EX-10.11



 





SEVERANCE AGREEMENT




     THIS SEVERANCE AGREEMENT (the “Agreement”) is made and entered into this
                   day of                   , 2004, between INSTEEL INDUSTRIES, INC. a North
Carolina corporation (the “Company”) and                    (the “Executive”).
Certain capitalized terms used in this Agreement are defined in Section 6.



R E C I T A L S




     The Company acknowledges that Executive has made and is expected to make
significant contributions to the growth and success of the Company. The
Company also acknowledges that Executive is employed on an at-will basis and
that the possibility of a termination without Cause may contribute to
uncertainty on the part of Executive and may result in the departure or
distraction of Executive from his operating responsibilities.



     Outstanding management of the Company is always essential to advancing the
best interests of the Company and its partners and its shareholders. The
Company believes that the objective of securing and retaining outstanding
management will be achieved if the Company’s key management employees are given
assurances against the risk of a termination without Cause so that they will
not be distracted by personal uncertainties and risks created by such
circumstances.



     NOW, THEREFORE, in consideration of the mutual covenants and obligations
herein the Company and Executive agree as follows:



1. Effective Date. The
Effective Date of this Agreement is        
                 
                 
 
, 2004.




2. Term of Agreement. The Term of this Agreement begins on the Effective Date
and ends on the day before the second anniversary of the Effective Date.
Notwithstanding the preceding sentence, the Term of this Agreement shall be
extended for an additional twelve month period, as of each anniversary of the
Effective Date, unless either party gives written notice, at least ninety days
prior to the applicable anniversary of the Effective Date, that the Term of
this Agreement will not be extended.




3. Right to Receive Termination Benefits. Executive shall be entitled to
receive the Termination Benefits described in Section 4 if, during the Term of
this Agreement, Executive’s employment with the Company (and any affiliate of
the Company) is terminated without Cause by the Company (or any affiliate of
the Company). No amounts will be payable under this Agreement unless
Executive’s employment with the Company (and its affiliates) terminates or is
terminated for any reason other than as described in the preceding sentence.




4. Termination Benefits. Upon a termination of Executive’s employment in
accordance with Section 3, Executive shall be entitled to receive the following
Termination Benefits:




     (a) A lump sum payment of any accrued but unpaid salary from the Company
through the date Executive’s employment terminates;



 









 





     (b) A lump sum payment of any bonus that has been earned from the Company
but which remains unpaid as of Executive’s termination of employment;



     (c) A lump sum payment of one and one-half times Executive’s annual base
salary at the rate in effect on the date of Executive’s termination of
employment;



     (d) Outplacement services provided by the firm selected by Executive, the
cost of which will be paid by the Company; provided, however, that the
Company’s obligation under this subsection (d) will not exceed $15,000;



     (e) Reimbursement for any expenses Executive incurred on behalf of the
Company prior to termination of employment to the extent that such expenses are
reimbursable under the Company’s standard reimbursement policies but have not
been reimbursed as of Executive’s termination of employment;



     (f) Except as provided in Section 4(g), continued participation in the
“employee welfare benefit plans” (as defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended) in which Executive
participates immediately prior to Executive’s date of termination on such terms
as are then in effect for eighteen months following the termination of
Executive’s employment with the Company. In the event that the continued
coverage of Executive in any such employee welfare benefit plan is barred by
its terms, the Company shall pay Executive, for eighteen months following
Executive’s termination (or the remainder of the eighteen month period in which
continued coverage is barred), the cash equivalent of the portion of the
insurance premium charged to the Company for Executive’s participation in such
employee welfare benefit plan(s) prior to Executive’s termination plus an
additional amount such that after payment of the income and employment tax
liability on such payment, Executive retains an amount equal to the portion of
the insurance premium charged to the Company for Executive’s participation in
such employee welfare benefit plans prior to Executive’s termination.



     (g) Payment by the Company of the cost or premium for continued coverage
in the Company health plan for a period of eighteen months pursuant to section
4980B of the Internal Revenue Code of 1986, as amended (“COBRA”) following
Executive’s termination (or such lesser period that Executive is entitled to
COBRA coverage);



     (h) All stock options and any other stock-based awards outstanding
immediately prior to Executive’s termination of employment shall immediately
vest and become exercisable by Executive for the remainder of the term provided
for in the agreement evidencing the stock option or award in which such options
or other stock-based awards were granted.



The Termination Benefits described in Section 4(a), 4(b) and 4(c) shall be
payable within ten days of Executive’s termination of employment in accordance
with Section 3. The payment of the Termination Benefits shall be reduced by
amounts required to be withheld for applicable income and employment taxes.




5. Limitation on Parachute Payments. The Termination Benefits and other
payments, distributions and benefits provided by the Company for Executive’s
benefit pursuant to this





 









 








Agreement and under other plans, programs, and agreements may constitute
Parachute Payments (as defined in Section 280G(b) of the Internal Revenue Code
of 1986 (the “Code”) that are subject to the “golden parachute” rules of Code
section 280G and the excise tax of Code section 4999. The Company and
Executive intend to reduce any Parachute Payments (but not any payment,
distribution or other benefit that is not a Parachute Payment) if, and only to
the extent that, a reduction will allow Executive to receive a greater Net
After Tax Amount than he would receive absent a reduction. The remaining
provisions of this subsection describe how that intent will be effectuated.




     (a) The Company will first determine the amount of any Parachute Payments
that are payable to Executive. The Company will also determine the Net After
Tax Amount attributable to total Parachute Payments.



     (b) The Company will next determine the amount of Executive’s Capped
Parachute Payments. Thereafter, the Company will determine the Net After Tax
Amount attributable to Executive’s Capped Parachute Payments.



     (c) Executive shall receive the total Parachute Payments unless the
Company determines that the Capped Parachute Payments will yield Executive a
higher Net After Tax Amount, in which case Executive will receive the Capped
Parachute Payments. If Executive will receive the Capped Parachute Payments,
the total Parachute Payments will be adjusted by first reducing the amount
payable under any other plan, program, or agreement that, by its terms,
requires a reduction to prevent a “golden parachute” payment under Code section
280G; by next reducing Executive’s benefit, if any, under this Agreement, to
the extent it is a Parachute Payment; and thereafter by reducing Parachute
Payments payable under other plans and agreements (with the reductions first
coming from cash benefits and then from noncash benefits). The Company will
notify Executive if it determines that the Parachute Payments must be reduced
to the Capped Parachute Payments and will send Executive a copy of its detailed
calculations supporting that determination. Within ten days after Executive’s
termination, the Company will pay Executive the Termination Benefits described
in Sections 4(a), 4(b) and 4(c) or the reduced Termination Benefits as
determined in this Section 6.



6. Certain Definitions. As used in this Agreement, certain terms have the
definitions set forth below.




     (a) Capped Parachute Payments means the largest amount of Parachute
Payments that may be paid without liability for any excise tax under Code
section 4999.



     (b) Cause means (i) willful, deliberate and continued failure by Executive
(other than for reason of mental or physical illness) to perform his duties as
established by the Board, or fraud or dishonesty in connection with such
duties, in either case, if such conduct has a materially detrimental effect on
the business operations of the Company; (ii) a material breach by Executive of
his fiduciary duties of loyalty or care to the Company; (iii) conviction of any
crime (or upon entering a plea of guilty or nolo contendere to a charge of any
crime) constituting a felony; (iv) misappropriation of the Company’s funds or
property; or (v) willful, flagrant, deliberate and repeated infractions of
material published policies and regulations of the Company of which Executive
has actual knowledge.



 









 





     (c) Net After Tax Amount means the amount of any Parachute Payments or
Capped Parachute Payments, as applicable, net of taxes imposed under Code
sections 1, 3101(b) and 4999 and any state or local income taxes applicable as
in effect on the date of the payment under Section 5 of this Agreement. The
determination of the Net After Tax Amount shall be made using the highest
combined effective rate imposed by the foregoing taxes on income of the same
character as the Parachute Payments or Capped Parachute Payments, as
applicable, in effect for the year for with the determination is made.



7. No Duplication of Benefits. No benefits shall be payable under this
Agreement if Executive becomes entitled to receive benefits under the “Change
in Control Severance Agreement” between Executive and the company dated May 20,
2003 or any successor agreement.




8. Attorneys’ Fees. Executive shall be entitled to reimbursement by the
Company for any attorneys’ fees and any other reasonable expenses that
Executive incurs in enforcing or protecting his rights under this Agreement.
Such reimbursement shall be made within thirty days following final resolution
of the dispute or occurrence giving rise to such fees and expenses, regardless
of whether Executive is deemed the prevailing party in the resolution of the
dispute or occurrence.




9. No Assignment. Except as required by applicable law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or
to execution, attachment, levy or similar process or assignment by operation of
law and any attempt to effect any such action shall be null, void and no
effect.




10. Governing Law. This Agreement shall be governed by the laws of the State
of North Carolina other than its choice of law provisions to the extent that
they would require the application of the laws of a State other than the State
of North Carolina.




11. Successors. The Company shall require any successor to all or
substantially all of the Company’s respective business or assets (whether
direct or indirect, by purchase, merger, consolidation or otherwise), to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such assumption
and agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle Executive to resign from the employ
of the Company and to receive the Termination Benefits and other benefits under
this Agreement in the same amount and on the same terms as Executive would be
entitled to hereunder if his employment was terminated in accordance with
Section 3. References in this Agreement to the “Company” include the Company
as herein before defined and any successor to the Company’s business, assets or
both which assumes and agrees to perform this Agreement by operation of law or
otherwise.




12. Binding Agreement. This Agreement shall inure to the benefit of and be
enforceable by Executive and his personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive dies while any amount remains payable to him





 









 








hereunder, all such amounts shall be paid in accordance with the terms of this
Agreement to Executive’s devisee, legatee or other designee or, if there is
none, to Executive’s estate.




13. No Employment Rights. Nothing in this Agreement confers on Executive any
right to continuance of employment by the Company or any affiliate. Nothing in
this Agreement interferes with the right of the Company or an affiliate to
terminate Executive’s employment at any time for any reason whatsoever, with or
without Cause, subject to the requirements of this Agreement. Nothing in this
Agreement restricts the right of Executive to terminate his employment with the
Company and affiliates at any time for any reason whatsoever, with or without
Good Reason.




14. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which together constitute
one and the same instrument.




15. Entire Agreement. This Agreement expresses the whole and entire agreement
between the parties with reference to the payment of the Termination Benefits
and supersedes and replaces any prior agreement, understanding or arrangement
(whether oral or written) by or between the Company and Executive with respect
to the payment of the Termination Benefits.




16. Notices. All notices, requests and other communications to any party under
this Agreement shall be in writing and shall be given to such party at its
address set forth below or such other address as such party may hereafter
specify for the purpose by notice to the other party:




	 	 	 	 	 
	 

	 	If to Executive:
	 	 
	 
	 	 	 	 
	

	 	If to the Company:
	 	Insteel Industries, Inc.
	

	 	 	 	1373 Boggs Drive
	

	 	 	 	Mt. Airy, North Carolina 27030







Each notice, request or other communication shall be effective if (i) given by
mail, seventy-two hours after such communication is deposited in the mails with
first class postage prepaid, address as aforesaid or (ii) if given by any other
means, when delivered at the address specified in this Section 16.




17. Modification of Agreement. No waiver or modification of this Agreement
shall be valid unless in writing and duly executed by the party to be charged
therewith. No evidence of any waiver or modification shall be offered or
received in evidence at any proceeding, arbitration or litigation between the
parties unless such waiver or modification is in writing, duly and executed.
The parties agree that this Section 16 may not be waived except as herein set
forth.




18. Recitals. The Recitals to this Agreement are incorporated herein and shall
constitute an integral part of this Agreement.




[SIGNATURE PAGE FOLLOWS]




 









 








     IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.



	 	 	 
	 

	 	(Executive)
	 
	 	 
	

	 	

	

	 	INSTEEL INDUSTRIES, INC.
	 
	 	 
	

	 	By:
	

	 	

	

	 	Name
	

	 	Title