Document:

EX-10.2

Exhibit 10.2

January 28, 2009

Eaton Corporation

Eaton Center

1111 Superior Avenue

Cleveland, Ohio 44114

Award of Restricted Shares Under the Eaton Corporation 2008 Stock Plan

Eaton Corporation (the “Company”) has awarded you a number of restricted Common Shares of the
Company effective as of February 24, 2009 (the “Effective Date”) under the terms and conditions of
the Company’s 2008 Stock Plan (the “Plan”). Information concerning the number of restricted shares
awarded to you (the “Award”) is available online through the Eaton Service Center at Fidelity which
may be accessed through the Company’s website. You are required to accept the Award online at the
Eaton Service Center at Fidelity. By so accepting the Award you acknowledge and agree as follows:

     1. Acceptance. You accept the Award on the terms and conditions provided in the Plan
and this Award Agreement.

     2. Restricted Shares. You acknowledge that, as of the Effective Date, this
Award has been granted to you, contingent on the occurrence of any one of the following vesting
events:

	 	a.	 	you leave service on the Company’s Board of Directors (the
“Board”) following two (2) years of continuous service as a member of the
Board; or
	 
	 	b.	 	your service on the Board ends due to your death or
disability at any time following the Effective Date; or
	 
	 	c.	 	you retire from the Board after attaining the mandatory Board
retirement date at any time following the Effective Date; or
	 
	 	d.	 	upon a Change of Control of the Company at any time following
the Effective Date.

Upon the occurrence of any one of the above events, all of the restricted shares which are the
subject of the Award (the “Restricted Shares”) shall immediately vest and become non-forfeitable.

 

 

If the Restricted Shares are forfeited for any reason, you will surrender to the Company any
certificates which you then hold evidencing such shares. You understand that you will not be
entitled to any payment in respect of the Restricted Shares so forfeited.

     3. Transferability. Until the possibility of forfeiture lapses with respect to any of
the Restricted Shares and the Restricted Shares vest, those shares shall be non-transferable. You
agree not to make, or attempt to make, any sale, assignment, transfer or pledge of any of the
Restricted Shares prior to the date on which the possibility of forfeiture with respect to such
shares lapses and the shares vest. Notwithstanding the foregoing provisions of this Paragraph 3,
you are permitted to designate one or more primary and contingent beneficiaries to whom the
restricted Shares will be transferred in the event of your death. The process for designating such
beneficiaries is available through the Eaton Service Center at Fidelity.

     4. Legends, Possession and Reorganization. You acknowledge that the certificates for
the Restricted Shares will bear a legend referring to this Agreement and to the restrictions
contained herein. You further acknowledge that the Company may elect to retain those certificates
in its possession as a means of enforcing these restrictions. In the event of a reorganization,
merger, consolidation, reclassification, recapitalization, combination or exchange of shares, stock
split, stock dividend, rights offering or other event affecting the Company’s Common Shares, the
number and class of the Restricted Shares shall be equitably adjusted so as to reflect that change.
Any new certificates for Restricted Shares shall bear the legends referred to in this Section 4.
No adjustment provided for in this Section 4 shall require the Company to sell or transfer a
fractional share.

     5. Dividends and Voting. If you are the shareholder of record on any record date for
the payment of a dividend on the Restricted Shares, you will be entitled to receive the dividend
when paid, regardless of whether or not the restrictions imposed by Section 2 have lapsed. If you
are the shareholder of record on any record date for the taking of a vote by the shareholders of
the Company, you will be entitled to vote the Restricted Shares regardless of whether or not the
restrictions imposed by Section 2 hereof have lapsed.

     6. Change of Control. For the purpose of this Agreement, a “Change of Control”
shall mean:

	 	A.	 	The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25%
or more of either (i) the then outstanding common shares of the Company (the
“Outstanding Common Shares”) or (ii) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); provided, however, that for
purposes of this subsection, the following acquisitions shall not constitute a Change
of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the
Company, or (iii) any acquisition by any employee benefit plan (or

2

 

	 	 	 	related trust)
sponsored or maintained by the Company or any corporation controlled by the Company; or
	 
	 	B.	 	Individuals who, as of the date hereof, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company’s shareholders, was approved by a
vote of at least two-thirds of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board; or
	 
	 	C.	 	Consummation by the Company of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the Company or
the acquisition of assets of another corporation (a “Business Combination”), in each
case, unless, following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Common Shares and Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more than 55%
of, respectively, the then outstanding common shares and the combined voting power of
the then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company’s assets
either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination of the
Outstanding Common Shares and Outstanding Company Voting Securities, as the case may
be, (ii) no Person (excluding any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 25% or more of, respectively, the then outstanding
common shares of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such corporation
except to the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
	 
	 	D.	 	Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.

Notwithstanding the foregoing, a “Change of Control” shall not be deemed to have occurred as a
result of any transaction or series of transactions which you, or any entity in which you are a
partner, officer or more than 50% owner, initiate, if immediately following the transaction or

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series of transactions that would otherwise constitute a Change of Control, you, either alone or
together with other individuals who are directors or executive officers of the Company immediately
prior thereto, beneficially own, directly or indirectly, more than 10% of the then outstanding
common shares of the Company or the corporation resulting from the transaction or series of
transactions, as applicable, or of the combined voting power of the then outstanding voting
securities of the Company or such resulting corporation.

     7. Miscellaneous. Unless otherwise expressly provided herein, terms defined in the
Plan shall have the same meanings when used in this Agreement. The use of the masculine gender
shall be deemed to include the feminine gender. In the event of a conflict between this Agreement
and the Plan, this Agreement shall control. This Agreement represents the entire understanding
between the parties on the subject hereof and shall be governed in accordance with Ohio law.

4EX-10.1

Exhibit 10.1

FOURTH MASTER AMENDMENT TO LOAN DOCUMENTS

(Sparton Corporation — Line of Credit)

     This Fourth Master Amendment to Loan Documents (the “Fourth Amendment”) dated as of January
20, 2009 is made by and between Sparton Corporation, an Ohio corporation (“Borrower”); Sparton
Medical Systems, Inc. f/k/a Astro Instrumentation, Inc., a Michigan corporation (“Sparton
Medical”); Sparton Technology, Inc., a New Mexico corporation (“Sparton Technology”); Spartronics,
Inc., a Michigan corporation (“Spartronics”); Sparton Electronics Florida, Inc., a Florida
corporation (“Sparton Florida”) and Sparton of Canada, Limited, a Canadian corporation (“Sparton
Canada”) (each of Sparton Medical, Sparton Technology, Spartronics, Sparton Florida and Sparton
Canada may be referred individually as a “Guarantor” and collectively, as the “Guarantors”) and
National City Bank, a national banking association (the “Lender”).

RECITALS

     A. The Lender has made a line of credit loan available (the “Line of Credit Loan”) to Borrower
in the original principal amount of Twenty Million and No/100 Dollars ($20,000,000.00), which Line
of Credit Loan is evidenced by, among other documents, that certain: (1) Promissory Note (the
“Original Note”) and Promissory Note Covenant Exhibit, as amended (the “Covenant Exhibit”), each
dated January 22, 2008, as amended by Master Amendment to Loan Documents dated as of April 21, 2008
and effective as of March 31, 2008 (the “First Master Amendment”), by Second Master Amendment to
Loan Documents dated as of July 31, 2008 and effective as of June 30, 2008 (the “Second Master
Amendment”) and by Third Master Amendment to Loan Documents dated as of November 12, 2008 (the
“Third Master Amendment” and, collectively with the Original Note, the Covenant Exhibit, the First
Master Amendment and the Second Master Amendment, the “Sparton Corporation Note”); and (2) Amended
and Restated Security Agreement dated as of April 21, 2008 and effective as of March 31, 2008 (the
“Sparton Corporation Security Agreement”, and together with the Sparton Corporation Note and all
other documents now or hereafter executed in connection therewith, including, without limitation,
the Guarantees (defined below), the “Sparton Corporation Loan Documents”).

     B. The Borrower’s obligations under the Sparton Corporation Loan Documents have been
guaranteed by the Guarantors pursuant to those Commercial Security Guaranty agreements, each dated
January 22, 2008, signed by each Guarantor and amended by the First Master Amendment (each, a
“Guaranty” and collectively, the “Guarantees”).

     C. Borrower has requested an extension of the maturity date of the Line of Credit Loan and the
Sparton Corporation Loan Documents and Lender is willing to make such modifications subject to the
terms of this Fourth Amendment.

     NOW, THEREFORE, in consideration of the foregoing Recitals and other good and valuable
consideration, the receipt of which is hereby acknowledged, the Borrower, Guarantors and the Lender
hereby agree as follows:

 

 

     1. The Sparton Corporation Note shall be amended to change the principal amount from
$20,000,000.00 to $18,000,000.00. Accordingly, all references in the Sparton Corporation
Note or the Sparton Corporation Loan Documents to “$20,000,000.00” and/or “Twenty Million and
00/100 Dollars ($20,000,000.00)” in reference to the principal amount of the Line of Credit Loan
shall be changed to $18,000,000.00 or “Eighteen Million and 00/100 Dollars ($18,000,000.00)”, as
applicable.

     2. Maturity Date. The first line in the second paragraph of the Note entitled
“Payment” shall be amended and restated as follows:

“Borrower will pay the loan in one payment of all outstanding
principal plus all accrued interest on May 1, 2009.”

     3. The first paragraph of Section 6 of the Second Master Amendment shall be
amended and restated as follows:

“6. Borrowing Base/Advance Formula. Notwithstanding
anything to the contrary in the Sparton Corporation Loan Documents,
advances under the Line of Credit Loan shall not exceed the lesser
of: (a) $18,000,000.00 and (b) the Borrowing Base Amount.
“Borrowing Base Amount” shall mean eighty percent (80%) of Eligible
Accounts.”

     4. Covenant Waiver. The Borrower has informed the Lender that, as of the quarter
ending December 31, 2008, it is in default of the required: (a) minimum EBITDA set forth in
Section 2.1 of the Covenant Exhibit (as amended); and (b) the minimum Tangible Net
Worth ratio set forth in Section 2.3 of the Covenant Exhibit (as amended) (each, an
“Existing Default” and collectively, the “Existing Events of Default”). Borrower has requested
that the Lender waive the Existing Events of Default. The Lender hereby waives the Existing Events
of Default as of the quarter ending December 31, 2008. This waiver shall be narrowly construed and
shall not extend to any other now or hereafter existing violations, defaults or events of default
under any of the Sparton Corporation Loan Documents including, without limitation, any violation of
one or more of the above described covenants for any future period of time, nor shall this waiver
prejudice any rights or remedies the Lender may have under the Sparton Corporation Loan Documents
or applicable law. This waiver does not imply that the Bank will waive any future defaults under
the Sparton Corporation Loan Documents. Specifically, without limitation, Borrower will continue
to be required to comply with the above described financial covenants for all future periods as
required under the Sparton Corporation Loan Documents.

     5. Electropac Settlement Agreement. The Third Master Amendment required that the
Borrower deliver certain documents in connection with the Electropac Settlement Agreement (defined
in the Third Master Agreement). As of the date hereof, Borrower has delivered the final Electropac
Settlement Agreement, the Electropac Mortgage (as defined in the Third Master Amendment) and the
Judgment (as defined in the Third Master Amendment). Borrower further agrees that Lender will
hereafter deliver to it an assignment of the Electropac Mortgage on terms and condition
satisfactory to Lender and, in accordance with the terms of the Third Master Amendment, Borrower
shall execute and deliver such assignment within three (3) business days of receiving such
assignment for Lender.

 

 

     6. Conditions Precedent. Borrower shall satisfy the following conditions simultaneous
with delivery of this signed Fourth Amendment and this Fourth Amendment shall not be effective
until all of the following have been satisfied to Lender’s reasonable satisfaction:

	 	(a)	 	Borrower shall have paid Lender a modification and waiver fee
of Twenty Five Thousand and No/100 Dollars ($25,000.00), which fee shall be
fully earned and non-refundable upon payment; and
	 
	 	(b)	 	Borrower shall have paid all of Lender’s costs and expenses
incurred in connection with the Line of Credit Loan, the Sparton Corporation
Loan Documents and this Fourth Amendment including, without limitation, UCC
search expenses, certified organizational document fees and Lender’s attorney
fees.

     7. Reaffirmation of Borrower. Borrower hereby reaffirms the representations and
warranties contained in the Sparton Corporation Loan Documents as if made as of the date of this
Fourth Amendment. Except for the Existing Events of Default described in Section
4, Borrower has fully complied with all covenants and agreements to be complied with or
performed by it under the Sparton Corporation Loan Documents to which it is a party and no default
or Event of Default currently exists under any Sparton Corporation Loan Document. Borrower has the
full power and authority to enter into this Fourth Amendment.

     8. Reaffirmation of Guarantors. Guarantors agree to the terms set forth in this
Fourth Amendment, reaffirm all of their obligations under the Guarantees and represent and warrant
that no defenses or counterclaims exist with respect to their obligations under the Guarantees.
Each Guarantor reaffirms the representations and warranties contained in the Guarantees as if made
as of the date of this Fourth Amendment. Each Guarantor represents and warrants that each of them
has fully complied with all covenants and agreements to be complied with or performed by its under
the Guarantees (and all documents executed in connection thereunder) and no Guarantor is presently
in default under any term of the Guarantees. Each Guarantor has the full power and authority to
enter into this Fourth Amendment.

     9. Full Force and Effect. Borrower and Guarantors expressly acknowledge and agree
that except as expressly stated in this Fourth Amendment, the Sparton Corporation Loan Documents,
as amended, remain in full force and effect and are ratified, confirmed and restated.

     10. Costs. Borrower is responsible for all costs incurred by Lender, including
without limit reasonable attorney fees, with regard to the Line of Credit Loan, the Sparton
Corporation Loan Documents and the preparation, negotiation and execution of this Fourth Amendment
and such other documents necessary in connection with the transactions contemplated hereunder.

     11. No Waiver. Except for the waiver of the Existing Events of Default, the execution
of this Fourth Amendment shall not be deemed to be a waiver of any now or hereafter existing
default or Event of Default.

     12. Governing Law. This Fourth Amendment shall be governed by and construed according
to the laws of the State of Michigan without regard to conflict of law principles in such state.

 

 

     13. Counterparts and Facsimiles. This Fourth Amendment may be executed in one or more
counterparts, each of which when taken together, shall constitute one and the same original.
Facsimile signatures are acceptable and may be relied upon as if originals.

     14. WAIVER OF JURY TRIAL. BORROWER, GUARANTORS AND LENDER ACKNOWLEDGE THAT THE RIGHT
TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED, EACH PARTY, AFTER CONSULTING
(OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS CHOICE, KNOWINGLY AND VOLUNTARILY,
AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING
THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS FOURTH AMENDMENT OR ANY OF THE
SPARTON CORPORATION LOAN DOCUMENTS.

     15. Release of Claims. Borrower and Guarantors each hereby waive, discharge, and
forever release Lender, Lender’s employees, officers, directors, attorneys, stockholders, and their
successors and assigns, from and of any and all claims, causes of action, allegations or assertions
that Borrower and/or Guarantor has or may have had at any time up through and including the date of
this Fourth Amendment, against any or all of the foregoing, regardless of whether any such claims,
causes of action, allegations or assertions are known to Borrower or any Guarantor or whether any
such claims, causes of action, allegations or assertions arose as result of Lender’s actions or
omissions in connection with the Line of Credit Loan or Sparton Corporation Loan Documents, or any
amendments, extensions or modifications thereto including, without limitation, this Fourth
Amendment or Lender’s administration of any debt evidenced by the Sparton Corporation Loan
Documents or otherwise.

     16. Amendment to Loan Documents. Each of the Sparton Corporation Loan Documents is
hereby amended to include all provisions of this Fourth Amendment. This Fourth Amendment is not an
agreement to any further or other amendment of the Sparton Corporation Loan Documents and Lender
shall have no obligation to agree to make any other modifications to the Sparton Corporation Loan
Documents now or hereafter requested by Borrower.

[Remainder of Page Intentionally Left Blank]

 

 

     IN WITNESS WHEREOF, Borrowers, Guarantors and Lender have executed and delivered this Fourth
Amendment as of the day and year first above written.

	 	 	 	 	 	 	 
	 	 	BORROWER:	 	 
	 
	 	 	 	 	 	 
	 	 	SPARTON CORPORATION,

an Ohio corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/
 

Joseph Lerczak
	 	 
	 

	 	Its:
	 	Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	GUARANTORS:	 	 
	 
	 	 	 	 	 	 
	 	 	SPARTON MEDICAL SYSTEMS, INC. 

f/k/a Astro
Instrumentation, Inc.,

a Michigan corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/
 

Joseph Lerczak
	 	 
	 

	 	Its:
	 	Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	SPARTON TECHNOLOGY, INC.,	 	 
	 	 	a New Mexico corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/
 

Joseph Lerczak
	 	 
	 

	 	Its:
	 	Treasurer	 	 

[Signature Page to Fourth Master Amendment to Loan Documents

(Sparton Corporation — Line of Credit) dated as of January 20, 2009]

[Signatures Continued on Following Page]

 

 

Signature Page to Fourth Master Amendment to Loan Documents

(Sparton Corporation — Line of Credit) dated January 20, 2009

	 	 	 	 	 	 	 
	 	 	SPARTRONICS, INC.,

a Michigan corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/
 

Joseph Lerczak
	 	 
	 

	 	Its:
	 	Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	SPARTON ELECTRONICS FLORIDA, INC., a Florida
corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/
 

Joseph Lerczak
	 	 
	 

	 	Its:
	 	Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	SPARTON OF CANADA, LIMITED,

a Canadian corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/
 

Joseph Lerczak
	 	 
	 

	 	Its:
	 	Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	LENDER:	 	 
	 
	 	 	 	 	 	 
	 	 	NATIONAL CITY BANK, a national banking

association	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/
 

John W. McManus
	 	 
	 

	 	Its:
	 	Regional President

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