Document:

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
	

	 	TitleEX-10.12

 

INSTEEL INDUSTRIES, INC.

RETIREMENT SECURITY AGREEMENT

     THIS RETIREMENT SECURITY AGREEMENT (the “Agreement”), made and entered
into as of the    day of    , 2004 (the “effective date”), by and
between INSTEEL INDUSTRIES, INC., a corporation located in Mount Airy, North
Carolina (the “Corporation”), and    (the “Executive”);

R E C I T A L S:

     The Corporation desires to provide supplemental retirement benefits to the
Executive separate from and in addition to any other retirement benefits to
which the Executive is or may become entitled under any plan of the Corporation
or any other agreement between the Executive and the Corporation.

     NOW, THEREFORE, the parties hereby agree as follows:

     Section 1. Purpose:

     This Agreement is being entered into by the Corporation to provide the
Executive with additional retirement and death benefits for the Executive and
his beneficiaries. The Agreement is not intended to be a qualified retirement
plan under Section 401(a) of the Internal Revenue Code (the “Code”), but it is
intended to constitute an arrangement to provide nonqualified deferred
compensation within the meaning of Section 409A of the Code. This Agreement is
also intended to be a “plan” for purposes of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”), and to be part of an unfunded plan
maintained by the Corporation primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
of the Corporation within the meaning of Sections 201(2), 301(a)(3) and
401(a)(1) of ERISA.

 

 

     Section 2. Supplemental Retirement Benefit:

     2.1 Normal retirement: If the Executive remains in continuous service
with the Corporation from the effective date of this Agreement until he
completes thirty years of continuous service with the Corporation, the
Corporation shall pay a supplemental retirement benefit to the Executive. The
annual amount of the supplemental retirement benefit shall be fifty percent
(50%) of the Executive’s final average compensation. The supplemental
retirement benefit shall be paid in equal installments in accordance with the
Corporation’s regular payroll practices for executives in effect from time to
time, commencing as of the first payroll period ending coincident with or
immediately following the Executive’s normal retirement date, and continuing
for a term certain of fifteen years. For purposes of this Agreement, unless
otherwise indicated by the context:

     (i) “Compensation” means the annual rate of gross base
compensation in effect for the Executive for service with the
Corporation in effect on the last day of the calendar year;
provided, that for the year in which the Executive’s termination
of employment with the Corporation occurs because of retirement or
otherwise, his compensation shall be the annual base rate in
effect on the date of his termination of employment.

     (ii) “Continuous service” means the Executive’s
uninterrupted service in the employment of the Corporation in a
full-time capacity. The Executive’s continuous service shall not
be deemed to be terminated or interrupted by a leave of absence or
sick leave not exceeding one year granted to the Executive by the
Corporation.

     (iii) “Final average compensation” means the average of the
Executive’s compensation as of the last day of each of the five
consecutive calendar years during the ten calendar years preceding
the Executive’s normal retirement date that produces the highest
average. If the Executive has not worked during at least five
calendar years preceding his normal retirement date, the
Executive’s final average compensation means the average of his
compensation for all of the years he worked for the Corporation

     (iv) “Normal retirement date” means the later of the
Executive’s sixty-fifth birthday or the date the Executive
terminates continuous service with the Corporation after
completing thirty years of continuous service.

     (v) “Year of continuous service” means a twelve-month
period of continuous service by the Executive, beginning on the
Executive’s initial date of

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employment with
the Corporation (and each anniversary thereof), and ending on
the day immediately preceding the anniversary of that date.

     2.2 Early retirement: If the Executive completes at least ten years of
continuous service with the Corporation but his continuous service terminates
for reasons other than death, disability or for “cause” (as defined in Section
2.4) after he attains age fifty-five but prior to his normal retirement date,
the Corporation will pay a supplemental early retirement benefit to the
Executive. The annual amount of the supplemental retirement early benefit
shall be fifty percent (50%) of the Executive’s final average compensation
determined as of the date of his termination of service, reduced by 1/360th
for each full calendar month of continuous service less than 360 that the
Executive has completed as of that date. The Executive’s supplemental early
retirement benefit shall be paid in equal installments in accordance with the
Corporation’s regular payroll practices for executives in effect from time to
time, commencing as of the first payroll period ending coincident with or
immediately following the later of the date the Executive attains age
sixty-five or the date the Executive terminates continuous service, and
continuing for a term certain of fifteen years.

     2.3 Disability retirement: If the Executive completes at least ten years
of continuous service with the Corporation but terminates continuous service
prior to his normal retirement date because of disability, the Corporation
shall pay a supplemental disability benefit to the Executive. The amount of
the supplemental disability benefit shall be as follows: (i) during the
period, if any, that the Executive is receiving benefit payments under a
long-term disability insurance plan for executives of the Corporation (the “LTD
plan”), the amount determined under Section 2.2, treating the date of the
Executive’s disability as his early retirement date, provided that such amount,
when added to the Executive’s benefit under the LTD plan, shall not exceed one
hundred percent (100%) of the Executive’s final average compensation determined
as of the date of his termination of service because of disability; and (ii)
during any period that the Executive is not receiving benefit

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payments under the LTD plan, an amount equal to the greater of the Executive’s
benefit determined under Section 2.2 as of the date of his disability or fifty
percent (50%) of the Executive’s final average compensation. The Executive’s
supplemental disability benefit will be paid in equal installments in
accordance with the Corporation’s regular payroll practices for executives in
effect from time to time, commencing as of the first payroll period ending
coincident with or immediately following the date as of which the Executive’s
disability is deemed to have occurred, and continuing for a term certain of ten
years. For this purpose, “disability” shall mean the inability, by reason of
any medically determinable physical or mental impairment that can be expected
to result in death can be expected to last for a continuous period of not less
than twelve months, or (ii) is, by reason of any medically determinable
physical or medical impairment that can be expected to result in death or that
can be expected to last for a continuous period of not less than twelve months,
receiving income replacement benefits for a period of not less than three
months under an accident or health plan covering employees of the Corporation.
The determination of the existence or nonexistence of disability under (i)
above shall be made by the Executive Compensation Committee of the Board of
Directors of the Corporation (the “Board”) pursuant to a medical examination by
a medical doctor selected or approved by the Executive Compensation Committee
and a medical doctor selected or approved by the Executive; provided, that if
the two medical doctors shall not agree that the Executive is or is not
disabled, the two doctors shall select a third medical doctor to examine the
Executive, and such third doctor’s determination of the Executive’s disability
shall be conclusive.

     2.4 Termination of continuous service for “cause”: Notwithstanding any
other provision of this Agreement, if the Corporation terminates the
Executive’s continuous service for “cause,” no benefit shall be paid by the
Corporation pursuant to this Agreement. For this purpose, “cause” means (i)
willful, deliberate and continued failure by the Executive (other than for
reason of mental or physical illness) to perform his duties as established by
the Board, or fraud or

-4-

 

 

dishonesty in connection with such duties, in either case, if such conduct has
a materially detrimental effect on the business operations of the Corporation;
(ii) a material breach by the Executive of his fiduciary duties of loyalty or
care to the Corporation; (iii) the conviction of the Executive 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 Corporation’s funds or
property by the Executive; or (v) willful, flagrant, deliberate and repeated
infractions of material published policies and regulations of the Corporation
of which the Executive has actual knowledge. Whether the Executive’s
termination is for “cause” shall be determined by the Executive Compensation
Committee of the Board.

     Section 3. Death of Executive:

     3.1 Death while in continuous service: If the Executive dies while in
continuous service with the Corporation, the Corporation will pay a
supplemental death benefit to the Executive’s beneficiary. The annual amount
of the supplemental death benefit shall be fifty percent (50%) of the
Executive’s final average compensation, determined as of the date of the
Executive’s death. The benefit provided in this Section 3.1 shall be paid in
equal installments in accordance with the Corporation’s regular payroll
practices for executives in effect from time to time, commencing as of the
first payroll period ending coincident with or immediately following the date
of the Executive’s death and continuing for a term certain of ten years.

     3.2 Death after termination of continuous service but before benefit
payments commence or death after benefit payments commence: If the Executive
dies either (i) after his termination of continuous service other than for
“cause” but before benefit payments commence, or (ii) after the date as of
which benefit payments have commenced under this Agreement, payment of the
Executive’s benefit shall commence or continue, as the case may be, to the
Executive’s

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beneficiary following the Executive’s death, treating the Executive’s beneficiary as
the Executive for all purposes under this Agreement.

     Section 4. Vesting:

     4.1 Vesting and forfeiture of benefits: The Executive shall become vested
in his supplemental benefit under this Agreement, to the extent accrued as of
any date, following the first to occur of his completion of ten years of
continuous service with the Corporation, or the date of his termination of
continuous service because of death or disability (as defined in Section 2.3).
The Executive shall not be vested in his supplemental benefit under this
Agreement if he terminates service with the Corporation prior to completing ten
years of continuous service for any reason other than death or disability (as
defined in Section 2.3). The Executive shall forfeit any benefit earned and
vested under this Agreement if his continuous service with the Corporation is
terminated for cause (as defined in Section 2.4).

     4.2 Accelerated vesting: Notwithstanding any other provision of this
Agreement, the Executive Compensation Committee may, with the approval of the
Board, direct that all or part of the Executive’s supplemental retirement
benefit under this Agreement shall be nonforfeitable as of any date prior to
the Executive’s normal retirement date on such terms and conditions as the
Executive Compensation Committee shall determine.

     Section 5. Deferral of Payment Date:

     As of any date that is at least twelve months prior to the Executive’s
normal retirement date (as specified in Section 2.1), the Committee and the
Executive may agree to establish a date following the Executive’s normal
retirement date (referred to herein as his “subsequent normal retirement date”)
as his normal retirement date for purposes of this Agreement; provided, that
such subsequent normal retirement date shall be at least five years following
the date of the agreement between the Committee and the Executive to establish
such subsequent normal retirement date. If a

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subsequent normal retirement date is established pursuant to this Section 5,
this Agreement shall be administered in all respects as if such subsequent
normal retirement date was the normal retirement date specified in Section 2.1,
except that the supplemental retirement benefit described in Section 2.1 shall
be adjusted actuarially by the Committee to reflect any delay in the
commencement of benefits beyond the Executive’s attainment of age 65. For
purposes of making such adjustment, the Committee shall apply actuarial
assumptions agreed to by the Executive at the time the deferral agreement is
entered into.

Section 6. Beneficiary:

The Executive’s beneficiary shall be the person or persons designated by
the Executive on the beneficiary designation form provided by and filed with
the Committee or its designee. If the Executive does not designate a
beneficiary, his beneficiary shall be his surviving spouse. If the Executive
does not designate a beneficiary and has no surviving spouse, the beneficiary
shall be the Executive’s estate. The designation of a beneficiary may be
changed or revoked only by filing a new beneficiary designation form with the
Committee or its designee. If the Executive’s beneficiary dies prior to
asserting a written claim for any death benefit payable under the Agreement,
such benefit shall be payable to the Executive’s estate. If a beneficiary (the
“primary beneficiary”) is receiving or is entitled to receive payments under
the Agreement and dies before receiving all of the payments due him, the
balance to which he is entitled shall be paid to the contingent beneficiary, if
any, named in the Executive’s current beneficiary designation form. If there
is no contingent beneficiary, the balance shall be paid to the estate of the
primary beneficiary. Any beneficiary may disclaim all or any part of any
benefit to which such beneficiary shall be entitled hereunder by filing a
written disclaimer with the Committee at least ten days before payment of such
benefit is to be made. Such a disclaimer shall be made in form satisfactory to
the Committee and shall be irrevocable when filed. Any benefit
disclaimed shall be payable from the Corporation

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under this Agreement in the
same manner as if the beneficiary who filed the disclaimer had died on the date
of such filing.

     Section 7. Administration by Committee:

     7.1 The Committee shall be responsible for the general administration and
interpretation of this Agreement and for carrying out its provisions, except to
the extent all or any of such obligations are specifically imposed on the
Board.

     7.2 The Committee shall maintain full and complete records of its
deliberations and decisions with respect to this Agreement. The minutes of its
proceedings shall be conclusive proof of the facts of the operation of the
Agreement. The records of the Committee with respect to this Agreement shall
contain all relevant data pertaining to the Executive and his rights under the
Agreement.

     7.3 Subject to the limitations of the Agreement, the Committee may from
time to time establish rules or by-laws for the administration of the Agreement
and the transaction of its business. The Committee may correct errors and, so
far as practicable, may adjust any benefit or credit or payment accordingly.
The Committee may in its discretion waive any notice requirements in the
Agreement; provided, that a waiver of notice in one or more cases shall not be
deemed to constitute a waiver of notice in any other case.

     7.4 Subject to the provisions of Section 12, the Committee shall have the
duty and authority to interpret and construe the provisions of this Agreement
and to decide any dispute which may arise regarding the rights of the Executive
hereunder.

     7.5 The Committee may engage an attorney, accountant or any other
technical advisor on matters regarding the operation of the Agreement and to
perform such other duties as shall be required in connection therewith, and may
employ such clerical and related personnel as the Committee shall deem
requisite or desirable in carrying out the provisions of the Agreement. The

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Committee shall from time to time, but no less frequently than annually, review
the financial and liquidity needs of the Corporation under the Agreement. The
Committee shall communicate such needs to the Corporation so that its policies
may be appropriately coordinated to meet such needs.

     7.6 The Committee shall be entitled to reimbursement by the Corporation
for its reasonable expenses properly and actually incurred in the performance
of its duties in the administration of the Agreement.

     7.7 No member of the Committee shall be personally liable by reason of any
contract or other instrument executed by him or on his behalf as a member of
the Committee nor for any mistake of judgment made in good faith, and the
Corporation shall indemnify and hold harmless, directly from its own assets
(including the proceeds of any insurance policy the premiums for which are paid
from the Corporation’s own assets), each member of the Committee and each other
officer, employee, or director of the Corporation to whom any duty or power
relating to the administration or interpretation of the Agreement may be
delegated or allocated, against any unreimbursed or uninsured cost or expense
(including any sum paid in settlement of a claim with the prior written
approval of the Board) arising out of any act or omission to act in connection
with the Agreement unless arising out of such person’s own fraud, bad faith,
willful misconduct or gross negligence.

     Section 8. Funding:

     The obligation of the Corporation to make payments hereunder shall
constitute a liability of the Corporation to the Executive. Notwithstanding
the foregoing, the Corporation may establish a grantor trust (the “Trust”) to
which the Corporation shall contribute according to its terms to pay the
benefits provided for in the Agreement; provided, that to the extent that there
shall not be sufficient funds in the Trust to make one or more payments
provided for under this Agreement, such payments shall be made from the general
funds of the Corporation. Except as otherwise provided herein, the Corporation
shall not be required to establish or maintain any special or separate fund, or

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otherwise to segregate assets to assure that such payments shall be made, and
the Executive shall not have any interest in any particular assets of the
Corporation by reason of its obligations hereunder. When the Trust is
established, a copy of the document shall be attached hereto and its terms
shall be incorporated herein by reference. Nothing contained in this Agreement
or the Trust shall create or be construed as creating a trust of any kind or
any other fiduciary relationship between or among the Corporation, the
Executive, the trustee under the Trust, or any other person. To the extent
that any person acquires a right to receive payment from the Corporation or the
Trust, such right shall be no greater than the right of an unsecured creditor
of the Corporation.

     Section 9. Allocation of Responsibilities:

     The persons responsible for the Agreement and the duties and
responsibilities allocated to each are as follows:

9.1 Board: To amend or terminate this
Agreement in accordance with Section 11.2;

9.2 Committee:

(i) To interpret the provisions of the Agreement and to
determine the rights of the Executive under the Agreement,
except to the extent otherwise provided in Section 12
relating to claims procedure;

(ii) To administer the Agreement in accordance with its
terms, except to the extent powers to administer the
Agreement are specifically delegated to another person or
persons as provided in the Agreement;

(iii) To account for the supplemental retirement benefit of
the Executive; and

(iv) To file such reports as may be required with the United
States Department of Labor, the Internal Revenue Service and
any other government agencies to which reports may be
required to be submitted from time to time.

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     Section 10. Benefits Not Assignable; Facility of Payments:

     10.1 No portion of any benefit credited or paid under this Agreement with
respect to the Executive shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any
attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber or
charge the same shall be void, nor shall any portion of such benefit be in any
manner payable to any assignee, receiver or any one trustee, or be liable for
his debts, contracts, liabilities, engagements or torts, or be subject to any
legal process to levy upon or attach.

     10.2 If any individual entitled to receive a payment under the Agreement
shall be physically, mentally or legally incapable of receiving or
acknowledging receipt of such payment, the Committee, upon the receipt of
satisfactory evidence of his incapacity and satisfactory evidence that another
person or institution is maintaining him and that no guardian or committee has
been appointed for him, may cause any payment otherwise payable to him to be
made to such person or institution so maintaining him. Payment to such person
or institution shall be in full satisfaction of all claims by or through the
Executive to the extent of the amount thereof.

     Section 11. Amendment and Termination of Agreement:

     This Agreement shall not be amended or terminated other than by a writing
signed by the Corporation and the Executive.

     Section 12. Claims Procedure:

     The following claims procedure shall apply with respect to this Agreement:

     12.1 Filing of a claim for benefits: If the Executive or his beneficiary
(the “claimant”) believes that he is entitled to benefits under the Agreement
which are not being paid to him or which are not being accrued for his benefit,
he shall file a written claim therefor with the Committee.

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     12.2 Notification to claimant of decision: Within 90 days after receipt
of a claim by the Committee (or within 180 days if special circumstances
require an extension of time), the
Committee shall notify the claimant of its decision with regard to the claim.
In the event of such special circumstances requiring an extension of time,
there shall be furnished to the claimant prior to expiration of the initial
90-day period written notice of the extension, which notice shall set forth the
special circumstances and the date by which the decision shall be furnished.
If such claim shall be wholly or partially denied, notice thereof shall be in
writing and worded in a manner calculated to be understood by the claimant, and
shall set forth: (i) the specific reason or reasons for the denial; (ii)
specific reference to pertinent provisions of the Agreement on which the denial
is based; (iii) a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of why such
material or information is necessary; and (iv) an explanation of the procedure
for review of the denial. If the Committee fails to notify the claimant of the
decision in timely manner, the claim shall be deemed denied as of the close of
the initial 90-day period (or the close of the extension period, if
applicable).

     12.3 Procedure for review: Within 60 days following receipt by the
claimant of notice denying his claim, in whole or in part, or, if such notice
shall not be given, within 60 days following the latest date on which such
notice could have been timely given, the claimant shall appeal denial of the
claim by filing a written application for review with the Board. Following
such request for review, the Board shall fully and fairly review the decision
denying the claim. Prior to the decision of the Board, the claimant shall be
given an opportunity to review pertinent documents and to submit issues and
comments in writing.

     12.4 Decision on review: The decision on review of a claim denied in
whole or in part by the Board on initial review shall be made in the following
manner:

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12.4.1 Within 60 days following receipt by the Board of the request for
review (or within 120 days if special circumstances require an extension
of time), the Board shall notify the claimant in writing of its decision
with regard to the claim. In the event of such special circumstances
requiring an extension of time, written notice of the extension shall be
furnished to the claimant prior to the commencement of the extension. If
the decision on review is not furnished in a
timely manner, the claim shall be deemed denied as of the close of the
initial 60-day period (or the close of the extension period, if
applicable).

12.4.2 With respect to a claim that is denied in whole or in part, the
decision on review shall set forth specific reasons for the decision,
shall be written in a manner calculated to be understood by the claimant,
and shall cite specific references to the pertinent Agreement provisions
on which the decision is based.

     12.5 If a dispute remains following the decision of the Board under
Section 12.4, the issue or issues in dispute shall be settled and finally
determined by arbitration in Winston-Salem, North Carolina, under the then
existing rules of the American Arbitration Association; and judgment may be
entered upon the award of the arbitrator by any Court of competent
jurisdiction. The standard of review for such arbitration shall be de novo;
therefore, discretion granted to the Board or the Committee by any other
provision of this Agreement shall be disregarded, and there shall be no
presumption in favor of any decision made by the Board or the Committee. Any
expenses of such arbitration shall be allocated among the parties to this
Agreement by the arbitrator.

     12.6 Action by authorized representative of claimant: All actions set
forth in this Section 12 to be taken by the claimant may likewise be taken by a
representative of the claimant duly authorized by him to act in his behalf on
such matters. The Committee and the Board may require such evidence as either
may reasonably deem necessary or advisable of the authority to act of any such
representative.

     Section 13. Miscellaneous Provisions:

     13.1 Notices: The Executive and each beneficiary shall be responsible for
furnishing the Committee or its designee with their current address for the
mailing of notices and benefit payments. Any notice required or permitted to
be given to the Executive or a beneficiary

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shall be deemed given if directed to
such address and mailed by regular United States mail, first class, postage
prepaid. If any check mailed to such address is returned as undeliverable to
the addressee, mailing of checks will be suspended until the Executive or
beneficiary furnishes the proper address.
This provision shall not be construed as requiring the mailing of any notice or
notification otherwise permitted to be given by posting or by other
publication.

13.2 Lost distributees: A benefit shall be deemed forfeited if the
Committee is unable after a reasonable period of time to locate the Executive
or his beneficiary to whom payment is due; provided, however, that such benefit
shall be reinstated if a valid claim is made by or on behalf of the Executive
or his beneficiary for the forfeited benefit.

13.3 Reliance on data: The Corporation and the Committee shall have the
right to rely on any data provided by the Executive or by any beneficiary.
Representations of such data shall be binding upon any party seeking to claim a
benefit through a Executive, and the Corporation and the Committee shall have
no obligation to inquire into the accuracy of any representation made at any
time by the Executive or his beneficiary.

13.4 Receipt and release for payments: Any payment made from the
Corporation to or with respect to the Executive or his beneficiary, or pursuant
to a disclaimer by a beneficiary, shall, to the extent thereof, be in full
satisfaction of all claims hereunder against the Corporation with respect to
the Agreement. The recipient of any payment may be required by the Committee,
as a condition precedent to such payment, to execute a receipt and release with
respect thereto in such form as shall be acceptable to the Committee.

13.5 Withholding: The Corporation shall withhold from any payments or
benefits under this Agreement all federal, state, or local taxes or other
amounts as shall be required pursuant to any law or governmental regulation or
ruling.

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     13.6 Headings: The headings and subheadings of the Agreement have been
inserted for convenience of reference and are to be ignored in any construction
of the provisions hereof.

     13.7 Continuation of employment: The establishment of the Agreement shall
not be construed as conferring any legal or other rights upon the Executive or
any persons for continuation of
employment, nor shall it interfere with the right of the Corporation to
discharge any employee or to deal with him without regard to the effect thereof
under the Agreement.

     13.8 Binding on successors: The obligations of the parties hereto shall
inure to the benefit of and shall be binding upon their successors and assigns,
including any successor to the Corporation by merger, consolidation or
otherwise that may agree to continue this Agreement.

     13.9 Construction: The provisions of the Agreement shall be construed and
enforced according to the laws of the State of North Carolina.

     IN WITNESS WHEREOF, this Retirement Security Agreement is executed by and
in behalf of the parties hereto as the day and year first above written.

	 	 	 	 	 
	 	 	INSTEEL INDUSTRIES, INC.
	 
	 	 	 	 
	

	 	By:	 	 
	Attest:

	 	 	 	

President
	

	 	 	 	 
	Secretary
	 	 	 	 
	 
	 	 	 	 
	[Corporate Seal]
	 	 	 	 
	 	 	EXECUTIVE
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

(SEAL)

	

	 	 	 	 
	Witness
	 	 	 	 

-15-

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