<PAGE> 1
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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
SPARTON CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
SPARTON CORPORATION
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] 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: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] 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: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<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 22, 1997, at 9 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 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 15, 1997 are entitled to notice of and to vote at the meeting.
By Order of the Board of Directors
LAWSON K. SMITH
Secretary
September 26, 1997
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 by revoking it as described on page 2 of the Proxy Statement.
<PAGE> 3
SPARTON CORPORATION
2400 East Ganson Street
Jackson, Michigan 49202
------------------
PROXY STATEMENT
------------------
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON OCTOBER 22, 1997
SOLICITATION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of SPARTON CORPORATION, an Ohio corporation (the
"Company"), of proxies for use at the 1997 Annual Meeting of Shareholders of the
Company (the "Annual Meeting") to be held at the offices of the Company, 2400
East Ganson Street, Jackson, Michigan 49202, on October 22, 1997 at 9 a.m.,
local time, and at any and all adjournments thereof. The cost of solicitation
will be paid by the Company. In addition, officers and employees of the Company
and its subsidiaries may solicit proxies personally, by telephone, facsimile or
other means, without additional compensation. This Proxy Statement and the form
of Proxy are being mailed to shareholders on or about September 26, 1997.
At the meeting, the Company's shareholders will act upon the election of
four (4) directors each to serve for a three (3) year term until the annual
meeting held in the year 2000 or until their successors are elected and
qualified, as described in more detail in this Proxy Statement.
OUTSTANDING STOCK AND VOTING RIGHTS
In accordance with the Code of Regulations of the Company, the Board of
Directors has fixed the close of business on September 15, 1997, as the record
date for determination of shareholders entitled to notice of, and to vote at,
the Annual Meeting. Only shareholders of record on that date will be entitled to
vote.
As of September 15, 1997, the record date for the Annual Meeting, the
Company had outstanding 7,828,090 shares of Common Stock, each entitled to one
vote at the Annual Meeting. Votes cast at the meeting and submitted by proxy are
counted by the inspectors of the meeting, who are appointed by the Company. As
of September 1, 1997, the persons named in the following table were known by the
management to be the beneficial owners of more than 5% of the Company'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 2,523,449(2) 32.24%(2)
Lawson K. Smith(1)
14901 Willowbrook Drive
Lake Odessa, Michigan 48849 738,456(3) 9.43(3)
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue, 11th Fl.
Santa Monica, California 90401 537,500(4) 6.87(4)
</TABLE>
1
<PAGE> 4
- ---------------
(1) Mr. John J. Smith and Mr. Lawson K. Smith are brothers.
(2) Includes 1,920,000 shares owned by Mr. John J. Smith. An additional 180,000
shares are held by a trust over which Mr. Smith has voting control. The
amount also includes 423,449 shares held by several of the Company's
retirement plans as to which Mr. Smith holds voting and investment power in
his capacity as chief executive officer of the Company. Mr. Smith has no
financial interest in these shares and disclaims any beneficial interest.
(3) Includes 399,056 shares and 339,400 shares held by the Lawson K. Smith Trust
and Margaret E. Smith Trust, respectively. Lawson K. Smith and his wife,
Margaret E. Smith, have voting and investment control over the shares held
in the trusts bearing their names.
(4) According to information included in the Form 13G Report filed as of
December 31, 1996, by Dimensional Fund Advisors Inc. ("Dimensional"), a
registered investment advisor, Dimensional is deemed to have beneficial
ownership of 537,500 shares of Common Stock, all of which shares are held in
portfolios of DFA Investment Dimensions Group Inc., a registered open-end
investment company, or in series of the DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans, to all of
which Dimensional Fund Advisors Inc. serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares.
As of September 1, 1997, the following table shows the shares of the
Company's Common Stock beneficially owned by the Named Executives identified in
the Compensation Table shown later in this Proxy Statement and all officers and
directors of the Company as a group (15 persons):
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME BENEFICIAL OWNERSHIP CLASS(4)
- --------------------------- -------------------- ----------
<S> <C> <C>
John J. Smith 2,523,449(1) 32.24%
David W. Hockenbrocht 82,869(2) 1.06
Richard D. Mico 17,000 .22
Douglas E. Johnson 5,000 .06
All Officers and Directors 3,478,010(3) 44.28
</TABLE>
- ---------------
(1) Reference is made to note (2) at the top of this page.
(2) Includes 26,667 shares which Mr. Hockenbrocht has the right to acquire
pursuant to options exercisable within 60 days.
(3) Includes shares under options held by officers and directors exercisable
within 60 days.
(4) 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 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). 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
delivered in time for voting. Unless otherwise specified, the Proxy will be
voted "FOR" the election of the four (4) director nominees.
2
<PAGE> 5
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 Company have cumulative voting rights in the
election of directors at the Annual Meeting if notice in writing is given by any
shareholder to the Chairman, President, a Vice President or the Secretary of the
Company not less than 48 hours before the time fixed for holding the Annual
Meeting that the shareholder desires that the voting at such election shall be
cumulative. An announcement of the giving of such notice shall be made upon the
convening of the Annual Meeting by the Chairman or Secretary.
If voting at the Annual 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, and the
shareholder may cast all such votes for one candidate or distribute such votes
among any number of candidates as the shareholder elects. The actual number of
shares required for election of a candidate will vary depending upon the total
number of shares voted. However, shareholders owning 1,565,619 shares, or
approximately 20% of the Company's outstanding shares, could elect at least one
director to the class of four directors to be elected at the 1997 annual meeting
for a term expiring in 2000 if there are five nominees.
ELECTION OF DIRECTORS
The following directors, previously elected by the Company's shareholders
and whose terms of office expire at the Annual Meeting, Messrs. James N. DeBoer,
David W. Hockenbrocht, Lawson K. Smith and Rory B. Riggs, are nominees each for
election to a three (3) year term expiring in 2000. 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 Company. As such, the four (4) individuals who
receive the greatest number of votes cast by the holders of Common Stock will be
elected as directors. Shares not voted at the Annual Meeting, whether by
abstention, broker nonvote, or otherwise, will not be treated as votes cast at
the meeting.
It is believed that all four (4) nominees are, and will be at the time of
the Annual Meeting, available for election; and, if elected, will serve.
However, in the event one or more 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.
3
<PAGE> 6
In the following table, the column "Amount and Nature of Beneficial
Ownership" relates to common shares of the Company beneficially owned by the
directors and nominees as of September 1, 1997, and is based upon information
furnished by them.
<TABLE>
<CAPTION>
HAS
SERVED AMOUNT AND
AS A NATURE OF
DIRECTOR BENEFICIAL PERCENT OF
NAME AGE PRINCIPAL OCCUPATION SINCE OWNERSHIP(1) CLASS(1)
- ------------------------ --- ------------------------------------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C>
NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS EXPIRING IN 2000
James N. DeBoer......... 72 Partner, law firm of Varnum, Ridder- 1971 4,370 .06%
ing, Schmidt & Howlett, LLP, Grand
Rapids, Michigan.
David W. Hockenbrocht... 62 President and Chief Operating Officer 1978 82,869(3) 1.06
of Sparton Corporation, Jackson,
Michigan.
Lawson K. Smith(2)...... 82 Vice President and Secretary of Spar- 1971 738,456(4) 9.43
ton Corporation, Jackson, Michigan.
Rory B. Riggs........... 44 President of Biomatrix, Inc., Rich- 1994 -0- -0-
field, New Jersey, a medical biotech-
nology company since 1997, and
President, ITIM Corporation, New
York, New York, an investment advi-
sory and venture capital firm since
1991. Mr. Riggs was President and
Chief Executive Officer of RF&P Cor-
poration, Richmond, Virginia, a real
estate investment company, from 1991
to 1994.
DIRECTORS WHOSE TERMS EXPIRE IN 1998
John J. Smith(2)........ 85 Chairman of the Board and Chief Ex- 1950 2,523,449(5) 32.24
ecutive Officer of Sparton Corpora-
tion, Jackson, Michigan.
Blair H. Thompson....... 72 Formerly Vice President and Trea- 1972 57,024 .73
surer of Sparton Corporation, Jack-
son, Michigan (Retired in 1990).
DIRECTORS WHOSE TERMS EXPIRE IN 1999
Robert J. Kirk.......... 84 Financial Consultant, Toledo, Ohio 1978 6,000 .08
Marshall V. Noecker..... 82 President and substantial owner of 1963 30,000 .38
the Marshall Noecker Group Companies
(aluminum fabrication and man-
ufacturing companies and investment
companies), Garden City, Michigan.
David B. Schoon......... 46 President, Stock Portfolio Manage- 1994 -0- -0-
ment, Inc., Grand Rapids, Michigan, a
financial consulting services com-
pany, since 1992. Senior Stock Ana-
lyst for other financial consulting
services companies, 1986-1992.
</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.
(3) Reference is made to note (2) in the middle of page 2.
(4) Reference is made to note (3) at the top of page 2.
(5) Reference is made to note (2) at the top of page 2.
4
<PAGE> 7
Mr. John J. Smith and Mr. Lawson K. Smith are brothers. There are no other
family relationships between the nominees and the directors. Except as noted,
the principal occupations referred to have been held by the foregoing nominees
and directors for at least five years.
Mr. Rory B. Riggs is a director of Biomatrix, Inc.
The Board of Directors, which had five (5) meetings during the past year,
has standing audit and compensation committees. There is no nominating
committee. The responsibilities of the audit committee, which met two (2) times
last year and consists of Robert J. Kirk and Marshall V. Noecker, include
reviewing the general scope of the audit of the Company's financial statements
and the results of the audit with the auditors and management. The compensation
committee, which met once 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
Company's executive officers. All Directors attended at least 75% of the
meetings of the Board and committees on which they serve except for Mr. Riggs
who attended 20% of such meetings.
Directors who are not employees of the Company 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 Company receive $350 for each directors'
meeting attended.
The Executive Compensation Committee Report and Performance Graph set forth
below are not deemed to be soliciting material or to be filed with the
Securities and Exchange Commission under the Securities Act of 1933 or the
Securities Exchange Act of 1934 or incorporated by reference in any document so
filed.
------------------------------------------------
COMPENSATION OF EXECUTIVE OFFICERS
The following tables provide certain data and information on the
compensation of the Company's Chief Executive Officer and its three most highly
compensated executive officers (other than the CEO) whose annual salary and
bonus exceeded $100,000 (collectively referred to as the "Named Executives").
This report addresses the Company's compensation policies and programs for the
year ended June 30, 1997, the details of which are reflected in the tables set
forth in the following pages of this Proxy Statement. The Company's and the
Board's policies and practices pertaining to the compensation of executive
officers and management have been in effect for a number of years.
EXECUTIVE 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 Mr. John J.
Smith, Chairman of the Board and Chief Executive Officer and four non-employee
directors; Messrs. Noecker, Kirk, DeBoer and Thompson.
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 of the Company's key
executives is based, in part, on the Compensation Committee's review of
executive compensation at other companies. The Committee's review entails a
comparison of executive' salaries at other companies for purposes of
ascertaining, in general, that the Company's salary structure is at or about
prevailing market rates. This review does not entail a quantative or qualitative
analysis of the components of the comparative executive compensation.
5
<PAGE> 8
The Company's compensation program was comprised of several elements: cash
compensation (including salary and incentive bonus), incentive stock options and
defined benefit or 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 performance goals for this plan are reviewed and approved
annually by the Compensation Committee. In addition, at the discretion of the
Committee, bonuses may be paid in addition to or in lieu of bonuses earned under
the incentive bonus plan based on the Committee's evaluation of the employee's
individual performance, level of responsibility and experience. During the past
fiscal year, both discretionary bonuses as well as bonuses under the incentive
bonus compensation plan were paid to the Named Executives.
The Company's Chief Executive Officer is compensated pursuant to employment
agreements that have been in existence since 1950. The employment agreement,
which expired on June 30, 1997, provided for a fixed base salary and an annual
cash bonus equal to 5 percent of the Company's pretax earnings in excess of $5
million, subject to an annual bonus limitation of $150,000. A further
description of the current employment agreement and related compensation of the
Company's Chief Executive Officer is set forth below under the caption
"Employment Agreement and Related Compensation."
<TABLE>
<S> <C>
Marshall V. Noecker Robert J. Kirk
James N. DeBoer John J. Smith
Blair H. Thompson
</TABLE>
EMPLOYMENT AGREEMENT AND RELATED COMPENSATION
The employment contract with Mr. John J. Smith, the Company's CEO, expired
on June 30, 1997. Under the terms of that contract, Mr. Smith's annual salary
for fiscal 1997 was to be $302,969. The contract also provided for an annual
cash bonus equal to 5% of the Company's pretax earnings in excess of $5,000,000
with the bonus limited to $150,000 for the fiscal year ended June 30, 1997. For
the year ended June 30, 1997, Mr. Smith voluntarily reduced his compensation to
$261,716 and reduced the bonus payable to him to $25,000.
Pursuant to prior employment agreements with Mr. Smith, a deferred
compensation account had been established. Mr. Smith was entitled to receive
payments in monthly installments following termination of employment; or,
subject to prior approval of the Company's Board of Directors, from time to time
in lump sums upon Mr. Smith's request. In December 1996, Mr. Smith requested and
received the accumulated balance in his deferred compensation account
($2,288,518). In fiscal 1995, Mr. Smith requested and received $120,000 from the
deferred compensation account.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. John J. Smith and Mr. Blair H. Thompson (a former officer of the
Company) are members of the Compensation Committee and as such participate in
establishing compensation for executives of the Company.
6
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table shows certain compensation information for
the Named Executives for services rendered in all capacities during the fiscal
years ended June 30, 1997, 1996 and 1995.
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
FISCAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- ------------------------------ ------- -------- ------- ------------
<S> <C> <C> <C> <C>
John J. Smith 1997 $261,716 $25,000 $2,290,268(1)
Chairman of the Board 1996 178,200 -0- 1,750(1)
and Chief Executive Officer 1995 120,000 -0- 121,750(1)
David W. Hockenbrocht 1997 178,200 25,000 1,750(2)
President and Chief 1996 178,200 -0- 1,750(2)
Operating Officer 1995 178,200 -0- 1,750(2)
Richard D. Mico 1997 106,302 10,915 4,157(3)
Vice President and General 1996 106,294 11,034 3,304(3)
Manager 1995 103,125 -0- 2,510(3)
Douglas E. Johnson 1997 103,434 12,000 -0-
Vice President and General 1996 100,000 -0- -0-
Manager 1995 93,572 -0- -0-
</TABLE>
- ---------------
(1) Represents payments made pursuant to deferred compensation arrangement
discussed under the caption Employment Agreement and Related Compensation on
the previous page, plus directors' fees of $1,750 paid in each of the three
years.
(2) Represents directors fees.
(3) Represents Company contributions to his employees' defined contribution
benefit plan.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in fiscal 1997 to
the Named Executives:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF % OF VALUE AT ASSUMED
SECURITIES TOTAL OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE PRICE APPRECIATION FOR
OPTIONS EMPLOYEES OR BASE FIVE YEAR OPTION TERM(3)
GRANTED IN FISCAL PRICE EXPIRATION -------------------------------
NAME (1)(2) YEAR ($/SH) DATE 0% 5% 10%
- ----------------- ---------- ------------- -------- ---------- ---- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
John J. Smith -0- -0- -0- -0- -0- -0- -0-
David W.
Hockenbrocht -0- -0- -0- -0- -0- -0- -0-
Richard D. Mico 10,000 5.1% $8.375 12/4/01 $-0- $23,139 $ 51,130
Douglas E.
Johnson 20,000 10.2 8.375 12/4/01 -0- 46,277 102,260
</TABLE>
- ---------------
(1) The options become exercisable cumulatively, beginning one year after the
date granted, in four equal annual installments. Optionees may surrender up
to one half of their unexer-
7
<PAGE> 10
cised options in exchange for cash or Common Stock equal to the difference
between the current market value and the option price of shares issuable
upon surrender of such options.
(2) The exercise price equals the closing price of the Corporation's Common
Stock on the business day preceding the date of grant.
(3) The dollar amounts under these columns are the result of calculations at 0%,
5% and 10% rates compounded annually. They are not intended to forecast
possible future appreciation, if any, of the Company's stock price. An
alternative formula for a grant date valuation was not used, as the Company
is not aware of any formula that will determine with reasonable accuracy a
present value amount based on future or changeable factors. No gain to the
optionees is possible without an increase in stock price, which will benefit
all shareholders commensurately. A 0% increase in stock price will result in
zero dollars for the optionee.
OPTION/SAR EXERCISES AND HOLDINGS
The following table sets forth information, with respect to the Named
Executives, concerning the unexercised options and SARs held at June 30, 1997.
None of the Named Executives exercised any options for the purchase of Company
Common Stock during the past fiscal year.
AGGREGATED OPTION/SARs EXERCISED IN
LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARs IN THE MONEY OPTIONS/SARs
AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
------------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John J. Smith -0- -0- $ -0- $ -0-
David W. Hockenbrocht 21,333 10,667 111,998 56,002
Richard D. Mico 5,000 10,000 26,250 35,000
Douglas E. Johnson -0- 20,000 -0- 70,000
</TABLE>
- ---------------
(1) The value of unexercised options reflects the increase in market value of
the Company's common stock from the date of grant through June 30, 1997
(when the closing price of the Company's common stock was $11.875 per
share). The value actually realized upon exercise by the Named Executives
will depend on the value of the Company's common stock at the time of
exercise.
RETIREMENT PROGRAMS
The Company maintains a defined benefit retirement plan for employees of
the Company and one subsidiary which provide for monthly pensions following
retirement. During the past year, no cash contributions were made by the Company
to the plan as in the judgment of the Company'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 and 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. The
maximum amount of annual
8
<PAGE> 11
compensation allowed to be included in determining final average compensation
has been limited by statute to $150,000 for 1997. This amount is subject to
future adjustment by the Internal Revenue Service.
<TABLE>
<CAPTION>
FINAL 10-YEAR AVERAGE YEARS OF CONTRIBUTORY AND CREDITED SERVICE AT AGE 65
ANNUAL 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 years of contributory credited service
under the plan and current annual earnings as of June 30, 1997:
<TABLE>
<CAPTION>
YEARS OF CONTRIBUTORY CURRENT ANNUAL EARNINGS
OFFICER CREDITED SERVICE (EXCLUDING BONUS)
- ---------------------- --------------------- -----------------------
<S> <C> <C>
David W. Hockenbrocht 19.50 $ 178,200
Douglas E. Johnson 9.00 103,434
</TABLE>
Mr. John J. Smith and Mr. Richard D. Mico do not participate in the Company's
defined benefit retirement plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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, 1997.
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 companies included therein are engaged in operations similar to the
Company's historical operations, including the now discontinued automotive
operations. The comparison assumes a $100 investment on June 30, 1992, and the
reinvestment of dividends.
9
<PAGE> 12
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
SPARTON CORPORATION, S&P 500 COMPOSITE INDEX AND AN INDUSTRY INDEX
(INDEX JUNE 30, 1992 = 100)
<TABLE>
<CAPTION>
S&P 500
MEASUREMENT PERIOD SPARTON COMPOSITE S&P WEIGHTED
(FISCAL YEAR COVERED) CORPORATION INDEX INDEX
<S> <C> <C> <C>
1992 100 100 100
1993 71 114 125
1994 78 115 131
1995 70 145 177
1996 58 183 279
1997 161 247 301
</TABLE>
INDEPENDENT AUDITORS
Representatives of Ernst & Young LLP, the Company'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 -- 1998 ANNUAL MEETING
Shareholder proposals intended to be presented at the 1998 Annual Meeting
of Shareholders of the Company must be received by the Company not later than
May 31, 1998, at its principal executive offices, 2400 East Ganson Street,
Jackson, Michigan 49202, Attention: Secretary, for inclusion in the Proxy
Statement and Proxy relating to the 1998 Annual Meeting of Shareholders.
By Order of the Board of Directors
LAWSON K. SMITH,
Secretary
Dated: September 26, 1997
10
<PAGE> 13
SPARTON CORPORATION
P ANNUAL MEETING OF SHAREHOLDERS TO BE HELD OCTOBER 22, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
R
John J. Smith, Lawson K. Smith, and R. Jan Appel, and each of them,
O are hereby appointed proxies of the undersigned with full power of
substitution, to represent the undersigned at the Annual Meeting of
X Shareholders of SPARTON CORPORATION on October 22, 1997, at 9
o'clock a.m., local time, and any and all adjournments thereof, and
Y to vote thereat as designated on the reverse side of this Proxy, all
the shares of said Corporation which the undersigned would be entitled
to vote if personally present.
(change of address)
Change __________________________
of [ ] __________________________
Address __________________________
__________________________
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER AND AS DESCRIBED IN
THE PROXY STATEMENT. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE ELECTION OF ALL DIRECTORS AS PROVIDED IN ITEM 1.
[SEE REVERSE]
[ SIDE ]
- --------------------------------------------------------------------------------
DETACH CARD
September 26, 1997
Dear Shareholder,
The Annual Meeting of your Company will be held on October 22, 1997. At the
meeting, we will be electing four directors each for a term of three years
as set forth in the Proxy Statement.
We ask that you please give us your support by signing, dating and returning the
-------- ------ ---------
attached proxy card in the postage paid envelope as soon as possible. Your vote
-------------------
is important, regardless of the number of shares that you own.
If your shares are held in the name of a bank or brokerage firm, only that firm
can execute a proxy on your behalf. Please contact the person responsible for
-----------------------------------------
your account with your voting instructions.
- -------------------------------------------
Very truly yours,
John J. Smith, Chairman
<PAGE> 14
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
<TABLE>
<CAPTION>
FOR WITHHELD Nominees:
<S> <C> <C> <C>
1. Election of [ ] [ ] James N. DeBoer, David W.
Directors Hockenbrocht, Lawson K.
Smith and Rory B. Riggs
For, except vote withheld from
the following nominee(s):
- -------------------------------
SIGNATURE(S) ___________________________________________________ DATE __________
SIGNATURE(S) ___________________________________________________ DATE __________
Please date and sign this Proxy exactly as your name(s) 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.
</TABLE>
- --------------------------------------------------------------------------------
DETACH CARD
