EXHIBIT 10.1
Change in Control
Agreement
January 16,
2009
Douglas A.
Starrett
690 Spring
Street
Athol, MA
01331
Dear
Doug:
The L.S. Starrett Company (the
“Company”) considers it important and in the best
interests of its stockholders to foster the continuous employment
of key management personnel. In this connection, the
Board of Directors of the Company (the “Board”)
recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control of the Company
may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the
departure or distraction of key management personnel to the
detriment of the Company and its stockholders.
The Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention
and dedication of certain members of the Company's management,
including you, to their assigned duties in the face of potentially
distracting circumstances arising from the possibility of a change
in control of the Company.
In order to motivate you to remain in the employ
of the Company in your current management position, the Company
agrees that you shall receive certain benefits set forth in this
letter agreement (the “Agreement”) in the event of a
Change in Control of the Company.
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Term of
this Agreement . The term of this Agreement (the
“Term”) shall commence on the date hereof and shall
continue in effect through June 30, 2010; provided, however, that
on July 1, 2010 and each July 1 thereafter, the term of this
Agreement shall automatically be extended for one additional year
unless, not later than June 15 of such year, the Company shall have
given written notice that it does not wish to extend this Agreement
(provided that no such notice may be given during the pendency of a
potential Change in Control of the Company); and, provided further,
that if a Change in Control of the Company shall have occurred
during the original or extended Term of this Agreement, this
Agreement shall continue in effect for a period of not less than
thirty-six (36) months beyond the month in which such Change in
Control occurred. Notwithstanding the termination of your
employment, any obligations hereunder which by their terms continue
shall survive such termination. This Agreement does not constitute
a contract of employment. Any termination of your employment by the
Company or by you during the Term shall be communicated by a
written notice of termination (“Notice of Termination”)
to the other party hereto in accordance with Section 7. The
“Date of Termination” shall mean the effective date of
such termination as specified in the Notice of Termination;
provided, however, that no such Notice of Termination shall specify
an effective date more than one hundred eighty (180) days after the
date of such Notice of Termination nor less than thirty (30)
days.
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Change in
Control . For
purposes of this Agreement, a “Change in Control” shall
occur or be deemed to have occurred only if any of the following
events occur:
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any
“person”, as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), (other than the Company, any group of
persons which includes you, any employee benefit plan of the
Company, any entity owned directly or indirectly by the
stockholders of the Company in substantially the same proportion as
their ownership of stock of the Company, or any other person owning
thirty (30) percent or more of the combined voting power of the
company as of the date hereof) is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing
in the aggregate thirty percent (30%) or more of the combined
voting power of the Company's then outstanding voting securities or
more than fifty percent (50%) of the total fair market value of the
Company; or
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a majority of
the members of the Board (as of the date hereof, the
“Incumbent Board”) is replaced during any 12 month
period (except as a result of a transaction with any group of
persons which includes you), provided that any person becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved
by a vote of at least a majority of the directors then comprising
the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with
an actual or threatened election contest relating to the election
of the directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A under the Exchange Act) shall be, for
purposes of this Agreement, considered as though such person were a
member of the Incumbent Board; or
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the
stockholders of the Company approve a merger or consolidation of
the Company with any other entity, other than (i) a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than thirty
percent (30%) of the combined voting power of the voting securities
of the Company or such surviving entity outstanding immediately
after such merger or consolidation, or (ii) a merger or
consolidation effected solely to implement a recapitalization of
the Company (or similar transaction) in which no
“person” (as hereinabove defined) increases the
percentage held of the combined voting power of the Company's then
outstanding securities, or (iii) a merger or consolidation with any
affiliate of yours; or
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the
consummation of transactions contemplated by a resolution of the
Board whereby any person or persons (except a related person as
provided in Section 1.409A-3(i)(5)(vii)(B) of the Treasury
Regulations issued under Section 409A) acquire all or substantially
all of the assets of the Company, whether in a single transaction
or series of transactions during the 12 month period ending on the
date of the most recent acquisition by such person or persons;
or
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the
stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale, lease, exchange or
disposition by the Company of all or substantially all of the
Company's assets.
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Compensation and Benefits Upon a Change in
Control .
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Upon a Change
in Control (a “Trigger Event”) and notwithstanding any
change in your employment with the Company, but subject to the
provisions of Section 5, the Company will pay to you within thirty
(30) days of the Trigger Event a lump sum amount equal to the
aggregate of:
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three times
your annual base salary at the rate in effect immediately prior to
the Trigger Event (or such higher rate as may have been in effect
within the ninety (90) days prior to any Notice of Termination);
and
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three times the
annualized amount equal to the average annual cash bonus paid to
(or accrued for) you by the Company during the three (3) full
years preceding such Trigger Event.
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Immediately
prior to a Change of Control, all of your then outstanding options
to purchase common stock of the Company shall be accelerated so
that they shall become immediately exercisable in full; provided,
in the event of a Change of Control as a result of a tender offer,
such options shall become fully exercisable in a timely manner such
that you may participate in such tender offer at any
stage.
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(i) For the
period terminating thirty-six (36) months after the Trigger Event
(the “Benefit Termination Date”), the Company shall
maintain in full force and effect, for the continued benefit of
you, your spouse and your dependents, all insured and self-insured
employee medical, dental, and prescription drug plans in which you
were eligible to participate immediately before the Trigger Event,
provided that your continued participation is possible under such
plans and you continue to pay the contribution amounts that the
Company customarily charges employee participants in such plans for
such coverage. If and to the extent that your continued
participation is NOT possible under one or more of such plans, you,
your spouse and/or dependents may elect COBRA health care
continuation coverage under that plan or those plans, provided that
the Company shall pay the COBRA premium costs for such coverage,
and if such COBRA coverage is not available or can only be provided
for a period that terminates before the Benefit Termination Date,
in each case for reasons other than discretionary acts by you, your
spouse and/or dependents, then the Company shall pay you in a lump
sum cash payment on the first day of each month during the period
that begins on the date that such coverage is not available or
cannot be provided and ends on the Benefit Termination Date, equal
to the COBRA premium (or the full monthly premium cost, if no COBRA
premium is prescribed) for coverage.
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(ii) If your
employment with the Company is terminated before the Benefit
Termination Date for any reason, the Company will pay to you within
thirty (30) days of your termination of employment a lump sum cash
payment equal to the dollar amount defined in paragraph (A) reduced
by the dollar amount defined in paragraph (B) below.
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The lump sum
cash present value, determined as of the Benefit Termination Date
using reasonable actuarial assumptions, of the accrued benefit
payable to you at your normal retirement date in the form of a
single life annuity under the Company’s pension plan as in
effect on the Trigger Date, assuming that you are continuously
employed by the Company through the Benefit Termination Date and
receive compensation through that date at your rate of earnings in
effect on the date of the Trigger Event.
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The lump sum
cash present value, determined as of the date that your employment
with the Company terminated using reasonable actuarial assumptions,
of the accrued benefit payable to you at your normal retirement
date in the form of a single life annuity under the Company’s
pension plan.
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The Company
shall maintain with a reputable carrier directors and officers
liability coverage for your benefit with coverage amounts at least
equal to those in place prior to the Trigger Event and on terms at
least as favorable as the terms of such coverage prior to the
Trigger Event.
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The Company
hereby covenants and agrees that in the event of a Change of
Control the Company and its successors and assigns will continue in
effect any Plan (as hereinafter defined, excluding any equity
compensation plan) in which you are participating at the time of
the
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