Proxy
III. APPROVAL OF THE L.S. STARRETT COMPANY 2012 LONG-TERM INCENTIVE PLAN On September 5, 2012, the Board adopted The L.S. Starrett Company 2012 Long-Term Incentive Plan (the
"Plan"), subject to stockholder approval. The purpose of the Plan is to advance the interests of the Company by providing for the grant to eligible
participants of stock-based and other incentive awards. The Plan is intended to accomplish these goals by enabling the Company to grant awards in the form of options, stock appreciation rights, restricted stock, unrestricted stock, performance awards, cash awards and stock units including restricted stock units or combinations thereof, all as more fully described below. The Plan is attached to this Proxy Statement as Exhibit II.
A. Overview The Plan will be administered by the Compensation Committee (the "Committee") of the Board. The term
"administrator" is used below to refer to the person (the Committee and its delegates) charged with administering the Plan. Under the Plan, the administrator may grant stock options, stock appreciation rights, restricted stock, unrestricted stock, performance awards (in cash or stock) and stock units, including restricted stock units, or combinations thereof, and may waive terms and conditions of any award. A total of 500,000 shares of Class A Stock may be issued under the Plan, as adjusted for any stock dividend, stock split or combination of shares (including a reverse stock split), recapitalization or other change in the Company's capital structure. Key employees, directors, consultants and advisors of the Company are eligible to receive awards under the Plan.
Section 162(m) of the Internal Revenue Code (the "Code") places annual limitations on the deductibility by
public companies of compensation in excess of $1,000,000 paid to any of the chief executive officer and the other three most highly compensated named executive officers (other than our Chief Financial Officer), unless, among other things, the compensation satisfies the requirements of a performance-based compensation exception prescribed in the Code and related regulations. For compensation attributable to stock options and stock appreciation rights to qualify as performance-based, among other requirements, the plan under which the awards are granted must state a maximum number of shares with respect to which options and rights may be granted to an individual during a specified period and must be approved by the Company's stockholders. To comply with these requirements, the Plan provides that the maximum number of shares as to which options may be granted to any participant during any fiscal year will be 150,000 and the maximum number of shares as to which stock appreciation rights may be granted to any participant during any fiscal year is 150,000. Similar rules apply to incentive awards (other than stock options and stock appreciation rights) that are intended to qualify for the performance-based compensation exception. The Plan provides that the maximum number of shares as to which other awards may be granted to any participant during any fiscal year will be 150,000, and the maximum amount payable to any person in any fiscal year as cash awards will be $2 million.
B. Types of Awards. Stock Options. The exercise price of a stock option granted under the Plan shall not be less than 100% of
the fair market value of the Class A Stock at the time of grant. Fair market value shall be determined in accordance with the requirements of Section 422, if applicable, and Section 409A of the Code. Subject to the foregoing, the administrator determines the exercise price of each option granted under the Plan. No stock options may be granted under the Plan after October 16, 2022, but stock options previously granted may extend beyond that date in accordance with their terms. The exercise price may be paid in cash or by check acceptable to the administrator or by other means approved by the administrator.
Stock Units: A stock unit award is denominated in shares of Common Stock and entitles the holder to
receive stock or cash measured by the value of the stock in the future. The delivery of stock or cash under a stock unit may be subject to the satisfaction of performance conditions or other vesting conditions.
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