This Employment
Agreement (“Agreement”) is made this 22
nd of November, 2008, by and between Sparton
Corporation, an Ohio corporation (“Company”), and
Richard Langley (“Executive” or “Langley”).
Any reference to the Company shall be deemed to include any
subsidiary or parent of the Company.
WHEREAS, Richard
Langley has had a long, distinguished career with the Company,
holding such positions as Chief Financial Officer, Director, and
Interim Chief Executive Officer (“CEO”);
WHEREAS, it is in
the best interests of the Company that Langley remain with the
Company and that he assist the new CEO with various duties during
the transition period so that the CEO can devote the bulk of his
time to returning the Company to profitability;
WHEREAS, Executive
agrees to retire as a member of the Board of Directors at the
December 19, 2008 Board Meeting in order to create a vacancy
for the new CEO, and intends on retiring from his position as
President at the end of the Term of this Agreement;
NOW, THEREFORE, in
consideration of the mutual promises contained herein, the Company
and Executive agree as follows:
1.
Employment . The Company employs the Executive as its
President, and the Executive accepts such employment, upon the
terms and conditions set forth in this Agreement.
2.
Duties . The Executive shall perform and discharge well and
faithfully such duties for the Company as may be reasonably
assigned to the Executive from time to time by the CEO. The
Executive shall devote his full business time, attention and
energies to the business of the Company, and shall not during the
employment Term (as defined below) engage in any other business
activity, whether or not such activity is pursued for gain, profit
or other pecuniary advantage, without the prior written approval of
the Board of Directors.
3.
Term . The term of employment under this Agreement shall
commence on November 24, 2008, and shall expire on
July 1, 2010 (“Term”). Neither the Company nor the
Executive is under any obligation to renew or extend
Executive’s employment beyond the Term of this
Agreement.
(a)
Salary . The Company shall pay the Executive a salary during
the Term at the rate of $265,000 per year, payable on the same
payroll schedule as other Executives of the Company, minus normal
payroll deductions required by law.
(b)
Benefits . The Company will provide the Executive with
fringe benefits no less favorable than those provided to other
Executives of the Company during the Term, including, but not
limited to, vacation, personal, and sick days (which may be
increased from time to time), health, disability, life insurance,
pension and 401(k) Savings Plan. During the
Term, Executive
will receive a car allowance of $5,850 annually, payable
periodically on the Company’s customary payroll schedule, to
cover the purchase/lease, fuel, and maintenance costs of an
automobile.
(c)
Reimbursement of Expenses . During the Term, the Executive
shall be reimbursed for all travel, meals, entertainment, and other
out-of-pocket expenses reasonably incurred by him on behalf of or
in connection with the performance of his duties and the business
of the Company, pursuant to the normal standards and guidelines
followed from time to time by the Company; provided that an expense
reimbursement shall under no circumstances occur later than
90 days after the date on which an expense is
incurred.
(d)
Bonus . The Company and Executive shall agree upon a written
bonus/incentive plan consistent with the same bonus plan provided
to other senior executives of the Company for fiscal years 2009 and
2010. The bonuses will be paid no later than the
September 15 th following the end of the fiscal year to which
such bonuses relate.
(a) In
the event Executive shall be unable to perform his duties under
this Agreement by virtue of illness or physical or mental capacity
or disability in substantially the manner and to the extent
required under this Agreement prior to the commencement of such
disability, and the Executive shall fail to perform such duties for
periods aggregating 120 days, whether or not continuous, in
any continuous period of 180 days, the Company shall have the
right to terminate the Executive’s employment under this
Agreement at the end of any calendar month during the continuance
of such disability upon at least 30 days’ prior written
notice to Executive. In the event of the Executive’s death,
the date of termination shall be the date of such death.
(b) In
the event the Executive’s employment is terminated pursuant
to this section, the Executive, or in the case of his death, the
Executive’s estate, shall be entitled to receive when
otherwise payable, but no later than sixty (60) days after the
date of termination, subject to any offsets (i) all salary
compensation earned but unpaid as of the date of termination, and
(ii) any unpaid reimbursable expenses outstanding, and any
unused accrued vacation, as of such date. Any benefits to which the
Executive or his beneficiaries may be entitled under the plans and
programs described above as of his date of termination shall be
determined in accordance with the terms of such plans and programs.
Except as stated in this paragraph, the Company shall have no
further liability to the Executive or the Executive’s heirs,
beneficiaries or estate for damages, compensation, benefits,
severance, indemnities or other amounts of whatever
nature.
(a)
With Cause . The Company, by direction of the Board of
Directors of the Company, 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 a felony or of any crime involving moral turpitude, dishonesty,
theft, unethical or unlawful conduct; or
(v) 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 may tend 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.
Upon termination
for Cause or by the Executive without Good Reason, the Company
shall pay the Executive, when otherwise payable (but no later than
sixty (60) days after the date of termination), subject to
offsets, his salary compensation, his unused accrued vacation and
any unpaid reimbursable expenses as of the date of termination. Any
benefits to which the Executive or his beneficiaries may be
entitled to under the plans and programs described above as of the
date of his termination shall be determined in accordance with the
terms of such plans and programs. The Company shall have no further
liability to the Executive or the Executive’s heirs,
beneficiaries or estate for damages, compensation, benefits,
severance, indemnities or other amount of whatever
nature.
(b)
Without Cause . At any time during the term of this
Agreement, the Company shall be entitled to terminate the Term and
discharge the Executive Without Cause, upon delivery of written
notice to the Executive. Upon termination Without Cause, the
Company shall pay the Executive, subject to offset, the unpaid
portions of his salary through the Term, as if Executive had not
been terminated. In all other respects, Executive shall receive the
same compensation and benefits as set forth above in paragraph 6(a)
for termination for Cause. This Paragraph 10(b) is intended to
satisfy the requirements of the exemption from the application of
Section 409A of the Internal Revenue Code of 1986, as amended
(“Code”), for separation pay plans under Treasury
Regulation Section 1.409A-1(b)(9). To the extent the
aggregate payments due hereunder exceed two (2) times the
lesser of (i) the Executiv
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