term “Claims” shall include (except for claims for breach of the Agreement)
any and all rights, claims, demands, debts, dues, sums of money, accounts,
attorneys’ fees, complaints, judgments, executions, actions and causes of action
of any nature whatsoever, known or unknown, cognizable at law or equity, and
shall include, without limitation, claims arising under (or alleged to have
arisen under) (i) the Age Discrimination in Employment Act of 1967, as amended;
(ii) Title VII of the Civil Rights Act of 1964, as amended; (iii) The Civil
Rights Act of 1991; (iv) Section 1981 through 1988 of Title 42 of the United
States Code, as amended; (v) the Employee Retirement Income Security Act of
1974, as amended; (vi) The Immigration Reform Control Act, as amended; (vii) The
Americans with Disabilities Act of 1990, as amended; (viii) The National Labor
Relations Act, as amended; (ix) The Fair Labor Standards Act, as amended;
(x) The Occupational Safety and Health Act, as amended; (xi) The Family and
Medical Leave Act of 1993;

 

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  (xii) the Sarbanes-Oxley Act; (xiii) the federal Worker Adjustment and
Retraining Notification Act and any similar state laws; (xiv) any state
antidiscrimination law; (xv) any state or local wage and hour law; (xvi) any
other local, state or federal law, regulation or ordinance; (xvii) any
whistleblower law; (xviii) any public policy, contract, tort, or common law; or
(xix) any allegation for costs, fees, or other expenses including attorneys’
fees incurred in these matters. (The Executive specifically releases any claim
based on any amendment to the laws referenced, whenever such amendment was
enacted, and specifically releases any claim under the Lily Ledbetter Fair Pay
Act and any new laws enacted after the date of this Release. The Executive does
not, however, release any claim which the applicable statute provides may not be
released under any circumstances.)

 

  (c) The term “Company Releasees” shall include the Company and its Affiliates
(as defined in the Agreement), and their officers, directors, trustees, members,
representatives, agents, employees, shareholders, partners, attorneys, assigns,
administrators and fiduciaries under any employee benefit plan of the Company
and its Affiliates, and insurers, and their predecessors and successors.

 

  (d) The term “Executive Releasors” shall include the Executive, and his
family, heirs, executors, representatives, agents, insurers, administrators,
successors, assigns, and any other person claiming through the Executive.

2. The following provisions are applicable to and made a part of the Agreement
and this Release:

 

  (a) This Release shall be executed not earlier than the Executive’s Date of
Termination (as defined in the Agreement). By this Release, the Executive
Releasors do not release or waive any right or claim which they may have under
the Age Discrimination in Employment Act, as amended by the Older Workers
Benefit Protection Act, which arises after the date of execution of this
Release.

 

  (b) In exchange for this Release, the Executive hereby acknowledges that he
has received separate consideration beyond that to which he is otherwise
entitled under the Company’s policy or applicable law.

 

  (c) The Company hereby expressly advises the Executive to consult with an
attorney of his choosing prior to executing this Release.

 

  (d) The Executive has twenty-one (21) days from the date of presentment to
consider whether or not to execute this Release. In the event of such execution,
the Executive has a further period of seven (7) days from the date of said
execution in which to revoke said execution. This Release will not become
effective until expiration of such revocation period.

 

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  (e) This Release, and the commitments and obligations of all parties under
Paragraph 5(d) of the Agreement:

 

  i. shall become final and binding immediately following the expiration of the
Executive’s right to revoke the execution of this Release in accordance with
Paragraph 2(d) of this Exhibit 1;

 

  ii. shall not become final and binding until the expiration of such right to
revoke; and

 

  iii. shall not become final and binding if the Executive revokes such
execution.

3. The Executive hereby acknowledges that he has carefully read and understands
the terms of this Release and each of his rights as set forth therein.

 

      Cary B. Wood Date:    

 

State of     County of     Subscribed Before Me This Day of , .   Notary Public

 

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