<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
SPARTON CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
SPARTON CORPORATION
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable
(2) Aggregate number of securities to which transaction applies:
Not Applicable
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:
Not Applicable
(4) Proposed maximum aggregate value of transaction:
Not Applicable
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
Not Applicable
(2) Form, schedule or registration statement no.:
Not Applicable
(3) Filing party:
Not Applicable
(4) Date filed:
Not Applicable
<PAGE> 2
SPARTON CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Our Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders of SPARTON
CORPORATION will be held at the offices of the Corporation, 2400 East Ganson
Street, Jackson, Michigan 49202, on Wednesday, October 26, 1994, at 10 o'clock
a.m., local time, for the following purposes:
1. To elect four directors each for a term of three years as set forth
in the Proxy Statement.
2. To elect two directors for a term of two years as set forth in the
Proxy Statement.
3. To transact such other business as may properly come before the
meeting.
Only holders of Common Stock of record at the close of business on
September 14, 1994 are entitled to notice of and to vote at the meeting.
By Order of the Board of Directors
LAWSON K. SMITH
Secretary
September 29, 1994
IMPORTANT
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR
NOT YOU PLAN TO ATTEND IN PERSON, YOU ARE URGED TO DATE AND SIGN THE PROXY
ENCLOSED AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED. THIS WILL ASSURE YOUR
REPRESENTATION AND A QUORUM FOR THE TRANSACTION OF BUSINESS AT THE MEETING. IF
YOU DO ATTEND THE MEETING IN PERSON, THE PROXY WILL NOT BE USED IF YOU SO
REQUEST.
<PAGE> 3
SPARTON CORPORATION
2400 East Ganson Street
Jackson, Michigan 49202
PROXY STATEMENT
------------------
SOLICITATION
The enclosed Proxy is being solicited by the Board of Directors of the
Corporation for the 1994 annual meeting of shareholders to be held October 26,
1994, and at any adjournment thereof. The cost of solicitation will be paid by
the Corporation. In addition to the use of the mails, officers and regular
employees of the Corporation and its subsidiaries may solicit proxies by
telephone, telecopy or personal interview. This Proxy Statement and the form of
Proxy are being mailed to shareholders on or about September 29, 1994.
OUTSTANDING SHARES AND VOTING
As of September 14, 1994, the record date for the meeting, the Corporation
had outstanding 7,811,370 shares of Common Stock (exclusive of 123,342 shares
held in treasury), each entitled to one vote at the meeting. As of September 1,
1994, the persons named in the following table were known by the management to
be the beneficial owners of more than 5% of the Corporation's outstanding Common
Stock:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- - ------------------------------- ------------- ---------
<S> <C> <C>
John J. Smith(1)
1839 S. Walmont
Jackson, Michigan 49203 2,050,000(2) 26.24%(2)
Lawson K. Smith(1)
717 Fourth Street
Lake Odessa, Michigan 48849 826,856(3) 10.59%(3)
Dimensional Fund Advisors Inc.
1299 Ocean Avenue, 11th Fl.
Santa Monica, California
90401 398,000(4) 5.10%(4)
</TABLE>
- - ---------------
(1) Mr. John J. Smith and Mr. Lawson K. Smith are brothers.
(2) All shares are owned directly by Mr. John J. Smith jointly with his wife. In
addition, this amount does not include 431,600 shares held by several of the
1
<PAGE> 4
Company's retirement plans as to which Mr. Smith holds voting and investment
powers in his capacity as Chief Executive Officer of the Company. Mr. Smith
has no pecuniary interest in these shares and disclaims any beneficial
ownership interest.
(3) Includes 10,000 shares owned individually by Mr. Lawson K. Smith, 731,656
shares owned by Mr. Smith jointly with his wife and 85,200 shares owned by
Mr. Smith's wife.
(4) According to the Form 13G filed February 9, 1994, Dimensional Fund Advisors
Inc. has sole voting power over 281,700 shares and sole dispositive power
over 398,000 shares. Persons who are officers of Dimensional Fund Advisors
Inc. also serve as officers of DFA Investment Dimensions Group Inc. (the
"Fund") and The Investment Trust Company (the "Trust"). The Fund and the
Trust are open-end management investment companies registered under the
Investment Company Act of 1940. In their capacities as officers of the Fund
and the Trust, these persons vote 92,900 shares which are owned by the Fund
and 23,400 shares which are owned by the Trust.
As of September 1, 1994, the following table shows the shares of the
Corporation's Common Stock beneficially owned by the four named executive
officers identified in the Compensation Table shown later in this Proxy
Statement and all officers and directors of the Corporation as a group (17
persons):
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME BENEFICIAL OWNERSHIP PERCENT OF CLASS
--------------------------- -------------------- ----------------
<S> <C> <C>
John J. Smith 2,050,000(1) 26.24%
David W. Hockenbrocht 60,369(2) .77%(6)
Richard H. Nichols 46,000(3) .59%(6)
Jerry R. Gause 4,700(4) .06%(6)
All Officers & Directors 3,119,661(5) 39.68%(6)
</TABLE>
- - ---------------
(1) Reference is made to note (2) on page 1.
(2) Reference is made to note (3) on page 6.
(3) Includes 15,000 shares which Mr. Nichols has the right to acquire pursuant
to options exercisable within 60 days.
(4) Includes 4,000 shares which Mr. Gause has the right to acquire pursuant to
options exercisable within 60 days.
(5) Includes 50,667 shares under options held by officers and directors
exercisable within 60 days.
2
<PAGE> 5
(6) Calculated based on total shares outstanding plus the shares subject to
options exercisable within 60 days as described in this Proxy Statement.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing a
written notice of revocation bearing a later date than the proxy with the
Chairman or Secretary of the Company, at or before the Annual Meeting, (ii) duly
executing a subsequent proxy relating to the same shares and delivering it to
the Chairman or Secretary of the Company at or before the Annual Meeting, or
(iii) attending the Annual Meeting and voting in person (although attendance at
the Annual Meeting will not in and of itself constitute a revocation of a
proxy). Any written notice revoking a proxy should be sent to the Chairman or
Secretary of the Company at the Company's offices. Unless revoked, the shares
represented by the enclosed Proxy will be voted at the meeting in accordance
with any specification made thereon, if the Proxy is returned properly executed
and is received in time for voting. Unless otherwise specified, the Proxy will
be voted "FOR" the election of the six (6) nominees.
Management does not intend to present, and does not know of anyone who
intends to present any matters at the meeting to be acted upon by the
shareholders not referred to in the Notice and this Proxy Statement. If any
other matters should properly come before the meeting, it is the intention of
the persons named in the Proxy to vote in accordance with their judgment on such
matters.
The shareholders of the Corporation have cumulative voting rights in the
election of directors at the meeting if written notice is given by any
shareholder to the Chairman, President, a Vice President or the Secretary of the
Corporation not less than 48 hours before the time fixed for holding the meeting
that the shareholder desires that the voting at such election shall be
cumulative, and if an announcement of the giving of such notice is made upon the
convening of the meeting by the Chairman or Secretary or by or on behalf of the
shareholder giving such notice.
If voting at the meeting is cumulative, each shareholder will have the
right to cast that number of votes which equals the number of shares owned by
the shareholder multiplied by the number of directors to be elected to each
class, and the shareholder may cast all such votes for one candidate or
distribute such votes among any number of candidates within the class as the
shareholder elects. The actual number of shares required for election of a
candidate will vary depending upon the total number of shares voting. However,
shareholders owning 2,603,791 shares, or approximately 33 1/3% of the
Corporation's outstanding shares, could elect at least one director to the class
to be elected at the 1994 annual meeting for a term expiring in 1996. Sharehold-
3
<PAGE> 6
ers owning 1,562,275 shares, or approximately 20%, could elect at least one
director to the class elected for a term expiring in 1997.
ELECTION OF DIRECTORS
The directors previously elected by the shareholders whose terms of office
expire at the annual meeting are Messrs. James N. DeBoer, David W. Hockenbrocht
and Lawson K. Smith, each of whom is a nominee for election to a three (3) year
term expiring in 1997. In addition, Rory Riggs is also a nominee for election to
a three (3) year term expiring in 1997. Messrs. David B. Schoon and Michael N.
Taglich are nominees for election to two (2) year terms expiring in 1996. The
following portion of this Proxy Statement contains additional information about
these nominees.
A plurality of the votes cast at the meeting is required to elect the
nominees as directors of the Corporation. As such, the six individuals who
receive the greatest number of votes cast by the holders of Common Stock will be
elected as directors. Shares represented but not voted at the meeting, whether
by abstention or otherwise, will not be treated as votes cast at the meeting.
Votes cast at the meeting and submitted by Proxy will be tabulated by the
Corporation's proxies appointed for that purpose.
It is believed that all nominees are available for election and, if
elected, will serve. However, in the event one of them is or should become
unavailable, or should decline to serve, it is intended that the proxies will be
voted for such substitute nominee or nominees as the persons named in the Proxy
may in their discretion select.
In the following table, the column "Amount and Nature of Beneficial
Ownership" relates to common shares of the Corporation beneficially owned by the
directors and nominees as of September 1, 1994, and is based upon information
furnished by them.
<TABLE>
<CAPTION>
AMOUNT
HAS AND
SERVED NATURE OF
AS A BENEFICIAL
DIRECTOR OWNER- PERCENT OF
NAME AGE PRINCIPAL OCCUPATION SINCE SHIP(1) CLASS(1)
- - ------------------------ --- ------------------------------------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS EXPIRING IN 1997
James N. DeBoer 69 Partner, law firm of Varnum, Ridder- 1971 4,370 .06%
ing, Schmidt & Howlett Grand Rapids,
Michigan
David W. Hockenbrocht 59 President and Chief Operating Officer 1978 60,369(3) .77%
of Sparton Corporation, Jackson,
Michigan
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
AMOUNT
HAS AND
SERVED NATURE OF
AS A BENEFICIAL
DIRECTOR OWNER- PERCENT OF
NAME AGE PRINCIPAL OCCUPATION SINCE SHIP(1) CLASS(1)
- - ------------------------ --- ------------------------------------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Lawson K. Smith(2) 79 Vice President and Secretary of Spar- 1971 826,856(4) 10.59%
ton Corporation, President of Sparton
Engineered Products, Inc. - Lake
Odessa Group, a wholly-owned sub-
sidiary of the Corporation (manufac-
turer of automotive parts and
accessories), Lake Odessa, Michigan
Rory Riggs 41 President & Chief Executive Officer, -- -0- -0-
R F & P Corporation, Richmond, Vir-
ginia, a real estate investment com-
pany, since 1991. Managing Director,
Mergers & Acquisitions Dept., Paine
Webber, Inc., New York, New York,
1981-1990
NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS EXPIRING IN 1996
David B. Schoon 43 President, Stock Portfolio Manage- -- -0- -0-
ment, Inc., Grand Rapids, Michigan, a
registered investment advisory ser-
vices company, since 1992. Senior
Stock Analyst for other registered
investment advisory services compa-
nies, 1986-1992.
Michael N. Taglich 29 Chairman and President, Taglich -- 2,200 .03%
Brothers, D'Amadeo, Wagner & Co.,
Inc. New York, New York, a regis-
tered stock brokerage firm since
1992. Vice President and Branch
Manager of Weatherly Securities, a
leveraged buyout and brokerage firm,
New York, New York, 1987-1992.
DIRECTORS WHOSE TERMS EXPIRE IN 1996
Robert J. Kirk 81 Financial Consultant, Toledo, Ohio 1978 6,000 .08%
Marshall V. Noecker 79 President and owner of the Marshall 1963 30,000 .38%
Noecker Group Companies (14 manu-
facturing companies in the aluminum
industry and 7 investment compa-
nies), Garden City, Michigan
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
AMOUNT
HAS AND
SERVED NATURE OF
AS A BENEFICIAL
DIRECTOR OWNER- PERCENT OF
NAME AGE PRINCIPAL OCCUPATION SINCE SHIP(1) CLASS(1)
- - ------------------------ --- ------------------------------------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
DIRECTORS WHOSE TERMS EXPIRE IN 1995
John J. Smith(2) 82 Chairman of the Board and Chief Ex- 1950 2,050,000(5) 26.24%
ecutive Officer of Sparton Corpora-
tion, Jackson, Michigan
Blair H. Thompson 69 Formerly Vice President and Trea- 1972 57,024 .73%
surer of Sparton Corporation, Jack-
son, Michigan (Retired May 1, 1990)
</TABLE>
- - ---------------
(1) Unless otherwise indicated by footnote, each director or nominee has sole
voting power and owns the shares directly, or shares voting and investment
power with his spouse or other family members under joint ownership.
(2) John J. Smith and Lawson K. Smith are "associates" of each other as defined
in Rule 14a-1 of Regulation 14A of the Securities and Exchange Commission.
The number of common shares beneficially owned by each of them is set forth
in the preceding table.
(3) Includes 10,667 shares which Mr. Hockenbrocht has the right to acquire
pursuant to options exercisable within 60 days. Such shares have been added
to the total shares outstanding in computing Mr. Hockenbrocht's percentage
ownership.
(4) Reference is made to note (3) on page 2.
(5) Reference is made to note (2) on page 1.
Mr. John J. Smith and Mr. Lawson K. Smith are brothers. There are no other
family relationships between the nominees and the directors named above. Except
as noted, the principal occupations referred to have been held by the foregoing
nominees and directors for at least five years.
Mr. Robert J. Kirk is a director of Seaway Foodtown, Inc., Toledo, Ohio and
Harbor Funds, Toledo, Ohio (six separate funds). Mr. Rory Riggs is a director of
Biomatrix, Inc.
The Board of Directors, which had six meetings during the past year, has
standing audit and compensation committees. There is no nominating committee.
The responsibilities of the audit committee, which met twice last year and
consists of Robert J. Kirk and Marshall V. Noecker, include reviewing the
general scope of the audit of the Corporation's financial statements and the
results of the audit with the auditors and
6
<PAGE> 9
management. The compensation committee, which met one time last year and
consists of John J. Smith, Robert J. Kirk, Marshall V. Noecker, James N. DeBoer
and Blair H. Thompson, establishes the remuneration, including stock options, to
be paid or offered to the Corporation's executive officers. All Directors
attended at least 75% of the meetings of the Board and committees on which they
serve.
Directors who are not employees of the Corporation are compensated at the
rate of $350 per month and $500 for each directors' meeting attended. Members of
the audit committee receive $500 for each audit committee meeting attended.
Directors who are employees of the Corporation receive $350 for each directors'
meeting attended.
COMPENSATION OF EXECUTIVE OFFICERS
The following tables provide certain data and information on the
compensation of the Company's Chief Executive Officer and other executive
officers whose annual salary and bonus exceeded $100,000. This report addresses
the Company's compensation policies and programs for the year ended June 30,
1994, the details of which are reflected in the tables set forth in the
following pages of this Proxy Statement. While this is only the second year for
this reporting format, the Company's and the Board's policies and practices
pertaining to the compensation of executive officers and management has been in
effect for a number of years.
COMPENSATION COMMITTEE REPORT
Decisions on the compensation of the Company's executive officers are made
by the Board's Compensation Committee. This Committee is composed of the four
non-employee directors, Messrs. Noecker, Kirk, DeBoer and Thompson and Mr. John
J. Smith, Chairman of the Board and Chief Executive Officer. The compensation of
Mr. John J. Smith is determined by these four non-employee directors.
The Company has long established policies and practices intended to
compensate its salaried employees in a manner that will enable the Company to
attract, retain and motivate them to accomplish corporate goals and objectives.
These policies and practices encourage management to remain dedicated to the
maximization of shareholder value. The Compensation Committee establishes
compensation for its key executives through a comparison of its salary levels
with companies of comparable size, sales and profitability.
The Company's compensation program is comprised of several elements: cash
compensation (including salary and incentive bonus), incentive stock options and
defined benefit and defined contribution retirement plans. Reflective of the
Company's goal of relating compensation to corporate performance, the incentive
bonus compensation plan permits certain executive officers to earn additional
compensation if the pretax earnings of their operating unit is in excess of an
established goal. The bonus
7
<PAGE> 10
for all other key executives is a subjective determination by the Compensation
Committee based upon an evaluation of the employee's individual performance,
level of responsibility and experience.
The Company's Chief Executive Officer is compensated pursuant to Employment
Agreements that have been in existence since 1950. The present Agreement expired
on June 30, 1994. Under the terms of this contract, Mr. Smith's annual salary
for fiscal 1994 was $261,716. The contract also provides for an annual cash
bonus equal to 5% of the Corporation's pretax earnings in excess of $5,000,000
with the bonus limited to $145,000 for the fiscal year ended June 30, 1994. For
the year ended June 30, 1994, Mr. Smith accepted approximately seventy-nine
percent of the total salary which he was entitled to receive under the terms of
his employment contract. No bonus was payable under the terms of the contract
for fiscal 1994.
On August 26, 1994, a new three-year employment agreement for Mr. Smith was
agreed to in principle. Pursuant to that agreement, Mr. Smith's annual
compensation for fiscal 1995 is established at $274,802 with annual increases of
5% per year. In addition, the bonus limit is increased to $150,000 for each of
the three years.
Effective June 1, 1994, Mr. Smith has voluntarily reduced his compensation
to a rate of $120,000 per annum. This reduction will remain in effect until such
time as the Company receives notice from Mr. Smith that he elects to return to
the contract rate of compensation.
Pursuant to prior employment agreements with Mr. Smith, a deferred
compensation account was established. Mr. Smith is entitled to receive payments
in monthly installments following termination of employment; or, subject to
prior approval of the Corporation's Board of Directors, from time to time in
lump sums upon Mr. Smith's request. During fiscal 1994, Mr. Smith requested and
received $161,172. The balance in Mr. Smith's deferred compensation account will
be paid in a lump sum upon his death. Beginning July 1, 1976, the Corporation
agreed to credit interest to Mr. Smith's deferred compensation account at the
rate of 1 1/2% above the prime rate, but not exceeding 10%, but if the prime
rate exceeds 10% then interest will be credited at the prime rate, but in no
event at a rate exceeding 14%. At June 30, 1994, the balance in Mr. Smith's
deferred compensation account was $1,912,265.
<TABLE>
<S> <C>
Marshall V. Noecker Robert J. Kirk
James N. DeBoer John J. Smith
Blair H. Thompson
</TABLE>
8
<PAGE> 11
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPANTS
Mr. John J. Smith is a member of the Compensation Committee and as such
participates in establishing compensation for executives of the Company.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table shows certain compensation information for
the Chief Executive Officer and the three other executive officers whose annual
compensation exceeded $100,000 (the Named Executives) for services rendered in
all capacities during the fiscal years ended June 30, 1994, 1993 and 1992.
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
OPTIONS/
SARS ALL OTHER
NAME AND PRINCIPAL FISCAL AWARDED COMPEN-
POSITION YEAR SALARY BONUS (NUMBER) SATION
- - ------------------------- ------- -------- -------- --------- --------------
<S> <C> <C> <C> <C> <C>
John J. Smith 1994 $206,287 $ -0- $163,272(2)
Chairman of the Board 1993 186,940 139,000 1,400(1)
and Chief Executive 1992 197,855 133,000 1,400(1)
Officer
David W. Hockenbrocht 1994 196,350 -0- 2,100(1)
President and Chief 1993 188,000 21,205 32,000 1,400(1)
Operating Officer 1992 181,033 33,610 1,400(1)
Richard H. Nichols 1994 129,425 -0- -0-
Vice President and 1993 123,789 23,228 15,000 -0-
General Manager 1992 119,617 34,759 -0-
Jerry R. Gause 1994 80,884 21,000 3,378(3)
Vice President and 1993 77,250 18,000 5,000 4,183(3)
General Manager 1992 75,000 15,000 3,599(3)
</TABLE>
- - ---------------
(1) Directors Fees.
(2) Directors fees and amounts paid pursuant to deferred compensation
arrangement discussed on page 8.
(3) Company contributions to employee's defined contribution benefit plan.
OPTIONS GRANTS IN LAST FISCAL YEAR
There were no options granted to any Named Executives or other officers or
employees for the fiscal year ended June 30, 1994.
9
<PAGE> 12
OPTION/SAR EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executives, concerning the exercise of stock options or stock appreciation
rights ("SARs") during the last fiscal year and unexercised options and SARs
held at June 30, 1994.
AGGREGATED OPTION/SARS EXERCISED IN
LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN THE
MONEY OPTIONS/SARS AT FISCAL
SHARES OPTIONS/SARS AT FISCAL YEAR-END YEAR-END(1)
ACQUIRED ON VALUE -------------------------------- --------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------------- ----------- ----------- ------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
John J. Smith -0- $ -0- $ -0- -0- $ -0- $ -0-
David W. Hockenbrocht -0- -0- 5,333 26,667 -0- -0-
Richard H. Nichols -0- -0- 18,750 11,250 20,625 -0-
Jerry R. Gause -0- -0- 2,750 3,750 2,063 -0-
</TABLE>
- - ---------------
(1) The value of unexercised options/SARs reflects the increase in market value
of the Common Stock from the date of grant through June 30, 1994 (when the
closing price of the Company's Common Stock was $5.75 per share). Value
actually realized upon exercise by the Named Executive will depend on the
value of the Company's Common Stock at the time of exercise.
RETIREMENT PROGRAMS
The Corporation maintains a defined benefit retirement plan for employees
of Sparton Corporation and one subsidiary which provides for monthly pensions
following retirement. During the past year, no cash contributions were made by
the Corporation to the plan as in the judgment of the Corporation's independent
actuaries, the pension plan was fully funded. The plan provides a basic benefit
of $2.25 per month for each year of credited service up to a maximum of $90 per
month. In addition, for those participants who contribute 5% of their monthly
compensation (excluding bonuses) per month, the plan provides for an additional
monthly pension amount equal to 1 1/2% of the participant's final 10-year
average monthly compensation (excluding bonuses) times the participant's years
of contributory credited service to a maximum of 30 years. The following table
shows the estimated annual retirement benefits in specified remuneration and
service classifications upon normal retirement at age 65. The benefits shown are
not subject to any deduction for Social Security or other offset amounts. (For
fiscal years beginning after June 30, 1993, the maximum amount of annual
compensation allowed to be included in determining final average
10
<PAGE> 13
compensation has been limited by statute to $150,000. This amount is subject to
future adjustment by the Internal Revenue Service.)
<TABLE>
<CAPTION>
FINAL 10-YEAR
AVERAGE ANNUAL YEARS OF CONTRIBUTORY AND CREDITED SERVICE AT AGE 65
EARNINGS (EXCLUDES ------------------------------------------------------------
BONUSES) 10 15 20 25 30
- - -------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 60,000 $ 9,270 $ 13,905 $ 18,540 $ 23,175 $ 27,810
80,000 12,270 18,405 24,540 30,675 36,810
100,000 15,270 22,905 30,540 38,175 45,810
120,000 18,270 27,405 36,540 45,675 54,810
140,000 21,270 31,905 42,540 53,175 63,810
160,000 24,270 36,405 48,540 60,675 72,810
180,000 27,270 40,905 54,540 68,175 81,810
</TABLE>
The following Named Executives have credited years of contributory credited
service under the plan and current annual earnings, for benefit purposes, as set
forth below.
<TABLE>
<CAPTION>
CURRENT ANNUAL
YEARS OF CONTRIBUTORY EARNINGS (EXCLUDING
NAME CREDITED SERVICE BONUS)
- - ------------------------------ --------------------- --------------------
<S> <C> <C>
David W. Hockenbrocht 17.50 $196,350
Richard H. Nichols 29.58 131,000
</TABLE>
Mr. John J. Smith and Mr. Jerry R. Gause do not participate in the
Company's defined benefit retirement plan.
Pursuant to Section 16 of the Securities Exchange Act of 1934, the
Company's directors and executive officers, as well as any person holding more
than ten percent of a registered class of the Company's equity securities, are
required to report any changes in their ownership of the Company's securities to
the Securities and Exchange Commission and the New York Stock Exchange. To the
Company's knowledge, all required reports were properly filed by such persons
during the fiscal year ended June 30, 1994, except that Jerry R. Gause failed to
file one report related to his purchase of 200 shares of Common Stock on April
12, 1994.
PERFORMANCE GRAPH
The following is a line-graph presentation comparing cumulative, five-year
shareholder return, on an indexed basis, of the Company's Common Stock with that
of a broad market index (the S&P 500 Composite Index) and a weighted index made
up of selected S&P 500 indices including Electronics Defense (50%), Automobiles
(25%) and Industrials (25%). The Company selected this weighted index because
the
11
<PAGE> 14
companies included therein are engaged in operations similar to the Company's
operations. The comparison assumes a $100 investment on June 30, 1989 and the
reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
SPARTON CORPORATION, S&P 500 COMPOSITE INDEX AND AN INDUSTRY INDEX
(INDEX JUNE 30, 1989 = 100)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P WEIGHTED SPARTON COR-
(FISCAL YEAR COVERED) S&P 500 INDEX INDEX PORATION
<S> <C> <C> <C>
1989 100 100 100
1990 117 116 44
1991 125 136 64
1992 142 140 78
1993 161 176 57
1994 164 184 62
</TABLE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
John J. Smith and his wife and Lawson K. Smith lease a manufacturing
facility located in White Cloud, Michigan to Sparton Engineered Products, Inc.
- - -- KPI Group, a wholly owned subsidiary of the Corporation (KPI Group). John J.
Smith and his
12
<PAGE> 15
wife also lease a facility located in Grand Haven, Michigan to KPI Group. Both
the facilities are occupied under lease agreements that allow termination by
either party upon ninety (90) day notice. The agreements, the result of
arms-length type negotiations, grant the Corporation the option to acquire the
properties during the lease term for $252,600 and $223,200, respectively.
Original leases of these facilities were in existence prior to the Corporation's
acquisition of KPI Group.
INDEPENDENT AUDITORS
Representatives of Ernst & Young LLP, the Corporation's independent
auditors for many years, are expected to be present at the annual meeting. They
will have an opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS -- 1995 ANNUAL MEETING
Any proposal of a shareholder intended to be presented for action at the
next annual meeting of the Corporation must be received by the Corporation at
2400 East Ganson Street, Jackson, Michigan 49202, not later than June 1, 1995,
if the shareholder wishes the proposal to be included in the Corporation's proxy
materials for that meeting.
By Order of the Board of Directors
LAWSON K. SMITH
Secretary
September 29, 1994
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<PAGE> 16
PROXY
SPARTON CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 26, 1994
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
John J. Smith, Lawson K. Smith and R. Jan Appel, and each of them, are
hereby appointed proxies of the undersigned with full power of
substitution, to represent the undersigned at the Annual Meeting of
Shareholders of SPARTON CORPORATION on October 26, 1994 at 10:00 A.M.,
local time, and any and all adjournments thereof, and to vote thereat as
designated below, all the shares of said Corporation which the undersigned
would be entitled to vote if personally present.
1. In the election of four directors for terms expiring in 1997.
<TABLE>
<S> <C>
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary below) / / to vote for all nominees listed below /
/
</TABLE>
James N. DeBoer, David W. Hockenbrocht, Lawson K. Smith and Rory Riggs
2. In the election of two directors for terms expiring in 1996.
<TABLE>
<S> <C>
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary below) / / to vote for all nominees listed below /
/
</TABLE>
David B. Schoon and Michael N. Taglich
(Instruction: To withhold authority to vote for any individual nominee(s),
write that nominee's name in the space provided below.)
(Continued, and to be signed, on reverse side.)
(Continued from the other side.)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" THE ELECTION OF ALL DIRECTORS AS PROVIDED IN ITEMS 1
AND 2.
PLEASE DATE AND SIGN THIS PROXY EXACTLY AS YOUR NAME APPEARS HEREIN AND
RETURN IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE. IF EXECUTING ON
BEHALF OF A CORPORATION, MINOR, ETC. SIGN THAT NAME AND ADD SIGNATURE AND
CAPACITY OF AUTHORIZED SIGNER.
Dated , 1994
--------------------------------
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