-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BL6P+Bk8bn+ABK8r/FgsNhIf/jKh0znOijrqMqKGg3izDIBwvObZG8ndWo1JUGYK 4mjvsAMVK1snyi932KuXKA== 0000093676-02-000011.txt : 20020816 0000093676-02-000011.hdr.sgml : 20020816 20020816165618 ACCESSION NUMBER: 0000093676-02-000011 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20020629 FILED AS OF DATE: 20020816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STARRETT L S CO CENTRAL INDEX KEY: 0000093676 STANDARD INDUSTRIAL CLASSIFICATION: CUTLERY, HANDTOOLS & GENERAL HARDWARE [3420] IRS NUMBER: 041866480 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-00367 FILM NUMBER: 02741633 BUSINESS ADDRESS: STREET 1: 121 CRESCENT ST CITY: ATHOL STATE: MA ZIP: 01331 BUSINESS PHONE: 5082493551 10-K 1 fy0210kmain.txt 2002 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended JUNE 29, 2002 Commission File No. 1-367 THE L.S. STARRETT COMPANY (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-1866480 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 121 CRESCENT STREET, ATHOL, MASSACHUSETTS 01331 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 978-249-3551 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Class A Common - $1.00 Per Share Par Value New York Stock Exchange Class B Common - $1.00 Per Share Par Value Not applicable Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes No X The Registrant had 5,154,160 and 1,390,621 shares, respectively, of its $1.00 par value Class A and B common stock outstanding on July 26, 2002. On that date, the aggregate market value of the common stock held by nonaffiliates was approximately $155,000,000. The exhibit index is located on page 22. Documents incorporated by reference Definitive Proxy Statement dated August 16, 2002 - Part III PART I Item I - Business The Company was founded in 1880 and incorporated in 1929 and is engaged in the business of manufacturing industrial, professional, and consumer products. The total number of different items made and sold by the Company exceeds 5,000. Among the items produced are precision tools, tape measures, levels, electronic gages, dial indicators, gage blocks, digital readout measuring tools, granite surface plates, optical measuring projectors, coordinate measuring machines, vises, M1 lubricant, hacksaw blades, hole saws, band saw blades, jig saw blades, reciprocating saw blades, and precision ground flat stock. Much of the Company's production is concentrated in hand measuring tools (such as micrometers, steel rules, combination squares and many other items for the individual craftsman) and precision instruments (such as vernier calipers, height gages, depth gages and measuring instruments that manufacturing companies buy for the use of their employees). These tools and instruments are sold throughout the United States and Canada and over 100 foreign countries, primarily to distributors. By far the largest consumer of these products is the metalworking industry, but other important consumers are automotive, aviation, marine and farm equipment shops, do-it-your-selfers and tradesmen such as builders, carpenters, plumbers and electricians. One retailer, Sears, accounted for approximately 14% of the Company's sales in fiscal 2002. Most of the Company's products are made from steel purchased from steel mills. Forgings, castings, and a few small finished parts are purchased from other manufacturers. Raw materials have always been readily available to the Company and, in most cases, the Company does not rely on sole sources. In the event of unavailability of purchased materials, the Company would be adversely affected, as would its competitors. Similarly, the ability of the Company to pass along raw material price increases is dependent on the competitive situation and cannot be assured. At June 29, 2002, the Company had 2,309 employees, approximately 70% of whom were domestic. None of the Company's operations are subject to collective bargaining agreements. In general, the Company considers its relations with its employees to be excellent. Because of various stock ownership plans, Company domestic personnel hold a large share of Company stock and this dual role of owner-employee has been good for morale over the years. The Company is one of the largest producers of mechanics' hand measuring tools and precision instruments. In the United States, there are three other major companies and numerous small competitors in the field, including direct foreign competitors. As a result, the industry is highly competitive. During the fiscal year ended June 29, 2002, there were no material changes in the Company's competitive position. During recent years, changes in the volume of sales of the Company have, in general, corresponded with changes throughout the industry. In saws and precision ground flat stock, the Company in the United States competes with many manufacturers. The Company competes principally through the high quality of its products and the service it provides its customers. The operations of the Company's foreign subsidiaries are consolidated in its financial statements. The subsidiaries located in Brazil, Scotland, and China are actively engaged in the manufacture of hacksaw and band saw blades and a limited line of precision tools and measuring tapes. A subsidiary in Australia and a subsidiary in Germany are engaged in distribution of the Company's products. The Company expects its foreign subsidiaries to continue to play a significant role in its overall operations. A summary of the Company's foreign operations is contained in the footnotes to the Company's fiscal 2002 financial statements under the caption "OPERATING DATA" found in item 8 of this Form 10-K and is hereby incorporated by reference. The Company generally fills orders from finished goods inventories on hand. Sales order backlog of the Company at any point in time is negligible. Total inventories amounted to $76,622,000 at June 29, 2002, and $84,834,000 at June 30, 2001. The Company uses the last-in, first-out (LIFO) method of valuing most inventories, which results in more realistic operating costs and profits. Inventory amounts are $23,835,000 and $22,685,000 lower, respectively, than if determined on a first-in, first-out (FIFO) basis. The Company does apply for patent protection on new inventions and presently owns a number of patents. Its patents are considered important in the operation of the business, but no single patent is of material importance when viewed from the standpoint of its overall business. The Company relies on its continuing product research and development efforts, with less dependence on its present patent position. It has for many years maintained engineers and supporting personnel engaged in research, product development, and related activities. The expenditures for these activities during fiscal years 2002, 2001 and 2000 were approximately $2,727,000, $2,663,000 and $3,111,000, respectively, all of which was expensed in the Company's financial statements. The Company uses trademarks with respect to its products. All of its important trademarks are registered. Compliance with federal, state and local provisions that have been enacted or adopted regulating the discharge of materials into the environment or otherwise relating to protection of the environment is not expected to have a material effect on the capital expenditures, earnings and competitive position of the Company. Specifically, the Company has taken steps to reduce and control water discharges and air emissions. The Company's business is to a small extent seasonal, with sales and earnings generally at the lowest level during the first and third quarters of the fiscal year. Item 2 - Properties The Company's principal plant is located in Athol, Massachusetts on about 15 acres of Company-owned land. The plant consists of 25 buildings, mostly of brick construction of varying dates, with approximately 535,000 square feet of production and storage area. An additional 9,000 square feet of leased space in Gardner, Massachusetts is considered part of this plant. The Webber Gage Division, Cleveland, Ohio, owns and occupies two buildings totaling approximately 50,000 square feet. The Company-owned facility in Mt. Airy, North Carolina consists of two buildings totaling approximately 356,000 square feet. It is occupied by the Company's Saw Division, Granite Surface Plate Division, Coordinate Measuring Machine/Optical Comparator Division, and Ground Flat Stock Division. The Company's Evans Rule Division, located in North Charleston, South Carolina, owns and occupies a 173,000 square foot building. In addition, this division leases 35,000 square feet of manufacturing space in Mayaguez, Puerto Rico. The Company's Exact Level Division is located in Alum Bank, Pennsylvania and owns and occupies a 50,000 square foot building. The Company's subsidiary in Itu, Brazil owns and occupies several buildings totaling 209,000 square feet. The Company's subsidiary in Jedburgh, Scotland owns and occupies a 187,000 square foot building and also a 33,000 square foot building in Skipton, England, where its wholly owned subsidiary manufactures optical measuring projectors. Two wholly owned subsidiaries in the Shanghai area of the People's Republic of China lease approximately 40,000 square feet and 2,000 square feet. In addition, the Company operates warehouses/sales-support offices in Glendale, Arizona; Elmhurst, Illinois; Atlanta, Georgia; Mississauga, Canada; Sydney, Australia; and Schmitten, Germany. In the Company's opinion, all of its property, plant and equipment is in good operating condition, well maintained and adequate for its needs. Item 3 - Legal Proceedings The Company is not involved in any material pending legal proceedings. Item 4 - Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended June 29, 2002. PART II Item 5 - Market for the Registrant's Common Equity and Related Stockholder Matters The Company's Class A common stock is traded on the New York Stock Exchange. Quarterly dividend and high/low closing market price information is presented in the table below. The Company's Class B common stock is generally nontransferable, except to lineal descendants, and thus has no established trading market, but it can be converted into Class A common stock at any time. The Class B common stock was issued on October 5, 1988, and the Company has paid the same dividends thereon as have been paid on the Class A common stock since that date. At July 26, 2002, there were 1,997 registered holders of Class A common stock and 1,682 registered holders of Class B common stock. Quarter ended Dividends High Low September 2000 $ 0.20 $ 19.44 $ 16.88 December 2000 0.20 22.94 16.69 March 2001 0.20 23.85 19.75 June 2001 0.20 22.74 17.45 September 2001 0.20 20.85 18.00 December 2001 0.20 21.15 18.95 March 2002 0.20 21.82 19.00 June 2002 0.20 25.25 21.20 Item 6 - Selected Financial Data Years ended in June ($000 except per share data) 2002 2001 2000 1999 1998 Net sales $184,346 $225,857 $235,169 $232,385 $262,340 Net earnings(loss) (380) 8,097 11,489 16,696 23,009 Basic earnings(loss)per share (0.06) 1.26 1.73 2.44 3.34 Diluted earnings(loss)per shr. (0.06) 1.25 1.73 2.44 3.33 Long-term debt 7,000 7,000 3,000 3,300 3,900 Total assets 239,097 248,532 250,418 245,728 250,263 Dividends per share 0.80 0.80 0.80 0.80 0.77 Items 7 and 7A- Management's Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosure about Market Risk RESULTS OF OPERATIONS SALES Sales decreased 18% in fiscal 2002 following a 4% decrease in fiscal 2001. The 2002 decrease is both domestic and foreign, 18% and 20%, respectively, although foreign sales were only down 10% in fiscal 2002 when measured in local currencies. In fiscal 2001, the 4% decrease was made up of a 5% decrease on the domestic side and a 1% decrease on the foreign side (7% increase in local currencies). Worldwide economic conditions continue to adversely affect business, although fourth quarter 2002 sales were not down as much (15%) as year to date. For the past three years, sales of our Scotland subsidiary have been adversely affected by the weak euro as compared to the British pound, which hurts business in terms of export pricing and import price competition. The devaluation of Brazil's currency accounts for about 1/4 of the current year's overall sales decrease of 18%. The current year decrease in domestic sales reflects the weak U.S. industrial manufacturing sector. EARNINGS (LOSS) BEFORE TAXES Primarily because of sales volume, pretax earnings dropped $12.7 million in 2002 to a loss of $(1.2) million. 2001 sales were 34% below 2000. Cost of sales was 75.6% in 2002, 71.1% in 2001, and 71.7% in 2000. Changes in these rates are mainly impacted by the manufacturing efficiencies that are gained or lost as a result of increased or decreased production levels, but also by pricing, product mix, and overhead spending. The cost of sales percent was adversely affected in 2002 by production levels about 5% lower than sales levels. Production levels were about 5% higher than sales in 2001. Selling and general expenses were reduced 12% in 2002 but as a percent of sales increased slightly from 23.1% to 24.9% because sales dropped more. In 2001, selling and general expenses actually increased despite the slight drop in sales due to increased expenditures on advertising, information technology, and employee benefits. Although fringe benefit costs were favorably affected in 2002 ($800,000) due to our overfunded pension plan, this was offset by nonrecurring employee severence costs ($600,000), warranty expenses ($700,000), and bad debts ($400,000). INCOME TAXES The effective income tax rate was 69% in 2002 compared to 29% in 2001 and 33% in 2000. Puerto Rico tax incentives, and somewhat lower foreign income tax rates all contribute to an overall effective tax rate that is normally slightly lower than the combined U.S. state and federal rate of approximately 39%. The current year's rate is not easily compared to the prior years because pretax earnings are so close to breakeven that permanent book/tax differences get exaggerated when converted to percentages. Nonrecurring permanent differences between book and taxable income for dividends paid from Brazil to the U.S. in 2001 and 2000 reduced Brazil's effective tax rate substantially when reported in U.S. dollars. We were unable to utilize and record the U.S. tax benefit of the foreign tax credits generated by the 2002 Brazil dividend and this caused our overall tax provision to be $700,000 higher when compared to 2001 and 2000. On the other hand, this is offset by the mix of income in 2002, with the more profitable divisions being in the jurisdictions with the lowest tax rates. Higher than usual foreign tax credits and a refund of prior year state taxes caused the 2001 overall rate to be lower than in 2000. EARNINGS (LOSS) PER SHARE As a result of the above, earnings (loss) per share were $(0.06) in fiscal 2002, $1.26 in 2001, and $1.73 in 2000. MARKET RISK Market risk is the potential change in a financial instrument's value caused by fluctuations in interest and currency exchange rates, and equity and commodity prices. The Company's operating activities expose it to risks that are continually monitored, evaluated, and managed. Proper management of these risks helps reduce the likelihood of earnings volatility. At June 2002 and 2001, the Company was not a party to any derivative arrangement and the Company does not engage in trading, market-making or other speculative activities in the derivatives markets. The Company does not enter into long- term supply contracts with either fixed prices or quantities. The Company does not engage in regular hedging activities to minimize the impact of foreign currency fluctuations. Net foreign monetary assets total approximately $5 million. A 10% change in interest rates would not have a significant impact on the aggregate net fair value of the Company's interest rate sensitive financial instruments (primarily variable rate investments of $8,600,000 and debt of $8,000,000 at June 29, 2002) or the cash flows or future earnings associated with those financial instruments. A 10% change in interest rates would impact the fair value of the Company's fixed rate investments of approximately $3,500,000 by $25,000. LIQUIDITY AND CAPITAL RESOURCES Years ended In June ($000) 2002 2001 2000 Cash provided by operations $17,700 $12,499 $18,822 Cash used in investing activities (10,451) (9,496) (9,267) Cash used in financing activities (7,435) (3,138) (7,892) Cash flows from operating activities increased $5 million from 2001, and in 2001 decreased $6 million from 2000. In 2002, decreasing inventories offset the drop in earnings. Increasing inventories was the main reason for the reduced cash flow from operations in 2001. "Retirement benefits" under noncash expenses in the detailed cash flow statement shows the effect on operating cash flow of the Company's pension and retiree medical plans. Primarily because the Company's domestic defined benefit plan is overfunded, retirement benefits in total generated approximately $2.2, $1.4, and $2.9 million of noncash income in 2002, 2001, and 2000 ($.4, ($.9), and $.5 million, respectively, of accrual basis income (expense)). The Company's investing activities consist of expenditures for plant and equipment and the investment of cash not immediately needed for operations. Plant expenditures of $8 million in 2002 were well below the $13 million and $14 million expended in 2001 and 2000 because of the need to conserve cash and because our multi-year information technology improvement project was essentially completed at the end of 2001. Cash flows from financing activities are primarily the payment of dividends, which tend to be quite steady from year to year. The Company requires little debt to finance day to day operations and the proceeds from the sale of stock under the various stock plans tend to be used to purchase treasury shares. Treasury share purchases were $1.8 million in 2002 compared to $3.8 million in 2001 and $9.0 million in 2000. Borrowings decreased $4.1 million in 2002 while increasing $2.4 million in 2001 and $2.8 million in 2000. The Company maintains sufficient liquidity and has the resources to fund its operations in the near term. If economic conditions do not improve and the Company continues to sustain losses, additional steps will have to be taken in order to maintain liquidity, including further workforce reductions and/or reducing or eliminating dividends. The Company maintains a $25 million line of credit but has not made significant borrowings under it during the past three years. The Company has a working capital ratio of 6.7 to 1 as of June 29, 2002 versus 5.4 to 1 as of June 30, 2001. Cash not immediately required for working capital is invested in high grade debt instruments as explained in the accounting policies footnote. Certain cash and investment balances of foreign subsidiaries may not be repatriated without adverse tax consequences and in certain cases may be subject to regulatory restriction. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This Annual Report on Form 10-K and the 2002 Annual Report, including the President's letter to stockholders, include forward-looking statements about the Company's business, sales, expenditures, environmental regulatory compliance, foreign operations, interest rate sensitivity, debt service, liquidity and capital resources, and other operating and capital requirements. In addition, forward-looking statements may be included in future Company documents and in oral statements by Company representatives to security analysts and investors. The Company is subject to risks that could cause actual events to vary materially from such forward-looking statements, including the following risk factors: Risks Related to Technology: Although the Company's strategy includes investment in research and development of new and innovative products to meet technology advances, there can be no assurance that the Company will be successful in competing against new technologies developed by competitors. Risks Related to the Euro: The United Kingdom has not adopted the euro and the Company's Scottish subsidiary transacts a significant amount of business with euro countries. There can be no assurance that this situation will not result in unforseen economic conditions that affect the Company's business. Indeed, the weakness of the euro as compared to the British pound has had an adverse impact on the Company's sales and margins on business done with euro countries. Risks Related to Foreign Operations: Approximately a third of the Company's sales and net assets relate to foreign operations. Foreign operations are subject to special risks that can materially affect the sales, profits, cash flows, and financial position of the Company, including taxes and other restrictions on distributions and payments, currency exchange rate fluctuations, political and economic instability, inflation, minimum capital requirements, and exchange controls. In particular, the Company's Brazilian operations, which constitute over half of the Company's revenues from foreign operations, can be very volatile, changing from year to year due to the political situation and economy. As a result, the future performance of the Brazilian operations is inherently unpredictable. Risks Related to Cyclical Nature of the Industry: The market for most of the Company's products is subject to economic conditions affecting the industrial manufacturing sector, including the level of capital spending by industrial companies. Accordingly, economic weakness in the industrial manufacturing sector will result in decreased demand for the Company's products and will adversely affect performance. Economic weakness in the consumer market also impacts the Company's performance. Risks Related to Competition: The Company's business is subject to direct and indirect competition from both domestic and foreign firms. In particular, low-wage foreign sources have created severe competitive pricing pressures. Under certain circumstances, including significant changes in U.S. and foreign currency relationships, such pricing pressures might reduce unit sales and/or adversely affect the Company's margins. Item 8 - Financial Statements and Supplementary Data Contents: Page Report of Independent Auditors 9 Consolidated Statements of Operations and Cash Flows 10 Consolidated Balance Sheets 11 Consolidated Statements of Stockholders' Equity 12 Notes to Consolidated Financial Statements 13-19 INDEPENDENT AUDITORS' REPORT To the Stockholders and Directors of The L.S. Starrett Company We have audited the accompanying consolidated balance sheets of The L.S. Starrett Company and subsidiaries as of June 29, 2002 and June 30, 2001, and the related consolidated statements of operations, cash flows and changes in stockholders' equity for each of the three years in the period ended June 29, 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company and subsidiaries as of June 29, 2002 and June 30 2001, and the results of their operations and their cash flows for each of the three fiscal years in the period ended June 29, 2002, in conformity with accounting principles generally accepted in the United States of America. S/DELOITTE & TOUCHE LLP Boston, Massachusetts August 2, 2002 THE L.S. STARRETT COMPANY Consolidated Statements of Operations and Cash Flows For the years ended in June (in thousands of dollars except per share data) 2002 2001 2000 OPERATIONS Net sales $184,346 $225,857 $235,169 Cost of goods sold (139,413) (160,562) (168,648) Selling, general and administrative expense (45,945) (52,223) (49,788) Other income and expense (217) (1,640) 496 Earnings (loss) before income taxes (1,229) 11,432 17,229 Income taxes (benefit) (849) 3,335 5,740 Net earnings (loss) $ (380) $ 8,097 $ 11,489 Basic earnings (loss) per share, based on average outstanding shares of 6,500,026, 6,446,457 and 6,645,019 $ (0.06) $ 1.26 $ 1.73 Diluted earnings (loss) per share, based on average outstanding shares of 6,500,026, 6,457,554 and 6,652,796 $ (0.06) $ 1.25 $ 1.73 CASH FLOWS Cash flows from operating activities: Net earnings (loss) $ (380) $ 8,097 $ 11,489 Noncash expenses: Depreciation and amortization 11,741 11,662 11,380 Deferred taxes 561 97 2,108 Unrealized translation losses 263 748 Retirement Benefits (2,170) (1,396) (2,916) Working capital changes: Receivables 1,664 707 (1,189) Inventories 7,656 (9,261) (3,357) Other current assets and liabilities (1,862) 1,665 1,293 Other 227 180 14 Net cash from operating activities 17,700 12,499 18,822 Cash flows from investing activities: Additions to plant and equipment (8,028) (13,198) (13,974) Decrease (increase) in investments (2,423) 3,702 4,707 Net cash used in investing activities (10,451) (9,496) (9,267) Cash flows from financing activities: Short-term borrowing, net (4,050) (1,645) 3,090 Long-term borrowings (repayments) 4,000 (300) Common stock issued 3,598 3,444 3,665 Treasury shares purchased (1,796) (3,792) (9,045) Dividends (5,187) (5,145) (5,302) Net cash used in financing activities (7,435) (3,138) (7,892) Effect of translation rate changes on cash (87) 72 74 Net increase (decrease) in cash (273) (63) 1,737 Cash beginning of year 1,945 2,008 271 Cash end of year $ 1,672 $ 1,945 $ 2,008 Supplemental cash flow information: Interest paid $ 695 $ 950 $ 844 Taxes paid, net $ (725) $ 1,688 $ 4,190 See notes to consolidated financial statements THE L.S. STARRETT COMPANY Consolidated Balance Sheets (in thousands of dollars) June 29 June 30 ASSETS 2002 2001 Current assets: Cash $ 1,672 $ 1,945 Investments 10,479 8,238 Accounts receivable (less allowance for doubtful accounts of $1,790,000 and $1,976,000) 32,391 34,080 Inventories: Raw materials and supplies 17,228 18,677 Goods in process and finished parts 24,632 27,811 Finished goods 34,762 38,346 Total inventories 76,622 84,834 Prepaid expenses, taxes and other current assets 5,903 5,830 Total current assets 127,067 134,927 Property, plant and equipment, at cost: Land 1,893 1,902 Buildings (less accumulated depreciation of $17,151,000 and $16,469,000) 22,698 23,272 Machinery and equipment (less accumulated depreciation of $61,813,000 and $57,142,000) 46,839 50,031 Total property, plant and equipment 71,430 75,205 Cost in excess of net assets acquired (less accumu- lated amortization of $4,216,000 and $3,947,000) 6,086 6,354 Prepaid pension cost 33,651 30,953 Other assets 863 1,093 $239,097 $248,532 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current maturities $ 996 $ 5,045 Accounts payable and accrued expenses 13,472 14,358 Accrued salaries and wages 4,163 4,827 Other 402 916 Total current liabilities 19,033 25,146 Deferred income taxes 16,012 15,218 Long-term debt 7,000 7,000 Accumulated postretirement benefit obligation 16,711 16,347 Stockholders' equity: Class A common stock $1 par (20,000,000 shrs. auth.; 5,147,201 outstanding in 2002, excluding 1,397,659 held in treasury; 5,017,569 outstanding in 2001, excluding 1,470,544 held in treasury) 5,147 5,018 Class B common stock $1 par (10,000,000 shrs. auth.; 1,397,480 outstanding in 2002, excluding 332,019 held in treasury; 1,440,006 outstanding in 2001, excluding 325,688 held in treasury) 1,397 1,440 Additional paid-in capital 47,858 45,112 Retained earnings reinvested and employed in the business 150,029 156,626 Accumulated other comprehensive income (loss) (24,090) (23,375) Total stockholders' equity 180,341 184,821 $239,097 $248,532 See notes to consolidated financial statements THE L.S. STARRETT COMPANY Consolidated Statements of Stockholders' Equity For the years ended in June, 2000 through 2002 (in thousands) Common Addi- Accumulated Stock Out- tional Other Com- standing Paid-in Retained prehensive ($1 Par) Capital Earnings Income(loss) Total Balance, June 26, 1999 $ 6,706 $ 42,730 $155,349 $ (14,749) $190,036 Comprehensive income: Net earnings 11,489 11,489 Unrealized net loss on investments (113) (113) Translation loss, net (2,708) (2,708) Total comprehensive income 8,668 Dividends ($0.80 per share) (5,302) (5,302) Treasury shares: Purchased (399) (2,956) (5,690) (9,045) Issued 161 3,400 3,561 Options exercised 5 99 104 Balance, June 24, 2000 6,473 43,273 155,846 (17,570) 188,022 Comprehensive income: Net earnings 8,097 8.097 Unrealized net loss on investments (38) (38) Translation loss, net (5,767) (5,767) Total comprehensive income 2,292 Dividends ($0.80 per share) (5,145) (5,145) Treasury shares: Purchased (192) (1,428) (2,172) (3,792) Issued 166 3,078 3,244 Options exercised 11 189 200 Balance, June 30, 2001 6,458 45,112 156,626 (23,375) 184,821 Comprehensive income: Net earnings (380) (380) Unrealized net loss on investments (169) (169) Translation loss, net ** (546) (546) Total comprehensive income (loss) (1,095) Dividends ($0.80 per share) (5,187) (5,187) Treasury shares: Purchased (87) (679) (1,030) (1,796) Issued 153 3,073 3,226 Options exercised 20 352 372 Balance, June 29, 2002 $ 6,544 $ 47,858 $150,029 $(24,090) $180,341 ** Subsequent to May 31, 2002, the fiscal year of our subsidiary in Brazil, the exchange rate for their currency declined approximately 12%. The effect of this decline, which has not been reflected in these financial statements, would be to increase Accumulated Other Comprehensive Income (Loss) by about $2.5 million and therefore reduce Stockholders' equity by the same amount. See notes to consolidated financial statements THE L. S. STARRETT COMPANY Notes to Consolidated Financial Statements SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation: The consolidated financial statements include the accounts of The L. S. Starrett Company and subsidiaries, manufacturers of industrial, professional and consumer products. All subsidiaries are wholly-owned and all significant intercompany items have been eliminated. Since the Company's fiscal year ends on the last Saturday in June, the 2001 fiscal year contains 53 weeks compared to 52 weeks in 2002 and 2000. The fiscal years of the Company's major foreign subsidiaries end in May. Financial instruments and derivatives: The Company's financial instruments consist primarily of current assets, except inventory, current liabilities, and long-term debt. Current assets and liabilities, except investments, are stated at cost, which approximates fair market value. Long-term debts, which are at current market interest rates, also approximate fair market value. The Company does not enter into derivative contracts. Investments: Investments consist primarily of marketable securities, including treasury bills, certificates of deposit and municipal securities. The Company considers all its investments "available for sale." As such, these investments are carried at market, which approximates cost, with unrealized temporary gains and losses recorded as a component of stockholders' equity. Included in investments at June 29, 2002 is $3.5 million of AAA rated Puerto Rico debt obligations that have maturities greater than one year but carry the benefit of possibly reducing repatriation taxes. These investments represent "core cash" and are part of the Company's overall cash management and liquidity program and, under SFAS 115, are considered "available for sale." The investments themselves are highly liquid, carry no early redemption penalties, and are not designated for acquiring non-current assets. Most other investments have maturities of less than one year. Long-lived assets: Buildings and equipment are depreciated using straight- line and accelerated methods over estimated useful lives as follows: buildings 15 to 50 years, building improvements 10 to 40 years, machinery and equipment 5 to 12 years, motor vehicles 3 to 5 years, computer hardware and software 3 to 7 years. Costs in excess of net assets acquired are being amortized on a straight-line basis over 25 to 40 years. Inventories: Inventories are stated at the lower of cost or market. For approximately 70% of all inventories, cost is determined on a last-in, first-out (LIFO) basis. For all other inventories, cost is determined on a first-in, first-out (FIFO) basis. LIFO inventories are $47,859,000 and $52,799,000 at the end of 2002 and 2001, respectively, such amounts being $23,835,000 and $22,685,000 less than if determined on a FIFO basis. Revenue is generally recognized when inventory is shipped to the customer or installed if installation is necessary. Income taxes: Deferred tax expense results from differences in the timing of certain transactions for financial reporting and tax purposes. Deferred taxes have not been recorded on undistributed earnings of foreign subsidiaries (approximately $40,000,000 at June 2002) or the related unrealized translation adjustments because such amounts are considered permanently invested. Valuation allowances are provided where management believes certain deferred tax benefits may not be realized. Research and development: Research and development costs were expensed as follows: $2,727,000 in 2002, $2,663,000 in 2001 and $3,111,000 in 2000. Earnings per share (EPS): Basic EPS excludes dilution and is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution by securities that could share in the earnings. The Company had 9,573, 11,097 and 7,777 of additional potential common shares in 2002, 2001 and 2000 resulting from shares issuable under its stock option plan. These additional shares are not used for the diluted EPS calculation in loss years. Translation of foreign currencies: Assets and liabilities are translated at exchange rates in effect on reporting dates, and income and expense items are translated at rates in effect on transaction dates. The resulting differences due to changing exchange rates are charged or credited directly to the "accumulated other comprehensive income" account included as part of stockholders' equity. Use of accounting estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reporting period. Amounts ultimately realized could differ from those estimates. ACCOUNTING PRONOUNCEMENTS The Company will adopt SFAS 142 as of the first day of fiscal 2003. This requires goodwill no longer be amortized, but instead tested for impairment. Any goodwill impairment loss at transition is recognized as the cumulative effect of a change in accounting principle. The Company has net goodwill of $6.1 million that it expects to write off as a result of adopting SFAS 142 and related annual amortization expense is $268,000. OTHER INCOME AND EXPENSE Other income and expense consists of the following (in thousands): 2002 2001 2000 Interest income, net $ 179 $ 131 $ 660 Realized and unrealized translation gains (losses) (351) (1,859) (101) Other (45) 88 (63) $ (217) $(1,640) $ 496 INCOME TAXES The provision for income taxes consists of the following (in thousands): 2002 2001 2000 Current: Federal $(1,640) $ 1,600 $ 1,581 Foreign 266 1,271 1,582 State (36) 367 469 Deferred 561 97 2,108 $ (849) $ 3,335 $ 5,740 Pretax domestic income (loss) as reportable to the IRS was $(3,100,000), $8,279,000 and $7,704,000 in 2002, 2001 and 2000, respectively. A reconciliation of expected tax expense at the U.S. statutory rate to actual tax expense is as follows (in thousands): 2002 2001 2000 Expected tax expense $ (430) $ 4,001 $ 6,030 Increase (decrease) from: State and Puerto Rico taxes, net of federal benefit (672) (588) (210) Foreign taxes, net of federal credits 163 (17) (247) Nontaxable investment income (10) (21) (43) Other 100 (40) 210 Actual tax expense $ (849) $ 3,335 $ 5,740 Deferred income taxes at year end are attributable to the following (in thousands): 2002 2001 Deferred assets: Retiree medical benefits $(6,768) $(6,716) Inventories (1,840) (1,335) Foreign NOL carried forward indefinately (1,235) (915) Foreign tax credit carryforward expiring 2012 (700) Other (826) (1,155) (11,369) (10,121) Deferred liabilities: Prepaid pension 13,550 12,625 Other employee benefits 680 459 Depreciation 7,296 8,252 Other 1,934 1,057 23,460 22,393 Valuation reserve for foreign tax credits 700 _______ Net deferred tax liability $12,791 $12,272 Long-term portion $16,012 $15,218 EMPLOYEE BENEFIT PLANS The Company has several pension plans, both defined benefit and defined contribution, covering all of its domestic and most of its nondomestic employees. In addition, certain domestic employees participate in an Employee Stock Ownership Plan (ESOP). Ninety percent of the actuarially determined annuity value of their ESOP shares is used to offset benefits otherwise due under the domestic defined benefit pension plan. The total cost (benefit) of all such plans for 2002, 2001 and 2000, considering the combined projected benefits and funds of the ESOP as well as the other plans, was $(1,783,000), $(462,000) and $(1,608,000), respectively. Under both domestic and foreign defined benefit plans, benefits are based on years of service and final average earnings. Plan assets, including those of the ESOP, consist primarily of investment grade debt obligations, marketable equity securities and approximately 1,028,000 shares of the Company's common stock. The status of these defined benefit plans, including the ESOP, is as follows (in thousands): 2002 2001 2000 Change in benefit obligation: Benefit obligation at beginning of year $ 83,203 $ 87,893 $ 88,088 Service cost 3,106 2,887 3,263 Interest cost 5,958 5,950 6,172 Participant contributions 226 242 247 Exchange rate changes 820 (1,942) (1,016) Benefits paid (3,614) (3,393) (3,315) Actuarial (gain) loss 3,650 (8,434) (5,546) Benefit obligation at end of year $ 93,349 $ 83,203 $ 87,893 Change in plan assets: Fair value of plan assets at beginning of year $128,038 $120,861 $137,578 Actual return on plan assets 633 12,213 (12,557) Employer contributions 92 Participant contributions 226 242 247 Benefits paid (3,614) (3,393) (3,315) Exchange rate changes 779 (1,885) (1,092) Fair value of plan assets at end of year $126,154 $128,038 $120,861 Reconciliation of funded status: Funded status $ 32,805 $ 44,835 $ 32,968 Unrecognized actuarial gain (370) (14,555) (3,858) Unrecognized transition asset (2,932) (3,869) (4,818) Unrecognized prior service cost 4,148 4,542 4,946 Prepaid pension cost $ 33,651 $ 30,953 $ 29,238 Amounts recognized in statement of financial Position: Prepaid pension cost $ 35,069 $ 32,390 $ 30,513 Accrued benefit liability (4,301) (1,558) (1,397) Intangible asset 1,133 121 122 Accumulated other comp. income 1,750 Prepaid pension cost $ 33,651 $ 30,953 $ 29,238 Components of net periodic benefit cost: Service cost $ 3,106 $ 2,887 $ 3,263 Interest cost 5,958 5,950 6,172 Expected return on plan assets (10,863) (9,986) (11,432) Amortization of prior service cost 394 404 409 Amortization of transition asset (937) (949) (956) Recognized actuarial gain (264) (20) (352) Net periodic benefit cost $ (2,606) $ (1,714) $ (2,896) Weighted average assumptions: Discount rate 7.00% 7.50% 7.75% Expected long-term rate of return 8.00% 8.50% 8.50% Rate of compensation increase 3.75% 4.00% 4.50% The Company provides certain medical and life insurance benefits for most retired employees in the United States. The status of these plans at year end is as follows (in thousands): 2002 2001 2000 Change in benefit obligation: Benefit obligation at beginning of year $ 15,197 $ 15,101 $ 13,668 Service cost 551 509 457 Interest cost 1,097 1,122 914 Benefits paid (1,014) (1,071) (1,170) Actuarial (gain) loss (182) (464) 1,232 Benefit obligation at end of year $ 15,649 $ 15,197 $ 15,101 Reconciliation of funded status: Funded status $(15,649) $(15,197) $(15,101) Unrecognized actuarial gain 2,259 2,523 3,098 Unrecognized prior service cost (3,321) (3,673) (4,026) Accrued benefit liability $(16,711) $(16,347) $(16,029) Components of net periodic benefit cost: Service cost $ 551 $ 509 $ 457 Interest cost 1,097 1,122 914 Amortization of prior service cost (353) (353) (353) Recognized actuarial gain 81 111 30 Net periodic benefit cost $ 1,376 $ 1,389 $ 1,048 Weighted average assumptions: Discount rate 7.00% 7.50% 7.75% Rate of compensation increase 3.75% 4.00% 4.50% For measurement purposes, a 12.0% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2003. The rate was assumed to decrease gradually to 5.0% for 2014 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one percentage point change in assumed health care cost trend rates would have the following effects (in thousands): 1% 1% Increase Decrease Effect on total of service and interest cost $ 43 $ (88) Effect on postretirement benefit obligation 286 (627) DEBT At year end, long-term debt consists of the following (in thousands): 2002 2001 Note payable due 12/03, 8.3% $ 4,000 $ 4,000 Revolving credit agreement 3,000 3,000 $ 7,000 $ 7,000 All debt is due in fiscal 2004. The revolving credit agreement is for $25,000,000 and expires June 13, 2004. The credit agreement requires commitment fees of .25%. Interest rates vary, but approximate LIBOR plus ..50% (2.3% as of June 29, 2002). All debt agreements contain financial covenants, the most restrictive of which is that at June 29, 2002 the Company must have tangible net worth of $164,000,000 and an EBITDA to debt service ratio of at least 1.5. Current notes payable carry interest at a rate of LIBOR plus 1 - 4%. Interest expense, prior to capitalization of interest on self-constructed assets was $641,000, $973,000 and $877,000 in 2002, 2001 and 2000. COMMON STOCK Class B common stock is identical to Class A except that it has 10 votes per share, is generally nontransferable except to lineal descendants, cannot receive more dividends than Class A, and can be converted to Class A at any time. Class A common stock is entitled to elect 25% of the directors to be elected at each meeting with the remaining 75% being elected by Class A and Class B voting together. In addition, the Company has a stockholder rights plan to protect stockholders from attempts to acquire the Company on unfavorable terms not approved by the Board of Directors. Under certain circumstances, the plan entitles each Class A or Class B share to additional shares of the Company or an acquiring company, as defined, at a 50% discount to market. Generally, the rights will be exercisable if a person or group acquires 15% or more of the Company's outstanding shares. The rights trade together with the underlying common stock. They can be redeemed by the Company for $.01 per right and expire in 2010. The Company accounts for stock based compensation under the provisions of Accounting Principles Board Opinion No. 25. Under the Company's stock purchase plans, the purchase price of the optioned stock is 85% of the lower of the market price on the date the option is granted or the date it is exercised. Options become exercisable exactly two years from the date of grant and expire if not exercised. Therefore, no options are exercisable at the end of 2002, 2001, or 2000. A summary of option activity is as follows: Weighted Average Exercise Shares Shares Price Available On Option At Grant For Grant Balance, June 26, 1999 51,803 $24.63 748,197 Options granted 69,122 19.56 (69,122) Options exercised ($20.30 and $17.00) (5,315) 19.50 Options canceled (43,632) 43,632 Balance, June 24, 2000 71,978 20.26 722,707 Options granted 53,285 17.14 (53,285) Options exercised ($15.52 and $18.96) (10,771) 18.55 Options canceled (41,156) 41,156 Balance, June 30, 2001 73,336 18.22 710,578 Options granted 28,191 18.06 (28,191) Options exercised ($17.77 and $18.65) (20,552) 18.11 Options canceled (32,026) 32,026 Balance, June 29, 2002 48,949 $17.48 714,413 At June 29, 2002, a total of 763,362 shares of common stock are reserved for issuance under the plan. The following information relates to outstanding options as of June 29, 2002: Weighted average remaining life 1.0 years Weighted average fair value on grant date of options granted in: 2000 $6.00 2001 5.50 2002 5.00 The fair value of each option grant was estimated on the date of grant using the Black-Scholes options pricing model with the following weighted average assumptions: volatility - 22% to 28%, interest - 3.5% to 6.5%, and expected lives - 2 years. The pro forma, after tax effect of any compensation costs related to use of SFAS No. 123, "Accounting for Stock Based Compensation," is as follows: 2002 $90,000, 2001 $170,000 and 2000 $200,000, or approximately $.01, $.03, and $.03 per share. In addition 99,045 shares of common stock are reserved for the Company's 401(k) plan at June 29, 2002. OPERATING DATA The Company believes it has no significant concentration of credit risk as of June 29, 2002. Trade receivables are dispersed among a large number of retailers, distributors and industrial accounts in many countries. One customer accounted for approximately 14% of sales in 2002 and 13% in 2001 and 2000. The Company is engaged in the single business segment of producing and marketing industrial, professional and consumer products. It manufactures over 5,000 items, including precision measuring tools, tape measures, gages and saw blades. Operating segments are identified as components of an enterprise about which separate discrete financial information is used by the chief operating decision maker in determining how to allocate assets and assess performance of the Company. The Company's operations are primarily in North America, Brazil, and the United Kingdom. Geographic information about the Company's sales and long- lived assets are as follows: 2002 2001 2000 Sales: North America $ 133,895 $ 164,572 $ 172,542 United Kingdom 26,331 30,520 33,064 Brazil 31,559 43,421 41,926 Eliminations and other (7,439) (12,656) (12,363) Total $ 184,346 $ 225,857 $ 235,169 Long-lived assets: North America $ 96,163 $ 97,656 United Kingdom 7,916 7,655 Brazil 5,857 6,037 Other 2,094 2,257 Total $ 112,030 $ 113,605 QUARTERLY FINANCIAL DATA (UNAUDITED)(in thousands except per share data) Earnings(Loss) Basic Before Net Earnings Net Gross Income Earnings (Loss) Per Quarter Ended Sales Profit Taxes (Loss) Share September 2000 $58,842 $17,101 $ 4,234 $ 2,895 $ 0.45 December 2000 60,650 17,121 3,664 2,583 0.40 March 2001 50,637 14,201 1,622 950 0.15 June 2001 55,728 16,872 1,912 1,669 0.26 $225,857 $65,295 $11,432 $ 8,097 $ 1.26 September 2001 $46,522 $12,624 $ 345 $ 262 $ 0.04 December 2001 44,918 10,099 (1,417) (611) (0.09) March 2002 45,419 10,039 (1,128) (462) (0.07) June 2002 47,487 12,171 971 431 0.06 $184,346 $44,933 $(1,229) $ (380) $(0.06) In the fourth quarter of fiscal 2001, the Company recorded a benefit related primarily to prior year state taxes and foreign tax credits. The Company's Class A common stock is traded on the New York Stock Exchange. Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The Company had no such changes in or disagreements with its independent auditors. PART III Item 10 - Directors and Executive Officers of the Registrant Directors The information concerning the Directors of the Registrant is contained on pages 1 through 5 in the Company's definitive Proxy Statement for the Annual Meeting of Stockholders to be held on September 18, 2002, as filed with the Securities and Exchange Commission ("SEC"), and is hereby incorporated by reference. Executive Officers of the Registrant Held Present Name Age Office Since Position Douglas A. Starrett 50 2001 President and CEO and Director Roger U. Wellington, Jr. 61 1984 Vice President, Treasurer and Chief Financial Officer and Director George B. Webber 81 1962 Vice President Webber Gage Division and Director Anthony M. Aspin 49 2000 Vice President Sales Stephen F. Walsh 56 2002 Vice President Operations Steven A. Wilcox 47 1997 Clerk Douglas A. Starrett has been President of the Company since 1995 and became CEO in 2001. Roger U. Wellington, Jr. and George B. Webber have served in the same capacities as listed above for at least the past five years. Anthony M. Aspin was previously a divisional sales manager with the Company. Stephen F. Walsh was previously president of the Silicon Carbide Division of Saint-Gobain Industrial Ceramics. Except in the case of Steven Wilcox, the positions listed above represent their principal occupations and employment during the last five years. Steven Wilcox, elected clerk in 1997, has been a partner in Ropes & Gray, counsel for the Company, throughout that period. The President, Treasurer and Clerk hold office until the first meeting of the directors following the next annual meeting of stockholders and until their respective successors are chosen and qualified, and each other officer holds office until the first meeting of directors following the next annual meeting of stockholders, unless a shorter period shall have been specified by the terms of his election or appointment or, in each case, until he sooner dies, resigns, is removed or becomes disqualified. There have been no events under any bankruptcy act, no criminal proceedings and no judgments or injunctions material to the evaluation of the ability and integrity of any director or executive officer during the past five years. Item 11 - Executive Compensation The information concerning management remuneration is contained on pages 8 through 12 in the Company's definitive Proxy Statement for the Annual Meeting of Stockholders to be held on September 18, 2002, as filed with the SEC, and, except for the information under the captions "Compensation Committee Report," is hereby incorporated by reference. Item 12 - Security Ownership of Certain Beneficial Owners and Management (a) Security ownership of certain beneficial owners: The information concerning a more than 5% holder of any class of the Company's voting shares is contained on pages 3 through 4 of the Company's definitive Proxy Statement for the Annual Meeting of Stockholders to be held on September 18, 2002, as filed with the SEC, and is hereby incorporated by reference. (b) Security ownership of management: The information concerning the beneficial ownership of each class of equity securities by all directors, and all directors and officers of the Company as a group, is contained on pages 2 through 4 of the Company's definitive Proxy Statement for the Annual Meeting of Stockholders to be held on September 18, 2002, as filed with the SEC, and is hereby incorporated by reference. (c) The Company knows of no arrangements that may, at a subsequent date, result in a change in control of the Company. Item 13 - Certain Relationships and Related Transactions (a) Transactions with management and others: None (b) Certain business relationships: Not applicable (c) Indebtedness of management: None (d) Transactions with promoters: Not applicable PART IV Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K Accompanying this Form 10-K are the certificates of the Chief Executive Officer and Chief Financial Officer required by Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, copies of which are furnished as exhibits to this report. (a) 1. Financial statements filed in item 8 of this annual report: Consolidated Statements of Operations and Cash Flows for each of the three years in the Period ended June 29, 2002 Consolidated Balance Sheets at June 29, 2002 and June 30, 2001 Consolidated Statements of Stockholders' Equity for each of the three years in the Period Ended June 29, 2002 Notes to Consolidated Financial Statements 2. All other financial statements and schedules are omitted because they are inapplicable, not required under the instructions, or the information is reflected in the financial statements or notes thereto. 3. See Exhibit Index below. Compensatory plans or arrangements are identified by an "*." (b) There were no reports on Form 8-K filed in the last quarter of the period covered by this report. (c) See Exhibit Index below. (d) Not applicable. THE L.S. STARRETT COMPANY AND SUBSIDIARIES - EXHIBIT INDEX 3a Restated Articles of Organization dated December 20, 1989, filed with Form 10-Q for the quarter ended December 23, 1989, are hereby incorporated by reference. 3b Bylaws as amended September 16, 1999, filed with Form 10-Q for the quarter ended September 24, 1999, are hereby incorporated by reference. 4 Second Amended and Restated Rights Agreement, dated as of March 13, 2002, between the Company and Mellon Investor Services, as Rights Agent, including Form of Common Stock Purchase Rights Certificate, filed herewith. 10a $25,000,000 Revolving Credit Agreement dated as of June 13, 2000, among The L.S. Starrett Company and Fleet National Bank filed with Form 10-K for the year ended June 24, 2000 is hereby incorporated by reference. 10b Form of indemnification agreement with directors and executive officers, filed herewith. 10c*The L.S. Starrett Company Supplemental Executive Retirement Plan, filed herewith. 10d*The L.S. Starrett Company 401(k) Stock Savings Plan (2001 Restatement), filed herewith. 21 Subsidiaries of the Registrant, filed herewith. 23 Independent Auditors' Consent, filed herewith. 99a Certification of Douglas A. Starrett pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. 99b Certification of Roger U. Wellington, Jr. pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes- Oxley Act of 2002, filed herewith. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE L.S. STARRETT COMPANY (Registrant) By S/ROGER U. WELLINGTON, JR. Roger U. Wellington, Jr., Vice President, Treasurer and Chief Financial Officer Date: August 16, 2002 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated: S/DOUGLAS A. STARRETT S/ANTONY MCLAUGHLIN Douglas A. Starrett, Aug. 16, 2002 Antony McLaughlin, Aug. 16, 2002 President and CEO and Director President Starrett Industria e Comercio, Ltda, Brazil S/WILLIAM S. HURLEY Thomas E. Mahoney, Aug. 16, 2002 William S. Hurley, Aug. 16, 2002 Director Director S/RICHARD B. KENNEDY S/GEORGE B. WEBBER Richard B. Kennedy, Aug. 16, 2002 George B. Webber, Aug. 16, 2002 Director Vice President Webber Gage Division and Director S/STEVEN G. THOMSON S/ROGER U. WELLINGTON, JR. Steven G. Thomson, Aug. 16, 2002 Roger U. Wellington,Jr., Aug.16, 2002 Chief Accounting Officer Vice President, Treasurer and CFO and Director - -14- EX-4 3 ex4rights.txt RIGHTS AGREEMENT EXHIBIT 4 THE L.S. STARRETT COMPANY and MELLON INVESTOR SERVICES as Rights Agent Second Amended and Restated Rights Agreement Dated as of March 13, 2002 Table of Contents Section Page Section 1. Certain Definitions. 1 Section 2. Appointment of Rights Agent. 6 Section 3. Issuance of Rights Certificates. 7 Section 4. Form of Rights Certificates. 8 Section 5. Countersignature and Registration. 9 Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates. 9 Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. 10 Section 8. Cancellation and Destruction of Rights Certificates. 12 Section 9. Reservation and Availability of Shares of Class A Common Stock; Other Covenants. 12 Section 10. Class A Common Stock Record Date; Etc. 14 Section 11. Antidilution Adjustments. 14 Section 12. Certificate of Adjustments. 23 Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. 23 Section 14. Fractional Rights and Fractional Shares. 25 Section 15. Rights of Action. 26 Section 16. Agreement of Rights Holders. 27 Section 17. Rights Certificate Holder Not Deemed a Stockholder. 27 Section 18. Concerning the Rights Agent. 28 Section 19. Merger or Consolidation or Change of Name of Rights Agent. 28 Section 20. Rights and Duties of Rights Agent. 29 Section 21. Change of Rights Agent. 31 Section 22. Issuance of New Rights Certificates. 32 Section 23. Redemption and Termination. 33 Section 24. Exchange. 33 Section 25. Notice of Proposed Actions. 34 Section 26. Notices. 35 Section 27. Supplements and Amendments. 36 Section 28. Successors. 36 Section 29. Determinations and Actions by the Board; etc. 36 Section 30. Benefits of this Agreement. 37 Section 31. Severability. 37 Section 32. Governing Law. 37 Section 33. Counterparts. 38 Section 34. Descriptive Headings. 38 SECOND AMENDED AND RESTATED RIGHTS AGREEMENT This Second Amended and Restated Rights Agreement, dated as of March 13, 2002, (the "Rights Agreement") by and between The L.S. Starrett Company, a Massachusetts corporation (the "Company") and Mellon Investor Services LLC, a New Jersey limited liability company (the "Rights Agent") amends and restates the Amended and Restated Rights Agreement, dated as of May 23, 2000, by and between the Company and Fleet National Bank (f/k/a BankBoston, N.A., f/k/a The First National Bank of Boston) ("Fleet") which Amended and Restated Rights Agreement amended and restated the Rights Agreement dated as of June 6, 1990 by and between the Company and Fleet, and reflects the change in Rights Agent. W I T N E S S E T H: WHEREAS, the Board of Directors of the Company (the "Board") authorized on June 6, 1990 the issuance of rights (collectively, the "Rights," and individually a "Right"), each Right being a right to purchase, on the terms and subject to the provisions of this Rights Agreement, shares of the Company's Class A Common Stock (or in certain circumstances provided in this Agreement, other securities of the Company or Common Stock or other securities of certain other Persons); and WHEREAS, on June 6, 1990 (the "Declaration Date") the Board authorized and declared a dividend distribution of one Right for every share of Class A Common Stock and Class B Common Stock of the Company outstanding at the Close of Business (as hereinafter defined) on June 18, 1990 (the "Dividend Record Date") and authorized the issuance of, and agreed to issue, one Right (as such number may be adjusted in accordance with Sections 11(i) or 11(p) hereof) for every share of Class A Common Stock and Class B Common Stock of the Company issued between the Dividend Record Date and the Distribution Date (as hereinafter defined); WHEREAS, on May 22, 2000, the Board adopted resolutions providing for the further amendment and extension of the Rights Agreement; WHEREAS, on March 6, 2002, the Board adopted resolutions providing for the further amendment and extension of the Amended and Restated Rights Agreement; and WHEREAS, the Company desires to appoint the Rights Agent to act on behalf of the Company and the Rights Agent is willing to so act; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto hereby agree as follows: Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated: (a) "Acquiring Person" shall mean (a) any Person who or which, together with all Affiliates of such Person, shall be the Beneficial Owner (whether such Beneficial Ownership is of shares of Class A Common Stock, shares of Class B Common Stock or shares of Class A Common Stock and Class B Common Stock) of 15% or more of the shares of Class A Common Stock and Class B Common Stock (taken together as a single class, treating each share of Class B Common Stock outstanding as one share of Class A Common Stock outstanding for the purposes of calculating such Beneficial Ownership) then outstanding or (b) any Person who or which, together with all Affiliates of such Person, is, as of May 23, 2000, an Acquiring Person (as such term is defined in the Rights Agreement dated as of June 6, 1990 between the Company and The First National Bank of Boston (now known as Fleet National Bank), as Rights Agent (the "1990 Rights Agreement"), which definition is hereby incorporated by reference, irrespective of the termination of said 1990 Rights Agreement) under the terms of the 1990 Rights Agreement; provided, that neither clause (a) nor clause (b) shall include: (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan of the Company or of any Subsidiary of the Company, (iv) any Person organized, appointed, or established by the Company or a Subsidiary of the Company for or pursuant to the terms of any plan described in clause (iii) above, or (v) any such Person who (A) has reported or is required to report such ownership on Schedule 13G under the Exchange Act (or any comparable or successor report) or on Schedule 13D under the Exchange Act (or any comparable or successor report) which Schedule 13D does not state any intention to or reserve the right to control or influence the management or policies of the Company or engage in any of the actions specified in Item 4 of such Schedule (other than the disposition of the Common Stock), (B) within 10 Business Days of being requested by the Company to advise it regarding the same, certifies to the Company that such Person acquired shares of Class A Common Stock and/or Class B Common Stock in excess of 14.9% inadvertently or without knowledge of the terms of the Rights and who, together with all of such Person's Affiliates, thereafter does not acquire additional shares of Class A Common Stock and/or Class B Common Stock while the Beneficial Owner of 15% or more of the shares of Class A Common Stock and Class B Common Stock then outstanding, provided, however, that if the Person requested to so certify fails to do so within 10 Business Days, then such Person shall become an Acquiring Person immediately after such 10 Business Day Period and (C) if requested to do so by the Company, within a specified number of Business Days (to be specified by the Company, but in no case fewer than ten) following such request from the Company to such Person, reduces its Beneficial Ownership of Common Stock to below 15% of the Class A Common Stock and Class B Common Stock then outstanding, provided, however, that if the Person requested to so reduce its Beneficial Ownership fails to do so within such specified number of Business Days, then such Person shall become an Acquiring Person immediately after such specified number of Business Days. (b) "Act" shall mean the Securities Act of 1933 (or any successor act), as amended and as may from time to time be in effect. (c) "Affiliate," with respect to any Person, shall mean any other Person who is, or who would be deemed to be, an "affiliate" or an "associate" of such Person within the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as such Rule is in effect on the Declaration Date. (d) A Person shall be deemed the "Beneficial Owner" of, and shall be deemed to "beneficially own" or have "Beneficial Ownership" of, any securities: (i) which such Person or any of such Person's Affiliates has "beneficial ownership" of within the meaning of Rule 13d-3 of the General Rules and Regulations under the Exchange Act, as such Rule is in effect on the Declaration Date; (ii) which such Person or any of such Person's Affiliates has, directly or indirectly, the right to acquire (whether such right is exercisable immediately or after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion, exchange or other rights, warrants or options, or otherwise; (iii) which such Person or any of such Person's Affiliates has, directly or indirectly, the right to vote or dispose of, including pursuant to any agreement, arrangement or understanding (whether or not in writing); provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own," any security for purposes of this Section 1(d)(iii) as a result of an agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding: (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable proxy solicitation rules and regulations promulgated under the Exchange Act or (B) is made in connection with, or is to otherwise participate in, a proxy or consent solicitation made, or to be made, pursuant to, and in accordance with, the applicable proxy solicitation rules and regulations promulgated under the Exchange Act, in either case described in clause (A) or (B) above, whether or not such agreement, arrangement or understanding is also then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iv) which are beneficially owned, directly or indirectly, by any other Person or any Affiliate thereof with which such Person or any of such Person's Affiliates has any agreement, arrangement or understanding (whether or not in writing), for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy or in connection with a proxy or consent solicitation described in clause (A) or (B) of the proviso to Section 1(d)(iii) hereof) or disposing of any securities of the Company; provided, however, that for purposes of this Section 1(d) a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own," (A) securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates until such tendered securities are accepted for purchase or exchange, (B) securities issuable upon exercise of Rights at any time prior to the occurrence of a Common Stock Event, or (C) securities issuable upon exercise of Rights which were held by a Person or its Affiliates prior to the Distribution Date as long as such Person is not responsible for the occurrence of the Common Stock Event giving rise to the Distribution Date; and provided, further, however, that nothing in this Section 1(d) shall cause a Person engaged in business as an underwriter of securities to be the "Beneficial Owner" of, or to "beneficially own," any securities acquired through such Person's par- ticipation in good faith in a firm commitment underwriting until the expiration of 40 days after the date of such acquisition. (e) "Board" shall have the meaning set forth in the preamble to this Agreement. (f) "Business Day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in The Commonwealth of Massachusetts or the State of New Jersey are authorized or obligated by law or executive order to close. (g) "Class A Common Stock" shall mean the Class A Common Stock, par value of $1.00 per share, of the Company. (h) "Class A Common Stock Equivalents" shall have the meaning set forth in Section 11(a)(iii) hereof. (i) "Class B Common Stock" shall mean the Class B Common Stock, par value of $1.00 per share, of the Company. (j) "Close of Business" on any given date shall mean 5:00 p.m., Boston, Massachusetts time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 p.m., Boston, Massachusetts time, on the next succeeding Business Day. (k) "Closing Price" shall have the meaning set forth in Section 11(d) hereof. (l) "Common Stock" shall mean or shall include the Class A Common Stock and the Class B Common Stock, except that "Common Stock" when used with respect to any Person other than the Company shall mean either (i) the common stock (or other capital stock or shares of beneficial interest) of such Person with the greatest voting power, or (ii) the equity securities or other equity interests having power to control or direct the management and affairs of such Person, or (iii) if such Person is a Subsidiary of another Person, the Person (A) who ultimately controls such Person that is the Subsidiary and (B) which has outstanding such common stock (or such other capital stock, equity securities or interests). (m) "Common Stock Event" shall mean the occurrence of any event described in (i) Section 11(a)(ii) hereof or (ii) clause (a), (b) or (c) of the first sentence of Section 13 hereof. (n) "Company" shall have the meaning set forth in the preamble to this Agreement. (o) "Current Market Price" shall have the meaning set forth in Section 11(d) hereof. (p) "Current Value" shall have the meaning set forth in Section 11(a)(iii) hereof. (q) "Declaration Date" shall have the meaning set forth in the preamble to this Agreement. (r) "Directors" shall mean the members of the Board. (s) "Disqualified Transferee" shall mean any Person who is a direct or indirect transferee of any Right from an Acquiring Person or an Affiliate of an Acquiring Person and became such a transferee (x) after the occurrence of a Common Stock Event or (y) prior to or concurrently with the Acquiring Person becoming such and received such Right pursuant to a transfer (whether or not for value) (A) from the Acquiring Person to holders of its Common Stock or other equity securities or to any Person with whom the Acquiring Person has any continuing agreement, arrangement, or understanding (whether or not in writing) regarding the transferred Right, or (B) which a majority of the Board reasonably determines is part of a plan, arrangement, or understanding (whether or not in writing) which has as a primary purpose or effect, the avoidance of Section 7(e) hereof. (t) "Distribution Date" shall mean the date which is the earlier of (x) the 10th Business Day following the Stock Acquisition Date (or such specified or unspecified date thereafter which is on or after the Dividend Record Date, as may be determined by a majority of the Board) or (y) the 10th Business Day following the Offer Commencement Date (or such specified or unspecified date thereafter which is on or after the Dividend Record Date, as may be determined by a majority of the Board). (u) "Dividend Record Date" shall have the meaning set forth in the preamble to this Agreement. (v) "Excess Amount" shall have the meaning set forth in Section 11(a)(iii) hereof. (w) "Exchange Act" shall mean the Securities Exchange Act of 1934 (or any successor act), as in effect on the Declaration Date. (x) "Exchange Ratio" shall have the meaning set forth in Section 24(a) hereof. (y) "Expiration Date" shall have the meaning set forth in Section 7(a) hereof. (z) "Offer Commencement Date" shall mean the date of the commencement by any Person, other than (i) the Company, (ii) a Subsidiary of the Company, (iii) any employee benefit plan of the Company or of any Subsidiary of the Company or (iv) any Person organized, appointed, or established by the Company or such Subsidiary pursuant to the terms of any such plan, of a tender or exchange offer (including when such offer is first published or sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act) if upon consummation thereof the Person and Affiliates thereof would be the Beneficial Owner (whether such Beneficial Ownership is of shares of Class A Common Stock, shares of Class B Common Stock or shares of Class A Common Stock and Class B Common Stock) of 15% or more of the then outstanding shares of Class A Common Stock and Class B Common Stock (taken together as a single class, treating each share of Class B Common Stock outstanding as one share of Class A Common Stock outstanding for the purposes of calculating such Beneficial Ownership) (including any such date which is after the date of this Agreement and prior to the issuance of the Rights thereafter). (a) "Officers' Certificate" has the meaning set forth in Section 20(b) hereof. (b) "Other Consideration" has the meaning set forth in Section 6(a) hereof. (c) "Person" shall mean a corporation, association, partnership, limited liability company, joint venture, trust, estate, organization, business, entity or individual. (d) "Purchase Price" shall have the meaning set forth in Section 7(b) hereof. (e) "Redemption Price" shall have the meaning set forth in Section 23 hereof. (f) "Rights" shall have the meaning set forth in the preamble to this Agreement. (g) "Rights Agent" shall have the meaning set forth in the preamble of this Agreement subject to the appointment of a successor Rights Agent pursuant to Section 21 hereof. (h) "Rights Certificates" shall have the meaning set forth in Section 3(a) hereof. (i) "Stock Acquisition Date" shall mean the later of (i) the date of the first public announcement by an Acquiring Person or the Company that an Acquiring Person has become such (including the first date on which any filing with any governmental authority disclosing that an Acquiring Person has become such becomes available to the public), or (ii) the date on which an executive officer of the Company has actual knowledge that an Acquiring Person has become such. (j) "Subsidiary" shall mean, as of any date, any Person of which the Company (or other specified Person) owns directly, or indirectly through a Subsidiary or Subsidiaries, at least a majority of the outstanding capital stock (or other shares of beneficial interest) entitled to vote generally, or holds directly, or indirectly through a Subsidiary or Subsidiaries, at least a majority of partnership or similar interests, or is a general partner, or of which the Company (or other specified Person) owns voting securities sufficient to elect at least a majority of the directors of such Person. (k) "Substitution Period" shall have the meaning set forth in Section 11(a)(iii) hereof. (l) "Summary of Rights" shall have the meaning set forth in Section 3(b) hereof. (m) "Trading Day" shall mean a day on which the principal national securities exchange on which such security is listed or admitted to trading is open for the transaction of business or, if such security is not listed or admitted to trading on any national securities exchange, a day which is a Business Day. Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time, upon prior written notice to the Rights Agent, appoint such Co-Rights Agents as it may deem necessary or desirable, upon ten (10) days' prior written notice to the Rights Agent. The Rights Agent shall have no duty to supervise, and shall in no event be liable for, the acts or omissions of any such Co-Rights Agent. The respective duties of the Rights Agent and any Co-Rights Agent shall be as the Company shall determine. Section 3. Issuance of Rights Certificates. (a) Until the Distribution Date, (i) the Rights will be evidenced (subject to the provisions of Section 3(b) hereof) by the certificates representing shares of Common Stock registered in the names of the holders of the Common Stock (which certificates shall be deemed also to be certificates for the associated Rights) and not by separate rights certificates, and (ii) the Rights will be transferable only in connection with the transfer of the associated shares of Common Stock. As soon as practicable after the Distribution Date, the Rights Agent will, if provided with a shareholder list and all other relevant information, send by first-class, insured, postage prepaid mail, to each record holder of the Common Stock as of the Close of Business on the Distribution Date, at the address of such holder shown on the stock transfer records of the Company, one or more rights certificates, in substantially the form of Exhibit A hereto (the "Rights Certificates"), evidencing in the aggregate that number of Rights to which such holder is entitled in accordance with the provisions of this Agreement. As of and after the Distribution Date, the Rights will be evidenced solely by such Rights Certificates. The Rights are exercisable only in accordance with the provisions of Section 7 hereof and are redeemable only in accordance with Section 23 hereof. The Company shall promptly notify the Rights Agent orally or in writing upon the occurrence of the Distribution Date and, if such notification is given orally, the Company shall confirm the same in writing on or prior to the Business Day next following. Until such notice is received by the Rights Agent, the Rights Agent may presume conclusively for all purposes that the Distribution Date has not occurred. (b) The Company caused a copy of a Summary of Rights to be sent by first-class, postage prepaid mail, to each record holder of the Common Stock as of the Close of Business on the Dividend Record Date, at the address of such holder shown on the stock transfer records of the Company. With respect to certificates for the Common Stock outstanding as of the Dividend Record Date, until the Distribution Date, the Rights associated with the shares of Common Stock represented by such certificates will be evidenced by such certificates for the Common Stock and the registered holders of the Common Stock shall also be the registered holders of the associated Rights. Until the Distribution Date (or the earlier redemption, expiration or termination of the Rights), the surrender for transfer of any of the certificates representing shares of the Common Stock outstanding on the Dividend Record Date, with or without a copy of the Summary of Rights, shall also constitute the transfer of the Rights associated with the Common Stock represented by such certificate. (c) Rights shall be issued in respect of all shares of Common Stock issued (whether originally issued or delivered from the Company's treasury) after the Dividend Record Date but prior to the earliest of (i) the Distribution Date, (ii) the Expiration Date, or (iii) the redemption of the Rights. Certificates representing such shares of Common Stock and certificates issued on transfer of such shares of Common Stock, with or without a copy of the Summary of Rights, prior to the Distribution Date (or earlier expiration or redemption of the Rights) shall be deemed also to be certificates for the associated Rights, and commencing as soon as reasonably practicable following March 13, 2002 shall bear the following legend (or a legend substantially in the form thereof): This certificate also evidences and entitles the holder to Rights set forth in a Rights Agreement between the issuer and Fleet National Bank (f/k/a The First National Bank of Boston), as Rights Agent, dated as of June 6, 1990, as amended and restated on May 23, 2000, and as further amended and restated by the Second Amended and Restated Rights Agreement by and between the issuer and Mellon Investor Services LLC as Rights Agent (the "Rights Agent"), dated March 13, 2002 (the "Rights Agreement"), the terms of which are incorporated herein by reference and a copy of which is on file at both the principal office of the issuer and the office of the Rights Agent designated for such purpose. The Rights Agent will mail to the registered holder of this certificate a copy of the Rights Agreement, as in effect on the date of mailing, without charge upon written request. Under certain circumstances set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. Under certain circumstances set forth in the Rights Agreement, Rights issued to, or held by any Person who is, was or becomes, or acquires shares from, an Acquiring Person or any Affiliate of an Acquiring Person (as each such term is defined in the Rights Agreement and generally relating to the ownership or purchase of large shareholdings), whether currently held by or on behalf of such Person or Affiliate or by certain subsequent holders, may become null and void. Until the Distribution Date or the earlier redemption, expiration or termination of the Rights, the Rights associated with the Common Stock shall be evidenced by the Common Stock certificates alone and the registered holders of Common Stock shall also be the registered holders of the associated Rights, and the surrender for transfer of any of such certificates shall also constitute the transfer of the Rights associated with the Common Stock represented by such certificate. Rights shall be issued to the extent provided in Section 22 hereof after the Distribution Date and prior to the Expiration Date. Section 4. Form of Rights Certificates. (a) The Rights Certificates (and the form of assignment and the form of exercise notice and certificate to be printed on the reverse thereof) shall each be substantially in the form set forth in Exhibit A hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate (but which do not affect the rights, duties, or responsibilities of the Rights Agent) and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed or traded, or to conform to usage. Subject to the provisions of Sections 11 and 22 hereof, the Rights Certificates, whenever distributed, shall be dated as of the Dividend Record Date (or, if the shares pursuant to which the Rights are attached are issued thereafter, such date of issuance), shall include the date of countersignature and on their face shall entitle the holders thereof to purchase such number of shares of Class A Common Stock as shall be set forth therein at the Purchase Price (as hereinafter defined), but the amount and type of securities issuable upon the exercise of each Right and the Purchase Price shall be subject to adjustment as provided herein. (b) Any Rights Certificate issued pursuant to Section 3(a) or 22 hereof that represents Rights beneficially owned by (i) any Acquiring Person or any Affiliate of an Acquiring Person, or (ii) any Disqualified Transferee, and any other Rights Certificate issued pursuant to Section 6 or 11 hereof upon the transfer, exchange, replacement, or adjustment of any such Rights Certificate, shall contain (to the extent feasible and to the extent the Rights Agent has been notified thereof) the following legend: The Rights represented by this Rights Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate (which includes both affiliates and associates) of an Acquiring Person (as each such term is defined in the Rights Agreement between the issuer and Fleet National Bank (f/k/a The First National Bank of Boston), as Rights Agent dated as of June 6, 1990, as amended and restated on May 23, 2000 and as further amended and restated by the Second Amended and Restated Rights Agreement by and between the issuer and Mellon Investor Services LLC as Rights Agent (the "Rights Agent"), dated as of March 13, 2002 (the "Rights Agreement")). Accordingly, this Rights Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of the Rights Agreement. The Rights Agent will mail to the registered holder of this certificate a copy of the Rights Agreement, as in effect on the date of such mailing, without charge upon written request. Section 5. Countersignature and Registration. The Rights Certificates shall be executed on behalf of the Company by its Chairman of the Board, President, Treasurer or any Vice President, either manually or by facsimile signature, and shall have affixed thereto the Company's seal or facsimile thereof which shall be attested by the Clerk or an Assistant Clerk of the Company, either manually or by facsimile signature. The Rights Certificates shall be countersigned, either manually or by facsimile signature, by the Rights Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent, issued, and delivered with the same force and effect as though the person who signed such Rights Certificates had not ceased to be such officer of the Company. Any Rights Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Agreement any such person was not such an officer. Following the Distribution Date, receipt by the Rights Agent of notice to that effect and all other relevant information referred to in Section 3(a), the Rights Agent shall keep or cause to be kept, at the office of the Rights Agent designated for such purpose, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates, and the date of countersignature thereof by the Rights Agent. Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates. (a) Subject to the provisions of Sections 4(b), 7(e), and 14 hereof, at any time after the Close of Business on the Distribution Date, and at or prior to the earlier of the Close of Business on the Expiration Date or the redemption of the Rights, any Rights Certificate may be transferred, split up, combined or exchanged for another Rights Certificate or Rights Certificates, entitling the registered holder to purchase a like number of shares of Class A Common Stock (or, following a Common Stock Event, Class A Common Stock and/or such other securities, cash, or other assets as shall be issuable in respect of the Rights in accordance with the terms of this Agreement (such other securities, cash or other assets being referred to herein as "Other Consideration")) as the Rights Certificate surrendered then entitled such holder (or former holder in the case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate to be transferred, split up, combined, or exchanged at the office of the Rights Agent designated for such purpose, accompanied by a signature guarantee and such other documentation as the Rights Agent may reasonably request. The Right Certificates are transferable only on the registry books of the Rights Agent. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder shall have (i) properly completed and signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate, (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) from whom the Rights evidenced by such Rights Certificate are to be transferred (or the Beneficial Owner to whom such Rights are to be transferred) or Affiliates thereof as the Company or the Rights Agent shall reasonably request, and (iii) paid a sum sufficient to cover any tax or charge that may be imposed in connection with any transfer, split up combination or exchange of Rights Certificates that the Company is not required by pay pursuant to Section 9(d) hereof. Thereupon, subject to Sections 4(b), 7(e) and 14 hereof, the Company shall execute and the Rights Agent shall countersign and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. The Company may require payment by the holders of Rights of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Rights Certificates which the Company is not required to pay in accordance with Section 9(d) hereof. The Right Agent shall have no duty or obligation to take any action under any Section of this Agreement which requires the payment by a Rights holder of applicable taxes and governmental charges unless and until the Rights Agent is reasonably satisfied that all such taxes and/or charges have been paid. (b) Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, the receipt of indemnity or security satisfactory to them, and at the Company's or the Rights Agent's request and upon reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate, if mutilated, accompanied by a signature guarantee and such other documentation as the Rights Agent may reasonably request, the Company will execute and deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Rights Certificate so lost, stolen, destroyed, or mutilated. Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. (a) Except as otherwise provided herein, the registered holder of any Rights Certificate may exercise the Rights evidenced thereby in whole or in part at any time from and after the Distribution Date and at or prior to the Close of Business on May 23, 2010 (the "Expiration Date") or the earlier redemption of the Rights. Immediately after the Close of Business on the Expiration Date (or the earlier redemption of the Rights), all Rights shall be extinguished and all Rights Certificates shall become null and void. To exercise Rights, the registered holder of the Rights Certificate evidencing such Rights shall surrender such Rights Certificate, with the form of election to purchase on the reverse side thereof and the certificate contained therein duly executed, to the Rights Agent at the office of the Rights Agent designated for such purpose, accompanied by a signature guarantee and such other documentation as the Rights Agent may reasonably request, together with payment in cash, only by electronic or wire transfer, or by certified check or bank check, of the Purchase Price with respect to the total number of shares of Class A Common Stock (or, after a Common Stock Event, shares and/or similar units of Class A Common Stock and/or Other Consideration) as to which the Rights are exercised (which payment shall include any additional amount payable by such Person in accordance with Section 9(d) hereof). The Rights Agent shall promptly deliver to the Company all payments of the Purchase Price received in receipt of Rights Certificates accepted for exercise. (b) The purchase price for each share of Class A Common Stock issuable pursuant to the exercise of a Right (the "Purchase Price") shall initially be $92.00, shall be subject to adjustment as provided in Section 11 hereof, and shall be payable in lawful money of the United States of America. (c) Upon receipt of a Rights Certificate representing the Rights, with the form of election to purchase set forth on the reverse side thereof and the certificate contained therein duly executed, accompanied by payment of the Purchase Price, with respect to each Right so exercised and an amount equal to any applicable tax or charge required to be paid by the holder of such Rights Certificate in accordance with Section 9(d) hereof, the Rights Agent, subject to Sections 7(e), 11(a)(iii) and 20(k) hereof, shall thereupon promptly (i) requisition from any transfer agent of the Class A Common Stock (or from the Company if there shall be no such transfer agent, or make available if the Rights Agent is such transfer agent) certificates for the total number of shares of Class A Common Stock to be purchased and the Company hereby irrevocably authorizes such transfer agent to comply with any such request, (ii) after receipt of such certificates, cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated in writing by such holder, and (iii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of a fractional share in accordance with Section 14 hereof and after receipt promptly deliver such cash to or upon the order of the registered holder of such Rights Certificate. After the occurrence of a Common Stock Event, the Company shall make all necessary arrangements so that any Other Consideration then deliverable in respect of the Rights is available for distribution by the Rights Agent if and when necessary to comply with this agreement. For purposes of this Section 7, the Rights Agent shall be entitled to rely, and shall be protected in relying, on an Officers' Certificate from the Company to the effect that the Distribution Date has occurred. (d) Subject to Sections 4(b), 7(e) and 14 hereof, in case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be executed and delivered by the Company to the Rights Agent and countersigned and delivered by the Rights Agent to the registered holder of such Rights Certificate or to such holder's duly authorized assigns. (e) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Common Stock Event, any Rights beneficially owned by (i) an Acquiring Person or an Affiliate of an Acquiring Person, or (ii) a Disqualified Transferee shall become null and void without any further action, and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The Company shall notify the Rights Agent when this Section 7(e) applies and shall use all reasonable efforts to ensure that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but neither the Company nor the Rights Agent shall have any liability to any holder of Rights Certificates or other Person and none of the terms of this Agreement or the Rights shall be deemed to be waived with respect to such holder or other Person as a result of any failure by the Company or the Rights Agent to make any determinations with respect to an Acquiring Person or any Affiliate of an Acquiring Person or Disqualified Transferees hereunder or any failure to have a legend placed on any Rights Certificate in accordance with Section 4(b) hereof or on any Common Stock certificate in accordance with Section 3(c) hereof. Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a holder of any Rights Certificate upon the occurrence of any purported exercise thereof unless such holder shall have (i) duly and properly completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise, and (ii) provided such additional evidence of the identity of the Beneficial Owner from whom the Rights evidenced by such Rights Certificate are to be transferred (or the Beneficial Owner to whom such Rights are to be transferred) or Affiliates thereof as the Company or the Rights Agent shall reasonably request. Section 8. Cancellation and Destruction of Rights Certificates. All Rights Certificates surrendered for the purpose of and accepted for exercise, or surrendered for the purpose of redemption, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents (other than the Rights Agent), be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificates purchased or retired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Rights Certificates to the Company, or may, at the written request of the Company, but shall not be required to, destroy such canceled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. Section 9. Reservation and Availability of Shares of Class A Common Stock; Other Covenants. (a) The Company covenants and agrees that as long as the Rights are outstanding, it shall use reasonable efforts to cause to be reserved and kept available out of its authorized and unissued shares of Class A Common Stock (or, following the occurrence of a Common Stock Event, out of its authorized and unissued shares of Class A Common Stock and/or Other Consideration, or out of its authorized and issued shares held in its treasury), the number of shares of Class A Common Stock (or, following a Common Stock Event, shares and/or similar units of Class A Common Stock and/or Other Consideration) that, except as provided in Section 11(a)(iii) hereof, would then be sufficient to permit the exercise in full of all outstanding Rights; provided, however, that the reservation of such shares shall be subject and subordinate to any other reservation of such shares made by the Company at any time for any lawful purpose; provided, further, however, that in no event shall such failure to so reserve shares affect the rights of any holder of Rights hereunder. (b) The Company covenants and agrees that so long as the Class A Common Stock (or, following a Common Stock Event, shares and/or similar units of Class A Common Stock and/or Other Consideration) issuable upon the exercise of Rights may be listed on any national securities exchange, the Company shall use its best efforts to cause all shares (or similar units) reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise. (c) The Company covenants and agrees that it shall take all such action as may be necessary to ensure that each share of Class A Common Stock (or, following a Common Stock Event, each share and/or similar unit of Class A Common Stock and/or Other Consideration) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (or units), subject to payment in full of the Purchase Price, be duly and validly authorized and issued and fully paid and nonassessable. (d) The Company covenants and agrees that it shall pay when due and payable any and all taxes and governmental charges which may be payable in respect of the issuance or delivery of the Rights Certificates or of any shares of Class A Common Stock (or, following the occurrence of a Common Stock Event, each share and/or similar unit of Class A Common Stock and/or Other Consideration) upon the exercise of Rights; provided, however, that the Company shall not be required to pay any tax or charge which may be payable in respect of any transfer involved in the transfer or delivery of Rights Certificates or in the issuance or delivery of certificates for any shares of Class A Common Stock (or, following the occurrence of a Common Stock Event, each share and/or similar unit of Class A Common Stock and/or Other Consideration) in a name other than that of the registered holder of the Rights Certificate evidencing Rights surrendered for exercise or to issue or deliver any certificates for any shares of Class A Common Stock (and, following the occurrence of a Common Stock Event, any shares and/or similar units of Class A Common Stock and/or Other Consideration) upon the exercise of any Rights until any such tax or charge shall have been paid (any such tax or charge being payable by the holder of such Rights Certificate at the time of surrender thereof) or until it has been established to the Company's satisfaction that no such tax or charge is due. (e) The Company shall use its best efforts (i) to file, as soon as practicable following the earliest date after the first occurrence of a Common Stock Event on which the consideration to be delivered by the Company upon exercise of the Rights has been determined in accordance with this Agreement, or as soon as is required by law following the Distribution Date, as the case may be, a registration statement under the Act, with respect to the securities issuable upon exercise of the Rights on an appropriate form, (ii) to cause such registration statement to become effective as soon as practicable after such filing, and (iii) to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities, or (B) the Expiration Date or earlier redemption of the Rights. The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or "blue sky" laws of the various states of the United States in connection with the exercisability of the Rights. The Company may temporarily suspend, for a period of time not to exceed ninety (90) days after the date set forth in clause (i) of the first sentence of this Section 9(e), the exercisability of the Rights in order to prepare and file such registration statement or to permit it to become effective. Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended. The Company shall thereafter issue a public announcement at such time as the suspension is no longer in effect. The Company shall notify the Rights Agent whenever it makes a public announcement pursuant to this Section 9(e) and give the Rights Agent a copy of such announcement. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction unless the requisite qualification in such jurisdiction shall have been obtained. Section 10. Class A Common Stock Record Date; Etc. Each Person in whose name any certificate for any shares of Class A Common Stock (or, following the occurrence of a Common Stock Event, shares and/or similar units of Class A Common Stock and/or Other Consideration) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such shares of Class A Common Stock (or such shares and/or similar units of Class A Common Stock and/or Other Consideration, as the case may be) represented thereby, and such certificate shall be dated the date which is the later of (i) the date upon which the Rights Certificate evidencing such Rights was duly surrendered, or (ii) the date upon which payment of the Purchase Price (and any applicable taxes and charges) in respect thereof was made; provided, however, that if such date is a date upon which the relevant transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares (or Other Consideration) on, and such certificate shall be dated, the next succeeding Business Day on which such transfer books of the Company are open; provided, further, that the Company covenants and agrees that it shall not close such transfer books for a period exceeding ten consecutive days. Prior to the exercise of the Rights evidenced thereby (which shall be deemed to have occurred on the date such certificate for shares and/or similar units of Class A Common Stock or Other Consideration shall be dated in accordance with this Section 10), the holder of a Rights Certificate, as such, shall not be entitled to any rights of a security holder of the Company with respect to the shares of Class A Common Stock (and/or such shares or similar units of Class A Common Stock or Other Consideration) for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions, or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as expressly provided herein. Section 11. Antidilution Adjustments. The Purchase Price and the number and kind of securities covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. (a) (i) In the event that the Company shall at any time after the date of this Agreement (A) declare and pay a dividend on the Class A Common Stock or Class B Common Stock payable in shares of Class A Common Stock or Class B Common Stock, (B) subdivide the outstanding Class A Common Stock or Class B Common Stock, (C) combine the outstanding Class A Common Stock or Class B Common Stock into a smaller number of shares, or (D) issue, change, or alter any of its shares of capital stock in a reclassification or recapitalization (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving Person), except as otherwise provided in this Section 11(a) and Section 7(e) hereof, then, and in each such case, the Purchase Price in effect at the time of the record date for such dividend or the effective time of such subdivision, combination, reclassification or recapitalization, and the number and kind of shares of capital stock issuable upon exercise of the Rights at such time, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of Common Stock or other capital stock which, if such Right had been exercised immediately prior to such time at the Purchase Price then in effect and at a time when the transfer books for the Common Stock (or other capital stock) of the Company were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination, reclassification or recapitalization. If an event occurs which would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof. (ii) In the event (A) any Person shall at any time after the Declaration Date become an Acquiring Person; or (B) any Acquiring Person or any Affiliate of any Acquiring Person, at any time after the Declaration Date, directly or indirectly, shall (1) merge into the Company or otherwise combine with the Company, and the Company shall be the continuing or surviving corporation of such merger or combination and either or both of the Class A Common Stock and/or the Class B Common Stock of the Company shall remain outstanding and no shares thereof shall be changed or otherwise transformed into stock or other securities of any other Person or the Company or cash or any other property, (2) in one or more transactions, transfer any assets to the Company in exchange (in whole or in part) for shares of any class of its equity securities or for securities exercisable for or convertible into shares of any such class or otherwise obtain from the Company, with or without consideration, any additional shares of any such class or securities exercisable for or convertible into shares of any such class (other than as part of a pro rata distribution to all holders of such class), (3) sell, purchase, lease, exchange, mortgage, pledge, transfer or otherwise dispose (in one transaction or a series of transactions) to, from or with the Company or any of the Company's Subsidiaries, assets with an aggregate fair market value in excess of 25% of the assets of the Company and its Subsidiaries determined on a consolidated basis on terms and conditions less favorable to the Company than the Company would be able to obtain through arm's-length negotiation with an unaffiliated third party, (4) receive any compensation from the Company or any of the Company's Subsidiaries other than compensation as a director of the Company or for full-time employment as a regular employee at rates in accordance with the Company's (or such Subsidiary's) past practices, (5) receive the benefit (except proportionately as a stockholder), of any loans, advances, guarantees, pledges or other financial assistance provided by the Company or any of its Subsidiaries on terms and conditions less favorable to the Company (or such Subsidiary) than the Company would be able to obtain through arm's-length negotiation with an unaffiliated third party or (6) commence a tender or exchange offer for securities of the Company; or (C) during such time as there is an Acquiring Person at any time after the Declaration Date, there shall be any reclassification of securities (including any combination thereof), or recapitalization of the Company, or any merger or consolidation of the Company with any of its Subsidiaries (whether or not with or into or otherwise involving an Acquiring Person or any Affiliate of an Acquiring Person), or any repurchase by the Company or any of its Subsidiaries of shares of the Common Stock of the Company, or any other class or series of securities issued by the Company, which reclassification, recapitalization, merger, consolidation or repurchase is effected at a time when a majority of the Board consists of persons who are the Acquiring Person or its Affiliates, or nominees or designees of any thereof, which has the effect, directly or indirectly, of increasing by more than 1% the proportionate share of the outstanding shares of any class of equity securities or securities exercisable for or convertible into any class of equity securities of the Company or any of its Subsidiaries which is directly or indirectly owned by an Acquiring Person or any Affiliate of an Acquiring Person then, in each such case, upon the Close of Business 10 Business Days after the occurrence of such event, proper provision shall be made so that each holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have the right to receive, upon exercise thereof at the Purchase Price in effect at the time of exercise in accordance with the terms of this Agreement, in lieu of one share of Class A Common Stock, such number of shares of Class A Common Stock of the Company as shall equal the result obtained by (x) multiplying an amount equal to the then current Purchase Price by an amount equal to the number of shares of Class A Common Stock for which a Right was or would have been exercisable immediately prior to the first occurrence of any such event whether or not such Right was then exercisable, and (y) dividing that product by 50% of the Current Market Price per share of the Class A Common Stock of the Company (as defined in Section 11(d) hereof) determined as of the date of such first occurrence. (iii) In lieu of issuing whole or fractional shares of Class A Common Stock in accordance with Section 7(c) hereof, the Company shall (i) in the event that the number of shares of Class A Common Stock which are authorized by the Company's charter but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights are not sufficient to permit the exercise in full of the Rights in accordance with Section 7(c) hereof, or (ii) if a majority of the Board determines that it would be appropriate and not contrary to the interests of the holders of Rights (other than any Acquiring Person or Disqualified Transferee or any Affiliate of the Acquiring Person or Disqualified Transferee), (A) determine an amount, if any, (the "Excess Amount") equal to the excess of (1) the value (the "Current Value") of the whole or fractional shares of Class A Common Stock issuable upon the exercise of a Right in accordance with Section 7(c) hereof, over (2) the Purchase Price, and (B) with respect to each Right, (subject to Section 7(e) hereof) make adequate provision to substitute for such whole or fractional shares of Class A Common Stock, upon payment of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) Class A Common Stock or other equity securities of the Company (including, without limitation, shares or units of Class B Common Stock or preferred stock which the Board has deemed in good faith to have the same value as a share of Class A Common Stock (such other equity securities or shares of preferred stock being referred to herein as "Class A Common Stock Equivalents")), (4) debt securities of the Company, (5) other assets, or (6) any combination of the foregoing (which would include the additional consideration provided to any holder by reducing the Purchase Price) having an aggregate value equal to the Current Value, where such aggregate value has been determined by the Board; provided, however, subject to the provisions of Section 9(e) hereof, that if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within 30 days following the Close of Business 10 Business Days after the first occurrence of a Common Stock Event described in Section 11(a)(ii) hereof, then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, whole or fractional shares of Class A Common Stock (to the extent available) and then, if necessary, cash, securities, and/or assets which in the aggregate are equal to the Excess Amount. If the Board shall determine in good faith that it is likely that sufficient additional shares of Class A Common Stock or Class A Common Stock Equivalents could be authorized for issuance upon exercise in full of the Rights, the 30-day period set forth above may be extended to the extent necessary, but not more than 90 days following the Close of Business 10 Business Days after the first occurrence of such a Common Stock Event (such 30 day period) as it may be extended to 90 days, is referred to herein as the "Substitution Period"). To the extent that the Company determines that some action is to be taken pursuant to the preceding provisions of this Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e) hereof, that (except as to the form of consideration which shall be determined as appropriate by a majority of the Board) such action shall apply uniformly to all outstanding Rights which shall not have become null and void, and (y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to such provisions and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended. The Company shall thereafter issue a public announcement at such time as the suspension is no longer in effect. The Company shall give the Rights Agent prompt written notice of each such suspension or termination of such suspension. For purposes of this Section 11(a)(iii), the value of the Class A Common Stock issuable upon exercise of a Right in accordance with Section 7(c) hereof shall be the Current Market Price per share of the Class A Common Stock (as determined pursuant to Section 11(d) hereof) on the Close of Business 10 Business Days after the date of the first occurrence of such a Common Stock Event and the value of any Class A Common Stock Equivalent shall be deemed to be equal to the Current Market Price per share of the Class A Common Stock on such date. (b) In the event the Company shall, after the Dividend Record Date, fix a record date for the issuance of any options, warrants, or other rights to all holders of Class A Common Stock and/or Class B Common Stock entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase (i) Class A Common Stock or (ii) securities convertible into or exchangeable for Class A Common Stock at a price per share of Class A Common Stock (or having a conversion price per share of Class A Common Stock, if a security is convertible into Class A Common Stock) less than the Current Market Price per share of Class A Common Stock (determined in accordance with Section 11(d) hereof) determined as of such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Class A Common Stock outstanding on such record date plus the number of shares of Class A Common Stock which the aggregate minimum offering price of the total number of shares of Class A Common Stock so to be offered (and/or the aggregate minimum conversion price of such convertible securities so to be offered) would purchase at such Current Market Price, and the denominator of which shall be the number of shares of Class A Common Stock outstanding on such record date plus the maximum number of additional shares of Class A Common Stock to be offered for subscription or purchase (or the maximum number of shares into which such convertible securities so to be offered are convertible). In case such subscription price may be paid by delivery of consideration part or all of which shall be in a form other than cash, for purposes of this Section 11(b) the value of such consideration shall be the fair market value thereof as determined in good faith by the Board (which determination shall be described in an Officers' Certificate filed with the Rights Agent). Shares of Class A Common Stock owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such options, warrants or other rights are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed (subject, however, to such other adjustments as are provided herein). (c) In the event that the Company shall, after the Dividend Record Date, fix a record date for the making of a distribution to all holders of Class A Common Stock and/or Class B Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the surviving or continuing Person) of evidences of indebtedness, cash (other than cash dividends paid out of the earnings or retained earnings of the Company and its Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles consistently applied), other property (other than a dividend payable in shares of Class A Common Stock or Class B Common Stock, but including any dividend payable in capital stock other than Class A Common Stock or Class B Common Stock), or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, of which the numerator shall be (i) the Current Market Price per share of Class A Common Stock (as defined in Section 11(d) hereof) determined as of such record date, less (ii) the sum of (A) that portion of cash plus (B) the fair market value, as determined in good faith by the Board (which determination shall be described in an Officers' Certificate filed with the Rights Agent) of that portion of such evidences of indebtedness, such other property, and/or such subscription rights or warrants applicable to one share of Class A Common Stock and of which the denominator shall be such Current Market Price per share of the Class A Common Stock. Such adjustments shall be made successively whenever such a record date is fixed; and in the event such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed (subject, however, to such other adjustments as are provided herein). (d) For purposes of any computation pursuant to Section 11(a)(iii) hereof, the "Current Market Price" per share (or unit) of any security on any date shall be deemed to be the average of the daily Closing Price of such security for the 10 consecutive Trading Days immediately after such date, and for the purpose of any other computation hereunder, the "Current Market Price" per share (or unit) of any security on any date shall be deemed to be the average of the daily Closing Price of such security for the 20 consecutive Trading Days immediately prior to but not including such date; provided, however, that in the event that the Current Market Price per share of such security is determined during a period following the announcement by the issuer of such security of (i) a dividend or distribution on such security payable in shares (or units) of such security or securities convertible into shares (or units) of such security, or (ii) any subdivision, combination or reclassification of such security, and prior to the expiration of such 10 Trading Days or 20 Trading Days after (A) the ex-dividend date for such dividend or distribution, or (B) the record date for such subdivision, combination or reclassification, as the case may be, then, and in each such case, the "Current Market Price" shall be the Closing Price of such security on the last day of such respective 10 Trading Day or 20 Trading Day period. For purposes of this Agreement, the "Closing Price" of any security on any day shall be the last sale price, regular way, with respect to shares (or units) of such security, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, with respect to such security, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange; or, if such security is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such security is listed or admitted to trading; or, if such security is not so listed or admitted to trading, the last quoted sale price with respect to shares (or units) of such security, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market with respect to shares (or units) of such security, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or such other similar system then in use; or, if on any such date such security is not quoted by any such organization, the average of the closing bid and asked prices with respect to shares (or units) of such security, as furnished by a professional market maker making a market in such security selected by the Board; or, if no such market maker is available, the fair market value of shares (or units) of such security as of such day as determined in good faith by the Board (which determination shall be described in an Officers' Certificate filed with the Rights Agent). (e) No adjustment in the Purchase Price shall be required unless adjustment would require an increase or decrease of at least 1% in such price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a share (or similar unit) of Class A Common Stock or other securities. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which mandates the adjustment or (ii) the Expiration Date. Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those required by this Section 11, as it in its discretion shall determine to be advisable in order that any dividends, subdivision of shares, distribution of rights to purchase shares of beneficial interest or other stock or securities, or distribution of securities convertible into or exchangeable for stock hereafter made by the Company to its stockholders shall not be taxable. (f) In the event that at any time, as a result of an adjustment made in respect of a Common Stock Event, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than shares of Class A Common Stock, thereafter the number of such other shares so receivable upon exercise of any Right and the Purchase Price thereof shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to such other shares contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k), (m) and (p) hereof, and the provisions of Sections 7, 9, 10, 11(d), 13 and 14 hereof with respect to the shares of Class A Common Stock shall apply on like terms to any such other shares. (g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of shares of Class A Common Stock purchasable from time to time hereunder upon exercise of the Rights represented thereby, all subject to further adjustment as provided herein. (h) Unless the Company shall have exercised its election as provided in Section 11(i) hereof, upon each adjustment of the Purchase Price as a result of the calculations made pursuant to Sections 11(b) and 11(c) hereof, each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of shares of Class A Common Stock (calculated to the nearest ten-thousandth of a share) obtained by (i) multiplying (x) the number of shares covered by a Right immediately prior to this adjustment, by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price, and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. (i) Assuming that no other adjustment pursuant to this Section 11 has been made, the Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights in substitution for any adjustment in the number of shares of Class A Common Stock purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of shares of Class A Common Stock for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to such adjustment of the Purchase Price by the Purchase Price in effect immediately after such adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made and shall promptly give the Rights Agent a record of such announcement. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least 10 days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i) the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights Certificates so to be distributed shall be issued, executed, and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement. (j) Irrespective of any adjustment or change in the Purchase Price or the number of whole or fractional shares of Class A Common Stock issuable upon exercise of such Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per share and the number of shares which were expressed in the initial Rights Certificates issued hereunder. (k) Before taking any action that would cause an adjustment reducing the Purchase Price below the then par value, if any, of the number of shares of Class A Common Stock issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue such number of fully paid and nonassessable shares of Class A Common Stock at such adjusted Purchase Price. (l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer (and shall give prompt written notice of such election to the Rights Agent) until the occurrence of such event the issuing to the holder of any Right exercised after such record date of the number of shares of Class A Common Stock and other shares of beneficial interest or other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of shares of Class A Common Stock and other shares of beneficial interest or other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional securities upon the occurrence of the event requiring such adjustment. (m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it, by means of a resolution of the Board acting in good faith, shall determine to be advisable in order that any consolidation or subdivision of the Class A Common Stock, issuance wholly for cash of any Class A Common Stock at less than the Current Market Price thereof, issuance wholly for cash of Class A Common Stock (or other securities which by their terms are convertible into or exchangeable for Class A Common Stock), dividends payable in shares of Class A Common Stock or other capital stock or shares of beneficial interest, or issuance of rights, options, or warrants referred to hereinabove in this Section 11, hereafter made or declared by the Company to the holders of its Class A Common Stock, shall not be taxable to such holders. (n) The Company covenants and agrees that it shall not, at any time after the Distribution Date, (i) consolidate with any other Person (other than a Subsidiary of the Company in a transaction that complies with Section 11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one transaction or a series of related transactions, more than 25% of (A) the assets (taken at net asset value as stated on the books of the Company and determined on a consolidated basis in accordance with generally accepted accounting principles consistently applied) or (B) the earning power of the Company and its Subsidiaries (determined on a consolidated basis in accordance with generally accepted accounting principles consistently applied) to any other Person or Persons (other than the Company or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), if (x) at the time of or immediately after such consolidation, merger or sale, there are any rights, warrants or other instruments or securities outstanding or agreements (whether or not in writing) in effect that would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such consolidation, merger or sale, the stockholders of such other Person shall have received a distribution of Rights previously owned by such Person or any of its Affiliates. (o) The Company covenants and agrees that, after the Distribution Date, it will not, except as permitted by Section 23 or 27 hereof, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights. (p) Anything in this Agreement to the contrary notwithstanding, in the event that the Company shall at any time after the date hereof and prior to the Distribution Date (i) declare or pay a dividend on the outstanding shares of Class A Common Stock and/or Class B Common Stock payable in shares of Class A Common Stock and/or Class B Common Stock, or (ii) effect a subdivision, combination or consolidation of the outstanding Class A Common Stock and/or Class B Common Stock (by reclassification or otherwise than by payment of dividends in shares of Class A Common Stock and/or Class B Common Stock) into a greater or smaller number of shares, then in any such case, (x) the number of shares of Class A Common Stock purchasable after such event upon proper exercise of each Right shall be determined by multiplying the number of shares of Class A Common Stock so purchasable immediately prior to such event by a fraction the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of shares of Common Stock outstanding immediately following the occurrence of such event; and (y) each share of Common Stock outstanding immediately after such event shall have issued with respect to it that number of Rights which each share of Common Stock outstanding immediately prior to such event had issued with respect to it. The adjustments provided for in this Section 11(p) shall be made successively whenever such a dividend is declared or paid or such a subdivision, combination or consolidation is effected. Section 12. Certificate of Adjustments. Whenever an adjustment is made as provided in Section 11 and/or 13 hereof, the Company shall (a) promptly prepare an Officers' Certificate setting forth such adjustment, including any adjustment in Purchase Price, the number of shares or Other Consideration payable, and a brief, reasonably detailed statement of the facts, computations and methodology accounting for such adjustment, (b) promptly file with the Rights Agent and with the transfer agent for the Class A Common Stock a copy of such Officers' Certificate, and (c) mail a brief summary thereof to each registered holder of a Rights Certificate in accordance with Section 26 hereof. The Rights Agent shall be fully protected in relying on any such Officers' Certificate and on any adjustment therein contained, and shall have no duty with respect to and shall not be deemed to have knowledge of any such adjustment unless and until it shall have received such an Officers' Certificate. Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. In the event that, following the Stock Acquisition Date, directly or indirectly, (a) the Company shall consolidate with, or merge with and into, any other Person (other than a Subsidiary of the Company in a transaction that complies with Section 11(o) hereof) and the Company shall not be the continuing or surviving Person of such consolidation or merger, (b) any Person (other than a Subsidiary of the Company in a transaction that complies with Section 11(o) hereof) shall consolidate with, or merge with and into, the Company, the Company shall be the continuing or surviving Person of such consolidation or merger and, in connection with such consolidation or merger, all or part of the Common Stock of the Company shall be changed or otherwise transformed into other stock or other securities of any other Person or the Company or cash or any other property, or (c) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one transaction or a series of related transactions, more than 25% of (A) the assets (taken at net asset value as stated on the books of the Company and determined on a consolidated basis in accordance with generally accepted accounting principles consistently applied) or (B) the earning power of the Company and its Subsidiaries (determined on a consolidated basis in accordance with generally accepted accounting principles consistently applied) to any Person (other than the Company or any Subsidiary of the Company in one or more transactions each of which complies with Section 11(o) hereof) then, from and after such event, proper provision shall be made so that (i) each holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have the right to receive, upon the exercise thereof at the Purchase Price in effect at the time of such exercise in accordance with the terms of this Agreement, such number of whole or fractional shares of validly authorized and issued, fully paid, non-assessable, and freely tradeable Common Stock of such other Person (or in the case of a transaction or series of transactions described in clause (c) above, the Person receiving the greatest amount of the assets or earning power of the Company, or if the Common Stock of such other Person is not and has not been continuously registered under Section 12 of the Exchange Act for the preceding 12-month period and such Person is a direct or indirect Subsidiary of another Person, that other Person, or if such other Person is a direct or indirect Subsidiary of more than one other Person, the Common Stock of two or more of which are and have been so registered, such other Person whose outstanding Common Stock has the greatest aggregate value), free and clear of any liens, encumbrances, rights of first refusal, or other adverse claims, as shall be equal to the result obtained by (x) multiplying the Purchase Price in effect immediately prior to the first occurrence of any Common Stock Event described in this Section 13 by the number of shares of Class A Common Stock for which a Right is exercisable immediately prior to such first occurrence (and without taking into account any prior adjustment made pursuant to 11(a)(ii)) and (y) dividing that product by 50% of the Current Market Price per share (as defined in Section 11(d) hereof) of the Common Stock of such other Person determined as of the date of consummation of such consolidation, merger, sale, or transfer; (ii) the issuer of such Common Stock shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale, or transfer, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed, for all purposes of this Agreement, to refer to such issuer, it being specifically intended that the provisions of Section 11 hereof (other than Section 11(a)(ii) hereof) shall apply only to such issuer following the first occurrence of a Common Stock Event described in this Section 13; (iv) such issuer shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Stock) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to the whole or fractional shares of its Common Stock thereafter deliverable upon the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect following the first occurrence of any Common Stock Event described in clauses (a), (b) or (c) of this Section 13. The Company shall not consummate any such consolidation, merger, sale or transfer unless (i) such issuer shall have a sufficient number of authorized shares of its Common Stock which have not been issued or reserved for issuance as will permit the exercise in full of the Rights in accordance with this Section 13, and (ii) prior thereto the Company and such issuer shall have executed and delivered to the Rights Agent a supplemental agreement so providing and further providing that as soon as practicable after the date of any Common Stock Event described above in this Section 13 such issuer shall (A) prepare and file a registration statement under the Act, with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, and will use its best efforts to cause such registration statement to (I) become effective as soon as practicable after such filing and (II) remain effective (with a prospectus at all times meeting the requirements of the Act) until the Expiration Date, and (B) will deliver to holders of the Rights historical financial statements of such issuer and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 under the Exchange Act. Furthermore, in case the Person which is to be party to a transaction referred to in this Section 13 has any provision in any of its authorized securities or in its charter or by-laws or other agreement or instrument governing its affairs, which provision would have the effect of causing such Person to issue, in connection with, or as a consequence of, the consummation of a Common Stock Event described in clauses (a), (b), or (c) of this Section 13, whole or fractional shares of Common Stock of such Person at less than the then Current Market Price per share thereof (as defined in Section 11(d) hereof), or to issue securities exercisable for, or convertible into, Common Stock of such Person at less than such then Current Market Price, then, in such event, the Company hereby agrees with each holder of the Rights that it shall not consummate any such transaction unless prior thereto the Company and such Person shall have executed and delivered to the Rights Agent a supplemental agreement providing that such provision in question shall have been canceled, waived, or amended so that it will have no effect in connection with, or as a consequence of, the consummation of the proposed transaction. The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. In the event that a Common Stock Event described in this Section 13 shall occur at any time after the occurrence of a Common Stock Event described in Section 11(a)(ii) hereof, the Rights which have not theretofore been exercised shall thereafter become exercisable, except as provided in Section 7(e) hereof, in the manner described in this Section 13. Section 14. Fractional Rights and Fractional Shares. (a) The Company shall not be required to issue fractions of Rights or to distribute fractions of Rights, except prior to the Distribution Date as provided in Section 11(i) hereof, or to distribute Rights Certificates which evidence fractional Rights. In lieu of issuing such fractional Rights, at the election of the Company, there shall be paid to the registered holders of the Rights with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a), the current market value of a whole Right shall be the Closing Price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. (b) The Company shall not be required to issue fractions of shares of its capital stock upon exercise of the Rights or to distribute certificates which evidence fractional shares. In lieu of fractional shares, at the election of the Company, there shall be paid to the registered holders of Rights at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of a share of such capital stock. For purposes of this Section 14(b), the current market value of a share of such capital stock shall be the Closing Price of such capital stock for the Trading Day immediately prior to the date of such exercise. (c) The holder of a Right, by the acceptance of the Right, expressly waives such holder's right to receive any fractional Rights or (except as provided in Section 14(b) hereof) any fractional share upon exercise of a Right. (d) Whenever a payment for fractional Rights or fractional shares is to be made by the Rights Agent, the Company shall (i) promptly prepare and deliver to the Rights Agent a certificate setting forth in reasonable detail the facts related to such payments and the prices and/or formulas utilized in calculating such payments, and (ii) provide sufficient monies to the Rights Agent in the form of fully collected funds to make such payments. The Rights Agent shall be fully protected in relying upon such a certificate and shall have no duty with respect to, and shall not be deemed to have any knowledge of any payment for fractional Rights or fractional shares under any Section of this Agreement relating to the payment of fractional Rights or fractional shares unless and until the Rights Agent shall have received such a certificate and sufficient monies. Section 15. Rights of Action. Excepting the rights of action given the Rights Agent under Section 18 hereof and except as set forth in Section 20(l) hereof, all rights of action in respect of this Agreement are vested in the registered holder of each Right; and any registered holder of any Right, without the consent of the Rights Agent or of the holder of any other Right, may, in its own behalf and for its own benefit, enforce, and may institute and maintain any suit, action, or proceeding against the Company to enforce, or otherwise act in respect of, such registered holder's right to exercise the rights evidenced by such Right in the manner provided in such Rights Certificate and in this Agreement, and the Company hereby agrees to reimburse such registered holder for all expenses (including reasonable attorneys' fees) incurred by such registered holder in connection therewith. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of the obligations hereunder, and shall be entitled to injunctive relief against actual or threatened violations of the obligations hereunder of any Person subject to this Agreement. Section 16. Agreement of Rights Holders. Every holder of a Right by accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of Common Stock; (b) from and after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the offices of the Rights Agent, duly endorsed or accompanied by a proper instrument of transfer with a form of assignment and certificate set forth on the reverse side thereof duly executed, accompanied by a signature guarantee and such other documentation as the Rights Agent may reasonably request; (c) subject to Sections 6(a) and 7(f) hereof, the Company and the Rights Agent may deem and treat the person in whose name a Rights Certificate (or, prior to the Distribution Date, the associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificate or, prior to the Distribution Date, the associated Common Stock certificate, made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary; and (d) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority prohibiting or otherwise restraining performance of such obligation; provided, however, the Company agrees to use its best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible. Section 17. Rights Certificate Holder Not Deemed a Stockholder. No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends, or otherwise be deemed for any purpose the holder of any securities of the Company which may be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a stockholder of the Company or any right to vote in the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any action by the Company, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or preemptive rights, or otherwise, until the time specified in Section 10 hereof. Section 18. Concerning the Rights Agent. The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the preparation, delivery, amendment, administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any and all loss, liability, damage, judgment, fine, claim, demand, settlement, cost or expense (including, without limitation, the reasonable fees and expenses of legal counsel), incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent (each as determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction), for any action taken, suffered, or omitted by the Rights Agent in connection with the acceptance, administration, exercise and performance of its duties under this Agreement, including the costs and expenses (including reasonable attorneys' fees and expenses) of defending against any claim of liability hereunder. The costs and expenses incurred by the Rights Agent in enforcing this right of indemnification shall be paid by the Company unless it is determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction that the Rights Agent is not entitled to indemnification due to the Rights Agent's gross negligence, bad faith or willful misconduct. The provisions of this Section 18 and Section 20 below shall survive the termination of this Agreement, the exercise or expiration of the Rights and the resignation or removal of the Rights Agent. The Rights Agent shall be authorized and protected and shall incur no liability for or in respect of any action taken, suffered, or omitted by it in connection with its acceptance and administration of this Agreement and the exercise and performance of its duties hereunder, in reliance upon any Rights Certificate or certificate for any shares of Class A Common Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, instruction, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed and executed by the proper Person or Persons, and verified or acknowledged as required by this Agreement, or otherwise upon the advice of reputable counsel as set forth in Section 20 hereof. The Rights Agent shall not be deemed to have any knowledge of any event of which it was supposed to receive notice thereof hereunder, and the Rights Agent shall be fully protected and shall incur no liability for failing to take any action in connection therewith unless and until it has received such notice in accordance with this Agreement. Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any Person into which the Rights Agent may be merged or with which it may be consolidated, or any Person resulting from any merger or consolidation to which the Rights Agent shall be a party, or any Person succeeding to the business of the Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided, however, that such Person would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement and any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. Section 20. Rights and Duties of Rights Agent. The Rights Agent undertakes only the duties and obligations expressly imposed upon it by this Agreement and no implied duties or obligations shall be read into this Agreement against the Rights Agent. The Rights Agent shall perform its duties and obligations hereunder upon the following terms and conditions: (a) The Rights Agent may consult with reputable legal counsel of its selection (who may be legal counsel to the Company or an employee of the Rights Agent), and the advice or opinion of such counsel shall be full and complete authorization and protection to the Rights Agent, and the Rights Agent shall incur no liability for, or in respect of any action taken, suffered or omitted by it in good faith in accordance with such advice or opinion; provided, that the Company agrees that Kelley Drye & Warren LLP and its attorneys shall be considered "reputable legal counsel" for purposes of this Agreement. (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person and the determination of Current Per Share Market Price) be proved or established by the Company prior to taking, suffering or omitting to take any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate (an "Officers' Certificate") signed by a person believed by the Rights Agent to be the Chairman of the Board, the President or any Vice President and by the Treasurer or any Assistant Treasurer or the Clerk or any Assistant Clerk of the Company and delivered to the Rights Agent; and such Officers' Certificate shall be full authorization and protection to the Rights Agent for any action taken, suffered or omitted by it under the provisions of this Agreement in reliance upon such Officers' Certificate. (c) The Rights Agent shall be liable hereunder only for its own gross negligence, bad faith, or willful misconduct (each as determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction). Anything to the contrary notwithstanding, in no event shall the Rights Agent be liable for special, indirect, consequential, or incidental loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates (except its countersignature on such Rights Certificate) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any change in the exercisability of the Rights, a transfer to an Acquiring Person or any adjustment required under the provisions of Sections 11 or 13 hereof or be responsible for the manner, method or amount of any such adjustment or procedures or the ascertaining of the existence of facts that would require any such adjustment or procedure (except with respect to the exercise of Rights evidenced by Rights Certificates after receipt by the Rights Agent of a certificate delivered pursuant to Section 12 hereof, describing any such adjustment or procedures, upon which the Rights Agent may rely); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Class A Common Stock or other securities to be issued pursuant to this Agreement or any Rights Certificate or as to whether any shares of Class A Common Stock, or any shares or similar units of other securities, will, when issued, be validly authorized and issued, fully paid, and nonassessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver, or cause to be performed, executed, acknowledged and delivered, all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any person believed by the Rights Agent to be the Chairman of the Board, the President or any Vice President or the Clerk or any Assistant Clerk or the Treasurer or any Assistant Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and such instructions shall be full authorization and protection to the Rights Agent, and the Rights Agent shall not be liable for any action taken, suffered or omitted by it in accordance with instructions of any such officer or for any delay in acting while waiting for those instructions, absent its own gross negligence, bad faith, or willful misconduct (each as determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction). Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent with respect to its duties or obligations under this Agreement and the date on and/or after which such action shall be taken or such omission shall be effective. The Rights Agent shall not be liable for any action taken by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than five (5) Business Days after the date any such officer actually receives such application, unless any such officer shall have consented in writing to an earlier date) unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent has received written instructions from the Company in response to such application specifying the action to be taken, suffered or omitted. (h) The Rights Agent and any stockholder, affiliate, director, officer, or employee of the Rights Agent may buy, sell, or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other Person. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company or any other Person resulting from any such act, default, neglect or misconduct, absent gross negligence, bad faith or willful misconduct (each as determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction) in the selection and continued employment thereof. (j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if it believes that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. (k) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certification appearing on the reverse side thereof following the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise of transfer without first consulting with the Company. (l) The provisions of this Section 20 are solely for the benefit of the Rights Agent or the Company and any failure or omission under this Section 20 shall not affect the rights of the Company under this Agreement and neither the Rights Agent nor the Company shall have any liability to any holder of Rights or other Person on account of such failure or omission. Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days' notice in writing mailed to the Company and to the transfer agent of the Class A Common Stock by registered or certified mail, and, subsequent to the Distribution Date, to the holders of the Rights Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, to the transfer agent of the Class A Common Stock by registered or certified mail, and, subsequent to the Distribution Date, to the holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit such holder's Rights Certificate for inspection by the Company), then the registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (i) a Person organized and doing business under the laws of the United States, the State of New York or The Commonwealth of Massachusetts (or of any other State of the United States so long as such Person is authorized to do business as a banking institution in the State of New York or The Commonwealth of Massachusetts), in good standing, having an office designated for such purpose in the State of New York or The Commonwealth of Massachusetts, which is authorized under such laws to exercise stock transfer powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50,000,000, or (ii) an Affiliate of a Person described in clause (i). After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose; and, except as the context herein otherwise requires, such successor Rights Agent shall be deemed to be the "Rights Agent" for all purposes of this Agreement. Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent and the transfer agent of the Class A Common Stock, and mail a notice thereof in writing to the registered holders of the Rights Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Section 22. Issuance of New Rights Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by the Board to reflect any adjustment or change in the Purchase Price per share and the number or kind or class of shares of stock or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale by the Company of shares of Common Stock following the Distribution Date and prior to the redemption or expiration of the Rights, the Company (a) shall, with respect to shares of Common Stock so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, or upon the exercise, conversion or exchange of securities hereinafter issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by the Board, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Rights evidenced by a Rights Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Rights would be issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof. Section 23. Redemption and Termination. The Board, by majority vote, may, at its option, at any time prior to the earlier of (i) the Distribution Date or (ii) the Close of Business on the Expiration Date, redeem all (but not less than all) of the then outstanding Rights at a redemption price of $.01 per Right, appropriately adjusted to reflect any stock split, stock dividend, combination of shares, or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price"). The Company may, at its option, pay the Redemption Price in cash, shares of Common Stock (based on the Current Market Price of the Common Stock at the time of redemption) or any other form of consideration deemed appropriate by the majority of the Board). Immediately upon the taking of such action ordering the redemption of all of the Rights, evidence of which shall have been filed with the Rights Agent, and without any further action and without any notice, the right to exercise the Rights so redeemed will terminate and the only right thereafter of the holders of such Rights so redeemed shall be to receive the Redemption Price (without the payment of any interest thereon). Within 10 days after such action ordering the redemption of all of the Rights, the Company shall give prompt written notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to the Rights Agent and all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Stock. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption shall state the method by which the payment of the Redemption Price shall be made. Section 24. Exchange. (a) The Board, by majority vote, may, at its option, at any time after any Person becomes an Acquiring Person, exchange all or part of the then outstanding and exercisable Rights for shares of Class A Common Stock at an exchange ratio of one share of Class A Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio, as the same may be so adjusted from time to time, being hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing, such Board shall not be empowered to effect such exchange at any time after any Person (other than (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan of the Company or of any such Subsidiary, or (iv) any Person organized, appointed or established for or pursuant to the terms of any such plan), together with all Affiliates of such Person, becomes the Beneficial Owner (whether such Beneficial Ownership is of shares of Class A Common Stock, shares of Class B Common Stock or shares of Class A Common Stock and Class B Common Stock)of 50% or more of the shares of Class A Common Stock and Class B Common Stock (taken together as a single class, treating each share of Class B Common Stock outstanding as one share of Class A Common Stock outstanding for the purposes of calculating such Beneficial Ownership) then outstanding. (b) Immediately upon the action of the Board ordering the exchange of any Rights pursuant to subsection (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of holders of such Rights shall be to receive that number of shares of Class A Common Stock equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice of any such exchange (with prompt written notice thereof to the Rights Agent); provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange shall state the method by which the exchange of the Class A Common Stock for Rights shall be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 7(e) hereof) held by each holder of Rights. (c) In the event that there shall not be sufficient shares of Class A Common Stock issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional Class A Common Stock for issuance upon exchange of the Rights. (d) The Company shall not be required to issue fractions of shares of Class A Common Stock or to distribute certificates which evidence fractional shares of Class A Common Stock. In lieu of such fractional shares of Class A Common Stock, the Company shall pay to each registered holder of a Rights Certificate with regard to which a fractional share of Class A Common Stock would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole share of Class A Common Stock. For the purposes of this paragraph (d), the current market value of a whole share of Class A Common Stock shall be the Closing Price of a share of Class A Common Stock (as determined pursuant to Section 11(d) hereof) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24. Section 25. Notice of Proposed Actions. In case the Company shall after the Distribution Date propose (a) to pay any dividend payable in stock of any class to the holders of its Class A Common Stock or to make any other distribution to the holders of its Class A Common Stock (other than a cash dividend out of earnings or the retained earnings of the Company), or (b) to offer to the holders of its Class A Common Stock rights or warrants to subscribe for or to purchase any additional shares of Class A Common Stock, Class B Common Stock or shares of stock of any other class or any other securities, rights, or options, or (c) to effect any reclassification of the Class A Common Stock (other than a reclassification involving only the subdivision of outstanding shares of Class A Common Stock), or (d) to effect any consolidation or merger into or with, or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one transaction or a series of related transactions, of more than 25% of (i) the assets of the Company and its Subsidiaries (taken at net asset value as stated on the books of the Company and determined on a consolidated basis in accordance with generally accepted accounting principles consistently applied) or (ii) the earning power of the Company and its Subsidiaries (determined on a consolidated basis in accordance with generally accepted accounting principles consistently applied) to any other Person or Persons, or (e) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to the Rights Agent and each holder of a Right, in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of Class A Common Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (a) or (b) above at least twenty days prior to the record date for determining holders of the Class A Common Stock for purposes of such action, and in the case of any such other action, at least twenty days prior to the date of the taking of such proposed action or the date of participation therein by the holders of Class A Common Stock whichever shall be the earlier. The failure to give notice required by this Section 25 or any defect therein shall not affect the legality or validity of the action taken by the Company or the vote upon any such action. In case any Common Stock Event described in Section 11(a)(ii) hereof shall occur, then, in any such case, the Company shall as soon as practicable thereafter give to the Rights Agent and each holder of a Rights Certificate, in accordance with Section 26 hereof, a notice of the occurrence of such Common Stock Event, which shall specify such event and the consequences of the event to holders of Rights under Section 11(a)(ii) hereof. Notwithstanding anything in this Agreement to the contrary, prior to the Distribution Date a filing by the Company with the Securities and Exchange Commission shall constitute sufficient notice to the holders of securities of the Company, including the Rights, for purposes of this Agreement and no other notice need be given. Section 26. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) or by facsimile transmission as follows: The L.S. Starrett Company 121 Crescent Street Athol, Massachusetts 01331 Attention: Treasurer Facsimile No.: (978) 249-6667 Copy to: Ropes & Gray One International Place Boston, MA 02110-2624 Attention: Steven A. Wilcox, Esq. Facsimile No.: (617) 951-7050 Subject to the provisions of Sections 19 and 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) or by facsimile transmission as follows: Mellon Investor Services LLC 111 Founders Plaza, 11th Floor East Hartford, CT 06108 Attn: Relationship Manager Facsimile No.: (860) 528-6472 with a copy to: Mellon Investor Services LLC 85 Challenger Road Ridgefield Park, New Jersey 07660 Attn: General Counsel Facsimile No.: (201) 296-4004 Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company. Section 27. Supplements and Amendments. Prior to the Distribution Date, the Board, upon the vote of a majority of the Board, may from time to time supplement or amend this Agreement without the approval of any holders of the Rights. From and after the Distribution Date, the Board may, upon the vote of a majority of the Board, from time to time amend this Agreement without the approval of any holders of the Rights in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to change any time period governing redemption of the Rights or any other time period or (iv) to make any other provisions in regard to matters or questions arising hereunder which the Board, upon the vote of a majority of the Board, may deem necessary or desirable and which shall not adversely affect the interests of the holders of the Rights (other than any Acquiring Person or Disqualified Transferee or any Affiliate of an Acquiring Person or Disqualified Transferee). The Rights Agent shall join with the Company in the execution and delivery of any such supplement or amendment, unless such supplement or amendment affects or changes in any way any of the rights, duties, liabilities, obligations or immunities of the Rights Agent hereunder, in which case the Rights Agent may, but shall not be required to, join in such execution and delivery. Section 28. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 29. Determinations and Actions by the Board; etc. The Board shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board, or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement and (ii) make all determinations (including a determination to redeem or not redeem the Rights or to amend this Agreement) deemed necessary or advisable for the administration of this Agreement. All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below all omissions with respect to the foregoing) which are done or made by the Board in good faith and with the concurrence of a majority of the Board shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other Persons and (y) not subject any Director to any liability to the holders of the Rights. The Rights Agent shall always be entitled to assume that the Board acted in good faith and shall be fully protected and incur no liability in reliance thereon. Section 30. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent, and the registered holders of the Rights Certificates (and, prior to the Distribution Date, the associated shares of Common Stock) any legal or equitable right, remedy, or claim under this Agreement or the Rights; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent, and the registered holders of the Rights (and, prior to the Distribution Date, the associated Common Stock). Section 31. Severability. The invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of any other term or provision hereof. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the Board determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated (with prompt written notice the Rights Agent) and shall not expire until the Close of Business on the tenth day following the date of such determination by the Board. Section 32. Governing Law. This Agreement and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of The Commonwealth of Massachusetts and for all purposes shall be governed by and construed in accordance with the laws of said Commonwealth applicable to contracts to be made and performed entirely within said Commonwealth; provided, however, that all provisions regarding the rights, duties and obligations of the Rights Agent shall, with respect to such rights, duties and obligations, be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within said State. Section 33. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Section 34. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and set their respective hands and seals, all as of the day and year first above written. THE L.S. STARRETT COMPANY By: /s/ Roger Wellington, Jr. Title: VP & CFO Attest: By: /s/ Kathy DeCoteau Title: Asst. to Treasurer MELLON INVESTOR SERVICES, LLC By: /s/ Lynore A. LeConche Title: Vice President Attest: By: /s/ Lee Tinto Title: Vice President EXHIBIT A FORM OF RIGHTS CERTIFICATE Certificate No. R- _______ Rights NOT EXERCISABLE AFTER May 23, 2010 OR EARLIER IF ORDER OF REDEMPTION IS GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE (WHICH INCLUDES AFFILIATES AND ASSOCIATES) OF AN ACQUIRING PERSON (AS EACH SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. THE RIGHTS SHALL NOT BE EXERCISABLE, AND SHALL BE VOID SO LONG AS HELD, BY A HOLDER IN ANY JURISDICTION WHERE THE REQUISITE QUALIFICATION TO THE ISSUANCE TO SUCH HOLDER, OR THE EXERCISE BY SUCH HOLDER, OF THE RIGHTS IN SUCH JURISDICTION SHALL NOT HAVE BEEN OBTAINED OR BE OBTAINABLE. [THE RIGHTS REPRESENTED BY THIS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE (WHICH INCLUDES AFFILIATES AND ASSOCIATES) OF AN ACQUIRING PERSON (AS EACH SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT. THE RIGHTS AGENT WILL MAIL TO THE REGISTERED HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT, AS IN EFFECT ON THE DATE OF SUCH MAILING, WITHOUT CHARGE UPON WRITTEN REQUEST.]* Rights Certificate THE L.S. STARRETT COMPANY This certifies that , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions, and conditions of the Rights Agreement dated as of June 6, 1990, as amended and restated as of May 23, 2000 between The L.S. Starrett Company (the "Company"), and Fleet National Bank (f/k/a BankBoston, N.A., f/k/a The First National Bank of Boston, and as further amended and restated by the Second Amended and Restated Rights Agreement between the Company and Mellon Investor Services LLC (the "Rights Agent"), dated March 13, 2002 (the "Rights Agreement"), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 p.m. (Boston, Massachusetts time) on May 23, 2010 (the "Expiration Date") at the office of the Rights Agent designated for such purpose, or its successors as Rights Agent, one share of Class A Common Stock, with a par value of $1.00 per share ("Class A Common Stock"), of the Company per each Right represented hereby, at a purchase price of $92.00 per share (the "Purchase Price") upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase set forth on the reverse side hereof and the certificate contained therein duly completed and executed, accompanied by a signature guarantee and such other documentation as the Rights Agent may reasonably request. The number of Rights evidenced by this Rights Certificate (and the number of shares which may be purchased upon exercise thereof) set forth above, and the Purchase Price per share set forth above, are the number and Purchase Price as of May 23, 2000, based on the shares of Common Stock of the Company as constituted at such date. As more fully set forth in the Rights Agreement, upon the occurrence of a Common Stock Event (as such term is defined in the Rights Agreement), if the Rights evidenced by this Rights Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate of an Acquiring Person (as each such term is defined in the Rights Agreement) or (ii) a Disqualified Transferee (as defined in the Rights Agreement), such Rights shall automatically become null and void and no holder hereof shall have any right with respect to such Rights from and after the occurrence of such Common Stock Event. The Rights evidenced by this Rights Certificate shall not be exercisable, and shall be void so long as held, by a holder in any jurisdiction where the requisite qualification to the issuance to such holder, or the exercise by such holder, of the Rights in such jurisdiction shall not have been obtained or be obtainable. As provided in the Rights Agreement, the Purchase Price and the number and type of securities which may be purchased upon the exercise of the Rights evidenced by this Rights Certificate are subject to modification and adjustment upon the happening of certain events. In the circumstances described in Section 13 of the Rights Agreement, the securities issuable upon the exercise of the Rights evidenced hereby shall be the common stock or similar equity securities or equity interests of an entity other than the Company. This Rights Certificate is subject to all of the terms, provisions, and conditions of the Rights Agreement, which terms, provisions, and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties, and immunities hereunder of the Rights Agent, the Company, and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under the specific circumstances set forth in the Rights Agreement. Copies of the Rights Agreement are on file at the office of the Rights Agent designated for such purpose and may be obtained by the holder of any Rights upon written request to the Rights Agent. This Rights Certificate, with or without other Rights Certificates, upon surrender at the office of the Rights Agent designated for such purpose, accompanied by a signature guarantee and such other documentation as the Rights Agent may reasonably request, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of shares of Class A Common Stock (or other consideration, as the case may be) as the Rights evidenced by the Rights Certificate or Rights Certificates surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be exercised in part, the holder shall be entitled to receive, upon surrender hereof, another Rights Certificate or Rights Certificates for the number of whole Rights not exercised. Subject to the provisions of the Rights Agreement, the Rights evidenced by this Rights Certificate may be redeemed by the Company by a majority vote of the Board (as defined in the Rights Agreement) at any time prior to the Expiration Date, at a redemption price of $.01 per Right (which amount is subject to adjustment as provided in the Rights Agreement). In addition, in certain circumstances, the Rights may be exchanged, in whole or in part, for shares of Class A Common Stock. Immediately upon action of the Board ordering the exchange of any Rights and without further action and without any notice, the right to exercise such Rights will terminate and the only right thereafter of a holder of such Rights will be to receive that number of shares of Class A Common Stock issuable upon exchange. The Company is not obligated to issue whole or fractional shares of Class A Common Stock (or other securities) upon the exercise of any Right or Rights evidenced hereby, but in lieu thereof a cash payment may be made at the election of the Company, as provided in the Rights Agreement. No holder of this Rights Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of Class A Common Stock or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any action by the Company, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Rights Certificate shall have been exercised as provided in the Rights Agreement. This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. WITNESS the facsimile signature of the proper officers and the seal of the Company. Dated as of _______ __, ____. THE L.S. STARRETT COMPANY By______________________________ Title: ATTEST: ____________________ Title: Countersigned: ____________________ MELLON INVESTOR SERVICES, LLC By____________________ Authorized Signatory Date of Countersignature: [Form of Reverse Side of Rights Certificate] FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the Rights Certificate) FOR VALUE RECEIVED ________________________ hereby sells, assigns and transfers unto ______________________ _________________________________________________________________ (Please print name and address of transferee) ______________________________________________________________________ whose social security or tax identification number is: ______________ the Rights evidenced by this Rights Certificate, together with all right, title and interest herein, and does hereby irrevocably constitute and appoint ____________________ Attorney, to transfer the within Rights Certificate on the books of the within-named Company, with full power of substitution. Dated: _________________________, ____. _________________________ Signature Signature Guaranteed:* Certificate The undersigned hereby certifies by checking the appropriate boxes that: (1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate of an Acquiring Person (as each such term is defined in the Rights Agreement); and (2) after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate after the occurrence of a Common Stock Event from any Person who is, was or subsequently became an Acquiring Person or an Affiliate of an Acquiring Person. Dated:____________________ ______________________________ Signature Signature Guaranteed:* ____________________________ NOTICE The signature to the foregoing Assignment and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever. FORM OF ELECTION TO PURCHASE (To be executed if holder desires to exercise the Rights Certificate) To The L.S. Starrett Company The undersigned hereby irrevocably elects to exercise _________________ Rights represented by this Rights Certificate to purchase the number of shares of Class A Common Stock (or other securities) issuable upon the exercise of such Rights and requests that certificates for such shares be issued in the name of: Please insert social security or other identifying number ________________________________________ _____________________________________________________________ (Please print name and address) If such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to: Please insert social security or other identifying number ________________________________________ _________________________________________________________________ (Please print name and address) Dated: _______________________, ____ ______________________________ Signature (Signature must conform in all respects to name of holder as specified on the face of this Rights Certificate) Signature Guaranteed:** Certificate The undersigned hereby certifies by checking the appropriate boxes that: (1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not being exercised by or on behalf of a Person who is or was an Acquiring Person or an Affiliate of any such Acquiring Person (as each such term is defined in the Rights Agreement); and (2) after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate after the occurrence of a Common Stock Event (as such term is defined in the Rights Agreement) from any Person who is, was, or subsequently became an Acquiring Person or an Affiliate of an Acquiring Person. Dated: _________________, ____ _________________________ Signature Signature Guaranteed:*** * The portion of the legend in brackets shall be inserted only if applicable. * Signature must be guaranteed by an "Eligible Guarantor Institution" (with membership in an approved signature guarantees medallion program)pursuant to Rule 17Ad-15 of the Securities Exchange Act of 1934. ** Signature must be guaranteed by an "Eligible Guarantor Institution" (with membership in an approved signature guarantees medallion program) pursuant to Rule 17Ad-15 of the Securities Exchange Act of 1934. *** Signature must be guaranteed by an "Eligible Guarantor Institution" (with membership in an approved signature guarantees medallion program) pursuant to Rule 17Ad-15 of the Securities Exchange Act of 1934. EX-10 4 ex10bindem.txt INDEMNIFICATION AGREEMENT EXHIBIT 10b INDEMNIFICATION AGREEMENT This Agreement, made and entered into this day of , , ("Agreement"), by and between The L.S. Starrett Company, a Massachusetts corporation, (the "Corporation"), and ("Indemnitee"): WHEREAS, the By-laws, as amended of the Corporation (the "By-laws") state that the Corporation shall, to the maximum extent permitted from time to time under applicable law and subject to certain other limitations, indemnify each person who serves as director or officer of the Corporation or while serving as a director or officer is or was serving at the request of the Corporation as a director, officer, trustee, employee or agent of another organization or who is or was a director, officer or employee who is or was serving at the request of the Corporation in any capacity with respect to any employee benefit plan (each, an "Indemnified Position"), against certain liabilities and expenses; and WHEREAS, the Corporation has requested that Indemnitee serve in an Indemnified Position; and WHEREAS, Indemnitee has relied upon the indemnification provisions in the By-laws of the Corporation as a source of protection against inordinate risks of claims and actions against him or her arising out of his or her service to, and activities on behalf of, the Corporation and is only willing to continue to serve on behalf of the Corporation on the condition that the Corporation enter into an agreement in substantially the form hereto. NOW, THEREFORE, in consideration of Indemnitee's continued service in an Indemnified Position for or at the request of, the Corporation after the date hereof, the parties hereto hereby agree as follows: 1. Indemnification of Indemnitee. (a) The Corporation hereby agrees, to the maximum extent permitted from time to time under applicable law, including the laws of the Commonwealth of Massachusetts and, in the case of any Indemnitee serving with respect to an employee benefit plan (each, a Plan"), the Employee Retirement Income Security Act ("ERISA"), to indemnify Indemnitee against all liabilities and expenses, including amounts paid in satisfaction of judgments, in settlement or as fines and penalties,and counsel fees, reasonably incurred by Indemnitee in connection with the defense or disposition of any action, suit or other proceeding (a "Proceeding"), whether civil, criminal, administrative or investigative, in which Indemnitee may be involved or with which Indemnitee may be threatened, by reason of the fact that Indemnitee is or was or has agreed to serve in an Indemnified Position. (b) Notwithstanding the foregoing, no indemnification shall be provided with respect to any matter disposed of by settlement, consent decree or other negotiated disposition unless: (i) such indemnification shall have been approved by the holders of the shares of the Corporation's capital stock then entitled to vote for directors, voting such shares as a single class, by a majority of the votes cast on the question exclusive of any shares owned by an interested director or officer; or (ii) such indemnification and such settlement, decree or disposition shall have been approved as being in the best interest of the corporation or organization or plan or participants served, as the case may be, after notice that it involves such indemnification, by a majority of the Disinterested Directors (or, if applicable, the sole Disinterested Director) then in office (whether or not constituting a quorum); or (iii) if no Disinterested Directors exist, a written opinion, reasonably satisfactory to the Corporation, of independent legal counsel selected by the Corporation shall have been furnished to the Corporation that (A) such indemnification and such settlement, decree or disposition are in the best interest of the corporation or organization or plan or participants served, and (B) if adjudicated, such indemnification would not be found to have been prohibited by law. (c) As used in this section, an "interested" director is one against whom in the capacity of an Indemnified Position the Proceeding in question or another Proceeding on the same or similar grounds is then pending or threatened, and a "Disinterested Director" is any director who is not an interested director. The absence of any express provision for indemnification shall not limit any right of indemnification existing independently of this section. 2. Additional Limitations on Indemnity. No indemnity pursuant to Section 1 hereof shall be paid by the Corporation; (a) except to the extent the aggregate of losses to be indemnified thereunder exceeds the sum of such losses for which Indemnitee is indemnified pursuant to any D & O Insurance or Fiduciary Insurance purchased and maintained by the Corporation; (b) in respect to remuneration paid to Indemnitee if it shall be determined by a final judgment or other final adjudication that such remuneration was in violation of law or public policy (and, in this respect, both the Corporation and Indemnitee have been advised that the Securities and Exchange Commission believes that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for such indemnification should be submitted to appropriate courts for adjudication); (c) on account of any Proceeding initiated by Indemnitee unless such Proceeding was authorized in the specific case by action of the Board of Directors of the Corporation (the "Board"); (d) on account of any suit in which judgment is rendered against Indemnitee for an accounting of profits made from the purchase or sale by Indemnitee of securities of the Corporation pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto (the "Exchange Act") or similar provisions of any federal, state or local statutory law; (e) on account of Indemnitee's conduct which is finally adjudged to have been knowingly fraudulent or deliberately dishonest, or to constitute willful misconduct; and (f) on account of Indemnitee's conduct which is the subject of a Proceeding described in Section 5(b)(ii) or (iii) hereof. 3. Continuation of Obligations. All agreements and obligations of the Corporation contained herein shall continue during the period Indemnitee is serving and shall continue thereafter so long as Indemnitee shall be subject to any possible claim or threatened, pending or completed Proceeding, whether civil, criminal or investigative, by reason of the fact that Indemnitee was serving in an Indemnified Position. 4. Notification and Defense of Claim. Not later than 30 days after receipt by Indemnitee of notice of the commencement of any Proceeding, Indemnitee will, if a claim in respect thereof is to be made against the Corporation under this Agreement, notify the Corporation of the commencement thereof but the omission so to notify the Corporation will not relieve the Corporation from any liability which it may have to Indemnitee otherwise than under this Agreement. With respect to any such Proceeding as to which Indemnitee notifies the Corporation of the commencement thereof: (a) The Corporation will be entitled to participate therein at its own expense; (b) Except as otherwise provided below, to the extent that it may wish, the Corporation jointly with any other indemnifying party similarly notified will be entitled to assume the defense thereof, with counsel reasonably satisfactory to Indemnitee. After notice from the Corporation to Indemnitee of its election so as to assume the defense thereof, the Corporation will not be liable to Indemnitee under this Agreement for any legal or other expenses subsequently incurred by Indemnitee in connection with the defense thereof other than reasonable costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ his or her counsel in such Proceeding but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of Indemnitee unless (i) the employment of counsel by Indemnitee has been authorized by the Corporation, (ii) Indemnitee shall have reasonably concluded that there is a material conflict of interest between the Corporation and Indemnitee in the conduct of the defense of such action which would impair the ability of the Corporation to adequately defend the interests of the Corporation, or (iii) the Corporation shall not in fact have employed counsel to assume the defense of such action, in each of which cases the reasonable fees and expenses of Indemnitee's separate counsel shall be at the expense of the Corporation. The Corporation shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Corporation or as to which Indemnitee shall have made the conclusion provided for in (ii) above; and (c) The Corporation shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent. The Corporation shall be permitted to settle any action except that it shall not settle any action or claim in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee's written consent. Neither the Corporation nor Indemnitee will unreasonably withhold its consent to any proposed settlement. 5. Advancement and Repayment of Expenses. (a) Expenses, including counsel fees ("Expenses"), reasonably incurred by Indemnitee in connection with the defense or disposition of any Proceeding shall be paid from time to time by the Corporation in advance of the final disposition thereof upon receipt of an undertaking by Indemnitee to repay the amounts so paid if Indemnitee ultimately shall be adjudicated to be not entitled to indemnification pursuant to this Agreement. Such an undertaking may be accepted without reference to the financial ability of Indemnitee to make repayment. (b) Notwithstanding the foregoing, the Corporation shall not be required to advance such expense to Indemnitee if he or she: (i) commences any Proceeding as a plaintiff unless such advance is specifically approved by a majority of the Board of Directors of the Corporation; (ii) is a party to any Proceeding brought by the Corporation which alleges willful misappropriation of corporate assets by Indemnitee, disclosure of confidential information in violation of his or her fiduciary or contractual obligations to the Corporation or any other willful and deliberate breach in bad faith of his or her duty to the Corporation or its stockholders; (iii) in the case of persons serving at the request of the Corporation with respect to any employee benefit plan, is a party to any Proceeding brought by the Corporation which alleges willful misappropriation of the assets of such employee benefit plan by Indemnitee, disclosure of confidential information in violation of his or her fiduciary or contractual obligations to such employee benefit plan or any other willful and deliberate breach in bad faith of his or her duty to such employee benefit plan or its participants or beneficiaries. (c) The Corporation shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within seven business days of such request) advance such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for (i) indemnification or advance payment of Expenses by the Corporation under this Agreement or any other agreement or By-law of the Corporation now or hereafter in effect; or (ii) recovery under any directors' and officers' liability insurance policies maintained by the Corporation, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment or insurance recovery, as the case may be. (d) Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Indemnified Position, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. 6. Procedure for Determination of Entitlement to Indemnification. (a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Corporation a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Clerk of the Corporation shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification. (b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 6(a) hereof, a determination, if required by applicable law, with respect to Indemnitee's entitlement thereto shall be made in the specific case: (i) if a Change in Control (as defined in Annex A) shall have occurred, by independent legal counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; (ii) if a Change of Control shall not have occurred, (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, or (B) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by independent legal counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee or (C) if so directed by the Board, by the stockholders of the Corporation; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within seven days after such determination. The Corporation and the Indemnitee shall each cooperate with the person, persons or entity making such determination with respect to Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Expenses incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Corporation (irrespective of the determination as to Indemnitee's entitlement to indemnification), and the Corporation hereby indemnifies and agrees to hold Indemnitee harmless therefrom. (c) In the event the determination of entitlement to indemnification is to be made by independent legal counsel pursuant to Section 6(b) hereof, the independent legal counsel shall be selected by the Board, provided, however, if a Change of Control shall have occurred, the independent legal counsel shall be selected by Indemnitee. For purposes of this Agreement, "independent legal counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and would not have a conflict of interest in representing either the Corporation or Indemnitee in an action to determine Indemnitee's rights under this Agreement. The Corporation agrees to pay the reasonable fees of the independent legal counsel referred to above and to fully indemnify such counsel against any and all expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto. (d) The Corporation shall not be required to obtain the consent of the Indemnitee to the settlement of any Proceeding which the Corporation has undertaken to defend if the Corporation assumes full and sole responsibility for such settlement and the settlement grants the Indemnitee a complete and unqualified release in respect of the potential liability. The Corporation shall not be liable for any amount paid by the Indemnitee in settlement of any Proceeding that is not defended by the Corporation, unless the Corporation has consented to such settlement, which consent shall not be unreasonably withheld. 7. Enforcement. (a) The Corporation expressly confirms and agrees that it has entered into this Agreement and assumed the obligation imposed on the Corporation ereby in order to induce Indemnitee to continue to serve in an Indemnified Position, and acknowledges that Indemnitee is relying upon this Agreement in continuing in such capacity. (b) In the event Indemnitee is required to bring any action to enforce rights or to collect moneys due under this Agreement and is successful in such action, the Corporation shall reimburse Indemnitee for all Indemnitee's reasonable fees and expenses in bringing and pursuing such action. 8. Remedies of Indemnitee. In the event that (i) a determination is made pursuant to this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of expenses is not timely made pursuant to this Agreement, or (iii) no determination of entitlement to indemnification shall have been made pursuant to this Agreement within 90 days after receipt by the Corporation of the request for indemnification, Indemnitee shall be entitled to an adjudication by any other court of competent jurisdiction, of his entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. 9. Presumptions and Effect of Certain Proceedings. (a) In making a determination with respect to entitlement to indemnification or the advancement of Expenses hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification or advancement of expenses under this Agreement if Indemnitee has submitted a request for indemnification or the advancement of expenses in accordance with Section 5(a) of this Agreement, and the Corporation shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. (b) If the person, persons or entity empowered or selected under Section 6 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within 60 days after receipt by the Corporation of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statement not materially misleading, in connection with the request for indemnification, or a prohibition of such indemnification under applicable law; provided, however, that the foregoing provisions of this Section 9(b) shall not apply if the determination of entitlement to indemnification is to be made by the stockholders pursuant to this Agreement and if: (i) within 15 days after receipt by the Corporation of the request for such determination, the Board has resolved to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within 75 days after such receipt and such determination is made thereat; or (ii) a special meeting of stockholders is called within 15 days after such receipt for the purpose of making such determination, such meeting is held for such purpose within 60 days after having been so called and such determination is made thereat. (c) For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee's action is based on: (i) the records or books of account of the Corporation or relevant enterprise, including financial statements; or (ii) information supplied to Indemnitee by the officers of the Corporation or relevant enterprise in the course of their duties; or (iii) the advice of legal counsel for the Corporation or relevant enterprise; or (iv) information or records given in reports made to the Corporation or relevant enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or relevant enterprise; or (d) The provisions of this Section shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement. 10. Subrogation. In the event of payment under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Corporation effectively to bring suit to enforce such rights. 11. Non-Exclusivity of Rights. The right of indemnification hereby provided shall not be exclusive. Nothing contained herein shall affect any other rights to indemnification to which Indemnitee may be entitled by contract, by any entity's charter or by-laws or otherwise under law. 12. Survival of Rights. The rights conferred on Indemnitee by this Agreement shall continue after he or she has ceased to serve in an Indemnified Position and shall inure to the benefit of Indemnitee's heirs, executors and administrators. 13. Severability. Each of the provisions of this Agreement is a separate and distinct agreement and independent of the others, so that if any or all of the provisions hereof shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of the other provisions hereof. 14. No Employment Contract. This Agreement shall not be deemed an employment contract between the Corporation (or any of its subsidiaries) and Indemnitee. Indemnitee specifically acknowledges that Indemnitee's employment with the Corporation (or any of its subsidiaries), if any, is at will, and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment contract between Indemnitee and the Corporation (or any of its subsidiaries), other applicable formal severance policies duly adopted by the Board, or, with respect to service as a director or officer of the Corporation, by the Corporation's Articles of Organization, By-laws, and applicable law. 15. Governing Law. This Agreement shall be interpreted and enforced in accordance with the laws of the Commonwealth of Massachusetts. 16. Binding Effect. This Agreement shall be binding upon Indemnitee and upon the Corporation, its successors and assigns, and shall inure to the benefit of Indemnitee, his or her heirs, personal representative and assigns and to the benefit of the Corporation, its successors and assigns. 17. Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless in writing signed by both parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the date first above written. THE L.S. STARRETT COMPANY By: Name: Title: INDEMNITEE: Name: ANNEX A For the purposes of this Agreement, a "Change of Control" means: a. The acquisition by any person, corporation, partnership, limited liability company or other entity (a "Person", which term shall include a group within the meaning of the Exchange Act) of ultimate beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act), directly or indirectly of 30% or more of either (i) the then outstanding shares of common stock of the Corporation (the "Outstanding Corporation Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the "Outstanding Corporation Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any such acquisition directly from the Corporation, except for acquisition of securities upon conversion of other securities of the Corporation (ii) any such acquisition by the Corporation, (iii) any such acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any corporation controlled by the Corporation or (iv) any such acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Annex A; 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 Corporation's shareholders, was approved by a vote of at least a majority 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 of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Corporation in one or a series of transactions (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 Corporation Common Stock and Outstanding Corporation Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, immediately following such Business Combination more than 50% of, respectively, the outstanding shares of common stock 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 Corporation or all or substantially all of the Corporation'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 Corporation Common Stock and outstanding Corporation Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Corporation or such corporation resulting from such Business Combination) ultimately beneficially owns, directly or indirectly, 30% or more of, respectively, the then outstanding shares of common stock 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 Corporation of a complete liquidation or dissolution of the Corporation. EX-10 5 ex10cserp.txt SERP THE L. S. STARRETT COMPANY EXHIBIT 10c SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Section 1. The L. S. Starrett Company (the "Company") has adopted the Plan set forth herein. The Plan is intended to be "a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly-compensated employees" within the meaning of Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA. The Plan shall be interpreted and administered to the extent possible in a manner consistent with the foregoing. The effective date of the Plan shall be the date the Plan is executed, but the Plan permits retroactive participation and credits certain service and compensation prior to that date. Section 2. Wherever used herein, the following terms have the meanings set forth below, unless a different meaning is clearly required in the context. "Administrator" means the Company, but the Company has delegated to the Retirement Committee the responsibility to perform such administrative functions under the Plan as are hereinafter specified. "Disability" has the same meaning given such term under the Retirement Plan. "Eligible Employee" means the Chief Executive Officer, President, Vice Presidents and Treasurer of the Company and each other key management employee of the Company and its subsidiaries. However, eligibility to participate in the Plan shall at all times be limited so that the Plan qualifies as a plan satisfying the standard set forth in the second sentence of Section 1. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. References to any section or subsection of ERISA include references to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such section or subsection. "Participant" means an Eligible Employee who has been selected by the Board of Directors of the Company to participate in the Plan. No one shall be deemed to have become a Participant prior to July 1, 1996. "Plan" means The L. S. Starrett Company Supplemental Executive Retirement Plan as set forth herein, and all subsequent amendments hereto. "Plan Year" means each 12-month period ending on June 30. "Retirement Plan" means The Retirement Plan for Employees of The L.S. Starrett Company as in effect from time to time. Section 3. An Eligible Employee who has become a Participant in the Plan shall continue to be a Participant so long as any amount remains payable to him or her under the Plan. The Board of Directors of the Company may terminate an employee's participation in the Plan prospectively for any reason, including, but not limited to, the Administrator's determination that such termination is necessary in order to maintain the Plan as a "plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly-compensated employees" within the meanings of sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA. The Administrator may similarly terminate an employee's participation in the Plan retroactively for any reason, subject to Section 9. Section 4. This Plan shall provide each Participant with a pension benefit, payable out of the general assets of the Company, equal to the excess of (i) the benefit to which the officer would be entitled under the Retirement Plan if the terms of the Retirement Plan were applied without regard to the annual limit on compensation established under Internal Revenue Code section 401(a)(17) (or any comparable or succeeding provisions of any legislation which amends, supplements or replaces such section) and any corresponding limits within the Retirement Plan, over (ii) the officer's actual benefit under the Retirement Plan. The pension benefit under this Plan shall be paid in the same form and at the same time or times as the Participant's benefit under the Retirement Plan. If a Participant in the Plan ceases to be employed by the Company and its subsidiaries by reason of a termination for "cause" at any time, or for any other reason (other than death or Disability) prior to having worked for at least five years for the Company and its subsidiaries, the Participant shall be entitled to no benefit under this Plan. "Cause" shall mean (i) the Participant's failure to perform, or material negligence in the performance of, his or her duties or responsibilities to the Company or any of its subsidiaries; (ii) fraud, embezzlement, or other material dishonesty with respect to the Company or any of its subsidiaries; or (iii) conduct materially harmful to the business, interests or reputation of the Company or any of its subsidiaries. Participants ineligible for a benefit from the Retirement Plan by reason of insufficient service shall be ineligible for a benefit hereunder. In the event of the Participant's death, his or her beneficiaries (as designated under the Retirement Plan) or, if none, the Participant's estate, shall be entitled to receive any payments under this Plan at the same time and in the same manner as payments under the Retirement Plan. Section 5. The Administrator shall oversee the administration of the Plan. However, the Board of Directors of the Company shall have final and binding discretionary authority to select Eligible Employees to become Participants in the Plan. The Administrator shall have exclusive and complete discretionary control and authority to interpret the Plan and to administer all aspects of the Plan, including, without limitation, the power: to appoint agents and counsel; to determine the rights and benefits and all claims, demands and actions arising out of the provisions of the Plan of any person having or claiming to have any interest under the Plan in a manner consistent with Section 6; and to decide all other matters under the Plan. Such interpretation and decision shall be final, conclusive and binding on all Plan Participants and any person claiming under or through any Participant, in the absence of clear and convincing evidence that the Administrator acted arbitrarily and capriciously. Any individual serving as Administrator, or on a committee acting as Administrator, who is a Participant in the Plan will not vote or act in any manner relating solely to himself or herself. When making a determination or calculation, the Administrator shall be entitled to rely on information furnished by a Participant, a beneficiary, or the Company. The Administrator shall be deemed to be the Plan administrator, except that the responsibility for complying with any reporting and disclosure requirements of ERISA is hereby delegated to the Company's Treasurer. Section 6. If any person believes he or she is being denied any rights or benefits under the Plan, such person may file a claim in writing with the Administrator. If any such claim is wholly or partially denied, the Administrator will notify such person of its decision in writing. Such notification will contain specific reasons for the denial, specific reference to pertinent Plan provisions, a description of any additional material or information necessary for such person to perfect such claim and an explanation of why such material or information is necessary, and information as to the steps to be taken if the person wishes to submit a request for review. Such notification will be given within 90 days after the claim is received by the Administrator (or within 180 days, if special circumstances require an extension of time for processing the claim, and if written notice of such extension and circumstances is given to such person within the initial 90-day period). If such notification is not given within such period, the claim will be considered denied as of the last day of such period; and such person may request a review of his or her claim. Within 60 days after the date on which a person receives a written notice of a denied claim (or, if applicable, within 60 days after the date on which such denial is considered to have occurred), such person (or his or her duly authorized representative) may file a written request with the Administrator for a review of his or her denied claim and of pertinent documents and may submit written issues and comments to the Administrator. The Administrator will notify such person of its decision in writing. Such notification will be written in a manner calculated to be understood by such person and will contain specific reasons for the decision, as well as specific references to pertinent Plan provisions. The decision on review will be made within 60 days after the request for review is received by the Administrator (or within 120 days, if special circumstances require an extension of time for processing the request, such as an election by the Administrator to hold a hearing, and if written notice of such extension and circumstances is given to such person within the initial 60-day period). If the decision on review is not made within such period, the claim will be considered denied. Section 7. The Company agrees to indemnify and to defend to the fullest extent permitted by law any director, officer or employee of the Company or any affiliated entity who serves as the Administrator or as a member of a committee appointed to serve as Administrator, or who assists the Administrator in carrying out its duties as part of his or her employment (including any such individual who formerly served in any such capacity) against all liability, damages, costs and expenses (including attorneys' fees and amounts paid in settlement of any claims approved by the Company) occasioned by any act or omission to act in connection with the Plan, if such act or omission is in good faith. Section 8. This Plan is strictly a voluntary undertaking on the part of the Company and shall not be deemed to constitute a contract between the Company and any employee or a consideration for, or an inducement or a condition of employment for, the performances of services by any employee. Participation in this Plan shall not give any person the right to be retained in the employ of the Company or any of its affiliates nor any right or interest in the Plan other than is herein provided. The Company reserves the right to dismiss any Participant without any liability for any claim against the Company, except to the extent provided herein. Section 9. The Company reserves absolutely the right to amend or terminate this Plan at any time by an instrument in writing which has been executed on its behalf by an officer thereof provided, however, that no such amendment or termination shall adversely affect the rights of any Participant with respect to the actuarial equivalent of the amount of any benefits payable to him or her as of the date of such amendment or termination. Subject to the foregoing, the Plan may be amended as to active as well as retired or terminated Participants. Section 10. All payment of benefits under the Plan shall be made from the general assets of the Company. The Company shall not be required to set aside or segregate any assets of any kind to meet its obligations hereunder. Each Participant and beneficiary will be an unsecured general creditor of the Company with respect to all benefits payable under the Plan. Nothing in this Plan will be construed to give any individual rights to any specific assets of the Company or other person or entity. Section 11. The rights and obligations of the Company shall inure to the benefit of and shall be binding upon its successors and assigns. Section 12. None of the benefits, payments, proceeds or claims of any Participant or beneficiary shall be subject to any claim of any creditor of the Participant or beneficiary and, in particular, the same shall not be subject to attachment or garnishment or other legal process by any creditor, nor shall any Participant or beneficiary have any right to alienate, anticipate, commute, pledge, encumber or assign the payment or proceeds which he or she may expect to receive, continently or otherwise, under this Plan. To the extent required by law, the foregoing shall not apply to the payment of benefits under the Plan pursuant to the terms of a qualified domestic relations order within the meaning of Code section 414(p), all as determined by the Administrator in its discretion. Section 13. All distributions from the Plan shall be subject to, and reduced by, applicable tax withholding. To the extent benefits payable under the Plan are determined by the Company to be subject to FICA, Medicare or FUTA tax prior to distribution, the Company in its discretion may withhold the required taxes from other amounts payable to the Eligible Employee or may require the Eligible Employee to pay the required taxes by separate check. To the extent a Participant fails to pay or provide for such taxes as required, the Administrator may suspend the Participant's participation in the Plan or reduce the benefits payable hereunder. Section 14. If any provision of this Plan shall be held invalid or unenforceable, the invalidity or unenforceability shall not affect any other provision hereof, and this Plan shall be construed and enforced as if such provision had not been excluded. Section 15. It is intended that this Plan will comply with all applicable laws and government regulations, and the Company shall not be obligated to perform an obligation hereunder in any case where, in the opinion of the Company's counsel, such performance would result in the violation of any law or regulation. Section 16. This Plan shall be construed, administered and governed in all respects under and by the laws of The Commonwealth of Massachusetts to the extent not preempted by ERISA. This Plan shall for all purposes be deemed to have become subject to Part 1 of Subtitle B of Title I of ERISA on the date of execution set forth below. IN WITNESS WHEREOF, The L. S. Starrett Company has caused this Plan to be executed by its duly authorized officer this 15th day of June, 1998. THE L. S. STARRETT COMPANY By: S/D.R.Starrett EX-10 6 ex10d401k.txt 401K EXHIBIT 10d The L.S. Starrett Company 401(k) Stock Savings Plan (2001 Restatement) TABLE OF CONTENTS ARTICLE 1.INTRODUCTION. 1 1.1. In General 1 1.2. Defined Terms 1 ARTICLE 2.ELIGIBILITY AND PARTICIPATION. 1 2.1. Who Is Eligible To Participate? Only Eligible Employees may be Active Participants 1 2.2. Enrollment 1 ARTICLE 3.CONTRIBUTIONS. 1 3.1. Elective Contribution 1 3.2. Matching Contributions 2 3.3. QNEC Contributions 2 3.4. Rollover Contributions 2 3.5. Making, Allocating and Posting Contributions. 2 3.6. Certain Limits Apply 3 3.7. Return of Contributions 3 ARTICLE 4.PARTICIPANT ACCOUNTS. 4 4.1. Accounts 4 4.2. Adjustment of Accounts 4 4.3. Investment of Accounts. 4 ARTICLE 5.VESTING OF ACCOUNTS 5 5.1. Vesting of Accounts 5 5.2. Distribution of Less Than Entire Vested Percentage; Other Forfeiture Events. 6 5.3. Changes in Vesting Schedule 6 ARTICLE 6.WITHDRAWALS PRIOR TO SEVERANCE FROM EMPLOYMENT. 7 6.1. Hardship Withdrawals. 7 6.2. Required Distributions After Age 70.5 8 6.3. Withdrawals After Age 59.5 8 6.4. Restrictions on Certain Withdrawals 8 6.5. Distributions Required by a QDRO 9 ARTICLE 7.LOANS TO PARTICIPANTS. 9 7.1. In General 9 7.2. Rules and Procedures 9 7.3. Maximum Amount of Loan 9 7.4. Minimum Amount of Loan; Fees 9 7.5. Note; Security Interest 9 7.6. Repayment 10 7.7. Repayment Upon Distribution 10 7.8. Default 10 7.9. Note as Trust Asset 10 7.10.Nondiscrimination 10 7.11.Affected Investments 11 ARTICLE 8.BENEFITS UPON DEATH OR SEVERANCE FROM EMPLOYMENT 11 8.1. Severance From Employment for Reasons Other Than Death 11 8.2. Time of Distributions 11 8.3. Distributions After a Participant's Death 11 8.4. Designation of Beneficiary 12 8.5. Direct Rollovers of Eligible Distributions 12 ARTICLE 9.ADMINISTRATION. 13 9.1. In General 13 9.2. Savings Plan Committee 14 9.3. Powers of the Administrator 14 9.4. Effect of interpretation or determination 14 9.5. Examination of records 15 9.6. Reliance on tables, etc 15 9.7. Expenses of Plan 15 9.8. Withholding of tax 15 9.9. Indemnification of Administrator 15 9.10. Claims and review procedures 15 ARTICLE 10. AMENDMENT AND TERMINATION. 15 10.1. Amendment 15 10.2. Termination 16 10.3. Distributions upon Termination of the Plan 16 10.4. Merger or Consolidation of Plan; Transfer of Plan Assets 16 ARTICLE 11. LIMITS ON CONTRIBUTIONS. 16 11.1. Code 404 Limits 16 11.2. Code 415 Limits 16 11.3. Code 402(g) Limits 17 11.4. Code 401(k)(3) Limits 17 11.5. Code 401(m) Limits 18 ARTICLE 12. SPECIAL TOP-HEAVY PROVISIONS. 19 12.1. Provisions to apply 19 12.2. Minimum Contribution 19 12.3. Special Vesting Schedule 20 12.4. Definitions 20 ARTICLE 13. MISCELLANEOUS. 22 13.1. Exclusive Benefit Rule 22 13.2. Uniformed Services Employment and Reemployment Rights Act of 1994 23 13.3. Limitation of Rights 23 13.4. Nonalienability of Benefits 23 13.5. Voting of Common Stock 23 13.6. Governing law 24 13.7. Additional Contributions In the Case of Participants Age 50 or Older 24 ARTICLE 14. DEFINITIONS. 24 14.1. "Account" 24 14.2. "Active Participant" 24 14.3. "Additional Elective Contribution" 24 14.4. "Administrator" 24 14.5. "Affiliated Employer" 24 14.6. "Basic Elective Contribution" 25 14.7. "Basic Matching Contribution" 25 14.8. "Beneficiary" 25 14.9. "Board" 25 14.10."Code" 25 14.11."Committee" or "Savings Plan Committee" 25 14.12."Common Stock" 25 14.13."Common Stock Fund" 25 14.14."Company" 25 14.15."Elective Contribution" 25 14.16."Eligible Borrower" 25 14.17."Eligible Employee" 25 14.18."Employee" 26 14.19."Employer" 26 14.20."Entry Date" 26 14.21."ERISA" 26 14.22."Fund" 26 14.23."HCE" 26 14.24."Match-Eligible Elective Contribution" 26 14.25."Match-Eligible Elective Contribution Account" 26 14.26 "Matching Contribution" 27 14.27."Matching Contribution Account" 27 14.28 "NHCE" 27 14.29 "Pay Reduction Agreement" 27 14.35."Period of Severance" 28 14.36."Plan" 28 14.37."Plan Year" 28 14.38."Prior Plan" 28 14.39."QDRO" 28 14.40."QNEC Contribution" 28 14.41."QNEC Contribution Account" 28 14.42."Rollover Contribution" 28 14.43."Rollover Contribution Account" 28 14.44."Service" 28 14.45."Substantial Period of Severance" 29 14.46."Supplemental Matching Contribution" 29 14.47."Transfer Account" 29 14.48 "Trust" 29 14.49."Trustee" 29 14.50."Valuation Date" 29 ARTICLE 1. INTRODUCTION. 1.1. In General. The Plan as set forth herein contains the amendment and restatement of the Plan accomplished in 1998 (which was effective generally as of January 1, 1999, but with certain provisions effective as of an earlier date, further modified to reflect subsequent changes in the law and regulations as well as design-based changes. The Plan as set forth herein is intended to qualify as a "profit-sharing" plan under Code 401(a), subject to Code 401(a)(27)(A) and Section 4.3(c) below, and the cash or deferred arrangement forming part of the Plan is intended to qualify under Code 401(k). The provisions of the Plan are to be construed and applied accordingly. Without limiting the foregoing, references in the Plan to "severance from employment" shall be construed to mean "separation from service" for all periods prior to January 1, 2002. 1.2. Defined Terms. Defined terms are indicated by initial capitalization and have the meanings set forth in Article 14. ARTICLE 2. ELIGIBILITY AND PARTICIPATION. 2.1. Who Is Eligible To Participate? Only Eligible Employees may be Active Participants. An individual, once an Active Participant, remains a Participant until his or her Accounts have been completely distributed or forfeited. 2.2. Enrollment. An Eligible Employee who is eighteen years or older may become an Active Participant as of any Entry Date coinciding with or following the completion of six months of Service by completing the enrollment forms prescribed by the Administrator. The Administrator may require that the prescribed forms be filed a reasonable period of time before activation of any Pay reduction specified by the Eligible Employee. In the case of an Eligible Employee who was participating in the Prior Plan on December 31, 1998, the Administrator may modify the forms, if any, required for continued participation in the Plan by taking into account and treating as effective for purposes of the Plan any forms and elections, or portions thereof, filed under the Prior Plan. ARTICLE 3. CONTRIBUTIONS. 3.1. Elective Contribution. Each Participating Employer will contribute to the Trust as an Elective Contribution, for each pay period for which an Active Participant employed by the Participating Employer has a Pay Reduction Agreement in effect, the amount of Pay reduction specified in that Agreement. In general, an Active Participant may specify any Pay reduction percentage from zero to 15% (whole percentages only). However, the Administrator may fix a maximum reduction percentage that is higher or lower than 15%. By specifying a level of Pay reduction in a Pay Reduction Agreement, an Active Participant agrees to a reduction in future Pay in the amount specified. Any Pay Reduction Agreement that specifies a level of Pay reduction in excess of 1% of Pay per pay period must also specify whether the related Additional Elective Contributions will be Match-Eligible Elective Contributions or Other Elective Contributions. If contributions under this Section are made in shares of Common Stock rather than in cash, the number of shares contributed shall be determined by assuming that the contributions were made in cash and applied toward the purchase of Common Stock in accordance with Section 4.3(a). 3.2. Matching Contributions. For each calendar month each Participating Employer will also contribute Matching Contributions to the Trust for the benefit of each Active Participant who is employed by such Participating Employer during that month, as follows: (a) The Participating Employer will contribute 33 1/3 cents in Matching Contributions (or such other amount as the Company may determine) with respect to each dollar of Basic Elective Contributions made for the benefit of the eligible Active Participant for the month. (b) For each dollar of Additional Elective Contributions made for the benefit of the eligible Active Participant for the month that is a Match-Eligible Elective Contribution, the Participating Employer will contribute such level or amount of Supplemental Matching Contributions, if any, as the Company determines. For purposes of this section, an Elective Contribution will be deemed to have been made for a calendar month only if it relates to a pay period that ends with or within such month. If Matching Contributions under this Section are made in shares of Common Stock rather than in cash, the number of shares contributed shall be determined by assuming that the contributions were made in cash and applied toward the purchase of Common Stock in accordance with Section 4.3(a). 3.3. QNEC Contributions. To the extent, if any, specified by the Administrator for any Plan Year, each Participating Employer will also contribute to the Trust a QNEC Contribution. 3.4. Rollover Contributions. Any Eligible Employee may make a Rollover Contribution to the Plan upon demonstration to the Administrator that the contribution (i) is eligible for transfer to the Plan pursuant to the rollover provisions of the Code, (ii) contains no after-tax amounts, and (iii) is attributable in its entirety to amounts distributed from a plan qualified under 401(a) of the Code or from an individual retirement account described in 408(a) of the Code the entire balance of which was attributable to a distribution from a plan qualified under 401(a) of the Code. 3.5. Making, Allocating and Posting Contributions. (a) Payment to the Trust. Elective Contributions will be paid in cash to the Trust as soon as they can reasonably be segregated from the general assets of the Participating Employer, but in no event later than the 15th business day of the month following the month in which the Pay to which they relate is paid. Matching Contributions or QNEC Contributions will be paid to the Trust at such time(s) as the Administrator determines but not later than the earlier of (i) the time prescribed by law (including extensions) for filing the Participating Employer's federal income tax return for its taxable year in which or with which ends the Plan Year to which the contribution relates and (ii) the last day of the Plan Year following the Plan Year to which the contribution relates. All contributions to the Trust are expressly conditioned upon their deductibility under the Code. (b) Allocation. Contributions will be allocated to the Accounts of the Participants to whom they relate as of such date or dates as the Administrator determines but in no event later than the last day of the Plan Year to which the contribution relates. However, contributions (whether or not treated as having been allocated) will be invested and share in any investment earnings or losses only when they have been received by the Trustee and posted to the Account of the Participant as described below. (c) Posting. Contributions will be posted to the Accounts of those Participants entitled to share in the contributions, for purposes of sharing in investment earnings and losses thereon, as soon as practicable after receipt by the Trustee. 3.6. Certain Limits Apply. All contributions to the Plan are subject to the applicable limits set forth in Code 401(k), 402(g), 401(m), 404, and 415, as further described elsewhere in the Plan. 3.7. Return of Contributions. If any contribution by a Participating Employer to the Trust is made by reason of a good faith mistake of fact or is determined to be nondeductible under the Code, the Trustee, upon request by the Administrator, will return to the Participating Employer the excess of the amount contributed over the amount, if any, that would have been contributed had there not occurred a mistake of fact or a mistake in determining the deductible amount. Such excess will be reduced by the losses of the Trust attributable thereto, if and to the extent such losses exceed the gains and income attributable thereto. In no event will the return of a contribution cause any Participant's Accounts to be reduced to less than they would have been had the mistaken or nondeductible amount not been contributed. No return of a contribution will be made more than one year after the mistaken payment or the determination as to nondeductibility, as the case may be. ARTICLE 4. PARTICIPANT ACCOUNTS. 4.1. Accounts. The Administrator will establish and maintain (or cause the Trustee to establish and maintain) for each Participant such Accounts as are necessary to carry out the purposes of this Plan. 4.2. Adjustment of Accounts. As of each Valuation Date, each Account will be adjusted to reflect the fair market value of the assets allocated to the Account. In so doing, each Account balance will be increased by all contributions, income and gain allocable to the Account that have not previously been reflected in the Account and decreased by all distributions, expenses and losses allocable to the Account that have not previously been reflected in the Account. Income, expense, gain or loss generated by a particular investment within the Trust will be allocated to an Account participating in such investment in the ratio which the portion of the Account invested therein bears to the entire amount of Trust assets invested therein. Any loan fees or other expenses relating to a specific Account and any commissions or sales charges with respect to an investment in which an Account participates may be charged solely to that Account. 4.3. Investment of Accounts. (a) Each Match-Eligible Elective Contribution Account and each Matching Contribution Account, including any portions thereof attributable to contributions under the Prior Plan and earnings thereon, will be invested at all times in the Common Stock Fund or, to the extent provided at Article 7 below, in promissory notes of Participants. Match-Eligible Elective Contributions and Matching Contributions made in cash to the Trust shall be applied by the Trustee to purchase Common Stock on or about the beginning of each calendar month. Such Common Stock may be purchased from the Company, provided that with respect to any such purchase no commission shall be charged and the price per share shall not exceed adequate consideration therefor, as determined pursuant to Section 408(e) of ERISA and the regulations promulgated thereunder. Notwithstanding the foregoing: (i) After a Participant attains age 59.5, he or she will have the opportunity, once each year and in accordance with procedures established by the Committee, to direct that all or any portion of his or her Match-Eligible Elective Contribution Account and Matching Contribution Account be invested as described in paragraph (b), provided that any amounts directed out of the Common Stock Fund shall not be reinvested therein. (ii) Prior to attainment of age 59.5, but on or after the later of January 1, 2002 or attainment of age 50, a Participant will have the opportunity, once each year and in accordance with procedures established by the Committee, to direct that up to fifteen percent (15%) of his or her Match-Eligible Elective Contribution Account and Matching Contribution Account be invested as described in paragraph (b), provided that any amounts directed out of the Common Stock Fund shall not be reinvested therein. (b) Each other Account maintained for the benefit of a Participant or Beneficiary will be invested by the Trustee at the direction of the Participant or Beneficiary in one or more of the Funds (other than the Common Stock Fund) that may from time to time be specified by the Administrator (or, to the extent provided at Article 7 below, in promissory notes of Participants). It is intended that the portion of the Plan described in this Section 4.3(b) be qualified under Section 404(c) of ERISA. The Savings Plan Committee will select the menu of Funds to be made available under the Plan for the investment of a Participant's Other Elective Contribution Account, QNEC Contribution Account, Rollover Contribution Account and Transfer Account, may add Funds to or eliminate Funds from that menu at any time, and may prescribe any forms, procedures and rules relating to the direction by Participants and Beneficiaries of investments in the Funds. The Committee is the fiduciary identified to furnish the information to Participants and Beneficiaries described in the ERISA 404(c) regulations but may designate on its behalf another person or entity to provide such information or perform any of the obligations of the Administrator under this Section 4.3. Accounts described in this Section 4.3(b) may not be invested in the Common Stock Fund. (c) It is intended that the Plan qualify for the exemption described at Section 407(b)(2)(B)(iv) of ERISA. The Plan is to be construed in a manner consistent with this intent. If at any time, by reason of judicial interpretation, governmental ruling or otherwise, the Plan is determined by the Administrator, in writing, not to comply with such exemption, that portion of the Plan consisting of Match- Eligible Elective Contribution Accounts shall instead be deemed retroactively to have constituted, from and after the earliest date the Plan failed to comply with such exemption, an "employee stock ownership plan" within the meaning of Code 4975(e)(7), and the provisions of the Plan relating thereto shall be deemed modified accordingly. Without limiting the foregoing, to the extent (and only to the extent) the Plan is deemed an "employee stock ownership plan", the provisions of Appendix B shall apply. ARTICLE 5. VESTING OF ACCOUNTS 5.1. Vesting of Accounts. A Participant will at all times be 100% vested in his or her Match-Eligible Elective Contribution Account, Other Elective Contribution Account (if any), QNEC Contribution Account (if any) and Rollover Contribution Account (if any). A Participant will be 100% vested in the remainder of his or her Accounts upon the earliest to occur of the following (taking into account any special rules applicable to Transfer Accounts, if any): (i) the Participant completes a five-year period of Service; (ii) the Participant attains age 65 while an Employee; or (iii) the Participant is affected by a termination or partial termination of the Plan. Except as provided in the preceding two sentences, a Participant will have no vested interest in any Accounts maintained under the Plan. Effective for any Participant with Service on or after January 1, 2002, clause (i) of the preceding sentence shall be applied by substituting "three-year period of Service" for "five-year period of Service." 5.2. Distribution of Less Than Entire Vested Percentage; Other Forfeiture Events. (a) If a Participant ceases to be an Employee and receives a Plan distribution of the entire vested portion of his or her Accounts, any remaining (unvested) portion of the Participant's Accounts will be immediately forfeited. If an individual described in the preceding sentence returns to the employ of the Employer before incurring a Substantial Period of Severance, the previously forfeited balance of his or her Accounts, if any, will be restored. Any portion of such restored amounts attributable to Accounts described at Section 4.3(a) will be reinvested in the Common Stock Fund, and any remaining portion of such restored amounts will be reinvested in accordance with Section 4.3(b) above. A Participant will have no vested interest in any previously forfeited amounts that are restored as described in this Section 5.2 prior to the earliest of the events described in the second sentence of Section 5.1. The restoration of Accounts required under this subsection (a) will be funded as the Administrator determines either from amounts forfeited from other Accounts during the same Plan Year or from additional Participating Employer contributions, which the Administrator is hereby authorized to require from each Participating Employer. (b) If a Participant ceases to be an Employee prior to full vesting in accordance with Section 5.1 and does not receive a Plan distribution of the entire vested portion of his or her Accounts, the undistributed portion of the Participant's Accounts will remain allocated until the Participant incurs a Substantial Period of Severance, at which time such portion, to the extent unvested, will be irrevocably forfeited. (c) Amounts forfeited under this Section 5.2 and not applied to restore the Accounts of reemployed Participants as described at subsection (a) above will be applied to reduce the contributions that would otherwise have been made by the Participating Employers for the Plan Year or to pay expenses of the Plan or Trust pursuant to Section 9.7, as the Administrator determines. 5.3. Changes in Vesting Schedule. If the Plan is amended in any way that directly or indirectly affects the computation of a Participant's vested interest in his or her Accounts, each Participant who has completed 3 years of Service may elect, within the period described below, to have his or her vested interest determined without regard to the amendment or change. The period referred to in the preceding sentence begins on the date the amendment of the vesting schedule is adopted and ends 60 days thereafter, or, if later, 60 days after the later of the date on which the amendment becomes effective and the date on which the Administrator issues the Participant written notice of the amendment. ARTICLE 6. WITHDRAWALS PRIOR TO SEVERANCE FROM EMPLOYMENT. 6.1. Hardship Withdrawals. (a) A Participant may apply to the Administrator for a hardship withdrawal to pay for any of the following: expenses for medical care described in Code 213(d) previously incurred by the Participant, his or her spouse or any of his or her dependents (as defined in Code 152) or necessary for these persons to obtain such medical care; costs directly related to the purchase of a principal residence of the Participant (excluding mortgage payments); the payment of tuition, related educational fees and room and board expenses for the next 12 months of post-secondary education for the Participant, his or her spouse, children or dependents (as defined in Code 152); or payments necessary to prevent the eviction of the Participant from his or her principal residence or foreclosure on the mortgage on that principal residence. The Administrator will authorize a hardship withdrawal only upon presentation by the Participant of written evidence satisfactory to the Administrator demonstrating the existence of one of the financial need categories described above and the amount of the financial need, and including such other information as the Administrator may require. No hardship withdrawal is permitted unless the Administrator also determines that the Participant has first obtained all loans and non-hardship withdrawals then available to the Participant under the Plan and all other plans maintained by the Employer. (b) As soon as practicable after the Administrator makes the necessary determinations under subsection (a) above, the Administrator will direct the Trustee to pay to the Participant the lesser of (i) the amount of the demonstrated need (including any federal, state or local income taxes and penalties that might reasonably be expected to be due with respect to the withdrawal), and (ii) the maximum amount available for withdrawal. The maximum amount available for a hardship withdrawal is the sum of the following determined without regard to any portion of an Account consisting of the Participant's promissory note: (A) the balance of the Participant's Rollover Contribution Account, if any, plus (B) the vested portion, if any, of the balance of the Participant's Matching Contribution Account, plus (C) that portion of the balance of the Participant's Other Elective Contribution Account, if any, which consists of Other Elective Contributions but not including any earnings with respect to such contributions, plus (D) that portion of the balance of the Participant's Match-Eligible Elective Contribution Account which consists of Match-Eligible Elective Contributions or elective contributions under the Prior Plan but not including any earnings with respect to such contributions. Hardship withdrawals will be drawn from, and applied as a reduction to, the Accounts described in the immediately preceding sentence in the order indicated, such that no reduction will be made in the withdrawing Participant's Matching Contribution Account until the full amount of his or her Rollover Contribution Account, if any, has been withdrawn, no reduction will be made in the withdrawing Participant's Other Elective Contribution Account until the full amount of his or her Rollover Contribution Account and the vested portion of his or her Matching Contribution Account have been withdrawn, and so forth. (c) If a Participant receives a hardship withdrawal that includes an amount described at clause (C) or clause (D) of subsection (b) above, then any Pay reduction and other deferrals of compensation or similar contributions with respect to the Participant under the Plan or any other qualified or nonqualified plan of deferred compensation maintained by the Employer, including stock option or stock purchase programs, will be suspended for the 12-month period immediately following the date of the hardship distribution. For the Plan Year following the withdrawal, the amount of Elective Contributions made for the benefit of the Participant, together with any elective deferrals made on his or her behalf under any other plan maintained by the Employer, will be limited to the excess of the then applicable limit under Code 402(g) over the amount of such contributions made on behalf of the Participant for the Plan Year of the withdrawal. 6.2. Required Distributions After Age 70.5. In the case of a Participant who is a "five percent owner" of the Employer (as defined at Code 416) and who remains an Employee after attaining age 70.5, the Administrator will instruct the Trustee to make distributions to the Participant of his or her Accounts not later than April 1 of the calendar year following the calendar year in which the Participant attains age 70.5. In the case of a Participant not described in the preceding sentence who remains an Employee after attaining age 70.5, distribution shall be made not later than April 1 of the calendar year following the calendar year in which the Participant retires. 6.3. Withdrawals After Age 59.5. A Participant who has attained age 59.5 may make a withdrawal from his or her Accounts once per Plan Year upon such notice as the Administrator may prescribe. Any such withdrawal shall be in the amount specified by the Participant, up to the Participant's vested interest in his or her Accounts determined as soon as practicable following the Administrator's receipt of notice of the withdrawal. Payment to the Participant shall be made on or as soon as practicable after the Valuation Date constituting such determination date and shall be in shares of Common Stock with respect to distributions from the Common Stock Fund (with cash in lieu of fractional shares) and in cash with respect to distributions from the other Funds. 6.4. Restrictions on Certain Withdrawals. In the case of a Participant whose vested Accounts have a value in excess of $5,000 (or such higher amount as may be permitted under Code 411(a)(11)) and who has not yet attained age 65, no withdrawal may be made by the Participant unless, between the 30th and 90th day prior to the date distribution is to be made, the Administrator notifies the Participant that he or she may defer distribution until age 65 (such notification to include such additional information as may be required by regulations) and the Participant thereafter consents to the distribution in writing. Notwithstanding the foregoing, distribution may commence fewer than 30 days after provision of the required notice if the Participant elects an earlier commencement after having been clearly informed of the right to have a full 30 days to review the notice. For purposes of this Section, a Participant's vested Accounts will be considered to have a value in excess of $5,000 (or such higher amount as may be permitted under Code 411(a)(11)) if the value of the Participant's vested Accounts exceeds or exceeded the applicable limitation under Code 411(a)(11) at the time of the distribution in question or at the time of any prior Plan distribution to (or withdrawal by) the Participant. 6.5. Distributions Required by a QDRO. To the extent required by a QDRO, the Administrator will direct the Trustee to make distributions from a Participant's vested Accounts to the alternate payee(s) named in the QDRO, regardless of whether the Participant is otherwise entitled to a distribution at such time under the Plan. ARTICLE 7. LOANS TO PARTICIPANTS. 7.1. In General. Upon the written request of an Eligible Borrower on a form acceptable to the Administrator and subject to the conditions of this Article, the Administrator will direct the Trustee to make a loan from the Trust to the Eligible Borrower. 7.2. Rules and Procedures. The Administrator will promulgate such rules and procedures, not inconsistent with the express provisions of this Article, as it deems necessary to carry out the purposes of this Article. All such rules and procedures will be deemed a part of the Plan for purposes of the Department of Labor regulation 2550.408b-1(d). Loans will not be made available to Eligible Borrowers who are HCEs in an amount (determined under Department of Labor regulation 2550.408b-1(c)) greater than the amount made available to other Eligible Borrowers. 7.3. Maximum Amount of Loan. No loan will be made to an Eligible Borrower to the extent it would result in taxable income to the Eligible Borrower by reason of exceeding the dollar limits described at Code 72(p)(2)(A)(i) or (ii). No loan may exceed in amount 50% of the Eligible Borrower's vested interest in his or her Accounts, determined as of the Valuation Date immediately preceding the date of the loan. 7.4. Minimum Amount of Loan; Fees. The Administrator may establish a minimum loan amount, not to exceed $1,000, and an administrative fee for initiating a loan. 7.5. Note; Security Interest. Each loan will be evidenced by a note signed by the Eligible Borrower and will be secured by 50% of the Eligible Borrower's vested interest in his or her Accounts, including in such security the note evidencing the loan. The loan will bear interest at a reasonable annual percentage interest rate determined by the Administrator. 7.6. Repayment. Each loan made to an Eligible Borrower who is receiving regular payments of compensation from a Participating Employer will be repayable by payroll deduction. Loans made to other Eligible Borrowers (and, in all events, where payroll deduction is no longer practicable) will be repayable in such manner as the Administrator determines. The documents evidencing a loan will provide for substantially level amortization with payments not less frequently than quarterly over a specified term determined by the Administrator, but not to exceed five years. However, loan repayments will be subject to suspension to the extent permitted under Code 414(u)(4). 7.7. Repayment Upon Distribution. If, at the time benefits are to be distributed to an Eligible Borrower with respect to a severance from employment, there remains any unpaid balance of a Plan loan to the Eligible Borrower, the unpaid balance will, to the maximum extent consistent with Department of Labor regulations, become immediately due and payable in full. Such unpaid balance, together with any accrued but unpaid interest on the loan, will be deducted from the Eligible Borrower's Accounts, subject to the default provisions below, before any distribution of benefits is made. Except as may be required in order to comply (in a manner consistent with continued qualification of the Plan under Code 401(a)) with Department of Labor regulations, no loan will be made or remain outstanding with respect to a Participant under this Article after the time distributions to the Participant with respect to a severance from employment are to be paid. 7.8. Default. In the event of a default in making any payment of principal or interest when due under the note evidencing any loan under this Article, if the default continues for more than 14 days after written notice of the default by the Administrator or Trustee (or such longer time as the Administrator may allow), the unpaid principal balance of the note will immediately become due and payable in full. The unpaid principal, together with any accrued but unpaid interest, shall thereupon be deducted from the Eligible Borrower's Accounts, subject to the further provisions of this Section. The amount so deducted will be treated as distributed to the Eligible Borrower and applied by the Eligible Borrower as a payment of the unpaid interest and principal (in that order) under the note evidencing such loan. In no event will the Eligible Borrower's Accounts be applied to satisfy the Eligible Borrower's repayment obligation, whether or not he or she is in default, unless the amount so applied otherwise could be distributed in accordance with the Plan. 7.9. Note as Trust Asset. The note evidencing a loan to an Eligible Borrower under this Article will be an asset of the Trust which is allocated to the Account of the Eligible Borrower and for purposes of the Plan will be deemed to have a value at any given time equal to the unpaid principal balance of the note plus accrued but unpaid interest. 7.10. Nondiscrimination. Loans will be made available under this Article to all Eligible Borrowers on a reasonably equivalent basis, except that the Administrator may make reasonable distinctions based on creditworthiness. 7.11. Affected Investments. The funds necessary to make a loan to an Eligible Borrower will be obtained by liquidating assets of the Eligible Borrower's vested Accounts in the order established by the Administrator and subject to such limitations as the Administrator may prescribe. The posting of loan payments will be made to the Accounts from which the loan was funded, in proportion to the amount of the loan drawn from each such Account. Loan repayments will be invested in the Common Stock Fund and the other Funds from which the loan was funded in proportion to the amount of the loan drawn from each such investment source, subject, as necessary, to any additional rules or procedures established by the Administrator. ARTICLE 8. BENEFITS UPON DEATH OR SEVERANCE FROM EMPLOYMENT 8.1. Severance From Employment for Reasons Other Than Death. Following a Participant's separation from the service of the Employer for any reason other than death, the Participant will receive the vested portion of his or her Accounts in a single sum. That portion of the distribution withdrawn from the Common Stock Fund will be made in shares of Common Stock (with cash in lieu of fractional shares), and the remaining portion of the distribution will be made in cash. The amount of each distribution will be determined as of the Valuation Date that immediately precedes or coincides with the date distribution is to be made, as described below. 8.2. Time of Distributions. Distribution with respect to a Participant's severance from employment normally will be made as soon as practicable after such separation. In the case of a Participant whose vested interest in his or her Accounts has a value in excess of $5,000 (or such higher amount as may be permitted under Code 411(a)(11)) and who has not yet attained age 65, however, distribution may not be made under this Section unless the notice and consent requirements described at Section 6.4 above have first been satisfied. Unless the Participant elects otherwise, distribution will be made in all events no later than the 60th day after the close of the Plan Year in which occurs the later of the Participant's severance from employment, the tenth anniversary of the year in which the Participant commenced participation in the Plan, or the Participant's attainment of age 65. 8.3. Distributions After a Participant's Death. If a Participant dies prior to his or her severance from employment with the Employer, the Participant's Beneficiary will receive the full amount of the Participant's Accounts (less any outstanding indebtedness owed by the Participant to the Plan, which shall be treated as having been distributed to the Participant's estate) in cash in a single sum as soon as practicable following the Participant's death but not later than December 31 of the calendar year following the year of the Participant's death, except that any portion of the distribution withdrawn from the Common Stock Fund will be distributed in shares of Common Stock (with cash in lieu of fractional shares). If a Participant dies after severance from employment but before the complete distribution of his or her vested Accounts has been made, the Participant's Beneficiary will receive the remaining vested portion of the Participant's Accounts (less any outstanding indebtedness owed by the Participant to the Plan, which shall be treated as having been distributed to the Participant's estate) in cash in a single sum, except that any portion of the distribution withdrawn from the Common Stock Fund will be distributed in shares of Common Stock (with cash in lieu of fractional shares), as soon as practicable following the Participant's death but not later than December 31 of the calendar year following the year of the Participant's death. Any distribution to a Beneficiary under this Section will be determined as of the Valuation Date immediately preceding or coinciding with the date distribution is to be made. 8.4. Designation of Beneficiary. Except as otherwise provided in this Section, a Participant's Beneficiary is the person or persons, if any, designated in writing by the Participant in accordance with such procedures as the Administrator may determine. The Administrator may decline to recognize any beneficiary designation received (e.g., by mail or from the decedent's attorney) after the Participant's death. In the absence of an effective written Beneficiary designation, a Participant's Beneficiary will be deemed to be his or her surviving spouse, if any, or if none, the Participant's estate. A nonspouse beneficiary designation by a Participant who is married at the time of his or her death will not be effective unless, (a) prior to the Participant's death, the Participant's surviving spouse consented to and acknowledged the effect of the Participant's designation of a specific non-spouse Beneficiary (including any class of Beneficiaries or any contingent Beneficiaries) on a written form approved by the Administrator; or (b) it is established to the satisfaction of the Administrator that spousal consent may not be obtained because there is no spouse, because the spouse has died (evidenced by a certificate of death) because the spouse cannot be located (based on information supplied by a government agency or independent investigator), or because of such other circumstances as the Secretary of the Treasury may prescribe. If a spouse is legally incompetent to give consent, the spouse's legal guardian, even if the guardian is the Participant, may give consent on behalf of the spouse. Any consent and acknowledgment by (or on behalf of) a spouse, or the establishment that the consent and acknowledgment cannot be obtained, will be effective only with respect to such spouse, but will be irrevocable once made. 8.5. Direct Rollovers of Eligible Distributions. Notwithstanding any provision of the Plan to the contrary that may otherwise limit a distributee's election under this Section, a distributee may elect, at the time and in the manner prescribed by the Administrator, to have any portion of an eligible rollover distribution paid in a direct rollover, including shares of Common Stock, to an eligible retirement plan specified by the distributee. For purposes of this Section, the following terms have the following meanings: (a) An "eligible rollover distribution" is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life expectancy of the distributee or the distributee and his or her designated Beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Code section 401(a)(9); amounts distributed pursuant to Section 6.1 on account of hardship (provided, that prior to January 1, 2002 the only such hardship-distribution amounts not eligible for rollover shall be those that are attributable to Elective Contributions); and, except in the case of a distribution on or after January 1, 2002, the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (b) For distributions prior to January 1, 2002, the term "eligible retirement plan" means: (i) with respect to a distributee other than the Participant's surviving spouse, an individual retirement account described in Code 408(a), an individual retirement annuity described in Code 408(b), an annuity plan described in Code 403(a), or a qualified trust described in Code 401(a), and (ii) with respect to a distributee who is a Participant's surviving spouse, an individual retirement account or an individual retirement annuity. For distributions on or after January 1, 2002, the term "eligible retirement plan" means (in the case of any distributee, including the Participant's surviving spouse) any plan or arrangement described in clause (i) as well as an annuity contract described in Code 403(b) and an eligible deferred compensation plan described in Code 457(b) which is maintained by an eligible employer described in Code 457(e)(1)(A). (c) a "distributee" includes an employee or former employee, the surviving spouse of a deceased employee or former employee, and the spouse or former spouse (who is an alternate payee under a QDRO) of an employee or former employee. (d) a "direct rollover" is a payment by the Plan to the eligible retirement plan specified by the distributee. ARTICLE 9. ADMINISTRATION. 9.1. In General. The named fiduciary charged with administering the Plan and selecting the menu of Funds for Participant- or Beneficiary-directed investments under the Plan is the Savings Plan Committee (the "Committee"). The Committee may delegate any or all of its duties to one or more other persons, who may be (but need not be) Employees. The term "Administrator" as used in the Plan refers to the Committee (including any member or members thereof acting on behalf of the Committee as described at Section 9.2 below) together with such other duly authorized person or persons. 9.2. Savings Plan Committee. The Committee will consist of individuals selected by the Board. All determinations required to be made by the Committee as a whole will be made by a vote of a majority of its eligible members voting at a meeting of the Committee at which a majority of its eligible members are present and voting, or by a written consent signed by a majority of the Committee's eligible members; but if the number of individuals comprising the eligible members of the Committee is fewer than three, any vote or consent taken by the Committee's eligible members must be unanimous. Notwithstanding the foregoing, the Committee may authorize one of its eligible members to act on behalf of the Committee, with such delegation of powers as the Committee may determine. References herein to the Committee include references to any such member or members acting on its behalf. Each member of the Committee will be deemed an eligible member as to all matters other than those that pertain uniquely to himself or herself. The Committee may establish such additional rules and procedures for its deliberations and operations as it deems advisable. All members of the Committee will serve without pay for the performance of their duties hereunder. Any member of the Committee may resign at any time by the delivery of his or her written resignation to the Committee, such resignation to be effective on delivery or at any later date specified by the resigning Committee member. The Board may remove a Committee member at any time and for any reason. If at any time there is a vacancy in the membership of the Committee, the remaining Committee members will continue to act until the vacancy is filled by the Board. 9.3. Powers of the Administrator. The Administrator will have full discretionary power to administer the Plan in all of its details, subject, however, to the requirements of ERISA. For this purpose the Administrator's discretionary power will include, but will not be limited to, the following authority: to make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan; to interpret the Plan; to decide all questions concerning the Plan and the eligibility of any person to participate in the Plan; to compute the amount of benefits which will be payable to any Participant or other person in accordance with the provisions of the Plan and to determine the person or persons to whom such benefits will be paid; to authorize the payment of benefits; to authorize the payment of reasonable expenses of administering the Plan in accordance with Section 9.7; to keep such records and submit such filings, elections, applications, returns or other documents or forms as may be required under the Code and applicable regulations, or under other federal, state or local law and regulations; to appoint such agents, counsel, accountants, consultants and Actuaries as may be required to assist in administering the Plan; and to allocate and delegate its fiduciary responsibilities under the Plan, any such allocation or designation to be by written instrument and in accordance with Section 405 of ERISA. 9.4. Effect of interpretation or determination. The Administrator's determinations and interpretations under the Plan will be final and conclusive on all persons in the absence of clear and convincing evidence that the Administrator acted arbitrarily and capriciously. 9.5. Examination of records. The Administrator will make available to each Participant such of its records as pertain to him or her, for examination at reasonable times during normal business hours. 9.6. Reliance on tables, etc. In administering the Plan, the Administrator will be entitled to the extent permitted by law to rely conclusively on all tables, valuations, certificates, opinions and reports which are furnished by an actuary, accountant, trustee, counsel or other expert who is employed or engaged by the Administrator or the Company. 9.7. Expenses of Plan. The Administrator may direct the Trustee to pay from the Trust any or all reasonable expenses of administering the Plan or Trust. The Administrator will determine what constitutes a reasonable expense of administering the Plan or Trust and whether such expenses shall be paid from the Trust. Any such expenses not paid out of the Trust will be paid by the Participating Employers in such proportions as the Administrator determines. 9.8. Withholding of tax. Any distribution under the Plan will be subject to such tax and other withholdings as may be required by the Code and applicable regulations. 9.9. Indemnification of Administrator. Each Participating Employer agrees to indemnify and to defend to the fullest extent permitted by law any member of the Committee and any employee or trustee of an Affiliated Employer who assists the Committee in administering the Plan, including any such person who formerly served as a member of the Committee or assisted the Committee in administering the Plan, against all liabilities, damages, costs and expenses (including attorneys' fees and amounts paid in settlement of any claims approved by the Company) occasioned by any act or omission to act in connection with the Plan, if such act or omission is in good faith. 9.10. Claims and review procedures. The Administrator shall establish reasonable procedures for processing benefit claims and appeals from denials of such claims, in accordance with Section 503 of ERISA and the regulations thereunder. ARTICLE 10. AMENDMENT AND TERMINATION. 10.1. Amendment. The Company reserves the power at any time or times to amend the provisions of the Plan and Trust to any extent and in any manner that it may deem advisable by a written instrument signed by an officer of the Company. However, no amendment will (a) cause or permit any part of the assets of the Trust to be diverted to purposes other than for the exclusive benefit of each Participant and his or her Beneficiary (except as permitted by the Plan with respect to QDROs or the return of contributions upon a determination of nondeductibility or mistake of fact, or to pay the reasonable expenses of the Plan or Trust), unless the amendment is required or permitted by law, governmental regulation or ruling; or to (b) reduce the accrued benefit of any Participant in violation of Code 411(d)(6), except as otherwise permitted or required by law. If the vesting schedule of the Plan is amended, each Participant's nonforfeitable percentage determined as of the later of the date the amendment is adopted or the date it becomes effective will not be less than the percentage determined without regard to such amendment. 10.2. Termination. The Company has established the Plan and authorized the establishment of the Trust with the bona fide intention and expectation that contributions will be continued indefinitely, but the Company reserves the absolute right to discontinue contributions under the Plan or terminate the Plan at any time by written notice delivered to the Trustee, without liability whatsoever for any such discontinuance or termination. 10.3. Distributions upon Termination of the Plan. As soon as practicable following complete termination of the Plan by the Company, the Trustee will distribute in a single sum to each Participant or other person entitled to distribution the value of the Participant's Accounts, subject, however, to the limitations of Code 401(k)(10). The amount of the distribution will be determined as of the Valuation Date immediately preceding or coinciding with the date distribution is to be made. If the limitations of Code 401(k)(10) preclude a distribution at time of termination, the Administrator will take appropriate steps to preserve the Accounts within a tax-qualified plan pending final distribution. 10.4. Merger or Consolidation of Plan; Transfer of Plan Assets. In case of any merger or consolidation of the Plan with, or transfer of assets and liabilities of the Plan to, any other plan, provision must be made so that each Participant would, if the Plan then terminated, receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he or she would have been entitled to receive immediately before the merger, consolidation or transfer if the Plan had then terminated. ARTICLE 11. LIMITS ON CONTRIBUTIONS. 11.1. Code 404 Limits. The sum of the Plan contributions made by each Participating Employer will not exceed the maximum amount deductible by the Participating Employer under the applicable provisions of the Code. 11.2. Code 415 Limits. Code 415 is hereby incorporated by reference into the Plan. The aggregate of all Elective Contributions, Matching Contributions and QNECs made for the benefit of a Participant under the Plan, after taking into account annual additions (for the same Plan Year) with respect to the Participant under other plans of the Employer, may not exceed the limitations of Code 415 (i.e., for limitation years commencing prior to January 1, 2002, the lesser of $30,000, as adjusted pursuant to Code 415(d), or 25% of compensation; and for limitation years commencing on or after January 1, 2002, the lesser of $40,000, as adjusted pursuant to Code 415(d), or 100% of compensation). For purposes of applying these limitations, the compensation taken into account for any Participant will be his or her compensation as defined in Treasury Regulations 1.415-2(d)(2) and (3), but including elective deferrals as defined in Code 402(g)(3), amounts not includible in gross income by reason of Code 125, and, for limitation years commencing on or after January 1, 2001, amounts not includible in gross income by reason of Code 132(f)(4). Although it is intended that compliance with the limitations of this Section be achieved, to the extent practicable, by limiting annual additions and benefits under other defined contribution plans and defined benefit plans, respectively, of the Employer before reducing annual additions under the Plan, in order to satisfy the limitations of this Section the Administrator has complete discretion to adjust contributions under the Plan prospectively or to adjust Accounts retroactively in accordance with Treasury Regulations 1.415-6(b)(6)(iv) by distributing elective deferrals (within the meaning of Code 402(g)(3)) and distributing gains attributable to those elective deferrals to the extent that the distribution would reduce the excess amounts in the Participant's Accounts. 11.3. Code 402(g) Limits. The maximum amount of Elective Contributions made on behalf of any Participant for any Plan Year, when added to the amount of elective deferrals (as defined in Code 402(g)(3)) under all other plans, contracts and arrangements of the Employer with respect to the Participant for the same year), shall not exceed the maximum applicable limit in effect for the year under Treasury Regulations 1.402(g)-1(d); provided, that for calendar years commencing on or after January 1, 2002, the limit shall be the amount described in 402(g)(1)(B) of the Code, subject to adjustment pursuant to 402(g)(4). A Participant will be considered to have had "excess deferrals" for a Plan Year to the extent that the Participant's elective deferrals (as so defined) for the year exceed the applicable limit. In the event that an amount is included in a Participant's gross income for a taxable year as a result of an excess deferral and the Participant notifies the Administrator on or before March 1 of the following year that all or a specified part of an Elective Contribution made for his or her benefit represents an excess deferral, the Administrator will make every reasonable effort to cause the excess deferral, adjusted for allocable income, to be distributed to the Participant no later than the April 15 following the calendar year in which such excess deferral was made. The income allocable to excess deferrals is equal to the allocable gain or loss for the taxable year of the individual, as determined by the Administrator, but not the allocable gain or loss for the period between the end of the taxable year and the date of distribution. No distribution of an excess deferral will be made during the taxable year of a Participant in which the excess deferral was made unless the correcting distribution is made after the date on which the Plan received the excess deferral and both the Participant and the Plan designates the distribution as a distribution of an excess deferral. The amount of any excess deferrals that may be distributed to a Participant for a taxable year will be reduced by the amount of Elective Contributions that were excess contributions (as defined under Code 401(k)(3)) and that were previously distributed to the Participant to comply with the limitations of Section 11.4. 11.4. Code 401(k)(3) Limits. Elective Contributions made under the Plan are subject to the limits of Code 401(k)(3), which are incorporated herein by reference. Those limits will be deemed satisfied if, for any Plan Year, the "actual deferral percentage" (as that term is defined in Code 401(k)(3)(B) and the Treasury Regulations thereunder) (the "ADP") for the group of all HCEs who are eligible to participate in Elective Contributions satisfies the requirements of Code 401(k)(3)(A)(ii) when measured against the ADP for the prior Plan Year for the group of all NHCEs who were eligible to participate in Elective Contributions during such Year. The Administrator may limit (in such manner as it determines) the Elective Contributions to be made for the benefit of one or more HCEs so that the requirements of the immediately preceding sentence are satisfied, but if as of the end of a Plan Year such requirements are determined not to have been satisfied, the Administrator will provide for one or a combination of the following remedial steps: (a) The Administrator may direct the Trustee to refund excess contributions, as defined in Code 401(k)(8)(B) and the Treasury Regulations thereunder, together with any allocable income, to those HCEs who are entitled to the refund under Code 401(k)(8)(C) and the Treasury Regulations thereunder, provided such refund is accomplished not later than by December 31 of the Plan Year following the Plan Year with respect to which such excess contributions arose. In determining the amount of excess contributions under Code 401(k)(8)(B), the maximum amount of such contributions permitted under the Plan shall be determined by reducing the contributions made on behalf of HCEs in the order of their deferral percentages starting with the highest deferral percentage until the limits of Code 401(k)(3) are satisfied (i.e., leveling by deferral percentages). In determining who is entitled to a refund under Code 401(k)(8)(C), the excess determined pursuant to the immediately preceding sentence shall be distributed to the HCEs on the basis of the amounts of the contributions on behalf of such HCEs (i.e., leveling by amount of contributions). The income allocable to excess contributions is equal to the allocable gain or loss for the Plan Year (as determined by the Administrator) but does not include the allocable gain or loss for the period between the end of the Plan Year and the date of distribution. The amount of excess contributions distributed with respect to an HCE for a Plan Year will be reduced by the amount of excess deferrals previously distributed to the HCE for the same year under Section 11.3 above. If Matching Contributions have been made with respect to Elective Contributions that are refunded under this subsection (a), the Matching Contributions will be distributed to the Participant at the same time as the related Elective Contributions. (b) The Administrator may instruct the Participating Employers to make a QNEC Contribution for the Plan Year for the benefit of those NHCEs who are designated by the Administrator. All references herein to Treasury Regulations will be deemed to include related supplemental guidance issued by the Internal Revenue Service. 11.5. Code 401(m) Limits. Matching Contributions made under the Plan are subject to the limits of Code 401(m)(2), which are incorporated herein by reference. Those limits will be deemed satisfied if, for any Plan Year, the "contribution percentage" (as that term is defined in Code 401(m)(3) and the Treasury Regulations thereunder) (the "Contribution Percentage") for the group of all HCEs who are eligible for Matching Contributions satisfies the requirements of Code 401(m)(2)(A) and the Treasury Regulations thereunder (and, for Plan Years commencing prior to January 1, 2002, the "multiple use" limits set forth in Treasury Regulations 1.401(m)-2) when measured against the Contribution Percentage for the prior Plan Year for the group of all NHCEs who were eligible for Matching Contributions during such Year. The Administrator may limit (in such manner as it determines) the Matching Contributions to be made for the benefit of one or more HCEs so that the requirements of the immediately preceding sentence are satisfied, but if as of the end of a Plan Year such requirements are determined not to have been satisfied, the Administrator will direct the Trustee to refund excess aggregate contributions, as defined in Code 401(m)(6)(B) and the Treasury Regulations thereunder, together with any allocable income, to those HCEs who are entitled to the refund under Code 401(m)(6)(C) and the Treasury Regulations thereunder, provided such refund is accomplished not later than by December 31 of the Plan Year following the Plan Year with respect to which such excess contributions arose. In determining the amount of excess contributions under Code 401(m)(6)(B), the maximum amount of Matching Contributions permitted under the Plan shall be determined by reducing the Matching Contributions made on behalf of HCEs in the order of their contribution percentages starting with the highest contribution percentage until the limits of Code 401(m)(2) are satisfied (i.e., leveling by contribution percentages). In determining who is entitled to a refund under Code 401(m)(6)(C), the excess determined pursuant to the immediately preceding sentence shall be distributed to the HCEs on the basis of the amounts of the Matching Contributions on behalf of such HCEs (i.e., leveling by amount of contributions). The income allocable to excess aggregate contributions is equal to the allocable gain or loss for the Plan Year (as determined by the Administrator) but does not include the allocable gain or loss for the period between the end of the Plan Year and the date of distribution. The amount of excess contributions distributed with respect to an HCE for a Plan Year will be reduced by the amount of excess deferrals previously distributed to the HCE for the same year under Section 11.3 above. All references herein to Treasury Regulations will be deemed to include related supplemental guidance issued by the Internal Revenue Service. ARTICLE 12. SPECIAL TOP-HEAVY PROVISIONS. 12.1. Provisions to apply. The provisions of this Article will apply for any top-heavy Plan Year notwithstanding anything to the contrary in the Plan. This Article is intended to comply with Code 416 and the Treasury Regulations thereunder, which are incorporated by reference. 12.2. Minimum Contribution. For any Plan Year which is a top-heavy plan year, the Participating Employers will contribute to the Trust a minimum contribution on behalf of each Eligible Employee who is not a key employee, who has not separated from service with the Employer by the end of the Plan Year, and who has satisfied the age and Service requirements for participation under Article 3 (regardless of whether or not the Participant has elected to have Elective Contributions made for his or her benefit for the Year). The minimum contribution will equal 3% of the Participant's compensation except as hereinafter provided. If the largest Plan contribution for the benefit of each key employee for the Plan Year, taking into account all contributions other than Rollover Contributions, is less than 3% of compensation, the highest such percentage will be used in lieu of 3%. Also, no minimum contribution will be required with respect to an individual who is also covered by another top-heavy defined contribution plan of an Affiliated Employer which meets the vesting requirements of Code section 416(b) and under which the Participant receives the top-heavy minimum contribution. If an individual entitled to a top-heavy contribution under this Section is also covered by a top-heavy defined benefit plan of an Affiliated Employer, "5%" will be substituted for "3%" above in determining the minimum contribution. If contributions are required under this Section, the Administrator will establish (or cause the Trustee to establish) a special Account to which such contributions will be allocated. 12.3. Special Vesting Schedule. Each Employee who is an Eligible Employee described in the first sentence of Section 12.2 above at any time during a top-heavy plan year will be vested in not less than the percentage of each of his or her Accounts as set forth in the following vesting schedule (or the Plan's general vesting schedule, if faster), based on the Participant's years of Service: Years of Service Vested Percentage fewer than 2 0% 2 but fewer than 3 20% 3 but fewer than 4 40% 4 but fewer than 5 60% 5 but fewer than 6 80% 6 or more 100% Further, no decrease in a Participant's nonforfeitable percentage may occur in the event the Plan's status as top-heavy changes for any Plan Year. If the vesting schedule under the Plan shifts in or out of the above schedule for any Plan Year because of the Plan's top-heavy status, the shift shall be considered to be an amendment to the vesting schedule for all purposes of the Plan. 12.4. Definitions. For purposes of these top-heavy provisions, the following terms have the following meanings: (a) "key employee" means a key employee described in Code 416(i)(l), and "non-key employee" means any employee who is not a key employee (including employees who are former key employees); (b) "top-heavy plan year" means a Plan Year if any of the following conditions exist: (i) the top-heavy ratio for the Plan exceeds 60 percent and the Plan is not part of any required aggregation group or permissive aggregation group of plans; (ii) this Plan is a part of a required aggregation group of plans but not part of a permissive aggregation group and the top-heavy ratio for the group of plans exceeds 60 percent; or (iii) the Plan is part of a required aggregation group and part of a permissive aggregation group of plans and the top-heavy ratio for the permissive aggregation group exceeds 60 percent. (c) "top-heavy ratio": (i) if the employer maintains one or more defined contribution plans (including any simplified employee pension plan) and the employer has not maintained any defined benefit plan which during the 5-year period ending on the determination date(s) has or has had accrued benefits, the top-heavy ratio for the Plan alone or for the required or permissive aggregation group as appropriate is a fraction, the numerator of which is the sum of the account balances of all key employees on the determination date(s) (including any part of any account balance distributed in the 5-year period ending on the determination date(s), but disregarding rollover contributions and similar transfers and the earnings thereon), and the denominator of which is the sum of all account balances (including any part of an account balance distributed in the 5-year period ending on the determination date(s), but disregarding rollover contributions and similar transfers and the earnings thereon), both computed in accordance with Code 416. Both the numerator and the denominator of the top-heavy ratio are increased to reflect any contribution not actually made as of the determination date, but which is required to be taken into account on that date under Code 416. (ii) If the employer maintains one or more defined contribution plans (including any Simplified Employee Pension Plan) and the employer maintains or has maintained one or more defined benefit plans which during the 5-year period ending on the determination date(s) has or has had any accrued benefits, the top-heavy ratio for any required or permissive aggregation group as appropriate is a fraction, the numerator of which is the sum of the account balances under the aggregated defined contribution plan or plans for all key employees, determined in accordance with (i) above, and the present value of accrued benefits under the aggregated defined benefit plan or plans for all key employees as of the determination date(s), and the denominator of which is the sum of the account balances under the aggregated defined contribution plan or plans for all participants, determined in accordance with (i) above, and the present value of all accrued benefits under the defined benefit plan or plans for all participants as of the determination date(s), all determined in accordance with Code 416. The accrued benefits under a defined benefit plan in both the numerator and denominator of the top-heavy ratio are increased for any distribution of an accrued benefit made in the 5-year period ending on the determination date. For purposes of (i) and (ii) above the value of account balances and the present value of accrued benefits will be determined as of the most recent valuation date that falls within or ends with the 12-month period ending on the determination date, except as provided in Code 416 for the first and second plan years of a defined benefit plan. The account balances and accrued benefits of a participant who is not a key employee but who was a key employee in a prior year, or who has not been credited with at least one hour of service with any employer maintaining the plan at any time during the 5-year period ending on the determination date, will be disregarded. The calculation of the top-heavy ratio, and the extent to which distributions, rollovers, and transfers are taken into account will be made in accordance with Code 416. Deductible employee contributions will not be taken into account for purposes of computing the top-heavy ratio. When aggregating plans the value of account balances and accrued benefits will be calculated with reference to the determination dates that fall within the same calendar year. The accrued benefit of a participant other than a key employee shall be determined under the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained by the employer, or if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of Code 411(b)(1)(C). For Plan Years commencing on or after January 1, 2002, the provisions of this subsection (c) shall be applied by replacing the words "5-year period" with "1-year period" except for in-service distributions and distributions upon termination of a plan. (d) The "permissive aggregation group" is the required aggregation group of plans plus any other plan or plan of the employer which, when considered as a group with the required aggregation group, would continue to satisfy the requirements of Code 401(a)(4) and 410. (e) The "required aggregation group" is (i) each qualified plan of the Employer in which at least one key employee participates or participated at any time during the determination period (regardless of whether the plan has terminated), and (ii) any other qualified plan of the Employer which enables a plan described in (i) to meet the requirements of Code 401(a)(4) and 410(b). (f) For purposes of computing the top-heavy ratio, the valuation date will be the last day of the applicable plan year. (g) The term "determination date" means, with respect to the initial plan year of a plan, the last day of such plan year and, with respect to any other plan year of a plan, the last day of the preceding plan year of such plan. The term "applicable determination date" means, with respect to the Plan, the determination date for the Plan Year of reference and, with respect to any other plan, the determination date for any plan year of such plan which falls within the same calendar year as the applicable determination date of the Plan. (h) The term "compensation" has the same meaning as under Code 415. ARTICLE 13. MISCELLANEOUS. 13.1. Exclusive Benefit Rule. No part of the corpus or income of the Trust forming part of the Plan will be used for or diverted to purposes other than for the exclusive benefit of each Participant and Beneficiary. The preceding sentence will not be construed to limit payments under a QDRO, payments by the Plan of reasonable expenses of administering the Plan or Trust, the return of contributions upon a determination of nondeductibility or mistake of fact, or a legal assignment (for example, pursuant to Code 401(a)(13(C)). 13.2. Uniformed Services Employment and Reemployment Rights Act of 1994. Notwithstanding any provision of the Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with 414(u) of the Internal Revenue Code. Loan repayments will be suspended under the Plan as permitted under Code 414(u)(4). 13.3. Limitation of Rights. Neither the establishment of the Plan or the Trust, nor any amendment thereof, nor the creation of any fund or account, nor the payment of any benefits, will be construed as giving to any Participant or other person any legal or equitable right against any Participating Employer or any person serving as Administrator (including, without limitation, any member of the Savings Plan Committee) or as Trustee, and in no event will the terms of employment or service of any Employee be modified or in any way be affected hereby. It is a condition of the Plan, and each Participant expressly agrees by his or her participation herein, that each Participant will look solely to the assets held in the Trust for the payment of any benefit to which he or she may be entitled under the Plan. 13.4. Nonalienability of Benefits. The benefits provided hereunder will not be subject to the voluntary or involuntary alienation, assignment, garnishment, attachment, execution or levy of any kind, and any attempt to cause such benefits to be so subjected will not be recognized, except to such extent as may be required by law, except that if the Administrator receives any QDRO that requires the payment of benefits hereunder or the segregation of any Account, such benefits will be paid, and such Account segregated, in accordance with the applicable requirements of such Order. In addition, the vested portion of an Account balance may be pledged as security for a loan from the Plan in accordance with the Plan's loan procedures. 13.5. Voting of Common Stock. The Trustee will vote Common Stock allocated to the Accounts of the Participants or Beneficiaries ("allocated shares") in accordance with the directions of the Participants or Beneficiaries to whose Accounts such Common Stock has been allocated, or in the case of a tender or similar rights in respect of such Common Stock will respond to such offer in accordance with the directions of such Participants or Beneficiaries. The Trustee will utilize its best efforts to deliver on a timely basis (or cause to be delivered) to each Participant or Beneficiary such information as will be distributed to stockholders of the Company in connection with any vote, tender or similar right with respect to Common Stock allocated to such Participant's or Beneficiary's Accounts. The Trustee will vote allocated shares for which no directions are timely received in proportion to the ways in which the Trustee votes those allocated shares for which timely directions are received. Unallocated shares of Common Stock, if any, will be voted by the Trustee in the Trustee's discretion. 13.6. Governing law. The Plan and Trust will be construed, administered and enforced according to the laws of Massachusetts to the extent such laws are not preempted by ERISA. 13.7. Additional Contributions In the Case of Participants Age 50 or Older. Notwithstanding any provision of the Plan, any Participant who is eligible to have Elective Contributions made for his or her benefit and who has attained age 50 prior to the end of a Plan Year beginning on or after January 1, 2002 may elect to have additional Elective Contributions ("catch- up contributions") made for such year in accordance with, and subject to the limitations of, Code Section 414(v). Such catch-up contributions shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of Code 402(g) and 415. The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of Code 401(k)(3), 401(k)(11), 401(k)(12), 410(b) or 416, as applicable, by reason of the making of such catch-up contributions. ARTICLE 14. DEFINITIONS. Wherever used in the Plan, the following terms have the following meanings unless the context clearly indicates otherwise: 14.1. "Account". means any of the following: Match-Eligible Elective Contribution Account, Other Elective Contribution Account, Matching Contribution Account, QNEC Contribution Account, Rollover Contribution Account, or Transfer Account, each as adjusted pursuant to Article 4. 14.2. "Active Participant". means an Eligible Employee who has satisfied the requirements for participation set forth in Article 2 and is deferring Pay under the Plan. 14.3. "Additional Elective Contribution". means an Elective Contribution that is not a Basic Elective Contribution. Each Pay Reduction Agreement will specify whether Additional Elective Contributions in respect of Pay reductions under that Agreement are to be treated as Match-Eligible Elective Contributions or Other Elective Contributions. 14.4. "Administrator". has the meaning set forth in Section 9.1. 14.5. "Affiliated Employer". means (a) the Company, (b) any corporation that is a member of a controlled group of corporations (as defined in Code 414(b)) of which the Company is also a member, (c) any trade or business, whether or not incorporated, that is under common control (as defined in Code 414(c)) with the Company, (d) any trade or business that is a member of an affiliated service group (as defined in Code 414(m)) of which the Company is also a member, or (e) to the extent required by Regulations issued under Code 414(o), any other organization; provided, that the term "Affiliated Employer" shall not include any corporation or unincorporated trade or business prior to the date on which such corporation, trade or business satisfies the affiliation or control tests of (b), (c) (d) or (e) above, except as the Board expressly determines. 14.6. "Basic Elective Contribution". means any Elective Contribution for the benefit of a Participant to the extent that it does not exceed one percent (1%) of the Participant's Pay for the Pay period to which it relates. All Basic Elective Contributions are Match-Eligible Elective Contributions. 14.7. "Basic Matching Contribution". means a Matching Contribution that is made with respect to a Basic Elective Contribution pursuant to Section 3.2(a). 14.8. "Beneficiary". means the person or persons (including a trust or other entity) entitled to receive benefits under the Plan upon the death of a Participant. 14.9. "Board". means the Board of Directors of the Company. 14.10. "Code". means the Internal Revenue Code of 1986, as amended from time to time. Reference to any section or subsection of the Code includes reference to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such section or subsection, and also includes reference to any Regulation issued pursuant to or with respect to such section or subsection. 14.11. "Committee" or "Savings Plan Committee". means the Savings Plan Committee appointed by the Board to administer the Plan in accordance with Article 9. 14.12. "Common Stock". means either or both of the Class A Common Stock and the Class B Common Stock of the Company. 14.13. "Common Stock Fund". means the investment Fund maintained within the Trust, consisting of shares of Common Stock and cash awaiting distribution or reinvestment in Common Stock, in which, except as provided in Section 4.3(a), Match-Eligible Elective Contribution Accounts and Matching Contribution Accounts will be invested. 14.14. "Company". means The L.S. Starrett Company, a Massachusetts corporation, and any successor by law or contract. The Company is the "plan administrator" for purposes of ERISA. 14.15. "Elective Contribution". means a contribution to the Trust described in Section 3.1. The term "Elective Contribution" includes Basic Elective Contributions and Additional Elective Contributions. 14.16. "Eligible Borrower". means a Participant who is an Employee or is otherwise a "party in interest" within the meaning of ERISA section 3(14) or a deceased Participant's Beneficiary who has not yet received the entire vested portion of the Participant's Accounts and who is a "party in interest" as described above. 14.17. "Eligible Employee". means any employee who is employed by a Participating Employer other than the following: (a) individuals covered by a collective bargaining agreement where retirement benefits were the subject of good faith bargaining, unless such agreement specifically provides for participation in the Plan; (b) "leased employees" within the meaning of Code 414(n); (c) individuals who are at the time classified by an Affiliated Employer or by the Administrator as an independent contractor, regardless of any later reclassification; and (d) nonresident aliens. 14.18. "Employee". means any individual employed by an Affiliated Employer. 14.19. "Employer". means the Affiliated Employers or any of them, as the context requires. 14.20. "Entry Date". means the first day of any payroll period. 14.21. "ERISA". means the Employee Retirement Income Security Act of 1974, as from time to time amended, and any successor statute or statutes of similar import. 14.22. "Fund". means one or more of the investment funds, including the Common Stock Fund, from time to time designated by the Administrator as available for investment of a Participant's Other Elective Contribution Account (if any), QNEC Contribution Account (if any), Rollover Contribution Account (if any), and Transfer Account (if any). 14.23. "HCE". means an Employee who (a) for the Plan Year immediately preceding the Plan Year of reference had compensation (as that term is defined in Code 415) from the Employer in excess of $80,000 (or such higher dollar amount as is in effect under Code 414(q)), or (b) for the Plan Year of reference or the immediately preceding Plan Year is (or was) a "5-percent owner" as defined in Code 416(i). 14.24. "Match-Eligible Elective Contribution". means an Elective Contribution that is either (a) a Basic Elective Contribution, or (b) an Additional Elective Contribution which is designated in the Pay Reduction Agreement as a Match-Eligible Elective Contribution. 14.25. "Match-Eligible Elective Contribution Account". means the Account maintained to reflect Match-Eligible Elective Contributions and the earnings thereon. For each Participant who was a participant in the Prior Plan (and whose accounts under the Prior Plan have not been completely distributed or forfeited), the "Match-Eligible Elective Contribution Account" will also include matching contributions made for the benefit of the Participant under the Prior Plan and the earnings thereon, as adjusted. The Administrator will maintain or cause the Trustee to maintain such sub- accounting, if any, as is necessary to demonstrate what portion of a Participant's Match-Eligible Elective Contribution Account is attributable to elective contributions under the Prior Plan (and the earnings thereon), Basic Elective Contributions (and the earnings thereon), and Additional Elective Contributions designated as Match-Eligible Elective Contributions (and the earnings thereon). 14.26. "Matching Contribution". means a contribution described in Section 3.2. The term "Matching Contribution" includes Basic Matching Contributions and Supplemental Matching Contributions. 14.27. "Matching Contribution Account". means the Account maintained to reflect Matching Contributions made for the benefit of a Participant, and the earnings thereon. For each Participant who was a participant in the Prior Plan (and whose accounts under the Prior Plan have not been completely distributed or forfeited), the "Matching Contribution Account" will also include matching contributions made for the benefit of the Participant under the Prior Plan and the earnings thereon, as adjusted. 14.28. "NHCE". means an Employee who is not an HCE. 14.29. "Other Elective Contribution". means an Additional Elective Contribution that is not a Match-Eligible Elective Contribution. 14.30. "Other Elective Contribution Account". means the Account maintained to reflect Other Elective Contributions and the earnings thereon. 14.31. "Participant". means each Employee for whom an Account is maintained under the Plan. 14.32. "Participating Employer". means the Company and each other Affiliated Employer that adopts the Plan with the consent of the Company. A list of Participating Employers (other than the Company) is attached as Appendix A. 14.33. "Pay". for any pay period means (i) amounts currently includible in income that consist of wages, salaries, fees for professional services and similar amounts (including commissions and bonuses) received for the pay period in respect of personal services actually performed for a Participating Employer, and (ii) amounts that would be described in (i) but for deferral under the Plan or a plan of the Employer described in Code 125 or, beginning January 1, 2001, a plan of the Employer described in Code 132(f)(4). The term "Pay" does not include payments or benefits under any "welfare benefit plan" (as that term is defined in Section 3(1) of ERISA) or items of non-cash compensation such as (but not limited to) imputed compensation from group term life insurance, amounts received in connection with any stock-based award, reimbursements for professional fees, and moving or other expense reimbursements, whether or not taxable. The maximum amount of Pay that may be taken into account for any Participant in any Plan Year is the dollar limit described in Code 401(a)(17) as in effect for such Plan Year. 14.34. "Pay Reduction Agreement". means an agreement, in form satisfactory to the Administrator, by which an Active Participant agrees to have his or her Pay reduced by a specified percentage in exchange for a promise by his or her Participating Employer to make Elective Contributions of equivalent amount to the Trust. 14.35. "Period of Severance". means the period of time, expressed in years and days, commencing with the earlier of (a) the date an individual ceases to be an Employee by reason of quitting, being fired, retiring or dying, or (b) the first anniversary of the Employee's absence from work for any other reason, and ending on the date the individual again performs an "hour of service" (as that term is defined under the definition of "Service", below). 14.36. "Plan". means The L.S. Starrett 401(k) Stock Savings Plan (1999 Restatement), as the same may from time to time be amended. 14.37. "Plan Year". means the calendar year. 14.38. "Prior Plan". means The L.S. Starrett Company 401(k) Stock Savings Plan as in effect prior to January 1, 1999. 14.39. "QDRO". means any judgment, decree or order (including approval of a property settlement agreement) which is determined by the Administrator to constitute a "qualified domestic relations order" within the meaning of Code section 414(p). A judgment, decree or order will not be considered to be other than a QDRO merely because it requires a distribution to an alternate payee (or the segregation of accounts pending distribution to an alternate payee) before the Participant is otherwise entitled to a distribution under the Plan. 14.40. "QNEC Contribution". means a discretionary contribution by one or more Participating Employers intended to satisfy the requirements of Code 401(m)(4)(C). 14.41. "QNEC Contribution Account". means the Account maintained to reflect the QNEC Contributions, if any, made for the benefit of a Participant, and the earnings thereon, as adjusted pursuant to Article 4. 14.42. "Rollover Contribution". means a contribution made by an Eligible Employee which satisfies the requirements for rollover contributions set forth in the Plan. 14.43. "Rollover Contribution Account". means the Account maintained to reflect the Rollover Contributions, if any, made for the benefit of a Participant, and the earnings thereon, as adjusted pursuant to Article 4. 14.44. "Service". means, with respect to any Employee, the aggregate of all time periods commencing with the Employee's first day of employment or reemployment and ending on the date a Period of Severance begins. The first day of employment or reemployment is the first day the Employee performs an hour of service, and an "hour of service" for this purpose is an hour for which the Employee is paid or entitled to payment for the performance of duties for an Affiliated Employer. An Employee will also receive Service credit for (a) any Period of Severance that ends with reemployment of the Employee if such reemployment occurs not later that twelve (12) months after the earlier of (i) the date on which the Employee ceased to be an Employee by reason of having quit, been fired, retired or died, or (ii) if the Employee had been absent from work for any other reason prior to such quit, fire, retirement or death, the commencement of such absence, and (b) to the extent required by Federal law, for any absences from work attributable to periods of service in the armed forces of the United States. Fractional periods of a year will be expressed in terms of days. 14.45. "Substantial Period of Severance". means a Period of Severance of at least five (5) years' duration, except that in the case of an individual who is absent from work for maternity or paternity reasons, or by reason of any qualified family or medical leave under the Family and Medical Leave Act of 1993, a Substantial Period of Severance will not be deemed to have occurred until the Period of Severance has lasted as least six (6) years. For purposes of this definition, an absence from work for maternity or paternity reasons means an absence (i) by reason of the pregnancy of the individual, (ii) by reason of the birth of a child of the individual, (iii) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (iv) for purposes of caring for such child for a period beginning immediately following such birth or placement. 14.46. "Supplemental Matching Contribution". means any Matching Contribution made pursuant to Section 3.2(b). 14.47. "Transfer Account". means the Account maintained to reflect any amounts transferred to the Plan for the benefit of a Participant in a trust-to-trust (Code 414(l)) transfer as distinct from a direct rollover. 14.48. "Trust". means trust established between the Company and the Trustee to hold and invest the assets of the Plan. 14.49. "Trustee". mean the person or persons who are at any time the acting Trustee under the Trust. 14.50. "Valuation Date". means the last business day of each Plan Year and such other day or days as are specified by the Administrator. In the case of a Valuation Date other than the last business day of a Plan Year, the Administrator may, if appropriate under the circumstances, adjust (or direct the Trustee to adjust) only a specified Account or Accounts. IN WITNESS WHEREOF, the Company has caused this instrument to be signed in its name and on its behalf by its duly authorized officer, this ______ day of April, 2002. THE L.S. STARRETT COMPANY By:_________________________ Appendix A The following are the Participating Employers (in addition to The L.S. Starrett Company) as of January 1, 1999: Level Industries Evans Rule Appendix B Special ESOP provisions (applicable only to the extent required by Section 4.3(c)) Reference is made to Section 4.3(c) of the Plan. Should any portion of the Plan be required to be construed as an "employee stock ownership plan" in accordance with that subsection (the "ESOP portion"), and only in such circumstances, the following provisions shall apply (retroactively to the extent required) in addition to the generally applicable provisions of the Plan to the ESOP portion: A. The ESOP portion shall be invested primarily in employer securities within the meaning of Code 409(l). B. Distributions and withdrawals in respect of the ESOP portion shall be eligible to be received in the form of whole shares of Common Stock (with cash in lieu of any fractional share value). C. The Plan does not provide for "exempt loans" as described in the regulations under Code 4975. However, if for any reason the Plan were amended to provide for such a loan, no security acquired with the proceeds of such a loan may be subject to a put (except as provided below), call or other option, or buy-sell or similar arrangement, while held by and when distributed from the ESOP portion, whether or not the Plan or any portion thereof is then still an "employee stock ownership plan". If any share of Common Stock distributed from the ESOP portion is not readily tradeable on an established securities market or is subject to a substantial trading limitation, the recipient shall have the right to sell the share to the Company for fair market value. The right described in the preceding sentence may be exercised at any time during the fifteen month period beginning on the date of distribution. If the Company is prohibited by federal or state law from purchasing the share, the period for exercising the right shall be appropriately extended. The person exercising the right must notify the Company in writing that he or she is doing so. The Company shall pay for any shares required to be purchased under this paragraph in cash in a single payment or, in the Company's discretion, with an adequately secured promissory note bearing a reasonable rate of interest and providing for payment in substantially equal payments over a period not to exceed five years. D. An individual who has participated in the ESOP portion for ten or more years and who has attained age 55 would have the right to diversify the investment of the ESOP portion to the extent required by Code 401(a)(28). The determination as to whether the Plan or any portion thereof is required to be treated as an "employee stock ownership plan" for purposes of Section 4.3(c) and this Appendix shall be made by the Committee in its sole discretion. The determination of the Committee shall be binding on all persons. The prior restatement was generally effective January 1, 1999, but (i) Sections 6.4 and 8.2 were effective January 1, 1998, (ii) Sections 6.2, 11.2, 11.4, 11.5 and 14.33 were effective as of January 1, 1997, and Section 13.2 was effective as of October 13, 1996. EX-21 7 ex21subs.txt SUBSIDIARIES THE L.S. STARRETT COMPANY AND SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT JUNE 29, 2002 The parent company, The L.S. Starrett Company, incorporated in Massachusetts, has the following subsidiaries, all of which are wholly owned: Fiscal Year End Starrett Securities Corporation Incorporated in Last Sat. Massachusetts in June Evans Rule Company, Inc. Incorporated in Last Sat. New Jersey in June The L.S. Starrett Co. of Canada Incorporated in Last Sat. Limited Canada in June The L.S. Starrett Company Incorporated in May 31 Limited Scotland Starrett Industria e Incorporated in May 31 Comercio Ltda. Brazil Level Industries, Inc. Incorporated in Last Sat. Massachusetts in June Starrett Tools (Suzhou) Co., Ltd. Incorporated in Dec. 31 China Starrett Tools (Shanghai) Co., Ltd. Incorporated in Dec. 31 China The L.S. Starrett Company of Incorporated in June 30 Australia Pty. Ltd. Australia EX-23 8 ex23consent.txt CONSENT EXHIBIT 23 DELOITTE & TOUCHE INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 33-55623, 333-12997 and 333-89965 of The L.S. Starrett Company on Form S-8 of our report dated August 2, 2002 appearing in this Annual Report on Form 10-K of The L.S. Starrett Company for the year ended June 29, 2002. S/DELOITTE & TOUCHE LLP Boston, Massachusetts August 16, 2002 EX-99 9 ex99adascert.txt DAS CERT Exhibit 99a CERTIFICATION PURSUANT TO SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as chief executive officer of The L.S. Starrett Company (the "Company"), does hereby certify that to the undersigned's knowledge: 1) the Company's Annual Report on Form 10-K fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2) the information contained in the Company's Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Douglas A. Starrett Douglas A. Starrett Chief Executive Officer Dated: August 16, 2002 EX-99 10 ex99bruwcert.txt RUW CERT Exhibit 99b CERTIFICATION PURSUANT TO SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as chief financial officer of The L.S. Starrett Company (the "Company"), does hereby certify that to the undersigned's knowledge: 1) the Company's Annual Report on Form 10-K fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2) the information contained in the Company's Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Roger U. Wellington, Jr. Roger U. Wellington, Jr. Chief Financial Officer Dated: August 16, 2002 -----END PRIVACY-ENHANCED MESSAGE-----