UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

 

 

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☐   Soliciting Material Pursuant to Rule14a-12

 

THE L.S. STARRETT COMPANY 

(Name of Registrant as Specified in Its Charter)

 

 

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1

 

 THE L.S. STARRETT COMPANY

121 Crescent Street

Athol, Massachusetts 01331

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

November 2, 2020

 

NOTICE IS HEREBY GIVEN that the Annual Meeting of the stockholders (the “Annual Meeting”) of The L.S. Starrett Company (the “Company”) will be held by virtual meeting format on Monday, November 2, 2020, at 8:00 a.m. This year, a live webcast of our annual meeting of stockholders will be accessible over the internet at www.meetingcenter.io/267479413, where you will be able to listen to the meeting live, submit questions and vote. The meeting password is SCX2020. The Annual Meeting is being held for the following purposes:

 

 

1.

To elect a class of three directors, each to hold office for a term of three years and until his successor is chosen and qualified;

 

 

2.

To hold a non-binding advisory vote on the compensation of named executive officers;

 

 

3.

To ratify the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for fiscal 2021; and

 

 

4.

To consider and act upon any other matter that may properly come before the meeting or any adjournment or adjournments thereof.

 

The Board of Directors has fixed September 4, 2020 as the record date for the determination of stockholders entitled to vote at the Annual Meeting, or any adjournments thereof, and to receive notice thereof. The transfer books of the Company will not be closed.

 

We are actively monitoring the public health and travel safety concerns relating to the coronavirus outbreak (COVID-19) and the advisories and mandates being issued by federal, state and local governments and related agencies. In the event it is not possible or advisable to hold the Annual Meeting as currently planned, we may change the date, time and/or location of the Annual Meeting. In the event of any such change, we would publicly announce the decision via a press release and post details on our website as soon as practicable before the Annual Meeting.

 

You are requested to execute and return the enclosed proxy, which is solicited by the management of the Company.  

 

 Athol, Massachusetts /s/ STEVEN A. WILCOX, Clerk
September 17, 2020  

 

WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED FORM OF PROXY IN THE ENCLOSED STAMPED AND ADDRESSED ENVELOPE OR, ALTERNATIVELY, COMPLETE YOUR PROXY BY TELEPHONE OR OVER THE INTERNET AS DESCRIBED IN THE ENCLOSED INSTRUCTIONS. IF YOU DESIRE TO VOTE YOUR SHARES IN PERSON AT THE ANNUAL MEETING, YOUR PROXY WILL BE RETURNED TO YOU.

 
Important Notice Regarding the Availability of Proxy Materials for the Stockholders’ Meeting to be held on November 2, 2020. The Notice of Annual Meeting, Proxy Statement and Annual Report are available at:

 

Proxy: http://www.starrett.com/u?Proxy

Annual Report: http://www.starrett.com/u?Annual_Report

 

If your shares are held in “street name” in a stock brokerage account or by a bank or other nominee, you must provide your broker with instructions on how to vote your shares in order for your shares to be voted on important matters presented at the Annual Meeting. If you do not instruct your broker on how to vote, your shares will not be voted on these matters.

 

2

 

PROXY STATEMENT

 

ANNUAL MEETING OF STOCKHOLDERS

OF

 

THE L.S. STARRETT COMPANY

121 CRESCENT STREET

ATHOL, MASSACHUSETTS 01331

 

The enclosed form of proxy and this Proxy Statement have been mailed to stockholders on or about October 6, 2020 in connection with the solicitation by the Board of Directors of The L.S. Starrett Company (the “Company”) of proxies for use at the Annual Meeting to be held by virtual meeting format on Monday, November 2, 2020, at 8:00 a.m., or at any adjournments thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders.

 

This year, we are planning to conduct a “virtual” meeting, which will be held via live webcast at www.meetingcenter.io/267479413. The meeting password is SCX2020. Stockholders attending the annual meeting via live webcast will be able to listen to the meeting live, submit questions and vote.

 

We are actively monitoring the public health and travel safety concerns relating to the coronavirus outbreak (COVID-19) and the advisories and mandates being issued by federal, state and local governments and related agencies. In the event it is not possible or advisable to hold the Annual Meeting as currently planned, we may change the date, time and/or location of the Annual Meeting. In the event of any such change, we would publicly announce the decision via a press release and post details on our website as soon as practicable before the Annual Meeting.

 

It is the intention of the persons named as proxies to vote shares represented by duly executed proxies for the proposals described in this Proxy Statement unless contrary specification is made. Any such proxy may be revoked by a stockholder at any time prior to the voting of the proxy by a written revocation received by the Clerk of the Company, by properly executing and delivering a later-dated proxy, or by attending the meeting, requesting return of the proxy and voting in person. A proxy, when executed and not so revoked, will be voted at the meeting, including any adjournments thereof; and if it contains any specifications, it will be voted in accordance therewith. If no choice is specified, proxies will be voted in favor of the proposals described in this Proxy Statement.

 

Stockholders of record at the close of business on September 4, 2020 are entitled to vote at this meeting. On that date, the Company had outstanding and entitled to vote 6,329,317 shares of Class A Common Stock (the “Class A Stock”) and 657,270 shares of Class B Common Stock (the “Class B Stock” and together with the Class A Stock, the “Common Stock”). Each outstanding share of Class A Stock entitles the record holder thereof to one vote and each outstanding share of Class B Stock entitles the record holder thereof to ten votes. The holders of Class A Stock are entitled to elect 25% of the Company’s directors to be elected at each meeting and such holders voting together with the holders of Class B Stock as a single class are entitled to elect the remaining directors to be elected at the meeting. Except for the foregoing and except as provided by law, all actions submitted to a vote of stockholders will be voted on by the holders of Class A Stock and Class B Stock voting together as a single class. The Company’s Board of Directors is divided into three classes with one class to be elected at each annual meeting of stockholders.

 

I.     ELECTION OF DIRECTORS

 

The Board of Directors has fixed the number of directors at seven and designated Russell D. Carreker, Christopher C. Gahagan and Thomas J. Riordan to serve as Class I Directors; Douglas A. Starrett and David A. Lemoine to serve as Class II Directors; and Richard B. Kennedy and Scott W. Sproule to serve as Class III Directors; and, in the case of each director, until his successor is chosen and qualified.  Terry A. Piper retired from the Board and was replaced by Scott W. Sproule as a Class III Director effective on June 30, 2020. David A. Lemoine will retire from the Board and will be replaced by Deborah R. Gordon as a Class II Director effective October 14, 2020.

 

3

 

It is the intention of the persons named in the proxy to vote for the election of the three persons named below as Class I Directors, each to hold office for a term of three years and until his successor is chosen and qualified.

 

The names and ages as of August 26, 2020 of the nominees for director proposed by the Board of Directors, their principal occupations, the significant business directorships they hold, and the years in which they first became directors of the Company are as follows:

 

Name (Age)  

Principal Occupation During Last Five Years

and Directorships

 

Director

Since

  Term Expires
             
Class I Director to be elected by Class A Stockholders: 
             

Thomas J. Riordan (64)

 

From 2011 until retirement in 2018, he was President and CEO of Neenah Enterprises, Inc., a designer and major manufacturer of castings and forgings. From 2007-2011, Tom was President and Chief Operating Officer of Terex Corporation, a NYSE-listed global construction company. From 1996-2007, He served in numerous positions, including Executive Vice President and COO of SPX Corporation, a NYSE-listed multinational capital goods manufacturer. From 1979-1996 he worked in various management positions with four different manufacturing companies. We believe his experience provides a deep understanding of the key issues facing manufacturers in the 21st century as well as how to manage the regulatory requirements of a publicly traded company, which qualifies him to serve on the Board

 

2017

 

2020

             
Class I Directors to be elected by Class A & B Stockholders
             

Russell D. Carreker (56)

 

Since 2015, he has served as the Managing Partner of C3 Investment Properties, a commercial real estate investment company. From 2012-2015, he was President of Starrett-Bytewise, a technology company that designs and manufactures laser measurement systems. He was CEO of Bytewise Measurement Systems from 1995 to 2012. Prior to 1995, he was Vice President of Credit Card Operations at Columbus Bank and Trust Company. Mr. Carreker brings a deep understanding of the required skills and issues facing an independent entrepreneur and management of a small subsidiary in a public company environment. We believe his experience enables the Board to better understand technology applications in metrology and how best to grow high-growth potential subsidiaries, which qualifies him to serve on the Board

 

2017

 

2020

             

Christopher C. Gahagan (56)

 

From 2018-2020, Mr. Gahagan and his wife founded a non-profit foundation whose mission is dedicated to expanding STEM and Trade career opportunities for underserved and underrepresented populations. From 2015-2017, he was President and CEO of Symbotic LLC, an early stage company in automation technology for the warehouse and distribution industry. From 2009-2015, he was Senior Vice President of Avid Technologies, a technology company that develops hardware and software for digital media. From 2002-2009, he was Senior Vice President of EMC Corporation, a designer and manufacturer of computer hardware and software. Prior to 2002, he held software architect, designer and developer positions with large companies. We believe his experience provides a strong technology background for the Board and management which helps facilitate software integration in our products and processes, which qualifies him to serve on the Board.

 

2017

 

2020

 

4

 

The following tables set forth the names and ages as of August 26, 2020 of the Class II and Class III Directors continuing in office, their positions and offices with the Company, if applicable, their principal occupations, the significant business directorships they hold, the years in which they first became directors of the Company and the years that their current term in office expires:

 

Name (Age)

 

 

Principal Occupation During Last Five Years

and Directorships

 

Director

Since

 

Term Expires 

 

 

 

 

 

 

 

Class II Director: 

 

 

 

 

             

Douglas A. Starrett (68)

 

Since 2001, he has served as President and Chief Executive Officer of the Company. Prior to 2001, he was President of the Company. Mr. Starrett started his career with the Company in 1976 as an apprentice toolmaker and has been promoted to positions of increasing responsibility in engineering, operations and management. We believe Mr. Starrett’s broad exposure to both domestic and international operations and markets provides an in-depth understanding of our business and its culture and qualifies him to serve on the Board.

 

1984

 

2021

 

Name (Age)

 

 

Principal Occupation During Last Five Years

and Directorships

 

Director

Since

 

Term Expires

 

 

 

 

 

   

Class III Directors: 

   
             

Richard B. Kennedy (77)

 

From 2004 until retirement in June 2013, he served as President and Chief Executive Officer, Worcester Regional Chamber of Commerce, Worcester, MA. From 2002 to 2004, he was Associate Principal and Market Strategy Consultant, Frank Lynn & Associates, Chicago, IL. From 2000 to 2001, he served as Executive Vice President and Director of GlobalBA.com, a start-up in the chemical industry. Until 1999, he was Vice President Marketing, Saint-Gobain Abrasives, Worcester, MA, a producer of abrasive products. Mr. Kennedy’s career at Saint Gobain spanned sales and marketing in both domestic and international markets. We believe his deep understanding of distribution channels and his geo-political savvy qualifies him to serve on the Board.

 

1996

 

2022

             

Scott W. Sproule (50)

 

(Effective June 30, 2020) Mr. Sproule has served as Vice President, Chief Financial Officer and Treasurer of SPX Corporation (“SPX”) since 2015. He joined SPX in 2005 and has held a variety of leadership positions across the corporation in both corporate as well as multiple segments. Prior to joining SPX, Mr. Sproule began his finance career at PricewaterhouseCoopers in auditing, and held a series of financial management roles at Eastman Kodak Company and Corning, Incorporated. He is a Certified Public Accountant and earned his B.S. in Accounting from Robert Morris University. We believe Mr. Sproule’s financial and business management acumen makes him well suited to lead our audit committee and qualifies him to serve on the Board.

 

2020

 

2023

 

5

 

The following tables set forth the names and ages as of August 26, 2020 of the Class II and Class III Directors who have retired in 2020 or will not continue in office, their principal occupations, the significant business directorships they hold, the years in which they first became directors of the Company and the years that their current term in office expires:

 

Name (Age)

 

 

Principal Occupation During Last Five Years

and Directorships

 

Director

Since

 

Term Expires 

             
Class II Director:             
             

David A. Lemoine (72)

 

Until his retirement in 2010, Dave was an Audit Partner, Deloitte & Touche LLP (“D&T”), Boston, MA (1985-2010). He was Partner-in-charge of D&T’s audit Boston practice (1995-2000). From 1980-1985, he served as the Senior Vice President, Finance & Administration, Briox Technologies, Inc., Worcester, MA. As a former partner of a large multi-national audit practice he brings to the Board extensive knowledge and experience in accounting and auditing matters, financial reporting and internal controls and Securities and Exchange Commission (the “SEC”) matters. Mr. Lemoine has served on the Board of Directors of Insulet Corporation (NASDAQ) since February 2016 and is a member of its Audit Committee and Compensation Committee. We believe Mr. Lemoine’s financial acumen and business experience qualifies him to serve on the Board.

 

2010

 

20201

 

Class III Director:             
             

Terry A. Piper (75)

 

Chairman, President and Chief Executive Officer of Precision Steel Warehouse, Inc., Franklin Park, Illinois, a wholesale steel service center. Mr. Piper began his career at Precision Steel Warehouse in 1961 and has served in a series of progressively more responsible positions culminating in the position of CEO in 1999. We believe that, as a head of a subsidiary of the Berkshire Hathaway Co., his practical experience and best-in-practice expertise qualified him to serve on the Board.

 

2003

 

20202

 


1 Mr. Lemoine will retire from the Board effective October 14, 2020.

2 Mr. Piper retired from the Board effective June 30, 2020.

 

The Board of Directors has determined that Messrs. Kennedy, Carreker, Gahagan, Lemoine, Riordan and Sproule are “independent” directors, as defined by the applicable New York Stock Exchange rules.

 

Director’s Competency

 

Our directors play a critical role in overseeing the strategic direction and management of the Company. Board candidates are considered based on a broad breadth of professional skills, experiences, and financial acumen. They must possess a global perspective, personal integrity, sound judgment, and social and community awareness. However, in selecting qualified and competent directors, it is important to understand that our Company is a manufacturing business. Therefore, we look for candidates that have expertise and in-depth knowledge in the manufacturing field and our distribution channels. As a small public company, we also look for Board members who possess specific experiences that augment areas where we may have limited expertise.

 

Collectively our current members of the Board meet all the above criteria. The Board of Directors believes that the composition of the Board provides a good balance between the business expertise and the appropriate social perspective to ensure that the business is operating with concern for the long-term interest of our stockholders, employees, and the community. Our directors have demonstrated that they have the time to devote to Board activities and to execute their fiduciary duties to the Company and its stockholders.

 

6

 

GENERAL INFORMATION RELATING TO THE BOARD

OF DIRECTORS AND ITS COMMITTEES

 

The Board of Directors held five regular meetings and three special meetings during the fiscal year ended June 30, 2020 (“fiscal 2020”). Each of the Company’s directors attended at least 75% of the total of: (i) the meetings of the Board during which he has been a director and (ii) the meetings of the committee(s) on which that director served during such period. In addition, the Company’s non-management directors met in executive session without management participation eight times during fiscal 2020. Mr. Riordan chairs the executive sessions as the lead independent director, as appointed in March 2020. A regular board meeting is traditionally held immediately following the annual meeting of stockholders but the Board does not have a policy requiring the attendance by the directors at the Annual Meeting. Six of the directors attended the 2019 annual meeting, which was held on October 16, 2019. Mr. Kennedy did not attend the 2019 annual meeting.

 

Douglas A. Starrett currently serves as Chief Executive Officer and Chairman of the Board of Directors. Mr. Starrett has worked for the Company for the past 44 years. The Board believes that Mr. Starrett’s breadth of experience and unique understanding of the corporate culture are important assets in executing the duties of Chief Executive Officer and Chairman. The advantage of the combined duties contributes to more effective and streamlined implementation of strategy and creates direct accountability. The Board believes that Mr. Starrett’s in-depth knowledge of manufacturing and the industrial markets, combined with his international experience, allow Mr. Starrett to provide strong leadership and direction for the Company. Whether the same leadership structure will be selected when our Chief Executive Officer’s tenure with the Company ends is a matter that the Board feels should be evaluated at that time in light of the skills and experience of the Chief Executive Officer and other relevant considerations.

 

As noted above, in March 2020 Mr. Riordan was appointed lead independent director. As lead independent director, Mr. Riordan provides independent oversight and promotes effective communication between the Board and management, including Mr. Starrett. Our lead independent director role includes, among others, presiding over all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors, facilitating discussion and open dialogue among the independent directors during meetings of the Board, executive sessions, and otherwise, serving as principal liaison between the independent directors and the Chairman and coordinating with the Chairman to set the agenda for meetings of the Board. The lead independent director also performs such additional duties as the Board may otherwise determine and delegate. 

 

The role of the Board in managing risk at the Company is to have ultimate oversight for the risk management process. Management has day-to-day responsibility for the identification and control of risk facing the Company including timely identifying, monitoring, mitigating and managing those risks that could have a material effect on the Company. Further, management has the responsibility to report these risks as they arise to the Board and its committees and the Company’s auditors. The Board has delegated certain risk assessment responsibilities to its audit committee (the “Audit Committee”), its compensation committee (the “Compensation Committee”), its corporate governance and nominating committee (the “Corporate Governance and Nominating Committee”) and its executive committee (the “Executive Committee”). The responsibilities of each of these committees are described below.

 

During fiscal 2020, the members of the Audit Committee were Messrs. Lemoine (Chair), Kennedy, and Riordan. Effective June 30, 2020 Mr. Sproule was appointed to the Audit Committee and the Board. Mr. Sproule will Chair the Audit Committee effective October 14, 2020 upon the retirement of Mr. Lemoine from the Board. In addition, effective October 14, 2020, Deborah Gordon will be appointed to both the Board and the Audit Committee. The Board has determined that each current and future member of the Audit Committee is independent, as defined by the applicable New York Stock Exchange rules. In general, the Audit Committee recommends to the Board the independent auditors to be selected and confers with the Company’s independent auditors to review the audit scope, the Company’s internal controls, financial reporting issues, results of the audit and the range of non-audit services. Also see section “II. Relationship with Independent Auditors” below. The Audit Committee also oversees the Company’s internal audit function. The Board has adopted a written charter for the Audit Committee, which is available on the Company’s website at www.starrett.com.

 

7

 

The members of the Compensation Committee during fiscal 2020 were Messrs. Kennedy, Piper, Gahagan and Carreker. Mr. Gahagan is the Chair of the Compensation Committee. Mr. Piper retired from the Starrett Board effective June 30, 2020. Messrs. Gahagan, Kennedy, and Carreker will remain members of the Committee in fiscal 2021. The Board has determined that each member of the Committee is independent, as defined by the applicable New York Stock Exchange rules. The function of the Compensation Committee is to review the compensation of key management personnel and to set the Chief Executive Officer’s compensation. The Board has adopted a written charter for the Compensation Committee, which is available on the Company’s website at www.starrett.com.

 

The members of the Corporate Governance and Nominating Committee during fiscal 2020 were Messrs. Riordan (Chair), Kennedy, Lemoine and Piper. Messrs. Riordan, Kennedy, and Lemoine are current members of the committee. Mr. Lemoine will continue to serve as a member of the committee until his retirement on October 14, 2020. The Board has determined that each member of the Corporate Governance and Nominating Committee is independent as defined by the applicable New York Stock Exchange rules. The Corporate Governance and Nominating Committee is responsible for recommending to the Board nominees for director and for the Company’s corporate governance practices. The Corporate Governance and Nominating Committee recommends to the Board individuals as director nominees who, in the opinion of the Committee, have high personal and professional integrity, have experience that is of particular relevance to the Company, have sufficient time available to devote to the affairs of the Company, and who will be effective, in conjunction with the other nominees and members of the Board, in collectively serving the long-term best interests of the stockholders. The Board has adopted a written charter for the Corporate Governance and Nominating Committee, which is available on the Company’s website at www.starrett.com.

 

The Corporate Governance and Nominating Committee’s process for identifying and evaluating director candidates, including candidates recommended by stockholders, includes actively seeking to identify qualified individuals by reviewing lists of possible candidates, such as executive officers of public companies, considering proposals from a number of sources, such as the Board of Directors, management, employees, stockholders, industry contacts and outside search firms. The Committee has adopted a policy with respect to submission by stockholders of candidates for director nominees, which is available on the Company’s website at www.starrett.com. The Committee will consider up to two candidates each year recommended by stockholders under this policy. Any stockholder or group of stockholders (referred to in either case as a “Nominating Stockholder”) that, individually or as a group, have beneficially owned at least 5% of the Company’s voting power for at least one year prior to the date the nominating stockholder submits a candidate for nomination as a director may submit in writing one candidate to the committee for consideration at each stockholder meeting at which directors are to be elected but not later than the 120th calendar day before the first anniversary of the date that the Company released its proxy statement to stockholders in connection with the previous year’s annual meeting. Recommendations should be sent to The L.S. Starrett Company, Attention: Clerk, 121 Crescent Street, Athol, Massachusetts 01331. The recommendation must include specified information about and the consent and agreement of the candidate. There are no differences in the manner in which the Committee evaluates candidates for director whether an individual is recommended by a stockholder or otherwise. The Committee will determine whether to interview any candidates and may seek additional information about candidates from third-party sources. In addition, stockholders may nominate individuals for election as director at the Company’s next annual meeting in accordance with the procedures described in Section 3.11 of the Company’s By-laws.

 

The members of the Executive Committee during fiscal 2020 were Messrs. Starrett, Kennedy, and, effective November 4, 2019, Mr. Tripp. Mr. O’Brien served on the committee until his retirement as Chief Financial Officer on November 4, 2019. The Executive Committee may exercise most Board powers during the period between Board meetings.

 

In June 2019, the annual director retainer fee for fiscal 2020 was set at $40,000. In addition, the Chairmen of the Audit (Lemoine), Compensation (Gahagan) and Governance and Nominating Committees (Riordan) would receive an additional fee of $10,000, $7,750 and $7,750, respectively. The fiscal 2021 fees are expected to remain the same.

 

Non-management directors may elect to defer part or all of their director’s compensation, in which event such deferred compensation and interest thereon will generally be payable in four equal installments after they cease to be a director.

 

8

 

The Board of Directors as a whole evaluates and approves any transactions with related parties. The Company has not adopted a written policy or procedure used to evaluate and approve transactions with related parties. Instead, transactions are considered by the Board of Directors at meetings or through written consents.

 

In the fourth quarter of fiscal 2016, Mr. Guilherme Camargo was appointed Operations Manager of Armco do Brasil S.A. (Armco.) Armco is the largest supplier of steel to our subsidiary in Brazil. Mr. Camargo is the son of Salvador de Camargo, who was the president of our subsidiary in Brazil. Mr. De Camargo retired from the Company effective June 30, 2018. The Company made annual purchases from Armco of $3.8 million in fiscal 2018. Other than the transaction with Armco, there have not been any transactions, or proposed transactions, during the last two fiscal years, to which the Company was or is to be a party, in which any director or executive officer of the Company, any nominee for election as a director, any security holder owning beneficially more than 5% of the Common Stock of the Company, or any member of the immediate family of the aforementioned persons had or is to have a direct or indirect material interest.

 

A.

Audit Committee Report

 

The Audit Committee operates in accordance with a written charter adopted by the Board and reviewed annually by the Audit Committee. The Audit Committee is responsible for overseeing the quality and integrity of the Company’s accounting, auditing and financial reporting practices. It is composed solely of members who are independent, as defined by the applicable rules of the New York Stock Exchange and under Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Mr. Lemoine is an “audit committee financial expert” as defined by the rules of the Securities and Exchange Commission (the “SEC”). The Audit Committee is chaired by Mr. Lemoine until he retires from the Board on October 14, 2020. Mr. Lemoine is a certified public accountant and is a retired partner of a large public accounting firm. Further, Mr. Sproule, who will become the Audit Committee Chair on October 14, 2020, is also an "audit committee financial expert." He is a certified public accountant and has served as Chief Financial Officer and Treasurer of a publicly traded company for five years and has held a series of other senior financial positions.

 

Management has the primary responsibility for the financial statements and the financial reporting process. Management is also responsible for assessing and maintaining the effectiveness of internal controls over the financial reporting process in compliance with Sarbanes-Oxley Section 404 requirements. The Audit Committee oversees the Company’s financial reporting process and internal controls on behalf of the Board. In this regard, the Audit Committee helps to ensure the independence of the Company’s auditors, its internal audit function, and the integrity of management and the adequacy of disclosure to stockholders. Representatives of the Company’s independent auditors, Grant Thornton LLP, and financial management and other management personnel have unrestricted access to the Audit Committee.

 

The Company’s independent auditors are responsible for auditing the Company’s annual financial statements and expressing an opinion as to whether the statements are fairly stated in conformity with accounting principles generally accepted in the United States. In addition, the Company’s independent auditors are responsible for auditing the Company’s internal controls over financial reporting. The Company’s independent auditors perform their responsibilities in accordance with the standards of the Public Company Accounting Oversight Board.

 

For fiscal 2020, management, Grant Thornton LLP and the Audit Committee met six times including meetings to discuss the Company’s annual and quarterly earnings reports and financial statements prior to each public release of such reports or statements. With respect to fiscal 2020, the Audit Committee met prior to the issuance of the Company’s Annual Report on Form 10-K, to:

 

 

review and discuss the audited financial statements with the Company’s management;

 

discuss with Grant Thornton LLP the matters required to be discussed by Statement on Auditing Standard No. 1301, Communications with Audit Committees Concerning Independence; 

 

discuss with Grant Thornton LLP its independence and receive from Grant Thornton LLP the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding Grant Thornton LLP’s communications with the Audit Committee concerning independence.

 

9

 

Based upon these reviews and discussions, the Audit Committee recommended that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020 for filing with the SEC.

 

The Audit Committee has considered and determined that the provision of the non-audit services provided by Grant Thornton LLP is compatible with maintaining the auditor’s independence. There were no services provided by Grant Thornton LLP in fiscal 2020 or fiscal 2019 other than the services included in “Audit Fees” and “Tax Fees.”

 

The Audit Committee has appointed Grant Thornton LLP as the independent registered public accounting firm of the Company for fiscal 2021 and intends to submit such recommendation to the Company’s stockholders for ratification (but not for approval) at the Annual Meeting.

 

Audit Committee

David A. Lemoine, Chairman

 

Scott W. Sproule

 

Richard B. Kennedy

September 4, 2020

Thomas J. Riordan

 

This report of the Audit Committee shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended (the “Securities Act”) or under the Exchange Act, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under the Securities Act and the Exchange Act and shall not be deemed soliciting material.

 

B.

Audit Fees and Audit Committee Pre-Approval Policy

 

Audit Fees

 

The following table sets forth the approximate aggregate fees billed to the Company for the fiscal years ended June 30, 2020 and June 30, 2019 by the Company’s independent auditors, Grant Thornton LLP, in each of the last two fiscal years:

 

Fee Category

 

Fiscal 2020

Fees

   

Fiscal 2019
Fees

 

Audit Fees

  $ 1,054,000     $ 1,100,710  

Tax Fees

    170,000       129,433  

All Other Fees

    -       -  
                 

Total Fees

  $ 1,224,000     $ 1,230,143  

 

“Audit Fees” were for professional services rendered for the audit of the Company’s consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by Grant Thornton LLP in connection with statutory and regulatory filings or engagements. Audit fees for fiscal 2020 and fiscal 2019 also included services related to the Company’s compliance with Section 404 of the Sarbanes-Oxley Act regarding internal control over financial reporting.

 

“Audit-Related Fees” are for assurance and related services that are reasonably related to the performance of the audit or review of Company’s consolidated financial statements and are not reported under “Audit Fees.”

 

“Tax Fees” were for professional services for federal, state and international tax compliance, tax advice and tax planning.

 

“All Other Fees” were for services other than the services reported above. There were no services provided by Grant Thornton LLP in fiscal 2020 or fiscal 2019 other than the services included in “Audit Fees” and “Tax Fees.”

 

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 In making its determination regarding the independence of Grant Thornton LLP, the Audit Committee considered whether the provision of the services covered in the sections entitled “Audit-Related Fees” and “Tax Fees” was compatible with maintaining such independence. All of the work performed by Grant Thornton LLP was performed by full-time employees of the firm.

 

No fees were paid to Grant Thornton LLP for financial information systems design or implementation services during fiscal 2020 or fiscal 2019.

 

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

 

The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the independent auditors in order to ensure that the provision of such services does not impair the auditors’ independence. These services may include audit services, audit-related services, tax services and other services. In addition to generally pre-approving, on a case-by-case basis, services provided by the independent auditors, the Audit Committee has adopted a policy for the pre-approval of certain specified services, which may be provided by the independent auditors. Under this policy, the Audit Committee has pre-approved the auditors’ engagement letter for the provision of certain services. These services set forth in the engagement letter have been identified in a sufficient level of detail so that management will not be called upon to make judgment as to whether a proposed service fits within the scope of the engagement letter. Pursuant to the policy, the Audit Committee is informed of the auditors’ provision, if any, of a pre-approved service on a periodic basis and the auditor’s report to the Audit Committee the fees for any services performed under this pre-approval policy.

 

C.

Executive Officers of the Company

 

The following table sets forth the names of the executive officers of the Company, their positions and ages as of September 4, 2020:

 

Name

 

Age

 

Position

Douglas A. Starrett

  68  

President, Chief Executive Officer and Director

John C. Tripp

  58  

Chief Financial Officer and Treasurer

Emerson T. Leme

  59  

Vice President Industrial Products North America

Christian Arntsen

  53  

Vice President Industrial Products International

 

Mr. Starrett’s background is described above under “I. Election of Directors.”

 

John C. Tripp was appointed Chief Financial Officer and Treasurer, effective November 4, 2019. Prior to joining the Company, Mr. Tripp served as Chief Financial Officer of the IWIS Group, The Americas, since 2012, and prior to that, Divisional Chief Financial Officer of The Stanley Works – Healthcare Solutions, from 2008 to 2012. Mr. Tripp earned a BA in Economics from Harvard University and an MBA from Boston University.

 

Emerson T. Leme was appointed Vice President Industrial Products North America effective July 2019 and prior to that he was Head of Metrology Equipment since 2016. Emerson joined the Company in 2004 as the General Manager of Starrett China. Previously, Mr. Leme worked as manufacturing consultant in 2004, as Latin America Operations Director for Steelcase Co. from 2001 to 2003 and from 1984 to 2001 he held several positions of increasing responsibility including Manufacturing Manager at Toledo do Brazil, then a subsidiary of Mettler-Toledo. Mr. Leme holds a Bachelor’s degree in mechanical engineering from FEI – Faculdade de Engenharia Industrial, São Bernando, Brazil and a MBA from Fundação Getulio Vargas, São Paulo, Brazil with an extension at The University of Chicago Graduate School of Business.

 

Christian Arntsen was appointed Vice President Industrial Products International effective July 2019 and prior to that was President of Starrett Brazil since July 2018. He has been working for the Company since 2000 in various International Sales and Marketing roles including Export Sales Manager Latin America as well as Marketing Director. Mr. Arntsen previously worked for Norton, Construction Products Division, a Saint Gobain Abrasives Company in Atlanta, GA, USA from 1996 to 2000 as a Latin American Export Sales Manager and Regional Sales Manager, South-East, NA. Mr. Arntsen earned a Bachelor’s degree in Economics from Pontifícia Universidade Católica, São Paulo, Brazil and an MBA from Fundação Getulio Vargas, São Paulo, Brazil

 

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The President and Treasurer hold office until the first meeting of the directors following the next annual meeting of stockholders and until their respective successors are chosen and qualified, and each other officer holds office until the first meeting of directors following the next annual meeting of stockholders, unless a shorter period shall have been specified by the terms of his election or appointment or, in each case, until he sooner dies, resigns, is removed or becomes disqualified. There have been no events under any bankruptcy act, no criminal proceedings and no judgments or injunctions material to the evaluation of the ability and integrity of any executive officer during the past ten years. 

 

D. Executive and Director Compensation

 

The section provides an overview of our executive compensation program and philosophy and discusses the compensation paid during fiscal 2020 to our named executive officers (“NEOs”). In light of the COVID -19 pandemic the Compensation Committee and the Board of Directors as described below, has addressed the need to alter the compensation of the company’s executives and Board of Directors reflecting the impact that the pandemic has had on financial performance while protecting the Company and recognizing the need to retain our executive talent.

 

For fiscal 2020, our NEOs consisted of the following three individuals: Douglas A. Starrett, John C. Tripp and Emerson T. Leme.

 

 

SUMMARY COMPENSATION TABLE

 

 

Name and Principal

Position

 

Year

Salary

($)

 

Bonus

($)(a)

Stock

Awards

($)(b)

Non-Equity

Incentive Plan

Compensation

($)(c)

All Other

Compensation

($)(d)

Total

($)

Douglas A. Starrett

2020

407,019

-

131,430

-

12,995

551,444

President, Chief Executive

Officer and Director

2019

425,000

 

133,140

374,000

15,484

947,624

 

 

 

 

 

 

 

 

John C. Tripp

2020

165,846

25,000

50,550

-

3,791

245,187

Chief Financial Officer and

Treasurer

             
               

Emerson T. Leme

2020

229,077

-

74,140

-

4,582

307,799

Vice President Industrial

North America

             

 

(a) Mr. Tripp received a one-time signing bonus upon acceptance of his offer of employment.

(b) This column represents the grant date fair value of performance-based restricted stock units granted. The Company did not achieve the applicable performance targets for performance-based restricted stock units with vesting criteria based on fiscal 2020 performance. The Company did achieve the applicable performance targets for performance-based restricted stock units with vesting criteria based on fiscal 2019 performance. For a detailed description of the assumptions used for purposes of determining fair value, see Note 3 to our Consolidated Financial Statements included in our Form 10-K for the fiscal year ended June 30, 2020.

(c) This column represents the annual incentive bonuses earned by our NEOs under our FY19 Cash Bonus Plan. Company performance targets were met for fiscal 2019, but not in fiscal years 2020 and 2018.

(d) Includes employer matching contributions to the 401(k) plan.

 

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Overview

 

Although the Company is a small to mid-sized manufacturer, the Compensation Committee understands that the Company’s breadth of product, global operating presence and brand equity demands that the business be managed by highly competent personnel in order to meet the challenges and the continually changing landscape of today’s global economy. The Company’s executives require the same talents as much larger organizations and must be motivated, versatile and experienced in order for the Company to prosper in the future. To that end, the Company must recruit, retain and reward qualified executive talent in order to build long-term stockholder value and a sustainable business for the benefit of all stakeholders.

 

The Compensation Committee is responsible for reviewing and setting the compensation of the Company’s Chief Executive Officer (“CEO”) and for recommending to the full Board of Directors the compensation for the Company’s other NEOs.

 

In fiscal 2020, the Compensation Committee engaged Radford, an executive compensation consultant, to benchmark total executive compensation against the competitive marketplace using a peer group of similarly situated companies.

 

The Compensation Committee holds discussions to review Radford’s recommendations regarding compensation for the CEO and other NEOs.

 

The Compensation Committee has the opportunity to work closely with each NEO during the year at various board and committee meetings and has a good understanding and working knowledge of each officer’s contributions and talents. The Compensation Committee also discusses with the CEO the performance and contributions of the other NEOs and seeks his advice and recommendations when setting their compensation. The CEO is not present when the Compensation Committee discusses his compensation.

 

Our compensation practices are relatively simple, straightforward and transparent. Setting compensation is not done by a strict formula. It is a subjective judgment based on a number of factors. We do not look at the performance for just one year, but for a number of years, and consider the economic climate in all areas of the world where we operate. We look at how stockholders, employees and stakeholders at all locations have fared during these periods. In particular, we look at measures affecting stockholders’ equity such as sales revenues and net profit margins, which are key indicators of stockholder value. We also consider stock price movement, bearing in mind that the stock market is generally short-term oriented and subject to pressures that are not under the control of our NEOs.

 

Our NEOs currently do not have employment contracts or company-paid memberships or professional services. For fiscal year 2020, compensation consisted primarily of base salary, cash incentive compensation, and grants of awards under the 2012 Long Term Incentive Plan. In addition, in fiscal year 2020, long-term equity (stock) incentives were available to our NEOs and employees on the same basis through our employee stock purchase plan. In fiscal 2019, Radford recommended that 60% of compensation be based upon salary and annual cash bonus and 40% be based on long-term equity (stock) awards and we continued to follow that guidance in fiscal 2020.

 

We make judgments based on the considerations listed above and on competitive compensation at companies of similar size and in similar fields. We compare our compensation practices to those of our peer group listed above and we draw on our knowledge of the market cost of any executive who might have to be replaced. The Compensation Committee also periodically reviews various publicly available sources of compensation data. We believe that our executive compensation is generally lower than executive compensation paid by companies of similar size and in similar fields for comparable positions as our executives are currently in the 25% range of our peer group with respect to total compensation. The Company plans to move to the 50% range of its peer group, principally through the use of short-term cash incentives, in order to close the compensation gap with our peers and be able to retain and attract qualified management talent.

 

In fiscal 2020 consistent with the prior year, the Company increased the percentage of salary cash incentive as a strategy to narrow the 25% to 50% gap. The CEO’s percentage increased from 40% at target to 80% and from 60% at maximum to 100%. The CFO’s percentage increased from 40% at target to 55% and from 60% at maximum to 75%. The other Vice Presidents’ percentage increased from 40% at target to 50% and from 60% at maximum to 70%.

 

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The five elements of our executive compensation program are:

 

 

Base salary

 

Cash incentive compensation

 

Long-term incentives

 

Retirement benefits

 

Other compensation

 

These components are intended to encourage and achieve the purpose and philosophies of our compensation programs set forth above. We have not adopted formal policies for allocation between long- and short-term, and cash- and non-cash, compensation. We seek a mix of all elements of compensation to achieve a total compensation package that is commensurate with the NEO’s position, responsibility and performance relative to his peers in other companies of similar size and in similar fields.

 

At the 2017 annual meeting of stockholders, the stockholders approved, on a non-binding, advisory basis, the compensation of the Company’s NEOs. In addition, the stockholders of the Company also voted in favor of holding future advisory votes on the compensation paid to the Company’s NEOs every three years. The Compensation Committee considered the results of this vote and determined that, consistent with the majority vote of the Company’s stockholders, the Company will hold future non-binding stockholder advisory votes on the compensation of the Company’s NEOs every three years at the Company’s annual meeting of stockholders. Accordingly, the Company will seek a non-binding, advisory vote on executive compensation from its stockholders at the Annual Meeting and will next seek a non-binding, advisory vote on executive compensation from its stockholders at the 2023 annual meeting of stockholders.

 

Base Salary

 

Base salary is the fixed component of the NEO’s cash compensation and should reflect the individual’s position and scope of responsibility, taking into consideration experience, tenure, long-term potential and the ability to assume additional responsibility.

 

The Compensation Committee reviews base salaries for the NEOs in June of each year or in connection with promotions. The following chart represents the base salaries for fiscal 2020 of our NEOs. The base salary of our NEOs did not increase from fiscal 2019 to fiscal 2020.

 

As part of the response to the COVID-19 pandemic’s impact on global sales for Starrett, all NEOs, in addition to all senior management of the company, accepted a 20% reduction of base salary, as reflected in the table below:

 

Named executive officer   Fiscal 2020 base salary    

Covid-Related Temporary

Base Salary

(As of April 1, 2020)

 

Douglas A. Starrett

  $425,000     $340,000  

John C. Tripp

  $280,000     $224,000  

Emerson T. Leme

  $240,000     $192,000  

 

 

Cash Incentive Compensation

 

Annual cash incentive compensation is variable pay for the NEOs to reward them for overall Company and individual performance in the key areas of sales, operational, and financial results. This component of incentive compensation is important to attract highly motivated and skilled executives.

 

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For fiscal 2020, a Cash Bonus Plan (the “FY20 Cash Bonus Plan”) was reviewed and recommended by the Compensation Committee and approved by the Board of Directors. The bonus targets under the FY20 Cash Bonus Plan are established based upon a fully vetted budget process for all divisions and include specific targets for consolidated sales and operating profit. Realization of a 4% minimum income before tax must be achieved before any cash bonuses for the named executive officers are awarded. Once the consolidated 4% minimum income before tax is achieved, an NEO earns a percentage of salary based upon the percentage level of achievement against the three financial targets based on Company sales, operating profit and cash flow. The table below shows the threshold, target and maximum percentage of base pay opportunity for each of our NEOs, for the FY20 Cash Bonus Plan:

 

   

Fiscal 2020 Cash Bonus Plan (% of Base Salary)

 

Title

 

Threshold

   

Target

   

Max

 

CEO

  15 %   80 %   100 %

CFO

  15 %   55 %   75 %

VP North America

  15 %   50 %   70 %

 

 

The Company experienced the negative financial impact of COVID-19 in January and that impact accelerated in March. As a result of the significant decline in revenues and the corresponding decline in operating income and cash, no cash bonuses were earned by our NEOs as the result of fiscal 2020.

 

In fiscal 2021, cash generation will remain a priority as the Company recovers from the pandemic. As such, as recommended by the Compensation Committee and approved by the Board of Directors, the 4% minimum income before tax threshold is waived and the cash bonus target will be reduced to 20% of base salary for all NEOs upon achievement against the three financial targets based on Company sales, operating profit and cash flow.

 

Long Term Equity Incentives

 

The Board of Directors adopted the Company’s 2012 Long-Term Incentive Plan, which was approved by the stockholders at the October 17, 2012 annual meeting and under which equity-based and cash-based awards may be granted to employees, directors, consultants and advisors of the Company. On October 18, 2017, the stockholders reapproved the material terms of the performance goals under this plan. During fiscal 2020, we granted awards to our NEOs under the 2012 Long-Term Incentive Plan that were intended to link executive compensation and stockholder value, as well as to encourage retention; generally, the awards were not eligible to vest unless Company financial performance metrics were achieved and the executive would forfeit any earned but unvested portion of the award if he was not employed by the Company at the time of vesting. Radford, in conducting a competitive review of executive compensation in 2019, determined the NEOs’ total compensation continued to be at the 25th percentile of its peer group. Radford also recommended a larger percentage of restricted stock units be based upon performance tied to annual financial goals.

 

The Board of Directors approved the following grants of performance-based restricted stock units to each of our NEOs. On September 4, 2019, 20,500 restricted stock units were granted to Mr. Starrett; 8,000 restricted stock units were granted to Mr. Leme. In addition, 8,000 restricted stock units were granted to Mr. Tripp on December 4, 2019. The restricted stock units awarded in fiscal year 2020 become eligible to vest as to 50% of the award in the current fiscal year and 50% in the subsequent fiscal year based upon the Company achieving 100% of its current year operating income target.

 

None of the restricted stock units granted on September 4, 2019 and December 4, 2019 were earned as a result of the Company’s COVID-19 impacted financial results. However, based on the executive leadership team’s proactive and prompt response to the pandemic that protected our global associates, the Company, and cash balances, the Compensation Committee recommended discretionary equity awards for fiscal 2020. The awards were as follows: Mr. Starrett – 39,000 shares, Mr. Leme, and Mr. Tripp – 15,000 shares. These awards will be delivered as follows: 67% as fully vested shares and 33% vesting after one year. These awards were approved by the Board of Directors on September 2, 2020.

 

There are also other opportunities for our employees, including our NEOs, to invest in Company stock through the 401(k) Plan, the Company’s 1952 Employees’ Stock Purchase Plan and the 2017 Employee Stock Purchase Plan.

 

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Other Compensation

 

The Company strives to maintain a reasonable relationship between executive pay and average non-executive employee pay. The Company does not provide its executives with perks such as club memberships or access to company-paid professional services that are not uniformly available to non-executive officer employees of the Company.

 

Outstanding Equity Awards as of Fiscal-Year End

 

The following table summarizes the number of shares of common stock underlying outstanding equity incentive plan awards for each NEO as of June 30, 2020:

 

Name

Number of

Securities

Underlying

Unexercised

Stock Options

(Exercisable)

(#)(a)

Number of

Securities

Underlying

Unexercised

Stock Options (Unexercisable)

(#)(a)

Option

Exercise

Price

($)(b)

Option

Expiration

Date

(c)

Number of

Shares or

Units of

Performance-

Based Vested

Stock That Have
Not Vested

(#)(d)

Market Value

of Shares

or Units of

Performance-

Based Vested

Stock That Have

Not Vested

($)(e)

Douglas A. Starrett

7,500

-

10.08

12/17/2022

10,500

$35,595

 

 


(a) Stock options vest ratably over a three-year period commencing on the grant date of December 17, 2012.

(b) Represents the stock price (fair market value) on the grant date of December 17, 2012.

(c) Stock options expire, if not exercised, on the ten-year anniversary of the grant.

(d)  Performance based restricted stock units granted to Mr. Starrett on September 5, 2018 vest over two years. 10,500 shares vested September 5, 2019 and the number of shares (10,500) included in this column vested on September 5, 2020.

(e) Represents market value as June 30, 2020 at $3.39/share

 

Retirement Benefits

 

The Compensation Committee and Company management believe that it is important to provide retirement benefits to employees who reach retirement age. Company retirement benefits consist of the following:

 

 

The 401(k) Plan. The Company’s 401(k) Plan is a defined contribution plan intended to be qualified under the Internal Revenue Code. Our NEOs are eligible to participate in the 401(k) plan on the same terms as our other employees. The Company enhanced the employer contribution to the 401(k) Plan effective January 1, 2017 in conjunction with freezing the Retirement Plan, effective December 31, 2016. The enhancement increased the Company’s total contribution across all eligible participants by approximately $1.0 million annually.

 

 

The Retirement Plan. The Company’s Retirement Plan is a defined benefit pension plan intended to be qualified under the Internal Revenue Code. Participants in this plan are generally eligible to retire with an unreduced pension benefit at age 65.Mr. Starrett participates in the Retirement Plan on the same basis as our other employees with similar years of service at the Company. The Company froze the Retirement Plan effective December 31, 2016. Consequently, the Plan will be closed to new participants and current participants will no longer earn additional benefits after December 31, 2016.

 

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The ESOPs. The Company’s 1984 Employee Stock Ownership Plan (the “1984 ESOP”) and the 2013 Employee Stock Ownership Plan (the “2013 ESOP” and collectively with the 1984 ESOP, the “ESOPs”) are employee stock ownership plans intended to be qualified under the Internal Revenue Code. An employee’s vested balance, if any, under the ESOPs will generally be distributed at the same time that the employee is eligible to begin receiving a benefit under the Retirement Plan. Our NEOs participate in the ESOPs on the same terms as our other employees with similar years of service at the Company.

 

 

The Supplemental Executive Retirement Plan (the “SERP”). Certain members of management and highly compensated employees, including the Mr. Starrett, participate in the SERP. The SERP provides supplemental retirement benefits out of the general assets of the Company that are otherwise denied to participants due to legislation limiting the amount of compensation that may be taken into account in computing the benefit payable under the Company’s Retirement Plan.

 

Hedging Policy

 

We do not have a hedging policy at this time.

 

Pension Benefits

 

The Company’s Retirement Plan covers all eligible employees who have at least one year of service and have attained age 21. An “eligible employee” is an employee of the Company (or an affiliate of the Company that participates in the Plan) other than a union employee, leased employee, independent contractor, or, except as determined by the Company, a nonresident alien. Benefits under the Retirement Plan are determined by reducing a formula amount calculated under the Retirement Plan by 90% of the annuity value of the employee’s vested account balance, if any, under the 1984 ESOP. See “Employee Stock Ownership and 401(k) Savings Plans” below. At no time will the benefit of any participant under the Retirement Plan be less than such participant’s benefits, if any, under the Retirement Plan before establishment of the 1984 ESOP. The formula amount calculated under the Retirement Plan is based on the sum of 1.25% of the employee’s average base salary up to the employee’s Social Security covered compensation plus 1.70% of the employee’s average base salary over covered compensation, times the number of years of credited service up to but not exceeding 35 years. An employee’s average base salary is his average base salary for the five consecutive highest paid of his last ten years of employment.

 

Pursuant to provisions of the Internal Revenue Code of 1986, as amended, in general, annual compensation that may be taken into account in computing a participant’s benefit under the Retirement Plan is limited (to $280,000 for the plan year beginning on July 1, 2019) and annual annuity benefits may not exceed a specified dollar limit (currently $225,000). The Company has established the Supplemental Executive Retirement Plan (“SERP”) to provide on an unfunded basis out of the general assets of the Company benefits earned under the Retirement Plan formula that are in excess of Internal Revenue Code limits. At June 30, 2020, the retirement benefits are outlined in the Pension Benefits table below.

 

The Company froze the pension plan as of December 31, 2016 and no additional benefits accrued after that date.

 

 Employee Stock Ownership and 401(k) Savings Plans

 

The Company also maintains the 1984 ESOP, established in 1984, a 401(k) Savings Plan, established in 1986, and the 2013 ESOP, established in fiscal 2013. All plans are designed to supplement retirement benefits provided under the Company’s Retirement Plan and to enable employees to share in the growth of the Company.

         

The 1984 ESOP covers eligible domestic employees who have at least one year of service and have attained age 21. However, as of June 30, 1994, all of the shares of Common Stock in the 1984 ESOP were allocated to participant accounts, and future 1984 ESOP contributions by the Company (if any) are discretionary. Employees who retire, die, or otherwise terminate employment will be entitled to receive their vested account balance, if any, under the 1984 ESOP, which will generally be distributed at the same time that the employee is eligible to begin receiving a benefit under the Retirement Plan. An amount equal to 90% of an employee’s 1984 ESOP account balance, if any, expressed in annuity form, will be used to offset the employee’s benefit under the Retirement Plan. See “Pension Benefits” above.  

 

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The 2013 ESOP covers eligible domestic employees who have at least one year of service and have attained age 21. The 2013 ESOP plan year ends on June 30. The plan is funded exclusively by Company contributions, and employees will neither be required nor permitted to make contributions to the plan. Each year, the Company will determine the extent of its contribution to the plan. For fiscal 2013, the Company made a contribution to the plan totaling $773,000, equal to 2% of each eligible participant’s annual compensation. Participants will become vested in the plan over a six-year period at 20% per year beginning in the second year. In fiscal 2014, the Company amended the 2013 ESOP plan to provide that participants will become vested over a five-year period at 20% per year beginning in the first year, rather than the second year. There were no contributions to the 2013 ESOP in fiscal years 2018, 2019 and 2020.

 

The 401(k) Savings Plan is a savings and salary deferral plan that is intended to qualify for favorable tax treatment under Section 401(a) of the Internal Revenue Code. To be a participant in the 401(k) Savings Plan (a “Participant”), an eligible employee must have completed six months of service and be at least 18 years old. Participants may authorize deferral of a percentage of their compensation through payroll deductions, subject to any limitations imposed by the 401(k) Savings Plan administrator, which the Company will contribute to a trust fund established for the 401(k) Savings Plan (the “401(k) Trust”).

 

The prior Company contribution to the 401(k) Savings Plan for the benefit of each Participant was a matching contribution equal to one-third of the first 5% of the participant’s compensation (as determined under the 401(k) Savings Plan) that the Participant contributes as a salary deferral for each month.

In conjunction with freezing the Defined Benefit Pension Plan on December 31, 2016, the Company amended the 401(k) plan to adopt a safe harbor plan formula with an enhanced matching contribution. Effective January 1, 2017, the Company makes a non-elective employer contribution equal to 3% of compensation (determined under the 401(k) Savings Plan) plus a matching contribution equal to 50% of the first 2% of compensation deferred by the employee.

 

Under current vesting rules, matching contributions vest after three years of service (as determined under the 401(k) Savings Plan) and salary deferral contributions and non-elective employer contributions vest immediately. Participants may, among other investment choices, invest their contributions and matching contributions in the Company stock fund.

 

Assets of the 401(k) Savings Plan, including Company stock, are held in trust. Company stock is held in a unitized fund that includes both Company stock and cash. Counsel Trust Company is the trustee of the 401(k) Trust.

 

A participant’s accounts may be invested (along with any earnings) as the Participant directs in one or more of the investments made available by the Plan administrator, including the Company stock fund. Withdrawals from the 401(k) Savings Plan may only be made upon termination of employment, attainment of age 59 1/2 or in connection with certain provisions of the Plan that permit hardship withdrawals. The 401(k) Savings Plan also permits loans to participants.                

 

For fiscal 2020 and 2019, Company safe harbor and matching contributions for all executive officers of the Company as a group were $37,334 and $33,940, respectively, and for all employees of the Company as a group were $1,027,124 and $1,122,449, respectively.

 

Potential Payments upon Termination or Change in Control

 

The Company entered into Change in Control Agreements (“CIC Agreements”) with Douglas A. Starrett on January 16, 2009 and with John C. Tripp, and Emerson Leme on January 1, 2020. Under the CIC Agreements, Messrs. Starrett, Tripp, and Leme are entitled to certain payments in connection with a “change in control” (as defined in the CIC Agreements) of the Company. Among other triggering events set forth in the definition, a change in control of the Company will occur if any person is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding voting securities or more than 50% of the total fair market value of the Company. The material terms of the CIC Agreements are summarized below.

 

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CIC Agreement with Douglas A. Starrett

 

Under Mr. Starrett’s CIC Agreement, Mr. Starrett is entitled to certain payments and benefits if there is a change in control of the Company. In the event of a change in control of the Company (and notwithstanding any change in employment with the Company), Mr. Starrett is entitled to:

 

 

A lump sum payment of three times his annual base salary immediately prior to the change in control plus three times the average of his annual bonus for the past three years. As of the date of this Proxy Statement, this amount is estimated to be approximately $1,650,000.

 

 

Full acceleration of his options to purchase stock of the Company (including the right to participate in any stage of a tender offer) and full acceleration of his restricted stock units. Mr. Starrett was granted 21,000 restricted stock units on September 5, 2018 and 20,500 restricted stock units on September 4, 2019. The value of full acceleration as of June 30, 2020 for the stock options and performance-based restricted stock units would be $0 and $105,900, respectively.

 

 

Continued coverage under existing medical, dental, and prescription drug plans for Mr. Starrett and his family for 36 months following the change in control. In the event that coverage under such a plan is not available, the Company will pay the premium costs for COBRA health care continuation coverage for him and his spouse and/or dependents or, to the extent that COBRA coverage is not available, monthly lump sum cash payments equal to the monthly COBRA premiums directly to him for such 36-month period. This is estimated to be approximately $70,000.

 

 

Continued coverage under a director and officer liability policy.

 

 

A “gross up payment” for excise and related taxes in the event that payments or distributions to him under the CIC Agreement would constitute “excess parachute payments” under Section 280G of the Internal Revenue Code. Based on the calculation of the amounts payable to Mr. Starrett as of June 30, 2020, he would be entitled to a gross-up payment as of such date equal to $731,357.

 

 

In the event that he is terminated for any reason within 36 months of a change in control, a lump sum payment equal to the value of any additional benefits that would have accrued to him under the Company's retirement plan from the date of his termination if he had remained employed with the Company for 36 months following the change in control. No estimate of this payment is available at this time.

 

 

The Company's covenant to continue in effect all retirement plans in which he is a participant immediately prior to the change in control. No estimate of this payment is available at this time.

 

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CIC Agreements with John C. Tripp and Emerson T. Leme

 

Under their CIC Agreements, Messrs. Tripp and Leme are entitled to certain payments and benefits if (1) there is a change in control of the Company and (2) any of them is terminated in connection with the change in control. In the event of a termination in connection with a change in control, each of Messrs. Tripp and Leme is entitled to:

 

 

A lump sum payment equal to one and one-half times his annual base salary immediately prior to the change in control and one and one-half times the average of his annual bonus over the past three years. For Mr. Tripp, this equates to $420,000 and for Mr. Leme - $397,684.

 

 

Continued coverage under existing medical, dental, and prescription drug plans for him and his family for 18 months following the change in control and termination of employment. In the event that coverage under such a plan is not available, the Company will pay the premium costs for COBRA health care continuation coverage for him and his spouse and/or dependents or, to the extent that COBRA coverage is not available, monthly lump sum cash payments equal to the monthly COBRA premiums directly to him for such 18-month period. This equates to approximately $35,000 each.

 

 

Continued coverage under a director and officer liability policy.

 

 

A “gross up payment” for excise and related taxes in the event that payments or distributions to him under the CIC Agreement would constitute “excess parachute payments” under Section 280G of the Internal Revenue Code.

 

 

In the event he is terminated for any reason within 18 months of a change in control, a lump sum payment equal to any additional benefits that would have accrued to him under the Company's retirement plan from the date of his termination if he had remained employed with the Company for 18 months following the change in control. No estimate of this payment is available at this time.

 

 

In the event that his employment is not terminated following a change in control, the Company's covenant to continue in effect all retirement plans in which he is a participant immediately prior to a change in control. No estimate of the value of this benefit is available at this time.

 

In the event of a change in control of the Company (and notwithstanding any change in employment with the Company), Messrs. Tripp and Leme are entitled to full acceleration of their options to purchase stock of the Company (including the right to participate in any stage of a tender offer) and full acceleration of their time-based vested restricted stock units.

 

20

 

Summary of Director Compensation

 

 Our non-management directors in fiscal 2020 received:

 

 

Annual cash retainers ranging from $35,813 to $50,000.

 

Reimbursement for Company-related out-of-pocket expenses, including travel expenses.

 

DIRECTOR COMPENSATION FOR FISCAL 2020

 

The table below summarizes the compensation earned by our directors/and or paid by the Company to our directors for fiscal 2020.  

 

Name

Fees Earned

or Paid in

Cash

(Meeting

Fees and

Retainers)

($)(a)

Stock

Awards

($)(b)

Total

($)

Richard B. Kennedy

40,000

22,080

62,080

Terry A. Piper(c)

40,000

22,080

62,080

David A. Lemoine

50,000

22,080

72,080

Thomas J. Riordan

47,750

22,080

69,830

Russell D. Carreker

40,000

22,080

62,080

Christopher C. Gahagan

35,813

22,080

57,893

 

(a) This column represents retainer fees paid for services as a director during the fiscal year ended June 30, 2020. Each of the Company’s non-management directors is paid a retention fee of $40,000. Each non-management director who serves as a committee chairperson receives an additional amount for his service as a chairperson. In addition to each of their retention fees, Mr. Riordan received $7,750 for serving as corporate governance and nominating committee chair, Mr. Lemoine received $10,000 for serving as audit committee chair and Mr. Gahagan received $5,813 for serving as compensation committee chair. Mr. Gahagan declined one quarterly payment of $11,937 as a response to the Covid-19 pandemic challenges being faced by the company.

(b) This column represents the grant date fair value of restricted stock units granted in fiscal 2020. Mr. Kennedy, Mr. Piper, Mr. Lemoine, Mr. Riordan, Mr. Carreker and Mr. Gahagan all received $22,080 in stock awards. Mr. Kennedy and Mr. Lemoine each held restricted stock units with respect to 4,833 shares that had not yet vested as of June 30, 2020. Messrs. Riordan, Carreker and Gahagan each held restricted stock units with respect to 5,167 shares that had not vested as of June 30, 2020.

(c) Upon his retirement from the Board of Directors, effective June 30, 2020, all of Mr. Piper’s unvested shares were accelerated.


Employees’ Stock Purchase Plans

 

The 2017 Employees’ Stock Purchase Plan (the “2017 Plan”), which was approved by the stockholders on October 18, 2017, provides eligible employees with the opportunity to acquire an interest in the future of the Company by purchasing its Common Stock at an option price. The options may cover shares of Class A or Class B Stock as the Company shall determine. The principal difference between the Class A Stock and the Class B Stock is their respective voting rights. Class B Stock is otherwise identical to the Class A Stock except (i) that it is generally non-transferable except to lineal descendants, (ii) cannot receive more dividends per share than the Class A Stock and (iii) can be converted to Class A Stock at any time. Under the 2017 Plan, the option price to purchase shares of the Company’s Common Stock is the lower of 85% of the market price on the date of grant or 85% of the market price on the date of exercise (two years from the date of grant). 

 

The 2017 Plan gives employees an opportunity to participate in the success of the Company and allows present employee stockholders to invest further if they so desire. The Company’s management feels that a further financial interest of this type on the part of those who work for the Company and its subsidiaries gives it an added edge that makes a difference in Company performance. At June 30, 2020, 217 employees were eligible to participate in the 2017 Plan. Based on the closing market price for the Company’s Common Stock on June 30, 2020 of $3.21 per share, the aggregate market value of the 500,000 shares of Common Stock issuable under the 2017 Plan would be approximately $1,600,000.

 

21

 

I.     Security Ownership of Certain Owners and Management  

 

 

1.

Security Ownership of Management

 

The following table and accompanying footnotes set forth certain information about the beneficial ownership of the Company’s Common Stock as of September 4,, 2020 by the directors, the named executive officers and all directors and executive officers as a group.

 

Name of Beneficial Owner   Title of Class
of Common
Stock
  Amount and Nature of
Beneficial Ownership
1
  Percent of Class

Douglas A. Starrett2

 

Class A

 

90,407

 

1.43%

 

 

Class B

 

55,349

 

8.40%

  

 

  

 

  

 

  

Thomas J. Riordan

 

Class A

 

38,334

 

*

   

Class B

 

-

   
             

Russell D. Carreker3

 

Class A

 

2,832

 

*

   

Class B

 

4,853

   
             

Richard B. Kennedy4

 

Class A

 

4,099

 

*

 

 

Class B

 

  

 

*

  

 

  

 

  

 

  

Terry A. Piper5

 

Class A

 

13,800

 

*

 

 

Class B

 

  

 

*

  

 

  

 

  

 

  

David A. Lemoine

 

Class A

 

7,432

 

*

  

 

Class B

 

  

 

  

             

Christopher C. Gahagan

 

Class A

 

2,832

 

*

   

Class B

       
             

John C. Tripp

 

Class A

 

10,000

 

*

   

Class B

       
             

Emerson T. Leme

 

Class A

 

1,667

 

*

   

Class B

       
             

All Directors and Executive Officers (as a Group 9 persons)

 

Class A

 

159,736

 

2.52%

 

 

Class B

 

60,202

 

9.14%

 

 


 

*

Less than one percent (1%)

 

1

Shares are held with sole voting and investment power except as indicated below.

 

2

Includes 238 Class A and 1,150 Class B shares held with shared voting and investment power and 8,104 Class A and 49,154 Class B shares held with sole voting power only. Does not include shares of Common Stock held by Mr. Starrett as Trustee under the 1984 ESOP except for 6,111 Class A and 1,545 Class B shares allocated to Mr. Starrett’s 1984 ESOP account. See Note 5 under “Security Ownership of Certain Beneficial Owners” below.

 

3

Includes 3,528 Class B shares held with sole voting and investment power and 2,832 Class A shares and 1,325 Class B shares with shared voting power only.

 

4

Includes 125 Class A shares with shared voting power, and 3,974 shares with sole voting power.

 

5

Includes 200 Class A shares with shared voting power, and 13,600 shares with sole voting power.

 

22

 

2.

Security Ownership of Certain Beneficial Owners

 

The following table and accompanying footnotes set forth the persons or groups known by the Company to be beneficial owners of more than 5% of the Company’s Common Stock as of July 31, 2020.  

 

Name and Address

of Beneficial Owners

 

Title of Class of
Common Stock
  

 

Amount and 

Nature of
Beneficial Ownership
  

 

Percent of Class 

Dimensional Place1

 

Class A

 

426,542

 

6.74%

6300 Bee Cave Road

 

 

 

 

 

 

Building One

 

Class B

 

-

 

*

Austin, TX 78746

           

  

 

  

 

  

 

  

Renaissance Technologies LLC2

 

Class A

 

532,076

 

8.41%

800 Third Ave.

           

New York, NY 10022

 

Class B

 

-

 

*

             

Morgan Stanley3

 

Class A

 

407,976

 

6.45%

1585 Broadway

           

New York, NY 10036

 

Class B

 

-

 

*

             

Mid-Atlantic Trust Company

 

Class A

 

231,357

 

3.66%

The Times Building

 

 

 

 

 

 

336 Fourth Avenue, Suite 5

Pittsburgh, PA 15222

 

Class B

 

13,770

 

2.09%

  

 

  

 

  

 

  

Phillip J. Cote, Douglas A. Starrett

 

Class A

 

347,652

 

5.49%

and John C. Tripp, as

 

 

 

 

 

 

Trustees under The L.S. Starrett

Company’s Employees Stock Ownership Plan4

c/o The L.S. Starrett Company

121 Crescent Street

Athol, MA 01331

 

Class B

 

88,675

 

13.46%

 


 

*

Less than one percent (1%)

 

1

Share information based on information set forth in the Schedule 13G filed by Dimensional Fund Advisors LP with the SEC on February 12, 2020.

 

2

Share information is based upon information set forth in the Amendment on Schedule 13G filed by Renaissance Technologies LLC with the SEC on February 13, 2020.

 

3

Share information is based upon information set forth in the Amendment on Schedule 13G filed by Morgan Stanley with the SEC on February 13, 2020.

 

4

Phillip J. Cote, Douglas A. Starrett and John C. Tripp in their capacity as Trustees under the ESOPs (the “ESOPs Trustees”) hold the shares with sole dispositive power subject to the terms of the ESOPs. The ESOPs Trustees disclaim beneficial ownership of the ESOPs shares except with respect to their own vested shares in the ESOPs.

 

23

  

II. RELATIONSHIP WITH INDEPENDENT AUDITORS

 

During the fiscal year ended June 30, 2020, Grant Thornton LLP was engaged to perform the annual audit. Representatives of Grant Thornton LLP are expected to be present at the Annual Meeting and will have the opportunity to make a statement if they desire to do so. They will also be available to respond to appropriate questions.

 

The Audit Committee has appointed Grant Thornton LLP as the independent registered public accounting firm of the Company for fiscal 2021 and intends to submit such recommendation to the Company’s stockholders for ratification (but not for approval) at the Annual Meeting.

 

III. GENERAL

A.

Solicitation and Voting

 

In case any person or persons named herein for election as a director should not be available for election at the Annual Meeting, proxies in the enclosed form (in the absence of express contrary instructions) may be voted for a substitute or substitutes as well as for other persons named herein.

 

As of the date of this Proxy Statement, management knows of no business that will be presented to the Annual Meeting that is not referred to in the accompanying notice, other than the approval of the minutes of the last meeting of stockholders, which action will not be construed as approval or disapproval of any of the matters referred to in such minutes.

 

As to other business, if any, that may properly come before the Annual Meeting, it is intended that proxies in the attached form that do not contain specific instructions to the contrary will be voted in respect thereof in accordance with the judgment of the persons voting the proxies.

 

The enclosed proxy is solicited by the Board of Directors of the Company. The cost of solicitation will be borne by the Company. Such solicitation will be made by mail and may also be made by the Company’s officers and employees personally or by telephone, facsimile, courier or e-mail. The Company will, on request, reimburse brokers, custodians and nominees for their expenses in sending proxies and proxy material to beneficial owners. A proxy that is executed but that does not specify a vote for, against or an abstention will be voted in accordance with the recommendation of the Board of Directors contained herein.

 

Consistent with Massachusetts law and under the Company’s By-laws, a majority of the shares entitled to be cast on a particular matter, present at the meeting, or represented by proxy, constitutes a quorum as to such matter. Votes cast by proxy or at the Annual Meeting will be counted by persons appointed by the Company to act as election tellers for the Annual Meeting. For Proposal No. 1, the three nominees for election as directors at the Annual Meeting who receive the greatest number of votes properly cast for the election of directors will be elected directors. For Proposal No. 2, the non-binding advisory vote on the compensation of named executive officers for the fiscal year ended June 30, 2020 requires the affirmative vote of a majority of the votes properly cast. Proposal No. 3, the ratification of Grant Thornton LLP as the Company’s independent auditor, requires the affirmative vote of a majority of the votes properly cast. However, a vote in favor or against the ratification of Grant Thornton LLP as the Company’s independent auditor is not binding on the Board of Directors.

 

24

 

 Abstentions and broker non-votes are counted as present or represented for purposes of determining a quorum for the Annual Meeting. A broker non-vote is a proxy from a brokerage firm or other nominee indicating that such person has not received instructions from the beneficial owner on a particular matter with respect to which the brokerage firm or other nominee does not have discretionary voting power. Shares held by a brokerage firm or other nominee that are not voted on any matter at the meeting are not included in determining whether a quorum is present.

 

Under the rules and regulations of the New York Stock Exchange (the “NYSE rules”), the proposal to ratify the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for fiscal 2021 is considered a “routine” matter, which means that brokerage firms or other nominees may vote in their discretion on this matter on behalf of clients who have not furnished voting instructions. However, the election of directors and the non-binding advisory vote on the compensation of named executive officers are “non-routine” matters under the NYSE rules, which means brokerage firms or other nominees that have not received voting instructions from their clients on these matters may not vote on these proposals.

 

With respect to Proposal 1, the election of directors, only “for” and “withhold” votes may be cast. Votes that are withheld will have the same effect as an abstention and will not count as a vote for or against a director because directors are elected by plurality voting. Broker non-votes will have no effect on the outcome of this proposal. With respect to Proposal 2, the non-binding advisory vote on the compensation of named executive officers, only “for,” “against” and “abstain” votes may be cast and abstentions and broker non-votes will have no direct effect on the outcome of the proposal. With respect to Proposal 3, the ratification of the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for fiscal 2021, only “for,” “against” and “abstain” votes may be cast. Abstentions and broker non-votes will have no effect on the outcome of Proposal 3. Brokerage firms and other nominees generally have discretionary authority to vote on Proposal 3; thus, we do not expect any broker non-votes on Proposal 3.

 

To attend the virtual meeting online, please refer to the instructions below in order to access the live webcast. You will be able to vote your shares electronically if you attend the Annual Meeting via webcast.

 

If you were a registered stockholder as of September 4, 2020, the record date for our Annual Meeting, you may access the live webcast and participate in the virtual meeting by visiting www.meetingcenter.io/267479413 and [entering the 15-digit control number found on your proxy card]. The meeting password is SCX2020. The webcast will begin promptly at 8:00 a.m. We encourage you to access the meeting prior to the start time. Online check-in will begin at 7:45 a.m., and you should allow ample time for the check-in procedures. If during the check-in time or during the Annual Meeting you have technical difficulties click on the “Help” button in the upper right corner.

 

If you hold your shares through an intermediary, such as a bank or broker, you must register in advance to attend the Annual Meeting virtually online. To register to attend the Annual Meeting online by webcast you must submit proof of your proxy power (legal proxy) reflecting your Company holdings along with your name and email address to Computershare. Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, on November 1, 2020. You will receive a confirmation of your registration by email after we receive your registration materials. Requests for registration should be directed to us at the following:

 

By email:

Forward the email from your broker, or attach an image of your legal proxy, to legalproxy@computershare.com.

 

By mail:

Computershare

The L.S. Starrett Company Legal Proxy

P.O. Box 43001

Providence, RI 02940-3001

 

25

 

B.    Communication with the Board of Directors

 

Stockholders and other interested parties can communicate directly with the Board by writing to: Board of Directors, c/o Clerk, The L.S. Starrett Company, 121 Crescent Street, Athol, Massachusetts 01331. The Company will forward such communications to the Board at, or prior to, the next meeting of the Board.

 

Stockholders and other interested parties wishing to communicate only with the Company’s independent directors (i.e., non-management directors) can address their communications to “Independent Directors, c/o Corporate Governance and Nominating Committee” at the same address as above. These communications will be handled by the Corporate Governance and Nominating Committee and forwarded to the independent directors at or prior to the next meeting of the independent directors. The Board or the independent directors will determine, in such group’s sole discretion, the method by which any such communications will be reviewed and considered.

 

Communications to the Board (including to the independent directors) should not exceed 200 words in length, excluding the information required to accompany the communication. All such communications must be accompanied by the following information: (i) a statement of the type and amount of the securities of the Company that the person holds and (ii) the address, telephone number and e-mail address, if any, of the person submitting the communication. Interested parties that do not hold any securities of the Company may omit the information required by item (i) above in communications with the Board.

 

C.     Corporate Governance

 

The Company’s Corporate Governance Policy, and its Policy on Business Conduct and Ethics (“Ethics Policy”) for all directors, officers and employees of the Company, including executive officers, as well as any waivers under the Ethics Policy granted to directors and executive officers, are available on the Company’s web site at www.starrett.com. The Company’s website is included in this Proxy Statement as a textual reference only and the information in the website is not incorporated by reference into this Proxy Statement. Stockholders may also obtain free of charge printed copies of these policies as well as the committee charters for the Company’s Board of Directors by writing to the Clerk of the Company at the Company’s headquarters.

 

D.     Submission of Stockholder Proposals

 

In order to be included in the Company’s proxy materials for presentation at the 2021 annual meeting of stockholders, a stockholder proposal pursuant to Rule 14a-8 as promulgated under the Exchange Act must be received by the Company not less than 120 days prior to October 6, 2021 and must comply with the requirements of Rule 14a-8. Such proposals should be sent to the Board of Directors, c/o Clerk, at 121 Crescent Street, Athol, Massachusetts 01331.

 

Under the Company’s By-laws, stockholders who wish to make a proposal at the 2021 annual meeting of stockholders, other than a stockholder proposal submitted pursuant to Rule 14a-8 as promulgated under the Exchange Act, must notify the Company not less than 120 days nor more than 150 days prior to the meeting; provided that in the event that less than 130 days’ notice or prior public disclosure of the date of meeting is given or made to stockholders, the notice must be received no later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure is made. If a stockholder who wishes to present a proposal fails to notify the Company in accordance with the procedure set forth in the Company’s By-laws, the stockholder would not be entitled to present the proposal at the meeting. If, however, notwithstanding the requirements of the Company’s By-laws, the proposal is brought before the meeting, then under the SEC’s proxy rules the proxies solicited by management with respect to the meeting will confer discretionary voting authority with respect to the stockholder’s proposal on the persons selected by management to vote the proxies. If a stockholder makes a timely notification, the proxies may still exercise discretionary voting authority under circumstances consistent with the SEC’s proxy rules.

 

26

 

E.     Additional Information

  

The Company makes available through its web site, www.starrett.com, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed pursuant to Section 13(a) and 15(d) of the Exchange Act.

 

IN ORDER THAT THE PRESENCE OF A QUORUM MAY BE ASSURED IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS ARE URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD IN THE STAMPED ENVELOPE ADDRESSED TO COMPUTERSHARE, INC., THE COMPANY’S TRANSFER AGENT, OR TO VOTE BY TELEPHONE OR OVER THE INTERNET AS PROVIDED ON THE ENCLOSED INSTRUCTIONS. Stockholders who execute proxies, but attend the Annual Meeting in person, may withdraw their proxies and vote directly if they prefer. The Company’s transfer agent will assist the Company in tabulating the stockholder vote.

 

27

 

PROPOSAL NO. 1

 

ELECTION OF DIRECTORS

 

The election of three directors is proposed by the Board of Directors, each to hold office for a term of three years and until his successor is chosen and qualified. The Company's Board of Directors proposes for election: Thomas J. Riordan, Russell D. Carreker and Christopher C. Gahagan. All of the nominees are current members of the Company's Board of Directors.

 

In accordance with the Board of Directors’ recommendation, the proxy holders will vote the shares of the Company's Common Stock covered by the respective proxies for the election of each of the three director nominees, unless the stockholder gives instructions to the contrary. If, for any reason, any of the director nominees become unavailable for election, the proxy holders may exercise discretion to vote for substitute nominees proposed by the Board of Directors. Each of the director nominees has indicated that he will be able to serve if elected and has agreed to do so.

 

For details regarding qualifications, experience and specific skills of each of our director nominees, please see “I. Election of Directors” included elsewhere in this Proxy Statement.

 

The Board of Directors recommends a vote FOR the election of ALL the nominated directors.

 

28

 

PROPOSAL NO. 2

 

ADVISORY VOTE ON EXECUTIVE COMPENSATION

 

 

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the Company stockholders are entitled to cast an advisory vote to approve the compensation of the Company’s named executive officers, as disclosed in this proxy statement. Pursuant to the Dodd-Frank Act, the stockholder vote is an advisory vote only and is not binding on the Company or the Board. Stockholders have elected to conduct this vote every three years.

 

The Executive and Director Compensation included in this Proxy Statement describes our executive compensation program and the compensation of our named executive officers for fiscal 2020.

 

As described in more detail in the Executive and Director Compensation we have a total compensation approach that is based on the following stated philosophies:

 

 

Pay for performance and reward Company and individual achievement;

 

Strive to achieve compensation that is competitive with the companies that compete with us for talent; and

 

Be fair and consistent.

 

The Board recommends that stockholders vote to approve, on an advisory basis, this proposal. We believe that the compensation of the Company’s named executive officers is reasonable, competitive and strongly focused on pay for performance principles. We also believe that the policies and procedures articulated in this Proxy Statement are effective in achieving the Company's goals and that the executive compensation reported in this Proxy Statement was appropriate and aligned with fiscal 2020 results. Please refer to Executive and Director Compensation for a full description of our executive compensation practices and programs.

 

The Board is asking stockholders to cast a non-binding, advisory vote indicating their approval of compensation the Company’s named executive officers by voting FOR the following resolution:

 

RESOLVED, that the stockholders of The L. S. Starrett Company APPROVE, on a non-binding, advisory basis, the compensation of its named executive officers set forth in the Executive and Director Compensation in the proxy statement for the Company’s 2020 Annual Meeting of Stockholders.

 

Because this proposal asks for a non-binding, advisory vote, this proposal is not binding upon the Company or the Board. However, the Board values the opinions expressed by its stockholders in this advisory vote, and the Compensation Committee, which is responsible for overseeing and administering our executive compensation programs, will consider the outcome of the vote when determining future compensation arrangements for its named executive officers.

 

 

 

The Board of Directors recommends a vote FOR the advisory approval of executive compensation.
 

29

 

PROPOSAL NO. 3

 

RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR FISCAL YEAR 2021

 

The Audit Committee of the Board of Directors has appointed Grant Thornton LLP to serve as the Company’s independent registered public accountants for fiscal year 2021. The Audit Committee and the Board of Directors seek to have the stockholders ratify the Audit Committee’s appointment. The Company expects representatives of Grant Thornton LLP will be present at the Annual Meeting and will have the opportunity to make a statement, if they desire to do so, and to respond to appropriate questions. If the appointment of Grant Thornton LLP is not ratified by the stockholders, the Audit Committee may appoint another independent registered public accounting firm or may decide to maintain its appointment of Grant Thornton LLP.

 

The Board of Directors recommends a vote FOR the ratification of the appointment of Grant Thornton LLP as independent registered public accountants for the fiscal year 2021.

 

30

 

 

31

 

 

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