AMENDED AND RESTATED SEVERANCE AGREEMENT
EXHIBIT 99.6
AMENDED AND RESTATED SEVERANCE AGREEMENT
THIS AMENDED AND RESTATED SEVERANCE AGREEMENT (the “Agreement”) is made and entered into this
the 14TH day of November, 2006, between INSTEEL INDUSTRIES, INC., a North Carolina corporation (the
“Company”), and (the “Executive”). This Agreement amends, restates and supersedes
the Severance Agreement between the Executive and the Company dated December 2, 2004. Certain
capitalized terms used in this Agreement are defined in Section 6.
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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. The purpose
of this amended and restated Agreement is to amend and restate the severance agreement between the
Executive and the Company dated December 2, 2004 to take into account Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”).
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 the date set forth above.
2. Term of Agreement. The Term of this Agreement begins on the Effective Date and ends on the day
before December 2, 2007. Notwithstanding the preceding sentence, the Term of this Agreement shall
be extended for an additional twelve month period, as of each anniversary of December 2, 2007,
unless either party gives written notice, at least ninety days prior to the applicable anniversary,
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 all Related Entities of the Company) is terminated without Cause by the Company
(or any Related Entity of the Company). No amounts will be payable
under this Agreement unless Executive’s employment with the Company (and its Related Entities)
terminates or is terminated for any reason other than as described in the preceding sentence and
such termination of employment constitutes a Separation from Service as defined below.
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) Reasonable 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) A lump sum 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) 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 and
payment by the Company of the entire cost or premium for continued coverage pursuant to Section
4980B of the Code in the Company health plan for a period of eighteen months following Executive’s
termination (or such lesser period that Executive is entitled to such continued coverage). In the
event that the continued coverage of Executive in any such employee welfare benefit plan or the
Company health plan is barred by its terms, the Company shall pay Executive, for the eighteen
months following Executive’s termination (or the remainder of the eighteen month period in which
continued coverage is barred) or for such lesser period during which Executive might have been
entitled to such continued coverage, 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)
and/or the entire premium for continued coverage in the Company’s health plan 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
plan(s) and the entire premium for continued coverage in the Company’s health plan prior to
Executive’s termination of employment.
(g) 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.
Except as provided in Section 20, Termination Benefits payable in a lump sum shall be payable
within ten days of Executive’s termination of employment in accordance with Section 3 and the other
Termination Benefits shall be paid as described above. The payment of the Termination
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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 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. The Company will pay
Executive the Termination Benefits or the reduced Termination Benefits determined in this Section 5
as described in Sections 4 and 20.
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
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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 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 which the
determination is made.
(d) Related Entity means any entity that is part of a controlled group of corporations
or is under common control with the Company within the meaning of Sections 1563(a), 414(b) or
414(c) of the Code.
(e) Separation from Service means the termination of the Executive’s employment with
the Company and all Related Entities; provided, however, that the Executive will not be considered
as having had a Separation from Service if (i) the Executive continues to provide services to the
Company or any Related Entity as an employee at an annual rate that is at least equal to 20 percent
of the services rendered, on average, during the immediately preceding three full calendar years of
employment (or, if employed less than three years, such lesser period) and the annual remuneration
for such services is at least equal to 20 percent of the average annual remuneration earned during
the final three full calendar years of employment (or if less, such lesser period), (ii) the
Executive continues to provide services to the Company or any Related Entity in a capacity other
than as an employee and such services are provided at an annual rate that is 50 percent or more of
the services rendered, on average, during the immediately preceding three full calendar years of
employment (or, if employed less than three years, such lesser period) and the annual remuneration
for such services is 50 percent or more of the annual remuneration earned during the final three
full calendar years of employment (or, if less, such lesser period) or (iii) the Executive is on
military leave, sick leave or other bona fide leave of absence (such as temporary employment by the
government) so long as the period of such leave does not exceed six months, or if longer, so long
as the Executive’s right to reemployment with the Company or any Related Entity is provided either
by statute or by contract. If the period of leave exceeds six months and the Executive’s right to
reemployment is not provided either by statute or by contract, the Separation from Service will be
deemed to occur on the first date immediately following such six-month period. For purposes of
this Section 6(e), the annual rate of providing services shall be determined based upon the
measurement used to determine the Executive’s base compensation. This definition of Separation
from Service is intended to comply with the definition of “separation from service” as used in
Section 409A(a)(2)(A)(i) of the Code and shall be interpreted accordingly.
(f) Specified Employee generally means an employee who is (i) an officer of the
Company or a Related Entity having annual compensation greater than $140,000 (with certain
adjustments for inflation after 2006), (ii) a five-percent owner of the Company or a Related Entity
or (iii) a one-percent owner of the Company or a Related Entity having annual compensation greater
than $150,000. This definition is intended to comply with the “specified employee” rules of
Section 409A(a)(2)(B)(i) of the Code and shall be interpreted accordingly.
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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. Additionally, the Company
and the Executive may be parties to other agreements, policies, plans, programs or arrangements
relating to the Executive’s employment. In such an event, this Agreement shall be construed and
interpreted so that severance pay and benefits are provided under this Agreement only to the extent
that similar amounts of severance and benefits are not paid or provided to the Executive under any
other agreements, policies, plans, programs or arrangements; it being the intent of this Agreement
not to provide to the Executive any duplicative payments of severance pay or other benefits. The
Company, in its sole discretion, shall determine whether payments or other benefits to the
Executive under any other such agreements, policies, plans, programs or arrangements shall
constitute duplicative payments of severance pay or benefits hereunder. In the event the Company
determines that payments or other benefits to the Executive under any other such agreements,
policies, plans, programs or arrangements constitute duplicative payments, the severance pay or
benefits otherwise payable under this Agreement shall be reduced to the extent of such duplicative
payments.
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. Subject to Section 20, 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 of 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.
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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 Related Entity or any right to receive or continue to receive
any rate of pay or other compensation. Nothing in this Agreement interferes with the right of the
Company or a Related Entity 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 Related
Entities 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. | |||
| 0000 Xxxxx Xxxxx | ||||
| Xx. Xxxx, Xxxxx Xxxxxxxx 00000 |
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, and duly executed.
The parties agree that this Section 17 may not be waived except as herein set forth.
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18. Recitals. The Recitals to this Agreement are incorporated herein and shall constitute an
integral part of this Agreement.
19. Section 409A. This Agreement is intended to comply with the applicable requirements of Section
409A of the Code and shall be construed and interpreted in accordance therewith. Notwithstanding
the preceding, the Company and its Related Entities shall not be liable to the Executive or any
other person if the Internal Revenue Service or any court or other authority having jurisdiction
over such matter determines for any reason that any amount under this Agreement is subject to
taxes, penalties or interest as a result of failing to comply with Section 409A of the Code.
20. Delay of Payment. Notwithstanding any other provision of this Agreement, if the Executive is a
Specified Employee, to the extent necessary to comply with Section 409A of the Code, no payments or
benefits (which are not otherwise exempt) may be paid or provided hereunder before the date which
is six months after the Executive’s Separation from Service or, if earlier, his death. The amounts
which would have otherwise been required to be paid, and the benefits which would have otherwise
been provided, during such six months or, if earlier, until Executive’s death, shall be paid to
Executive in one lump sum cash payment as soon as administratively practical after the date which
is six months after Executive’s Separation from Service or, if earlier, after the Executive’s
death. Any other payments scheduled to be made or benefits scheduled to be provided after such
period shall be made or provided at the times otherwise designated in this Agreement disregarding
the delay of payment for the payments and benefits described in this Section 20.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above
written.
| INSTEEL INDUSTRIES, INC. | ||||||
| By: | ||||||
| Name | ||||||
| Title | ||||||
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