Exhibit 10d
THE L. S. STARRETT COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
AND TRUST AGREEMENT
(Amended and Restated July 1, 2010)
Article 1.
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Introduction.
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2
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1.1. Restatement of Plan.
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2
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1.2. Purpose and nature of Plan.
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2
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Article 2.
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Definitions.
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3
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Article 3.
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Administration.
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8
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3.1. Retirement Committee.
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8
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8
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3.3. Examination of Plan records.
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9
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3.4. Claims and review procedures.
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9
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3.5. Nondiscriminatory exercise of authority.
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9
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3.6. Reliance on tables, etc.
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9
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3.7. Report to the Board.
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9
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3.8. Indemnification of Retirement Committee.
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9
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9
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Article 4.
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Participation.
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10
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4.1. Date of Participation.
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10
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4.2. Reemployment of Participant.
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10
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4.3. Duration of participation.
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10
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Article 5.
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ESOP Loans & Leveraged Acquisitions.
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11
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11
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5.2. Use of ESOP Loan proceeds.
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11
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5.3. Liability and collateral on ESOP Loan.
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11
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11
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11
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5.6. Release of collateral for ESOP Loan.
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12
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Article 6.
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Contributions to the Trust.
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13
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6.1. Amount of Participating Employer contributions.
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13
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6.2. Time of making Participating Employer contributions.
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13
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6.3. Advice to Trustee if contribution not to be made.
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13
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6.4. Return of contributions.
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13
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6.5. No Employee contributions.
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14
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Article 7.
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Suspense Account and Participants’ Accounts.
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15
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15
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7.2. Individual accounts.
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15
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7.3. Order of adjustments to accounts.
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15
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7.4. Adjustment for income, expenses, gain or loss.
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16
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7.5. Allocations to accounts.
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16
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17
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7.7. Report to Participants.
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17
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7.8. Independent Appraisal.
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18
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7.9. Diversification of Investments by Certain Participants over Age 55.
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18
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Article 8.
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Vested Benefits.
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19
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19
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19
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8.3. Special vesting rules for certain early retirements.
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19
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8.4. Other termination of employment.
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19
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8.5. Election of former vesting schedule.
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19
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20
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20
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8.8. Designation of Beneficiary.
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20
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Article 9.
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Distribution of Benefits.
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22
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9.1. Distribution of Stock.
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22
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22
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9.3. Timing of distributions.
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22
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24
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9.5. Right of first refusal.
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24
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24
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9.7. Transfers to Retirement Plan.
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25
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Article 10.
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Concerning the Trust and the Trustee.
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27
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27
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10.2. Investment of Trust Fund.
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27
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27
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27
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10.5. Reliance by Trustee on other persons.
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28
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10.6. Consultation by Trustee with counsel.
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28
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29
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10.8. Approval of accounts.
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29
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10.9. Resignation of Trustee.
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29
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10.10. Removal of Trustee.
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29
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10.11. Appointment of successor or additional Trustee.
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29
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10.12. Compensation of Trustee and expenses of Trust.
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29
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10.13. Disputes as to persons entitled to payment.
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30
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10.14. Action by majority vote.
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30
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10.15. Indemnification of Trustee.
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30
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Article 11.
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Top Heavy Provisions.
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31
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11.1. Special contribution for top heavy Plan Years.
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31
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11.2. Special top-heavy vesting.
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31
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32
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Article 12.
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Amendment and Termination.
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34
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34
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34
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12.3. Distributions upon termination of the Plan.
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34
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12.4. Merger or consolidation of Plan; transfer of Plan assets.
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35
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Article 13.
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Miscellaneous.
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36
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13.1. Limitation of rights.
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36
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13.2. Nonalienability of benefits.
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36
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13.3. Payment under Qualified Domestic Relations Orders.
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36
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13.4. Certain Distribution Requirements.
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36
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13.5. Information between Retirement Committee and Trustee.
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37
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37
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37
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Article 14.
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Minimum Required Distributions.
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37
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14.1. General Rules Regarding Minimum Required Distributions.
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37
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14.2. Time and Manner of Minimum Required Distribution.
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38
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39
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The L. S. Starrett Company
Employee Stock Ownership
Plan and Trust Agreement (January 1, 2011 Amendment and Restatement)
THIS AGREEMENT made this 21st day of December, 2010 by and between The L. S. Starrett Company, a corporation duly organized and existing under the laws of Massachusetts (the “Company”), and Harold J. Bacon, Francis J. O’Brien, and Douglas A. Starrett as Trustees:
W I T N E S S E T H T H A T:
WHEREAS the Company has heretofore adopted The L. S. Starrett Company Employee Stock Ownership Plan (the “Plan”) and the Trust Agreement associated therewith; and
WHEREAS the Company desires to amend and restate said Plan and Trust Agreement to read as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, it is agreed by and between the Company and the Trustees that pursuant to the provisions of Article 12 of the Plan, said Plan be and it hereby is amended in its entirety, effective as of the date or dates set forth in Section 1.1 below, to read as follows:
Article 1.
Introduction
.
1.1.
Restatement of Plan
. The L. S. Starrett Company Employee Stock Ownership Plan and Trust Agreement was originally established in 1984 and has since been amended and restated on several occasions. The amendment and restatement set forth below is intended to take effect from and after July 1, 2010;
provided
, that those provisions of the Plan that reflect changes in the law (including the Code), regulations and other Treasury or Department of Labor guidance applicable to the Plan (each, a “law change”) shall have effect, retroactively where applicable, from and after the effective date of the law change. Except as otherwise specifically provided herein, the rights and benefits, if any, of an individual who was a Participant in the Plan and who ceased to be an Eligible Employee prior to the Effective Date, and who does not subsequently become an Eligible Employee, will be determined in accordance with the provisions of the Plan as in effect on the date he or she ceased to be an Eligible Employee.
1.2.
Purpose and nature of Plan
. The purpose of this Plan is to enable participating Employees to share in the growth and prosperity of the Company and, in conjunction with The Retirement Plan for Employees of The L. S. Starrett Company, to provide them with an opportunity to accumulate capital for future economic security. The Plan is intended to do this without any deductions from the Participant’s paychecks and without calling on the Participants to invest their personal savings. The Plan is intended to qualify as an employee stock ownership plan under Section 4975(e)(7) of the Code, and its Trust is intended to qualify as a tax-exempt trust under Section 501(a) of the Code. Both the Plan and the Trust, as herein amended and restated, are a continuation of an arrangement established prior to 1987 and shall be so construed for purposes of the effective-date provisions applicable to Section 407(d)(3)(C) and Section 407(d)(9) of ERISA. The assets held in trust under the Plan will be invested in stock of The L. S. Starrett Company. Subject to the provisions of Sections 6.4, 7.6 and 13.3, no part of the corpus or income of the trust maintained under the Plan will be used for or diverted to purposes other than for the exclusive benefit of each Participant and his or her Beneficiary.
Article 2.
Definitions.
Wherever used herein, the following terms have the following meanings unless a different meaning is clearly required by the context:
2.1. “Absence from Service” means, in the case of each Employee, a period of absence from service with the Employer for any reason other than a quit, discharge, retirement or death, such as vacation, holiday, lay off, disability or Leave of Absence.
2.2. “Affiliated Company” means (i) any corporation (other than the Company) after it becomes a member of a controlled group of corporations (as defined in Section 414(b) of the Code) with the Company, (ii) any trade or business (other than the Company), whether or not incorporated, after it comes under common control (as defined in Section 414(c) of the Code) with the Company; (iii) any trade or business (other than the Company) after that trade or business becomes a member of an affiliated service group (as defined in Section 414(m) of the Code) of which the Company is also a member, (iv) any entity required to be aggregated with the Company pursuant to regulations issued under Section 414(o) of the Code; and (v) any other corporation, trade or business after the Board in its discretion declares it to be an “Affiliated Company”. For purposes of applying Sections 414(b) and 414(c) of the Code to Section 7.6, relating to limitations on annual additions, the special rule of Section 415(h) of the Code shall apply.
2.3. “Beneficiary” means the person or persons entitled under Section 8.8 to receive benefits under the Plan upon the Participant’s death.
2.4. “Board” means the Board of Directors of the Company. The Board may designate a person or persons (including a committee) to carry out any fiduciary responsibilities of the Company or the Board under the Plan, any such designation to be made in accordance with Section 405 of ERISA.
2.5. “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.
2.6. “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. The Company will be the “plan administrator” for purposes of ERISA, but has established the Retirement Committee to perform such administrative functions under the Plan as are hereinafter specified.
2.7. “Compensation” means the basic remuneration received by a Participant from a Participating Employer during the Plan Year of reference for services rendered while a Participant, including salary or wages and elective contributions to a plan pursuant to a cash or deferred arrangement within the meaning of Section 401(k) of the Code or pursuant to an election under Section 125 or section 132(f) of the Code, but not including bonuses, overtime pay, commissions, incentive compensation and (except as otherwise specifically provided above) contributions under the Plan or any group insurance or other employee pension or welfare benefit plan established or maintained by a Participating Employer.
For all purposes under the Plan, Compensation shall be limited to the amount in effect from time to time under Section 401(a)(17) of the Code.
In addition, “Compensation” shall include payments of regular pay, vacation cash outs, and deferred compensation made by the later of 2.5 months after severance from employment or the last day of the Plan Year in which such severance from employment occurs if such payments are described in Section 1.415(c)-2(e)(3)(ii) or (iii) of the Treasury regulations and would have been included in compensation if paid prior to severance from employment with the Company; provided however that any payments not described in this Section 2.7 shall not be considered compensation if paid after severance from employment, even if they are paid by the later of 2.5 months after the date of severance from employment or the end of the Plan Year that includes the date of severance from employment.
2.8. “Effective Date” means the date or dates specified in Section 1.1.
2.9. “Eligibility Service” means, with respect to each Employee, the sum of his or her Periods of Service, excluding from such sum any Periods of Service prior to a Substantial Period of Severance.
2.10. “Eligible Employee” means any individual, other than a leased employee as defined in Section 414(n)(2) of the Code, who is employed by a Participating Employer
other than
the following: (a) individuals covered by a collective bargaining agreement where retirement benefits were the subject of good faith bargaining, unless such agreement specifically provides for participation in the Plan; (b) ”leased employees” within the meaning of Section 414(n)(2) of the Code; (c) individuals who are at the time classified by an Affiliated Employer or by the Company as independent contractors, regardless of any later reclassification; and (d) except as determined by the Company, nonresident aliens.
2.11. “Employee” means any individual employed by the Employer, and to the extent required by Section 414(n) of the Code, any leased employee (as defined in Section 414(n)(2) of the Code) who performs services for the Employer.
2.12. “Employer” means the Company and all Affiliated Companies.
2.13. “Employment Commencement Date” means, in the case of each Employee, the date on which he or she first performs an Hour of Service, or, in the case of an Employee who has a Substantial Period of Severance, the date on which he or she first performs an Hour of Service after such Severance.
2.14. “Entry Date” means the July I and January 1 of each Plan Year.
2.15. “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.
2.16. “ESOP Loan” means a loan for a definite term to the Plan, either made by the Company or guaranteed by the Company, in accordance with Article 5.
2.17. “Hour of Service” means an hour for which an Employee is paid, or entitled to payment, for the performance of duties for the Employer as determined under Section 2530.200b-1(a) of the Department of Labor regulations, such hour to be credited for the period in which the duties were performed.
2.18. “Leave of Absence” means, in the case of any Participant, a period of absence on leave from active employment with an Employer that is granted by the Employer on account of illness, accident, or other reason (including service in the armed forces of the United States), including any leave required under the Family and Medical Leave Act of 1993 or service covered by the Uniformed Services Employment and Reemployment Rights Act regardless of whether the Employer has consented to such leave or service. To the extent required by the Family and Medical Leave Act or the Uniformed Services Employment and Reemployment Rights Act, a Leave of Absence described in those Acts shall be treated as a Period of Service rather than an Absence from Service.
2.19. “Lender” means any person, including a Participating Employer, making an ESOP Loan to the Plan in accordance with Article 5.
2.20. “Leveraged Stock” means Stock which has been acquired by the Plan by means of an ESOP Loan in accordance with Article 5.
2.21. “Normal Retirement Date” means the first day of the calendar month coinciding with or next following the date on which the Participant attains age 65.
2.22. “Participant” means any individual who participates in the Plan in accordance with Article 4 hereof.
2.23. “Participation Commencement Date” means, in the case of each Participant, the Entry Date on which he or she first participates in the Plan, or, in the case of a Participant who has a Substantial Period of Severance, the Entry Date on which he or she first participates in the Plan after such Severance.
2.24. “Participating Employer” means the Company or any Affiliated Company which has adopted the Plan with the approval of the Board.
2.25. “Period of Service” means, in the case of each Employee, (a) the period of time, expressed in years and fractions of years based on days, commencing on his or her Employment Commencement Date or Reemployment Commencement Date, whichever is applicable, and ending on the last day of the calendar month in which his or her Severance from Service Date occurs and (b) any Period of Severance, expressed in years and fractions of years based on days, which ends within 12 months after (1) in the case in which the Period of Severance began prior to an Absence from Service, the Severance from Service Date and (2) in the case in which the Period of Severance began during or following an Absence from Service, the date on which such Absence began.
2.26. “Period of Severance” means, in the case of each Employee, the period of time, measured in years and fractions of years based on days, commencing on his or her Severance from Service Date and ending on the date on which he or she again performs an Hour of Service.
2.27. “Plan” means The L. S. Starrett Company Employee Stock Ownership Plan as set forth herein, together with any and all amendments and supplements hereto.
2.28. “Plan Year” means the 12-month period ending on June 30.
2.29. “Qualified Domestic Relations Order” means any judgment, decree or order (including approval of a property settlement agreement) which satisfies the requirements of Section 414(p) of the Code and Section 206(d)(3) of ERISA.
2.30. “Reemployment Commencement Date” means, in the case of each Employee, the date on which he or she first performs an Hour of Service following any Period of Severance which is not included in a Period of Service.
2.31. “Retirement Committee” means the committee appointed to administer the Retirement Plan in accordance with Article 3 of the Retirement Plan.
2.32. “Retirement Plan” means The Retirement Plan for Employees of The L. S. Starrett Company as amended from time to time.
2.33. “Severance from Service Date” means, in the case of each Employee, the earlier of:
(a)
the date on which he or she quits, retires, is discharged, or dies; or
(b)
the date, determined in accordance with uniformly applied rules established by the Company, which is at least 12 months after the date on which an Absence from Service began.
In the case of a maternity/paternity absence, as hereinafter defined, the Severance from Service Date of an Employee or Participant who is absent from work beyond the first anniversary of the first day of such absence shall be the second anniversary of the first day of such absence. The period between the first and second anniversaries of the first day of such absence shall be treated as neither a Period of Service nor a Period of Severance. For purposes of the foregoing, a maternity/paternity absence, in the case of any Employee or Participant, is an absence from work commencing on or after July 1, 1985 by reason of the pregnancy of the Employee or Participant, by reason of the birth of a child of the Employee or Participant, by reason of the placement of a child with the Employee or Participant in connection with the adoption of such child by such individual, or for purposes of caring for such child for a period beginning immediately following such birth or placement. The Retirement Committee may require that an Employee or Participant who claims a maternity/paternity absence provide information establishing the nature of the absence, as a precondition to the application of the special rules provided hereunder with respect to such absences.
2.34. “Share of the Trust Fund” means, in the case of each Participant, that portion of the Trust’s assets which is credited to the account of the Participant in accordance with Article 7 of the Plan.
2.35. “Stock” means the common stock of the Company, consisting of Class A common stock and Class B common stock.
2.36. “Substantial Period of Severance” means, in the case of any Employee or Participant who does not have a nonforfeitable right to any portion of his or her accrued benefit, a Period of Severance of at least twelve consecutive months which equals or exceeds the greater of (a) five years, or (b) his or her Eligibility Service (for purposes of Section 2.9) or Vesting Service (for purposes of Section 2.41) prior to such Period of Severance. Notwithstanding the foregoing, an Employee or Participant will be considered as having incurred a Substantial Period of Severance with respect to any Period of Severance of at least twelve consecutive months if, as of any date prior to July 1, 1985, such Period of Severance equals or exceeds his or her Eligibility Service (for purposes of Section 2.9) or Vesting Service (for purposes of Section 2.41) prior to such Period. For purposes of the preceding sentences, an Employee’s or Participant’s Eligibility Service or Vesting Service, whichever is applicable, prior to any Period of Severance will be deemed not to include any such Service disregarded by reason of any prior Substantial Period of Severance.
2.37. “Trust” means The L. S. Starrett Company Employee Stock Ownership Trust established hereunder, together with any and all amendments and supplements hereto.
2.38. “Trust Fund” means the property held in trust by the Trustee for the benefit of Participants and their Beneficiaries.
2.39. “Trustee” means the person or persons who have executed this Agreement as trustee or trustees of the Trust, any successor trustee or trustees, and any additional trustee or trustees.
2.40. “Valuation Date” means the last business day of each calendar month and such other days as may be specified by the Retirement Committee.
2.41. “Vesting Service” means, with respect to any Employee, the sum of his or her Periods of Service, excluding from such sum--
(a)
any Periods of Service which are excluded under Section 2.41(a) of the Retirement Plan (concerning service performed before July 1, 1976);
(b)
any Periods of Service before the date on which he or she attains age 18; and
(c)
any Periods of Service prior to a Substantial Period of Severance.
Article 3.
Administration
.
3.1.
Retirement Committee
. The Plan will be administered by the Retirement Committee appointed by the Board in accordance with Article 3 of the Retirement Plan. No Employee serving on the Retirement Committee will receive any compensation for services performed in his or her capacity as a member of such Committee. However, the Company may reimburse any member for any necessary expenses incurred to the extent such expenses are not paid by the Plan.
A majority of the members of the Retirement Committee at the time in office will constitute a quorum for the transaction of business. All resolutions adopted or other actions taken by the Retirement Committee at any meeting must be approved by the vote of a majority of the members of the Committee, but resolutions may be adopted or other action taken without a meeting upon written consent signed by all members of the Committee. If at any time a majority of the individuals serving on such Committee and eligible to vote are unable to agree, or if there is only one such individual, any action required of the Committee will be taken by the Board and its decision will be final. An individual serving on the Retirement Committee who is a Participant will not vote or act on any matter relating solely to himself or herself.
3.2.
Powers
. The Retirement Committee will have full power and discretionary authority to administer the Plan in all of its details, subject however, to the requirements of ERISA. For this purpose the Retirement Committee’s power will include, but will not be limited to, the following discretionary authority:
(a)
to make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan or to comply with applicable law;
(b)
to interpret the Plan, its interpretation thereof in good faith to be final, binding and conclusive with respect to all persons in the absence of clear and convincing evidence that the Retirement Committee acted arbitrarily or capriciously;
(c)
to decide all questions and ambiguities concerning the Plan and the eligibility of any person to participate in the Plan in accordance with Article 4;
(d)
to compute the amount of benefits which will be payable to any Participant or other person in accordance with the provisions of the Plan, and to determine the person or persons to whom such benefits will be paid;
(e)
to authorize the payment of benefits;
(f)
to appoint such agents, counsel, accountants and consultants as may be required to assist in administering the Plan;
(g)
to allocate and delegate its responsibilities, including fiduciary responsibilities under the Plan, and to designate other persons to carry out any of its responsibilities, including fiduciary responsibilities under the Plan, any such allocation, delegation or designation to be by written instrument and in accordance with Section 405 of ERISA; and
(h)
to keep such records and submit such filings, elections, applications, returns or other documents or forms as may be required under the Code or ERISA and applicable regulations, or under state or local law or regulations.
3.3.
Examination of Plan records
. The Retirement Committee will make available to each Participant such of its Plan records as pertain to him or her, for examination at reasonable times during normal business hours.
3.4.
Claims and review procedures
. The Retirement Committee will establish reasonable procedures for processing claims and appeals from denials of such claims, in accordance with Section 503 of ERISA and the regulations thereunder.
3.5.
Nondiscriminatory exercise of authority
. Whenever, in the administration of the Plan, any discretionary action by the Retirement Committee is required, the Retirement Committee shall exercise its authority in a nondiscriminatory manner so that all persons similarly situated will receive substantially the same treatment.
3.6.
Reliance on tables, etc
. In administering the Plan, the Retirement Committee will be entitled to the extent permitted by law, to rely conclusively on all tables, valuations, certificates, opinions and reports which are furnished by any actuary, accountant, Trustee, counsel or other expert who is employed or engaged to act in connection with the Plan.
3.7.
Report to the Board
. The Retirement Committee will submit annually to the Board a report consisting of (i) a summary of the financial conditions of the Trust Fund, (ii) a summary of the operations of the Plan for the past year and (iii) any further information which the Board may require.
3.8.
Indemnification of Retirement Committee
. The Company agrees to indemnify and to defend to the fullest extent permitted by law any Employee or former Employee who is or was a member of the Retirement Committee (and any Employee or former Employee to whom the Retirement Committee has or had allocated or delegated any of its responsibilities or who has been or had been designated to carry out any of its responsibilities pursuant to Section 3.2(g)) against all liabilities, damages, costs and expenses (including attorneys’ fees and amounts paid in settlement of any claims approved by the Company) occasioned by any act or omission to act in connection with the Plan, if such act or omission is in good faith.
3.9.
Named Fiduciary
. The Retirement Committee will be a “named fiduciary” for purposes of Section 402(a)(1) of ERISA with authority to control and manage the operations and administration of the Plan, and will be responsible for complying with all of the reporting and disclosure requirements of Part 1 of Subtitle B of Title I of ERISA. The Retirement Committee will not, however, have any authority over the investment of the assets of the Trust.
Article 4.
Participation
.
4.1.
Date of Participation
. Each Eligible Employee who was a Participant in the Plan as in effect on the day immediately preceding the Effective Date and who is an Eligible Employee on the Effective Date shall continue to be a Participant, subject to Section 4.3. Each other Eligible Employee will become a Participant on the Entry Date coinciding with or next following the later of the date on which he or she completes one year of Eligibility Service and the date on which he or she attains age 21,
provided
he or she is an Eligible Employee on such Entry Date.
An Eligible Employee who satisfies the age and service requirements specified in the preceding sentence as of an Entry Date, but who is separated from service with the Participating Employer on such Entry Date by reason of a quit, discharge or retirement, will not become a Participant on such Entry Date. However, if such Eligible Employee returns to service with a Participating Employer prior to a Substantial Period of Severance, the Eligible Employee will become a Participant on the date on which he or she returns.
4.2.
Reemployment of Participant
. If a Participant’s Period of Service is interrupted and he or she thereafter commences a Period of Service, any benefits being paid to him or her under the Plan will be suspended during his or her subsequent Period of Service. If such Participant has not had a Substantial Period of Severance, he or she will again become a Participant on his or her Reemployment Commencement Date. If such Participant has had a Substantial Period of Severance, he or she will be treated for all purposes under the Plan as a new Employee and will again become a Participant on the date on which he or she satisfies the requirements of Section 4.1.
4.3.
Duration of participation
. A Participant will cease to be a Participant as of the earlier of (a) the date on which he or she ceases to be an Eligible Employee, or (b) the date on which the Plan terminates.
Article 5.
ESOP Loans & Leveraged Acquisitions
.
5.1.
ESOP Loans
. This Plan and Trust, acting through the Trustee, may, from time to time, enter into an ESOP Loan, which Loan may either be made by one or more of the Participating Employers to the Plan or made by another Lender to the Plan and guaranteed by the Participating Employer. An ESOP Loan may be a direct loan of cash, a purchase-money transaction or an assumption of an obligation of the Plan.
5.2.
Use of ESOP Loan proceeds
. Within a reasonable time after the receipt of the proceeds from an ESOP Loan, such proceeds will be used by the Plan in one or more of the following ways:
(a)
to acquire Stock at fair market value either from a Participating Employer or from any other party;
(b)
to prepay such ESOP Loan; or
(c)
to repay a prior ESOP Loan.
Leveraged Stock may not be subject to a put, call or other option, or buy-sell or similar arrangement, while held by or when distributed from the Plan, except as provided in Section 9.4 and Section 9.5. The preceding sentence shall continue to apply regardless of whether the Plan remains an employee stock ownership plan within the meaning of Section 4975 of the Code and regardless of whether the ESOP Loan, the proceeds of which were used to acquire such stock, remains outstanding. The preceding sentence shall be applied in accordance with Section 54.4975-7(b)(4) of the Treasury regulations.
5.3.
Liability and collateral on ESOP Loan.
(a)
An ESOP Loan shall be without recourse against the Plan. The only asset of the Plan which may be given as collateral is Stock which was either acquired with the proceeds of such Loan or used as collateral on a prior ESOP Loan repaid with the proceeds of such Loan.
(b)
No person entitled to payment under the ESOP Loan may be given any rights to assets of the Plan other than (i) the collateral given for the Loan, (ii) cash contributions made to the Plan pursuant to Section 6.1(a) in order for the Plan to meet its obligations under the Loan, and (iii) earnings attributable to such collateral and the investment of such cash contributions.
5.4.
Default
. An ESOP Loan must provide that, in the event of default, the value of Plan assets transferred in satisfaction of the Loan must not exceed the amount of default. If a Participating Employer or any disqualified person (within the meaning of Section 4975 of the Code) is the Lender, the ESOP Loan must provide for a transfer of Plan assets on default only upon, and to the extent of, the failure of the Plan to meet the payment schedule of the Loan.
5.5.
Rate of interest
. The rate of interest on an ESOP Loan shall not be in excess of a reasonable rate.
5.6.
Release of collateral for ESOP Loan
. If Stock held by the Plan is used as collateral for an ESOP Loan, such Loan must provide for the release of the Stock as provided in either (a) or (b):
(a)
For each Plan Year during the duration of the ESOP Loan, the number of shares of Stock released shall equal the number of shares then encumbered under the Loan multiplied by a fraction, the numerator of which is the amount of principal and interest paid on the Loan for such Plan Year, and the denominator of which is the sum of the numerator plus the principal and interest to be paid under the Loan for all future years. The number of future years under the Loan must be definitely ascertainable and shall be determined without taking into account extensions or renewal periods. If a variable interest rate is used, the interest to be paid in future years shall be computed by using the rate applicable as of the end of the Plan Year.
(b)
Release of Stock from encumbrance may instead be determined solely by reference to principal payments for the Plan Year, provided: (i) the ESOP Loan provides for annual payments of principal and interest at a cumulative rate that is not less rapid at any time than level annual payments of such amounts for 10 years; (ii) the interest element included in any Loan payment is disregarded only to the extent it would be determined to be interest under standard loan amortization tables; and (iii) the method of release provided in this paragraph (b) is not used from the time that, by reason of a renewal, extension or refinancing, the sum of the expired duration of the Loan, the renewal period, the extension period, and the duration of the new ESOP loan exceeds 10 years.
Article 6.
Contributions to the Trust
.
6.1.
Amount of Participating Employer contributions
.
(a)
For each Plan Year during which an ESOP Loan is outstanding, each Participating Employer shall contribute to the Trust an amount equal to its share, as determined by the Board, of the total principal and interest due on such ESOP Loan during such Plan Year, taking into account dividends to be applied toward such Loan. Such contribution shall be made in cash unless the ESOP loan is a purchase-money loan from a Participating Employer to the Plan, in which case such contribution may be in the form of a forgiveness of indebtedness by such Employer.
(b)
Each Participating Employer may contribute to the Trust for any Plan Year, in addition to any cash amount required by paragraph (a) above, an additional amount designated by the Board. Such contribution may be made either in Stock or in cash to be invested in Stock. In no event will such additional Participating Employer contribution for any Plan Year cause the total Participating Employer contribution to exceed the maximum amount which the Participating Employer is permitted to deduct for federal income tax purposes, including amounts deductible under the carryover provisions of the Code. Every such additional contribution hereunder is hereby conditioned on deductibility under Section 404 of the Code.
In no event will such additional Participating Employer contribution be in an amount which would cause the annual addition for any Participant to exceed the amount permitted under Section 7.6.
6.2.
Time of making Participating Employer contributions
.
(a)
The Participating Employers will make the contributions required under Section 6.1(a) in such installments as are necessary to enable the Trust to pay timely, with the proceeds of such installments and dividends paid on Stock held in the Trust, amounts of principal and interest due under an ESOP Loan.
(b)
Each Participating Employer will make any additional contributions made for a Plan Year under Section 6.1(b) directly to the Trustee not later than the time prescribed by law (including extensions thereof) for filing its federal income tax return for its taxable year ending with or in which ends such Plan Year. The amount of such Participating Employer contribution will be based on the best information available at the time the contribution is made and any contribution so made will be final, except as hereinafter provided.
6.3.
Advice to Trustee if contribution not to be made
. If, for a Plan Year, no contribution is required under Section 6.1(a) and no contribution is to be made under Section 6.1(b), the Company will promptly advise the Trustee. The Trustee will have no authority or responsibility to inquire into the correctness of the amounts contributed and paid over to the Trustee, or to determine whether any contribution is payable under this Article 6.
6.4.
Return of contributions
. If a contribution by a Participating Employer to the Trust is
(a)
made by reason of a good faith mistake of fact, or
(b)
in the case of additional Participating Employer contributions made under Section 6.1(b), believed by the Participating Employer in good faith to be deductible under Section 404 of the Code, but the deduction is disallowed,
the Trustee shall, upon request by the Participating Employer, return to the Participating Employer the excess of the amount contributed over the amount, if any, that would have been contributed had there not occurred a mistake of fact or a mistake in determining the deduction. Such excess shall be reduced by amounts attributable thereto which have been credited to the accounts of Participants who have since received a distribution from the Trust, except to the extent such amounts continue to be credited to such Participants’ accounts at the time the excess is returned to the Participating Employer. Such excess shall also be reduced by the losses of the Trust attributable thereto, if and to the extent such losses exceed the gains and income attributable thereto. In no event shall the return of a contribution hereunder cause the balance of the individual account of any Participant to be reduced to less than the balance which would have been credited to the account 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 deductions, as the case may be.
6.5.
No Employee contributions
. No Employee will be required or permitted to make contributions to the Plan.
Article 7.
Suspense Account and Participants’ Account
s.
7.1.
Suspense account
. For so long as an ESOP Loan remains outstanding, the Trustee will establish and maintain a suspense account for shares of Leveraged Stock which have not been allocated to the individual accounts of Participants. All Leveraged Stock will be credited to the suspense account at the time it is purchased. Any amounts received as cash dividends with respect to such Stock will be applied toward payments of principal and interest on an ESOP Loan, subject to restoration by the Employer;
provided
, that if any dividends remain after such application they shall be used to purchase additional Stock to be held in the suspense account for allocation along with the Stock from which the dividends derived.
For each Plan Year, the Trustee will release from the suspense account and credit to the accounts of the Participants in accordance with Section 7.5
(a)
that number of shares of Leveraged Stock released from encumbrance for the Plan Year in accordance with Section 5.6, and
(b)
if the suspense account holds shares of Leveraged Stock which are not pledged as collateral for the ESOP Loan, that number of shares of such Stock which would have been required to be released under Section 5.6 had the Stock been pledged as collateral for such Loan.
7.2.
Individual accounts
. The Trustee will establish and maintain an account for each Participant which will reflect
(a)
his or her shares of (i) the Stock released from the suspense account in accordance with Section 7.1, (ii) any additional Participating Employer contribution made in accordance with Section 6.1(b) and (iii) any forfeitures arising under the Plan, and
(b)
his or her share of any income, expenses, and gain or loss of the Trust Fund.
The Trustee will establish and maintain such other accounts and records as are required under Section 8.5 (if any) or as the Trustee decides, in his or her discretion, to be reasonably required in order to discharge his or her duties under the Plan.
During any period when an ESOP Loan is outstanding, amounts received as cash dividends with respect to Stock allocated to a Participant’s account will be applied toward payments of principal and interest on such Loan. For each dividend otherwise allocable to a Participant’s account which is so applied, there shall be restored to the Participant’s account an equivalent amount either by contribution or allocation as more fully described in Section 7.5. Upon payment in full of all outstanding ESOP Loans, or if the amount received as dividends with respect to Stock allocated to Participant accounts exceeds in any Plan Year the amount of all payments of principal and interest on ESOP Loans in such Year, the excess will be used to purchase additional Stock to be allocated to such accounts.
7.3.
Order of adjustments to accounts
. As of each Valuation Date, the Trustee will:
(a)
first, adjust the balances in the individual accounts of Participants (including former Participants and Beneficiaries) to reflect the current value of the assets of the Trust Fund as provided in Section 7.4;
(b)
second, charge to the individual accounts all payments or distributions, if any, made from such accounts as of such Valuation Date; and
(c)
third, credit Stock released from the suspense account, restored dividends, and additional Participating Employer contributions and forfeitures, if any, which are to be credited as of such Valuation Date in accordance with Section 7.5.
In the case of a Valuation Date other than the last business day of the calendar month, the Retirement Committee may, if appropriate because distributions are to be made, direct the Trustee to adjust only a specified account or accounts.
7.4.
Adjustment for income, expenses, gain or loss
. In adjusting the individual accounts under Section 7.3(a) to reflect the current value of the assets of the Trust Fund, the Trustee will allocate to such accounts, in proportion to the balances therein immediately prior to such adjustment, an amount equal to the income and expenses of the Trust and of the gain and loss (realized and unrealized) on such assets credited to all such accounts, valued at their fair market value, except that the amounts allocated under this Section 7.4 will not include any income or gain or loss on assets attributable to the Participating Employer contributions for the Plan Year with respect to which the allocation is made.
7.5.
Allocations to accounts
. As of any dividend payment date with respect to dividends on Stock allocated to a Participant’s account which are used to pay principal or interest on an ESOP Loan, there shall be allocated to such account, from among shares released from the suspense account, Stock having a fair market value equal to the amount of such dividends less any contribution previously made to restore such dividends or any portion thereof. If the fair market value of shares released from the suspense account is insufficient to make the allocations described in the preceding sentence, the Participating Employers shall make a special contribution, to be invested in Stock, sufficient to restore Participant accounts as described in the preceding sentence. As of the last business day of each Plan Year, Stock (other than Stock allocated in accordance with the preceding provisions of this Section) released from the suspense account for such Year as a result of contributions made by Participating Employers or the application of cash dividends with respect to Stock held in the Trust, plus any additional contributions by such Participating Employers for such Year (adjusted for income, expenses, gain or loss), will be allocated among and credited to the accounts of the qualified individuals in proportion to their respective amounts of Compensation for such Plan Year. Stock shall be allocated in units of shares and fractional shares. For purposes of this Section 7.5, an individual is a qualified individual if he or she is a Participant on the last business day of such Plan Year or if he or she ceased to be a Participant during such Plan Year because of retirement under Article 8 or because of death. In addition, as of the last business day of each Plan Year forfeitures, if any, which occurred during such Year under Section 8.6 shall be allocated among and credited to the accounts of those individuals (whether or not Participants or qualified individuals) (“eligible account holders”) who for such Year (A) received amounts treated as compensation taken into account for purposes of Section 7.6 below) but (B) were not treated as “highly compensated employees” for purposes of Section 414(q) of the Code. Subject to the limitations of Section 7.6 below, allocations of forfeitures pursuant to the preceding sentence shall be made in units of shares and fractional shares in proportion to the relative account balances of the eligible account holders for the Plan Year, determined before allocating thereto Stock released from the suspense account, restored dividends or additional Participating Employer contributions. If any portion of a forfeiture cannot be allocated to the account of an eligible account holder by reason of the limitations of Section 7.6 below, such amount shall be reallocated among the accounts of other eligible account holders in proportion to their relative account balances determined in accordance with the preceding sentence.
7.6.
Limitations
. Notwithstanding any other provisions of the Plan, the annual addition to a Participant’s account under the Plan for any limitation year, when aggregated with the annual additions (if any) to the individual’s accounts under all other defined contribution plans maintained by the Company or any Affiliated Company, shall not exceed the applicable limitations of Section 415(c) of the Code. To the extent necessary to satisfy such limitations, a Participating Employer will first reduce the contribution (if any) it would otherwise make for the Participant’s benefit under Section 6.1(b) for the applicable limitation year. If said limitation cannot be satisfied by eliminating the Participating Employer’s contribution under Section 6.1(b) for the Participant’s benefit for such limitation year, the forfeitures which would otherwise be allocated to the Participant’s account, and that portion (if any) of any contributions under Section 6.1(a) or amounts used to restore forfeitures which would be both treated as an annual addition under applicable law and allocable to the Participant, will be reduced to the extent necessary to satisfy said limitation, and the amount of the reduction will be allocated to the accounts of other Participants not affected by said limitation. Allocations and reallocations of forfeitures shall be made pursuant to Section 7.5. Allocations of amounts other than forfeitures shall then be made in proportion to the respective amounts of Compensation of such other Participants for such limitation year, except that the amount allocated to each Participant’s account must satisfy the limitation described in paragraph (a) with respect to that Participant. If, after reallocation of amounts other than forfeitures, there is any such amount for the limitation year which cannot be allocated to the accounts of Participants because of the aforesaid limitations, Stock representing such amounts will be returned to the suspense account established under Section 7.1 for allocation to the accounts of Participants at the earliest time that such allocation can be made within the limitation of paragraph (a) above. If amounts previously credited to a Participant’s account (together with annual additions under other defined contribution plans of the Employer) cause his or her annual addition to exceed the foregoing limitations, such excess credits hereunder shall be reallocated in accordance with Section 1.415-6(b)(6)(i) of the Treasury regulations.
For purposes of this Section 7.6, “limitation year” means the calendar year, “annual additions” has the meaning provided under Section 415(c) of the Code, including Section 415(c)(6) of the Code, and in determining the maximum annual addition for any limitation year, the applicable limitations (including the maximum dollar limitation) shall be those set forth in Section 415(c) of the Code and the compensation taken into account shall be the Participant’s total taxable compensation as determined pursuant to Section 1.415-2(d) of the Treasury regulations.
For the avoidance of doubt, effective January 1, 2008, “compensation” for the purposes of this Section 7.6 shall include payments of regular pay, vacation cash outs, and deferred compensation made by the later of 2.5 months after severance from employment or the last day of the Plan Year in which such severance from employment occurs if such payments are described in Section 1.415(c)-2(e)(3)(ii) or (iii) of the Treasury regulations and would have been included in compensation if paid prior to severance from employment with the Company; provided however that any payments not described in this Section 7.6 shall not be considered compensation if paid after severance from employment, even if they are paid by the later of 2.5 months after the date of severance from employment or the end of the Plan Year that includes the date of severance from employment. For purposes of this Section 7.6, effective January 1, 2009, "compensation" shall include any differential wage payment (as defined in Section 414(u)(12)(D) of the Code) paid to an individual by the Affiliated Companies to the extent required under Section 414(u)(12) of the Code (and, to the extent required by Section 414(u)(12)(A)(i) of the Code, such an individual shall be treated as an Employee).
7.7.
Report to Participants
. The Trustee, at least annually, will determine each Participant’s Share of the Trust Fund and report the same in writing to the Retirement Committee, which will furnish a copy of such report to the Participant concerned. Notwithstanding any such report, a Participant’s right to his or her Share of the Trust Fund shall be limited to the nonforfeitable portion of the amount actually allocated to his or her account, as adjusted from time to time.
7.8.
Independent Appraisal
. It is anticipated that the Trust will continue to be invested in Stock, all of which is either listed and traded on a national exchange or converts automatically into such listed and traded stock upon transfer. However, should the Trust invest in other employer securities and those securities are not readily tradable on an established securities market within the meaning of Section 401(a)(28)(C) of the Code, valuations of such securities with respect to activities carried on by the Plan shall be made by an independent appraiser.
7.9.
Diversification of Investments by Certain Participants over Age 55
. Reference is made to the floor/offset arrangement described in Section 9.7, pursuant to which a Participant’s benefit under the Retirement Plan is subject to offset by the actuarial equivalent of 90% of the Participant’s vested Share of the Trust Fund under this Plan. For purposes of this Section 7.9, the remaining 10% of a Participant’s vested Share of the Trust Fund (determined as of any distribution date described in this Section) is referred to as the “distributable portion.” Each qualified Participant (as hereinafter defined) may elect, within 90 days after the close of each Plan Year in his or her qualified election period, a distribution solely in shares of Stock of all or a part of his or her distributable portion determined as of the most recent Valuation Date, excluding any fractional shares. Each distribution elected pursuant to this Section 7.9 must consist of Stock worth at least $200 on such Valuation Date, unless (i) the distribution is pursuant to the Participant’s first election and represents the Participant’s entire distributable portion, or (ii) the distribution occurs during the Participant’s final qualified election period and represents the balance of the shares of Stock remaining in the distributable portion, excluding any fractional shares. In the case of any qualified Participant, for each election after the first annual election the available distribution shall be determined by counting toward the distributable portion amounts already distributed under this Section to the Participant, including any dividends which would have been attributable to such amounts already distributed had such amounts not been distributed. Any distribution elected under this Section shall be completed within 180 days after the close of the Plan Year (
i.e.,
within 90 days after the close of the applicable election window). For purposes of this Section, the term “qualified Participant” means any Employee who has completed at least 10 years of participation in the Plan and who has attained age 55; and an individual’s “qualified election period” shall be the period consisting of the six consecutive Plan Years beginning with the first Plan Year in which the individual first became a qualified Participant. Any distribution under this Section shall be treated as a distribution under Section 401(a)(28) of the Code to the extent, if any, required thereby. Shares of Stock acquired prior to January 1, 1987 shall be treated as allocable first to that portion of a Participant’s account which is not the distributable portion, and only thereafter to the distributable portion.
Article 8.
Vested Benefits.
8.1.
Normal retirement
. Upon attainment of age 65 while an Employee, each Participant will have a fully vested and nonforfeitable interest in his or her Share of the Trust Fund. Retirement by a Participant from the service of his or her Participating Employer as of his or her Normal Retirement Date is referred to as a normal retirement. In the event of a normal retirement, the Participant’s Share of the Trust Fund, determined as of the Valuation Date specified in Section 9.3, will, subject to the provisions of Section 8.7, be distributed in accordance with Article 9 below.
8.2.
Late retirement
. If a Participant continues in the service of a Participating Employer after his or her Normal Retirement Date, he or she will continue to have a fully vested and nonforfeitable interest in his or her Share of the Trust Fund. Such Participant will continue to participate in the Plan, but will not be entitled to a distribution until the earlier of (a) the date he or she is required to begin receiving distributions under Section 9.3(b) below, or (b) the date he or she establishes with his or her Participating Employer for his or her retirement. Such retirement is referred to as a late retirement. In the event of a late retirement, the Participant’s Share of the Trust Fund determined as of the Valuation Date specified in Section 9.3, will, subject to Section 8.7, be distributed in accordance with Article 9 below.
8.3.
Special vesting rules for certain early retirements
. A Participant who attains age 55 but not age 65 while an Employee and who has completed five or more whole years of Vesting Service will have a fully vested and nonforfeitable interest in his or her Share of the Trust Fund. In the event of the retirement of a Participant described in the preceding sentence prior to Normal Retirement Date (an “early retirement”), the Participant’s Share of the Trust Fund, determined as of the Valuation Date specified in Section 9.3, will, subject to Section 8.7, be distributed at the time prescribed in, and in accordance with, Article 9 below.
8.4.
Other termination of employment
. If a Participant ceases to be an Employee for any reason other than normal, late or early retirement and at a time when he or she has completed at least five whole years of Vesting Service, the Participant (or, in the event of the Participant’s death, his or her Beneficiary, as determined under Section 8.8) will be entitled to receive a vested benefit equal to the value of his or her Share of the Trust Fund determined as of the Valuation Date coinciding with or next preceding the date on which distribution to him or her will commence under Section 9.3. The minimum service requirement (five years of Vesting Service) described in the preceding sentence shall not apply to any Participant with a Period of Service on or after July 1, 2001.
8.5.
Election of former vesting schedule
. If the Plan is amended at any time after the Effective Date and such amendment directly or indirectly affects the computation of a Participant’s rights to his or her Share of the Trust Fund, each Participant who has completed three years of Vesting Service (determined under Section 2.41 but without regard to subsections (a), (b) and (c) thereof) prior to the expiration of the election period described below and whose nonforfeitable percentage at any time after such amendment could be less than the percentage determined without regard to such amendment may elect during the election period to have the nonforfeitable percentage of his or her Share of the Trust Fund determined without regard to such amendment. The election period referred to in the first sentence of this Section will begin on the date the amendment of the vesting schedule is adopted and will end on the latest of the following dates: (i) the date which is 60 days after the date on which such amendment is adopted; (ii) the date which is 60 days after the date on which such amendment becomes effective; and (iii) the date which is 60 days after the date on which the Participant is issued written notice of such amendment by the Retirement Committee. An election under this Section 8.5 may be made only by an individual who is a Participant at the time such election is made and, once made, shall be irrevocable.
8.6.
Forfeitures
. If, prior to July 1, 2001, a Participant leaves the employ of the Employer prior to satisfying the requirements for normal, late or early retirement and at a time when he or she has not completed five whole years of Vesting Service (or, if Section 11.2 applies, at a time when he or she has less than a one hundred percent nonforfeitable interest in his or her Share of the Trust Fund as determined under that Section), any portion of the Participant’s Share of the Trust Fund not payable to him or her under Section 8.4 (subject to Section 11.2, if applicable) will remain credited to the Participant’s account until such time as he or she has incurred a Period of Severance of at least five years in duration, at which time such portion will be forfeited by him or her. Notwithstanding the foregoing, if at the time a Participant ceases to be an Employee he or she has a nonforfeitable right under Section 11.2 to a portion of his or her account and if at any time prior to the expiration of the aforementioned five-year period the Participant or his or her Beneficiary receives a distribution of said nonforfeitable portion, the remaining (forfeitable) portion will be forfeited as of the later of (a) the date of such distribution, and (b) the date on which the Participant has incurred a Period of Severance of at least 12 months in duration. In the event any portion of a Participant’s Share of the Trust Fund is forfeited under the preceding sentence but such Participant is reemployed prior to incurring a Period of Severance of at least five years in duration, the amount so forfeited, without adjustment for interest or earnings, shall be recredited to a separate account maintained for the benefit of the Participant under Section 7.2. Notwithstanding the provisions of Sections 8.4 or, if applicable, Section 11.2, but subject to the provisions of Sections 8.1, 8.2 and 8.3, the Participant’s nonforfeitable interest in the portion of his or her Share of the Trust Fund held in such separate account will be equal to P (AB + D)
-
D, where P is the nonforfeitable percentage at the time of reference as determined under Section 8.4 (or, if applicable, Section 11.2); AB is the account balance of the separate account at the time of reference; and D is the amount of the distribution.
Amounts (if any) required to be credited to a Participant’s account pursuant to the preceding paragraph shall be taken first from amounts forfeited by other Participants which have not yet been allocated in accordance with Section 7.5. If such reallocated forfeitures are insufficient to reinstate in full the amount required to be recredited to a reemployed Participant’s account, the difference shall be contributed by the Participant’s Participating Employer. If, after such allocations, there remain forfeited amounts which have not been reallocated, such amounts shall be applied as provided in Section 7.5.
8.7.
Adjustment
. Until distributed or forfeited, any amounts credited to the account or accounts of a Participant who has ceased to be an Employee will continue to be adjusted as of each Valuation Date under Section 7.3 to reflect the income, expenses and gain or loss of the Trust Fund.
8.8.
Designation of Beneficiary
. If a Participant was married at time of death, he or she shall be deemed to have named his or her surviving spouse as his or her Beneficiary unless
(a)
prior to his or her death, the Participant designated as his or her Beneficiary a person other than his or her surviving spouse, such designation to be made in writing at such time and in such manner as the Retirement Committee shall approve or prescribe; and
(b)
either
(i)
his or her surviving spouse consents in writing to the designation described in (a) above, and such consent acknowledges the effect of such designation (with acknowledgment of the specific non-spouse beneficiary, including any class of beneficiaries and any contingent beneficiaries) and is witnessed by a Plan representative or a notary public, or
(ii)
it is established to the satisfaction of the Retirement Committee that the consent required under (i) above may not be obtained because there is no spouse, because the spouse cannot be located, or because of such other circumstances as the Secretary of the Treasury may prescribe; and
(c)
the non-spouse Beneficiary designated in accordance with the provisions of this Section survives the Participant.
Any consent by a spouse under (b)(i) above, or a determination by the Retirement Committee with respect to such spouse under (b)(ii) above, shall be effective only with respect to such spouse.
A Participant who is not married may designate a non-spouse as Beneficiary provided such designation is made in writing at such time and in such manner as the Retirement Committee shall approve or prescribe. A Participant who has designated a non-spouse as Beneficiary in accordance with the provisions of this Section may change such designation at any time by giving written notice to the Retirement Committee, subject (in the case of a Participant who is married at the time of such redesignation) to the spousal-consent requirements of (b) above and to such other conditions and requirements, if any, as the Retirement Committee may prescribe in accordance with applicable law. The Retirement Committee will file a copy of any Beneficiary designation form with the Trustee or, if a Participant is deemed to have designated his or her surviving spouse as Beneficiary, will so inform the Trustee. If a Participant dies without a surviving Beneficiary, the full benefit payable upon the Participant’s death will be paid
per stirpes
. If there is no surviving issue, then the benefit may be paid to the Participant’s executor or administrator or applied to the payment of the Participant’s debts and funeral expenses or paid to any relative, all as the Retirement Committee shall determine.
Article 9.
Distribution of Benefits
.
9.1.
Distribution of Stock
. Subject to Section 13.4, a distribution to a Participant or Beneficiary from the Trust will be made in shares of Stock in a single payment; provided, however, that distribution of any fractional shares will be made in cash in lieu of such fractional shares. Such distribution will consist of that number of shares of Stock credited to the Participant’s account plus that number of shares of Stock produced by dividing the value of any assets other than Stock credited to his or her account by the fair market value of one share of Stock, such value or fair market value, as the case may be, to be determined as of the Valuation Date immediately preceding the date of distribution. However, if the Participant becomes entitled to a distribution by reason of the application of Sections 8.4 and 11.2, then his or her distribution will consist of the number of shares of Stock determined under the preceding sentence multiplied by the applicable nonforfeitable percentage determined under Section 11.2.
9.2.
Notice to Trustee
. The Retirement Committee will notify the Trustee whenever any Participant is entitled to a distribution under the Plan. In giving such notice, the Retirement Committee will indicate the name of the Participant’s Beneficiary, if appropriate. Upon receipt of a written notice from the Retirement Committee certifying that an amount is payable to a Participant or Beneficiary, the Trustee will, as soon as reasonably practicable, distribute such amount in accordance with the instructions of the Retirement Committee.
9.3.
Timing of distributions
. It is the intent of the Plan that distributions hereunder with respect to Participants who are also participants with a vested benefit in the Retirement Plan be coordinated with the benefits payable under the Retirement Plan to provide the combined retirement benefit to which such Participants are entitled. Subject to the foregoing:
(a)
Distributions on account of normal or late retirement pursuant to Sections 8.1 and 8.2 will be made as soon as reasonably practicable after the Valuation Date coinciding with or next succeeding the event giving rise to such distribution.
Distributions made on account of early retirement under Section 8.3 or other termination of employment under Section 8.4 will normally commence as soon as reasonably practicable after the Valuation Date coinciding with or next succeeding the later of (i) the Participant’s termination of employment, and (ii) the date on which the Participant attains age 55 (or the date on which he or she dies, if earlier). However, except in the case of a Participant’s death, distribution may not be made under the preceding sentence unless between the 30th and 90th days prior to the date distribution is to be made the Retirement Committee notifies the Participant in writing that he or she may defer distribution until Normal Retirement Age, including the consequences of failure to so defer, and, after receiving such information, the Participant consents to the distribution in writing and files his or her consent with the Retirement Committee. Nonetheless, a distribution may commence less than 30 days after the notification under the preceding sentence is given, provided that the Retirement 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 in writing to receive the distribution.
Notwithstanding the foregoing or Section 13.4, any vested Share of the Trust Fund with a value of $1,000 or less shall be distributed as soon as practicable following a Participant’s termination of employment.
Distributions will not be made to a terminated Employee after he or she has returned to the employ of the Participating Employer except as may otherwise be provided in the Plan.
(b)
Notwithstanding subsection (a) above, distribution to a Participant shall be made not later than the earlier of the dates described in (i) and (ii) below, where
(i)
is the 60th day after the close of the Plan Year in which occurs the latest of (1) the date on which the Participant attains age 65, (2) the tenth anniversary of the date on which the Participant commenced participation in the Plan, and (3) the date on which the Participant ceases to be an Employee, and
(ii)
in the case of a Participant who is a “five percent owner” of the Employer (as defined at Section 416 of the Code) and who remains in the employ of the Employer after attaining age 70½, is April 1 of the calendar year first following the calendar year in which the Participant attains age 70½ . In the event distributions are required to commence to a Participant under this Section 9.3(b)(ii), he or she shall receive a distribution of his or her account in the form of a single payment, in accordance with the provisions of Sections 9.1, 9.4 and 9.5, valued as of the applicable December 31, and the value (if any) of the Participant’s Account as of any subsequent December 31 shall be distributed on or before the following December 31 (but not in excess of the value of such account at the time of distribution).
If the Participant dies before the date his or her benefits are required to begin under this subsection (b), then in no event will any distribution to his or her spouse or Beneficiary be paid later than December 31 of the year in which occurs the fifth anniversary of the Participant’s death or, if the benefit is payable to the Participant’s spouse, December 31 of the year in which the Participant would have attained age 70½ . All benefit distributions under the Plan shall be made in a manner consistent with Section 401(a)(9) of the Code and the regulations thereunder.
(c)
The provisions of this subsection (c) shall apply notwithstanding the provisions of subsection (a) above, but only in the case of vested distributable amounts that are attributable to Stock acquired after December 31, 1986 (“eligible distributable amounts”). A distributable amount is attributable to Stock acquired before 1987 (and therefore is not an eligible distributable amount) if it consists of Stock acquired, either with an ESOP Loan or an Employer contribution, prior to January 1, 1987 or dividends or contributions in lieu of dividends attributable thereto. In the case of a Participant who separates from service by reason of normal or late retirement or disability, or death, distribution of any eligible distributable amount shall be made not later than the later of (i) the close of the Plan Year which follows the Plan Year in which such retirement or death occurs, or (ii) in the case of portion of such amount attributable to Stock acquired with an ESOP Loan, the close of the Plan Year in which such loan is repaid in full. In the case of a Participant who separates from service for any other reason, distribution of any eligible distributable amount shall be made not later than the later of (A) the close of the sixth Plan Year following the Plan Year in which such separation from service occurs, or (B) in the case of a portion of such amount attributable to Stock acquired with an ESOP Loan, the close of the Plan Year in which such loan is repaid in full. Distribution in the case of a separation from service described in the preceding sentence may be deferred until the Participant’s commencement of benefits under the Retirement Plan, but only if the Participant consents to such deferral and the Participant’s Share of the Trust Fund has a value greater than $1,000.
9.4.
Put Option
. Any Stock which at the time of distribution is either not publicly traded or is subject to a trading limitation within the meaning of the regulations under Section 4975 of the Code, shall be accompanied by an option in the Participant, his or her donees (if any), and any person to whom Stock distributed to the Participant passes by reason of the Participant’s death, to put such Stock to the Company at its fair market value. Such an option shall be exercised by the holder thereof notifying the Company in writing that the option is being exercised, and such option shall be exercisable for a period of fifteen (15) months beginning on the date the Stock is distributed. At the option of the Company, payment for Stock put to the Company pursuant to an option described in this Section may be deferred if adequate security and a reasonable interest rate are provided for any credit extended and if the cumulative payments at any time are no less than the aggregate of reasonable periodic payments as of such time. Periodic payments are reasonable if annual installments, beginning with 30 days after the date the put option is exercised, are substantially equal. The payment period may not end more than five (5) years after the date the put option is exercised. An option described in this Section 9.4 may provide that the Plan may assume the rights and obligations of the Company at the time the option is exercised. The option described in this Section 9.4 shall continue to exist regardless of whether the Plan remains an employee stock ownership plan within the meaning of section 4975 of the Code. The provisions of this Section 9.4 shall be applied in a manner consistent with and subject to the requirements of Section 409(h) of the Code and the regulations thereunder, if any.
For purposes of this Section 9.4, in the case of a transaction between the Plan and a disqualified person (within the meaning of Section 4975(e)(2) of the Code), fair market value shall be determined as of the date of the transaction. In all other cases fair market value shall be determined as of the most recent Valuation Date.
9.5.
Right of first refusal
. Stock distributed pursuant to the provisions of Section 9.1 shall be subject to the right of the Plan, and then of the Company, to purchase such Stock at fair market value prior to its sale to any other prospective purchaser, but only if the Stock is not publicly traded at the time such right may be exercised. The right in the Plan, and then the Company, to purchase such Stock shall expire fourteen (14) days after the holder of such Stock gives written notice to the Plan, and then to the Company, that an offer by a third party to purchase the security has been received.
For purposes of this Section 9.5, in the case of a transaction between the Plan and a disqualified person (within the meaning of Section 4975(e)(2) of the Code), fair market value shall be determined as of the date of the transaction. In all other cases fair market value shall be determined as of the most recent Valuation Date.
9.6.
Direct Rollovers
. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee’s election under this Section 9.6, a distributee may elect, at the time and in the manner prescribed by the Retirement 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 Retirement Committee shall give a distributee notice of his or her right to elect a direct rollover and an explanation of the withholding consequences if 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, in writing, the right to 30 days’ notice. For purposes of this Section, the following terms have the following meanings:
(a) An “eligible rollover distribution” is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life expectancy of the distributee or the distributee and his or her designated Beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and, except in the case of a distribution on or after January 1, 2002, the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities).
(b) For distributions prior to January 1, 2002, the term “eligible retirement plan” means: (i) with respect to a distributee other than the Participant’s surviving spouse, an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, and (ii) with respect to a distributee who is a Participant’s surviving spouse, an individual retirement account or an individual retirement annuity. For distributions on or after January 1, 2002, the term “eligible retirement plan” means (in the case of any distributee, including the Participant’s surviving spouse) any plan or arrangement described in clause (i) as well as an annuity contract described in Section 403(b) of the Code and an eligible deferred compensation plan described in Section 457(b) of the Code maintained by an eligible employer described in Section 457(e)(1)(A) of the Code which agrees to separately account for amounts transferred into such plan from this Plan. For distributions on or after January 1, 2008, the term “eligible retirement plan” also means a Roth IRA described in Section 408A of the Code.
(c) a “distributee” includes an employee or former employee, the surviving spouse of a deceased employee or former employee, and the spouse or former spouse (who is an alternate payee under a QDRO) of an employee or former employee. Effective July 1, 2010, a “distributee” also includes a deceased employee’s non-spouse beneficiary; provided, however, that a distribution to such distributee may only be rolled into an individual retirement account or annuity in accordance with Section 402(c)(11) of the Code.
(d) a “direct rollover” is a payment by the Plan to the eligible retirement plan specified by the distributee.
9.7.
Transfers to Retirement Plan
. Reference is made to the Retirement Plan, a defined benefit pension plan the benefits under which may be wholly or substantially offset by the actuarial equivalent of 90% of a Participant’s vested Share of the Trust Fund under this Plan. Any Participant in the Plan who at the time of separation from service has a vested accrued benefit under the Retirement Plan may elect to have the 90% portion of his or her vested Share of the Trust Fund hereunder which is eligible to serve as an offset to the Retirement Plan benefit (the “offset portion”) transferred directly from the Trust to the trust maintained in connection with the Retirement Plan, in exchange for an actuarially equivalent increase in his or her benefit under the Retirement Plan (determined by applying the actuarial assumptions set forth in the Retirement Plan). The Participant’s offset portion shall be determined by the Trustee by taking into account prior distributions, if any, made pursuant to Section 7.9, including any dividends which would have been attributable to such distributions had the distributions not been made.
Any Participant who elects a transfer as described in the preceding paragraph shall, with respect to the offset portion subject to such election, thereafter be subject to the provisions of Section 417 of the Code, which shall be satisfied under the provisions of the Retirement Plan. The transfer provisions of this Section 9.7 shall apply only to the extent, if any, that the Retirement Plan by its terms will provide for an increased benefit under that plan to reflect such transfer and the trustee of the trust associated with the Retirement Plan will accept a transfer of shares of Stock, taking into account,
inter alia
, the limitations of Section 407 of ERISA and such trustee’s fiduciary obligations under ERISA.
The provisions of this Section shall also apply to any spouse beneficiary of a deceased Participant who is eligible for a pre-retirement survivor annuity under the Retirement Plan and is also eligible for a distribution hereunder upon the death of the Participant. In the case of any Participant, or any surviving spouse described in the preceding paragraph, no transfer to the Retirement Plan shall be possible unless the benefit restored under the Retirement Plan has an actuarial value (determined using the applicable factors under the Retirement Plan) which is not less than the value of the transferred amount.
Article 10.
Concerning the Trust and the Trustee
.
10.1.
Trust Fund
. The Trustee will accept and hold in the Trust Fund contributions made on behalf of Participants. The Trust Fund will consist of all such contributions and the investments and reinvestments thereof without distinction between principal and income.
10.2.
Investment of Trust Fund
. In furtherance of the purposes of the Plan as described in Article 1, it is intended that the Trust assets be invested in Stock. To the extent that Participating Employer contributions are made in Stock, the Trustee will be expected to retain such Stock. To the extent Participating Employer contributions are made in cash, the Trustee will be expected to obtain Stock either from other shareholders or directly from the Company. To the extent consistent with the foregoing, the Trust may hold temporary investments other than Stock and may hold such portion of the Trust Fund uninvested as it deems advisable for making distributions under Article 9.
10.3.
Voting of Stock
.
(a)
The Trustee shall, in his or her discretion, vote the Stock in the suspense account.
(b)
The Trustee shall vote Stock credited to the individual accounts of the Participants (“allocated shares”) in accordance with the directions of the Participants to whose accounts such Stock has been credited. The Trustee shall vote allocated shares for which no directions are timely received in proportion to how the Trustee votes those allocated shares for which timely directions are received.
10.4.
Powers of Trustee
. In addition to and not in limitation of such powers granted to him or her by law or under any other provisions of this Agreement, the Trustee will have the following powers:
(a)
to deal with all or any part of the Trust Fund;
(b)
to enforce by suit or otherwise, or to waive, his or her rights on behalf of the Trust Fund, and to defend claims asserted against him or her or the Trust Fund, provided that the Trustee is indemnified to his or her satisfaction against liability and expenses;
(c)
to compromise, adjust or settle any and all claims against or in favor of him or her or the Trust Fund;
(d)
to vote or give proxies to vote any securities held in the Trust Fund except to the extent described in Section 10.3;
(e)
to oppose or participate in and consent to the organization, merger, consolidation or readjustment of the finances of any enterprise, to pay assessments and expenses in connection therewith, and to deposit securities under any agreements;
(f)
to borrow or raise moneys for the purposes of the Trust Fund in such amounts and on such terms and conditions as the Trustee shall determine;
(g)
to open and make use of such bank accounts as he or she deems appropriate, which accounts, if bearing a reasonable rate of interest, may be with the Trustee (if the Trustee is a bank);
(h)
to employ such agents and counsel as may be reasonably necessary from time to time and to pay them reasonable expenses and compensation (and the Trustee will not be responsible for any loss occasioned by any such agent or counsel selected with reasonable care);
(i)
to hold securities unregistered, or to register them in his or her own name or in the name of nominees;
(j)
to make, execute, acknowledge and deliver any and all instruments which may
(k)
generally to exercise any of the powers of an owner with respect to all or any part of the Trust Fund; and
(l)
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 (if there is more than one Trustee).
10.5.
Reliance by Trustee on other persons
. To the extent permitted by law, the Trustee may rely upon and act upon any writing from any person signing on behalf of the Company or from any other person authorized by the Retirement Committee to give instructions concerning the Plan and may conclusively rely upon and be protected in acting upon any written order from the Retirement Committee or upon any other notice, request, consent, certificate or other instructions or paper reasonably believed by the Trustee to have been executed by a duly authorized person, so long as the Trustee acts in good faith in taking or omitting to take any such action. The Trustee need not inquire as to the basis in fact of any statement in writing received from the Retirement Committee, except as may otherwise be required by law.
The Trustee will be entitled to rely on the latest certificate he or she has received from the Retirement Committee as to any person or persons authorized to act for the Retirement Committee hereunder and to sign on behalf of the Retirement Committee any directions or instructions, until he or she receives from the Retirement Committee written notice that such authority has been revoked.
Notwithstanding any provision contained herein, the Trustee will be under no duty to take any action with respect to any Participant’s account (other than as specified herein) unless and until the Retirement Committee furnishes the Trustee with written instructions on a form acceptable to the Trustee and the Trustee consents thereto in writing. Except as may be required by law, the Trustee will not be liable for any action taken pursuant to the Retirement Committee’s written instructions (nor for the purpose or propriety of any distribution made thereunder) and may return any contribution transmitted to the Trustee under the Plan unless accompanied by full and complete instructions in writing as to the disposition of such contribution.
10.6.
Consultation by Trustee with counsel
. The Trustee may consult with legal counsel (who may be but need not be counsel for the Company or the Retirement Committee) concerning any question which may arise with respect to his or her rights and duties under the Plan, and the opinion of such counsel will, to the extent permitted by law, be full and complete protection in respect of any action taken or omitted by the Trustee hereunder in good faith and in accordance with the opinion of such counsel.
10.7.
Accounts
. The Trustee 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 Trustee will determine the then net worth of the Trust Fund and will render to the Company an account of his or her administration of the Trust during the period since the last such accounting, including all allocations made by him or her during such period.
10.8.
Approval of accounts
. To the extent permitted by 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 every Participating Employer, the Retirement Committee, the Participants and all persons who then are or thereafter become interested in the Trust. The failure of the Company to notify the Trustee 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 Trustee cannot amicably settle the question raised by such objections, the Trustee will have the right to have such questions settled by judicial proceedings. Nothing herein contained will be construed so as to deprive the Trustee of the right to have a judicial settlement of his or her accounts. In any proceeding for a judicial settlement of any account or for instructions, the only necessary parties will be the Trustee and the Company.
10.9.
Resignation of Trustee
. Any Trustee may resign at any time by filing with the Company his or her written resignation, which will be effective thirty days after receipt thereof by the Company, upon the prior appointment of a successor Trustee or upon such other date as may be mutually agreed upon.
10.10.
Removal of Trustee
. The Company may remove any Trustee at any time by notice in writing forwarded to such Trustee by registered mail or delivered to such Trustee. Such removal will be effective at the expiration of thirty days from the date of mailing or the date of delivery, as the case may be, or upon such other date as may be mutually agreed upon. In the case of any such removal, the Company will give notice thereof to the remaining Trustee or Trustees, if any.
10.11.
Appointment of successor or additional Trustee
. The Company may appoint a successor Trustee to replace any Trustee who has died, resigned or been removed, and may appoint an additional Trustee or additional Trustees at any time and from time to time. Any such successor Trustee or additional Trustee will, upon written acceptance of his or her appointment, become vested with the estate, rights, powers, discretions, duties and obligations of a Trustee hereunder as if he or she had been originally named as Trustee in this Agreement.
10.12.
Compensation of Trustee and expenses of Trust
. The Trustee will serve without compensation except as may from time to time otherwise be agreed upon by the Company and the Trustee. Unless paid by a Participating Employer or by a distributee in connection with a distribution from the Trust Fund, all expenses of the Trust, including without limitation reasonable legal fees, compensation of the Trustee, 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 Retirement Committee may direct, or, in the absence of such direction, as the Trustee may determine.
10.13.
Disputes as to persons entitled to payment
. If any dispute arises as to the persons to whom payment or delivery of any funds or property is to be made by the Trustee, the Trustee 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 Trustee has been indemnified to his or her satisfaction against loss, or until such dispute has been settled by the persons concerned.
10.14.
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 Trustee 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 Trustee 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 without limitation checks drawn on any bank account or accounts maintained from time to time for the Trust.
10.15.
Indemnification of Trustee
. 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 or her having occupied a fiduciary position in connection with the Plan.
Article 11.
Top Heavy Provisions
.
11.1.
Special contribution for top heavy Plan Years
. Notwithstanding anything in the Plan to the contrary, if for any top heavy Plan Year the value of the allocation under Section 7.5 to the account of any individual who is a Participant on the last day of such year and who is not a key employee for such year is less than three percent of such Participant’s total taxable compensation for such year, the Participant’s Participating Employer shall contribute to the Trust, for his or her benefit, an additional amount sufficient to cause the sum of all contributions made for the benefit of such Participant for such year to equal three percent of his or her total taxable ompensation. Notwithstanding the foregoing, if for such top heavy Plan Year the allocation to the account of each key employee, expressed as a percentage of total taxable compensation, is less than three percent, the minimum contribution required under this Section 11.1 for the benefit of each Participant who is not a key employee will be limited to an amount which, when added to the allocation to the account of such Participant, constitutes a percentage of such Participant’s total taxable compensation not less than the highest percentage obtained by dividing, for each key employee, the allocation to the account of such key employee by his or her total taxable compensation. In applying the preceding sentence, there shall be aggregated with allocations under the Plan all allocations (other than elective contributions made by non-key employees), if any, made on behalf of the Participant under all qualified defined contribution plans required to be aggregated with the Plan pursuant to Section 11.3(b)(iii)(1) or (2) of the Code, subject to the special rule of Section 416(c)(2)(B)(ii)(II) of the Code.
Any additional contribution made for the benefit of any Participant under this Section shall be credited to his or her account as soon as practicable after the close of the Plan Year for which the contribution is made.
Notwithstanding the foregoing provisions of this Section, no contribution hereunder shall be required for the benefit of any Participant to the extent such contribution would result in the duplication of minimum benefits or contributions, within the meaning of Section 416(f) of the Code and regulations prescribed thereunder, with respect to such Participant. In the case of any Participant who is also a participant in the Retirement Plan and who, in respect of any top heavy plan year, accrues a benefit under the Retirement Plan at least as great as the minimum accrual required under Section 416(c)(1) of the Code, no additional contribution shall be made under this Section 11.1.
11.2.
Special top-heavy vesting
. Notwithstanding any other provision of the Plan, each individual who is a Participant at any time during a Plan Year that is a top heavy plan year will have a full vested and nonforfeitable interest in not less a percentage of his or her Share of the Trust Fund than as set forth in the following schedule, based on his or her completed whole years of Vesting Service:
|
Years of Vesting Service
|
Applicable
Nonforfeitable
Percentage
|
|
|
|
|
|
less than 2
|
0
|
|
|
2 but less than 3
|
20
|
|
|
3 but less than 4
|
40
|
|
|
4 but less than 5
|
60
|
|
|
5 but less than
|
80
|
|
|
6 or more
|
100
|
|
11.3.
Definitions
. For purposes of this Article the following definitions shall apply.
(a)
“Key employee” means any Employee or Beneficiary who is a “key employee” within the meaning of Section 416(i) of the Code and the regulations thereunder. For purposes of determining whether an individual is a key employee, the compensation to be taken into account shall be his or her Compensation (within the meaning of Section 2.7).
(b)
“Top heavy plan year” means a Plan Year commencing on or after January 1, 1984 if the sum of the present value of the total accrued benefits of all key employees under each defined benefit plan (as of the applicable determination date of each such plan) which is aggregated with this Plan and the sum of the account balances of all key employees under the Plan and under each other defined contribution plan (as of the applicable determination date of each such plan) which is aggregated with this Plan exceeds sixty percent of the sum of such amounts for all Employees or former Employees (other than former key employees but including beneficiaries of deceased former Employees) under such plans.
The following rules shall apply for purposes of the foregoing determination.
(i)
All determinations hereunder will be computed in accordance with Section 416 of the Code and the regulations thereunder, which are specifically incorporated herein by reference.
(ii)
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.
(iii)
There will be aggregated with this Plan
(1) any other plan of an Employer under which at least one key employee participates and which is able to satisfy the requirements of Sections 401(a)(4) and 410 of the Code by reason, at least in part, of the existence of this Plan, or
(2) if at least one key employee is a Participant hereunder, any other plan of an Employer in which a key employee participates or which enables a plan maintained by an Employer in which a key employee participates (including, but not limited to, the Plan) to satisfy the requirements of Sections 401(a)(4) and 410 of the Code.
Any plan of an Employer not required to be aggregated with the Plan under the preceding sentence may nevertheless, at the discretion of the Retirement Committee, be aggregated with the Plan if the benefits and coverage of all aggregated plans would continue to satisfy the requirements of Sections 401(a)(4) and 410 of the Code.
(c)
“Total taxable compensation” includes the compensation taken into account for purposes of Section 7.6, subject to the limitations of Sections 401(a)(17) of the Code.
Article 12.
Amendment and Termination
.
12.1.
Amendment
. The Company reserves the power at any time or times to amend the provisions of the Plan and Trust to any extent and in any manner that it may deem advisable by delivery to the Trustee of a written instrument executed by the Company providing for such amendment. Upon the delivery of such instrument to the Trustee, such instrument will become effective in accordance with its terms as to all Participants and all persons having or claiming any interest hereunder; provided, however, that the Company will not have the power:
(a)
to amend the Plan or Trust in such manner as would cause or permit any part of the assets of the Trust to be diverted to purposes other than for the exclusive benefit of each Participant and his or her Beneficiaries, unless such amendment is required or permitted by law, governmental regulation or ruling;
(b)
to amend the Plan or Trust retroactively in such a manner as would deprive any Participant of any benefit to which he or she was entitled under the Plan by reason of contributions made by a Participating Employer prior to the amendment, unless such amendment is permitted by, or necessary to conform the Trust or Plan to, any law, governmental regulation or ruling, or to permit the Trust and the Plan to meet the requirements of Sections 401(a) and 501(a) of the Code; or
(c)
to amend the Plan or Trust in such manner as would increase the duties or liabilities of the Trustee or affect his or her fee for services, unless the Trustee consents thereto in writing.
12.2.
Termination
. The Company has established, and each Participating Employer has adopted, the Plan and the Trust with the bona fide intention and expectation that contributions will be continued indefinitely, but the Company and each Participating Employer will have no obligation or liability whatsoever to maintain or continue participation in the Plan for any given length of time and may discontinue contributions under the Plan or, in the case of the Company, terminate the Plan at any time by written notice delivered to the Trustee without any liability whatsoever for any such discontinuance or termination.
12.3.
Distributions upon termination of the Plan
. Upon termination or partial termination of the Plan for any reason or complete discontinuance of contributions thereunder, each affected Participant (including a terminated Participant in respect of amounts not previously forfeited by him or her) will have a fully vested and nonforfeitable interest in his or her Share of the Trust Fund. In the event of the termination of the Plan, the Trustee will make distributions to the Participants or other persons entitled to distributions pursuant to Article 9, in accordance with the instructions of the Retirement Committee or, in the absence of such instructions, as the Trustee in his or her discretion deems advisable. For the avoidance of doubt, the Retirement Committee or the Trustee, as the case may be, may continue to maintain the Trust following an event described in this Section and make distributions in the ordinary course in accordance with the provisions of Articles 8 and 9 or, to the extent consistent with applicable law, may provide for immediate distributions. Upon the completion of such distribution, the Trust will terminate, the Trustee will be relieved from all liability under the Trust, and no Participant or other person will have any claims thereunder, except as required by applicable law.
12.4.
Merger or consolidation of Plan; transfer of Plan assets
. In case of any merger or consolidation of the Plan with, or transfer of assets and liabilities of the Plan to, any other plan, provision must be made so that each Participant would, if the Plan then terminated, receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he or she would have been entitled to receive immediately before the merger, consolidation or transfer if the Plan had then terminated.
Article 13.
Miscellaneous
.
13.1.
Limitation of rights
. Neither the establishment of the Plan and the Trust nor any amendment thereof nor the creation of any fund or account nor the payment of any benefits will be construed as giving to any Participant or other person any legal or equitable right against any Participating Employer, the Retirement Committee or any Trustee, except as provided herein, and in no event will the terms of employment or service of any Participant be modified or in any way be affected hereby. It is a condition of the Plan, and each Participant expressly agrees by his or her participation herein, that each Participant will look solely to the assets held in the Trust for the payment of any benefit to which he or she is entitled under the Plan.
13.2.
Nonalienability of benefits
. The benefits provided hereunder will not be subject to alienation, assignment, garnishment, attachment, execution or levy of any kind, and any attempt to cause such benefits to be so subjected will not be recognized except to such extent as may be required by law.
The provisions of the preceding paragraph shall apply in general to the creation, assignment or recognition of a right to any benefit payable with respect to a Participant pursuant to a domestic relations order. Notwithstanding the foregoing, if such order is a Qualified Domestic Relations Order, the provisions of the preceding paragraph shall not apply.
13.3.
Payment under Qualified Domestic Relations Orders
. Notwithstanding any provisions of the Plan to the contrary, if there is entered any Qualified Domestic Relations Order that affects the payment of benefits hereunder, such benefits shall be paid in accordance with the applicable requirements of such Order. The Retirement Committee shall establish reasonable procedures to determine whether an order is a Qualified Domestic Relations Order, and to administer distributions under such Orders. An order shall not be treated as failing to qualify as a Qualified Domestic Relations Order merely because it provides for payment to one or more alternate payees prior to the Participant’s “earliest retirement age” (as that term is defined in Section 414(p)(4)(B) of the Code), unless the procedures established by the Retirement Committee under this Section otherwise specify.
13.4.
Certain Distribution Requirements
. Notwithstanding any provision of the Plan to the contrary, the provisions of this Section 13.4 shall apply with respect to any distribution (other than an elective transfer to the Retirement Plan under Section 9.7) of the offset portion (as that term is defined in Section 9.7) of the Participant’s vested Share of the Trust Fund. At least thirty days and not more than ninety days before the Participant’s annuity starting date, as defined in Section 417(f)(2) of the Code, the Retirement Committee shall provide the Participant with information concerning the effect under the Retirement Plan of any offset with respect to accumulations under this Plan, the possibilities for obtaining annuitization of the offset amount hereunder and the rights of the Participant’s spouse (if any) with respect to the distribution of the offset amount;
provided
, that the Retirement Committee may cause such information to be furnished after the 30
th
day preceding the annuity starting date so long as the actual commencement of benefit payments occurs more than seven (7) days after the information is provided. Within the ninety-day period preceding the annuity starting date (or, if the information described in the preceding sentence is provided after the 30
th
day preceding the annuity starting date, within the thirty (30) days following the furnishing of such information), the Participant may elect either to (i) transfer the offset portion to the Retirement Plan pursuant to and subject to the limitations of Section 9.7, (ii) obtain a lump-sum distribution of the offset portion (together with any remaining portion of his or her Share of the Trust Fund not previously distributed) pursuant to Section 9.1; or (iii) elect to have the Retirement Committee apply the value of his or her offset portion to the purchase of a commercial annuity satisfying the requirements of Section 417 of the Code. Any election under (ii) above shall require the written consent of the Participant’s spouse (if the Participant is married) under rules analogous to those described in Section 8.8. In the absence of spousal consent where required, the Participant’s offset portion shall be applied as described in (iii) above unless it is transferred to the Retirement Plan as described in (i) above.
In the case of a married Participant who dies prior to his or her annuity starting date, any part of the Participant’s offset portion that is payable to the Participant’s surviving spouse shall be applied toward the purchase of a commercial annuity (including, if applicable, a transfer to the Retirement Plan) or distributed in a single payment of shares (plus cash in lieu of any fractional share) pursuant to Article 9, as the surviving spouse elects. With respect to the disposition of any part of the Participant’s offset portion: (i) the Retirement Committee shall provide to each affected Participant, during the periods specified in Section 417(a)(3)(B)(ii) of the Code and the regulations thereunder, information concerning the benefit alternatives and spousal rights described in this paragraph; and (ii) no designation of another beneficiary in accordance with Section 8.8, or consent thereto by the Participant’s spouse, shall be effective unless the designation is made on or after the first day of the Plan Year in which the Participant attains age 35, or in the case of a Participant who earlier separates from service on or after the date of such separation;
provided
, that a Participant who has not yet reached the Plan Year in which he or she will attain age 35 may designate an alternative beneficiary pursuant to Section 8.8 subject to the condition that such designation will become null and void as of the first day of the Plan Year in which the Participant attains age 35, unless renewed in accordance with Section 8.8 and the provisions of this Section.
13.5.
Information between Retirement Committee and Trustee
. The Retirement Committee will furnish to the Trustee, and the Trustee will furnish to the Retirement Committee, such information relating to the Plan and Trust as may be required under the Code and any regulations issued or forms adopted by the Treasury Department thereunder or under the provisions of ERISA and any regulations issued or forms adopted by the Labor Department thereunder.
13.6.
Military Service
. Effective December 12, 1994, notwithstanding any other provision of the Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Section 414(u) of the Code. Without limiting the generality of the foregoing, to the extent required under Section 401(a)(37) of the Code, in the case of a Participant who dies on or after January 1, 2007 while performing qualified military service, (i) the Participant's survivors are entitled to any additional benefits (other than benefit accruals relating to the period of qualified military service) provided under the Plan had the Participant resumed employment with the Employer in accordance with his or her reemployment rights under the Uniformed Services Employment and Reemployment Rights Act of 1994 and then terminated employment on account of death and (ii) the deceased Participant shall be credited with service for vesting purposes for his or her period of qualified military service.
13.7.
Governing law
. The Plan and Trust will be construed, administered and enforced according to the provisions of ERISA and, to the extent not preempted thereby, the laws of Massachusetts.
Article 14.
Minimum Required Distributions
.
14.1.
General Rules Regarding Minimum Required Distributions
.
(a)
Effective Date. The provisions of this Article 14 will apply for purposes of determining minimum required distributions for years beginning or after July 1, 2003.
(b)
Precedence. The requirements of this Article 14 will take precedence over any inconsistent provisions of the Plan.
(c)
Requirements of Treasury Regulations Incorporated. All distributions required under Sections 14.1 and 14.2 will be determined and made in accordance with the Treasury regulations under Section 401(a)(9) of the Code.
(d)
TEFRA Section 242(b)(2) Elections. Notwithstanding the other provisions of this Article 14, distributions may be made under a designation made before January 1, 1984, in accordance with Section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (“TEFRA”) and the provisions of the Plan that relate to Section 242(b)(2) of TEFRA.
14.2.
Time and Manner of Minimum Required Distribution
.
(a)
Required Beginning Date
. The Participant’s entire interest, if distributed to the Participant and unless transferred to The L.S. Starrett Company Retirement Plan pursuant to Section 9.7 (in which case the Participant’s benefit will be distributed pursuant to the terms of the Retirement Plan) or applied to the purchase of an annuity pursuant to Section 13.4 (in which case benefits will be paid under the annuity in accordance with the requirements of Section 401(a)(9) of the Code and the Treasury regulations thereunder), will be distributed in a single payment pursuant to the otherwise applicable provisions of the Plan but no later than the Participant’s Required Beginning Date.
(b)
Death of Participant Before Distributions Begin
. If the Participant dies before distribution is made (and before the Required Beginning Date), the Participant’s entire interest will be distributed pursuant to the otherwise applicable provisions of the Plan but no later than as follows:
(i)
If the Participant’s surviving spouse is a designated Beneficiary, the portion of the Participant’s interest in the Plan that is distributable to such surviving spouse shall be distributed, unless transferred to The L.S. Starrett Company Retirement Plan pursuant to Section 9.7 (in which case the benefit will be distributed pursuant to the terms of the Retirement Plan) or applied to the purchase of an annuity pursuant to Section 13.4 (in which case benefits will be paid under the annuity in accordance with the requirements of Section 401(a)(9) of the Code and the Treasury regulations thereunder), in a single payment not later than the later of (A) December 31 of the calendar year containing the fifth anniversary of the Participant’s death or (B) December 31 of the calendar year in which the Participant would have attained age 70½.
(ii)
Any portion of the Participant’s interest in the Plan that is not distributable to a designated beneficiary who is the Participant’s surviving spouse shall be distributed in a single payment to the beneficiary entitled thereto not later than December 31 of the calendar year containing the fifth anniversary of the Participant’s death.
(iii)
If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary and the surviving spouse dies after the Participant but before distribution to the surviving spouse has been made or required to have been made, this Section 14.2(b), other than Section 14.2(b)(i), shall apply as if the surviving spouse were the Participant.
14.3.
Definitions
. For purposes of this Article, the following definitions shall apply:
(a)
“designated Beneficiary” means the individual who is designated as the Beneficiary under Section 8.8 of the Plan and is the designated Beneficiary under Section 401(a)(9) of the Code and Section 1.401(a)(9)-4 of the Treasury regulations.
(b)
“Required Beginning Date” means, with respect to a Participant who is not a “five percent owner” of the Employer (as defined at Section 416 of the Code), April 1 of the calendar year following the later of: (i) the calendar year in which the Participant attains age 70½, or (ii) the calendar year in which the Participant retires; and, with respect to a “five percent owner,” April 1 of the calendar year following the calendar year in which the Participant attains age 70½.
IN WITNESS WHEREOF, the Company and the Trustee have caused this Agreement to be executed by their respective officers thereunto duly authorized all as of the date first above written.
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THE L. S. STARRETT COMPANY
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By:
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/s/ D.A. Starrett
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TRUSTEES
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/s/ Harold J. Bacon
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/s/ D.A. Starrett
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/s/ Francis J. O’Brien
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THE L.S. STARRETT COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST AGREEMENT
(2010 Restatement)
First Amendment
Pursuant to Section 12.1 of The L.S. Starrett Company Employee Stock Ownership Plan and Trust Agreement as amended and restated effective July 1, 2010 (the “Plan”), The L.S. Starrett Company hereby amends Article 14 of the Plan, effective January 1, 2009 by adding the following new Section 14.4 to the end thereof:
“
14.4
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2009 Required Minimum Distributions
. Notwithstanding any other provision of this Article 14, a Participant or Beneficiary who would have been required to receive required minimum distributions for 2009 but for the enactment of Code section 401(a)(9)(H) (“2009 Required Minimum Distributions”) and who would have satisfied that requirement by receiving distributions that are (i) equal to the 2009 Required Minimum Distributions or (ii) one or more payments in a series of substantially equal distributions (that include the 2009 Required Minimum Distributions) made at least annually and expected to last for the life (or life expectancy) of the Participant, the joint lives (or joint life expectancy) of the Participant and the Participant’s designated beneficiary, or for a period of at least 10 years, will not receive those distributions for 2009.”
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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 December, 2011.
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THE L.S. STARRETT COMPANY
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By:
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/s/D.A. Starrett
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Its:
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President and CEO
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-40-
Exhibit 10h
TD BANK, N.A.
LOAN AND SECURITY AGREEMENT
(ALL ASSETS)
LOAN AND SECURITY AGREEMENT (ALL ASSETS),
dated as of June ____, 2009 by and among The L. S. Starrett Company, a Massachusetts corporation having a principal place of business located at 121 Crescent Street, Athol, Massachusetts 01331 ("
Starrett
"), Evans Rule Company, Inc., a New Jersey corporation having a principal place of business located at 5965 Core Road, Suite 618, North Charleston, SC 29406 ("
Evans Rule
"), Level Industries, Inc., a Massachusetts corporation having a principal place of business located at 121 Crescent Street, Athol, Massachusetts 01331 ("
Level Industries
"), Tru-Stone Technologies, Inc., a Delaware corporation having a principal place of business located at 1101 Prosper Drive, P.O. Box 430, Waite Park, MN 56387 ("
Tru-Stone
"), and Starrett Kinemetric Engineering, Inc., a Delaware corporation having a principal place of business located at 26052 Merit Circle, Suite 103, Laguna Hills, CA 92653 ("
Kinemetric
" and together with Starrett, Evans Rule, Level Industries and Tru-Stone, each a
"Borrower"
and together the "
Borrower
") and T.D. Bank, N.A., a national banking association organized and existing under the laws of the United States of America, the secured party hereunder having a place of business located at 370 Main Street, Worcester, Massachusetts 01608 (the "
Bank
"). The parties hereto hereby agree as follows:
1.
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DEFINITIONS AND ACCOUNTING TERMS.
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Section 1.01.
As used in this Agreement, the following terms have the following meanings (terms defined in the singular to have the same meaning when used in the plural and vice versa):
“Adjusted EBITDA”
shall mean, during the applicable period, EBITDA minus Extraordinary Gains (or plus Extraordinary Losses), minus dividends and distributions.
“Affiliate”
shall mean any Person (a) which directly or indirectly Controls, or is Controlled by or is under common Control with the Borrower or a subsidiary, (b) which directly or indirectly beneficially holds or owns five (5%) percent or more of any class of voting stock of the Borrower or any subsidiary, or (c) five (5%) percent or more of the voting stock of which is directly or indirectly beneficially owned or held by the Borrower or a subsidiary.
“Bankruptcy Code”
as used herein shall mean Title 11 of the United States Code entitled “Bankruptcy”.
“Borrowing Base”
as used herein shall mean the sum of the following:
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(a)
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eighty (80%) percent of the unpaid face amount of Qualified Accounts (as defined below), PLUS
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(b)
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fifty (50%) percent of the cost or market value, whichever is lower, of all Eligible Inventory (as defined below).
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“Capital Assets”
shall mean assets that, in accordance with GAAP, are required or permitted to be depreciated or amortized on the Borrower’s balance sheet.
“Capital Expenditures”
shall mean but not be limited to amounts paid during such year for Capital Assets or Capital Leases and shall include, in the case of a purchase, the entire purchase price and, in the case of a Capital Lease (but not an operating lease), the entire rental for the term.
“Capital Leases”
shall mean Capital Leases, conditional sales contracts and other title retention agreements relating to the purchase or acquisition of Capital Assets.
“CMLTD”
shall mean the current maturity of long term indebtedness other than Revolving Loans to be paid during the next twelve-month period, including but not limited to, amounts required to be paid during such period under Capital Leases.
“Collateral”
shall have the meaning assigned to such term in Section 5.
“Commercial Letters of Credit”
shall mean a letter of credit issued to support the purchase by Borrower of Inventory prior to its transport to one of Borrower’s places of business that provides that all draws thereunder must require presentation of customary documentation including, if applicable, commercial invoices, packing lists, certificate of origin, bill of lading, an airway bill, customs clearance documents, quota statement, certificate, beneficiaries statement and bill of exchange, bills of lading, dock warrants, dock receipts, warehouse receipts or other documents of title, in form and substance satisfactory to Bank and reflecting passage to Borrower of title to first quality Inventory conforming to Borrower’s contract with the seller thereof.
“Control”
shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of any Person, whether through the ownership of voting securities, by contract or otherwise.
“Credit Limit”
means an amount equal to Twenty-Three Million ($23,000,000.00) Dollars.
“Debt”
means (a) indebtedness or liability for borrowed money; (b) obligations evidenced by bonds, debentures, notes, or other similar instruments; (c) obligations for the deferred purchase price of property or services (including trade obligations); (d) obligations as lessee under Capital Leases; (e) current liabilities in respect of unfunded vested benefits under plans covered by ERISA; (f) obligations under Letters of Credit; (g) obligations under acceptance facilities; (h) all guaranties, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any Person, or otherwise to assure a creditor against loss; and (i) obligations secured by any Liens, whether or not the obligations have been assumed.
“Debt Service Coverage Ratio”
shall mean, during the applicable period, that quotient equal to (a) Adjusted EBITDA, divided by (b) Fixed Charges, that is,
Adjusted EBITDA
Fixed Charges
“Distributions”
shall mean all payment or distributions to Owners in cash or in property other than reasonable salaries, bonuses and expense reimbursements.
“EBIT”
shall mean, for the applicable period, income from continuing operations before the payment of interest and taxes, determined in accordance with GAAP for Starrett and its subsidiaries on a consolidated basis.
“EBITDA”
shall mean, for the applicable period, EBIT plus depreciation, depletion, amortization and other non-cash charges, determined in accordance with GAAP for Starrett and its subsidiaries on a consolidated basis.
“Eligible
Inventory”
means Borrower’s raw materials and finished goods which are initially and at all times until sold: new and unused or refurbished (except, with Bank’s written approval, used equipment held for sale or lease), in first−class condition, merchantable and saleable through normal trade channels; at a location which is in the United States; subject to a perfected security interest in favor of Bank (upon Bank's filing of Financing Statements as defined in Section 5(e) hereof); owned by Borrower free and clear of any lien except in favor of Bank and/or Permitted Liens; not obsolete; not scrap, waste, defective goods and the like; have been produced by Borrower in accordance with the Federal Fair Labor Standards Act of 1938, as amended, and all rules, regulations and orders promulgated thereunder; not stored with a bailee, warehouseman or similar party unless Bank has given its prior written consent thereto; and have not been designated by Bank, in accordance with its normal credit policies, as unacceptable for any reason by notice to Borrower.
“Environmental Law”
means any federal, state, local or other governmental statute, regulation, law or ordinance dealing with the protection of human health and the environment.
“ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as amended.
“Event of Default”
shall have the meaning assigned to such term in Section 14.01.
“Extraordinary Gains/Losses”
shall mean, during the applicable period, a gain or loss related to the sale of a Capital Asset, income of a subsidiary Borrower under a concept of pooling or accounting, income from minority interest under the equity method of accounting, the write-up or impairment of assets, the forgiveness of Debt income, litigation gain or loss, casualty loss and income or loss from discontinued operations or the sale of a business.
“Fixed Charges”
shall mean Interest plus CMLTD for the next 12 months
“Funded Debt”
shall mean, for each quarterly period of Starrett and its consolidated subsidiaries, all outstanding liabilities for borrowed money and other interest-bearing liabilities, including current and long term Debt and Letters of Credit of Starrett and its consolidated subsidiaries
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“GAAP”
shall mean generally accepted accounting principles as in effect from time to time; provided, however, that for purposes of calculating the financial covenants contained in Section 13 GAAP shall mean generally accepted accounting principles as in effect on the date of this Agreement.
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“Hazardous Substances”
means pollutants, contaminants, hazardous substances, hazardous wastes, petroleum and fractions thereof, and all other chemicals, wastes, substances and materials listed in, regulated by or identified in any Environmental Law.
“Interest”
shall mean, for the applicable period, all interest paid or payable, including, but not limited to, interest paid or payable on indebtedness and on Capital Leases of Starrett and its consolidated subsidiaries, determined in accordance with GAAP.
“Letters of Credit”
shall have the meaning assigned to such term in Section 2.05.
“Leverage Ratio”
shall mean the ratio of Funded Debt to EBITDA for the twelve (12) month period ending on the last day of each fiscal quarter of Starrett and its consolidated subsidiaries.
“LIBOR”
(London Interbank Offered Rate) shall mean the rate of interest in U.S. Dollars (rounded upwards, at the Bank's option, to the next 100
th
of one percent) equal to the British Bankers' Association LIBOR ("
BBA LIBOR
") for one (1) month as published by Bloomberg (or such other commercially available source providing quotations of BBA LIBOR as designated by Bank form time to time) at approximately 11:00 a.m. (London time) two (2) London Banking Days prior the Reset Date; provided however, if more than one BBA LIBOR is specified, the applicable rate shall be the arithmetic mean of all such rates. London Banking Days means any day on which commercial banks are open for general business (including dealings in foreign exchange and foreign currency deposits) in London, England. If, for any reason, such rate is not available, the term LIBOR shall mean, with respect to any one (1) month period, the rate of interest per annum determined by Bank to be the average rate per annum at which deposits in dollars are offered for such Interest Period by major banks in London, England at approximately 11:00 a.m. (London time) two (2) London Banking Days prior to the Reset Date.
“Lien”
means any mortgage, deed of trust, pledge, security interest, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority, or other security agreement or preferential arrangement, charge, or encumbrance of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the UCC or comparable law of any jurisdiction to evidence any of the foregoing).
“Margin”
shall mean, during the applicable period, the percentages set forth below, as determined by the Borrower’s Leverage Ratio (as defined herein):
Level
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Leverage Ratio
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Margin
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1
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Less than 1.00
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1.50%
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2
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1.00 to 2.00
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1.75%
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3
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Greater than 2.00 and up
to and including 2.50
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2.00%
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4
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Greater than 2.50
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2.25%
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Prior to the Bank's receipt of the Borrower's management prepared quarterly financial statements for the period ending June 30, 2009, the Margin shall mean 1.75%. Upon the Bank’s receipt of a Margin Certificate in the form of
Exhibit 1
attached hereto and the financial statements of Starrett and its consolidated subsidiaries in accordance with Section 11 of this Agreement (the "
Required Documents
") the Margin shall be determined and be effective as of the first day of the following month, which Margin shall remain in effect until the first day of the calendar month following the Bank’s receipt of the subsequent Margin Certificate and shall be adjusted, if at all, as at the end of each quarterly period thereafter based on the applicable accurate Margin Certificate. In the event that the Borrower fails to timely furnish the Bank with the Required Documents in accordance with Section 11 of this Agreement then the Margin shall be determined as if Level 4 was applicable, from the first day after the date that such Required Documents were due until the first day of the calendar month following the Bank’s receipt of the Required Documents.
“
Note
” shall have the meaning assigned to such term in Section 2.02.
“Obligations”
shall have the meaning assigned to such term in Section 6.
“Organizational Documents”
means (a) with respect to a corporation, its certificate or articles of incorporation and by-laws; (b) with respect to a partnership, its partnership certificate and partnership agreement; (c) with respect to a limited liability company, its articles or certificate of formation and its operating or management agreement; and (d) with respect to a trust, the declaration of trust; and, with respect to any of them, any other document required to be filed with public authorities to evidence or establish authority to conduct business.
“Owner”
means with respect to Starrett and its subsidiaries, any Person having legal or beneficial title to an ownership interest in Starrett and its subsidiaries or a right to acquire such an interest.
“Permitted Liens”
shall have the meaning assigned to such term in Section 13.08.
“Permitted Protests”
means the right of the Borrower to protest any Lien (other than a Lien that secures the Obligations), tax (other than payroll taxes or taxes that are the subject of a federal or state tax lien) or rental payment, provided that (x) a reserve with respect to such liability is established on the books of the Borrower, (y) any such protest is instituted and diligently prosecuted by the Borrower in good faith, and (z) the Bank is satisfied that, while such protest is pending, there will be no impairment of the enforceability, validity or priority of any of the Liens of the Bank in and to the Collateral.
“Person”
means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority, or other entity of whatever nature.
“Plan”
means any employee plan subject to Title IV of ERISA maintained for employees of Borrower, any subsidiary of Borrower or any other trade or business under common control with Borrower within the meaning of Section 414(c) of the Internal Revenue Code of 1986 or any regulations thereunder.
“Qualified
Account”
, as used herein, means an Account owing to Borrower which met the following specifications at the time it came into existence and continues to meet the same until it is collected in full:
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(a)
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The Account is not more than ninety (90) days from the date of the invoice thereof.
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(b)
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The Account arose from the performance of services or an outright sale of goods by Borrower, such goods have been shipped to the account debtor, and Borrower has possession of, or has delivered to Bank, shipping and delivery receipts evidencing such shipment.
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(c)
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The Account is not subject to any prior assignment, claim, lien, or security interest, and Borrower will not make any further assignment thereof or create any further security interest therein, nor permit Borrower’s rights therein to be reached by attachment, levy, garnishment or other judicial process.
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(d)
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No set−off, credit, allowance or adjustment has been asserted by the account debtor, except discount allowed for prompt payment and the account debtor has not complained as to his liability thereon and has not returned any of the goods from the sale of which the Account arose.
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(e)
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The Account arose in the ordinary course of Borrower’s business and did not arise from the performance of services or a sale of goods to a supplier or employee of the Borrower.
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(f)
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No notice of bankruptcy or insolvency of the account debtor has been received by or is known to the Borrower.
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(g)
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The Account is not owed by an account debtor whose principal place of business is outside the United States of America.
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(h)
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The Account is not owed by an entity which is a parent, brother/sister, subsidiary or Affiliate of Borrower.
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(i)
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The account debtor is not located in the State of New Jersey or in the State of Minnesota, unless Borrower has filed and shall file all legally required Notice of Business Activities Reports with the New Jersey Division of Taxation or the Minnesota Department of Revenue, as the case may be.
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(j)
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The Account when aggregated with all of the Accounts of that account debtor does not exceed fifty (50%) percent of the then aggregate of Qualified Accounts.
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(k)
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The Account is not evidenced by a promissory note.
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(l)
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The Account did not arise out of any sale made on a bill and hold, dating or delayed shipment basis.
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(m)
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The Account did not arise as a result of a progress billing or from a project on which the Account Debtor has a payment or performance bond.
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(n) The Account is not for retainage.
(o) Bank has not deemed the Account to be unacceptable for any reason in accordance with its normal credit policies by notice to Borrower.
PROVIDED THAT if at any time fifty (50%) percent or more of the aggregate amount of the Accounts due from any account debtor are unpaid in whole or in part more than ninety (90) days from the respective dates of invoice, from and after such time none of the Accounts (then existing or hereafter arising) due from such account debtor shall be deemed to be Qualified Accounts until such time as all Accounts due from such account debtor are (as a result of actual payments received thereon) no more than ninety (90) days from the date of invoice; Accounts payable by Borrower to an account debtor shall be netted against Accounts due from such account debtor and the difference (if positive) shall constitute Qualified Accounts from such account debtor for purposes of determining the Borrowing Base (notwithstanding paragraph (d) above); characterization of any Account due from an account debtor as a Qualified Account shall not be deemed a determination by Bank as to its actual value nor in any way obligate Bank to accept any Account subsequently arising from such account debtor to be, or to continue to deem such Account to be, a Qualified Account; it is Borrower’s responsibility to determine the creditworthiness of account debtors and all risks concerning the same and collection of Accounts are with Borrower; and all Accounts whether or not Qualified Accounts constitute Collateral.
“Receivables”
shall have the meaning assigned to such term in Section 5.
“Revolving Loan(s)”
shall mean all loans, including all Letters of Credit, advanced by Bank to Borrower or for the account of Borrower hereunder.
“
Security Trigger Event
” shall have the meaning assigned to such term in Section 5(e).
“Senior Debt”
shall mean any Debt which is not Subordinated Debt.
“Subordinated Debt”
shall mean Debt which is expressly stated to be subordinated or junior in right of payment to Borrower’s Debt to Bank.
“Tangible Net Worth”
shall mean the equity of Starrett and its consolidated subsidiaries determined in accordance with GAAP, consistently applied,
subtracting
therefrom
(a) intangibles (as determined in accordance with such principles so applied), and (b) Debt owing to Borrower from any employee, Owner, or other Affiliate of Borrower.
“UCC”
shall mean the Uniform Commercial Code as in effect in the Commonwealth of Massachusetts.
Section 1.02.
All accounting terms not specifically defined herein shall be construed in accordance with GAAP consistent with those applied in the preparation of the financial statements referred to in Section 8.05, and all financial data submitted pursuant to this Agreement shall be prepared in accordance with such principles.
Section 1.03.
Unless otherwise defined in this Agreement, capitalized words shall have the meanings set forth in the UCC as of the date of this Agreement.
2.
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REVOLVING
LOANS AND OTHER FINANCIAL ACCOMMODATIONS.
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Section 2.01.
From time to time upon Borrower’s request, so long as the sum of the aggregate principal amount of all Revolving Loans outstanding, and the requested Revolving Loan does not exceed the lesser of (a) the Borrowing Base, or (b) the Credit Limit, Bank shall make such requested Revolving Loan, provided that there has not occurred an Event of Default or an event which, with notice or the lapse of time or both, would constitute an Event of Default.
Section 2.02.
All Revolving Loans shall bear interest and at the option of the Bank shall be evidenced by and repayable in accordance with a revolving note drawn to the order of Bank substantially the form of
Exhibit 2
hereto (the
“Note”
), as the same may hereafter be amended, supplemented or restated from time to time and any note or notes issued in substitution therefor, but in the absence of the Note shall be conclusively evidenced by Bank’s records of Revolving Loans and repayments.
Section 2.03.
Interest will be charged to Borrower at a fluctuating rate which is the monthly equivalent to a per annum rate equal to the aggregate of: (x) LIBOR, and (y) the Margin, or at such other rate agreed on from time to time by the parties, upon any balance owing to Bank at the close of each day and shall be payable (a) on the first day of each month in arrears; (b) on termination of this Agreement; (c) on acceleration of the time for payment of the Obligations; and (d) on the date the Obligations are paid in full. The rate of interest payable by Borrower shall be changed if at all, effective as of the first day of each month (the "
Reset Date
"). The Bank shall not be required to notify the Borrower of any adjustments to the interest rate. Interest shall be computed on the basis of the actual number of days elapsed over a year of three hundred sixty (360) days. Interest shall be payable in lawful money of the United States of America to Bank, or as Bank shall direct, without set-off, deduction or counterclaim monthly, in arrears, on the first day of each month, commencing on the first day of the month next succeeding the date hereof.
Section 2.04.
Borrower hereby authorizes and directs Bank, in Bank’s sole discretion (provided, however, Bank shall have no obligation to do so): (a) to pay accrued interest as the same becomes due and payable pursuant to this Agreement or pursuant to any note or other agreement between Borrower and Bank, and to treat the same as a Revolving Loan to Borrower, which shall be added to Borrower’s Revolving Loan balance pursuant to this Agreement; (b) to charge any of Borrower’s accounts under the control of Bank; or (c) apply the proceeds of Collateral, including, without limitation, payments on Accounts and other payments from sales or lease of Inventory and any other funds to the payment of such items. Bank shall promptly notify Borrower of any such charges or applications.
Section 2.05.
At the request of any Borrower, and upon the execution of letter of credit documentation satisfactory to Bank, Bank, within the limits of the Borrowing Base, as then computed and also within the limits of the Credit Limit as then computed, shall issue letters of credit from time to time by Bank for the account of any Borrower (collectively
“Letters of Credit”
). The Letters of Credit shall be on terms mutually acceptable to Bank, Bank and any Borrower, and no Letter of Credit shall have an expiration date later than the sooner to occur of (a) twelve (12) months from the date of issuance of the subject Letter of Credit, or (b) the termination date of this Agreement. A Revolving Loan in an amount equal to any amount paid by Bank under a Letter of Credit shall be deemed made to any Borrower, without request therefor, immediately upon any payment by Bank on such Letter of Credit. In connection with the issuance of any Letter of Credit, such Borrower shall pay to Bank a percentage of the face amount of such Letter of Credit according to the fee schedule then in effect at Bank plus transaction fees at the customary rates charged by Bank and all other normal and customary fees charged by Bank. Borrower hereby authorizes and directs Bank, in Bank’s sole discretion (provided, however, Bank shall have no obligation to do so) to pay all such fees and costs as the same become due and payable and to treat the same as a Revolving Loan to such Borrower, which shall be added to the Borrower’s Revolving Loan balance pursuant to this Agreement. For purposes of computing the Credit Limit, all Letters of Credit and acceptances shall be deemed to be Revolving Loans.
Section 2.06.
The Borrowing Base formula set forth above is intended solely for monitoring purposes. The making of Revolving Loans by Bank to the Borrower in excess of the above described Borrowing Base formula is for the benefit of the Borrower and does not affect the obligations of Borrower hereunder; all such Revolving Loans constitute Obligations and must be repaid by Borrower in accordance with the terms of this Agreement.
Section 2.07.
Borrower shall pay to Bank the principal amount of all Revolving Loans as follows:
(a)
Credit Limit or Borrowing Base Exceeded
. Whenever the outstanding principal balance of all Revolving Loans exceed the lesser of the Credit Limit or the Borrowing Base, Borrower shall immediately pay to Bank the excess of the outstanding principal balance of the Revolving Loans over the Credit Limit or the Borrowing Base.
(b)
Payment in Full on Termination
. On termination of this Agreement or upon acceleration of the Obligations, Borrower shall pay to Bank the entire outstanding principal balance of all Revolving Loans and shall deliver to Bank cash collateral in an amount equal to the aggregate of (A) amounts then undrawn on all outstanding Letters of Credit issued pursuant to this Agreement for the account of the Borrower, and (B) the amount of all outstanding acceptances issued pursuant to this Agreement.
Section 2.08.
It is the intention of the parties hereto to comply strictly with applicable usury laws, if any; accordingly, notwithstanding any provisions to the contrary in this Agreement or any other documents or instruments executed in connection herewith, in no event shall this Agreement or such documents or instruments require or permit the payment, taking, reserving, receiving, collecting or charging of any sums constituting interest under applicable laws which exceed the maximum amount permitted by such laws. If any such excess interest is called for, contracted for, charged, paid, taken, reserved, collected or received in connection with the Obligations or in any communication by Bank or any other Person to the Borrower or any other Person, or in the event all or part of the principal of the Obligations or interest thereon shall be prepaid or accelerated, so that under any of such circumstances or under any other circumstance whatsoever the amount of interest contracted for, charged, taken, collected, reserved, or received on the amount of principal actually outstanding from time to time under this Agreement shall exceed the maximum amount of interest permitted by applicable usury laws, if any, then in any such event it is agreed as follows: (a) the provisions of this paragraph shall govern and control, (b) neither the Borrower nor any other Person now or hereafter liable for the payment of the Obligations shall be obligated to pay the amount of such interest to the extent such interest is in excess of the maximum amount of interest permitted by applicable usury laws, if any, (c) any such excess which is or has been received notwithstanding this paragraph shall be credited against the then unpaid principal balance hereof or, if the Obligations have been or would be paid in full by such credit, refunded to the Borrower, and (d) the provisions of this Agreement and the other documents or instruments executed in connection herewith, and any communication to the Borrower, shall immediately be deemed reformed and such excess interest reduced, without the necessity of executing any other document, to the maximum lawful rate allowed under applicable laws as now or hereafter construed by courts having jurisdiction hereof or thereof. Without limiting the foregoing, all calculations of the rate of interest contracted for, charged, taken, collected, reserved, or received in connection herewith which are made for the purpose of determining whether such rate exceeds the maximum lawful rate shall be made to the extent permitted by applicable laws by amortizing, prorating, allocating and spreading during the period of the full term of the Obligations, including all prior and subsequent renewals and extensions, all interest at any time contracted for, charged, taken, collected, reserved or received. The terms of this paragraph shall be deemed to be incorporated in every loan document and communication relating to the Obligations.
Section 2.09.
In order to facilitate the requesting and making of advances hereunder and the delivery of certain certificates, Evans Rule, Level Industries, Tru-Stone and Kinemetric do hereby appoint Starrett as their authorized agent to request, receive and distribute all Revolving Loans made hereunder, to communicate with the Bank with respect to the Revolving Loans, and to execute and furnish the Bank with all Margin, Covenant Compliance and Borrowing Base certificates, and Starrett hereby accepts such appointment.
Section 2.10.
In addition to all other sums payable hereunder, the Borrower shall pay the Bank a fee equal to one-quarter of one (0.25%) percent of the difference between: (i) the Credit Limit, and (ii) the average amount of the principal balance of all Revolving Loans outstanding hereunder for each quarterly period this Agreement is in effect (the "
Unused Fee
"). Such Unused Fee shall be payable quarterly in arrears. On any date which an Unused Fee is due hereunder, the Bank may charge the Borrower's demand deposit account(s) with the amount thereof. The failure of the Bank to charge such account shall not relieve the Borrower of its obligations to pay the Unused Fee.
After the end of each month, Bank will render to Borrower a statement of Borrower’s Revolving Loan account with Bank hereunder, showing all applicable credits and debits. Each statement shall be considered correct and to have been accepted by Borrower and shall be conclusively binding upon Borrower in respect of all charges, debits and credits of whatsoever nature contained therein under or pursuant to this Agreement, and the closing balance shown therein, unless Borrower notifies Bank in writing of any discrepancy within twenty (20) days from the mailing by Bank to Borrower of any such monthly statement.
If after the date hereof, Bank determines that (a) the adoption of any applicable law, rule, or regulation regarding capital requirements for banks or bank holding companies or the subsidiaries thereof, (b) any change in the interpretation or administration of any such law, rule or regulation by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or (c) compliance by Bank or its holding company with any request or directive of any such governmental authority, central bank or comparable agency regarding capital adequacy (whether or not having the force of law), has the effect of reducing the return on Bank’s capital to a level below that which Bank could have achieved (taking into consideration Bank’s and its holding company’s policies with respect to capital adequacy immediately before such adoption, change, or compliance and assuming that Bank’s capital was fully utilized prior to such adoption, change, or compliance) but for such adoption, change, or compliance as a consequence of Bank’s commitment to make advances pursuant hereto by any amount deemed by Bank to be material:
(a) Bank shall promptly, after Bank’s determination of such occurrence, give notice thereof to Borrower; and
(b) Borrower shall pay to Bank as an additional fee from time to time, on demand, such amount as Bank certified to be the amount that will compensate Bank for such reduction.
A certificate of Bank claiming entitlement to compensation as set forth above will be conclusive in the absence of manifest error. Such certificate will set forth the nature of the occurrence giving rise to such compensation, the additional amount or amounts to be paid to Bank and the method by which such amounts were determined. In determining such amount, Bank may use any reasonable averaging and attribution method.
Borrower, for valuable consideration, receipt whereof is hereby acknowledged, hereby grants to Bank a continuing security interest in and to, and assigns to Bank, the following property of the Borrower, wherever located and whether now owned or hereafter acquired:
(a) All Inventory, including all goods, merchandise, raw materials, goods and work in process, finished goods, and other tangible personal property now owned or hereafter acquired and held for sale or lease or furnished or to be furnished under contracts of service or used or consumed in Borrower’s business;
(b) All Accounts, contracts, contract rights, notes, bills, drafts, acceptances, General Intangibles (including without limitation registered and unregistered tradenames, copyrights, customer lists, goodwill, computer programs, computer records, computer software, computer data, trade secrets, trademarks, patents, ledger sheets, files, records, data processing records relating to any Accounts and all tax refunds of every kind and nature to which Borrower is now or hereafter may become entitled to, no matter how arising), Instruments, Documents, Chattel Paper (whether tangible or electronic), Deposit Accounts, Letter or Credit Rights (whether or not the Letter of Credit is evidenced by a writing), securities, Security Entitlements, Security Accounts, Investment Property, Supporting Obligations, choses in action, Commercial Tort Claims and all other debts, obligations and liabilities in whatever form, owing to Borrower from any Person, whether now existing or hereafter arising, now or hereafter received by or belonging or owing to Borrower, for goods sold by it or for services rendered by it, or however otherwise same may have been established or created, all guarantees and securities therefor, all right, title and interest of Borrower in the merchandise or services which gave rise thereto, including the rights of reclamation and stoppage in transit, all rights to replevy goods, and all rights of an unpaid seller of merchandise or services (all hereinafter called the
“Receivables”
);
(c) All machinery, Equipment, Fixtures and other Goods whether now owned or hereafter acquired by the Borrower and wherever located, all replacements and substitutions therefor or accessions thereto and all proceeds thereof (all hereinafter, collectively, called the
“Equipment”
); and
(d) All proceeds and products of all of the foregoing in any form, including, without limitation, all proceeds of credit, fire or other insurance, and also including, without limitation, rents and profits resulting from the temporary use of any of the foregoing (which, with Inventory, Receivables and Equipment are all hereinafter called
“Collateral”
).
(e) Notwithstanding anything contained herein to the contrary, Bank shall not perfect its security interest in the Collateral except as provided herein. Upon the execution of this Agreement, however, the Bank shall hold a Uniform Commercial Code Financing Statement for each Borrower naming such Borrower as a debtor and the Bank as a secured party (together, the "
Financing Statements
") and a Patent Security Agreement in escrow. Upon the occurrence of an Event of Default(s) hereunder based upon the Borrower's failure to adhere to any of the financial covenants contained and calculated in accordance with Section 13 hereof in any two (2) consecutive quarters (a
“Security Trigger Event”
), the Bank may file the Financing Statements in such jurisdictions deemed necessary by the Bank to perfect the Bank's security interest and the Bank may file the Patent Security Agreement with the United States Patent and Trademark Office ("
USPTO
") in the Collateral without any additional consent or authorization from the Borrower. For purposes of clarification the Bank's right to perfect its security interest in the Collateral is not predicated upon the occurrence of an Event of Default in the same financial covenant for two (2) consecutive quarters. The Bank's filing of the Financing Statements and the Patent Security Agreement shall in no event be deemed a waiver of any rights or remedies that the Bank has or may have against the Borrower at such time resulting from the occurrence of such Event(s) of Default and the Bank hereby reserves and preserves all of its rights and remedies against the Borrower under this Agreement, any related documents executed in connection with this Agreement and under applicable law. In the event that the Bank has filed Financing Statements, the Bank shall promptly file termination statements with respect to the filed Financing Statements and a release of the Patent Security Agreement upon the Borrower's achieving a Debt Service Coverage Ratio in excess of 2.0:1.0 and a ratio of Total Debt divided by Tangible Net Worth on a consolidated basis is less than 1.0:1.0 as evidenced by the financial statements furnished to the Bank in accordance with Section 11 hereof and provided no Event of Default has occurred and is continuing at that time. For purposes of this covenant, Debt Service Coverage Ratio means Adjusted EBITDA measured at quarter end based on the previous 12 months financial performance divided by Fixed Charges measured at the same quarter end. The Bank, however, may refile such Financing Statements and refile the Patent Security Agreement upon the occurrence of an Event(s) of Default based solely upon the financial covenants contained in Section 13 herein for two (2) consecutive fiscal quarters thereafter without any additional consent or authorization from the Borrower. Thereafter, the Bank will refile such Financing Statements and/or Termination Statements all in accordance with this Section 5(e).
(f) Notwithstanding anything contained herein to the contrary, the Borrower shall furnish the Bank with Landlord's Consents and Waiver of Lien for each leased location of the Borrower and a Warehousemen's Letter for each location of the Borrower that any Inventory is stored upon the occurrence of an Event of Default hereunder based solely upon the breach of a financial covenant contained in Section 13 herein for any fiscal quarter of the Borrower. Such Landlord's Consents and Waiver of Lien and Warehousemen's Letters shall be delivered to the Bank in form and substance satisfactory to the Bank in its sole discretion within thirty (30) days of the earlier to occur of the Borrower's knowledge of such Event of Default or the Borrower's receipt of written notice by the Bank of such Event of Default. The Borrower's failure to use all reasonable efforts to comply with this Section 5(f) shall constitute an Event of Default hereunder.
The security interest granted hereby is to secure payment and performance of all Revolving Loans, debts, liabilities and obligations of Borrower to Bank hereunder and also any and all other debts, liabilities and obligations of Borrower to Bank of every kind and description, direct or indirect, absolute or contingent, primary or secondary, due or to become due, now existing or hereafter arising, whether or not such obligations are related to the transactions described in this Agreement, by class, or kind, or whether or not contemplated by the parties at the time of the granting of this security interest, regardless of how they arise or by what agreement or instrument they may be evidenced or whether evidenced by any agreement or instrument, and includes obligations to perform acts and refrain from taking action as well as obligations to pay money including, without limitation, all interest, fees, charges, expenses and overdrafts, and also including, without limitation, all obligations and liabilities which Bank may incur or become liable for, on account of, or as a result of, any transactions between Bank and Borrower including any which may arise out of any Letter of Credit, acceptance or similar instrument or obligation issued for the account of Borrower and also including obligations arising out of any foreign exchange contracts, interest rate swap, cap, floor or hedging agreements and all obligations of Borrower to Bank arising out of or in connection with any Automated Clearing House (
“ACH”
) agreements relating to the processing of ACH transactions, together with the fees, expenses, charges and other amounts owing or chargeable to Borrower under the ACH agreements (all hereinafter called
“Obligations”
).
7.
|
BORROWER’S PLACES OF BUSINESS, INVENTORY LOCATIONS AND RETURNS POLICY
.
|
Section 7.01.
Borrower warrants that Borrower has no places of business other than that shown at the end of this Agreement, unless other places of business are listed on Schedule “A”, annexed hereto, in which event Borrower represents that it has additional places of business at those locations set forth on Schedule “A”.
Section 7.02.
Borrower’s principal executive office and the office where Borrower keeps its records concerning its accounts, contract rights and other property, is that shown at the end of this Agreement. All Inventory presently owned by Borrower is stored at the locations (in excess of $50,000.00 per location) set forth on Schedule “A”.
Section 7.03.
Borrower will promptly notify Bank in writing of any change in the location of any principal place of business or the location of any Inventory (in excess of $50,000.00) or the establishment of any new place of business or location of Inventory (in excess of $50,000.00) or office where its records are kept which would be shown in this Agreement if it were executed after such change.
Section 7.04.
Borrower represents and warrants that it has described its returns policy in writing to Bank and that it does now, and will continue to, apply such policy consistently in the conduct of its business and agrees that it shall notify Bank in writing before changing its policy or the application thereof.
8
.
|
BORROWER’S
ADDITIONAL
REPRESENTATIONS
AND
WARRANTIES
.
|
Borrower represents and warrants that:
Section 8.01.
Starrett and Level Industries are duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts as a corporation. Tru-Stone and Kinemetric are duly organized, validly existing and in good standing under the laws of the State of Delaware as a corporation. Evans Rule is duly organized, validly existing and in good standing under the laws of the State of New Jersey as a corporation. Each Borrower shall hereafter remain in good standing in that state, and is duly qualified and in good standing in every other state in which it is required to be qualified, and shall hereafter remain duly qualified and in good standing in every other state in which the failure to qualify or become licensed could have a material adverse effect on the financial condition, business or operations of the Borrower.
Section 8.02.
Borrower’s exact legal name is as set forth in this Agreement and Borrower will not undertake or commit to undertake any act which will result in a change of Borrower’s legal name, without giving Bank at least thirty (30) days’ prior written notice of the same.
Section 8.03.
The execution, delivery and performance of this Agreement, and any other document executed in connection herewith, are within the Borrower’s powers, have been duly authorized, are not in contravention of law or the terms of the Borrower’s Organizational Documents, or of any indenture, agreement or undertaking to which the Borrower is a party or by which it or any of its properties may be bound.
Section 8.04.
All Organization Documents and all amendments thereto of Borrower have been duly filed and are in proper order. All ownership interest of Borrower outstanding was and is properly issued and all books and records of Borrower, including but not limited to its minute books, Organization Documents and books of account, are accurate and up to date and will be so maintained.
Section 8.05.
The balance sheet of the Borrower as at June 28, 2008, and the related statements of income and retained earnings of the Borrower for the fiscal year then ended, and the accompanying footnotes, together with the opinion thereon, dated September 11, 2008, of the independent certified public accountants of the Borrower, and the interim balance sheet of the Borrower as at March 29, 2009, and the related statement of income and retained earnings for the nine (9) month period then ended, copies of which have been furnished to the Bank, are complete and correct and fairly present the financial condition of the Borrower as at such dates and the results of the operations of the Borrower for the periods covered by such statements, all in accordance with GAAP consistently applied (subject to year-end adjustments in the case of the interim financial statements), and since March 29, 2009, there has been no material adverse change in the condition (financial or otherwise), business, or operations of the Borrower. There are no liabilities of the Borrower, fixed or contingent, which are material but are not reflected in the financial statements or in the notes thereto, other than liabilities arising in the ordinary course of business since March 29, 2009. No information, exhibit, or report furnished by the Borrower to the Bank in connection with the negotiation of this Agreement contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statement contained therein not materially misleading.
Section 8.06.
Borrower owns all of the assets reflected in the most recent of Borrower’s financial statements provided to Bank, except assets sold or otherwise disposed of in the ordinary course of business since the date thereof, and such assets together with any assets acquired since such date, including without limitation the Collateral, are free and clear of any Lien, except (a) the security interests and other encumbrances (if any) listed on Schedule “B” annexed hereto, (b) those leases set forth on Schedule “C” annexed hereto, (c) those liens permitted pursuant to Section 13.05 of this Agreement, (d) liens and security interests in favor of Bank, or (e) Permitted Liens.
Section 8.07.
Borrower has made or filed all tax returns, reports and declarations relating to any material tax liability required by any jurisdiction to which it is subject (any tax liability which may result in a lien on any Collateral being hereby deemed material); has paid all taxes shown or determined to be due thereon except those being contested in good faith and which Borrower has, prior to the date of such contest, identified in writing to Bank as being contested; and has made adequate provision for the payment of all taxes so contested, so that no lien will encumber any Collateral, and in respect of subsequent periods.
Section 8.08.
Borrower (a) is not subject to any restrictions in its Organization Documents or other legal restriction, or any judgment, award, decree, order, governmental rule or regulation or contractual restriction which could have a material adverse effect on its financial condition, business or prospects, and (b) is in compliance with its Organization Documents, all contractual requirements by which it or any of its properties may be bound and all applicable laws, rules and regulations (including without limitation those relating to environmental protection) other than laws, rules or regulations the validity or applicability of which it is contesting in good faith or provisions of any of the foregoing the failure to comply with which cannot reasonably be expected to materially adversely affect its financial condition, business or prospects or the value of any Collateral.
Section 8.09.
There is no action, suit, proceeding or investigation pending or, to Borrower’s knowledge, threatened against or affecting it or any of its assets before or by any court or other governmental authority which, if determined adversely to it, would have a material adverse effect on its financial condition, business or prospects or the value of any Collateral.
Section 8.10.
Borrower is in compliance with ERISA; no Reportable Event has occurred and is continuing with respect to any Plan; and it has no unfunded vested liability under any Plan.
Section 8.11.
Neither Borrower nor, to the knowledge of Borrower, any of its Owners or Affiliates, is in violation of any laws relating to terrorism or money laundering (
“Anti-Terrorism Laws”
), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the
“Executive Order”
), and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56.
Section 8.12.
Neither Borrower nor, to the knowledge of Borrower, any of its Owners or Affiliates or other agent of Borrower acting or benefitting in any capacity in connection with the transactions contemplated hereunder, is any of the following: (a) a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; (b) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; (c) a Person with which Bank is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; (d) a Person that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or (e) a Person that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control (
“OFAC”
) at its official website or any replacement website or other replacement official publication of such list.
Section 8.13.
Neither Borrower nor, to the knowledge of Borrower, any agent of any of its Owners or Affiliates acting in any capacity in connection with the transactions contemplated hereunder (a) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Person described in Section 8.12 above, (b) deals in, or otherwise engages in any transaction relating to, any property or interest in property blocked pursuant to the Executive Order, or (c) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.
So long as Borrower is not in default hereunder, Borrower shall have the right, in the regular course of business, to process and sell Borrower’s Inventory. A sale in the ordinary course of business shall not include a transfer in total or partial satisfaction of a debt.
10.
|
FINANCING STATEMENTS
.
|
Borrower hereby irrevocably authorizes Bank at any time and from time to time after the occurrence of a Security Trigger Event to file in any Uniform Commercial Code jurisdiction any initial financing statements and amendments thereto in accordance with the terms and conditions set forth in Section 5(e) hereof that (a) indicate the Collateral (i) as all assets of Borrower or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the Uniform Commercial Code of such jurisdiction, or (ii) as being of an equal or lesser scope or with greater detail, and (b) contain any other information required by the Uniform Commercial Code for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether Borrower is an organization, the type of organization and any organization identification number issued to Borrower, and (ii) in the case of a financing statement filed as a fixture filing or indicating Collateral as as-extracted Collateral or timber to be cut, a sufficient description of real property to which the Collateral relates. Borrower agrees to furnish any such information to Bank promptly upon request. Borrower also ratifies its authorization for Bank to have filed in any Uniform Commercial Code jurisdiction any like initial financing statements or amendments thereto if filed prior to the date hereof.
Section 11.01.
Within twenty (20) calendar days after the end of each month, Borrower shall submit to Bank an aging report in form satisfactory to Bank showing the amounts owing on all domestically-located Accounts according to Borrower’s records as of the close of such month or such shorter period as may be required by Bank from time to time, together with such other information as Bank may require, all on a consolidating and consolidated basis. If Borrower’s monthly aging reports are prepared by an accounting service or other agent, Borrower hereby authorizes such service or agent to deliver such aging reports and any other related documents to Bank.
Section 11.02.
Within twenty (20) calendar days after the end of each month, Borrower shall furnish to Bank a certificate describing all of Borrower’s domestically-located Inventory by value based on the lower of cost or market value, listing all Inventory by nature, quantity and location, together with such other information as Bank may require, all on a consolidating and consolidated basis.
Section 11.03.
Borrower shall deliver to Bank all documents, as frequently as indicated below, or at such other times as Bank may request, and all other documents and information requested by Bank:
|
DOCUMENT
|
|
FREQUENCY DUE
|
|
(a)
|
A Borrowing Base Certificate, including cash receipts, credit memos, sales, debit memos, the unpaid loan balance, new borrowing requests and the adjusted loan balance
|
|
Monthly, within twenty (20) calendar days after the end of each month
|
|
(b)
|
Notice of noncompliance with the provisions of this Agreement
|
|
Immediately upon learning of such noncompliance, or if any representation or warranty contained herein is no longer true or accurate
|
|
(c)
|
Compliance Certificate in the form annexed hereto as
Exhibit 3
|
|
As soon as available and in any event within forty-five (45) days after the close of each quarterly period of Borrower’s fiscal year
|
|
Section 11.04.
Borrower will furnish Bank as soon as available, and in any event within forty-five (45) days after the close of each quarterly period of its fiscal year, a balance sheet as of the end of such period, and a statement of income and retained earnings for the period commencing at the end of the previous fiscal year and ending with the end of such period, and a statement of cash flows of Starrett and its consolidated subsidiaries for the portion of the fiscal year ended with the last day of such period, including the Securities and Exchange Commission Form 10-Q, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year, and all prepared in accordance with GAAP, certified by the chief financial officer of the Borrower (subject to year end adjustment), said financials shall be on a consolidating and consolidated basis.
Section 11.05.
Borrower will furnish Bank, annually, as soon as available, and in any event within one hundred twenty (120) days after the end of each fiscal year of Starrett and its consolidated subsidiaries, audited financial statements including a balance sheet as of the end of such fiscal year, and a statement of income and retained earnings for such fiscal year, and a statement of cash flows for such fiscal year, including the Securities and Exchange Commission Form 10-K, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the prior fiscal year, and all prepared in accordance with GAAP, all on a consolidating and consolidated basis and accompanied by an unqualified opinion prepared by independent public accountants selected by the Borrower and acceptable to Bank.
Section 11.06.
Borrower will promptly, upon receipt thereof, deliver to Bank, copies of any reports submitted to the Borrower by Borrower’s independent public accountants in connection with the examination of the financial statements of Starrett and its consolidated subsidiaries made by such accountants (the so-called “
Management Letter
”).
Section 11.07.
Borrower will furnish Bank as soon as possible, and in any event within sixty (60) days after close of each fiscal year, a management-prepared budget for the next twelve (12) months of Starrett and its consolidated subsidiaries in form and content satisfactory to the Bank on a consolidating and consolidated basis (the "
Projections
").
Section 11.08.
In addition to the foregoing, the Borrower promptly shall provide Bank with such other and additional information concerning the Borrower, the Collateral, the operation of the Borrower’s business, and the Borrower’s financial condition, including financial reports and statements, as Bank may from time to time reasonably request from the Borrower. All financial information provided Bank by the Borrower shall be prepared in accordance with GAAP or generally accepted auditing principles (as applicable) applied consistently in the preparation thereof and with prior periods to fairly reflect the financial conditions of Starrett and its consolidated subsidiaries at the close of, and its results of operations for, the periods in question.
12.
|
GENERAL
AGREEMENTS
OF
BORROWER.
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Section 12.01.
Borrower agrees to keep all the Collateral insured with coverage and in amounts not less than that usually carried by one engaged in a like business (including business interruption insurance) with loss payable to Bank and Borrower, as their interests may appear, hereby appointing Bank as attorney for Borrower in obtaining, adjusting, settling and canceling such insurance and endorsing any drafts. As further assurance for the payment and performance of the Obligations, Borrower hereby assigns to Bank all sums, including returns of unearned premiums, which may become payable under any policy of insurance on the Collateral and Borrower hereby directs each insurance company issuing any such policy to make payment of such sums directly to Bank.
Section 12.02.
Bank or its agents have the right to inspect the Collateral and all records pertaining thereto at reasonable intervals to be determined by Bank and without hindrance or delay.
Section 12.03.
Although, as above set forth, Bank has a continuing security interest in all of Borrower’s Collateral and in the proceeds thereof, Borrower will at all times maintain as the minimum security hereunder a Borrowing Base not less than the aggregate unpaid principal of all Revolving Loans made hereunder including the aggregate amount undrawn on all Letters of Credit issued hereunder and if Borrower fails to do so, Borrower will immediately make the necessary reduction in the unpaid principal amount of said Revolving Loans so that the sum of the Revolving Loans outstanding hereunder plus the amount undrawn on Letters of Credit outstanding hereunder does not in the aggregate exceed the Borrowing Base.
Section 12.04.
Borrower will at all times keep accurate and complete records of Borrower’s Inventory, Accounts and other Collateral, and Bank, or any of its agents, shall have the right to call at Borrower’s place or places of business at intervals to be determined by Bank, and without hindrance or delay, to inspect, audit, check, and make extracts from any copies of the books, records, journals, orders, receipts, correspondence which relate to Borrower’s Accounts, and other Collateral or other transactions, between the parties thereto and the general financial condition of Borrower and Bank may remove any of such records temporarily for the purpose of having copies made thereof. Borrower shall pay to Bank all reasonable audit fees, plus all travel and other expenses incurred in connection with any such audit.
Section 12.05.
Borrower will maintain a standard and modern system of accounting which enables Borrower to produce financial statements in accordance with GAAP and maintain records pertaining to the Collateral that contain information as from time to time may be requested by Bank.
Section 12.06.
Starrett and its subsidiaries will maintain its corporate existence in good standing and comply with all laws and regulations of the United States or of any state or states thereof or of any political subdivision thereof, or of any governmental authority which may be applicable to it or to its business except where the failure to comply with which cannot reasonably be expected to materially adversely effect its financial condition, business or prospects or the value of any Collateral.
Section 12.07.
Starrett and its subsidiaries will pay all real and personal property taxes, assessments and charges and all franchises, income, unemployment, old age benefits, withholding, sales and other taxes assessed against it, or payable by it at such times and in such manner as to prevent any penalty from accruing or any lien or charge from attaching to its property.
Section 12.08.
Bank may in the name of others communicate with account debtors in order to verify with them to Bank’s satisfaction the existence, amount and terms of any Accounts, and upon the occurrence of an Event of Default the Bank may in its own name communicate with account debtors in order to verify with them to Bank’s satisfaction the existence, amount and terms of any Accounts.
Section 12.09.
This Agreement may but need not be supplemented by separate assignments of Accounts and if such assignments are given the rights and security interests given thereby shall be in addition to and not in limitation of the rights and security interests given by this Agreement.
Section 12.10.
If any of Borrower’s Accounts arise out of contracts with the United States or any department, agency, or instrumentality thereof when Bank has perfected its security interest in the Collateral, Borrower will immediately notify Bank thereof in writing and execute any instruments and take any steps required by Bank in order that all monies due and to become due under such contracts shall be assigned to Bank and notice thereof given to the Government under the Federal Assignment of Claims Act.
Section 12.11.
If any of Borrower’s Accounts should be evidenced by promissory notes, trade acceptances, or other instruments for the payment of money when Bank has perfected its security interest in the Collateral, Borrower will immediately deliver same to Bank, appropriately endorsed to Bank’s order and, regardless of the form of such endorsement, Borrower hereby waives presentment, demand, notice of dishonor, protest and notice of protest and all other notices with respect thereto.
Section 12.12.
If any material goods are at any time in the possession of a bailee when Bank has perfected its security interest in the Collateral, Borrower shall promptly notify Bank thereof and, if requested by Bank, shall, after the occurrence of a Security Trigger Event, promptly obtain an acknowledgment from the bailee, in form and substance satisfactory to Bank, that the bailee holds such Collateral for the benefit of Bank and shall act upon the instructions of Bank, without the further consent of Borrower.
Section 12.13.
If Borrower is at any time a beneficiary under a letter of credit now or hereafter issued in favor of Borrower, Borrower shall promptly notify Bank thereof and, at the request and option of Bank, after the occurrence of a Security Trigger Event, Borrower shall, pursuant to an agreement in form and substance satisfactory to Bank, either (a) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to Bank of the proceeds of any drawing under the letter of credit, or (b) arrange for Bank to become the transferee beneficiary of the letter of credit, with Bank agreeing, in each case, that the proceeds of any drawing under the letter of credit are to be applied in the same manner as any other payment on an Account.
Section 12.14.
If Borrower shall at any time hold or acquire a commercial tort claim when Bank has perfected its security interest in the Collateral, Borrower shall immediately notify Bank in a writing signed by Borrower of the brief details thereof and grant to Bank in such writing a security interest therein, and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to Bank.
Section 12.15.
Borrower will promptly pay when due all taxes and assessments upon the Collateral or for its use or operation or upon this Agreement, or upon any note or notes evidencing the Obligations, and will, at the request of Bank, promptly furnish Bank the receipted bills therefor. At its option, Bank may at any time following the occurrence and continuance of an Event of Default hereunder, discharge taxes, liens or security interests or other encumbrances at any time levied or placed on the Collateral, may pay for insurance on the Collateral and may pay for the maintenance and preservation of the Collateral. Borrower agrees to reimburse Bank on demand for any payments made, or any expenses incurred by Bank pursuant to the foregoing authorization, and upon failure of the Borrower so to reimburse Bank, any such sums paid or advanced by Bank shall be deemed secured by the Collateral and constitute part of the Obligations.
Section 12.16.
Borrower will immediately notify Bank upon receipt of notification of any potential or known release or threat of release of Hazardous Substance from any site operated by Starrett and its subsidiaries of the incurrence of any expense or loss in connection therewith or with the Borrower’s obtaining knowledge of any investigation, action or the incurrence of any expense or loss by any governmental authority in connection with the assessment, containment or removal of any Hazardous Substance for which expense or loss the Borrower may be liable.
Section 12.17.
Except for Bank’s gross negligence or willful misconduct, Borrower will indemnify and save Bank harmless from all loss, costs, damage, liability or expenses (including, without limitation, court costs and reasonable attorneys’ fees) that Bank may sustain or incur by reason of defending or protecting this security interest or the priority thereof or enforcing the Obligations, or in the prosecution or defense of any action or proceeding concerning any matter growing out of or in connection with this Agreement and/or any other documents now or hereafter executed in connection with this Agreement and/or the Obligations and/or the Collateral. This indemnity shall survive the repayment of the Obligations and the termination of Bank’s agreement to make Revolving Loans available to Borrower and the termination of this Agreement.
Section 12.18.
At the option of Bank, Borrower will furnish to Bank, from time to time, within five (5) days after the accrual in accordance with applicable law of Starrett and its subsidiaries’ obligation to make deposits for F.I.C.A. and withholding taxes and/or sales taxes, proof satisfactory to Bank that such deposits have been made as required.
Section 12.19.
Should Borrower fail to make any of such deposits or furnish such proof then Bank may, in its sole and absolute discretion, (a) make any of such deposits or any part thereof, (b) pay such taxes, or any part thereof, or (c) set up such reserves as Bank, in its judgment, shall deem necessary to satisfy the liability for such taxes. Each amount so deposited or paid shall constitute an advance under the terms hereof, repayable on demand with interest, as provided herein, and secured by all Collateral and any other property at any time pledged by Borrower with Bank. Nothing herein shall be deemed to obligate Bank to make any such deposit or payment or set up such reserve and the making of one or more of such deposits or payments or the setting up of such reserve shall not constitute (a) an agreement on Bank’s part to take any further or similar action, or (b) a waiver of any default by Borrower under the terms hereof.
Section 12.20.
All advances by Bank to Borrower under this Agreement and under any other agreement constitute one general revolving fluctuating loan, and all indebtedness of Borrower to Bank under this and under any other agreement constitute one general Obligation. Each advance to Borrower hereunder or otherwise shall be made upon the security of all of the Collateral held and to be held by Bank. It is distinctly understood and agreed that all of the rights of Bank contained in this Agreement shall likewise apply, insofar as applicable, to any modification of or supplement to this Agreement and to any other agreements between Bank and Borrower. The entire Obligation of Borrower to Bank shall become due and payable when payments become due and payable hereunder upon termination of this Agreement.
Section 12.21.
After the occurrence of a Security Trigger Event, Borrower will, at its expense, upon request of Bank promptly and duly execute and deliver such documents and assurances and take such actions as may be necessary or desirable or as Bank may request in order to correct any defect, error or omission which may at any time be discovered or to more effectively carry out the intent and purpose of this Agreement and to establish, perfect and protect Bank’s security interest, rights and remedies created or intended to be created hereunder. Without limiting the generality of the above, Borrower will, at all times when Bank has perfected its security interest in the Collateral, join with Bank in executing financing and continuation statements pursuant to the UCC or other notices appropriate under applicable Federal or state law in form satisfactory to Bank and filing the same in all public offices and jurisdictions wherever and whenever requested by Bank.
Section 12.22.
After the occurrence of a Security Trigger Event, Borrower shall perform any and all further steps requested by Bank to perfect Bank’s security interest in Inventory,
Section 12.23.
Reserved.
Section 12.24.
Bank shall be Borrower’s main bank of deposit. For each other deposit account that Borrower at any time opens or maintains, Borrower shall, at Bank’s request and option, pursuant to an agreement in form and substance satisfactory to Bank, either (a) cause the depositary bank to agree to comply at any time with instructions from Bank to such depositary bank directing the disposition of funds from time to time credited to such deposit account, without further consent of Borrower, or (b) arrange for Bank to become the customer of the depositary bank with respect to the deposit account, with Borrower being permitted, only with the consent of Bank, to exercise rights to withdraw funds from such deposit account. Bank agrees with Borrower that Bank shall not give any such instructions or withhold any withdrawal rights from Borrower, unless an Event of Default has occurred and is continuing, or, after giving effect to any withdrawal not otherwise permitted by this Agreement would occur. The provisions of this paragraph shall not apply to (a) any deposit account for which Borrower, the depositary bank and Bank have entered into a cash collateral agreement specially negotiated among Borrower, the depositary bank and Bank for the specific purpose set forth therein, (b) deposit accounts specially and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s salaried employees. Borrower shall utilize Bank's cash management services and shall transfer such service from Bank of America, N.A. by September 30, 2009.
Section 12.25.
Borrower hereby grants to Bank for a term to commence on the date of this Agreement and continuing thereafter until all debts and Obligations of any kind or character owing from Borrower to Bank are fully paid and discharged, the right to use all premises or places of business which Borrower presently has or may hereafter have and where any of the Collateral may be located, at a total rental for the entire period of $1.00. Bank agrees not to exercise the rights granted in this paragraph unless and until Bank determines to exercise its rights against the Collateral. In connection with the Bank’s exercise of the Bank’s rights after the occurrence of an Event of Default, the Bank may enter upon, occupy and use any premises owned or occupied by the Borrower, and may exclude the Borrower from such premises or portion thereof as may have been so entered upon, occupied, or used by the Bank. The Bank shall not be required to remove any of the Collateral from any such premises upon the Bank’s taking possession thereof, and may render any Collateral unusable to the Borrower. In no event shall the Bank be liable to the Borrower beyond the rental specified above for use or occupancy by the Bank of any premises pursuant to this Agreement.
Section 12.26.
Borrower hereby grants to Bank for a term to commence on the date of this Agreement and continuing thereafter until all debts and Obligations of any kind or character owed to Bank are fully paid and discharged, a non−exclusive irrevocable royalty−free license in connection with Bank’s exercise of its rights hereunder, to use, apply or affix any trademark, trade name logo or the like and to use any patents, in which the Borrower now or hereafter has rights, which license may be used by Bank upon and after the occurrence of any one or more of the Events of Default, provided, however, that such use by Bank shall be suspended if such Events of Default are cured. This license shall be in addition to, and not in lieu of, the inclusion of all of Borrower’s trademarks, servicemarks, tradenames, logos, goodwill, patents, franchises and licenses in the Collateral; in addition to the right to use said Collateral as provided in this paragraph, Bank shall have full right to exercise any and all of its other rights regarding Collateral with respect to such trademarks, servicemarks, tradenames, logos, goodwill, patents, franchises and licenses.
Section 12.27.
Any and all deposits (whether demand or time deposits) or other sums at any time credited by or due from Bank to Borrower shall at all times constitute additional security for the Obligations and may be set−off against any Obligations at any time following the occurrence of an Event of Default or an event which with notice or the lapse of time, or both, would constitute an Event of Default whether or not they are then due or other security held by Bank is considered by Bank to be adequate. Any and all instruments, documents, policies and certificates of insurance, securities, goods, accounts, choses in action, general intangibles, chattel papers, cash, property and the proceeds thereof (whether or not the same are Collateral or proceeds thereof hereunder) owned by Borrower or in which Borrower has an interest, which now or hereafter are at any time in possession or control of Bank or in transit by mail or carrier to or from Bank or in the possession of any third party acting in Bank’s behalf, without regard to whether Bank received the same in pledge, for safekeeping, as agent for collection or transmission or otherwise or whether Bank had conditionally released the same, shall constitute additional security for the Obligations and may be applied at any time following the occurrence of an Event of Default or an event which with notice or the lapse of time, or both, would constitute an Event of Default, to any Obligations which are then owing, whether due or not due. Bank shall be entitled to presume, in the absence of clear and specific written notice to the contrary hereinafter provided by Borrower to Bank, that any and all deposits maintained by Borrower with Bank are general accounts as to which no Person other than Borrower has any legal or equitable interest whatsoever.
Section 12.28.
Borrower shall pay to Bank on demand any and all reasonable counsel fees and other expenses incurred by Bank in connection with the preparation, interpretation, enforcement, administration or amendment of this Agreement, or of any documents relating thereto, and any and all expenses, including, but not limited to, a collection charge on all Accounts collected, all attorneys’ fees and expenses, and all other expenses of like or unlike nature which may be expended by Bank to obtain or enforce payment of any Account either as against the account debtor, Borrower, or any guarantor or surety of Borrower or in the prosecution or defense of any action or concerning any matter growing out of or connected with the subject matter of this Agreement, the Obligations or the Collateral or any of Bank’s rights or interests therein or thereto, including, without limiting the generality of the foregoing, any counsel fees or expenses incurred in any bankruptcy or insolvency proceedings and all costs and expenses incurred or paid by Bank in connection with the administration, supervision, protection or realization on any security held by Bank for the debt secured hereby, whether such security was granted by Borrower or by any other Person primarily or secondarily liable (with or without recourse) with respect to such debt, and all costs and expenses incurred by Bank in connection with the defense, settlement or satisfaction of any action, claim or demand asserted against Bank in connection with the debt secured hereby, all of which amounts shall be considered advances to protect Bank’s security, and shall be secured hereby. At its option, and without limiting any other rights or remedies, Bank may at any time pay or discharge any taxes, liens, security interests or other encumbrances at any time levied against or placed on any of the Collateral, and may procure and pay any premiums on any insurance required to be carried by Borrower, and provide for the maintenance and preservation of any of the Collateral, and otherwise take any action reasonably deemed necessary to Bank to protect its security, and all amounts expended by Bank in connection with any of the foregoing matters, including reasonable attorneys’ fees, shall be considered obligations of Borrower and shall be secured hereby.
Section 12.29.
Borrower does hereby make, constitute and appoint any officer or agent of Bank as Borrower’s true and lawful attorney−in−fact, with power to endorse the name of Borrower or any of Borrower’s officers or agents upon any notes, checks, drafts, money orders, or other instruments of payment (including payments payable under any policy of insurance on the Collateral) or Collateral that may come into possession of Bank in full or part payment of any amounts owing to Bank; to sign and endorse the name of Borrower or any of Borrower’s officers or agents upon any invoice, freight or express bill, bill of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with Accounts, and any instrument or documents relating thereto or to Borrower’s rights therein; to give written notice to such office and officials of the United States Post Office to effect such change or changes of address so that all mail addressed to Borrower may be delivered directly to Bank; granting upon Borrower’s said attorney full power to do any and all things necessary to be done in and about the premises as fully and effectually as Borrower might or could do, and hereby ratifying all that said attorney shall lawfully do or cause to be done by virtue hereof. Neither Bank nor the attorney shall be liable for any acts or omissions nor for any error of judgment or mistake, except for their gross negligence or willful misconduct. This power of attorney shall be irrevocable for the term of this Agreement and all transactions hereunder and thereafter as long as Borrower may be indebted to Bank.
Section 12.30.
Borrower covenants and agrees that during the term of this Agreement, neither Borrower nor any of its Owners or Affiliates shall, directly or indirectly, by operation of law or otherwise, knowingly cause or permit (a) any of the funds or properties of Borrower or any of its Owners or Affiliates that are used to repay the Revolving Loans to constitute property of, or be beneficially owned directly or indirectly by, any Person subject to sanctions or trade restrictions under United States law (
“Embargoed Person”
or
“Embargoed Persons”
) that is identified on (i) the “List of Specially Designated Nationals and Blocked Persons” (the
“SDN List”
) maintained by OFAC and/or on any other similar list (
“Other List”
) maintained by OFAC pursuant to any authorizing statutes including, but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Order or regulation promulgated thereunder, with the result that the investment in Borrower (whether directly or indirectly) is prohibited by law, or the Revolving Loans made by Bank would be in violation of law, or (ii) the Executive Order, any related enabling legislation or any other similar Executive Orders, or (b) any Embargoed Person to have any direct or indirect interest, or any nature whatsoever in Borrower or any of its Owners or Affiliates, with the result that the investment in Borrower (whether directly or indirectly) is prohibited by law or any of the transactions contemplated hereunder is in violation of law.
13
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BORROWER’S NEGATIVE COVENANTS.
Borrower will not at any time:
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Section 13.01.
Permit, for the twelve-month period ending on the last day of any fiscal quarter of the Borrower commencing with the twelve (12) month period ending on June 30, 2011, its Debt Service Coverage Ratio to be less than 1.25 to 1, such covenant shall be measured on a consolidated basis;
Section 13.02.
Permit the Tangible Net Worth of Starrett and its consolidated subsidiaries to be less than $140,000.00 as at June 30, 2009, which amount shall increase by fifty (50%) percent of Starrett and its consolidated subsidiaries’ net income as at the last day of each fiscal quarter thereafter, and which amount shall not be reduced by losses in any fiscal quarter, such covenant shall be measured on a consolidated basis;
Section 13.03.
Permit EBITDA to be less than $3,500,000.00 for the twelve (12) month period ending on June 30, 2009 and for the twelve (12) month period ending on the last day of each fiscal quarter thereafter through and including March 31, 2011, such covenant shall be measured on a consolidated basis;
Section 13.04.
During any fiscal year of Starrett and its consolidated subsidiaries, make, directly or indirectly, capital expenditures in an aggregate amount greater than $10,000,000.00, such covenant shall be measured on a consolidated basis;
Section 13.05.
Issue evidence of Debt or suffer to exist Debt in addition to the Obligations, except (a) Debt for money borrowed which in the aggregate does not exceed the sum of Two Million Five Hundred Thousand ($2,500,000.00) Dollars, or (b) Debt or liabilities of Borrower other than for money borrowed, incurred or arising in the ordinary course of business;
Section 13.06.
Use such proceeds of the Revolving Loans made hereunder in excess of $5,000,000.00 in the aggregate for acquisitions;
Section 13.07.
Sell, assign, exchange or otherwise dispose of any of the Collateral, other than Inventory consisting of (a) scrap, waste, defective goods and the like; (b) obsolete goods; (c) finished goods sold in the ordinary course of business or any interest therein to any individual, partnership, trust or other corporation; and (d) Equipment which is no longer required or deemed necessary for the conduct of Borrower’s business, so long as Borrower receives therefor a sum substantially equal to such Equipment’s fair value;
Section 13.08.
Create, permit to be created or suffer to exist any Lien upon any of the Collateral or any other property of Borrower, now owned or hereafter acquired, except: (a) landlords’, carriers’, warehousemen’s, mechanics’ and other similar liens arising by operation of law in the ordinary course of Borrower’s business; (b) arising out of pledge or deposits under worker’s compensation, unemployment insurance, old age pension, social security, retirement benefits or other similar legislation; (c) purchase money Liens arising in the ordinary course of business (so long as the Debt secured thereby does not exceed the lesser of the cost or fair market value of the property subject thereto, and such Lien extends to no other property); (d) Liens for unpaid taxes that are either (i) not yet due and payable, or (ii) the subject of Permitted Protests; (e) Liens which are the subject of Permitted Protests; (f) those Liens and encumbrances set forth on Schedule “B” or Schedule “C” annexed hereto; and (g) in favor of Bank (hereinafter, collectively,
“Permitted Liens”
);
Section 13.09.
Pay or make any distribution on account of any class of Borrower’s ownership interest in cash or in property (other than additional ownership interest), or redeem, purchase or otherwise acquire, directly or indirectly, any of the ownership interests at any time after the occurrence and during the continuance of an Event of Default hereunder on account of the Debt Service Coverage Ratio as defined and calculated in accordance with Section 13.01 hereof both prior to and after giving effect to such distribution;
Section 13.10.
Make any loans or advances to any Person, including without limitation Borrower’s directors, officers and employees, except advances to officers or employees with respect to expenses incurred by them in the ordinary course of their duties which are properly reimbursable by Borrower and intercompany loans between each Borrower;
Section 13.11.
Assume, guaranty, endorse or otherwise become directly or contingently liable in respect of (including without limitation by way of agreement, contingent or otherwise, to purchase, provide funds to or otherwise invest in a debtor or otherwise to assure a creditor against loss), any indebtedness (except as set forth on Exhibit 13.11 and guarantees by endorsement of instruments for deposit or collection in the ordinary course of business and guarantees in favor of Bank) of any individual, partnership, trust or other corporation;
Section 13.12.
(a) Use any Revolving Loan proceeds to purchase or carry any “margin stock” (as defined in Regulation U of the Board of Governors of the Federal Reserve System) or (b) invest in or purchase any stock or securities of any individual, partnership, trust or other corporation except (x) readily marketable direct obligations of, or obligations guaranteed by, the United States of America or any agency thereof or (y) time deposits with or certificates of deposit issued by the Bank;
Section 13.13.
Enter into any lease or other transaction with any Owner, officer or Affiliate on terms any less favorable than those which might be obtained at the time from Persons who are not such a Owner, officer or Affiliate;
Section 13.14.
Sell, transfer or otherwise dispose of any stock of any subsidiary of Borrower; or
Section 13.15.
(a) Merge or consolidate with or into any Person, (b) enter into any joint venture or partnership with any Person; (c) convey, lease or sell all or any material portion of its property or assets or business to any other Person, except for the sale of Inventory in the ordinary course of its business; or (d) convey, lease or sell any of its assets to any Person for less than the fair market value thereof.
Section 14.01.
Upon the occurrence of any one or more of the following events (herein,
“Events
of
Default”
), Bank may decline to make any or all further Revolving Loans hereunder or under any other agreements with Borrower, any and all Obligations of the Borrower to Bank shall become immediately due and payable, at the option of Bank and without notice or demand. The occurrence of any such Event of Default shall also constitute, without notice or demand, a default under all other agreements between Bank and the Borrower and instruments and papers given Bank by the Borrower, whether such agreements, instruments, or papers now exist or hereafter arise, namely:
(a) The failure by the Borrower to pay within five (5) business days after due any principal, interest, fees, costs, and expenses due pursuant to this Agreement.
(b) The failure by the Borrower to pay within five (5) business days after
due any other Obligations.
(c) Default by the Borrower in the observance or performance of any of the covenants or agreements of the Borrower contained in Sections 13 and 15.08 of this Agreement.
(d) The failure by the Borrower to promptly, punctually and faithfully perform, or observe any term, covenant or agreement on its part to be performed or observed pursuant to any of the provisions of this Agreement, other than those described in Sections 2.02, 2.07, 13, 12.25 or 15.08 or in any other agreement with Bank which is not remedied within the earlier of thirty (30) days after (i) notice thereof by Bank to Borrower, or (ii) the date Borrower was required to give notice to Bank pursuant to Section 11.03(b) hereof.
(e) The determination by Bank that any representation or warranty heretofore, now or hereafter made by the Borrower to Bank, in any documents, instrument, agreement, or paper was not true or accurate when given in any material respect.
(f) The occurrence of any event such that any material indebtedness of the Borrower from any lender other than Bank has been accelerated.
(g) The occurrence of any event which would cause a lien creditor, as that term is defined in Section 9−301 of the Code, to take priority over advances made by Bank at such time as the Bank has a perfected security interest in the Collateral.
(h) A filing against or relating to the Borrower of (i) a federal tax lien in favor of the United States of America or any political subdivision of the United States of America, or (ii) a state tax lien in favor of any state of the United States of America or any political subdivision of any such state.
(i) Any act by, against, or relating to the Borrower, or its property or assets, which act constitutes the application for, consent to, or sufferance of the appointment of a receiver, trustee or other Person, pursuant to court action or otherwise, over all, or any part of the Borrower’s property.
(j) The granting of any trust mortgage or execution of an assignment for the benefit of the creditors of the Borrower, or the occurrence of any other voluntary or involuntary liquidation or extension of debt agreement for the Borrower; the failure by the Borrower to generally pay the debts of the Borrower as they mature; adjudication of bankruptcy or insolvency relative to the Borrower; the entry of an order for relief or similar order with respect to the Borrower in any proceeding pursuant to the Bankruptcy Code or any other federal Bankruptcy law; the filing of any complaint, application, or petition by or against the Borrower initiating any matter in which the Borrower is or may be granted any relief from the debts of the Borrower pursuant to the Bankruptcy Code or any other insolvency statute or procedure; the calling or sufferance of a meeting of creditors of the Borrower; the meeting by the Borrower of a formal or informal creditor’s committee; the offering by or entering into by the Borrower of any composition, extension or any other arrangement seeking relief or extension for the debts of the Borrower, or the initiation of any other judicial or non−judicial proceeding or agreement by, against or including the Borrower which seeks or intends to accomplish a reorganization or arrangement with creditors.
(k) The entry of any uninsured judgment(s) against Borrower in excess of $1,000,000.00, which judgment(s) is not satisfied or appealed from (with execution or similar process stayed) within fifteen (15) days of its entry.
(l) The entry of any court order which enjoins, restrains or in any way prevents the Borrower from conducting all or any part of its business affairs in the ordinary course of business.
(m) The service of any process upon Bank seeking to attach by trustee process any funds of the Borrower on deposit with Bank.
(n) The occurrence of any material uninsured loss, theft, damage or destruction to any material asset(s) of the Borrower.
(o) Any act by or against, or relating to the Borrower or its assets pursuant to which any creditor of the Borrower seeks to reclaim or repossess or reclaims or repossesses all or a portion of the Borrower’s assets.
(p) The termination of existence, dissolution, or liquidation of the Borrower, or the ceasing to carry on actively any substantial part of Borrower’s current business.
(q) This Agreement shall, at any time during which Bank has perfected its security interest in the Collateral and for any reason, cease (i) to create a valid and perfected first priority security interest in and to the property purported to be subject to this Agreement; or (ii) to be in full force and effect or shall be declared null and void, or the validity or enforceability hereof shall be contested by the Borrower or any guarantor of the Borrower denies it has any further liability or obligation hereunder.
(r) Any of the following events occur or exist with respect to the Borrower or any ERISA affiliate: (i) any “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Internal Revenue Code) involving any Plan; (ii) any “reportable event” (as defined in Section 4043 of ERISA and the regulations issued under such Section) shall occur with respect to any Plan; (iii) the filing under Section 4041 of ERISA of a notice of intent to terminate any Plan or the termination of any Plan; (iv) any event or circumstance exists which might constitute grounds entitling the Pension Benefit Guaranty Corporation (PBGC) to institute proceedings under Section 4042 of ERISA for the termination of, or for the appointment of a trustee to administer, any Plan, or the institution by the PBGC of any such proceedings; (v) or partial withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer Plan or the reorganization, insolvency, or termination of any Multiemployer Plan; and in each case above, such event or condition, together with all other events or conditions, if any, could in the opinion of Bank subject the Borrower to any tax, penalty, or other liability to a Plan, a Multiemployer Plan, the PBGC, or otherwise.
Section 14.02.
Upon the filing of any complaint, application, or petition by or against the Borrower initiating any matter in which the Borrower is or may be granted any relief from the debts of the Borrower pursuant to the Bankruptcy Code, Bank’s obligation hereunder shall be canceled immediately, automatically, and without notice, and all Obligations of the Borrower then outstanding shall become immediately due and payable without presentation, demand, or notice of any kind to the Borrower.
SECTION 15.
|
RIGHTS AND REMEDIES UPON DEFAULT; SET-OFF; EXPENSES; POWER OF ATTORNEY
.
|
Upon the occurrence of an Event of Default, the Bank shall have the following rights and remedies, certain of which are predicated upon the Bank having perfected its security interest in the Collateral.
Section 15.01.
Bank may declare any obligation Bank may have hereunder to be cancelled, declare all Obligations of Borrower to be due and payable and proceed to enforce payment of the Obligations and to exercise any and all of the rights and remedies afforded to Bank by the UCC (at such time as the Bank has perfected its security interest in the Collateral) or under the terms of this Agreement or otherwise. In addition, upon the occurrence of an Event of Default, if Bank proceeds to enforce payment of the Obligations, Borrower shall be obligated to deliver to Bank cash collateral in an amount equal to the aggregate amounts then undrawn on all outstanding Letters of Credit or acceptances issued or guaranteed by Bank for the account of Borrower, and Bank may proceed to enforce payment of the same and to exercise all rights and remedies afforded to Bank by the UCC or under the terms of this Agreement or otherwise. Upon the occurrence of, and during the continuance of, an Event of Default, the Borrower, as additional compensation to the Bank for its increased credit risk, promises to pay interest on all Obligations (including, without limitation, principal, whether or not past due, past due interest and any other amounts past due under this Agreement) at a per annum rate of four (4%) percent greater than the rate of interest then specified in Section 2.03 of this Agreement.
Section 15.02.
In connection with the Bank’s exercise of the Bank’s rights under this Agreement, the Bank may enter upon, occupy and use any premises owned or occupied by the Borrower, and may exclude the Borrower from such premises or portion thereof as may have been so entered upon, occupied, or used by the Bank. The Bank shall not be required to remove any of the Collateral from any such premises upon the Bank’s taking possession thereof, and may render any Collateral unusable to the Borrower. In no event shall the Bank be liable to the Borrower for use or occupancy by the Bank of any premises pursuant to this Agreement.
Section 15.03.
Any sale or other disposition of the Collateral may be at public or private sale upon such terms and in such manner as the Bank deems advisable, having due regard to compliance with any statute or regulation which might affect, limit or apply to the Bank’s disposition of the Collateral. The Bank may conduct any such sale or other disposition of the Collateral upon the Borrower’s premises. Unless the Collateral is perishable or threatens to decline speedily in value, or is of a type customarily sold on a recognized market (in which event the Bank shall provide the Borrower with such notice as may be practicable under the circumstances), the Bank shall give the Borrower at least the greater of the minimum notice required by law or seven (7) days prior written notice of the date, time and place of any proposed public sale, and of the date after which any private sale or other disposition of the Collateral may be made. The Bank may purchase the Collateral, or any portion of it at any such sale.
Section 15.04.
If the Bank sells any of the Collateral on credit, the Borrower will be credited only with payments actually made by the purchaser of such Collateral and received by the Bank. If the purchaser fails to pay for the Collateral, the Bank may re-sell the Collateral and the Borrower shall be credited with the proceeds of the sale.
Section 15.05.
The Bank may require the Borrower to assemble the Collateral and make it available to the Bank at the Borrower’s sole risk and expense at a place or places which are reasonably convenient to both the Bank and the Borrower.
Section 15.06.
Borrower shall, following the occurrence of an Event of Default which is continuing, deliver to Bank, daily, a schedule in form and content satisfactory to Bank describing the invoices issued by Borrower since the last schedule submitted to Bank. The schedules to be provided under this subsection are solely for the convenience of Bank in administering this Agreement and maintaining records of the Collateral. Borrower’s failure to provide Bank with any such schedule shall not affect the security interest of Bank in such Accounts.
Section 15.07.
Within thirty (30) calendar days after the end of each month or on such other basis as may be required by Bank from time to time, Borrower shall, following the occurrence of an Event of Default which is continuing, submit to Bank an accounts payable aging report in form satisfactory to Bank showing the amounts due and owing on all accounts payable according to Borrower’s records as of the close of such month or such shorter period as may be required by Bank from time to time, together with such other information as Bank may require. If Borrower’s monthly accounts payable aging reports are prepared by an accounting service or other agent, Borrower hereby authorizes such service or agent to deliver such accounts payable aging reports and any other related documents to Bank.
Section 15.08.
From and after the occurrence of an Event of Default which is continuing, Borrower will immediately, upon receipt of all checks, drafts, cash and other remittances in payment of any Inventory sold or in payment or on account of Borrower’s accounts, contracts, contract rights, notes, bills, drafts, acceptances, general intangibles, choses in action and all other forms of obligations, deliver the same to Bank accompanied by a remittance report in form specified by Bank. Said proceeds shall be delivered to Bank in the same form received except for the endorsement of Borrower where necessary to permit collection of items, which endorsement Borrower agrees to make. Bank will credit (conditional upon final collection) all such payments against the principal or interest of any Revolving Loans secured hereby; provided, however, for the purpose of computing interest, any items requiring clearance or payment shall not be considered to have been credited against any Revolving Loans secured hereby until two (2) business days after receipt by Bank of any such items. The order and method of such application shall be in the sole discretion of Bank and any portion of such funds which Bank elects not to so apply shall be paid over from time to time by Bank to Borrower. Bank will at all times have the right to require Borrower (a) to enter into a lockbox arrangement with Bank for the collection of such remittances and payments, or (b) to maintain its deposit accounts at Bank or, in the alternative, at another financial institution which has agreed to accept drafts drawn on it by Bank under a written depository transfer agreement with Bank and to block Borrower’s account and waive its rights as against such account.
Section 15.09.
Bank may at any time, after the occurrence of an Event of Default or an event which, with notice or the passage of time or both, would constitute an Event of Default, notify account debtors that Collateral has been assigned to Bank and that payments shall be made directly to or as directed by Bank. Upon request of Bank at any time, Borrower will so notify such account debtors and will indicate on all billings to such account debtors that their Accounts must be paid directly to or as directed by Bank. Bank shall have full power to collect, compromise, endorse, sell or otherwise deal with the Collateral or proceeds thereof in its own name or in the name of Borrower.
16. WAIVER OF JURY TRIAL.
BORROWER AND BANK EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE OR HEREAFTER HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. Borrower hereby certifies that neither Bank nor any of its representatives, agents or counsel has represented, expressly or otherwise, that Bank would not, in the event of any such suit, action or proceeding, seek to enforce this waiver of right to trial by jury. Borrower acknowledges that it has read the provisions of this Agreement and in particular, this section; has consulted legal counsel; understands the right it is granting in this Agreement and is waiving in this section in particular; and makes the above waiver knowingly, voluntarily and intentionally.
17. CONSENT TO JURISDICTION.
Borrower and Bank agree that any action or proceeding to enforce or arising out of this Agreement may be commenced in any court of the Commonwealth of Massachusetts sitting in the county of Suffolk, or in the District Court of the United States for the District of Massachusetts, and Borrower waives personal service of process and agrees that a summons and complaint commencing an action or proceeding in any such court shall be properly served and confer personal jurisdiction if served by registered or certified mail to Borrower, or as otherwise provided by the laws of the Commonwealth of Massachusetts or the United States of America.
18. TERMINATION.
(a) Unless renewed in writing, this Agreement shall terminate on April 30, 2012 (the
“Termination Date”
), and all Obligations shall be due and payable in full without presentation, demand, or further notice of any kind, whether or not all or any part of the Obligations is otherwise due and payable pursuant to the agreement or instrument evidencing same. Bank may terminate this Agreement immediately and without notice upon the occurrence of an Event of Default. Notwithstanding the foregoing or anything in this Agreement or elsewhere to the contrary, the security interest, Bank’s rights and remedies hereunder and Borrower’s obligations and liabilities hereunder shall survive any termination of this Agreement and shall remain in full force and effect until all of the Obligations outstanding, or contracted or committed for (whether or not outstanding), shall be finally and irrevocably paid in full. No Collateral shall be released or financing statement terminated (if applicable) until such final and irrevocable payment in full of the Obligations, as described in the preceding sentence.
(b) In the event that Bank continues to make Revolving Loans hereunder after the Termination Date without a written extension of the Termination Date or after the occurrence of an Event of Default, all such Revolving Loans: (i) shall be made in the sole and absolute discretion of Bank; and (ii) shall, together with all other Obligations, be payable thereafter
ON DEMAND
.
19. JOINT AND SEVERAL LIABILITY.
Section 19.01.
Each Borrower is accepting joint and several liability under this Agreement in consideration of the financial accommodations to be provided by Bank under this Agreement, for the mutual benefit, directly and indirectly, of each Borrower and in consideration of the undertakings of each other Borrower to accept joint and several liability for the Obligations of each Borrower to Bank.
Section 19.02.
Each Borrower, jointly and severally, hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with each other Borrower, with respect to the payment and performance of all of the Obligations of each Borrower to Bank under this Agreement (including, without limitation, any Obligations arising under this section), it being the intention of the parties hereto that all the Obligations of each Borrower to Bank under this Agreement shall be the joint and several Obligations of each of the Borrowers without preferences or distinction among them.
Section 19.03.
If and to the extent that any of the Borrowers shall fail to make any payment with respect to any of the Obligations of each Borrower to Bank under this Agreement, as and when due or to perform any of such Obligations in accordance with the terms thereof, then in each such event the other Borrower, under this Agreement will make such payment with respect to, or perform, such Obligation.
Section 19.04.
The Obligations of each Borrower under the provisions of this section constitute full recourse Obligations of each Borrower enforceable against each such Borrower to the full extent of its properties and assets, irrespective of the validity, regularity or enforceability of this Agreement or any other circumstance whatsoever.
Section 19.05.
Each Borrower hereby waives notice of acceptance of its joint and several liability, notice of any Revolving Loans made under this Agreement, notice of any action at any time taken or omitted by Bank under or in respect of any of the Obligations of each Borrower to Bank under this Agreement, and, generally, to the extent permitted by applicable law, all demands, notices and other formalities of every kind in connection with this Agreement. Each Borrower hereby assents to, and waives notice of, any extension or postponement of the time for the payment of any of the Obligations of each Borrower to Bank under this Agreement, the acceptance of any payment of any of such Obligations, the acceptance of any partial payment thereon, any waiver, consent or other action or acquiescence by Bank at any time or times in respect of any default by any Borrower in the performance or satisfaction of any term, covenant, condition or provision of this Agreement, any and all other indulgences whatsoever by Bank in respect of any of the Obligations of each Borrower to Bank under this Agreement, and the taking, addition, substitution or release, in whole or in part, at any time or times, of any security for any of such Obligations of each Borrower to Bank or the addition, substitution or release, in whole or in part, of any Borrower. Without limiting the generality of the foregoing, each Borrower assents to any other action or delay in acting or failure to act on Bank's part with respect to the failure by any Borrower to comply with any of its respective Obligations, including, without limitation, any failure strictly or diligently to assert any right or to pursue any remedy or to comply fully with applicable laws or regulations thereunder, which might, but for the provisions of this section, afford grounds for terminating, discharging or relieving any Borrower, in whole or in part, from any of its Obligations under this section, it being the intention of each Borrower that, so long as any of the Obligations under this Agreement remain unsatisfied, the Obligations of such Borrower under this section shall not be discharged except by performance and then only to the extent of such performance. The Obligations of each Borrower under this section shall not be diminished or rendered unenforceable by any winding up, reorganization, arrangement, liquidation, reconstruction or similar proceeding with respect to any other Borrower or Bank. The joint and several liability of each Borrower under this Agreement shall continue in full force and effect notwithstanding any absorption, merger, amalgamation or any other change whatsoever in the name, membership, constitution or place of formation of any Borrower or Bank.
Section 19.06.
The provisions of this section are made for the benefit of Bank and Bank's successors and assigns, and may be enforced by Bank in good faith from time to time against any or all of the Borrowers as often as occasion therefor may arise and without requirement on Bank's part first to marshal any of its claims or to exercise any of its rights against any Borrower or to exhaust any remedies available to Bank against any other Borrower or to resort to any other source or means of obtaining payment of any of the Obligations under this Agreement or to elect any other remedy. The provisions of this section shall remain in effect until all of the Obligations of each Borrower to Bank under this Agreement shall have been paid in full or otherwise fully satisfied. If at any time, any payment, or any part thereof, made in respect of any of such Obligations of each Borrower to Bank, is rescinded or must otherwise be restored or returned by Bank upon the insolvency, bankruptcy or reorganization of any Borrower, or otherwise, the provisions of this section will forthwith be reinstated in effect, as though such payment had not been made.
Section 19.07.
Each Borrower agrees that it shall not exercise, and hereby expressly waives until full and final payment of all Obligations to Bank: (a) any right to subrogation or indemnification, and any other right to payment from or reimbursement by any other Borrower, in connection with or as a consequence of any payment made by any Borrower to Bank, (b) any right to enforce any right or remedy which Bank may have or may hereafter have against any other Borrower, and (c) any benefit of, and any right to participate in (i) any collateral now or hereafter held by Bank, or (ii) any payment to Bank by, or collection by Bank from any other Borrower. The provisions of this paragraph are made for the express benefit of each Borrower as well as Bank, and may be enforced independently by each Borrower or any successor in interest to each Borrower.
20. MISCELLANEOUS.
Section 20.01.
No delay or omission on the part of Bank in exercising any rights shall operate as a waiver of such right or any other right. Waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. All Bank’s rights and remedies, whether evidenced hereby or by any other agreement, instrument or paper, shall be cumulative and may be exercised singularly or concurrently.
Section 20.02.
Bank is authorized to make Revolving Loans under the terms of this Agreement upon the request, either written or oral, in the name of Borrower or any authorized person whose name appears at the end of this Agreement or of any of the following named person, or persons, from time to time, holding the following offices of Borrower, President, Treasurer and such other officers and authorized signatories as may from time to time be set forth in separate banking and borrowing resolutions.
Section 20.03.
This Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties hereto;
provided
,
however
, that Borrower may not assign this Agreement or any rights or duties hereunder without Bank’s prior written consent and any prohibited assignment shall be absolutely void. No consent to an assignment by Bank shall release Borrower from its Obligations. Bank may assign this Agreement and its rights and duties hereunder and no consent or approval by Borrower is required in connection with any such assignment. Bank reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in Bank’s rights and benefits hereunder. In connection with any assignment or participation, Bank may disclose all documents and information which Bank now or hereafter may have relating to Borrower or Borrower’s business. To the extent that Bank assigns its rights and obligations hereunder to another party, Bank thereafter shall be released from such assigned obligations to Borrower and such assignment shall effect a novation between Borrower and such other party.
Section 20.04.
Borrower agrees that any and all Revolving Loans made by Bank to Borrower or for its account under this Agreement shall be conclusively deemed to have been authorized by Borrower and to have been made pursuant to duly authorized requests therefor on its behalf.
Section 20.05.
Paragraph and section headings used in this Agreement are for convenience only, and shall not effect the construction of this Agreement. If one or more provisions of this Agreement (or the application thereof) shall be invalid, illegal or unenforceable in any respect in any jurisdiction, the same shall not, invalidate or render illegal or unenforceable such provision (or its application) in any other jurisdiction or any other provision of this Agreement (or its application). This Agreement is the entire agreement of the parties with respect to the subject matter hereof and supersedes any prior written or verbal communications or instruments relating thereto.
Section 20.06.
Unless otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement or any other loan document shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by registered or certified mail (postage prepaid, return receipt requested ), overnight courier, or facsimile to Borrower or to Bank, as the case may be, at its address set forth below:
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If to Bank:
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TD Bank, N.A.
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|
|
370 Main Street
|
|
|
Worcester, MA 01608
|
|
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Attn: Steven S. Carpinella, Vice President
|
|
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Telephone: (508) 368-6537
|
|
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Telecopier: (508) 368-6521
|
|
with a copy to:
|
Ruberto, Israel & Weiner, P.C.
|
|
|
100 North Washington Street
|
|
|
Boston, MA 02114
|
|
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Attn: Brian T. Garrity, Esq.
|
|
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Telephone: (617) 742-4200
|
|
|
Telecopier: (617) 742-2355
|
|
If to Borrower:
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The L. S. Starrett Company
|
|
|
121 Crescent Street
|
|
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Athol, MA 01331
|
|
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Attn: Douglas A. Starrett, President
|
|
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Telephone:
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Telecopier:
|
|
with a copy to:
|
Ropes & Gray, LLP
|
|
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One International Place
|
|
|
Boston, MA 02110
|
|
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Attn: David A. McKay, Esq.
|
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Telephone: (617) 951-7000
|
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Telecopier: (617) 951-7050
|
The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other. All notices or demand sent in accordance with this section shall be deemed received on the earlier of the date of actual receipt or three (3) days after the deposit thereof in the mail.
Section 20.07.
Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against Bank or Borrower, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of all parties hereto.
Section 20.08.
Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.
Section 20.09.
This Agreement, together with the other documents and instruments executed concurrently herewith represent the entire and final understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by evidence of any prior, contemporaneous or subsequent other agreement, oral or written, before the date hereof.
Section 20.10.
This Agreement can only be amended by a writing signed by both Bank and Borrower.
Section 20.11.
The laws of Massachusetts shall govern the construction of this Agreement and the rights and duties of the parties hereto. This Agreement shall take effect as a sealed instrument.
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[SIGNATURE PAGE OF THE LOAN AND SECURITY AGREEMENT (ALL ASSETS)]
|
BANK:
|
Witnessed by:
|
TD BANK, N.A.
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_______________________________
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By:_______________________________________
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Print Name:
|
Steven S. Carpinella, Vice President
|
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BORROWER:
|
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THE L. S. STARRETT COMPANY
|
_______________________________
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By:_______________________________________
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Print Name:
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Randall Hylek,
|
|
Chief Financial Officer and Treasurer
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Randall Hylek,
|
|
Chief Financial Officer and Treasurer
|
|
|
|
LEVEL INDUSTRIES, INC.
|
_______________________________
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By:_______________________________________
|
Print Name:
|
Randall Hylek,
|
|
Chief Financial Officer and Treasurer
|
|
|
|
TRU-STONE TECHNOLOGIES, INC.
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Randall Hylek,
|
|
Chief Financial Officer and Treasurer
|
|
|
|
STARRETT KINEMETRIC ENGINEERING, INC.
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Randall Hylek,
|
|
Chief Financial Officer and Treasurer
|
SCHEDULES
The following Schedules to the within Loan and Security Agreement (All Assets) are respectively described in the section indicated. Those Schedules in which no information has been inserted shall be deemed to read “None”.
SCHEDULE “A”
Borrower’s Places of Business (§7)
Address
Property Located At Such Address
SEE ATTACHED
SCHEDULE “B”
Other Encumbrances and Liens (§8.06(a))
Secured Party or Mortgagee
Description of Collateral
Payment Terms and Dates of Maturity
NONE
SCHEDULE “C”
Leases (§8.06(b))
Lessor
Description of Property
Date of Lease and Term
Rental Payable
SEE ATTACHED
EXHIBIT 1
TD BANK, N.A.
MARGIN CERTIFICATE
The L. S. Starrett Company, a Massachusetts corporation, Evans Rule Company, Inc., a New Jersey corporation, Level Industries, Inc., a Massachusetts corporation, Tru-Stone Technologies, Inc., a Delaware corporation, and Starrett Kinemetric Engineering, Inc., a Delaware corporation (together, the "
Borrower
") certifies to TD Bank, N.A. (the "
Bank
"), pursuant to a Loan and Security Agreement (All Assets) between the Borrower and the Bank dated June ____, 2009, as may be amended from time to time (the "
Loan Agreement
"), that, as of the date hereof or, for such period as may be designated below, the computations, ratio and calculations set forth below are true and correct as the related to Starrett and its consolidated subsidiaries:
1.
Leverage Ratio
. Leverage Ratio of the Borrower for the preceding 12-month period was equal to ____:1.0, computed as follows:
A.
|
Funded Debt
|
$___________
|
|
|
|
B.
|
EBITDA
|
$___________
|
|
|
|
C.
|
Ratio of A to B = ____ to _____
|
|
IN WITNESS WHEREOF, the undersigned, a duly authorized officer of Borrower, has executed and delivered this Margin Certificate in the name and on behalf of the Borrower on _________________, 200___.
|
THE L. S. STARRETT COMPANY, as Agent
|
|
|
|
|
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By:
|
|
|
|
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Print Name:
|
|
|
|
Print Title:
|
|
|
|
|
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EXHIBIT 2
TD BANK, N.A.
REVOLVING NOTE
$23,000,000.00
|
Boston, Massachusetts
|
June ____, 2009
For value received, the undersigned, The L. S. Starrett Company, a Massachusetts corporation, Evans Rule Company, Inc., a New Jersey corporation, Level Industries, Inc., a Massachusetts corporation, Tru-Stone Technologies, Inc., a Delaware corporation, and Starrett Kinemetric Engineering, Inc., a Delaware corporation (together, the "
Borrower
"), jointly and severally hereby promises to pay to the order of TD Bank, N.A. (the "
Bank
"), at its offices in Worcester, Massachusetts, or at any other place designated at any time by the holder hereof, in lawful money of the United States of America and in immediately available funds, the principal sum of Twenty-Three Million ($23,000,000.00) Dollars, or, if less, the aggregate unpaid principal amount of all Revolving Loans made by the Bank to the Borrower under the Loan Agreement (defined below) together with interest on the principal amount hereunder remaining unpaid from time to time, computed on the basis of the actual number of days elapsed and a 360-day year, from the date hereof until this Note is fully paid at the rate from time to time in effect under the Loan and Security Agreement (All Assets) of even date herewith (the "
Loan Agreement
") by and between the Bank and the Borrower. The principal hereof and interest accruing thereon shall be due and payable as provided in the Loan Agreement. This Note may be prepaid only in accordance with the Loan Agreement.
This Note is issued pursuant, and is subject, to the Loan Agreement, which provides, among other things, for acceleration hereof. This Note is the “Note” referred to in the Loan Agreement.
This Note is secured, among other things, pursuant to the Loan Agreement, and may now or hereafter be secured by one or more other security agreements, mortgages, deeds of trust, assignments or other instruments or agreements.
The Borrower hereby agrees to pay all costs of collection, including attorneys’ fees and legal expenses in the event this Note is not paid when due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest are expressly waived.
All rights and obligations hereunder shall be governed by the laws of the Commonwealth of Massachusetts and this Note shall be deemed to be under seal.
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|
THE L. S. STARRETT COMPANY
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Randall Hylek,
|
|
Chief Financial Officer and Treasurer
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Randall Hylek,
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
LEVEL INDUSTRIES, INC.
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Randall Hylek,
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
TRU-STONE TECHNOLOGIES, INC.
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Randall Hylek,
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
STARRETT KINEMETRIC ENGINEERING, INC.
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Randall Hylek,
|
|
Chief Financial Officer and Treasurer
|
EXHIBIT 3
COMPLIANCE CERTIFICATE
The L. S. Starrett Company, a Massachusetts corporation, Evans Rule Company, Inc., a New Jersey corporation, Level Industries, Inc., a Massachusetts corporation, Tru-Stone Technologies, Inc., a Delaware corporation, and Starrett Kinemetric Engineering, Inc., a Delaware corporation (
“Borrower”
) hereby certifies to TD Bank, N.A. (
“Bank”
) pursuant to the Loan and Security Agreement (All Assets) between Borrower and Bank dated June ____, 2009, as may be amended from time to time (
“Loan Agreement”
), that:
A.
General
1. Capitalized terms not defined herein shall have the meanings set forth in the Loan Agreement.
2. The Borrower has complied with all the terms, covenants and conditions to be performed or observed by the Borrower contained in the Loan Agreement and other documents required to be executed by the Borrower in connection with the Loan Agreement.
3. Neither on the date hereof nor, if applicable, after giving effect to the loan made on the date hereof, does there exist an Event of Default or an event which would with notice or the lapse of time, or both, constitute an Event of Default.
4. The representations and warranties contained in the Loan Agreement and in any certificate, document or financial or other statement furnished at any time thereunder are true, correct and complete in all material respects with the same effect as though such representations and warranties had been made on the date hereof, except to the extent that any such representation and warranty relates solely to an earlier date (in which case such representation and warranty shall be true, correct and complete on and as of such earlier date).
B.
Financial Covenants
As of the date hereof or, for such period as may be designated below, the computations, ratios and calculations as set forth below in accordance with Section 13 of the Loan Agreement are true and correct:
1.
Debt Service Coverage Ratio - Section 13.01
The cash flow of Starrett and its consolidated subsidiaries for the preceding twelve-month period was equal to ______ times the amount of Fixed Charges for such period, computed as follows:
A.
|
EBITDA
|
$___________
|
|
|
|
|
|
B.
|
Distributions/Dividends
|
$___________
|
|
|
|
|
|
C.
|
Extraordinary Gains/Extraordinary Losses
|
$___________
|
|
D.
|
Adjusted EBITDA (A - B -/+C)
|
$___________
|
|
|
|
|
|
E.
|
Interest Expense
|
$___________
|
|
|
|
|
|
F.
|
CMLTD
|
$___________
|
|
|
|
|
|
G.
|
E + F = Fixed Charges
|
$___________
|
|
|
|
|
|
H.
|
Ratio of D to G = ____ to _____
|
|
|
|
2.
|
Minimum Tangible Net Worth- Section 13.02
|
A.
|
Owners’ Equity
|
$___________
|
|
|
|
|
|
B.
|
Intangibles
|
$___________
|
|
|
|
|
|
C.
|
Debt owing from employees, Owners
and Affiliates
|
$___________
|
|
|
|
|
|
D.
|
Tangible Net Worth (A - B - C)
|
$___________
|
|
|
3.
|
EBITDA - Section 13.03
|
|
4.
|
Capital Expenditures - Section 13.04
|
The total amount expended by Starrett and its consolidated subsidiaries during the current fiscal year for Capital Expenditures was $____________.
IN WITNESS WHEREOF, the undersigned, a duly authorized officer of Borrower, has executed and delivered this Certificate in the name and on behalf of the Borrower on _________________, 200___.
|
THE L. S. STARRETT COMPANY, as Agent
|
|
|
|
|
|
|
By:
|
|
|
|
|
Print Name:
|
|
|
|
Print Title:
|
|
|
|
|
|
The L. S. Starrett Company
Evans Rule Company, Inc.
Level Industries, Inc.
Tru-Stone Technologies, Inc.
Starrett Kinemetric Engineering, Inc.
121 Crescent Street
Athol, MA 01331
Attn: Francis J. O’Brien
|
Re:
|
First Amendment of Loan and Security Agreement (All Assets) dated June 29, 2009
|
Gentlemen:
Reference is made to that certain Loan and Security Agreement (All Assets) dated June 29, 2009 (the "
Loan Agreement
") by the among The L. S. Starrett Company, Evans Rule Company, Inc., Level Industries, Inc., Tru-Stone Technologies, Inc. and Starrett Kinemetric Engineering, Inc. (each and together, the "
Borrower
") and TD Bank, N.A. (the "
Bank
"). The Loan Agreement is hereby amended, effective immediately, as follows:
1. Section 1.01 of the Loan Agreement is hereby amended to add the following definitions of "Current Assets", "Current Liabilities" and "Current Ratio" thereto after the definition of "Credit Limit" appearing on page 2 of the Loan Agreement, as follows:
"
Current Assets
" shall mean total current assets determined in accordance with GAAP.
"
Current Liabilities
" shall mean total current Debt as determined in accordance with GAAP.
"
Current Ratio
" shall mean, for the applicable period, the ratio of (a) total Current Assets divided by (b) total Current Liabilities.
2. Section 13 of the Loan Agreement is hereby amended to provide that as a result of the Borrower's election of a 52-53 week taxable year, the actual dates for calculation of the financial covenants contained therein may not correspond in all cases to the end of the traditional calendar quarters (i.e., March 31, June 30, September 30 and December 31) and shall be calculated as of the actual effective dates of the end of each fiscal quarter of Borrower.
3. Section 13.02 of the Loan Agreement is hereby deleted in its entirety and the following new Section 13.02 substituted therefor, as follows:
"13.02 Permit the Tangible Net Worth of Starrett and its consolidated subsidiaries to be less than $130,000,000.00 as at December 31, 2009, which amount shall increase by fifty (50%) percent of Starrett and its consolidated subsidiaries’ net income as at the last day of each fiscal quarter thereafter, and which amount shall not be reduced by losses in any fiscal quarter, such covenant shall be tested quarterly on a consolidated basis and in calculating such covenant the effect of the Borrower's "minimum pension liability" shall be excluded in determining the Borrower's consolidated stockholders' equity (whether as a result of an under-funded or over-funded pension plan);"
4. Section 13.03 of the Loan Agreement is hereby deleted in its entirety and the following new Section 13.03 substituted therefor, as follows:
"13.03: (A.) Permit, for each fiscal quarter of Borrower, commencing with the fiscal quarter ending December 31, 2009 through and including the fiscal quarter ending June 30, 2010 its Current Ratio to be less than 2.0 to 1.0, such covenant shall be measured on a consolidated basis or (B.) permit EBITDA to be less than $3,500,000.00 for the twelve (12) month period ending on September 30, 2010 or for the twelve (12) month period ending on the last day of any fiscal quarter thereafter through and including March 31, 2011, such covenant to be measured on a consolidated basis;"
5. Exhibit 3 of the Loan Agreement is hereby deleted in its entirety and Exhibit 3 attached hereto substituted therefor.
6. Except as specifically amended hereby, the Loan Agreement remains in full force and effect and the Borrower hereby reaffirms all representations and warranties contained herein, as of the date hereof.
Please acknowledge your assent and agreement to the foregoing by signing a copy of this letter in the space provided and returning it to the undersigned, whereupon it shall take effect as an instrument under seal.
|
Very truly yours,
|
|
|
|
|
|
TD BANK, N.A.
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
Steven S. Carpinella, Vice President
|
|
ACCEPTED AND AGREED TO:
THE L. S. STARRETT COMPANY
By:_________________________________
Francis J. O'Brien,
Chief Financial Officer and Treasurer
EVANS RULE COMPANY, INC.
By:_________________________________
Douglas A. Starrett, Secretary
LEVEL INDUSTRIES, INC.
By:_________________________________
Douglas A. Starrett, President
TRU-STONE TECHNOLOGIES, INC.
By:_________________________________
Douglas A. Starrett, President
STARRETT KINEMETRIC ENGINEERING,
INC.
By:_________________________________
Douglas A. Starrett, President
EXHIBIT 3
COMPLIANCE CERTIFICATE
The L. S. Starrett Company, a Massachusetts corporation, Evans Rule Company, Inc., a New Jersey corporation, Level Industries, Inc., a Massachusetts corporation, Tru-Stone Technologies, Inc., a Delaware corporation, and Starrett Kinemetric Engineering, Inc., a Delaware corporation (
“Borrower”
) hereby certifies to TD Bank, N.A. (
“Bank”
) pursuant to the Loan and Security Agreement (All Assets) between Borrower and Bank dated June 29, 2009, as may be amended from time to time (
“Loan Agreement”
), that:
A.
General
1. Capitalized terms not defined herein shall have the meanings set forth in the Loan Agreement.
2. The Borrower has complied with all the terms, covenants and conditions to be performed or observed by the Borrower contained in the Loan Agreement and other documents required to be executed by the Borrower in connection with the Loan Agreement.
3. Neither on the date hereof nor, if applicable, after giving effect to the loan made on the date hereof, does there exist an Event of Default or an event which would with notice or the lapse of time, or both, constitute an Event of Default.
4. The representations and warranties contained in the Loan Agreement and in any certificate, document or financial or other statement furnished at any time thereunder are true, correct and complete in all material respects with the same effect as though such representations and warranties had been made on the date hereof, except to the extent that any such representation and warranty relates solely to an earlier date (in which case such representation and warranty shall be true, correct and complete on and as of such earlier date).
B.
Financial Covenants
As of the date hereof or, for such period as may be designated below, the computations, ratios and calculations as set forth below in accordance with Section 13 of the Loan Agreement are true and correct:
1.
Debt Service Coverage Ratio - Section 13.01
The cash flow of Starrett and its consolidated subsidiaries for the preceding twelve-month period was equal to ______ times the amount of Fixed Charges for such period, computed as follows:
A.
|
EBITDA
|
$___________
|
|
|
|
|
|
B.
|
Distributions/Dividends
|
$___________
|
|
|
|
|
|
C.
|
Extraordinary Gains/Extraordinary Losses
|
$___________
|
|
D.
|
Adjusted EBITDA (A - B ± C)
|
$___________
|
|
|
|
|
|
E.
|
Interest Expense
|
$___________
|
|
|
|
|
|
F.
|
CMLTD
|
$___________
|
|
|
|
|
|
G.
|
E + F = Fixed Charges
|
$___________
|
|
|
|
|
|
H.
|
Ratio of D to G = ____ to _____
|
|
|
|
2.
|
Minimum Tangible Net Worth- Section 13.02
|
A.
|
Stockholders' Equity
|
$___________
|
|
|
|
|
|
B.
|
Goodwill and Intangibles
|
$___________
|
|
|
|
|
|
C.
|
Debt owing from employees, Owners
and Affiliates
|
$___________
|
|
|
|
|
|
D.
|
Minimum Pension Liability
|
$___________
|
|
|
|
|
|
E.
|
Tangible Net Worth (A - B - C ± D)
|
$___________
|
|
|
3.
|
Current Ratio (through June 30, 2010) /
EBITDA (starting September 30,
2010) - Section 13.03
|
A.
|
Current Assets
|
$___________
|
|
|
|
|
|
B.
|
Current Liabilities
|
$___________
|
|
|
|
|
|
C.
|
Current Ratio (A ÷ B) = ____:1.0
|
|
|
|
|
|
|
|
|
|
|
A.
|
EBITDA
|
$___________
|
|
|
4.
|
Capital Expenditures - Section 13.04
|
The total amount expended by Starrett and its consolidated subsidiaries during the current fiscal year for Capital Expenditures was $____________.
IN WITNESS WHEREOF, the undersigned, a duly authorized officer of Borrower, has executed and delivered this Certificate in the name and on behalf of the Borrower on _________________, 200___.
|
THE L. S. STARRETT COMPANY, as Agent
|
|
|
|
|
|
|
By:
|
|
|
|
|
Print Name:
|
|
|
|
Print Title:
|
|
|
|
|
|
November ____, 2010
The L. S. Starrett Company
Evans Rule Company, Inc.
Level Industries, Inc.
Tru-Stone Technologies, Inc.
Starrett Kinemetric Engineering, Inc.
121 Crescent Street
Athol, MA 01331
Attn: Francis J. O’Brien
|
Re:
|
Second Amendment of Loan and Security Agreement (All Assets) dated June 29, 2009
|
Gentlemen:
Reference is made to that certain Loan and Security Agreement (All Assets) dated June 29, 2009, as amended (the "
Agreement
") by the among The L. S. Starrett Company, Evans Rule Company, Inc., Level Industries, Inc., Tru-Stone Technologies, Inc. and Starrett Kinemetric Engineering, Inc. (each and together, the "
Borrower
") and TD Bank, N.A. (the "
Bank
"). The Loan Agreement is hereby amended, effective as of July 31, 2010, as follows:
1. Section 11 of the Agreement is hereby amended to delete Sections 11.01, 11.02 and 11.03(a) in their entirety and substitute the following new Sections 11.01, 11.02 and 11.03(a) therefor, as follows:
"
Section 11.01.
At all times in which the outstanding principal amount of the Revolving Loan exceeds $10,000,000.00, within twenty (20) calendar days after the end of each month, Borrower shall submit to Bank an aging report in form satisfactory to Bank showing the amounts owing on all domestically-located Accounts according to Borrower’s records as of the close of such month, together with such other information as Bank may require, all on a consolidating and consolidated basis. If Borrower’s monthly aging reports are prepared by an accounting service or other agent, Borrower hereby authorizes such service or agent to deliver such aging reports and any other related documents to Bank.
Section 11.02.
At all times in which the outstanding principal amount of the Revolving Loan exceeds $10,000,000.00, within twenty (20) calendar days after the end of each month, Borrower shall furnish to Bank a certificate describing all of Borrower’s domestically-located Inventory by value based on the lower of cost or market value, listing all Inventory by nature, quantity and location, together with such other information as Bank may require, all on a consolidating and consolidated basis.
Section 11.03.
Borrower shall deliver to Bank all documents, as frequently as indicated below, or at such other times as Bank may request, and all other documents and information requested by Bank:
|
DOCUMENT
|
|
FREQUENCY DUE
|
|
(a)
|
A Borrowing Base Certificate, including cash receipts, credit memos, sales, debit memos, the unpaid loan balance, new borrowing requests and the adjusted loan balance
|
|
At all times in which the outstanding principal amount of the Revolving Loan exceeds $10,000,000.00, monthly, within twenty (20) calendar days after the end of each month"
|
|
2. Except as specifically amended hereby, the Loan Agreement remains in full force and effect and the Borrower hereby reaffirms all representations and warranties contained herein, as of the date hereof.
Please acknowledge your assent and agreement to the foregoing by signing a copy of this letter in the space provided and returning it to the undersigned, whereupon it shall take effect as an instrument under seal.
|
Very truly yours,
|
|
|
|
|
|
TD BANK, N.A.
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
Steven S. Carpinella, Vice President
|
|
ACCEPTED AND AGREED TO:
THE L. S. STARRETT COMPANY
By:_________________________________
Francis J. O'Brien,
Chief Financial Officer and Treasurer
EVANS RULE COMPANY, INC.
By:_________________________________
Douglas A. Starrett, Secretary
LEVEL INDUSTRIES, INC.
By:_________________________________
Douglas A. Starrett, President
TRU-STONE TECHNOLOGIES, INC.
By:_________________________________
Douglas A. Starrett, President
STARRETT KINEMETRIC ENGINEERING,
INC.
By:_________________________________
Douglas A. Starrett, President
THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (ALL ASSETS)
Reference is made to that certain Loan and Security Agreement (All Assets) dated June 29, 2009, as amended (the "
Agreement
") by the among The L. S. Starrett Company, Evans Rule Company, Inc., Level Industries, Inc., Tru-Stone Technologies, Inc. and Starrett Kinemetric Engineering, Inc. (each and together, the "
Borrower
") and TD Bank, N.A. (the "
Bank
"). The Agreement was previously amended by a First Amendment of Loan and Security Agreement (All Assets) dated December 18, 2009, and a Second Amendment of Loan and Security Agreement (All Assets) dated November 9, 2010. Terms used in this Amendment which are defined in the Agreement shall have the same meanings as defined therein, unless otherwise defined herein.
RECITALS
The Bank has previously agreed to make certain loan advances to the Borrower and to issue or cause to be issued certain letters of credit for the account of the Borrower pursuant to the terms and conditions set forth in the Agreement.
The loan advances under the Agreement are presently evidenced by the Note.
All indebtedness of the Borrower to the Bank, including, without limitation, the obligations owing under the Revolving Note, is secured pursuant to the terms of the Agreement and all other transaction documents (collectively, the
"Security Documents"
), with the proviso that the Bank shall not perfect its security interest in the Collateral except as provided therein following a Security Trigger Event.
The parties desire that certain amendments be made to the Agreement, that a new $15,500,000.00 Term Loan be extended, and that Starrett Bytewise Development, Inc., a Delaware corporation with offices located at 1150 Brookstone Center Parkway, Columbus, Georgia 31904 (
"Starrett Bytewise"
), be added as a Borrower and be a party to this Amendment.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, the Agreement is hereby amended, effective immediately, as follows:
|
1.
|
The term Borrower as used in the Agreement is hereby amended to mean the Borrower and Starrett Bytewise.
|
|
2.
|
Starrett Bytewsie, for valuable consideration, receipt of which is hereby acknowledged, hereby repeats and restates each and every covenant, agreement, representation and warranty of the Agreement as if fully stated herein as of the date hereof, and contemporaneously with the execution of this Amendment, Starrett Bytewise shall execute an Assumption Agreement in substantially the form of
Exhibit “A”
attached hereto.
|
|
3.
|
The Note shall hereby be replaced by an Amended and Restated Revolving Note in the maximum principal amount of Twenty-three Million ($23,000,000.00) Dollars and payable to the order of the Bank in the form of
Exhibit “B”
attached hereto.
|
|
4.
|
Starrett Bytewise hereby grants to Bank a continuing security interest in all of its Collateral as more fully outlined in Section 5 of the Agreement as if fully restated herein as of the date hereof. As a Borrower under the Agreement, Starett Bytewise hereby irrevocably authorizes Bank at any time and from time to time after the occurrence of a Security Trigger Event to file in any Uniform Commercial Code jurisdiction any initial financing statements and amendments thereto in the form of
Exhibit “C”
attached hereto, and/or accordance with the terms and conditions set forth in Section 5(e) of the Agreement that (a) indicate the Collateral (i) as all assets of Borrower or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the Uniform Commercial Code of such jurisdiction, or (ii) as being of an equal or lesser scope or with greater detail, and (b) contain any other information required by the Uniform Commercial Code for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether Borrower is an organization, the type of organization and any organization identification number issued to Borrower, and (ii) in the case of a financing statement filed as a fixture filing or indicating Collateral as as-extracted Collateral or timber to be cut, a sufficient description of real property to which the Collateral relates. Borrower agrees to furnish any such information to Bank promptly upon request. Borrower also ratifies its authorization for Bank to have filed in any Uniform Commercial Code jurisdiction any like initial financing statements or amendments thereto if filed prior to the date hereof.
|
|
5.
|
As a Borrower under the Agreement, Starrett Bytewise similarly agrees not to create, permit to be created or suffer to exist any Lien upon any of the Collateral or any other property of Borrower, now owned or hereafter acquired, except for Permitted Liens as defined in Section 13.08 of the Agreement.
|
|
6.
|
Starrett Bytewise hereby warrants that is has no places of business other than 1150 Brookstone Centre Parkway, Columbus, Georgia 31904, which is its principal executive office and where all owned inventory is presently located, unless otherwise noted on
Schedule “A”
attached hereto, and that it is duly organized, validly existing and in good standing under the laws of the State of Delaware as a corporation.
|
|
7.
|
Section 1.01 of the Agreement is hereby amended by deleting the definition of
“Tangible Net Worth”
, and inserting the following in lieu thereof:
|
“Tangible Net Worth”
shall mean the equity of Starrett and its consolidated subsidiaries determined in accordance with GAAP, consistently applied, exclusive of the effect of the Borrower’s “minimum pension liability” (whether as a result of an under-funded or over-funded pension plan), and
subtracting
therefrom
(a) intangibles (as determined in accordance with such principles so applied), and (b) Debt owing to Borrower from any employee, Owner, or other Affiliate of Borrower.
|
8.
|
Section 2.01 of the Agreement is hereby amended by adding the following sentence at the conclusion of that Section:
|
“The Bank shall also make a term loan to the Borrower in the original principal amount of $15,500,000.00 (the “
Term Loan
”).
|
9.
|
Section 2.09 of the Agreement is hereby stricken in its entirety and the following new Section 2.09 substituted therefor:
|
“Section 2.09.
In order to facilitate the requesting and making of advances hereunder and the delivery of certain certificates, Evans Rule, Level Industries, Tru-Stone, Kinemetric and Starrett Bytewise do hereby appoint Starrett as their authorized agent to request, receive and distribute all Revolving Loans and the Term Loan made hereunder, to communicate with the Bank with respect to the Revolving Loans and the Term Loan, and to execute and furnish the Bank with all Margin, Covenant Compliance and Borrowing Base certificates, and Starrett hereby accepts such appointment.”
|
10.
|
Section 5(e) of the Agreement is hereby stricken in its entirety and the following new Section 5(e) substituted therefor:
|
“(e) Notwithstanding anything contained herein to the contrary, Bank shall not perfect its security interest in the Collateral except as provided herein. Upon the execution of this Agreement, however, the Bank shall hold a Uniform Commercial Code Financing Statement for each Borrower naming such Borrower as a debtor and the Bank as a secured party (together, the "
Financing Statements
") and a Patent Security Agreement in escrow. Upon the occurrence of an Event of Default(s) hereunder based upon the Borrower's failure to adhere to any of the financial covenants contained and calculated in accordance with Section 13 hereof in any two (2) consecutive quarters (a
“Security Trigger Event”
), the Bank may file the Financing Statements in such jurisdictions deemed necessary by the Bank to perfect the Bank's security interest and the Bank may file the Patent Security Agreement with the United States Patent and Trademark Office ("
USPTO
") in the Collateral without any additional consent or authorization from the Borrower. For purposes of clarification the Bank's right to perfect its security interest in the Collateral is not predicated upon the occurrence of an Event of Default in the same financial covenant for two (2) consecutive quarters. The Bank's filing of the Financing Statements and the Patent Security Agreement shall in no event be deemed a waiver of any rights or remedies that the Bank has or may have against the Borrower at such time resulting from the occurrence of such Event(s) of Default and the Bank hereby reserves and preserves all of its rights and remedies against the Borrower under this Agreement, any related documents executed in connection with this Agreement and under applicable law. In the event that the Bank has filed Financing Statements, the Bank shall promptly file termination statements with respect to the filed Financing Statements and a release of the Patent Security Agreement upon the Borrower's achieving a Debt Service Coverage Ratio in excess of 2.0:1.0 and a ratio of total Debt divided by Tangible Net Worth on a consolidated basis is less than 1.0:1.0 as evidenced by the financial statements furnished to the Bank in accordance with Section 11 hereof and provided no Event of Default has occurred and is continuing at that time. For purposes of this covenant, Debt Service Coverage Ratio means Adjusted EBITDA measured at quarter end based on the previous 12 months financial performance divided by Fixed Charges measured at the same quarter end. The Bank, however, may refile such Financing Statements and refile the Patent Security Agreement upon the occurrence of an Event(s) of Default based solely upon the financial covenants contained in Section 13 herein for two (2) consecutive fiscal quarters thereafter without any additional consent or authorization from the Borrower. Thereafter, the Bank will refile such Financing Statements and/or Termination Statements all in accordance with this Section 5(e).
|
11.
|
Section 6 of the Agreement is hereby stricken in its entirety and the following new Section 2.09 substituted therefor:
|
“
Section 6
. Obligations Secured. The security interest granted hereby is to secure payment and performance of all Revolving Loans and the Term Loan, debts, liabilities and obligations of Borrower to Bank hereunder and also any and all other debts, liabilities and obligations of Borrower to Bank of every kind and description, direct or indirect, absolute or contingent, primary or secondary, due or to become due, now existing or hereafter arising, including without limitation those obligations under that certain Amended and Restated Revolving Note in the maximum principal amount of $23,000,000.00 from Borrower to Bank, and that certain $15,500,000.00 Term Note from the Borrower to Bank, both being dated on or about of even date of the Third Amendment to this Loan and Security Agreement, whether or not such obligations are related to the transactions described in this Agreement, by class, or kind, or whether or not contemplated by the parties at the time of the granting of this security interest, regardless of how they arise or by what agreement or instrument they may be evidenced or whether evidenced by any agreement or instrument, and includes obligations to perform acts and refrain from taking action as well as obligations to pay money including, without limitation, all interest, fees, charges, expenses and overdrafts, and also including, without limitation, all obligations and liabilities which Bank may incur or become liable for, on account of, or as a result of, any transactions between Bank and Borrower including any which may arise out of any Letter of Credit, acceptance or similar instrument or obligation issued for the account of Borrower and also including obligations arising out of any foreign exchange contracts, interest rate swap, cap, floor or hedging agreements and all obligations of Borrower to Bank arising out of or in connection with any Automated Clearing House (
“ACH”
) agreements relating to the processing of ACH transactions, together with the fees, expenses, charges and other amounts owing or chargeable to Borrower under the ACH agreements (all hereinafter called
“Obligations”
).”
|
12.
|
Section 13.02 of the Agreement is hereby stricken in its entirety, and the following new Section 13.02 substituted therefore:
|
|
|
“
Section 13.02.
For the quarters ending June 30, 2011 and September 30, 2011, permit the Tangible Net Worth of Starrett and its consolidated subsidiaries to be less than a cumulatively increasing amount equal to the sum of $130,000,000.00 plus (50%) percent of Starrett and its consolidated subsidiaries’ net income as at the last day of each fiscal quarter commencing with the quarter ending March 31, 2010; and for the quarter commencing on October 1, 2011 (to be tested as of December 31, 2011) and at the end of each fiscal quarter thereafter, permit the Tangible Net Worth of Starrett and its consolidated subsidiaries to be less than a cumulatively increasing amount equal to the sum of $120,000,000.00 plus (50%) percent of Starrett and its consolidated subsidiaries’ net income as at the last day of each fiscal quarter commencing with the quarter ending March 31, 2010; and which amount shall not be reduced by losses in any fiscal quarter, such covenant to be measured on a consolidated basis.
|
|
13.
|
Section 13.04 of the Agreement is hereby stricken in its entirety and the following new Section 13.04 substituted therefore:
|
“
Section 13.04.
During any fiscal year of Starrett and its consolidated subsidiaries commencing with the fiscal year ending June 30, 2012, make, directly or indirectly, capital expenditures in an aggregate amount greater than $15,000,000.00, such covenant to be measured on a consolidated basis.”
|
14.
|
The following new Section 13.16 is hereby added to the Agreement:
|
“Section 13.16.
Permit the Borrower’s consolidated cash plus liquid investments to be less than $10,000,000.00 at any time, such convent to be measured on a consolidated basis.”
|
15.
|
The following new Section 14.01(s) is herby added to the Agreement:
|
“Section 14.01 (s)
. The occurrence of an event of default under the Term Loan.”
|
16.
|
Section 18(a) of the Agreement is hereby stricken in its entirety and the following new Section 18(a) substituted therefore:
|
"
Section 18
(a) Unless renewed in writing, this Agreement shall terminate on April 30, 2012 (the
“Termination Date”
), and all Obligations with the sole exception of the Term Loan shall be due and payable in full without presentation, demand, or further notice of any kind, whether or not all or any part of such Obligations are otherwise due and payable pursuant to the agreement or instrument evidencing same. Bank may terminate this Agreement immediately and without notice upon the occurrence of an Event of Default. Notwithstanding the foregoing or anything in this Agreement or elsewhere to the contrary, the security interest, Bank’s rights and remedies hereunder and all of the Borrower’s obligations and liabilities hereunder shall survive any termination of this Agreement and shall remain in full force and effect until all of the Obligations outstanding, or contracted or committed for (whether or not outstanding), including without limitation those obligations owing under the Term Loan, shall be finally and irrevocably paid in full. No Collateral shall be released or financing statement terminated (if applicable) until such final and irrevocable payment in full of the Obligations including, without limitation, the Term Loan.”
|
17.
|
Exhibit 3
of the Agreement is hereby deleted in its entirety and the new
Exhibit 3
attached hereto is hereby substituted therefore.
|
|
18.
|
Except as explicitly amended by this Amendment, all of the terms and conditions of the Loan Agreement shall remain in full force and effect and shall apply to any loan or letter of credit thereunder.
|
|
19.
|
The Borrower hereby reaffirms its agreement under the Agreement to pay or reimburse the Bank on demand for all costs and expenses incurred by the Bank in connection with the Agreement, the Security Documents, the Term Loan, this Third Amendment to the Agreement, and all other documents contemplated thereby, including without limitation all reasonable fees and disbursements of legal counsel. Without limiting the generality of the foregoing, the Borrower specifically agrees to pay all fees and disbursements of counsel to the Bank for the services performed by such counsel in connection with the preparation of this Amendment and the documents and instruments incidental hereto.
|
|
20.
|
This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original and all of which counterparts, taken together, shall constitute one and the same instrument.
|
[Signatures appear on the following pages]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed under seal this __ day of November, 2011.
|
THE L. S. STARRETT COMPANY
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
LEVEL INDUSTRIES, INC.
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
TRU-STONE TECHNOLOGIES, INC.
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
STARRETT KINEMETRIC ENGINEERING, INC.
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
|
STARRETT BYTEWISE DEVELOPMENT, INC.
|
|
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
|
|
T.D. BANK, N.A.
|
|
|
|
|
|
By:_______________________________________
|
|
Steven S. Carpinella, Vice President
|
|
|
EXHIBIT “A”
ASSUMPTION AGREEMENT
AGREEMENT made this day of November, 2011, between T.D. Bank, N.A., a national banking association organized and existing under the laws of the United States of America, with a place of business located at 370 Main Street, Worcester, Massachusetts 01608 (
"Bank"
), and Starrett Bytewsie Development, Inc., a Delaware corporation, with a usual place of business at 1150 Brookstone Center Parkway, Columbus, Georgia 31904 (the
"Company"
).
WHEREAS, The L. S. Starrett Company, Evans Rule Company, Inc., Level Industries, Inc., Tru-Stone Technologies, Inc. and Starrett Kinemetric Engineering, Inc. (collectively, the
"Borrower"
), entered into a Loan and Security Agreement (All Assets) with the Bank dated April 26, 2010, as amended by First Amendment of Loan and Security Agreement (All Assets) dated December 18, 2009, and Second Amendment of Loan and Security Agreement (All Assets) dated November 9, 2010 (the
"Loan Agreement"
); and
WHEREAS, the Company desires to become a Borrower under the Loan Agreement; and
WHEREAS, the Company and the Borrower desire the consent of the Bank to add the Company as part of the Borrower.
NOW, THEREFORE, the parties hereto agree as follows:
1. The Bank consents to the Company becoming a Borrower under the Loan Agreement on the condition that the rights of the Bank shall not in any manner be impaired nor shall any liability or obligation or any claim or demand existing by the Bank against the Borrower be released or impaired by such addition of the Company as a Borrower and that the Company assume and be liable for all Obligations of the Borrower to the Bank in the same manner and to the same extent as if the Company itself was an original signatory to the Loan Agreement and named as the Borrower therein.
2. The Company hereby agrees to assume all liabilities and Obligations of the Borrower to the Bank pursuant to the Loan Agreement, which Loan Agreement is incorporated herein by reference, and to be liable for the same in the manner and to the extent as if the Company itself had incurred such liabilities or Obligations and had executed the Loan Agreement, and further agrees to ratify and confirm the terms of this Agreement by executing such promissory notes and other documents as the Bank may require.
3. The Company hereby agrees to assume all liabilities and obligations of the Borrower to the Bank pursuant to that certain Secured Term Note in the original principal amount of Fifteen Million Five Hundred Thousand ($15,500,000.00) Dollars, and that certain Amended and Restated Revolving Note in the maximum principal amount of $23,000,000.00, both Notes being dated on or about of even date of this Agreement (the
"Notes"
), which Notes are incorporated herein by reference, and to be liable for the same in the manner and to the extent as if the Company itself had incurred such liabilities or obligations, and further agrees to ratify and confirm the terms of this Agreement by executing any other documents as the Bank may require.
4. The Company confirms to the Bank that the Bank has and hereby grants to the Bank a continuing security interest in the Collateral as security for all Obligations of the Company and the Borrower to the Bank.
5. The Company confirms to the Bank, and hereby assumes, joint and several liability with the Borrower pursuant to Section 19 of the Loan Agreement.
6. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Loan Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this document to be executed as of the date and year first above written.
|
STARRETT BYTEWISE DEVELOPMENT, INC.
|
|
|
|
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
|
|
|
T.D. BANK, N.A.
|
|
|
|
|
|
By:_______________________________________
|
|
Steven S. Carpinella, Vice President
|
|
|
|
THE L. S. STARRETT COMPANY
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
LEVEL INDUSTRIES, INC.
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
|
TRU-STONE TECHNOLOGIES, INC.
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
STARRETT KINEMETRIC ENGINEERING, INC.
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
EXHIBIT B
AMENDED AND RESTATED $23,000,000.00 REVOLVING NOTE
EXHIBIT “C”
FORM OF UCC FINANCING STATEMENT
EXHIBIT 3
COMPLIANCE CERTIFICATE
The L. S. Starrett Company, a Massachusetts corporation, Evans Rule Company, Inc., a New Jersey corporation, Level Industries, Inc., a Massachusetts corporation, Tru-Stone Technologies, Inc., a Delaware corporation, Starrett Kinemetric Engineering, Inc., a Delaware corporation, and Starrett Bytewise Development, Inc., a Delaware corporation (
“Borrower”
) hereby certifies to TD Bank, N.A. (
“Bank”
) pursuant to the Loan and Security Agreement (All Assets) between Borrower and Bank dated June 29, 2009, as may be amended from time to time (
“Loan Agreement”
), that:
A.
General
1. Capitalized terms not defined herein shall have the meanings set forth in the Loan Agreement.
2. The Borrower has complied with all the terms, covenants and conditions to be performed or observed by the Borrower contained in the Loan Agreement and other documents required to be executed by the Borrower in connection with the Loan Agreement.
3. Neither on the date hereof nor, if applicable, after giving effect to the loan made on the date hereof, does there exist an Event of Default or an event which would with notice or the lapse of time, or both, constitute an Event of Default.
4. The representations and warranties contained in the Loan Agreement and in any certificate, document or financial or other statement furnished at any time thereunder are true, correct and complete in all material respects with the same effect as though such representations and warranties had been made on the date hereof, except to the extent that any such representation and warranty relates solely to an earlier date (in which case such representation and warranty shall be true, correct and complete on and as of such earlier date).
B.
Financial Covenants
As of the date hereof or, for such period as may be designated below, the computations, ratios and calculations as set forth below in accordance with Section 13 of the Loan Agreement are true and correct:
1.
Debt Service Coverage Ratio - Section 13.01
The cash flow of Starrett and its consolidated subsidiaries for the preceding twelve-month period was equal to ______ times the amount of Fixed Charges for such period, computed as follows:
A.
|
EBITDA
|
$___________
|
|
|
|
|
|
B.
|
Distributions/Dividends
|
$___________
|
|
C.
|
Extraordinary Gains/Extraordinary Losses
|
$___________
|
|
D.
|
Adjusted EBITDA (A - B ± C)
|
$___________
|
|
|
|
|
|
E.
|
Interest Expense
|
$___________
|
|
|
|
|
|
F.
|
CMLTD
|
$___________
|
|
|
|
|
|
G.
|
E + F = Fixed Charges
|
$___________
|
|
|
|
|
|
H.
|
Ratio of D to G = ____ to _____
|
|
|
|
2.
|
Minimum Tangible Net Worth- Section 13.02
|
A.
|
Stockholders' Equity
|
$___________
|
|
|
|
|
|
B.
|
Goodwill and Intangibles
|
$___________
|
|
|
|
|
|
C.
|
Debt owing from employees, Owners
and Affiliates
|
$___________
|
|
|
|
|
|
D.
|
Minimum Pension Liability
|
$___________
|
|
|
|
|
|
E.
|
Tangible Net Worth (A - B - C ± D)
|
$___________
|
|
|
3.
|
Capital Expenditures - Section 13.04
|
The total amount expended by Starrett and its consolidated subsidiaries during the current fiscal year for Capital Expenditures was $____________.
[Signatures appear on the following page]
IN WITNESS WHEREOF, the undersigned, a duly authorized officer of Borrower, has executed and delivered this Certificate in the name and on behalf of the Borrower on _________________, 200___.
|
THE L. S. STARRETT COMPANY
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
LEVEL INDUSTRIES, INC.
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
TRU-STONE TECHNOLOGIES, INC.
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
STARRETT KINEMETRIC ENGINEERING, INC.
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
|
STARRETT BYTEWISE DEVELOPMENT, INC.
|
|
|
|
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
SCHEDULE “A”
STARRETT BYTEWISE ADDITIONAL BUSINESS/INVENTORY LOCATIONS
FOURTH AMENDMENT OF LOAN AND SECURITY AGREEMENT
(ALL ASSETS)
Reference is made to that certain Loan and Security Agreement (All Assets) dated June 29, 2009, as amended (the "
Agreement
") by the among The L. S. Starrett Company, Evans Rule Company, Inc., Level Industries, Inc., Tru-Stone Technologies, Inc., Starrett Kinemetric Engineering, Inc. and Starrett Bytewise Development, Inc. (each and together, the "
Borrower
") and TD Bank, N.A. (the "
Bank
"). The Agreement was previously amended by a First Amendment of Loan and Security Agreement (All Assets) dated December 18, 2009, a Second Amendment of Loan and Security Agreement (All Assets) dated November 9, 2010 and a Third Amendment of Loan and Security Agreement (All Assets) dated November 22, 2011. Terms used in this Amendment which are defined in the Agreement shall have the same meanings as defined therein, unless otherwise defined herein.
RECITALS
The Bank has previously agreed to make certain loan advances to the Borrower and to issue or cause to be issued certain letters of credit for the account of the Borrower pursuant to the terms and conditions set forth in the Agreement.
The loan advances under the Agreement are presently evidenced by the Note.
All indebtedness of the Borrower to the Bank, including, without limitation, the obligations owing under the Note, is secured pursuant to the terms of the Agreement and all other transaction documents (collectively, the "
Security Documents
"), with the proviso that the Bank shall not perfect its security interest in the Collateral except as provided therein following a Security Trigger Event.
The parties desire that certain amendments be made to the Agreement, including extension of the Termination Date for the Revolving Loan.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, the Agreement is hereby amended, effective immediately, as follows:
1. Section 1.01 of the Agreement is hereby amended to add the definition of "Liquid Investments" before the definition of "Margin" appearing on page 5 of the Agreement as follows:
" 'Liquid Investments' shall mean investments which are considered cash equivalents or are readily convertible into cash."
2. Section 1.01 of the Agreement is hereby further amended to add the definition of "Total Liabilities" thereto between the definitions of "Tangible Net Worth" and "UCC" appearing on page 8 of the Agreement as follows:
" 'Total Liabilities' means Total Liabilities as expressed on the Borrower's balance sheet, prepared in accordance with GAAP consistently applied."
3. Section 13.02 of the Agreement is hereby stricken in its entirety, and the following new Section 13.02 substituted therefor, as follows:
"13.02 Permit the ratio of the Total Liabilities of Starrett and its consolidated subsidiaries to the Tangible Net Worth of Starrett and its consolidated subsidiaries to exceed .85:1.0 as at the end of each fiscal quarter of Borrower, commencing with the fiscal quarter ending June 30, 2012."
4. Section 13.09 of the Agreement is hereby stricken in its entirety, and the following new Section 13.09 substituted therefor, as follows:
"13.09 Pay or make any distributions on account of any class of ownership interest in Borrower in cash or in property (other than additional ownership interests) if at the time of any proposed distribution there exists an Event of Default under Borrower's Debt Service Coverage Ratio (as defined and calculated in accordance with Section 13.01 hereof) or if the making of such distribution would cause an Event of Default under the Debt Service Coverage Ratio or redeem, purchase or otherwise acquire, directly or indirectly, any of the ownership interests in Borrower."
5. Section 13.10 of the Agreement is hereby stricken in its entirety, and the following new Section 13.10 substituted therefor, as follows:
"13.10 Make any loans or advances to any Person, including, without limitation, Borrower’s directors, officers and employees, in an aggregate amount exceeding $500,000.00 at any time, except advances to officers or employees with respect to expenses incurred by them in the ordinary course of their duties which are properly reimbursable by Borrower and intercompany loans between each of the entities constituting the Borrower."
6. Section 13.16 of the Agreement is hereby stricken in its entirety, and the following new Section 13.16 substituted therefor, as follows:
"13.16 Permit the Borrower’s consolidated cash plus Liquid Investments to be less than $10,000,000.00 at any time, such convent to be measured on a consolidated basis."
7. Section 18(a) of the Agreement is hereby stricken in its entirety and the following new Section 18(a) substituted therefor:
"(a) Unless renewed in writing, this Agreement shall terminate on April 30, 2015 (the '
Termination Date
'), and all Obligations with the sole exception of the Term Loan shall be due and payable in full without presentation, demand, or further notice of any kind, whether or not all or any part of such Obligations are otherwise due and payable pursuant to the agreement or instrument evidencing same. Bank may terminate this Agreement immediately and without notice upon the occurrence of an Event of Default. Notwithstanding the foregoing or anything in this Agreement or elsewhere to the contrary, the security interest, Bank’s rights and remedies hereunder and all of the Borrower’s obligations and liabilities hereunder shall survive any termination of this Agreement and shall remain in full force and effect until all of the Obligations outstanding, or contracted or committed for (whether or not outstanding), including without limitation those obligations owing under the Term Loan, shall be finally and irrevocably paid in full. No Collateral shall be released or financing statement terminated (if applicable) until such final and irrevocable payment in full of the Obligations including, without limitation, the Term Loan."
8.
Exhibit 3
of the Agreement is hereby deleted in its entirety and the following new
Exhibit 3
attached hereto is hereby substituted therefor.
Except as explicitly amended by this Amendment, all of the terms and conditions of the Agreement shall remain in full force and effect and shall apply to any loan or letter of credit thereunder.
The Borrower hereby reaffirms its agreement under the Agreement to pay or reimburse the Bank on demand for all costs and expenses incurred by the Bank in connection with the Agreement, the Security Documents, the Term Loan, this Fourth Amendment to the Agreement, and all other documents contemplated thereby, including without limitation all reasonable fees and disbursements of legal counsel. Without limiting the generality of the foregoing, the Borrower specifically agrees to pay all fees and disbursements of counsel to the Bank for the services performed by such counsel in connection with the preparation of this Amendment and the documents and instruments incidental hereto.
This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original and all of which counterparts, taken together, shall constitute one and the same instrument.
[Signatures appear on the following pages]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed under seal this ___ day of April, 2012.
|
THE L. S. STARRETT COMPANY
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
LEVEL INDUSTRIES, INC.
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
TRU-STONE TECHNOLOGIES, INC.
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
STARRETT KINEMETRIC ENGINEERING, INC.
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
|
STARRETT BYTEWISE DEVELOPMENT, INC.
|
|
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
|
T.D. BANK, N.A.
|
|
|
|
|
|
By:_______________________________________
|
|
Steven S. Carpinella, Vice President
|
EXHIBIT 3
COMPLIANCE CERTIFICATE
The L. S. Starrett Company, a Massachusetts corporation, Evans Rule Company, Inc., a New Jersey corporation, Level Industries, Inc., a Massachusetts corporation, Tru-Stone Technologies, Inc., a Delaware corporation, Starrett Kinemetric Engineering, Inc., a Delaware corporation, and Starrett Bytewise Development, Inc., a Delaware corporation (each and together, the "
Borrower
") hereby certifies to TD Bank, N.A. ("
Bank
") pursuant to the Loan and Security Agreement (All Assets) between Borrower and Bank dated June 29, 2009, as may be amended from time to time ("
Loan Agreement
"), that:
A.
General
1. Capitalized terms not defined herein shall have the meanings set forth in the Loan Agreement.
2. The Borrower has complied with all the terms, covenants and conditions to be performed or observed by the Borrower contained in the Loan Agreement and other documents required to be executed by the Borrower in connection with the Loan Agreement.
3. Neither on the date hereof nor, if applicable, after giving effect to the loan made on the date hereof, does there exist an Event of Default or an event which would with notice or the lapse of time, or both, constitute an Event of Default.
4. The representations and warranties contained in the Loan Agreement and in any certificate, document or financial or other statement furnished at any time thereunder are true, correct and complete in all material respects with the same effect as though such representations and warranties had been made on the date hereof, except to the extent that any such representation and warranty relates solely to an earlier date (in which case such representation and warranty shall be true, correct and complete on and as of such earlier date).
B.
Financial Covenants
As of the date hereof or, for such period as may be designated below, the computations, ratios and calculations as set forth below in accordance with Section 13 of the Loan Agreement are true and correct:
1.
Debt Service Coverage Ratio - Section 13.01
The cash flow of Starrett and its consolidated subsidiaries for the preceding twelve-month period was equal to ______ times the amount of Fixed Charges for such period, computed as follows:
A.
|
EBITDA
|
$___________
|
|
|
|
|
|
B.
|
Distributions/Dividends
|
$___________
|
|
C.
|
Extraordinary Gains/Extraordinary Losses
|
$___________
|
|
D.
|
Adjusted EBITDA (A - B ± C)
|
$___________
|
|
|
|
|
|
E.
|
Interest Expense
|
$___________
|
|
|
|
|
|
F.
|
CMLTD
|
$___________
|
|
|
|
|
|
G.
|
E + F = Fixed Charges
|
$___________
|
|
|
|
|
|
H.
|
Ratio of D to G = ____ to _____
|
|
|
|
2.
|
Maximum Total Liabilities to Tangible Net Worth- Section 13.02
|
A.
|
Total Liabilities
|
$___________
|
|
|
|
|
|
B.
|
Stockholders' Equity
|
$___________
|
|
|
|
|
|
C.
|
Goodwill and Intangibles
|
$___________
|
|
|
|
|
|
D.
|
Debt owing from employees, Owners
and Affiliates
|
$___________
|
|
|
|
|
|
E.
|
Minimum Pension Liability
|
$___________
|
|
|
|
|
|
F.
|
Tangible Net Worth (A - B - C ± D)
|
$___________
|
|
|
|
|
|
G.
|
The ratio of Total Liabilities to Tangible Net Worth (A to F) was ___:1.00
|
|
|
|
3.
|
Capital Expenditures - Section 13.04
|
The total amount expended by Starrett and its consolidated subsidiaries during the current fiscal year for Capital Expenditures was $____________.
|
4.
|
Minimum Liquidity – Section 3.16
|
The Liquid Assets of Starrett and its consolidated subsidiaries as at _________, 20__ was $____________, computed as follows:
A.
|
Cash
|
$___________
|
|
|
|
|
|
B.
|
Liquid Investments
|
$___________
|
|
C.
|
Liquid Assets (A + B)
|
$___________
|
|
IN WITNESS WHEREOF, the undersigned, a duly authorized officer of Borrower, has executed and delivered this Certificate in the name and on behalf of the Borrower on _________________, 20___.
|
THE L. S. STARRETT COMPANY
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
LEVEL INDUSTRIES, INC.
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
TRU-STONE TECHNOLOGIES, INC.
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
STARRETT KINEMETRIC ENGINEERING, INC.
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
|
|
STARRETT BYTEWISE DEVELOPMENT, INC.
|
|
|
_______________________________
|
By:_______________________________________
|
Print Name:
|
Francis J. O’Brien,
|
|
Chief Financial Officer and Treasurer
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4
FIFTH AMENDMENT OF LOAN AND SECURITY AGREEMENT
(ALL ASSETS)
Reference is made to that certain Loan and Security Agreement (All Assets) dated June 29, 2009, as amended (the "
Agreement
") by the among The L. S. Starrett Company, Evans Rule Company, Inc., Level Industries, Inc., Tru-Stone Technologies, Inc., Starrett Kinemetric Engineering, Inc. and Starrett Bytewise Development, Inc. (each and together, the "
Borrower
") and TD Bank, N.A. (the "
Bank
"). The Agreement was previously amended by a First Amendment of Loan and Security Agreement (All Assets) dated December 18, 2009, a Second Amendment of Loan and Security Agreement (All Assets) dated November 9, 2010, a Third Amendment of Loan and Security Agreement (All Assets) dated November 22, 2011 and a Fourth Amendment of Loan and Security Agreement dated April 25, 2012. Terms used in this Amendment which are defined in the Agreement shall have the same meanings as defined therein, unless otherwise defined herein.
RECITALS
The Bank has previously agreed to make certain loan advances to the Borrower and to issue or cause to be issued certain letters of credit for the account of the Borrower pursuant to the terms and conditions set forth in the Agreement.
The loan advances under the Agreement are presently evidenced by the Note.
All indebtedness of the Borrower to the Bank, including, without limitation, the obligations owing under the Note, is secured pursuant to the terms of the Agreement and all other transaction documents (collectively, the "
Security Documents
"), with the proviso that the Bank shall not perfect its security interest in the Collateral except as provided therein following a Security Trigger Event.
The parties desire that certain amendments be made to the Agreement, including extension of the Termination Date for the Revolving Loan.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, the Agreement is hereby amended, effective immediately, as follows:
1.
Section 1.01 of the Agreement is hereby amended to delete the definition of EBITDA on page 3 of the Agreement and substitute the following therefor:
" '
EBITDA
' shall mean, for the applicable period, income from continuing operations before the payment of interest and taxes plus depreciation, depletion, amortization and non-cash pension and retirement benefit expense, determined in accordance with GAAP for Starrett and its subsidiaries on a consolidated basis."
2. Section 13.02 of the Agreement is hereby stricken in its entirety, and the following new Section 13.02 substituted therefor, as follows:
"13.02 Permit the ratio of the Funded Debt of Starrett and its consolidated subsidiaries to EBITDA of Starrett and its consolidated subsidiaries to exceed 1.45:1.0 for the twelve (12) month period ending on the last day of each fiscal quarter of Starrett and its consolidated subsidiaries, commencing with the fiscal quarter ending September 30, 2012."
3.
Exhibit 3
of the Agreement is hereby deleted in its entirety and the following new
Exhibit 3
attached hereto is hereby substituted therefor.
Except as explicitly amended by this Amendment, all of the terms and conditions of the Agreement shall remain in full force and effect and shall apply to any loan or letter of credit thereunder.
The Borrower hereby reaffirms its agreement under the Agreement to pay or reimburse the Bank on demand for all costs and expenses incurred by the Bank in connection with the Agreement, the Security Documents, the Term Loan, this Fifth Amendment to the Agreement, and all other documents contemplated thereby, including without limitation all reasonable fees and disbursements of legal counsel. Without limiting the generality of the foregoing, the Borrower specifically agrees to pay all fees and disbursements of counsel to the Bank for the services performed by such counsel in connection with the preparation of this Amendment and the documents and instruments incidental hereto.
This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original and all of which counterparts, taken together, shall constitute one and the same instrument.
[Signatures appear on the following pages]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed under seal this 7
th
day of September, 2012.
WITNESS:
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THE L. S. STARRETT COMPANY
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By:
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Print Name:
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Francis J. O’Brien,
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Chief Financial Officer and Treasurer
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EVANS RULE COMPANY, INC.
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By:
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Print Name:
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Francis J. O’Brien,
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Chief Financial Officer and Treasurer
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LEVEL INDUSTRIES, INC.
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By:
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Print Name:
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Francis J. O’Brien,
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Chief Financial Officer and Treasurer
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TRU-STONE TECHNOLOGIES, INC.
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By:
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Print Name:
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Francis J. O’Brien,
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Chief Financial Officer and Treasurer
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STARRETT KINEMETRIC ENGINEERING, INC.
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By:
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Print Name:
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Francis J. O’Brien,
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Chief Financial Officer and Treasurer
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STARRETT BYTEWISE DEVELOPMENT, INC.
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By:
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Print Name:
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Francis J. O’Brien,
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Chief Financial Officer and Treasurer
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T.D. BANK, N.A.
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By:
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Steven S. Carpinella, Vice President
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EXHIBIT 3
COMPLIANCE CERTIFICATE
The L. S. Starrett Company, a Massachusetts corporation, Evans Rule Company, Inc., a New Jersey corporation, Level Industries, Inc., a Massachusetts corporation, Tru-Stone Technologies, Inc., a Delaware corporation, Starrett Kinemetric Engineering, Inc., a Delaware corporation, and Starrett Bytewise Development, Inc., a Delaware corporation (each and together, the "
Borrower
") hereby certifies to TD Bank, N.A. ("
Bank
") pursuant to the Loan and Security Agreement (All Assets) between Borrower and Bank dated June 29, 2009, as may be amended from time to time ("
Loan Agreement
"), that:
A.
General
1. Capitalized terms not defined herein shall have the meanings set forth in the Loan Agreement.
2. The Borrower has complied with all the terms, covenants and conditions to be performed or observed by the Borrower contained in the Loan Agreement and other documents required to be executed by the Borrower in connection with the Loan Agreement.
3. Neither on the date hereof nor, if applicable, after giving effect to the loan made on the date hereof, does there exist an Event of Default or an event which would with notice or the lapse of time, or both, constitute an Event of Default.
4. The representations and warranties contained in the Loan Agreement and in any certificate, document or financial or other statement furnished at any time thereunder are true, correct and complete in all material respects with the same effect as though such representations and warranties had been made on the date hereof, except to the extent that any such representation and warranty relates solely to an earlier date (in which case such representation and warranty shall be true, correct and complete on and as of such earlier date).
B.
Financial Covenants
As of the date hereof or, for such period as may be designated below, the computations, ratios and calculations as set forth below in accordance with Section 13 of the Loan Agreement are true and correct:
1.
Debt Service Coverage Ratio - Section 13.01
The cash flow of Starrett and its consolidated subsidiaries for the preceding twelve-month period was equal to ______ times the amount of Fixed Charges for such period, computed as follows:
A.
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EBIT from continuing operations
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$___________
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B.
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Depreciation
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$___________
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C.
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Depletion/Amortization
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$___________
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D.
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Non-cash pension expense
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$___________
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E.
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Non-cash retirement benefit expense
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$___________
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F.
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EBITDA (A + B + C + D + E)
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$___________
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G.
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Distributions/Dividends
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$___________
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H.
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Extraordinary Gains/Extraordinary Losses
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$___________
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I.
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Adjusted EBITDA (F - G ± H)
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$___________
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J.
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Interest Expense
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$___________
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K.
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CMLTD
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$___________
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L.
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J + K = Fixed Charges
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$___________
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M.
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Ratio of I to L = ____ to _____
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2.
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Maximum Leverage - Section 13.02
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The ratio of the Funded Debt of Starrett and its consolidated subsidiaries to the EBITDA of Starrett and its consolidated subsidiaries was ___:1.0 for the twelve (12) month period ending __________, 20__, computed as follows:
A.
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Funded Debt
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$___________
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B.
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EBITDA
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$___________
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C.
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Ratio of Funded Debt to EBITDA (A to B) was ___:1.00
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3.
Capital Expenditures - Section 13.04
The total amount expended by Starrett and its consolidated subsidiaries during the current fiscal year for Capital Expenditures was $____________.
4.
Minimum Liquidity – Section 3.16
The Liquid Assets of Starrett and its consolidated subsidiaries as at _________, 20__ was $____________, computed as follows:
A.
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Cash
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$___________
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B.
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Liquid Investments
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$___________
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C.
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Liquid Assets (A + B)
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$___________
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IN WITNESS WHEREOF, the undersigned, a duly authorized officer of Borrower, has executed and delivered this Certificate in the name and on behalf of the Borrower on _________________, 20___.
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THE L. S. STARRETT COMPANY
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By:
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Print Name:
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Francis J. O’Brien,
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Chief Financial Officer and Treasurer
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EVANS RULE COMPANY, INC.
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By:
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Print Name:
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Francis J. O’Brien,
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Chief Financial Officer and Treasurer
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LEVEL INDUSTRIES, INC.
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By:
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Print Name:
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Francis J. O’Brien,
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Chief Financial Officer and Treasurer
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TRU-STONE TECHNOLOGIES, INC.
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By:
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Print Name:
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Francis J. O’Brien,
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Chief Financial Officer and Treasurer
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STARRETT KINEMETRIC ENGINEERING, INC.
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By:
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Print Name:
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Francis J. O’Brien,
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Chief Financial Officer and Treasurer
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STARRETT BYTEWISE DEVELOPMENT, INC.
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By:
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Print Name:
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Francis J. O’Brien,
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Chief Financial Officer and Treasurer
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