M-TRON
INDUSTRIES, INC.
 100
Douglas Street
 P.O. Box
630
 Yankton,
SD 57078
  January
7, 1999
  Robert R.
Zylstra
 12329
Ethan Avenue
 White
Bear Lake, MN 55110
  Dear
Bob:
  The
following summarizes our agreement regarding your retention by M-tron
Industries, Inc. (the “Company”), effective January 24, 2000.
  1.
              POSITION. You
      will serve as President and Chief Executive Officer of the Company. You
      will also be made a director of the
Company.
  2.
                COMPENSATION.  You
      are to receive a base salary, bonus potential and equity incentive as set
      forth herein.
 (a)           BASE SALARY. Your
initial base salary will be $175,000 per year payable semi-monthly.
  (b)           BONUS PROGRAM. You
will develop and recommend to the Board of Directors of the Company a bonus
program applicable to you and the other principal executives of the Company for
Year 2000 and beyond.
  (c)           BONUS. Your bonus for
the year ended December 31, 2000 will be not less than $100,000 provided that
the Company meets its plan target for EBITDA (calculated in the manner as set
forth in Schedule A hereto) of $3,832,000 for said year. The upside follows the
formula in the bonus program adopted in Paragraph 2.(b) above. The bonus will be
paid as soon as practical after the end of Year 2000.
  (d)           EQUITY  INCENTIVE.
It is the parties’ intention to provide you with an equity incentive, intended
to be approximately 3% as set forth herein.
  (i)           COMPANY GOES PUBLIC.
If the Company shall complete an initial public offering (“IPO”) of its common
stock during your employment and prior to January 24, 2003, you shall be
entitled to purchase at the time of the IPO shares of common stock of the
Company equal to 3% of the outstanding shares of common Stock immediately after
the IPO. The purchase price for the stock will be 33 1/3% of the public offering
price payable in cash or, with the Company’s agreement, structured notes secured
by the stock. The exact structure of your ownership will be structured by the
Company at the time with the Company’s
   1
  tax, book
accounting and “blue sky” law implications taking dominant importance versus
your tax position. It is anticipated that the Company will adopt a stock option
program at the time of an IPO and you will be entitled to participate therein.
You will agree to such restrictions on the shares of stock or options acquired
by you as the underwriters for the IPO may request. The certificates for such
shares and for any shares of Lynch Corporation issued pursuant to Paragraph
2(d)(ii) shall contain such legends including without limitation a securities
acts legend as the Company deems appropriate.
  (ii)           COMPANY DOES NOT GO
PUBLIC. If the Company has not done an IPO by January 24, 2003 and if you
are then employed by the Company, you shall be entitled, upon any termination of
your employment to an inputed equity value benefit (“IEVB”) equal to 3% of the
increase in the economic value of the Company from January 1, 2000 through the
end of the last fiscal quarter next preceding termination of your employment
(the “Valuation Date”). The economic value of the Company at January 1, 2000
shall be deemed to be 7.5 times the EBITDA (plus cash and marketable securities
and minus debt) of the Company for the year ended December 31, 1999 (calculated
in the manner set forth on Schedule A hereto), and the value at the Valuation
date shall be 7.5 times the EBITDA (plus cash and marketable securities and
minus debt) of the Company for the twelve months ended on the Valuation Date
(with EBITDA for such twelve month period being calculated in the same manner as
on Schedule A). Should there have been any stock issued in connection with any
acquisition included in the calculation, the value of the stock issued, at the
time of issuance, will be deemed to be debt for purposes of the calculation. The
IEVB shall, at the Company’s option, be payable either in (a) cash in three (3)
equal installments payable on the first, second and third anniversary dates of
the date of your termination of employment and such deferred payments shall bear
interest on the outstanding principal amount at an annual rate equal to eight
percent (8%), which interest shall be payable in arrears on each of said
anniversary dates or (ii) in common stock of Lynch Corporation valued at the
average closing market price thereof for the ten trading days on which the stock
traded prior to the date of payment. For purposes of this Paragraph 2(d)(ii)
only, any sale by Lynch Corporation of a majority of common stock of the Company
(other than to its shareholders or in a public offering) or any sale by the
Company of all or substantially all of its assets (excluding its investment in
Spinnaker Industries, Inc. and any successor investments to Spinnaker
Industries, Inc.), in each case other than to an “affiliate” (i.e., a person or
entity that directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with the person or entity) of
the Company, shall be deemed to be a termination of employment effective as of
the date of such event (with you being deemed to have satisfied the three year
vesting requirement).
   2
  (e)           EMPLOYEE BENEFIT
PROGRAMS. You will also be entitled to participate in all salaried
employee benefit programs in effect from time to time at the Company in
accordance with their terms.
  3.
              TERM. The term
      of this Agreement is two years, subject to earlier termination. In the
      event that you are terminated prior to the expiration of your employment
      term as provided in this Section 3 (“Terminated”) without “good cause,”
      you will be entitled to receive a termination payment equal to your base
      salary for the remainder of the two year term, payable over such term when
      salary would otherwise have been payable, as your compensation for such
      termination. In the event that you are terminated for “good cause,” then
      you shall be entitled only to your base Salary through the date of
      Termination.
  In the
event that you are terminated due to a “disability,” you shall be entitled to
receive your base salary through the date of Termination. You will also be
entitled to receive any disability benefits that the Company may have provided
to you pursuant to Section 2(e) of this Agreement. A “disability” will have been
deemed to occur if, as a result of your incapacity due to physical or mental
illness, you shall have been absent from the full time performance of your
duties under this agreement for a period of three (3) consecutive months. The
determination of such a disability may be verified, at the Company’s request, by
a doctor or medical group selected by the Company.
  In the
event of your death, your estate shall be entitled to receive your base salary
through the date of your death and any other benefits to which your estate may
be entitled pursuant to Section 2(e) of this agreement.
  4.
              YANKTON. You
      will move to the Yankton, ND area as soon as practicable. The Company will
      reimburse you for moving expenses pursuant to the terms of the Company’s
      general policy, subject to a maximum of
$50,000.
  5.
              RULES/CONFIDENTIALITY/NON-COMPETE.
      You shall obey all rules, regulations and policies of the Company
      including, without limitation those set out in the Salaried Employees
      Handbook as it may be amended from time to time. In addition, you agree to
      be bound by the confidentiality and non-competition provisions set forth
      in Schedule B hereto.
  6.
              (a)
      For purposes of this Agreement, “good cause” shall mean that you shall
      have (i) willfully or grossly neglected your duties as President, Chief
      Executive Officer and a director of the Company and those that may be
      assigned to you by the Board of Directors of the Company or any
      subsidiary, (ii) continually failed to devote your full time and attention
      to the Company and its subsidiaries and your duties, (iii) committed
      fraud, embezzlement or misappropriation in connection with your employment
      with, the Company or any subsidiary, (iv) committed a felony or crime
      involving moral turpitude, or (v) materially breached any covenants or
      obligations contained in this Agreement or any other agreement or
      instrument applicable to you.
   3
  (b) All
calculations of EBITDA, cash, marketable securities, and debt and/or other value
or economic value of the Company contemplated in this Agreement shall exclude
entirely the Company’s investment in Spinnaker Industries, Inc. and any
successor investments to Spinnaker Industries, Inc. It is also understood that
the Company would probably determine not to include any investment in Spinnaker
Industries, Inc. and any successor investments to Spinnaker Industries, Inc. in
any IPO.
  7.
              This
      Agreement shall be governed by the internal law of the State of
      Delaware.
  If the
above is acceptable to you, please sign below where indicated.
  Very
      Truly yours,M-tron
      Industries, Inc.AGREED
      AND ACCEPTED:Robert
      R. Zylstra
              
              By:
              /s/ Martin
      J. Kiousis     1/18/00By:
              /s/
      Robert R. ZylstraDate:
              Jan
      10, 2000
   4
 
 M-TRON
      INDUSTRIES INC.
                IN
      DOLLARS
              
              SCHEDULE
      A“Model”ESTIMATE FOR YEARS ENDED DECEMBER 31,
      1999*REVENUES
              
              
              26,600,000COSTS
      OF SALES
              
              
              (19,348,000
              )GROSS
      MARGIN
              
              
              7,252,000ENGINEERING,
      SELLING AND ADMINISTRATIVE EXPENSES
              
              
              (5,281,000
              )OPERATING
      PROFIT
              
              
              1,971,000ADD
      BACK DEPRECIATION
              
              
              740,000EBITDA
              
              
              2,711,000MULTIPLE
              
              
              7.520,332,500CASH
      ON HAND AT DECEMBER 31, 1999 (ESTIMATE)*
              
              
              16,000DEBT
      OUTSTANDING AT DECEMBER 31, 1999 (ESTIMATE)*
              
              
              (2,991,000
              )VALUE
      OF M-TRON EQUITY
              
              
              17,357,500
  * To Be
Adjusted For Actual December 31, 1999 Results and Balances.
  ABOVE
AMOUNTS RELATE SOLELY TO M-TRON INDUSTRIES INC. AND ITS WHOLLY OWNED SUBSIDIARY,
M-TRON INDUSTRIES LIMITED, AND EXCLUDES ANY ACTIVITY AND BALANCES RELATING TO
M-TRON'S OWNERSHIP OF SHARES IN SPINNAKER INDUSTRIES INC.
  
  SCHEDULE
B
  Confidentiality. You covenant
and agree with the Company that you will not either during the term of your
employment, or at any time thereafter, directly or indirectly, divulge,
communicate or disclose to anyone any information concerning the business or
affairs of the Company without regard to whether the information would be deemed
confidential, material or important; provided, however, that this provision
shall not apply, during your employment with the Company, to disclosure by you
in the ordinary course of the Company’s business in furtherance of the Company’s
business and subject to confidentiality agreements as appropriate. In this
regard, you also acknowledge having read a document entitled “Lynch Corporation
and Subsidiaries Policy Statement on Business Conduct and Conflicts of
Interest,” the terms of which are adopted as part of this agreement by reference
thereto. Upon any termination of employment you will return to the Company all
materials in your possession, (including copies and computer materials) relating
to the Company or its business.
  Non-Compete. The Company and
you mutually acknowledge that the Company’s operations are global in nature and
it has customers/suppliers world-wide. During the term of your employment and
for a period of two years immediately after termination of employment, you will
not, either directly or indirectly, make known or divulge to anyone the names or
addresses of any of the customers/suppliers of the Company who were
customers/suppliers during your employment; provided, however, that this
provision shall not apply, during your employment with the Company, to
disclosure by you in the ordinary course of the Company’s business in
furtherance of the Company’s business and subject to confidentiality agreements
as appropriate. Furthermore, you will not, during the term of your employment
and for a period of two years immediately after termination of employment,
directly or indirectly, (i) act as a director, officer or executive or
managerial employee of, consultant to, or own more than 1% of any class of stock
of, any person or entity that competes with the Company as to any products or
services manufactured, distributed, marketed, sold or offered for sale during
the term of your employment; provided that you may be employed by a
multi-industry company if you work solely for a subsidiary or division which
does not, directly or indirectly, so compete with the Company, do not provide,
directly or indirectly, any advise or assistance to any part of the
multi-industry company that does so compete with the Company, and do not
otherwise, directly or indirectly, violate any provisions of this Schedule B,
(ii) either for yourself or any other person, firm ox corporation, call upon,
solicit, divert or take away or attempt to solicit, divert, call upon or take
away any of the customers/suppliers of the Company who were customers/suppliers
during your employment or any officers, employees or agents of the
Company.