<PAGE>
As filed with the Securities and Exchange Commission on September 27, 1996
File No. 33-3112
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
__________________________
THE L. S. STARRETT COMPANY
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-1866480
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
121 CRESCENT STREET
ATHOL, MASSACHUSETTS 01331
(Address of principal executive offices, including zip code)
_________________________
THE L.S. STARRETT COMPANY
401(K) STOCK SAVINGS PLAN
_________________________
(Full title of the plan)
Roger U. Wellington, Jr. Peter MacDougall
The L. S. Starrett Company Ropes & Gray
121 Crescent Street One International Place
Athol, Massachusetts 01331 Boston, Massachusetts 02110
(508) 249-3551 (617) 951-7000
_________________________
(Name, Address and Telephone Number, including Area Code, of Agents for Service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Title of Amount Proposed Proposed Amount of
securities to be maximum maximum registration
to be registered offering aggregate fee
registered/(1)/ price per offering
share/(2)/ price/(2)/
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A and B 800,000 shs. $23.875 $19,100,000 $6,586.21
Common Stock,
par value $1.00
- --------------------------------------------------------------------------------
</TABLE>
/(1)/ In addition, pursuant to Rule 416(c) under the Securities Act of 1933,
this registration statement also covers an indeterminate amount of interests to
be offered or sold pursuant to the employee benefit plan described herein.
/(2)/ Pursuant to Rule 457, the proposed maximum offering price per share is
based on the average of the high and low prices of the L.S. Starrett Company
Class A Common Stock reported on the New York Stock Exchange, Inc. on September
24, 1996.
================================================================================
Page 1 of 82 pages. Exhibit Index on page 9.
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Note: The document(s) containing the information required by Item 1 of
this Form S-8 and the statement of availability of Registrant information, and
other information required by Item 2 of this Form will be sent or given to
employees as specified by Rule 428 under the Securities Act of 1933, as amended
(the "Act"). In accordance with Rule 428 and the requirements of Part I of Form
S-8, such documents are not being filed with the Securities and Exchange
Commission (the "Commission") either as part of this Registration Statement or
as prospectuses or prospectus supplements pursuant to Rule 424. The L. S.
Starrett Company (the "Company" or the "Registrant") shall maintain a file of
such documents in accordance with the provisions of Rule 428. Upon request, the
Registrant shall furnish to the Commission or its staff a copy of any or all of
the documents included in such file.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
---------------------------------------
The Registrant incorporates the following documents herein by reference:
(a) The Company's Form 10-K for the fiscal year ended June 29, 1996, as
filed with the Commission pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
(b) The latest annual report of The L.S. Starrett Company 401(k) Stock
Savings Plan (the "Plan") filed pursuant to Section 13(a) or 15(d) of
the Exchange Act.
(c) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the Company
document referred to in (a) above.
(d) The description of the Company's Class A and Class B Common Stock, $1.00
par value (the "Common Stock"), contained in the Company's Registration
Statements and subsequent reports filed under the Exchange Act.
All documents subsequently filed by the Registrant or the Plan pursuant to
Section 13(a), Section 13(c), Section 14 and Section 15(d) of the Exchange Act,
prior to the filing of a post-effective amendment to this registration statement
that indicates that all securities offered have been sold or which deregisters
all securities then remaining unsold, shall be deemed incorporated herein by
reference and to be part hereof from the date of filing of such documents.
Item 4. Description of Securities.
-------------------------
Both the Company's Class A and Class B Common Stock are registered under
Section 12 of the Exchange Act.
Holders of Class A and Class B Common Stock are entitled to receive
dividends when and if declared by the Board of Directors of the Company. No cash
dividends, however, may be declared on the Class B Common Stock unless cash
dividends of at least an equal amount are declared and paid on the Class A
Common Stock. In addition, no dividends payable in stock or property (other than
cash) shall be declared or paid on either the Class A or Class B Common Stock
unless an equal per share dividend of stock or property is declared and paid on
the shares of the other class.
The Common Stock does not have cumulative voting rights. Every holder of
Class A Common Stock is entitled to one vote on all matters for each share held
and every holder of Class B Common Stock is entitled to ten votes on all matters
for each share held. Except as otherwise required by law or the Articles of
Organization of the Company, the holders of Class A and Class B Common Stock
vote together as a single class, subject to any voting rights which may be
granted to holders of any series of Preferred Stock.
<PAGE>
At every meeting of the stockholders called for the election of
directors, the holders of Class A Common Stock, voting as a class, are entitled
to elect 25% of the number of directors to be elected at such meeting, and if
25% of such number of directors is not a whole number, then the holders of Class
A Common Stock, voting as a class, are entitled to elect the next higher whole
number of directors to be elected at such meeting but in any event are entitled
to elect at least one director at such meeting, and the holders of Class B
Common Stock have no voting rights with respect to the election of such
directors. The holders of Class A Common Stock and Class B Common Stock, voting
as a single class, are entitled to elect the remaining directors to be elected
at such meeting.
The vote of two-thirds of the Class A and Class B Common Stock
outstanding and entitled to vote, voting together as a class, shall be necessary
for approval of any agreement of consolidation or merger entered into by the
Company pursuant to the provisions of Section 78 or Section 79 of Chapter 156B
of the General Laws of The Commonwealth of Massachusetts.
Holders of the Common Stock are entitled in liquidation to pro rata
distribution of assets available for distribution to the stockholders after
payment of debts and expenses of liquidation. No holder of Common Stock has any
pre-emptive right to subscribe to any additional shares of any class of stock.
Each share of Class B Common Stock may at any time be converted into a share of
Class A Common Stock. Otherwise, there are no conversion rights, sinking fund
or redemption provisions relating to the Common Stock. Outstanding shares of
Common Stock are fully paid and non-assessable. The Class B Common Stock is not
transferable except in certain limited circumstances including a transfer to the
holder's spouse or to a lineal descendant of the holder.
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, can be redeemed by
the Company for $.01 per right and expire in the year 2000.
Item 5. Interests of Named Experts and Counsel.
--------------------------------------
Peter MacDougall, a partner in Ropes & Gray, is Clerk to the Company.
Item 6. Indemnification of Directors and Officers.
-----------------------------------------
The Company's By-Laws provide that the Company shall, to the extent
legally permissible, indemnify each of its directors or officers against all
liabilities and expenses, including amounts paid in satisfaction of judgments,
in compromise or as fines and penalties, and counsel fees, reasonably incurred
by him in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, in which he may be involved or with
which he may be threatened, while in office or thereafter, by reason of his
being or having been such a director or officer, except with respect to any
matter as to which he shall have been determined as provided in the By-Laws not
to have acted in good faith in the reasonable belief that his action was in the
best interests of the Company.
<PAGE>
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
The Company has purchased Reimbursement for Directors and Officers
Liability Insurance and Directors and Officers Liability Insurance.
Item 7. Exemption From Registration Claimed.
-----------------------------------
Not applicable.
Item 8. Exhibits.
--------
Number Title of Exhibit
- ------ ----------------
4.1 401(k) Stock Savings Plan.
5.1 Opinion of Ropes & Gray.
5.2 Determination Letter of Internal Revenue Service
as to Qualified Status of Plan.
9 401(k) Stock Savings Plan Trust Agreement.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Ropes & Gray (contained in the opinion filed as
Exhibit 5 to this registration statement).
24. Powers of Attorney (included on signature page).
Item 9. Undertakings.
------------
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement;
(i) to include any prospectus required by Section 10(a)(3) of the Act,
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement, and (iii) to include any material information
with respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement; provided, however, that paragraphs
-------- -------
<PAGE>
(a)(1)(i) and (a)(1)(ii) shall not apply if the information required to
be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to
section 13 or section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
(2) that, for the purpose of determining any liability under the
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
---- ----
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
----
fide offering thereof.
- ----
(c) Insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement on Form S-8 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Athol, The Commonwealth of Massachusetts, on
September 26, 1996.
THE L. S. STARRETT COMPANY
By /s/ Douglas R. Starrett
----------------------------
Douglas R. Starrett
Chief Executive Officer
POWER OF ATTORNEY
-----------------
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature appears below
hereby authorizes and constitutes Douglas R. Starrett, Roger U. Wellington, Jr.
and Peter MacDougall, and each of them singly, his true and lawful attorneys
with full power to them, and each of them singly, to sign for him and in his
name in the capacities indicated below any and all amendments (including post-
effective amendments) to this registration statement and to file the same, with
exhibits thereto, and other documents in connection therewith, and he hereby
ratifies and confirms his signature as it may be signed by said attorneys, or
any of them, to any and all such amendments.
<TABLE>
<CAPTION>
Signature Capacity in Which Signed Date
- --------- ------------------------ ----
<S> <C> <C>
/s/ Douglas R. Starrett Chief Executive Officer and September 26, 1996
- ------------------------------ Director (principal executive
Douglas R. Starrett officer)
/s/ Douglas A. Starrett President and Director September 26, 1996
- ------------------------------
Douglas A. Starrett
/s/ Roger U. Wellington, Jr. Treasurer and Chief Financial September 26, 1996
- ------------------------------ Officer and Director (principal
Roger U. Wellington, Jr. financial officer)
/s/ Steven G. Thomson Chief Accounting Officer September 26, 1996
- ------------------------------
Steven G. Thomson
/s/ William S. Hurley Director September 26, 1996
- ------------------------------
William S. Hurley
</TABLE>
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the Plan has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Athol and the
Commonwealth of Massachusetts, this 26th day of September, 1996.
THE L.S. STARRETT COMPANY
401(k) STOCK SAVINGS PLAN
By:
/s/Douglas A. Starrett
--------------------------------
Douglas A. Starrett
/s/Roger U. Wellington, Jr.
--------------------------------
Roger U. Wellington, Jr.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Title of Exhibit
- ------ ----------------
<S> <C>
4.1 401(k) Stock Savings Plan.
5.1 Opinion of Ropes & Gray.
5.2 Determination Letter of Internal Revenue Service
As to Qualified Status of Plan.
9 401(k) Stock Savings Plan Trust Agreement.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Ropes & Gray (contained in the
opinion filed as Exhibit 5 to this registration
statement).
24. Powers of Attorney (included on Signature Page).
</TABLE>
<PAGE>
Exhibit 4.1
THE L. S. STARRETT COMPANY
401(k) STOCK SAVINGS PLAN
(Amended and Restated Effective January 1, 1989)
<PAGE>
THE L. S. STARRETT COMPANY
401(K) STOCK SAVINGS PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
INTRODUCTION...........................................................
1.1 Amendment and Restatement....................................
1.2 Purpose......................................................
1.3 Defined Terms................................................
ARTICLE II
DEFINITIONS............................................................
2.1 "Accounts"...................................................
2.2 "Affiliated Company".........................................
2.3 "Basic Contribution".........................................
2.4 "Beneficiary"................................................
2.5 "Board of Directors".........................................
2.6 "Code".......................................................
2.7 "Company"....................................................
2.8 "Company Account"............................................
2.9 "Compensation"...............................................
2.10 "Eligible Employee".........................................
2.11 "Employee"..................................................
2.12 "Employer"..................................................
2.13 "Entry Date"................................................
2.14 "ERISA".....................................................
2.15 "Highly Compensated Employee"...............................
2.16 "Limitation Year"...........................................
2.17 "Matching Company Contribution".............................
2.18 "Normal Retirement Age".....................................
2.19 "Participant"...............................................
2.20 "Participant Account".......................................
2.21 "Participating Company".....................................
2.22 "Pay Deferral Contribution".................................
2.23 "Period of Service".........................................
</TABLE>
<PAGE>
<TABLE>
<S> <C>
2.24 "Plan"......................................................
2.25 "Plan Year".................................................
2.26 "Qualified Domestic Relations Order"........................
2.27 "Rollover Contribution".....................................
2.28 "Rollover Account"..........................................
2.29 "Savings Plan Committee"....................................
2.30 "Section"...................................................
2.31 "Stock".....................................................
2.32 "Supplemental Contribution".................................
2.33 "Trust".....................................................
2.34 "Trust Fund"................................................
2.35 "Trustee"...................................................
2.36 "Valuation Date"............................................
ARTICLE III
PARTICIPATION..........................................................
3.1 Eligibility for Participation................................
3.2 Commencement of Participation................................
3.3 Duration of Participation....................................
3.4 Reemployment of Former Participants..........................
ARTICLE IV
ACCOUNTS...............................................................
4.1 Participant Accounts.........................................
4.2 Company Accounts.............................................
4.3 Rollover Accounts............................................
4.4 Adjustment of Accounts.......................................
4.5 Investment of Accounts.......................................
4.6 Annual Statement.............................................
ARTICLE V
PAY DEFERRAL AGREEMENTS................................................
5.1 Pay Deferral Agreement.......................................
5.2 Suspension or Modification of Pay Deferral Agreement.........
5.3 Procedure for Making and Suspending Pay Deferral Agreement...
5.4 Pay Deferral Contributions...................................
5.5 Rollover Contributions.......................................
</TABLE>
<PAGE>
<TABLE>
<S> <C>
5.6 Time for Making Pay Deferral Contributions...................
5.7 Certain Limits Apply.........................................
5.8 Return of Contributions......................................
ARTICLE VI
COMPANY CONTRIBUTIONS..................................................
6.1 Amount of Matching Company Contribution......................
ARTICLE VII
LIMITS ON CONTRIBUTIONS................................................
7.1 Code Section 404 Limits......................................
7.2 Code Section 415 Limits......................................
7.3 Code Section 402(g) Limits...................................
7.4 Code Section 401(k)(3) Limits................................
7.5 Code Section 401(m) Limits...................................
ARTICLE VIII
VALUATION OF TRUST FUND................................................
8.1 Valuation by Trustee.........................................
ARTICLE IX
DISTRIBUTION OF BENEFITS...............................................
9.1 Vested Rights................................................
9.2 Benefits upon Separation from Service........................
9.3 Forfeitures..................................................
9.4 Disability and Retirement Benefits...........................
9.5 Death Benefits...............................................
9.6 Time of Distribution.........................................
9.7 Payments to Incompetents or Minors...........................
9.8 Form of Distribution.........................................
9.9 Optional Direct Transfer of Eligible Rollover Distributions..
9.10 Latest Commencement of Benefits.............................
ARTICLE X
WITHDRAWALS PRIOR TO SEPARATION FROM SERVICE...........................
10.1 Hardship Withdrawals........................................
10.2 Effect of Hardship Withdrawal...............................
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE XI
LOANS TO PARTICIPANTS..................................................
11.1 In General..................................................
11.2 Rules and procedures........................................
11.3 Repayment upon distribution.................................
11.4 Default.....................................................
11.5 Note as trust asset.........................................
11.6 Administrative fee..........................................
ARTICLE XII
TRUSTEE AND THE TRUST FUND.............................................
12.1 Trustee.....................................................
12.2 Voting of Stock.............................................
12.3 Trust Fund..................................................
ARTICLE XIII
ADMINISTRATION OF THE PLAN.............................................
13.1 The Company.................................................
13.2 Plan Administration and Interpretation......................
13.3 Other Powers of the Company.................................
13.4 Consultations by the Company................................
13.5 Finality of Actions.........................................
13.6 Indemnification.............................................
13.7 Compensation and Expenses...................................
13.8 Claim and Appeal Procedure..................................
ARTICLE XIV
AMENDMENT AND TERMINATION..............................................
14.1 Amendment of Plan...........................................
14.2 Termination of Plan.........................................
14.3 Binding effect on other Participating Companies.............
ARTICLE XV
SPECIAL TOP-HEAVY PROVISIONS...........................................
15.1 Provisions to Apply.........................................
15.2 Minimum Contribution........................................
</TABLE>
<PAGE>
<TABLE>
<S> <C>
15.3 Special Vesting Schedule....................................
15.4 Adjustment to Limitation on Benefits........................
15.5 Definitions.................................................
ARTICLE XVI
SPECIAL PROVISIONS.....................................................
16.1 Rights of Employees.........................................
16.2 Merger or Consolidation of Plan; Transfer of Plan Assets....
16.3 Limitation of Assignment....................................
16.4 Distributions under Qualified Domestic Relations Orders.....
16.5 Rules of Construction.......................................
16.6 Governing Law...............................................
</TABLE>
<PAGE>
ARTICLE I
INTRODUCTION
1.1 Amendment and Restatement. This Plan amends, restates and continues
-------------------------
The L.S. Starrett Company 401(k) Stock Savings Plan. Except as otherwise
specifically and expressly provided herein, the provisions of the Plan as set
forth below will be effective as of January 1, 1989 or such earlier date
required for a provision under the applicable provisions of the Code and the
regulations thereunder. The original effective date of the Plan is March 1,
1986.
1.2 Purpose. The purpose of the Plan is to provide Eligible Employees of
-------
the Participating Companies with tax-effective long-term savings opportunities.
The Plan and its related Trust are intended to qualify as a profit-sharing plan
and trust under Code sections 401(a) and 501(a), and the cash or deferred
arrangement forming part of the Plan is intended to qualify under Code section
401(k). The provisions of the Plan and Trust shall be construed and applied
accordingly. Except as otherwise provided in Section 5.8, Article XIV and
Section 16.4, no part of the corpus or income of the Trust Fund will be used
for, or diverted to, any purposes other than for the exclusive benefit of
Participants, former Participants, and their Beneficiaries and for the payment
of expenses of administering the Plan and Trust.
1.3 Defined Terms. All capitalized terms used in the following
-------------
provisions of the Plan have the meanings given them under the Article entitled
"Definitions."
<PAGE>
ARTICLE II
DEFINITIONS
Wherever used in the Plan the following words and phrases shall have the
meanings set forth in this Article II unless a different meaning is plainly
required by the context.
2.1 "Accounts" mean, for any Participant, the accounts established by the
Trustee to which contributions made for the Participant's benefit, and any
allocable income, expense, gain and loss, are allocated. References to a
Participant's Participant Account, Company Account, and Rollover Account,
respectively, refer to those Accounts established for a Participant to which the
respective contributions are allocated.
2.2 "Affiliated Company" means (a) any corporation (other than the
Company) that is a member of a controlled group of corporations (as defined by
Code section 414(b)) of which the Company is also a member, (b) any trade or
business (other than the Company), whether or not incorporated, that is under
common control (as defined in Code section 414(c)) with the Company, (c) any
trade or business (other than the Company) that is a member of an affiliated
service group (as defined in Code section 414(m)) of which the Company is also a
member, or (d) to the extent required by regulations issued under Code section
414(o), any other organization. No such corporation, trade or business, or other
organization shall be treated as an Affiliated Company prior to the date such
organization satisfies the foregoing control or affiliation tests. In
identifying any "Affiliated Companies" for purposes of the Code section 415
limits, the definitions in Code sections 414(b) and (c) shall be modified as
provided in Code section 415(h).
2.3 "Basic Contribution" means, in the case of any Participant for any
period, that portion of the Pay Deferral Contribution made for the Participant's
benefit for such period which is designated by the Company as the "Basic
Contribution," up to a maximum of 15% of the Compensation of such Participant
during such period. The Company may from time to time reduce (including to
zero) the percentage rate of Pay Deferral Contributions eligible to be treated
as "Basic Contributions."
2.4 "Beneficiary" means the person or persons designated by a Participant
pursuant to the provisions of Section 9.5(a) to receive benefits under the Plan
upon the death of such Participant.
2.5 "Board of Directors" means the Board of Directors of the Company.
<PAGE>
2.6 "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.
2.7 "Company" means The L.S. Starrett Company, and any successor to all or
a major portion of its assets or business which assumes the obligations of the
Company under the Plan.
2.8 "Company Account" means the account established pursuant to Section
6.1 for each Participant's share of Matching Company Contributions (and earnings
attributable thereto).
2.9 "Compensation" means,
(a) for purposes of determining the Code section 415 limits and the
amount of any minimum contribution under the special top-heavy provisions,
the Participant's wages, salaries, fees for professional services and other
amounts received (without regard to whether or not an amount is paid in
cash) for personal services actually rendered in the course of employment
with the Employer to the extent that the amounts are includible in gross
income, including but not limited to commissions, compensation for services
on the basis of a percentage of profits, bonuses, fringe benefits,
reimbursements, and expense allowances, but not including those items
excludable from the definition of compensation under Treasury Regulation
section 1.415-2(d)(3);
(b) for purposes of determining the status of an individual as a
Highly Compensated Employee or a key employee, the same as described in (a)
above, but increased by any such amounts that would have been received by
the individual from the Employer but for an election under Code sections
125, 401(k), or 402(h); and
(c) for all other purposes under the Plan, the same as in (b) above,
but excluding amounts in the form of non-cash compensation (even if
includible in gross income), including but not limited to imputed
compensation from group term life insurance, amounts received in connection
with any stock awards, reimbursements for professional fees, and moving or
other expense reimbursements.
(d) Compensation shall include only that Compensation which is
actually paid to the Participant during the applicable Plan Year. For
purposes of (b) and (c) above, Compensation for any individual will be
limited for any Plan Year beginning after
<PAGE>
December 31, 1988. For each Plan Year on or after January 1, 1989 and
before January 1, 1994, the limit shall be $200,000 (or such larger amount
as the Secretary of the Treasury may determine for such Plan Year under
Code section 401(a)(17)). For each Plan Year on or after January 1, 1994,
the limit shall be $150,000 (or such larger amount as the Secretary of
Treasury may determine for such Plan Year under Code section 401(a)(17)).
If the period for determining Compensation used in calculating a
Participant's allocation for a determination period is shorter than 12
months, the annual Compensation limit shall be an amount equal to the
otherwise applicable limit multiplied by a fraction, the numerator of which
is the number of months in the period, and the denominator of which is 12.
In determining the Compensation of a Participant for purposes of this
limitation, the rules of Code section 414(q)(6) shall apply, except in
applying such rules, the term "family" shall include only the spouse of the
Participant and any lineal descendants of the Participant who have not
attained age 19 before the close of the Plan Year. If, as a result of the
application of such rules the limitation under Code section 401(a)(17) is
exceeded, then the limitation shall be prorated among the affected
individuals in proportion to each such individual's Compensation as
determined under this Section prior to the application of this limitation.
2.10 "Eligible Employee" means any Employee who is employed by a
Participating Company. In no event shall an individual who is treated as an
Employee solely by reason of being a "leased employee" within the meaning of
Code section 414(n) become an Eligible Employee until he or she becomes actually
employed by a Participating Company.
2.11 "Employee" means any person who is employed by the Employer, including
any leased employee and any other person required to be treated as an employee
pursuant to Code sections 414(n) and 414(o).
2.12 "Employer" means the Participating Companies and all Affiliated
Companies.
2.13 "Entry Date" means, with respect to each Eligible Employee, the
Eligible Employee's first payroll date of each pay period during each calendar
year as well as any other date specified by the Savings Plan Committee.
2.14 "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.
<PAGE>
2.15 "Highly Compensated Employee" means an Employee who is a "highly
compensated employee" within the meaning of Code section 414(q). The term
Highly Compensated Employee includes highly compensated active Employees and
highly compensated former Employees.
(a) A highly compensated active Employee includes any Employee who
performs service for an Employer during the determination year and who, during
the look-back year: (1) received Compensation from the Employer in excess of
$75,000 (as adjusted pursuant to Code section 414(q)(1)); (2) received
Compensation from the Employer in excess of $50,000 (as adjusted pursuant to
Code section 414(q)(1)) and was a member of the top-paid group for such year; or
(3) was an officer of the Employer and received Compensation during such year
that is greater than 50 percent of the dollar limitation in effect under Code
section 415(b)(1)(A).
(b) The term Highly Compensated Employee also includes: (1) an
Employee who is described in paragraph (a) if the term "determination year" is
substituted for the term "look-back year" and the Employee is one of the 100
Employees who received the most Compensation from the Employer during the
determination year; and (2) an Employee who is a 5 percent owner at any time
during the look-back year or determination year. If no officer has satisfied
the compensation requirement of (a)(3) above during either a determination year
or look-back year, the highest paid officer for such year shall be treated as a
Highly Compensated Employee. For this purpose, the determination year shall be
the Plan Year. The look-back year shall be the 12-month period immediately
preceding the determination year.
(c) A highly compensated former Employee includes any Employee who
separated (or was deemed to have separated) from service prior to the
determination year, performs no service for the Employer during the
determination year, and was a highly compensated active Employee for either the
separation year or any determination year ending on or after the Employee's 55th
birthday.
(d) If an Employee is, during a determination year or look-back year,
a family member of either a 5 percent owner who is an active or former Employee
or a Highly Compensated Employee who is one of the 10 most Highly Compensated
Employees ranked on the basis of Compensation paid by the Employer during such
year, then the family member and the 5 percent owner or top 10 Highly
Compensated Employee shall be aggregated. In such case, the family member and 5
percent owner or top 10 Highly
<PAGE>
Compensated Employee shall be treated as a single Employee receiving
compensation and Plan contributions equal to the sum of such compensation and
contributions of the family member and 5 percent owner or top 10 Highly
Compensated Employee. For purposes of this Section, family member includes the
spouse, lineal ascendants and descendants of the Employee or former Employee and
the spouses of such lineal ascendants and descendants.
(e) The top paid group shall consist of the top 20 percent of active
Employees, ranked on the basis of Compensation received from the Employer during
the year. The number of officers treated as Highly Compensated Employees shall
be limited to the lesser of (1) 50 Employees or (2) the greater of 3 Employees
or 10 percent of all Employees. If there is not at least one officer whose
Compensation is in excess of 50 percent of the limit in Code section
415(b)(i)(A), then the highest paid officer of the Employer shall be treated as
a Highly Compensated Employee. The determination of who is a Highly Compensated
Employee, including the determinations of the number and identity of Employees
in the top-paid group, the top 100 Employees, the number of Employees treated as
officers and the compensation that is considered, will be made in accordance
with Code section 414(q).
2.16 "Limitation Year" means, for periods beginning prior to 1994, the
Company's taxable year for federal income tax purposes. Effective June 26,
1994, "Limitation Year" means the calendar year.
2.17 "Matching Company Contribution" means the Company contribution made on
behalf of each Participant under the Plan for whom a Basic Contribution is made
pursuant to Section 5.4.
2.18 "Normal Retirement Age" means age 65.
2.19 "Participant" means an Eligible Employee who has satisfied the
eligibility requirements for Plan Participation set forth in Article III and has
submitted the required pay deferral agreement to the Company pursuant to Section
5.1.
2.20 "Participant Account" means the account established for each
Participant pursuant to Section 4.1 for all contributions made under a pay
deferral agreement (and earnings attributable thereto).
2.21 "Participating Company" means the Company and any other affiliate or
company or subsidiary of the Company which has adopted the Plan with the
approval of the Board of
<PAGE>
Directors. Schedule A, attached to the Plan and updated periodically, contains
a list of Participating Companies and their respective dates of participation.
2.22 "Pay Deferral Contribution" means, in the case of any Participant, a
contribution made for the benefit of the Participant under Section 5.4.
2.23 "Period of 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 break in service 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 the
Employer. An Employee will also receive credit for any period of severance of
less than 12 consecutive months. Fractional periods of a year will be expressed
in terms of days. In the case of an individual who is absent from work for
maternity or paternity reasons, the 12-consecutive month period beginning on the
first anniversary of the first day of such absence shall not constitute a break
in service. The period between the first and second anniversaries of the first
day of absence from work shall be neither a period of service nor a period of
severance, provided, however, than an Employee who has not returned to
employment with a Participating Company by the second anniversary of this first
day of absence from work shall incur a date of severance as of such second
anniversary date. For purposes of this Section,
(a) an absence from work for maternity or paternity reasons means an
absence (1) by reason of the pregnancy of the individual, (2) by reason of
the birth of a child of the individual, (3) by reason of the placement of a
child with the individual in connection with the adoption of such child by
such individual, or (4) for purposes of caring for such child for a period
beginning immediately following such birth or placement;
(b) a break in service is a period of severance of at least 12
consecutive months;
(c) a period of severance is a continuous period of time during which
the Employee is not employed by the Employer. Such period begins on the
date the Employee retires, quits, or is discharged, or if earlier, the 12-
month anniversary of the date on which the Employee was otherwise first
absent from service, and ends on the date on which the Employee next
performs an hour of service; and
(d) any period of authorized leave of absence, or a leave of absence
under the Family and Medical Leave Act of 1993 which is required to be
credited for purposes of the Plan, shall not be considered a break in
service.
<PAGE>
(e) In the case of a leave of absence for service in the armed forces
of the United States, no period shall be excluded under this paragraph
during which the Employee has reemployment rights with respect to the
Employer under federal law.
(f) An Employee will be deemed to have quit upon failure to return to
active employment with the Employer upon the expiration of an authorized
leave of absence, an absence for service in the armed forces of the United
States, or a leave of absence under the Family and Medical Leave Act of
1993.
2.24 "Plan" means The L.S. Starrett Company 401(k) Stock Savings Plan, as
set forth herein together with any and all amendments thereto.
2.25 "Plan Year" means the calendar year.
2.26 "Qualified Domestic Relations Order" means any judgment, decree or
order (including approval of a property settlement agreement) which constitutes
a "qualified domestic relations order" within the meaning of Code section
414(p). A judgment, decree or order shall not be considered not to be a
Qualified Domestic Relations Order merely because it requires a distribution to
an alternate payee (or the segregation of accounts pending distribution to an
alternate payee) before the Participant attains the "earliest retirement age"
(as defined in section 414(p) of the Code.
2.27 "Rollover Contribution" means a contribution made to the Plan by a
Participant which satisfies the requirements for rollovers as set forth in
Section 5.5 of the Plan.
2.28 "Rollover Account" means the account established for a Participant to
which Rollover Contributions made by the Participant (and earnings attributable
thereto) are credited.
2.29 "Savings Plan Committee" means the committee established by the
Company in accordance with Article XIII.
2.30 "Section" means a Section of the Plan.
2.31 "Stock" means Class A common stock or Class B Common Stock of the
Company.
2.32 "Supplemental Contribution" means, for any period, that portion (if
any) of any contribution made to the Plan for such period for the benefit of a
Participant under a pay deferral agreement which represents the difference
between the Basic Contribution made for the benefit of
<PAGE>
the Participant for such period and 15% of the Compensation of such Participant
during such period.
2.33 "Trust" means the trust established between the Company and the
Trustee pursuant to Article XII.
2.34 "Trust Fund" means the property held in trust by the Trustee for the
benefit of Participants and their Beneficiaries.
2.35 "Trustee" means the person or persons designated as Trustee by the
Company and any duly appointed successor trustee or trustees.
2.36 "Valuation Date" means the date as of which the Trust Fund is valued
and the Accounts of each Participant (or the Participant's Beneficiary) are
adjusted as provided in Section 4.4. Valuation Dates shall be the last day in
the calendar month of December and any other interim dates designated by the
Savings Plan Committee.
<PAGE>
ARTICLE III
PARTICIPATION
3.1 Eligibility for Participation. Each Eligible Employee who was a
-----------------------------
Participant in the Plan as of December 31, 1988 will remain a Participant as of
January 1, 1989, subject to Section 3.3 below. Each other Eligible Employee
shall become immediately eligible for participation under the Plan upon his or
her completion of a six month Period of Service and attainment of age 18,
subject to Section 3.2 below.
3.2 Commencement of Participation. Each Eligible Employee may become a
-----------------------------
Participant by filing an application with a Participating Company; such
application shall be on a form supplied by the Participating Company. The
Eligible Employee's participation shall become effective on the Entry Date next
following the receipt of such application form, provided he or she is an
Eligible Employee on such Entry Date.
3.3 Duration of Participation. A Participant will continue to be a
-------------------------
Participant as long as he or she remains an Eligible Employee or is entitled to
a benefit under the Plan and will cease to be a Participant when he or she is
neither an Eligible Employee nor entitled to receive such benefit.
3.4 Reemployment of Former Participants. Each former Participant of the
-----------------------------------
Plan who is rehired as an Eligible Employee shall immediately be eligible to re-
enter the Plan. If such Participant does not re-enter immediately, he or she
shall be eligible to re-enter as of any Entry Date following his or her date of
rehire.
<PAGE>
ARTICLE IV
ACCOUNTS
4.1 Participant Accounts. The Trustee shall establish and maintain for
--------------------
each Participant a separate Participant Account to which shall be credited all
contributions made to the Plan on behalf of the Participant pursuant to a pay
deferral agreement under Article V. A Participant shall be fully vested in and
have a nonforfeitable right to the value of such Account at all times.
4.2 Company Accounts. The Trustee shall establish and maintain for each
----------------
Participant a separate Company Account to which shall be credited the Matching
Company Contributions made on behalf of such Participant. A Participant shall
be vested in his or her Matching Company Contributions in accordance with
Section 9.1.
4.3 Rollover Accounts. The Trustee shall establish and maintain for each
-----------------
Participant, as it deems necessary, a separate Rollover Account to which shall
be credited the Rollover Contributions, if any, made to the Plan by such
Participant in accordance with Section 5.5. A Participant shall be fully vested
in and have a nonforfeitable right to the value of such Account at all times.
4.4 Adjustment of Accounts. As of each Valuation Date, the Savings Plan
----------------------
Committee shall adjust each Account to reflect the fair market value of the
assets allocated to the Account. In so doing,
(a) each Account balance will be increased by the amount of
contributions, income and gain allocable to such Account since the prior
Valuation Date; and
(b) each Account balance will be decreased by the amount of
distributions from the Account and expenses and losses allocable to the
Account since the prior Valuation Date.
Income, expense, gain and loss which are generated by a particular investment
within the Trust Fund shall be allocated to the Accounts participating in such
investment in proportion to their balances as of such Valuation Date; provided,
however, that in determining such balances, only a proportionate amount of any
contribution made to the Plan under a pay deferral agreement, pursuant to
Section 5.1, or of any contribution made by the Participating Company since the
prior Valuation Date shall be recognized; such amount is based on the number of
full calendar months the contribution was in the Trust Fund during the current
valuation period.
<PAGE>
4.5 Investment of Accounts. All Accounts of a Participant shall be
----------------------
invested by the Trustee in Stock. Where contributions made to the Plan are not
made directly in the form of Stock, the Trustee shall purchase Stock in
accordance with the terms and conditions of the trust agreement between the
Company and the Trustee or, if such agreement does not specify terms and
conditions pertaining to the purchase of Stock, as the Trustee, in consultation
with the Company, may determine, subject in each case to Sections 407 and 408 of
ERISA. Except in the case of shares (if any) of Class B common stock
distributed with respect to shares of Class A common stock held by the Trustee,
and except as otherwise hereinafter provided, all investments by the Trustee in
Stock shall be in Class A common stock. The Company by action of the Board of
Directors or by action of one or more individuals duly authorized by the Board
of Directors (the "directing party") may direct the Trustee to invest some or
all of the contributions to or assets of the Plan, or the income thereon, in
Class B common stock in lieu of or in addition to Class A common stock, whether
by establishment of separate investment funds or in a commingled fund, provided
only that any such direction shall apply to Participants in a manner satisfying
the nondiscrimination provisions of Treas. Regs. (S) 1.401(a)(4)-4, and provided
further that any such direction shall be effective only to the extent consistent
with the instruments governing Class B common stock or Class A common stock, as
the case may be, and permissible under applicable securities law. Without
limiting the foregoing, the directing party may direct that only Matching
Company Contributions and the income thereon, or a portion or all of other
contributions and the income thereon, or any combination of the foregoing, shall
be invested in Class B common stock and may, but need not, provide Participants
with a choice between the Class A and Class B common stock. Any such direction
or determination by the directing party shall be deemed a part of the Plan for
purposes of Section 407 of ERISA.
4.6 Annual Statement. As soon as administratively feasible after each
----------------
Plan Year (or at other times established by the Trustee), the Trustee shall
furnish to each Participant or Participant's Beneficiary, if appropriate, a
statement of his or her Accounts showing the fair market value of the Accounts
at the beginning of the Plan Year, any changes during such Plan Year, and the
fair market value of the Accounts as of such Plan Year.
<PAGE>
ARTICLE V
PAY DEFERRAL AGREEMENTS
5.1 Pay Deferral Agreement. Each Participant may enter into a written
----------------------
agreement with the Participating Company (hereinafter referred to as a "pay
deferral agreement") to have his or her Compensation for each payroll period
reduced by a number of whole percentage points between 1% and 15% (inclusive)
elected by the Participant. Each such agreement shall be in the form prescribed
or approved by the Savings Plan Committee and shall be (i) irrevocable while the
agreement is in effect with respect to Compensation already earned but (ii)
revocable as of any payroll period with respect to Compensation not yet earned.
The amount of such salary reduction with respect to a Participant will be
credited to his or her Participant Account on a payroll period basis. A pay
deferral agreement shall remain in effect unless suspended or modified pursuant
to Section 5.2.
5.2 Suspension or Modification of Pay Deferral Agreement. A Participant
----------------------------------------------------
may at any time suspend his or her pay deferral agreement with respect to future
Compensation by notifying the Participating Company in writing. The Participant
may resume his or her pay deferral agreement at any time by notifying the
Participating Company in writing within such period as the Savings Plan
Committee may permit. A Participant may change the percentage of pay which he
or she defers through the pay deferral agreement at any time by notifying the
Participating Company in writing within such period as the Savings Plan
Committee may permit, subject to the conditions of Section 5.1. Any such
suspension, resumption, or change will be effective as of the first payroll date
by which the Participating Company can accommodate the Participant's request.
5.3 Procedure for Making and Suspending Pay Deferral Agreement. The pay
----------------------------------------------------------
deferral agreement and any suspension thereof shall be made by the Participant
on such form, within such time, and in accordance with such rules and procedures
as may be established by the Savings Plan Committee.
5.4 Pay Deferral Contributions. On behalf of each Participant for whom
--------------------------
there is in effect, for any payroll period, a pay deferral agreement described
in Section 5.1, the Participating Company shall make a contribution to the
Trust, as a Pay Deferral Contribution, in an amount equal to the amount
generated through such pay deferral agreement.
5.5 Rollover Contributions. An Eligible Employee may make a Rollover
----------------------
Contribution to the Plan in any amount, provided that the rollover provisions of
the Code are satisfied. Such Rollover Contribution will not be considered an
annual addition for the limitation purposes of Section 7.2.
<PAGE>
5.6 Time for Making Pay Deferral Contributions. Pay Deferral
------------------------------------------
Contributions will be paid in cash to the Trustee as soon as administratively
feasible following the payroll period to which they relate and will be credited
to the Participant's Participant Account in accordance with Section 4.4. In no
event shall a Pay Deferral Contribution be paid to the Trustee later than 90
days after the date on which the Compensation to which such contributions relate
is paid.
5.7 Certain Limits Apply. All Participating Company contributions to the
--------------------
Plan are subject to the applicable limits set forth under Code sections 401(k),
402(g), 401(m), 404, and 415, as further described elsewhere in the Plan. In
addition, certain minimum allocations may be required under Code section 416, as
also further described elsewhere in Plan.
5.8 Return of Contributions. If any contribution by a Participating
-----------------------
Company to the Trust is
(a) made by reason of a good faith mistake of fact, or
(b) believed by the Participating Employer in good faith to be
deductible under Code section 404, but the deduction is disallowed,
the Trustee shall, upon request by the Participating Company, return to the
Participating Company 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 deduction. Such excess shall be reduced by the
losses of the Trust Fund attributable thereto, if and to the extent such losses
exceed the gains and income attributable thereto. In no event shall the return
of a contribution hereunder 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 hereunder shall be made more than one
year after the mistaken payment of the contribution, or disallowance of the
deduction, as the case may be.
<PAGE>
ARTICLE VI
COMPANY CONTRIBUTIONS
6.1 Amount of Matching Company Contribution. For each calendar quarter,
---------------------------------------
the Participating Company will contribute to the Plan on behalf of each eligible
Participant a Matching Company Contribution equal to a percentage, specified by
the Company as hereinafter provided, of the Basic Contribution contributed for
the benefit of the Participant for such quarter. The Company, in its
discretion, may from time to time change the rate of, or reduce to zero, the
rate of Matching Company Contributions with respect to Basic Contributions.
Such change will be made on a prospective basis only. The Company will
determine for each calendar quarter the rate at which a Matching Company
Contribution (if any) will be made. Except as otherwise provided by the
Company, Matching Company Contributions will be made at the rate of one share of
Stock for each three shares of Stock purchased with the Basic Contributions to
which the Matching Company Contributions relate. No Participant will be
eligible to share in a Matching Company Contribution unless he or she is a
Participant on the last day of the calendar quarter for which the Matching
Company Contribution is made. The Participating Company shall make its matching
contribution to the Trustee at such time as the Company determines, but in any
event no later than the time prescribed by law (including extensions) for filing
the Participating Company's income tax return for its taxable year in or with
which the Plan Year ends. Such contributions shall be credited to the
Participant's Company Account no later than each Valuation Date. In addition,
Matching Company Contributions for a Plan Year must be made no later than the
last day of the 12-month period immediately following the Plan Year.
<PAGE>
ARTICLE VII
LIMITS ON CONTRIBUTIONS
7.1 Code Section 404 Limits. The sum of the contributions made by each
-----------------------
Participating Company under the Plan for any Plan Year shall not exceed the
maximum amount deductible under the applicable provisions of the Code, provided
that the foregoing maximum deduction limits shall not apply to any Participating
Company that is not incorporated in the United States. All contributions under
the Plan made by a Participating Company are expressly conditioned on their
deductibility under Code section 404 for the taxable year when paid (or treated
as paid under Code section 404(a)(6)).
7.2 Code Section 415 Limits.
-----------------------
(a) Incorporation by reference. Code section 415 is hereby
--------------------------
incorporated by reference into the Plan.
(b) Annual Addition. The Savings Plan Committee shall determine an
---------------
"annual addition" for each Participant for each Limitation Year, which
shall consist of the following amounts allocated to the Participant's
Accounts for the year:
(1) Pay Deferral Contributions,
(2) Matching Company Contributions, and
(3) forfeitures.
(c) General Limitation on Annual Additions. The annual addition to a
--------------------------------------
Participant's Accounts under the Plan for any Limitation Year, when added
to the annual additions to his or her accounts for such Year under all
other defined contribution plans maintained by the Employer, shall not
exceed the lesser of
(1) $30,000 (or such other amount as is in effect under Code
section 415(c)(1)(A) for the Limitation Year), or
(2) 25% of the Participant's Compensation for such Limitation
Year.
(d) Combined Limitations. In the case of a Participant who also
--------------------
participates in a defined benefit plan maintained by the Employer, the
annual addition for a Limitation Year will, if necessary, be further
limited so that the sum of the Participant's defined
<PAGE>
contribution fraction and his or her defined benefit plan fraction for such
Limitation Year does not exceed 1.0, taking into account any transition
rules applicable to section 415(e) of the Code.
(e) Order of Reduction. To the extent necessary to satisfy the
------------------
limitations of Code section 415 for any Participant, the annual addition
which would otherwise be made on behalf of the Participant under the Plan
shall be reduced after the Participant's benefit is reduced in the
following order:
(1) any and all defined benefit plans,
(2) The L.S. Starrett Company Employee Stock Ownership Plan, and
(3) any other defined contribution plan.
(f) Correction of Excess Annual Addition. If, as a result of the
------------------------------------
allocation of forfeitures, a reasonable error in estimating a Participant's
Compensation for a Plan Year or Limitation Year, a reasonable error in
determining the amount of elective deferrals (within the meaning of Code
section 402(g)(3)) that may be made with respect to any individual under
the limits of Code section 415, or under such other facts and circumstances
as may be permitted under regulations or by the Internal Revenue Service,
the annual addition under the Plan for a Participant would cause the Code
section 415 limitations for a Limitation Year to be exceeded (after
application of (e) above), any Pay Deferral Contributions made pursuant to
a pay deferral agreement together with earnings thereon made by or on
behalf of the Participant for the Limitation Year, to the extent necessary,
will be returned to the Participant. Any contributions so returned will be
disregarded for purposes of the limits under Code sections 402(g) and
401(k)(3). If the remaining annual addition for the Participant still
exceeds the Code section 415 limits for the Limitation Year, Matching
Company Contributions (including forfeitures applied to reduce any such
Participating Company contributions), together with earnings thereon, will
not be allocated to the Participant's Account to the extent necessary for
the Limitation Year, but will be used to reduce Participating Company
contributions for the next Limitation Year (and succeeding Limitation
Years, as necessary) for that Participant if the Participant is covered by
the Plan as of the end of the Limitation Year. However, if the Participant
is not covered by the Plan as of the end of the Limitation Year, the excess
amounts will not be distributed to Participants or former Participants, but
will be held unallocated for that Limitation Year in a suspense account. If
the suspense account is in existence at any time during any subsequent
Limitation Year, all amounts in the suspense account will be allocated to
the Company Accounts of all Participants in
<PAGE>
proportion to their relative amounts of Compensation for the subsequent
Limitation Year, before any other contributions which would be part of an
annual addition are made to the Plan for the subsequent Limitation Year.
No investment gains or losses will be allocated to any suspense account
described in this paragraph; instead, any such gains or losses shall be
allocated among the remaining Accounts in proportion to their respective
balances.
7.3 Code Section 402(g) Limits. The maximum amount of Pay Deferral
--------------------------
Contributions made on behalf of any Participant for any calendar year shall in
no event exceed the maximum applicable limit in effect for the calendar year
under Treasury Regulation section 1.402(g)-1(d).
7.4 Code Section 401(k)(3) Limits.
-----------------------------
(a) In general. Pay Deferral Contributions made under the Plan are
----------
subject to the limits of Code section 401(k)(3), as more fully described
below. The Plan provisions relating to the 401(k)(3) limits are to be
interpreted and applied in accordance with Code sections 401(k)(3) and
401(a)(4), which are hereby incorporated by reference, and in such manner
as to satisfy such other requirements relating to Code section 401(k) as
may be prescribed by the Secretary of the Treasury from time to time.
(b) Actual deferral ratios. For each Plan Year, the Savings Plan
----------------------
Committee will determine the "actual deferral ratio" for each Participant
who is eligible for Pay Deferral Contributions. The actual deferral ratio
shall be the ratio, calculated to the nearest one-hundredth of one percent,
of the Pay Deferral Contributions made on behalf of the Participant for the
Plan Year to the Participant's Compensation for the applicable period. For
purposes of determining a Participant's actual deferral ratio,
(1) Pay Deferral Contributions will be taken into account only
if each of the following requirements are satisfied:
(A) the Pay Deferral Contribution is allocated to the
Participant's Participant Account as of a date within the Plan
Year, is not contingent upon participation in the Plan or
performance of services on any date subsequent to that date, and
is actually paid to the Trust no later than the end of the 12-
month period immediately following the Plan Year to which the
contribution relates; and
(B) the Pay Deferral Contribution relates to Compensation
that either would have been received by the Participant in the
Plan Year but for the
<PAGE>
Participant's election to defer under the Plan. or is
attributable for services performed in the Plan Year and, but for
the Participant's election to defer, would have been received by
the Participant within 2 1/2 months after the close of the Plan
Year.
(2) in the case of a Participant who is a Highly Compensated
Employee for the Plan Year and is eligible to have elective deferrals
(and qualified matching contributions, to the extent treated as
elective deferrals) allocated to his or her accounts under two or more
cash or deferred arrangements described in Code section 401(k)
maintained by the Employer, the Participant's actual deferral ratio
shall be determined as if such elective deferrals (as well as
qualified matching contributions) are made under a single arrangement,
and if two or more of the cash or deferred arrangements have different
Plan Years, all cash or deferred arrangements with the Plan Years
ending with or within the same calendar year shall be treated as a
single arrangement;
(3) for purposes of determining the actual deferral ratio of a
Participant who is a 5 percent owner or one of the 10 most highly paid
Highly Compensated Employees, the Pay Deferral Contributions and
Compensation of such Participant shall include the Pay Deferral
Contributions and Compensation for the Plan Year of the Participant's
family members (as defined in Code section 414(q)(6)), such family
members shall be disregarded as separate employees for purposes of
determining the actual deferral ratio of both Highly Compensated
Employees and non-Highly Compensated Employees, and in the event that
there are excess contributions with respect to such family members,
the excess shall be allocated among such family members in proportion
to their Pay Deferral Contributions;
(4) the applicable period for determining Compensation for each
Participant for a Plan Year shall be the 12-month period ending on the
last day of such Plan Year; provided, that to the extent permitted
under Treasury Regulations, the Savings Plan Committee may choose, on
a uniform basis, to treat as the applicable period only that portion
of the Plan Year during which the individual was a Participant;
(5) in the event that the Plan satisfies the requirements of
Code sections 401(k), 410(a)(4), or 410(b) only if aggregated with one
or more other plans with the same plan year, or if one or more other
plans with the same plan year satisfy such Code sections only if
aggregated with this Plan, then this Section shall be
<PAGE>
applied by determining the actual deferral ratios as if all such plans
were a single plan;
(6) an employee who would be a Participant but for the failure to
make Pay Deferral Contributions shall be treated as a Participant on
whose behalf no Pay Deferral Contributions are made; and
(7) Pay Deferral Contributions which are made on behalf of non-
Highly Compensated Employees which could be used to satisfy the Code
section 401(k)(3) limits but are not necessary to be taken into
account in order to satisfy such limits, may instead be taken into
account for purposes of the Code section 401(m) limits to the extent
permitted by Treasury Regulation section 1.401(m)-1(b)(5).
(c) Actual Deferral Percentages. The actual deferral ratios for all
---------------------------
Highly Compensated Employees who are eligible for Pay Deferral
Contributions for a Plan Year shall be averaged to determine the actual
deferral percentage for the highly compensated group for the Plan Year, and
the actual deferral ratios for all Employees who are not Highly Compensated
Employees but are eligible for Elective Contributions for the Plan Year
shall be averaged to determine the actual deferral percentage for the
nonhighly compensated group for the Plan Year. The actual deferral
percentages for any Plan Year must satisfy at least one of the following
tests:
(1) the actual deferral percentage for the highly compensated
group does not exceed 125% of the actual deferral percentage for the
nonhighly compensated group; or
(2) the excess of the actual deferral percentage for the highly
compensated group over the actual deferral percentage for the
nonhighly compensated group does not exceed two percentage points, and
the actual deferral percentage for the highly compensated group does
not exceed twice the actual deferral percentage of the nonhighly
compensated group.
(d) Adjustments by Savings Plan Committee. If, prior to the time all
-------------------------------------
Pay Deferral Contributions for a Plan Year have been contributed to the
Trust, the Savings Plan Committee determines that Pay Deferral
Contributions are being made at a rate which will cause the Code section
401(k)(3) limits to be exceeded for the Plan Year, the Savings Plan
Committee may, in its sole discretion, limit the amount of Pay Deferral
Contributions to be made with respect to one or more Highly Compensated
Employees for the balance of the Plan Year by suspending or reducing Pay
Deferral Contribution
<PAGE>
elections to the extent the Savings Plan Committee deems appropriate. Any
Pay Deferral Contributions which would otherwise be made to the Trust shall
instead be paid to the affected Participant in cash.
(e) Excess Contributions. If the Code section 401(k)(3) limits have
--------------------
not been met for a Plan Year after all contributions for the Plan Year have
been made, the Savings Plan Committee will determine the amount of excess
contributions with respect to Participants who are Highly Compensated
Employees. To do so, the Savings Plan Committee will reduce the actual
deferral ratio of the Highly Compensated Employee with the highest actual
deferral ratio to the extent necessary to (i) enable the Plan to satisfy
the Code section 401(k)(3) limits or (ii) cause such employee's actual
deferral ratio to equal the actual deferral ratio of the Highly Compensated
Employee with the next highest actual deferral ratio, and will repeat this
process until the Plan satisfies the Code section 401(k)(3) limits. The
amount of excess contributions for each Highly Compensated Employee for the
Plan Year shall equal the amount of Pay Deferral Contributions actually
made to the Trust for the Plan Year, less the product of (1) the Highly
Compensated Employee's reduced actual deferral ratio as determined under
the preceding sentence, and (2) his or her Compensation. Any excess
contributions will be distributed as provided below. In no event will
excess contributions remain unallocated or be allocated to a suspense
account for allocation in a future Plan Year.
(f) Distribution of Excess Contributions. A Participant's excess
------------------------------------
contributions, adjusted for income, will be designated by the Participating
Company as a distribution of excess contributions and distributed to the
Participant. The income allocable to excess contributions is equal to the
allocable gain or loss for the Plan Year, but not the allocable gain or
loss for the period between the end of the Plan Year and the date of
distribution (the "gap period"). Income allocable to excess contributions
for the Plan Year shall be determined by multiplying the gain or loss
attributable to the Participant's Participant Account balance by a
fraction, the numerator of which is the excess contributions for the
Participant for the Plan Year, and the denominator of which is the sum of
the Participant's Participant Account balance as of the beginning of the
Plan Year plus the Participant's Pay Deferral Contributions for the Plan
Year. Distribution of excess contributions will be made after the close of
the Plan Year to which the contributions relate, but within 12 months after
the close of such Plan Year. Excess contributions shall be treated as
annual additions under the Plan, even if distributed under this paragraph.
(g) Special Rules. For purposes of distributing excess contributions,
-------------
<PAGE>
(1) the amount of excess contributions that may be distributed
with respect to a Highly Compensated Employee for a Plan Year shall be
reduced by the amount of excess deferrals previously distributed to
the Highly Compensated Employee for his or her taxable year ending
with or within such Plan Year.
(2) the determination and correction of excess contributions
with respect to a Highly Compensated Employee whose actual deferral
ratio is determined pursuant to the family aggregation rules will be
accomplished by reducing the actual deferral ratio as required above
and allocating the excess contributions for the family group among
family members in proportion to the Pay Deferral Contribution of each
family member that is combined to determine the actual deferral ratio.
(h) Recordkeeping Requirement. The Savings Plan Committee, on behalf
-------------------------
of the Participating Companies, shall maintain such records as are
necessary to demonstrate compliance with the Code section 401(k)(3) limits.
(i) Effect on Matching Company Contributions. A Participant's Pay
----------------------------------------
Deferral Contributions which are returned as a result of the Code section
401(k)(3) limits for a Plan Year shall not be taken into account in
determining the amount of Matching Company Contributions to be made for the
Participant's benefit for the Plan Year. To the extent Matching Company
Contributions have already been made with respect to the Pay Deferral
Contributions at the time the Pay Deferral Contributions are determined to
be excess contributions, such Matching Company Contributions shall be
distributed to the Participant at the same time as the Pay Deferral
Contributions are returned.
7.5 Code Section 401(m) Limits.
--------------------------
(a) In general. Matching Company Contributions made under the Plan
----------
are subject to the limits of Code section 401(m), as more fully described
below. The Plan provisions relating to the 401(m) limits are to be
interpreted and applied in accordance with Code sections 401(m) and
401(a)(4), which are hereby incorporated by reference, and in such manner
as to satisfy such other requirements relating to Code section 401(m) as
may be prescribed by the Secretary of the Treasury from time to time.
(b) Actual Contribution Ratios. For each Plan Year, the Savings Plan
Committee will determine the "actual contribution ratio" for each
Participant who is eligible for Matching Company Contributions. The actual
contribution ratio shall be the ratio, calculated to the nearest one-
hundredth of one percent, of the Matching Company Contributions which are
not treated as Pay Deferral Contributions made by and on behalf
<PAGE>
of the Participant for the Plan Year, to the Participant's Compensation for
the Plan Year. For purposes of determining a Participant's actual
contribution ratio,
(1) A Matching Company Contribution will be taken into account
only if the Contribution is allocated to a Participant's Account as of
a date within the Plan Year, is actually paid to the Trust no later
than 12 months after the close of the Plan Year, and is made on behalf
of a Participant on account of the Participant's Pay Deferral
Contributions for the Plan Year;
(2) for purposes of determining the actual contribution ratio of
a Participant who is a 5 percent owner or one of the 10 most highly
paid Highly Compensated Employees, the Matching Company Contributions
and Compensation of such Participant shall include the Matching
Company Contributions and Compensation for the Plan Year of the
Participant's family members (as defined in Code section 414(q)(6)),
and such family members shall be disregarded as separate employees for
purposes of determining the actual contribution ratio of both Highly
Compensated Employees and non-Highly Compensated Employees;
(3) in the case of a Participant who is a Highly Compensated
Employee for the Plan Year and is eligible to have matching
contributions allocated to his or her accounts under two or more plans
maintained by the Employer which may be aggregated for purposes of
Code sections 410(b) and 401(a)(4), the Participant's actual
contribution ratio shall be determined as if such contributions are
made under a single plan, and if two or more of the plans have
different Plan Years, all plans ending with or within the same
calendar year shall be treated as a single plan;
(4) the applicable period for determining Compensation for each
Participant for a Plan Year shall be the 12-month period ending on the
last day of such Plan Year; provided, that to the extent permitted
under Treasury Regulations, the Savings Plan Committee may choose, on
a uniform basis, to treat as the applicable period only that portion
of the Plan Year during which the individual was a Participant;
(5) Pay Deferral Contributions not applied to satisfy the Code
section 401(k)(3) limits may be treated as Matching Company
Contributions to the extent permitted by Treasury Regulation section
1.401(m)-1(b)(5);
(6) in the event that the Plan satisfies the requirements of
Code sections 401(k), 410(a)(4), or 410(b) only if aggregated with one
or more other plans with
<PAGE>
the same plan year, or if one or more other plans with the same Plan
Year satisfy such Code sections only if aggregated with this Plan,
then this Section shall be applied by determining the actual deferral
ratios as if all such plans were a single plan;
(7) any forfeitures under the Plan which are applied against
Matching Company Contributions shall be treated as Matching Company
Contributions.
(c) Actual Contribution Percentages. The actual contribution ratios
-------------------------------
for all Highly Compensated Employees who are eligible for Matching Company
Contributions for a Plan Year shall be averaged to determine the actual
contribution percentage for the highly compensated group for the Plan Year,
and the actual contribution ratios for all Employees who are not Highly
Compensated Employees but are eligible for Matching Company Contributions
for the Plan Year shall be averaged to determine the actual contribution
percentage for the nonhighly compensated group for the Plan Year. The
actual contribution percentages for any Plan Year must satisfy at least one
of the following tests:
(1) The actual contribution percentage for the highly
compensated group does not exceed 125% of the actual contribution
percentage for the nonhighly compensated group; or
(2) The excess of the actual contribution percentage for the
highly compensated group over the actual contribution percentage for
the nonhighly compensated group does not exceed two percentage points,
and the actual contribution percentage for the highly compensated
group does not exceed twice the actual contribution percentage of the
nonhighly compensated group.
(d) Multiple Use Test. In the event that (1) the actual deferral
-----------------
percentage and actual contribution percentage for the highly compensated
group each exceed 125% of the respective actual deferral and actual
contribution percentages for the nonhighly compensated group, and (2) the
sum of the actual deferral percentage and the actual contribution
percentage for the highly compensated group exceeds the "aggregate limit"
within the meaning of Treasury Regulation section 1.401(m)-2(b)(3), the
Savings Plan Committee shall reduce the actual contribution ratios of
Highly Compensated Employees who had both an actual deferral ratio and an
actual contribution ratio for the Plan Year to the extent required by such
section and in the same manner as described in paragraph (f) below.
<PAGE>
(e) Adjustments by Savings Plan Committee. If, prior to the time all
-------------------------------------
Matching Companies Contributions for a Plan Year have been contributed to
the Trust, the Savings Plan Committee determines that such Contributions
are being made at a rate which will cause the Code section 401(m) limits to
be exceeded for the Plan Year, the Savings Plan Committee may, in its sole
discretion, limit the amount of such Contributions to be made with respect
to one or more Highly Compensated Employees for the balance of the Plan
Year by limiting the amount of such Contributions to the extent the Savings
Plan Committee deems appropriate.
(f) Excess Aggregate Contributions. If the Code section 401(m) limits
------------------------------
have not been satisfied for a Plan Year after all contributions for the
Plan Year have been made, the excess of the aggregate amount of the
Matching Company Contributions (and any elective deferral taken into
account in computing the actual contribution percentages) actually made on
behalf of Highly Compensated Employees for the Plan Year over the maximum
amount of such contributions permitted under Code section 401(m)(2)(A)
shall be considered to be "excess aggregate contributions". The Savings
Plan Committee shall determine the amount of excess aggregate contributions
made with respect to each Participant who is a Highly Compensated Employee.
To do so, the Savings Plan Committee will reduce the actual contribution
ratio of the Highly Compensated Employee with the highest actual
contribution ratio to the extent necessary to (1) enable the Plan to
satisfy the section 401(m) limits or (2) cause such Employee's actual
contribution ratio to equal the actual contribution ratio of the Highly
Compensated Employee with the next highest actual contribution ratio, and
will repeat this process until the Plan satisfies the Code section 401(m)
limits. The amount of excess aggregate contributions for each Highly
Compensated Employee for the Plan Year shall equal the amount of Matching
Company Contributions (plus Pay Deferral Contributions for purposes of the
Code section 401(m) limits) actually made to the Trust for the Plan Year,
less the product of the (1) the Highly Compensated Employee's reduced
actual contribution ratio as determined under the preceding sentence, and
(2) his or her Compensation. Any excess aggregate contributions will be
distributed as provided below to the Highly Compensated Employee to which
they are attributable. In no event will excess aggregate contributions
remain unallocated or be allocated to a suspense account for allocation in
a future Plan Year.
(g) Distribution of Excess Aggregate Contributions. A Participant's
----------------------------------------------
excess aggregate contributions, adjusted for income, will be designated by
the Participating Company as a distribution of excess aggregate
contributions, and distributed to the Participant. The income allocable to
excess aggregate contributions is equal to the allocable gain or loss for
the taxable year of the individual, but not the allocable gain or
<PAGE>
loss for the period between the end of the taxable year and the date of
distribution (the "gap period"). Income allocable to excess aggregate
contributions for the taxable year shall be determined by multiplying the
gain or loss attributable to the Participant's Company Account balance by a
fraction, the numerator of which is the excess aggregate contributions for
the Participant for the Plan Year, and the denominator of which is the sum
of the Participant's Company Account balance as of the beginning of the
Plan Year plus the Participant's Matching Company Contributions for the
Plan Year. Distribution of excess aggregate contributions will be made
after the close of the Plan Year to which the contributions relate, but
within 12 months after the close of such Plan Year. Excess aggregate
contributions shall be treated as employer contributions for purposes of
Code sections 401(a)(4), 404, and 415 even if distributed from the Plan.
(h) Special Rules. For purposes of distributing excess aggregate
-------------
contributions, the determination and distribution of excess aggregate
contributions with respect to a Highly Compensated Employee whose actual
contribution ratio is determined pursuant to the family aggregation rules
will be accomplished by reducing the actual contribution ratio as required
above and allocating the excess aggregate contributions for the family
group among family members in proportion to the Matching Company
Contributions of each family member that is combined to determine the
actual contribution ratio.
(i) Recordkeeping Requirement. The Savings Plan Committee, on behalf
-------------------------
of the Participating Companies, shall maintain such records as are
necessary to demonstrate compliance with the Code section 401(m) limits,
including the extent to which Pay Deferral Contributions are taken into
account in determining the actual contribution ratios.
<PAGE>
ARTICLE
VALUATION OF TRUST FUND
8.1 Valuation by Trustee. As of each Valuation Date, the Trustee shall
--------------------
cause to be determined the total net worth of the Trust Fund. In
determining such net worth the Trustee shall value the assets of the Trust
Fund, exclusive of any Company contribution which is payable to the Trust
Fund. The valuation of such assets shall be at their fair market value as
of such Valuation Date.
<PAGE>
ARTICLE IX
DISTRIBUTION OF BENEFITS
9.1 Vested Rights. A Participant shall have at all times a fully
-------------
vested and nonforfeitable right to all amounts in his or her Participant
Account and Rollover Contribution Account. Notwithstanding any provision of
the Plan to the contrary, upon attainment of age 65 while an Employee,
death, disability or retirement, as defined herein, a Participant shall
have a fully vested and nonforfeitable right to all amounts in his or her
Company Account. Prior to a Participant's attainment of age 65 while an
Employee, death, disability or retirement, a Participant who has completed
a five-year Period of Service shall have a fully vested and nonforfeitable
right to all amounts in his or her Company Account.
(a) Changes in Vesting Schedule. If the Plan's vesting schedule
---------------------------
is amended, or the Plan is amended in any way that directly or
indirectly affects the computation of a Participant's vested
percentage (or if the Plan changes to or from a top-heavy vesting
schedule), each Participant who has completed a three-year Period of
Service may elect, within the period described below, to have his or
her vested percentage determined without regard to such amendment or
change. The period referred to in the preceding sentence will begin on
the date the amendment of the vesting schedule is adopted and will end
60 days after the latest of the following dates:
(1) the date on which such amendment is adopted;
(2) the date on which such amendment becomes effective; and
(3) the date on which the Participant is issued written
notice of such amendment by the Savings Plan Committee.
9.2 Benefits upon Separation from Service. A Participant who
-------------------------------------
separates from the service of the Employer for any reason other than death,
disability or retirement shall be entitled to receive a benefit equal to
the number of shares of Stock in his or her Participant Account and all
vested shares of Stock in his or her Company Account as of the Valuation
Date immediately preceding or coinciding with the date of distribution,
plus the amount of any contributions made in accordance with Section 5.1 on
behalf of the Participant since such Valuation Date, minus the amount of
any outstanding indebtedness incurred by the Participant under Article XI.
Any fractional shares shall be distributed in cash, as provided by Section
9.8.
9.3 Forfeitures. In the event a Participant separates from the
-----------
service of the Employer and receives a distribution under Section 9.2, all
amounts held in the Participant's Company
<PAGE>
Account which are not vested shall be treated as forfeited by such
Participant and applied to reduce subsequent Matching Company
Contributions. If a Participant separates from service with the Employer
and does not receive a distribution at that time, any nonvested amount held
in his or her Company Account will be forfeited when he or she incurs a one
year break in service.
(a) Restoration of Forfeitures. The amount held in a
--------------------------
Participant's Company Account that is forfeited in accordance with
this Section 9.3 shall be restored to the Participant's Company
Account in the event he or she is reemployed before the end of the
Plan Year within which such Participant has five consecutive one-year
breaks in service (six consecutive one-year breaks in service if such
break in service began because of an absence from work for maternity
or paternity reasons, as defined in Section 2.23). A one-year break in
service shall have the meaning set forth in Section 2.23. A
Participant who is reemployed after incurring five consecutive one-
year breaks in service shall not be entitled to a restoration of any
forfeiture under Section 9.3.
9.4 Disability and Retirement Benefits. A Participant who separates
----------------------------------
from the service of the Employer on account of disability or retirement
shall be entitled to receive a benefit equal to the value of his or her
Accounts as of the Valuation Date immediately preceding or coinciding with
such separation from service, plus the amount of any contributions made on
behalf of the Participant since such Valuation Date, minus the amount of
any outstanding indebtedness incurred by the Participant under Article XI.
(a) For purposes of this Plan, a Participant shall be deemed
retired if he or she is deemed retired under the provisions of The
Retirement Plan for Employees of The L.S. Starrett Company.
(b) For purposes of this Plan, a Participant is deemed to be
disabled if the Savings Plan Committee determines, on the basis of
such medical evidence as it may reasonably require, that a Participant
is totally and permanently disabled and unable to continue in the
employ of the Participating Company by reason of sickness or infirmity
of such Participant. The Savings Plan Committee's determination as to
whether a Participant has become totally and permanently disabled so
as to become unable to continue in the employ of the Participating
Company shall be conclusive and binding upon all persons.
9.5 Death Benefits. In the event of the death of a Participant before
--------------
the complete distribution of his or her Accounts, the Participant's
Beneficiary will receive the total value of such Participant's Accounts as
of the Valuation Date immediately preceding or coinciding with his or her
death, plus the amount of any contributions made for the benefit of the
Participant since such
<PAGE>
Valuation Date, minus the amount of any outstanding indebtedness incurred
by the Participant under Article XI.
(a) Designation of Beneficiary. A Participant may designate from
--------------------------
time to time one or more direct or contingent Beneficiaries to receive
any amounts which become payable under the Plan upon his or her death;
provided, however, that in the case of a married Participant such
Beneficiary shall be the Participant's spouse unless (i) the spouse
consents in writing on a form approved by the Savings Plan Committee
to the designation either with specific reference to the designated
Beneficiary or by permitting designations by the Participant without
further spousal consent, and such consent acknowledges the effect of
such designation or permission (with acknowledgment, where applicable,
of the specific non-spouse Beneficiary, including any class of
Beneficiaries or any contingent Beneficiaries) and is witnessed by a
duly authorized Plan representative or a notary public, or (ii) it is
established to the satisfaction of the Savings Plan Committee that the
spouse's consent may not be obtained because the Participant is not
married, because the spouse cannot be located, because the spouse has
died, or because of such other circumstances as the Secretary of the
Treasury may prescribe. A spouse may not revoke his or her consent
once it is given. The Beneficiary designation shall be in writing on a
form approved by the Savings Plan Committee and filed with the Savings
Plan Committee. In the absence of an effective Beneficiary
designation, or if the designated Beneficiary predeceases the
Participant, then the Participant shall be deemed to have designated
the following person or persons (if living) as his or her
Beneficiaries and contingent Beneficiaries in the following order of
priority:
(1) the Participant's surviving spouse;
(2) the Participant's natural and adopted children and
children of deceased children, per stirpes;
-----------
(3) the Participant's parents in equal shares, or the whole
to the survivor thereof;
(4) the Participant's brothers and sisters, and nephews and
nieces who are children of deceased brothers and sisters, per
---
stirpes; and
-------
(5) the Participant's estate.
In the event 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
<PAGE>
consent and acknowledgment by (or on behalf of) a spouse, or the
establishment that the consent and acknowledgment cannot be obtained,
shall be effective only with respect to such spouse, but shall be
irrevocable once made.
(b) A Participant who has designated a Beneficiary in accordance
with this Section 9.5 may change such designation at any time by
giving written notice to the Committee, subject to the conditions of
this Section 9.5 and such additional conditions and requirements as
the Savings Plan Committee may prescribe in accordance with applicable
law.
9.6 Time of Distribution. A Participant's benefits shall be paid to
--------------------
the Participant or his or her Beneficiary by the Trustee in a single sum as
soon as administratively feasible following the Participant's separation
from service or death but in no event later than 60 days following the end
of the Plan Year in which such separation or death occurred; provided,
however, that except as to payments made upon death, no distribution may be
made to the Participant before his or her Normal Retirement Age if the
Participant's Accounts are valued in excess of $3,500 unless:
(a) between the 30th and 90th day prior to the date distribution
is to be made, the Savings Plan Committee notifies the Participant in
writing that he or she may defer distribution until Normal Retirement
Age; and
(b) the Participant consents to the distribution in writing
after the information described above has been provided to him or her.
Notwithstanding the foregoing, a distribution under this Article may
commence less than 30 days after the required notification under paragraph
(a) above is given, provided that the Savings Plan Committee informs the
Participant that he or she has a right to a period of 30 days after
receiving the notice to consider whether or not to elect a distribution and
the Participant, after receiving the notice, affirmatively elects to
receive the distribution. For purposes of this Section, a Participant's
Accounts will be considered to be valued in excess of $3,500 if the value
of his or her Accounts exceeds such amount at the time of the distribution
in question or exceeded such amount at the time of any prior distribution
to (or withdrawal by) the Participant under the Plan.
9.7 Payments to Incompetents or Minors. If the Company shall receive
----------------------------------
evidence satisfactory to it that any person entitled to receive a benefit
is, at any time when such benefit becomes payable, either a minor or
physically or mentally incompetent to receive such a benefit and to give a
valid release therefor, and that any person or an institution is then
maintaining or has custody of said person, and that no guardian, committee
or other representative of the estate of such person shall have been duly
appointed, the Savings Plan Committee may authorize the
<PAGE>
payment of the benefit, otherwise payable to such person, to such other
person or institution, and the release of such other person or institution
shall constitute a valid and complete discharge for the payment of such
benefit.
9.8 Form of Distribution. Each Participant's benefit shall be
--------------------
distributable in a single lump-sum payment of Class A common stock,
provided that cash shall be distributed in lieu of fractional shares. Each
distribution will consist of the number of shares of Class A common stock
credited to such Participant's Accounts determined as of the Valuation Date
immediately preceding the distribution, plus an additional number of shares
of Class A common stock equal in value to the shares of Class B common
stock (if any) or other assets that were credited to such Accounts as of
such Valuation Date.
9.9 Optional Direct Transfer of Eligible Rollover Distributions.
-----------------------------------------------------------
(a) In General. Notwithstanding any provision of the Plan to the
----------
contrary that may otherwise limit a distributee's election under this
Section 9.9, effective January 1, 1993, a distributee may elect, at
the time and in the manner prescribed by the Savings Plan Committee,
to have any portion of an eligible rollover distribution paid directly
to an eligible retirement plan specified by the distributee in a
direct rollover. The Savings Plan Committee shall give a distributee
notice of his or her right to elect a direct rollover and an
explanation of the withholding consequence of not making the election.
Such notice shall be given no earlier than 90 days and no less than 30
days before the date of distribution. The distributee, in his or her
sole discretion, may waive or reduce, in writing, the right to 30
days' notice.
(b) Definitions. For purposes of this Section 9.9, the following
-----------
definitions shall apply:
(1) 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 (or life expectancy) of the
distributee or the joint lives of the distributee and the
distributee's 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); and 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).
<PAGE>
(2) With respect to a distributee other than the
Participant's surviving spouse, an "eligible retirement plan" is
an individual retirement account described in Code section
408(a), an individual retirement annuity described in Code
section 408(b), an annuity plan described in Code section 403(a),
or a qualified trust described in Code section 401(a). With
respect to a distributee who is a Participant's surviving spouse,
an eligible retirement plan is an individual retirement account
or an individual retirement annuity.
(3) A "distributee" includes an employee or former
employee. In addition, the employee's or former employee's
surviving spouse and the employee's or former employee's spouse
or former spouse, who is an alternate payee under a qualified
domestic relations order, as defined in Section 414(p) of the
Code, is a distributee with regard to the interest of the spouse
or former spouse.
(4) A "direct rollover" is a payment by the Plan to the
eligible retirement plan specified by the distributee. Payments
under this Section shall be made in the form described in Section
9.8 above.
9.10 Latest Commencement of Benefits. In no case will the payment of
-------------------------------
benefits to any Participant commence later than the earlier of
(a) unless the Participant otherwise elects, the sixtieth (60th)
day after the latest of the following: (i) the close of the Plan Year
in which occurs the date on which the Participant attains Normal
Retirement Age, (ii) the close of the Plan Year in which occurs the
tenth (10th) anniversary of the year in which the Participant
commenced participation in the Plan or (iii) the close of the Plan
Year in which the Participant separates from the service of the
Employer, or
(b) the April 1 next following the close of the calendar year in
which the Participant attains age 70 1/2; provided, that if a
--------
Participant works beyond such April 1, he or she shall receive a
distribution not later than each subsequent December 31 equal to his
or her Account balances (if any) as of the preceding December 31.
(c) Notwithstanding any other provision of the Plan to the
contrary, all benefit distributions under the Plan shall be made in a
manner consistent with section 401(a)(9) of the Code and Treasury
Regulations thereunder including Prop. Reg. section 1.401(a)(9)-2.
Life expectancies shall not be recalculated under section 401(a)(9)(D)
of the Code.
<PAGE>
ARTICLE X
WITHDRAWALS PRIOR TO SEPARATION FROM SERVICE
10.1 Hardship Withdrawals. A Participant may apply to the Savings Plan
--------------------
Committee to withdraw the value of his or her vested Accounts (other than
that portion of his or her Participant Account which is attributable to
income earned after December 31, 1988), on account of the Participant's
financial hardship as defined in applicable Internal Revenue Service rules
and regulations. Such application shall set forth the nature and amount of
the hardship need and documentary evidence thereof. The determination that
the Participant is faced with a financial hardship and of the amount
required to meet such hardship shall be made by the Savings Plan Committee
in its sole discretion. Subject to the provisions of Section 401(k) of the
Code and the regulations issued thereunder, financial hardship means
"immediate and heavy financial need" which includes the following:
(a) expenses for medical care described in Code section 213(d)
previously incurred by the Participant, his or her spouse or any of
his or her dependents (as defined in Code section 152) or necessary
care for these persons to obtain such medical care;
(bi) costs directly related to the purchase of a principal
residence of the Participant (excluding mortgage payments);
(c) the payment of tuition and related educational fees for the
next 12 months of post-secondary education for the Participant, his or
her spouse, children or dependents (as defined in Code section 152);
or
(d) payments necessary to prevent the eviction of the
Participant from his or her principal residence or foreclosure on the
mortgage on that principal residence.
Such a withdrawal shall not exceed the amount required to meet the
immediate financial need created by the hardship, increased by any federal,
state or local income taxes and penalties which may be reasonably
anticipated to be imposed on such distribution. In addition, no such
withdrawal shall be made unless the Participant has obtained all other
distributions (other than hardship distributions) and all nontaxable loans
currently available under the Plan and all other plans maintained by the
Employer. The existence of financial hardship and the amount which may be
withdrawn on account thereof shall be determined by the Savings Plan
Committee in accordance with nondiscriminatory standards applied uniformly
to all Participants similarly situated.
10.2 Effect of Hardship Withdrawal. If a Participant receives a
-----------------------------
withdrawal under this Article X:
<PAGE>
(a) no Pay Deferral Contributions shall be made for the
Participant's benefit for the 12-month period next following the date
on which the Participant receives the hardship withdrawal;
(b) no elective contributions or employee contributions shall be
made for such 12-month period to any other qualified or nonqualified
plan of deferred compensation maintained by the Employer, including
the L.S. Starrett Company Employees Stock Purchase Plan; and
(c) the Pay Deferral Contributions made for the Participant's
benefit (together with any elective contributions under other
qualified retirement plans maintained by the Employer) for the two-
calendar-year period in which such 12-month suspension begins may not
exceed the limit of section 402(g)(1) of the Code applicable to the
second calendar year in such period.
<PAGE>
ARTICLE IX
LOANS TO PARTICIPANTS
11.1 In General. The Savings Plan Committee may direct the Trustee to
----------
make a loan or loans to a Participant, provided the vested value of his or
her Accounts is at least equal to $2,000 at the time the loan is granted
and subject to the conditions below:
(a) A Participant may apply to the Savings Plan Committee to
receive a loan, provided such application is made at least thirty (30)
days prior to the date of the loan or such shorter period as the
Savings Plan Committee may permit. The Savings Plan Committee may
impose additional restrictions on loan availability, including but not
limited to a judgment of the applicant's creditworthiness that is
based on an objective standard, to the extent consistent with
applicable law.
(b) Loans shall be made in accordance with a uniform
nondiscriminatory policy and shall not be made available to
Participants who are Highly Compensated Employees in an amount
(determined under Department of Labor regulation section 2550.408-
1(b)) greater than the amount available to other Participants.
(c) Each loan shall be evidenced by a note in form satisfactory
to the Savings Plan Committee and signed by the Participant, and shall
be secured by 50% of the Participant's vested interest in his or her
account, including as part of such security the note evidencing the
loan.
(d) The amount of any loan together with any other outstanding
indebtedness of the Participant under the Plan or any other qualified
plans of the Employer, shall not exceed the lesser of:
(1) $50,000 reduced by the excess (if any) of (A) the
highest outstanding loan balance of the Participant
during the one-year period ending on the day before the
date on which the loan is made, over (B) the
outstanding loan balance from such plans on the date on
which such loan is made, or
(2) 50% of the balance in the vested Accounts of the
Participant;
provided that in no event shall a loan exceed the value of the balance
in his or her Participant Account plus the vested amounts in his or
her Company Account at the time of the loan. A loan shall not be
available under the Plan unless the loan is at least
<PAGE>
$1,000. For purposes of this Section 11.1(d), the value of a
Participant's accounts shall be determined as of the Valuation Date
immediately preceding the date the loan is approved.
(e) All loans shall be deemed to be an investment of the
Accounts of the Participant and interest shall be charged on such
loans at a reasonable rate determined by the Trustee. In determining
the interest rate, the Trustee shall take into consideration interest
rates currently being changed by persons in the business of lending
money with respect to loans made in similar circumstances.
(f) Each loan shall be repaid, in a manner specified by the
Savings Plan Committee, in substantially level amounts payable at
least quarterly, within a time period set by the Savings Plan
Committee not to exceed five years from the date the loan is made
unless the loan is being applied toward the purchase of a principal
residence for the Participant.
Notwithstanding anything to the contrary contained in the Plan, no loan
shall be made which shall constitute a distribution within the meaning of
Section 72(p) of the Code. For purposes of this Article XI, a former
Participant or an individual who 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" shall be treated as a Participant
only to the extent required by applicable regulations issued by the
Department of Labor.
11.2 Rules and procedures. The Savings Plan Committee shall 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 shall be deemed a part of the Plan
for purposes of the Department of Labor regulation section 2550.408b-1(d).
11.3 Repayment upon distribution. If, at the time benefits are to be
---------------------------
distributed (or to commence being distributed) to a Participant, with
respect to a separation from service, there remains any unpaid balance of a
loan hereunder, such unpaid balance shall, to the 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, shall be deducted from the Participant'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 section 401(a)) with
Department of Labor regulations, no loan shall be made or remain
outstanding with respect to a Participant under this Article after the
<PAGE>
time distributions to the Participant with respect to a separation from
service are to be paid or commence.
11.4 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 such default continues for more than 14 days after written
notice of the default by the Trustee, the unpaid principal balance of the
note shall immediately become due and payable in full. Such unpaid
principal, together with any accrued but unpaid interest, shall thereupon
be deducted from the Participant's Accounts, subject to the further
provisions of this Section. The amount so deducted shall be treated as
distributed to the Participant and applied by the Participant as a payment
of the unpaid interest and principal (in that order) under the note
evidencing such loan. In no event shall the Savings Plan Committee apply
the Participant's Accounts to satisfy the Participant'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.
11.5 Note as trust asset. The note evidencing a loan to an Participant
-------------------
under this Article shall be an asset of the Trust which is allocated to the
Account of such Participant, and shall for purposes of the Plan be deemed
to have a value at any given time equal to the unpaid principal balance of
the note plus the amount of any accrued but unpaid interest.
11.6 Administrative fee. If a Participant applies for a loan from the
------------------
Plan for any reason other than those enumerated by Section 10.1(i),
10.1(ii), 10.1(iii) or 10.1(iv), the Savings Plan Committee shall charge
the Participant with an administrative fee. Such fee shall be payable to
the Company and shall be equal to the sum of (i) fifty dollars and (ii) 1%
of the total amount of the loan multiplied by the number of years that the
loan amount will be outstanding. The Savings Plan Committee may from time
to time change the administrative fee.
<PAGE>
ARTICLE XII
TRUSTEE AND THE TRUST FUND
12.1 Trustee. The Company, by action of its Board of Directors, shall
-------
select a Trustee to hold, invest and distribute any assets of the Plan
which are held in the Trust Fund in accordance with the terms of a Trust
Agreement which shall be executed by the Company and the Trustee and shall
contain such terms and conditions, not in contravention of the provisions
of this Plan and intended qualification under Code sections 401(a) and
501(a), as the Company may elect. The Company at any time may remove and
appoint a successor Trustee, and from time to time may make such amendments
to the Trust Agreement or such further amendments as the Company in its
sole discretion may deem necessary or desirable to carry out the Plan.
12.2 Voting of Stock. The Trustee shall vote Stock allocated to the
---------------
Accounts of the Participants ("allocated shares") in accordance with the
directions of the Participants to whose accounts such Stock has been
allocated, or in the case of a tender or similar rights in respect of such
Stock shall respond to such offer in accordance with the directions of such
Participants. The Trustee shall 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 Stock allocated to such Participant's Accounts. The Trustee shall 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 Stock, if any, shall
be voted by the Trustee in the Trustee's discretion.
12.3 Trust Fund. The Trust Fund shall be used only to pay benefits as
----------
provided in the Plan and such other payments as directed by the Company.
All usual and reasonable expenses of the Trustee, and any expenses not paid
by the Company shall be paid from the Trust Fund if not prohibited by
applicable law or regulation.
<PAGE>
ARTICLE XIII
ADMINISTRATION OF THE PLAN
13.1 The Company. For purposes of ERISA, the plan administrator shall
-----------
be the Company. The Company shall be responsible for the general
administration of this Plan and for carrying out its provisions. The
Company shall designate in writing a Savings Plan Committee, consisting of
at least three members, to carry out its administration of the Plan and
fiduciary responsibilities under the Plan. The responsibilities of the
Board of Directors under the Plan shall be limited to amending or
terminating the Plan; to selecting, appointing, or removing members of the
Savings Plan Committee, the individuals described in Section 4.5, and the
Trustee; and in the absence of the appointment of other individuals, to
making the determinations and directions described in Section 4.5.
13.2 Plan Administration and Interpretation. The Company shall have
--------------------------------------
complete control over the administration of the Plan, with all powers
necessary to enable it to carry out its duties in that respect. Not in
limitation, but in amplification of the foregoing, the Company shall have
complete control and discretionary authority to construe this Plan and to
determine all questions relating to the eligibility of employees of the
Participating Companies to become Participants of the Plan and all the
questions relating to the rights and benefits and all claims, demands and
actions arising out of the provisions of the Plan of any Employee,
Participant, Beneficiary, any deceased Employee, or of any other person
having or claiming to have any interest in the Trust or under the Plan. The
Company shall establish such rules, regulations and policies as may be
necessary to carry out the provisions of the Plan, provided such rules,
regulations and policies shall in no way discriminate among employees
similarly situated.
13.3 Other Powers of the Company. The Company 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 Company's
discretionary power will include, but will not be limited to, the following
authority:
(a) to make and enforce such rules and regulations as it deems
necessary or proper for the efficient administration of the Plan as
required to comply with applicable law;
(b) to interpret the Plan;
(c) to decide all questions concerning the Plan and the
eligibility of any person to participate in the Plan;
<PAGE>
(d) to compute the amounts to be distributed under the Plan, and
to determine the person or persons to whom such amounts will be
distributed;
(e) to authorize the payment of distributions;
(f) 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;
(g) to allocate and delegate its ministerial duties and
responsibilities and to appoint such agents, counsel, accountants and
consultants as may be required or desired to assist in administering
the Plan; and
(h) by written instrument, to allocate and delegate its
fiduciary responsibilities in accordance with ERISA Section 405.
13.4 Consultations by the Company. In carrying out its
----------------------------
responsibilities under the Plan, the Company may, to the extent permitted
by law, employ counsel and agents, and obtain such clerical, accounting,
and other assistance as it may deem advisable. All administrative expenses
of the Plan, as well as expenses incurred by the Company in the performance
of its duties hereunder, shall be paid by the Company, except as provided
in Section 12.3.
13.5 Finality of Actions. To the extent permitted by law, any
-------------------
interpretation of the Plan as well as all acts and determinations of the
Company and the Savings Plan Committee shall be final and conclusive upon
all persons in the absence of clear and convincing evidence that the
Company or such Committee, as the case may be, acted arbitrarily or
capriciously. The Company may deem its records conclusively to be correct
as to the matters reflected therein with respect to information furnished
by an Employee at the time of employment.
13.6 Indemnification. The Company agrees to indemnify and defend to
---------------
the fullest extent permitted by law all fiduciaries who are or were
employees of the Company against any liabilities, damages, costs and
expenses (including attorney's fees and amounts paid in settlement of any
claim approved by the Company) occasioned by their occupying or having
occupied a fiduciary position in connection with the Plan except when due
to their willful misconduct or gross negligence.
13.7 Compensation and Expenses. No employee of the Company shall be
-------------------------
compensated for his or her services performed in connection with the
administration of the Plan. However, all usual and reasonable expenses of
the employees of the Company incurred in connection with the
<PAGE>
administration of the Plan shall be borne by the Company. Any expenses of
the Plan not paid by the Company shall be paid from the Trust Fund, if not
prohibited by law or applicable regulation.
13.8 Claim and Appeal Procedure. If any person claiming benefits under
--------------------------
the Plan is denied benefits by the Savings Plan Committee, no later than
ninety (90) days after the receipt of his or her claim by the Company (or
within one hundred eighty (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
ninety (90)-day period) he or she shall be furnished with a written
notification from the Savings Plan Committee stating:
(a) the specific reason(s) for the denial;
(b) specific references to pertinent Plan provisions on which
the denial is based;
(c) a description of any additional material or information
necessary for the claimant to perfect his or her claim and the reason
why such material or information is necessary; and
(d) the procedure for submitting his or her claim for review.
After the denial of his or her claim, a claimant shall be entitled to
review pertinent documents and to submit to the Savings Plan Committee in
writing any issues or comments he or she may have regarding his or her
claim for benefits under the Plan. If the claimant cannot settle his or her
dispute with a representative of the Savings Plan Committee, he may request
a review of his or her claim by the full Savings Plan Committee. Such
request must be made by the claimant in writing within sixty (60) days
after receipt of notice that his or her claim has been rejected by the
Savings Plan Committee. Within sixty (60) days after filing such request
the claimant, at the discretion of the Savings Plan Committee, may be
granted a hearing. The Savings Plan Committee shall advise the claimant in
writing of the disposition of his or her appeal within sixty (60) days (or
within one hundred twenty (120) days if special circumstances require an
extension of time for processing the request, such as an election by the
Committee to hold a hearing, and if written notice of such extension and
circumstances is given to such person within the initial sixty (60)-day
period) after the request for a review of the claim is first received by
the Savings Plan Committee, and shall give specific reasons for its
decision and specific references to the pertinent Plan provisions on which
the decision is based.
<PAGE>
ARTICLE XIV
AMENDMENT AND TERMINATION
14.1 Amendment of Plan. The Company reserves the power at any time and
-----------------
from time to time to amend any or all of the provisions of the Plan by vote
of its Board of Directors without the consent of any person, provided that:
(a) no amendment shall increase the duties or liabilities of the
Trustee without its written consent;
(b) no amendment shall permit any part of the Trust Fund to
revert to the Company or permit any part of the Trust Fund, other than
such part as may be required to pay taxes or administration expenses
of the Plan or the Trust Fund, to be used for or diverted to purposes
other than the exclusive benefit of Employees or their Beneficiaries
(except as permitted by the Plan with respect to a Qualified Domestic
Relations Order under Code section 414(p)), subject to the provisions
of Section 12.3;
(c) no amendment shall reduce any Participant's accrued benefit
in contravention of section 411(d)(6) of the Code..
14.2 Termination of Plan. While it is the intention of the Company to
-------------------
continue the Plan indefinitely, the Company reserves the right to terminate
the Plan at any time by vote of its Board of Directors. Upon termination or
partial termination of the Plan for any reason or complete discontinuance
of contributions thereunder, each affected Participant will have a fully
vested and nonforfeitable interest in his or her Accounts in the Plan. All
unallocated amounts in the Trust Fund shall be allocated pursuant to the
terms of the Plan.
14.3 Binding effect on other Participating Companies. Any amendment or
-----------------------------------------------
termination of the Plan by the Company under Section 14.1 shall bind all of
the other Participating Companies without the requirement for action or
consent on the part of any such Participating Company. In addition, no
Participating Company other than the Company shall have any power to amend,
modify, suspend or terminate the Plan as to its own or any other
Participating Company's participation therein, and all such power is
exclusively vested in the Company. In addition, the Plan shall be treated
as if it were maintained by a single employer, and the withdrawal from
participation of the Plan of one or more Participating Companies shall not
be deemed to be a termination or partial termination of the Plan with
respect to the Participants employed by such Participating Company or
Companies unless required to be treated as such by applicable laws or
regulations.
<PAGE>
ARTICLE XV
SPECIAL TOP-HEAVY PROVISIONS
15.1 Provisions to Apply. The provisions of this Article shall apply
-------------------
for any top-heavy Plan Year notwithstanding anything to the contrary in the
Plan.
15.2 Minimum Contribution. For any Plan Year which is a top-heavy plan
--------------------
year, the Participating Companies shall contribute to the Trust a minimum
contribution on behalf of each Participant who is not a key employee for such
year and who has not separated from service from the Employer by the end of the
Plan Year, regardless of whether or not the Participant has elected to make Pay
Deferral Contributions for the Year. The minimum contribution shall, in general,
equal 3% of each such Participant's Compensation, but shall be subject to the
following special rules:
(a) If the largest contribution on behalf of a key employee for such
year, taking into account both Pay Deferral Contributions and Matching
Company Contributions, is less than 3% of the key employee's Compensation,
such lesser percentage shall be the minimum contribution percentage for
Participants who are not key employees. This special rule shall not apply,
however, if the Plan is required to be included in an aggregation group and
enables a defined benefit plan to meet the requirements of Code section
401(a)(4) or 410.
(b) No minimum contribution will be required with respect to a
Participant who is also covered by another top-heavy defined contribution
plan of the Employer which meets the vesting requirements of Code section
416(b) and under which the Participant receives the top-heavy minimum
contribution.
(c) If a Participant is also covered by a top-heavy defined benefit
plan of the Employer, "5%" shall be substituted for "3%" above in
determining the minimum contribution.
(d) Any additional minimum contributions required by this Section
will be provided under the L.S. Starrett Company Employee Stock Ownership
Plan. In the event that such additional minimum contributions are not
provided under such plan, the Savings Plan Committee will establish (or
cause the Trustee to establish) a special Account to which such
contributions will be allocated. Distributions from such Account will be
made in accordance with the rules applicable to Company Accounts.
<PAGE>
(e) A minimum contribution required under this Section shall be
made even though, under other Plan provisions, the Participant would
not otherwise be entitled to receive an allocation for the year
because of (i) the Participant's failure to complete 1,000 hours of
service (or any equivalent provided in the Plan), or (ii) the
Participant's failure to make mandatory contributions or Pay Deferral
Contributions to the Plan, or (iii) compensation less than a stated
amount.
15.3 Special Vesting Schedule. Each Employee who is a Participant at
------------------------
any time during a top-heavy plan year shall 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 Period of Service:
<TABLE>
<CAPTION>
Vested
Period of Service Percentage
----------------- ----------
<S> <C>
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%
</TABLE>
Further, no decrease in a Participant's nonforfeitable percentage may occur
in the event the Plan's status as a top-heavy plan 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, such
shift shall be considered to be an amendment to the vesting schedule for
all purposes of the Plan.
15.4 Adjustment to Limitation on Benefits. For purposes of the Code
------------------------------------
section 415 limits, the definitions of "defined contribution plan fraction"
and "defined benefit plan fraction" contained therein shall be modified,
for any Plan Year which is a top-heavy plan year, by substituting "1.0" for
"1.25" in Code sections 415(e)(2)(B) and 415(e)(3)(B), unless the Plan and
each plan with which the Plan is required to be aggregated satisfies the
requirements of Section 416(h)(2)(A) of the Code, and such Plan year would
not be a top heavy plan year if "90 percent" were substituted for "60
percent" in the definition of top heavy plan year.
15.5 Definitions. For purposes of these top-heavy provisions, the
-----------
following terms have the following meanings:
<PAGE>
(a) "key employee" means a key employee described in Code
section 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:
(1) 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;
(2) the 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
(3) 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":
(1) If 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 of plans 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)), 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), both computed in
accordance with Code section 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 section 416.
(2) 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-
<PAGE>
heavy ratio for any required or permissive aggregation group of
plans 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 section 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.
(3) 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 section 416 for the first and
second plan years of a defined benefit plan. The account balances
and accrued benefits of a Participant (A) who is not a key
employee but who was a key employee in a prior year, or (B) 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 section 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.
(4) The accrued benefit of a Participant other than a key
employee shall be determined under (A) the method, if any, that
uniformly applies for accrual purposes under all defined benefit
plans maintained by the Employer, or (B) 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
section 411(b)(1)(C).
(d) The "permissive aggregation group" is the required
aggregation group of plans plus, at the discretion of the Company, any
other plan or plans of the Employer which,
<PAGE>
when considered as a group with the required aggregation group, would
continue to satisfy the requirements of Code sections 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 sections 401(a)(4) and 410(b).
(f) For purposes of computing the top-heavy ratio, the valuation
date shall 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.
<PAGE>
ARTICLE XVI
SPECIAL PROVISIONS
16.1 Rights of Employees. Nothing herein contained shall be deemed to
-------------------
give any Employee the right to be retained in the employ of the Company or
to interfere with the right of the Company to discharge such Employee at
any time, nor shall it be deemed to give the Company the right to require
the Employee to remain in its employ, nor to interfere with the Employee's
right to terminate his or her employment at any time.
16.2 Merger or Consolidation of Plan; Transfer of Plan Assets. Unless
--------------------------------------------------------
otherwise permitted by law or regulations, this Plan shall not be merged
into, or consolidated with, nor shall any assets or liabilities be
transferred to, any pension or retirement plan under circumstances
resulting in a transfer of assets or liabilities from this Plan to any
other plan unless immediately after any such merger, consolidation or
transfer each Employee would (if the plan then terminated) receive a
benefit after the merger, consolidation or transfer which would be equal to
or greater than the benefit he would have been entitled to receive
immediately before such merger, consolidation or transfer (if the Plan had
then terminated).
16.3 Limitation of Assignment. No benefits payable at any time under
------------------------
the Plan shall be subject in any manner to voluntary or involuntary
alienation, sale, transfer, assignment, pledge, garnishment, attachment,
execution or encumbrance of any kind. Any attempt to alienate, sell,
transfer, assign, pledge, garnish, attach, execute, levy or otherwise
encumber any such benefit, whether presently or thereafter payable, shall
be void. Neither any Plan benefit nor the Trust Fund shall be liable in any
manner for or subject to the debts or liabilities of any person entitled to
any benefits hereunder. Notwithstanding anything provided herein to the
contrary, benefits under the Plan may be paid to an alternate payee
pursuant to a Qualified Domestic Relations Order in accordance with the
applicable requirements of such Order.
16.4 Distributions under Qualified Domestic Relations Orders. To the
-------------------------------------------------------
extent required by a Qualified Domestic Relations Order, the Savings Plan
Committee shall make distributions from a Participant's Accounts to
alternate payees named in such order in a manner consistent with the
distribution options otherwise available under the Plan, regardless of
whether the Participant is otherwise entitled to a distribution at such
time under the Plan. The Savings Plan Committee shall establish reasonable
procedures to determine whether a domestic relations order is a Qualified
Domestic Relations Order.
16.5 Rules of Construction. Whenever used herein, a pronoun and
---------------------
adjective in the masculine gender includes the feminine gender unless the
context clearly indicates otherwise. The
<PAGE>
headings of the Plan are inserted for convenience of reference only and
shall not be construed as part of the Plan or have any effect upon the
meaning of the provisions hereof.
16.6 Governing Law. The Plan and all provisions thereof will be
-------------
governed by the provisions of ERISA, and to the extent not preempted
thereby, by the Commonwealth of Massachusetts.
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 21st
day of December, 1995.
THE L.S. STARRETT COMPANY
By: /s/ Douglas R. Starrett
--------------------------------
Chief Executive Officer
<PAGE>
Exhibit 5.1
September 27, 1996
The L. S. Starrett Company
121 Crescent Street
Athol, Massachusetts 01331
Ladies and Gentlemen:
We are furnishing this opinion in connection with your Registration
Statement on Form S-8 (the "Registration Statement") to be filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"), covering 800,000 shares of your Class A or
Class B Common Stock, $1.00 par value (the "Plan Shares"), to be registered for
offering pursuant to your 401(k) Stock Savings Plan.
We have examined and relied upon:
(a) Copies of your Restated Articles of Organization and By-Laws, as amended
to date;
(b) A copy of said Registration Statement in the form to be filed with the
Commission together with the exhibits thereto; and
(c) Such other documents and records as we have deemed necessary for
purposes of this opinion.
We assume that you will take all steps necessary to comply with the Act and
applicable state laws in connection with the offering and sale of the above-
mentioned shares.
Based upon the foregoing, we are of the opinion that the Plan Shares have
been duly authorized and, upon their issue and sale against receipt of the
agreed consideration therefor in accordance with the terms and provisions of the
401(k) Stock Savings Plan, the Plan Shares will be validly issued, fully paid
and non-assessable.
We hereby consent to the filing of this opinion with and as part of said
Registration Statement on Form S-8.
Very truly yours,
Ropes & Gray
<PAGE>
Exhibit 5.2
INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY
DISTRICT DIRECTOR
G.P.O. Box 1680
Brooklyn, NY 11202
Employer Identification Number:
Date: December 12, 1995 04-1866480
File Folder Number:
The L S Starrett Company 043001932
c/o DARCA L BOOM, ESQ Person to Contact:
ROPES & GRAY John Sampaio
ONE INTERNATIONAL PLACE Contact Telephone Number:
BOSTON, MA 02110-2624 (718) 488-2308
Plan Name:
THE L S STARRETT COMPANY 401 (K)
STOCK SAVINGS PLAN
Plan Number: 003
Dear Applicant:
We have made a favorable determination on your plan, identified above,
based on the information supplied. Please keep this letter in your permanent
records.
Continued qualification of the plan under its present form will depend
on its effect in operation. (See section 1.401-1(b)(3) of the Income Tax
Regulations.) We will review the status of the plan in operation periodically.
The enclosed document explains the significance of this favorable
determination letter, points out some features that may affect the qualified
status of your employee retirement plan, and provides information on the
reporting requirements for your plan. It also describes some events that
automatically nullify it. It is very important that you read the publication.
This letter relates only to the status of your plan under the Internal
Revenue Code. It is not a determination regarding the effect of other federal
or local statutes.
This determination is subject to your adoption of the proposed
amendments submitted in your letter dated 12/30/94 & 3/28/95. The proposed
amendments should be adopted on or before the date prescribed by the regulations
under Code section 401(b).
This determination letter is applicable for the amendment(s) adopted
on 6/7/95.
<PAGE>
-2-
The L S Starrett Company
This plan has been mandatorily disaggregated, permissively aggregated,
or restructured to satisfy the nondiscrimination requirements.
This letter is issued under Rev. Proc. 93-39 and considers the
amendments required by the Tax Reform Act of 1986 except as otherwise specified
in this letter.
This plan satisfies the nondiscriminatory current availability
requirements of section 1.401(a)(4)-4(b) of the regulations with respect to
those benefits, rights, and features that are currently available to all
employees in the plan's coverage group. For this purpose, the plan's coverage
group consists of those employees treated as currently benefiting for purposes
of demonstrating that the plan satisfies the minimum coverage requirements of
section 410(b) of the Code.
This letter may not be relied upon with respect to whether the plan
satisfies the qualification requirements as amended by the Uruguay Round
Agreements Act, Pub. L. 103-465.
The information on the enclosed addendum is an integral part of this
determination. Please be sure to read and keep it with this letter.
We have sent a copy of this letter to your representative as indicated
in the power of attorney.
If you have questions concerning this matter, please contact the
person whose name and telephone number are shown above.
Sincerely yours,
/s/ Herbert J. Huff
-------------------
Herbert J. Huff
District Director
Enclosures:
Publication 794
Addendum
<PAGE>
-3-
The L S Starrett Company
This determination letter is also being extended to the following
companies:
EVANS RULE COMPANY, INC.
LEVEL INDUSTRIES, INC.
<PAGE>
Exhibit 9
THE L. S. STARRETT COMPANY 401(k)
STOCK SAVINGS PLAN TRUST AGREEMENT
This Agreement, made and entered into this 20th day of March, 1986, by
and between THE L. S. STARRETT COMPANY, a Massachusetts corporation (the
"Company"), and Richard C. Newton, Douglas A. Starrett, and Roger U. Wellington,
Jr. (hereinafter, "Trustees"):
WITNESSETH:
WHEREAS the Company has adopted The L. S. Starrett Company 401(k)
Stock Savings Plan (the "Plan"), which is a stock bonus plan intended to qualify
under section 401(a) of the Internal Revenue Code of 1954, as amended (the
"Code") and containing a cash or deferred feature intended to qualify under
section 401(k) of the Code; and
WHEREAS the Company and the Trustees desire to enter into this trust
agreement in connection with the establishment of a trust under the Plan;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the Company and the Trustees agree as follows:
Article 1. Meaning of Terms. Except as otherwise provided herein or
as the context otherwise requires, terms used herein shall have the same meaning
as given them in the Plan.
Article 2. Contributions to the Trust. The Trustees shall receive
any contributions paid to them in cash or in the form of such other property as
shall have been delivered to it. All contributions so received together with the
income therefrom and any other increment in
<PAGE>
respect thereof (the "Trust Fund") shall be held, invested, reinvested and
administered by the Trustees pursuant to the terms of this Agreement without
distinction between principal and income. The Trustees shall not be responsible
for the calculation or collection of any contribution under or required by the
Plan, but shall be responsible only for cash and other property received by it
pursuant to this Agreement.
Article 3. Payments from the Trust. The Trustees shall from time to
time, on the written directions of the Savings Plan Committee, make
distributions out of the Trust Fund to such persons in such amounts and for such
purposes as may be specified in the written directions of the Savings Plan
Committee. To the extent permitted by law, the Trustees shall be under no
liability for any distribution made pursuant to the direction of the Savings
Plan Committee. Any written direction of the Savings Plan Committee shall
constitute a certification that the distribution or payment so directed is one
which the Savings Plan Committee or its designated representative is authorized
to direct.
Article 4. General Duties of Trustees. The Trustees will accept and
hold in trust contributions made by the Company on behalf of Participants. In
furtherance of the purposes of the Plan, as described therein, it is intended
that the Trust assets be invested in the common stock of the Company (the
"Common Stock"). To the extent that Company contributions are made in Common
Stock, the Trustees will be expected to retain such Common Stock. To the extent
Company contributions are made in cash, the Trustees will be expected to acquire
Common Stock either from other shareholders or directly from the Company.
Nothing in this Article 4, however, shall be deemed to restrict the Trustee's
ability to invest assets of the Trust in the promissory notes of Participants to
the extent required in connection with the
<PAGE>
making of loans to Participants under the Plan. To the extent consistent with
the foregoing, the Trust may hold temporary investments other than Common Stock
and may hold such portion of the Trust Fund uninvested as it deems advisable for
making distributions.
The Trustees shall determine the fair market value of the Trust Fund
as of the close of business on each Valuation Date, and shall perform such
record keeping and other services as shall be agreed upon by the Trustees and
the Company.
Article 5. Voting of Stock.
(a) The Trustees shall, in their discretion, vote shares of
Common Stock not credited to the accounts of Participants.
(b) The Trustees shall vote Common Stock credited to the
accounts of Participants only in accordance with the directions of the
Participants to whose accounts such shares have been credited.
Article 6. Powers of Trustee. Subject to the provisions of the Plan
and this Agreement, the Trustees are hereby authorized and empowered:
(a) To deal with all or any part of the Trust Fund within the
limits prescribed herein;
(b) To enforce by suit or otherwise, or to waive, their rights
on behalf of the Trust Fund, and to defend claims asserted against
them or the Trust Fund, provided that the Trustees are indemnified to
their satisfaction against liability and expenses;
(c) To employ at the expense of the Company, with the
Company's consent, such agents and counsel as may be reasonably
necessary in collecting, managing, administering, investing,
distributing and protecting the trust or assets thereof;
<PAGE>
(d) To compromise, adjust and settle any and all claims
against or in favor of them or the Trust Fund;
(e) If so directed by the Savings Plan Committee, to withhold
any and all amounts from distributions from the Trust Fund as may be
required to be withheld under the Code and applicable regulations;
(f) To make, execute, acknowledge and deliver any and all
instruments that they deem necessary or appropriate to carry out the
powers herein granted;
(g) To open and make use of such bank accounts as they deem
appropriate (and if any successor trustee hereunder is a bank, such
accounts, if bearing a reasonable rate of interest, may be with such
trustee) and to authorize any person to draw checks thereon;
(h) To hold securities unregistered, or to register them in
their own name or in the name of nominees;
(i) In accordance with Section 405(b)(1)(B) of ERISA, to
allocate, by written instrument and with the consent of the Company,
specific responsibilities, obligations and duties among themselves;
(j) At the direction of the Savings Plan Committee and in
accordance with the Plan, to make loans from the Trust Fund to
Participants;
(k) To enforce any right, obligation or claim in the Trustees'
absolute discretion and in general to protect in any way the interest
of the Trust Fund, either before or after default with respect to any
such right, obligation or claim, provided that
<PAGE>
the Trustees are indemnified to their satisfaction against liability
and expense, and, in case they consider such action for the best
interests of the Trust Fund, in their absolute discretion to abstain
from the enforcement of any right, obligation or claim and to abandon
any property, whether real or personal, which at any time may be held
by them;
(l) To cause any investment in the Trust Fund to be registered
in or transferred into their name as Trustees or the name of their
nominee or nominees or to retain any such investment unregistered or
in form permitting transferability by delivery, or to hold securities
with any depository under their nominee, provided that the books and
records of the Trustees must at all times show that all such
investments are part of the Trust Fund; and
(m) To do all acts which the Trustees may deem necessary or
proper and to exercise any and all powers of the Trustees under this
Trust Agreement under such terms and conditions as they may deem to be
for the best interests of the Trust Fund.
Article 7. Taxes. All real and personal property taxes, income taxes
and other taxes of any and all kinds whatsoever (except under Section 4975 of
the Internal Revenue Code) upon or in respect of the Trust or any money, income
or property forming a part thereof, shall be paid by the Trustees out of
principal or income of the Trust as the Trustees, in their discretion, shall
determine; and the payment thereof and the payment of all other costs, expenses
or compensation paid out of the Trust pursuant to authority granted herein shall
be deemed to be for the exclusive benefit of the Participants of the Plan.
<PAGE>
Article 8. Accounts. The Trustees will keep full accounts of all
receipts and disbursements and other transactions hereunder. Within 90 days
after the close of each Plan Year, upon termination of the Trust, and at such
other times as may be appropriate, the Trustees will determine the then worth of
the Trust Fund and will render to the Company an account of their administration
of the Trust during the period since the last such accounting, including all
allocations made by them during such period. To the extent permitted by the
law, the written approval of any account by the Company will be final and
binding, as to all matters and transactions stated or shown therein upon the
Company, the Savings Plan Committee, the Participants and all persons who then
are or thereafter become interested in the Trust. The failure of the Company to
notify the Trustees within 60 days after the receipt of any account of its
objection to the account will be the equivalent of written approval. If the
Company files any objections within such 60-day period with respect to any
matters or transactions stated or shown in the account, and the Company and the
Trustees cannot amicably settle the questions raised by such objections, the
Trustees will have the right to have such questions settled by judicial
proceedings. Nothing herein contained will be construed so as to deprive the
Trustees of the right to have a judicial settlement of their accounts. In any
proceeding for a judicial settlement of any account or for instructions, the
only necessary parties will be the Trustees and the Company.
Article 9. Compensation and Expenses of Trustees. The Trustees will
serve without compensation except as may from time to time otherwise be agreed
upon by the Company and the Trustees. Unless paid by the Company or by a
distributee in connection with a distribution from the Trust Fund, all expenses
of the Trust, including without limitation reasonable legal
<PAGE>
fees, compensation of the Trustees, and all taxes of any nature whatsoever
including interest and penalties, assessed against or imposed upon the Trustee
or the Trust Fund or the income thereof, will constitute a charge upon the Trust
Fund and will be paid out of the Trust Fund. Any amount so paid out of the Trust
Fund, unless allocable to the account of a particular distributee, will be
apportioned among the individual accounts of Participants as the Savings Plan
Committee may direct, or, in the absence of such direction, as the Trustees may
determine.
Article 10. Removal or Resignation of Trustees. Any Trustee may be
removed by the Company at any time upon 60 days' notice in writing to the
Trustee or upon such shorter period of notice as may be satisfactory to the
Company and the Trustees. Any Trustee may resign at any time upon 60 days'
notice in writing to the Company or upon such shorter period of notice as may be
satisfactory to the Company and the Trustee. Upon such removal or resignation
of a Trustee, the Company shall appoint and designate a successor Trustee, who
will qualify as such by delivering a written acceptance of the Trust to the
Company. Any successor Trustee will have the same powers and duties as those
conferred on the Trustees named herein. Upon removal or resignation of any or
all Trustees, the Trustees will take such action, including the execution of
such instruments of assignment and transfer and other documents, as may
reasonably be requested by the Company in order to confirm the title of the
successor Trustee to the assets of the Trust Fund.
Article 11. Actions by the Company. Any action by the Company,
including for this purpose the Savings Plan Committee, pursuant to any of the
provisions of this Trust Agreement will be evidenced by a written instrument
signed by an authorized officer of the
<PAGE>
body or bodies so acting, and the Trustees will to the extent permitted by law
be fully protected in acting in accordance with such instrument. The Trustees
will be entitled to rely on the latest certificate it has received from the
Company as to any person or persons authorized to act for the Company hereunder
and to sign on behalf of the Company any directions or instructions, until it
receives from the Company written notice that such authority has been revoked.
Article 12. Amendment and Termination. The Company reserves the
right at any time and from time to time to modify or amend in whole or in part
any or all of the provisions of this Trust Agreement or to terminate this Trust
Agreement by notice thereof in writing delivered to the Trustees; provided,
however, that no modification or amendment which affects the rights, duties or
responsibilities of the Trustees may be made without the Trustees' written
consent.
Article 13. Disputes as to Payments. If any dispute arises as to the
persons to whom payment or delivery of any funds or property is to be made by
the Trustees, the Trustees may retain such payment and postpone such delivery
until adjudication of such dispute has been made by a court of competent
jurisdiction, or until the Trustees have been indemnified to their satisfaction
against loss, or until such dispute has been settled by the persons concerned.
Article 14. Non-Alienability of Benefits. No benefits payable at any
time from the Trust shall be subject in any manner to alienation, sale,
transfer, assignment, pledge, attachment or encumbrance of any kind. Any
attempt to alienate, sell, transfer, assign, pledge or otherwise encumber any
such benefit, whether presently or thereafter payable, shall be void. Neither
any Plan benefit nor the Trust Fund shall be liable in any manner for, or
subject
<PAGE>
to, the debts or liabilities of any person entitled to any benefits hereunder.
Notwithstanding anything provided herein to the contrary, benefits under the
Plan may be paid to an alternate payee pursuant to a Qualified Domestic
Relations Order, as that term is defined in Code Section 414(p). The Savings
Plan Committee shall establish reasonable procedures to determine whether a
domestic relations order is a Qualified Domestic Relations Order under Code
Section 414(p).
Article 15. Exclusive Benefit. Except as otherwise permitted by the
Plan, no part of the corpus or income of the Trust shall be used for or diverted
to any purpose other than for the exclusive benefit of the Participants and
their beneficiaries, or the payment of expenses as herein provided.
Article 16. Liability for Predecessor or Successor. No successor
trustee hereunder shall in any way be liable or responsible for any actions or
omissions of any prior trustee in the administration of the Trust or the assets
comprising the Trust Fund prior to the date such successor trustee assumes its
obligations hereunder, nor shall any prior trustee in any way be liable or
responsible for any actions or omissions of any successor trustee, except as
ERISA may otherwise require.
Article 17. Action by Majority Vote. A majority of the Trustees at
the time in office may do any act which this Agreement authorizes or requires
the Trustees to do; and the action of such majority expressed from time to time
by vote at a meeting or in writing without a meeting will constitute the action
of the Trustees and will have the same effect for all purposes as if assented to
by all of the Trustees at the time in office. The Trustees may authorize any
one or more of them to execute any document or documents on behalf of all of
them, including
<PAGE>
without limitation checks drawn on any bank accounts maintained from time to
time for the Trust.
Article 18. Indemnification of Trustees. The Company agrees to
indemnify and defend to the fullest extent of the law any Employee or former
Employee who in good faith serves or has served in the capacity of Trustee
against any liability, damages, costs and expenses (including attorneys' fees
and amounts paid in settlement of any claims approved by the Company) occasioned
by his having occupied a fiduciary position in connection with the Trust.
Article 19. Construction. Except to the extent that Federal law
controls, this Trust Agreement will be construed, enforced and administered
according to the laws of The Commonwealth of Massachusetts.
Article 20. Miscellaneous.
(a) The titles to the Articles in this Agreement are placed
herein for convenience only, and in case of any conflict the text of
this instrument, rather than such titles, shall control.
(b) In case any provision of this Agreement shall be held
illegal or invalid for any reason, said illegality or invalidity shall
not affect the remaining parts of this Agreement, but this Agreement
shall be construed and enforced as if said illegal and invalid
provisions had never been inserted therein.
(c) This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and said
counterparts shall constitute but one and the same instrument and may
be sufficiently evidenced by any one counterpart.
<PAGE>
(d) This Agreement shall be binding upon the respective
successors and assigns of the Company and the Trustees.
(e) Neither the gender nor the number (singular or plural) of
any word shall be construed to exclude another gender or number when a
different gender or number would be appropriate.
(f) Communications to the Trustees shall be sent c/o the
Company at its principal offices or to such other address as the
Trustees may specify in writing. No communication shall be binding
upon the Trustees until it is received by the Trustees. Communications
to the Company, including for this purpose the Savings Plan Committee,
shall be sent to the Company's principal offices or to such other
address as the Company may specify in writing.
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by its duly authorized officer, and the Trustees have hereunto set their hands,
all as of the day and year first above written.
THE L. S. STARRETT COMPANY
/s/ Richard C. Newton By: /s/ Douglas A. Starrett
- --------------------------------- -----------------------
Richard C. Newton, Trustee Title:
/s/ Douglas A. Starrett
- ---------------------------------
Douglas A. Starrett, Trustee
/s/ Roger U. Wellington, Jr.
- ---------------------------------
Roger U. Wellington, Jr., Trustee
<PAGE>
THE L. S. STARRETT COMPANY 401(k)
STOCK SAVINGS PLAN TRUST AGREEMENT
First Amendment
Pursuant to Article 12 of The L. S. Starrett 401(k) Stock Savings Plan
Trust Agreement (the "Agreement"), The L. S. Starrett Company hereby amends
Article 5 of the Agreement, effective immediately, as follows:
"Article 5. Voting of Stock.
(a) The Trustees shall, in their discretion, vote shares of
Common Stock not credited to the accounts of Participants.
(b) The Trustees shall vote Common Stock credited to the
accounts of Participants ("allocated shares") in accordance with the
directions of the Participants to whose accounts such Common Stock has
been credited. The Trustees shall vote allocated shares for which no
directions are timely received in proportion to the ways in which the
Trustees vote those allocated shares for which timely directions are
received."
IN WITNESS WHEREOF, The L. S. Starrett Company has caused this
instrument of amendment to be executed by its duly authorized officer this 7th
day of March, 1990.
THE L. S. STARRETT COMPANY
By: /s/ Roger U. Wellington, Jr.
----------------------------
The Trustees hereby
acknowledge receipt of the
foregoing Amendment, and
consent thereto, as of the
7th day of March, 1990.
/s/ Roger U. Wellington, Jr.
- ----------------------------
/s/ Douglas A. Starrett
- ----------------------------
/s/ Richard C. Newton
- ----------------------------
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITOR'S CONSENT
The Board of Directors
The L. S. Starrett Company
We consent to the incorporation by reference in this Registration Statement of
the L. S. Starrett Company on Form S-8 of our reports dated August 2, 1996 and
May 24, 1996, appearing in the Annual Report on Form 10-K of the L. S. Starrett
Company for the year ended June 29, 1996 and in the Annual Report on Form 11-K
of the L. S. Starrett Company 401(k) Stock Savings Plan for the year ended
December 31, 1995, respectively.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
September 25, 1996
