1
Exhibit 10.11
INSTEEL INDUSTRIES, INC.
STOCK OPTION AGREEMENT
THIS AGREEMENT is made the 7th day of February, 1995, between
Insteel Industries, Inc., a North Carolina corporation, with its principal
office in Mount Airy, North Carolina (hereinafter called the "Company"), and
Xxxxx X. Xxxxxx (hereinafter called the "Optionee");
As authorized by the Company's Board of Directors, the Company
and the Optionee hereby agree as follows:
1. Grant of Option.
(a) The Company grants to the Optionee as a matter of
separate inducement and agreement in connection with his agreeing to
serve as a member of the Company's Board of Directors, which service
will help enhance the efficiency, soundness, profitability, growth and
shareholder value of the Company, and not in lieu of any salary or
other compensation for his services, the right and option to purchase
all or any part of an aggregate of NINETEEN THOUSAND NINE HUNDRED
SIXTY-FIVE (19,965) shares of the Common Stock of the Company, no par
value, at the purchase price of 7 7/8 Dollars ($7.875) per share.
(b) Except as otherwise expressly provided herein
regarding exercise of the option in the event of Optionee's death
while serving as a director (Paragraphs 2(d) and 3) and discretionary
acceleration of exercise rights in the event of termination of
Optionee's status as a nonemployee director (Paragraph 2(d)), all
rights of the Optionee with respect to the unexercised portion of the
option shall terminate upon termination of the Optionee's status as a
director of the Company.
2. Period of Option and Certain Limitations on Right to
Exercise.
(a) The period during which the option may be exercised
(the "option period") shall be ten years from the date hereof. The
option shall become exercisable in installments as follows: 20 percent
of the number of shares covered hereby at any time prior to the first
anniversary of the date hereof, and an additional 20 percent of such
number of shares annually following the first, second, third and
fourth anniversaries of the date hereof, with each such installment to
be cumulative. Any portion of the option not exercised before the
expiration of the option period shall terminate.
(b) The option may be exercised by giving written notice
of at least ten days to the Company at such place as the Board shall
direct. Such notice shall specify the number of shares to be purchased
pursuant to the option and the aggregate purchase price to be paid
therefor, and shall be accompanied by the payment of such purchase
46
2
price. Such payment shall be in the form of cash or shares owned by
the Optionee at the time of exercise, or in any combination of cash
and shares.
(c) Shares tendered in payment of the exercise of the
option shall be valued at their fair market value on the date of
exercise, which shall be determined in good faith by the Board and
shall be (i) the price per share of the last sale of such shares on
the New York Stock Exchange as reported in The Wall Street Journal for
the last trading day nearest preceding the date on which the option is
exercised; or (ii) if the Common Stock is not listed and traded on the
New York Stock Exchange or another recognized securities exchange but
is traded in the over the counter market, then the fair market value
shall be the closing sales price of such Common Stock as reported in
the NASDAQ National Market System on the last trading day nearest
preceding the date of exercise; or (iii) if the shares of the Company
cease to be traded on the open market, then in accordance with the
applicable provisions of Section 20.2031-2 of the Federal Estate Tax
Regulations, or in any other manner consistent with the Internal
Revenue Code of 1986, as amended, and accompanying regulations.
(d) The option shall not be exercised unless the Optionee
is, at the time of exercise, a nonemployee member of the Board of
Directors and has been a nonemployee member of the Board of Directors
continuously since the date hereof; provided, however, that the option
shall be exercisable following the death of the Optionee in accordance
with Paragraph 3. If the status of the Optionee as a nonemployee
director is terminated, the option may be exercised only to the extent
exercisable on the date of such termination, except that the Board may
in its discretion accelerate the date for exercising all or any part
of the option that was not otherwise exercisable on the date of such
termination.
(e) The Optionee or his legal representative, legatees or
distributees shall not be deemed to be the holder of any shares
subject to the option unless and until certificates for such shares
are issued to him or them under the plan.
3. Nontransferability of Option. During the Optionee's
lifetime, the option shall be exercisable only by him and shall not be
transferable (including by pledge or hypothecation); provided, however that the
option may be transferred upon the death of the Optionee in accordance with the
Optionee's will or the laws of descent and distribution.
4. Dilution or Other Adjustments. If there is any change
in the outstanding shares of Common Stock of the Company as a result of a
merger, consolidation, reorganization, stock dividend, stock split to holders
of shares that is distributable in shares, or other change in the capital stock
structure of the Company, the Board shall make such adjustments to the option
as the Board in its sole discretion deems equitable to prevent dilution or
enlargement of the option or otherwise advisable to reflect such change.
5. Surrender of Options. The Board may, in its sole
discretion and subject to such terms and conditions as it deems appropriate,
accept the surrender by the Optionee of all or a part of the option and
authorize payment in consideration therefor of an amount equal
47
3
to the difference between the option price and the fair market value of the
shares remaining subject to the option (determined pursuant to Paragraph 2(c)
hereof) on the date of such surrender. Such payment shall be made in shares
valued at such fair market value on the date of such surrender, or in cash, or
partly in such shares and partly in cash as the Board shall determine; provided,
that the Board determines that such settlement is consistent with the purpose
set forth in Paragraph 1 hereof. The surrender of the option under this
Paragraph 5 shall be permitted only to the extent that the option is
exercisable under Paragraph 2(a) on the date of surrender. The right to
surrender the option under this Paragraph 5 shall not be transferable
(including by pledge or hypothecation) and such right of surrender shall be
exercisable during the Optionee's lifetime only by him. In no event shall the
Optionee surrender this option under this Paragraph 5 if the fair market value
of the shares at the time of such surrender is less than the option price.
6. Investment Purpose.
(a) This option is granted on the condition that all
purchases of stock hereunder shall be for investment purposes and not
with a view to resale or distribution.
(b) Unless the option granted pursuant to this Agreement
and shares of stock underlying such option shall have been registered
with the Securities and Exchange Commission under a then effective
registration statement on an appropriate form, each certificate for
shares issued under exercise of the option granted hereunder shall
bear a legend in substantially the following form:
"The shares represented by this certificate
have not been registered with the Securities and
Exchange Commission and may not be transferred in the
absence of an effective registration statement with
respect thereto or an opinion of counsel satisfactory
to the Company that such registration is not
required."
7. Termination. This Agreement and the option granted
under it shall terminate upon the first of the following events to occur:
exercise in full of the option granted hereunder; termination of Optionee's
status as a director of the Company; or the close of business on February 6,
2005.
8. Binding Agreement. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
executors, administrators, next-of-kin, successor and assigns.
9. Governing Law. This Agreement shall be interpreted,
construed and enforced in accordance with the laws of the State of North
Carolina.
IN WITNESS WHEREOF, this Agreement has been executed in behalf
of the Company by its officers thereunto duly authorized, and the Optionee, in
acceptance of the
48
4
above-mentioned option, subject to the terms of this Agreement, has set forth
his hand and seal all on the day and year first above written.
INSTEEL INDUSTRIES, INC.
By: /s/ H. O. Xxxxx III
-------------------------------
President
ATTEST:
/s/ Xxxx X. Xxxxxxxx
--------------------------
Secretary
[Corporate Seal]
OPTIONEE
/s/ Xxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxx
49
