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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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INSTEEL INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0674867
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1373 BOGGS DRIVE, MOUNT AIRY, NORTH CAROLINA 27030
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(Address of principal executive offices, including zip code)
INSTEEL INDUSTRIES, INC. RETURN ON CAPITAL INCENTIVE COMPENSATION PLAN
INSTEEL INDUSTRIES, INC. DIRECTOR COMPENSATION PLAN
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(Full title of the plans)
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Howard O. Woltz, Jr.
Chairman of the Board
Insteel Industries, Inc.
1373 Boggs Drive
Mount Airy, North Carolina 27030
(336) 786-2141
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(Name, address and telephone number, including area code,
of agent for service)
CALCULATION OF REGISTRATION FEE
================================================================================
PROPOSED PROPOSED
TITLE OF MAXIMUM MAXIMUM
SECURITIES AMOUNT OFFERING AGGREGATE AMOUNT OF
TO BE TO BE PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER SHARE(1) PRICE(1) FEE(1)
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Common
Stock, no par value 150,000 shares $7.3125 $1,096,875.00 $323.58
================================================================================
(1) Pursuant to Rule 457(c) and (h)(1), based on the average of the high
and low prices of the registrant's common stock on March 12, 1998, as
reported on the New York Stock Exchange.
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed by Insteel Industries, Inc. (the
"Company") with the Securities and Exchange Commission (the "Commission") are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1997, filed with the Commission on December
10, 1997.
(b) All other reports that have been filed pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), since the end of the fiscal year covered by the Annual
Report on Form 10-K referred to in (a), above.
(c) The description of the Company's Common Stock (No Par
Value), which is incorporated by reference to the Company's
Registration Statement on Form S-1 (SEC File No. 33-4929).
All reports and other documents subsequently filed by the Company
pursuant to Sections 13, 14 and 15(d) of the Exchange Act prior to the filing of
a post-effective amendment which indicates that all securities offered hereby
have been sold or which deregisters all securities remaining unsold shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of the filing of such reports and documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 55-8-50 through 55-8-58 of the General Statutes of North
Carolina prescribe the conditions under which indemnification may be obtained by
a present or former director or officer who incurs expenses or liability as a
consequence of a legal proceeding arising out of his activities as a director or
officer.
Mandatory Statutory Indemnification. Under the statutes, a North
Carolina corporation must indemnify a director or officer who is wholly
successful on the merits or otherwise in defending a proceeding in which he was
involved by virtue of his being a director or officer of the corporation. This
mandatory indemnification covers reasonable expenses and attorneys' fees.
Permissive Statutory Indemnification. A North Carolina corporation may,
but is not required by statute to, indemnify its directors and officers who
conduct themselves in good faith and meet a reasonable belief test regarding the
challenged conduct. If he was acting in his official capacity, the director or
officer must have believed the challenged conduct was in the corporation's best
interest; if he was acting otherwise, he must meet the test that he reasonably
believed his conduct was not opposed to the corporation's best interest.
Notwithstanding those tests, however, statutory indemnification is prohibited
where the individual is held liable to the corporation or where he is held
liable on the basis of an improperly received personal benefit.
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Court-Ordered Indemnification. A director or officer may enforce his or
her right to mandatory indemnification and, if the court determines the
individual to be entitled to the mandatory indemnification, the court must also
order the corporation to pay the reasonable expenses incurred to enforce the
right, including counsel fees. The statutes authorize the court to provide
indemnification in any case regardless of whether the individual has met the
tests applicable to permissive indemnification upon a finding that the
individual "is fairly and reasonably entitled to indemnification in view of all
the relevant circumstances." [G.S. 55-8-54(2).] This relief is limited to
reasonable expenses when there is liability to the corporation by the
individual.
Voluntary Indemnification. Notwithstanding the limits on statutory
indemnification, a North Carolina corporation may voluntarily agree to indemnify
its directors and officers by provisions in the articles of incorporation, the
bylaws, a contract or a resolution of the Board of Directors against any
liability, subject to the limitation that an individual cannot be indemnified on
account of his activities which were at the time taken known or believed by him
to be clearly in conflict with the best interests of the corporation. A North
Carolina corporation may also obtain insurance to protect its directors and
officers from personal liability.
Exculpation of Directors from Liability. The articles of incorporation
of a North Carolina corporation may exonerate directors (but not officers) from
monetary liability for acts performed by them in their official capacity as
directors. This exculpation may not include conduct that the director knew or
believed was clearly in conflict with the best interests of the corporation,
liability for unlawful distributions, transactions from which he derived an
improper personal benefit or acts undertaken prior to the effective date of the
adoption of the exculpation provision. [G.S. 55-8-54(2).]
The Company's bylaws contain broad indemnification provisions covering
both directors and officers of the Company. The Company's articles of
incorporation contain the provision eliminating monetary liability of directors
to the extent permitted by law. The Company has purchased insurance providing
for indemnification of its directors and officers.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
The following exhibits are filed as a part of this Registration
Statement:
NUMBER DESCRIPTION
------ -----------
4.1 Restated articles of incorporation of the Company, as amended,
which are incorporated by reference to Exhibit 3.1 of the
Company's Current Report on Form 8-K, dated May 3, 1988
4.2 Bylaws of the Company, as last amended February 5, 1991, which
are incorporated by reference to Exhibit 3.2 to the Company's
Annual Report on Form 10-K for the year ended September 30,
1991
5 Opinion of Womble Carlyle Sandridge & Rice, PLLC, as to the
legality of the Common Stock being registered
23.1 Consent of Womble Carlyle Sandridge & Rice, PLLC, which is
contained in its opinion filed as Exhibit 5
23.2 Consent of Arthur Andersen LLP
II - 2
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23.3 Consent of KPMG Peat Marwick LLP
24 Power of Attorney
99.1 Insteel Industries, Inc. Return on Capital Incentive
Compensation Plan
99.2 Description of Insteel Industries, Inc. Director Compensation
Plan
ITEM 9. UNDERTAKINGS.
(a) The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended
(the "Securities Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Commission by the Company pursuant to Section
13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act
that is incorporated by reference in the Registration Statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the Company will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
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SIGNATURES
THE REGISTRANT
Pursuant to the requirements of the Securities Act of 1933,
Insteel Industries, Inc. certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-8 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Mount Airy, State of North Carolina,
on this 16th day of March, 1998.
INSTEEL INDUSTRIES, INC.
By: /s/ H. O. Woltz III
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H. O. Woltz III
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on March 16, 1998.
/s/ H. O. Woltz III * /s/ Howard O. Woltz, Jr. *
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Name: H. O. Woltz III Name: Howard O. Woltz, Jr.
Title: Director, President and Title: Chairman of the Board
Chief Executive Officer
(principal executive
officer)
/s/ Michael C. Gazmarian /s/ Louis E. Hannen *
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Name: Michael C. Gazmarian Name: Louis E. Hannen
Title: Chief Financial Officer Title: Director
(principal financial and
accounting officer)
/s/ Frances H. Johnson * /s/ Charles B. Newsome *
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Name: Frances H. Johnson Name: Charles B. Newsome
Title: Director Title: Director
/s/ C. Richard Vaughn * /s/ John E. Woltz *
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Name: C. Richard Vaughn Name: John E. Woltz
Title: Director Title: Director
By: /s/ H. O. Woltz, Jr.
---------------------------------
Name: H. O. Woltz, Jr.
Attorney-in-Fact
II - 4
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EXHIBIT INDEX
TO
REGISTRATION STATEMENT ON FORM S-8 OF
INSTEEL INDUSTRIES, INC.
EXHIBIT NO. DESCRIPTION
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4.1 Restated articles of incorporation of the Company, as
amended, which are incorporated by reference to
Exhibit 3.1 of the Company's Current Report on Form
8-K, dated May 3, 1988 *
4.2 Bylaws of the Company, as last amended February 5,
1991, which are incorporated by reference to Exhibit
3.2 to the Company's Annual Report on Form 10-K for
the year ended September 30, 1991 *
5 Opinion of Womble Carlyle Sandridge & Rice, PLLC, as
to the legality of the Common Stock being registered
23.1 Consent of Womble Carlyle Sandridge & Rice, PLLC,
which is contained in its opinion filed as Exhibit 5
23.2 Consent of Arthur Andersen LLP
23.3 Consent of KPMG Peat Marwick LLP
24 Power of Attorney
99.1 Insteel Industries, Inc. Return on Capital Incentive
Compensation Plan
99.2 Description of Insteel Industries, Inc. Director
Compensation Plan
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* Incorporated by reference.
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EXHIBIT 5
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Womble [LOGO] 3300 One First Union Center
Carlyle 301 South College Street
Sandridge Charlotte, NC 28202-6025
& Rice
A PROFESSIONAL LIMITED Telephone: (704) 331-4900
LIABILITY COMPANY Fax: (704) 331-4955
March 16, 1998
Insteel Industries, Inc.
1373 Boggs Drive
Mount Airy, North Carolina 27030
Re: Registration Statement on Form S-8 with respect to the Insteel
Industries, Inc. Return on Capital Incentive Compensation Plan
and Insteel Industries, Inc. Director Compensation Plan
Gentlemen:
We have served as counsel for Insteel Industries, Inc. (the "Company")
in connection with its registration under the Securities Act of 1933, as
amended, of an aggregate of 150,000 shares of its common stock, no par value
(the "Shares"), which are proposed to be offered and sold pursuant to the
Insteel Industries, Inc. Return on Capital Incentive Compensation Plan and the
Insteel Industries, Inc. Director Compensation Plan (individually, a "Plan" and
collectively, the "Plans"), and pursuant to the Company's Registration Statement
on Form S-8 (the "Registration Statement") to be filed with the Securities and
Exchange Commission (the "Commission") with respect to the Shares.
In rendering this opinion, we have relied upon, among other things, our
examination of such records of the Company and certificates of its officers and
of public officials as we have deemed necessary. We express no opinion as to
matters under or involving the laws of any jurisdiction other than the corporate
law of the State of North Carolina.
Based upon the foregoing, and having regard for such legal
considerations as we have deemed relevant, we are of the opinion that the Shares
have been duly authorized and, upon issuance pursuant to the terms of the
respective Plan, will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement.
WOMBLE CARLYLE SANDRIDGE & RICE
A Professional Limited Liability Company
By: /s/ Jane Jeffries Jones
----------------------------------
Jane Jeffries Jones
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EXHIBIT 23.2
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CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our report dated
October 16, 1997, included in Insteel Industries, Inc.'s Form 10-K for the year
ended September 30, 1997, and to all references to our firm included in this
registration statement.
Arthur Andersen LLP
Charlotte, North Carolina
March 3, 1998.
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EXHIBIT 23.3
Consent of KPMG Peat Marwick LLP
The Board of Directors and Shareholders
Insteel Industries, Inc.
We consent to incorporation by reference in this registration statement on Form
S-8 of Insteel Industries, Inc. of our report dated October 24, 1995, relating
to the consolidated statements of earnings, shareholders' equity and cash flows
of Insteel Industries, Inc. and subsidiaries for the year ended September 30,
1995 and related schedule for the year ended September 30, 1995 which report
appears in the September 30, 1997 annual report on Form 10-K of Insteel
Industries, Inc.
KPMG Peat Marwick LLP
Charlotte, North Carolina
March 13, 1998
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EXHIBIT 24
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
We, the undersigned directors and officers of Insteel Industries, Inc.,
and each of us, do hereby make, constitute and appoint Howard O. Woltz, Jr. and
H. O. Woltz III, and each of them (either of whom may act without the consent or
joinder of the other), our attorneys-in-fact and agents with full power of
substitution for us and in our name, place and stead, in any and all capacities,
to execute for us and in our behalf the Registration Statement on Form S-8 under
the Securities Act of 1933, and any post-effective amendments thereto, and to
file the same, with all exhibits thereto and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
the premises, as fully to all intents and purposes as we might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or either of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, we the undersigned have executed this Power of
Attorney this 19th day of February, 1998.
/s/ Howard O. Woltz, Jr. /s/ H. O. Woltz III
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Howard O. Woltz, Jr. H. O. Woltz III
/s/ Michael C. Gazmarian /s/ Louis E. Hannen
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Michael C. Gazmarian Louis E. Hannen
/s/ Frances H. Johnson /s/ Charles B. Newsome
- ------------------------------------ ------------------------------------
Frances H. Johnson Charles B. Newsome
/s/ C. Richard Vaughn /s/ John E. Woltz
- ------------------------------------ ------------------------------------
C. Richard Vaughn John E. Woltz
<PAGE> 1
EXHIBIT 99.1
<PAGE> 2
INSTEEL INDUSTRIES INC. RETURN ON CAPITAL INCENTIVE COMPENSATION
PLAN FOR KEY MEMBERS OF MANAGEMENT
1. Statement of Purpose
The purpose of the Insteel Industries Inc. Return on Capital Incentive
Compensation Plan For Key Members Of Management (the "Plan") is to encourage the
creation of shareholder value by establishing a direct link between the Return
on Capital (ROC) achieved and management's incentive compensation.
The Participants contribute to the success of Insteel Industries Inc. (the
"Company") through their ability and commitment to the Company. The Company
desires to receive the benefits derived from the services of the Participants,
to identify the continued interests of the Participants with the future success
of the Company, and to provide an incentive compensation plan that encourages
sustained achievement of the Company's objective to maximize shareholder wealth.
2. Definitions
2.1 Bonus Award
"Bonus Award" means the dollar amount which results from the
multiplication of the Bonus Percent for the year, by the Participant's
Base Salary for the same year.
2.2 Bonus Percent
"Bonus Percent" means the percentage amount which results from the
multiplication of the Participant's Target Bonus Percent for the Year,
by the Performance Factor for the same Year.
2.3 Bonus Bank
"Bonus Bank" means the accrual account maintained by the Company for
each Participant, into which either (i) the excess, for any Year, of
any Bonus Award above One-Third of the Participant's Target Bonus
Amount is credited; or (ii) the deficiency, for any Year, of any Award
below zero (0) is debited; and/or (iii) the Bonus Bank Distribution,
for any Year, as calculated in accordance with Section 5.3 is debited.
Such account, for book accounting purposes, shall be accrued in
accordance with generally accepted accounting principles. The Company
does not and will not transfer cash into such accounts and the accounts
exist only as bookkeeping records to evidence the Company's obligation
to pay these amounts according to the Plan. No interest is credited on
amounts in the Bonus Bank, and the individual's Bonus Bank balance
shall never be less than zero (0). Participants are never vested in
amounts in the Bonus Bank, and such amounts are not earned until the
respective Distribution Date.
2.4. Base Salary
"Base Salary" means the Participant's actual base salary compensation
earned during the Year; or partial Year, in the event of death,
Disability or Retirement during the year; excluding incentive payments,
salary continuation, and other payments which are not, in the sole
determination of the Committee, actual base salary.
2.5. Beneficiary
"Beneficiary" means the person or persons designated as such in
accordance with Section 6.
2.6. c*
"c*" also referred to as the "Weighted Average Cost of Capital," means
the Company's weighted average cost of debt and equity expressed as a
percent. It represents the Company's minimum required rate of return on
capital, as established by management. It shall be a rate rounded to
the nearest whole percent.
2.7. Committee
"Committee" means the Executive Compensation Committee.
2.8. Disability
"Disability" means a bodily injury or diseases as determined by the
Committee, that totally and continuously prevents the Participant, for
at least six (6) consecutive months, from engaging in an "occupation"
for pay or profit. During the first twenty-four (24) months of total
disability, "occupation" means the Participant's regular
<PAGE> 3
occupation. After that period, "occupation" means any occupation for
which the Participant is reasonably fitted, based upon the
Participant's education, training or experience as determined by the
Committee.
2.9. Distribution
"Distribution" means the cash payment and/or deferral amount resulting
from a Bonus Award or from a Bonus Bank or from a combination thereof.
2.10. Distribution Date
"Distribution Date" means the date on which the Employer makes
Distributions of Participant Awards and/or Distributions from the
Participants' Bonus Banks. The Distribution Date shall be once each
Year and no later than December 15 of the Year following the Year for
which an Award was calculated.
2.11. Effective Date
"Effective Date" means October 1, 1996, the date on which the Plan
commences.
2.12. Eligible Employee
"Eligible Employee" means a regular, exempt, salaried employee of the
Company who may be selected by management and recommended to the
Executive Compensation Committee for participation.
2.13. Employer
"Employer" (also referred to as the "Company") means Insteel
Industries Inc. and its wholly owned subsidiaries.
2.14. Executive Compensation Committee
"Executive Compensation Committee" (also referred to as the
"Committee") means the Executive Compensation Committee of the Board of
Directors of Insteel Industries Inc., which administers the Plan.
2.15. Expected Improvement Factor
The annual increase in SV, above the average of the prior year's actual
and target SV, required to produce a Performance Factor of 1.00 or the
Target Bonus Percent.
2.16. Invested Capital
"Invested Capital" means total assets less non-interest bearing current
liabilities, and for the Year represents the average of each of twelve
(12) month end amounts.
2.17. Leverage Factor
"Leverage Factor" determines the sensitivity of the Bonus Award to
performance - the slope of the SV-Bonus Award Line.
2.18. Net Operating Profit After Tax
"Net Operating Profit After Tax" (also referred to as "NOPAT") means
operating income before financing costs and income taxes reduced by
income taxes which are computed by applying a statistical tax rate
appropriate to the jurisdiction(s) in which the Company operates. The
total Awards for all the incentive plans other than this Plan are
charged to operating income of the Company prior to the computation of
NOPAT.
2.19. Participant
"Participant" means an Eligible Employee who has been recommended for
participation in the Plan by management and approved by the Committee.
Designation as a Participant must be renewed annually.
2.20. Performance Factor
"Performance Factor" means that number described in Section 4.2 which
is multiplied by a Participant's Target Bonus Percent to arrive at such
Participant's Bonus Percent.
2.21. Plan
"Plan" means this 1995 Return on Capital Incentive Compensation Plan
for Key Members of Management, as it may be hereafter amended.
<PAGE> 4
2.22. Retirement
"Retirement" means termination of employment by a Participant for
whatever reason other than death or Disability after attainment of age
fifty-five (55), or, if prior to having attained age fifty-five (55),
only after having obtained prior permission of the Committee. A
Participant who has experienced a Retirement as defined herein shall be
termed a "Retiree."
2.23. Shareholder Value
"Shareholder Value," also referred to as "SV," for the Company means
the amount obtained by subtracting (i) a capital charge computed by
multiplying Invested Capital for such year by c*, from (ii) Net
Operating Profit After Tax for such year, or as follows: SV = Net
Operating Profit After Tax - (Invested Capital x c*).
2.24. Target SV
"Target SV" means that SV amount, whether positive, negative or zero
(0), which, if attained, produces a Performance Factor of one (1.000).
For any one Year, Target SV shall equal the sum of (i) the average of
prior Year's Target SV, and the prior Year's Actual SV and (ii) the
Expected Improvement Factor.
2.25. Target Bonus Amount
"Target Bonus Amount" means that dollar amount earned that results from
multiplying the Target Bonus Percent for the year by the Participant's
Base Salary for the same year.
2.26. Target Bonus Percent
"Target Bonus Percent" means Percent of Base Salary earned if actual SV
equals Target SV.
2.27. Year
"Year" means the fiscal year in respect of which performance is
measured under the Plan.
2.28. Administration of the Plan
The Executive Compensation Committee shall be the sole administrator of
the Plan. The Committee shall have full power to formulate additional
details and regulations and make interpretations for carrying out the
Plan. The Committee shall also be empowered to make any and all of the
determinations not herein specifically authorized which may be
necessary or desirable for the effective administration of the Plan.
Any decision or interpretation of any provision of this Plan adopted by
the Committee shall be final and conclusive.
3. Targets
3.1. Establishment of Target Bonus Percent
At the time a Participant commences participation in the Plan, there
shall be established for such Participant a Target Bonus Percent. The
Target Bonus Percent for such Participant for any future Year(s) may be
increased, decreased or left unchanged from the prior Year. Following
the end of each Year, the Target Bonus Percent for that Year will be
multiplied by the Base Salary of such Participant for that Year to
arrive at the Target Bonus Amount for such Participant. The Target
Bonus Amount will then be multiplied by the Performance Factor for that
Year to arrive at the amount of the Bonus Award, if any, and the amount
of the credit or debit to the Participant's Bonus Bank, if any.
4. Calculation of the Performance Factors, Awards, Bonus Banks and
Distributions
4.1. Timing of the Calculation
The calculations necessary to obtain the Performance Factor for the
Year most recently ended shall be made no later than December 15 of the
subsequent fiscal year. Such calculation shall be carried out in
accordance with this Section.
4.2. Calculation of the Performance Factor
The Performance Factor for the Year corresponds with the difference
between the Actual SV and Target SV in relation to the leverage factor
where such difference is calculated by subtracting (i) the Target SV
from (ii) the Actual SV for the Year. The Performance Factor shall be
multiplied by the Participant's Target Bonus Amount to arrive at such
Participant's Award and Bonus Bank credits or debits, if any, for such
Year.
<PAGE> 5
4.3. Calculation of Distributions
If the Performance Factor for the Year is greater than one, then the
Participant's Award Distribution for that Year's performance shall
equal the target bonus amount plus one-third of the Bonus Bank balance.
In addition, the Participant's Bonus Bank shall be credited with an
amount calculated consistent with Section 4.4.
If the Performance Factor for the Year is greater than zero (0) but
less than or equal to the Participant's Target Bonus Amount, then that
Performance Factor shall be multiplied by each Participant's Target
Bonus Amount and the result shall be each Participant's Award
Distribution for that Year's performance. In addition, if at the
beginning of the Year the Participant had a Bonus Bank balance
resulting from prior Years' performance of that Participating Unit, an
additional Distribution will be made from the Participant's Bonus Bank
in an amount which represents the lesser of (i) One-Third of the
Participant's Bonus Bank balance at the beginning of the Year or (ii)
an amount which when combined with the Award Distribution for that
Year's performance equals the Participant's Target Bonus Amount.
If the Performance Factor for the Year is zero (0), then the
Participant's Award Distribution for that Year's performance shall be
zero (0). However, if at the beginning of the Year, the Participant had
a Bonus Bank balance resulting from prior Years' performance, a
Distribution will be made from the Participant's Bonus Bank in an
amount which represents the lesser of (i) One-Third of the
Participant's Bonus Bank balance at the beginning of the Year or (ii)
an amount which equals the Participant's Target Bonus Amount.
If the Performance Factor for the Year is less than zero (0), then the
Participant's Award Distribution for that Year's performance shall be
zero (0). However, if subsequent to the completion of the calculation
described in Section 4.4, the Participant has a Bonus Bank balance
resulting from prior Years' performance, a Distribution will be made
from the Participant's Bonus Bank in an amount which represents the
lesser of (i) One-Third of the Participant's Bonus Bank balance
following the debit calculated consistent with Section 4.4 or (ii) an
amount which equals the Participant's Target Bonus Amount.
In the event the Target Bonus Percent of a Participant who is an active
employee is changed to zero (0) and such Participant's Bonus Bank
balance is greater than zero (0), then the Target Bonus Amount to be
used for Bonus Bank Distributions shall be that Target Bonus Amount of
such Participant for the Year immediately prior to the Year of such
change.
4.4. Calculation of the Credits and Debits to Participant's Bonus
Bank Accounts
If the Performance Factor for the Year is greater than one (1) for any
respective Participant, then a credit to the Participant's respective
Bonus Bank will be made for Two-Thirds of that amount by which the
product obtained by multiplying, (i) the Performance Factor for such
Year times (ii) the Participant's Target Bonus Amount, exceeds the
Participant's Target Bonus Amount. Credits to the Bonus Bank do not
qualify as Distributions for the purpose of any deferred compensation
plan(s) maintained by the Company.
If the Performance Factor for the Year is less than zero (0) for any
respective Participation Basis, then a debit to the Participant's
respective Bonus Bank will be made in an amount equal to the product
obtained by multiplying, (i) the Performance Factor for such Year by
(ii) the Participant's Target Bonus Amount; however, in no event shall
a Participant's Bonus Bank ever be reduced to less than zero (0).
4.5. Calculation of Award Distributions and Credits and
Debits to Participants' Bonus Banks When a
Participant Has Multiple Participation Bases
In the event a Participant has been assigned multiple Participation
Bases for a Year, then Awards, Bonus Banks, Performance Factors and
Target Bonus Amounts shall be calculated separately and independently
for each Participation Basis of such Participant.
Bonus Banks shall be maintained separately for credits and debits from
each Participation Basis. Debits from one Participation Basis may not
be charged against a Bonus Bank of another Participation Basis.
4.6. Changes in Participation Basis During the Year
In the event a Participant experiences a change in Participation Basis
during a Year, then Awards, Bonus Banks, Performance Factors and Target
Bonus Amounts shall be calculated separately and independently for each
<PAGE> 6
Participation Basis of such Participant using those portions of the
Participant's Base Salary actually paid for service while included in
each separate Participation Basis.
Bonus Banks shall be maintained separately for credits and debits from
each Participation Basis. Debits from one Participation Basis may not
be charged against a Bonus Bank of another Participation Basis.
Distribution(s) from the Bonus Bank for an individual who experiences a
change in Participation Basis will be the same as such Distribution(s)
would have been had there been no change in Base Salary, Target Bonus
Amount or Participation Basis, and such Distribution(s) from more than
one Participation Basis shall be made by applying Sections 4.3 and 4.4
separately and independently to each such Participation Basis.
4.7. Changes in Target Bonus Percent During the Year
In the event a Participant experiences a change in Target Incentive
Percent without experiencing a change in Participation Basis during a
Year, then Award calculations and Bonus Bank adjustments will be made
separately using those portions of the Participant's Base Salary
actually paid for service while participating at each separate Target
Bonus Percent.
Separate Bonus Bank accounts shall not be maintained because of changes
in a Participant's Target Bonus Percent. Total Bonus Bank Distributions
of such Participant may not exceed such Participant's Target Bonus
Amount subsequent to the change. In the event the new Target Bonus
Percent is zero (0), then the Target Bonus Amount to be used for Bonus
Bank Distributions shall be that Target Bonus Amount of the Year
immediately prior to the Year of such change.
4.8. Taxes: Withholding
To the extent required by law, the Company shall withhold from all cash
Distributions made hereunder any amount required to be withheld by the
federal and any state, provincial or local government.
5. Distributions Following Termination
5.1. Eligibility
A Participant who terminates prior to September 30 of a Year shall not
be eligible for any Distribution for such Year or any future
Distributions, unless such termination is by reason of Retirement,
death or Disability.
5.2. Distributions for the Year of Retirement, Disability
Distributions for a Participant for the Year of such Participant's
Retirement, death or Disability shall be on the same basis as for all
Other Participants.
5.3. Bonus Bank Distributions the Year Following the Year of
Retirement, Death or Disability
Bonus Bank Distributions to a Participant in the Year immediately
following the Year of such Participant's Retirement, death or
Disability shall be calculated in the same way as for all other
Participants, except that no adjustments for performance achieved
beyond the year of death or Disability shall be allowed in the case of
Participants who have experienced a termination by reason of death or
Disability. Adjustments to the Bonus Bank for individuals who have
experienced a Retirement will be the same as for all other Participants
for the Year of Retirement. Bonus Bank adjustments, if any, for the
Year immediately subsequent to the Year of Retirement for such
Participants may only be negative, and then only if the Actual ROC is
such that the Performance Factor for the Year subsequent to Retirement
is negative. Such calculations will be based upon the Participant's
Target Bonus Amount for the twelve months immediately preceding
retirement.
Complete Distribution of Bonus Banks of individuals who have
experienced a termination by reason of Retirement, death or Disability
shall be accomplished no later than the Distribution Date for the Year
following the Year of Retirement, death or Disability, even though such
Distribution may exceed twice the terminated Participant's Target
Incentive Amount.
6. Beneficiary Designation
The Participant shall have the right, at any time and from time to
time, to designate and/or change or cancel any person/persons or entity
as to his Beneficiary (both principal and contingent) to whom
Distribution of Award(s)
<PAGE> 7
and/or Bonus Bank(s) under this Plan shall be made in the event of such
Participant's death prior to a Distribution. Any Beneficiary change or
cancellation shall become effective only when filed in writing with the
Committee during the Participant's lifetime on a form provided by or
otherwise acceptable to the Company.
The filing of a new Beneficiary designation form will cancel all
Beneficiary designations previously filed. Any finalized divorce of a
Participant subsequent to the date of filing of a Beneficiary
designation form shall revoke any prior designation of the divorced
spouse as a Beneficiary. The spouse of a Participant domiciled in a
community property jurisdiction shall be required to join in any
designation of Beneficiary other than the spouse in order for the
Beneficiary designation to be effective.
If a Participant fails to designate a Beneficiary as provided above,
or, if such Beneficiary designation is revoked by divorce, or
otherwise, without execution of a new designation, or if all designated
Beneficiaries predecease the Participant, then the Distribution shall
be made to the Participant's estate.
7. Miscellaneous
7.1. Unsecured General Creditor
Participants and their beneficiaries, heirs, successors and assigns
shall have no legal or equitable rights, interests, or other claim in
any property or assets of the Employer. Any and all assets shall remain
general, unpledged, unrestricted assets of the Employer. The Company's
obligation under the Plan shall be that of an unfunded and unsecured
promise to pay money in the future, and there shall be no obligation to
establish any fund, any security or any otherwise restricted asset, in
order to provide for the payment of amounts under the Plan.
7.2. Obligations To The Employer
If a Participant becomes entitled to a Distribution under the Plan,
and, if, at the time of the Distribution, such Participant has
outstanding any debt, obligation or other liability representing an
amount owed to the Employer, then the Employer may offset such amounts
owing to it or any affiliate against the amount of any Distribution.
Such determination shall be made by the Committee. Any election by the
Committee not to reduce any Distribution shall not constitute a waiver
of any claim for any outstanding debt, obligation, or other liability
representing an amount owed to the Employer.
7.3. Nonassignability
Neither a Participant nor any other person shall have any right to
commute, sell, assign, transfer, pledge, anticipate, mortgage or
otherwise encumber, transfer, hypothecate or convey in advance of
actual receipt the amounts, if any, payable hereunder, or any part
thereof, which are, and all rights to which are, expressly declared to
be unassignable and nontransferable. No part of an Award and/or Bonus
Bank, prior to actual Distribution, shall be subject to seizure or
sequestration for the payment of any debts, Judgements, alimony or
separate maintenance owed by a Participant or any other person, nor
shall it be transferable by operation of law in the event of the
Participant's or any other persons bankruptcy or insolvency.
7.4. Employment or Future Eligibility to Participate Not Guaranteed
Nothing contained in this Plan nor any action taken hereunder shall be
construed as a contract of employment or as giving any Eligible
Employee or any Participant or any former Participant any right to be
retained in the employ of the Employer. Designation as an Eligible
Employee or as a Participant is on a year-by-year basis and may or may
not be renewed for any employment years not yet commenced.
7.5. Gender, Singular and Plural
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, or neuter, as the identity of the person or
persons may require. As the context may require, the singular may be
read as the plural and the plural as the singular.
7.6. Captions
The captions to the articles, sections, and paragraphs of this Plan are
for convenience only and shall not control or affect the meaning or
construction of any of its provisions.
<PAGE> 8
7.7. Applicable Law
This Plan shall be governed and construed in accordance with the laws
of the State of North Carolina.
7.8. Validity
In the event any provision of the Plan is held invalid, void, or
unenforceable, the same shall not affect, in any respect whatsoever,
the validity of any other provision of the Plan.
7.9. Notice
Any notice or filing required or permitted to be given to the Committee
shall be sufficient if in writing and hand delivered, or sent by
registered or certified mail, to the principal office of the Company,
directed to the attention of the President and CEO of the Company. Such
notice shall be deemed given as of the date of delivery or, if delivery
is made by mail, as of the date shown on the postmark on the receipt
for registration or certification.
8. Amendment and Termination of the Plan
8.1. Amendment
The Committee may at any time amend the Plan in whole or in part
provided, however, that no amendment shall be effective to affect the
Participant's right to designate a beneficiary.
8.2. Termination of the Plan
a. Employer's Right to Terminate. The Committee may at any
time terminate the Plan as to prospective earning of Awards,
if it determines in good faith that the continuation of the
Plan is not in the best interest of the Company and its
shareholders. No such termination of the Plan shall reduce any
Distribution already made.
b. Payments Upon Termination of the Plan. Upon any termination
of the Plan under this Section, Awards for future years shall
not be made. With respect to the Year in which such
termination takes place, the employer will pay to each
Participant the Participant's Award for such Year or partial
Year, less any applicable taxes on the 15th day of December in
the fiscal year following the year of termination of the Plan.
Bonus Bank Distributions shall be made in their entirety to
the Participants on the 15th day of December in the fiscal
year following the year of termination of the Plan,
notwithstanding that such final Distribution may be in excess
of twice a Participant's Target Bonus Amount.
IN WITNESS WHEREOF, this Insteel Industries, Inc. Return on
Capital Incentive Plan has been executed in behalf of the Company effective as
of the 1st day of October, 1995.
INSTEEL INDUSTRIES, INC.
/s/ H.O. Woltz III
----------------------------
H.O. Woltz III
President
Attest:
/s/ Gary D. Kniskern
- ------------------------------
Gary D. Kniskern, Secretary
<PAGE> 9
INSTEEL INDUSTRIES, INC.
1997 DECLARATION OF AMENDMENT TO
INSTEEL INDUSTRIES, INC.
RETURN ON CAPITAL INCENTIVE COMPENSATION PLAN
FOR KEY MEMBERS OF MANAGEMENT
THIS DECLARATION OF AMENDMENT, made this 18th day of November, 1997, by
INSTEEL INDUSTRIES, INC., a North Carolina corporation (the "Corporation"), to
the Insteel Industries, Inc. Return on Capital Incentive Compensation Plan for
Key Members of Management (the "Plan").
R E C I T A L S:
WHEREAS, the Corporation has established the Plan, the purposes of
which include improving the association between shareholder value of the
Corporation and incentive compensation paid to selected members of management of
the Corporation; and
WHEREAS, to accomplish the Plan's purposes, the Plan currently provides
for the distribution of cash payments or deferral amounts, or both, from bonus
awards and individual bonus accrual accounts to those Plan participants who
qualify for such distributions; and
WHEREAS, the Corporation has determined that the purposes of the Plan
would be better served if the Plan provided for distributions in the form of
cash or shares of the common stock (the "Common Stock") of the Corporation, or
both, as determined in accordance with Plan terms by the Executive Compensation
Committee (the "Committee") of the Board of Directors of the Corporation; and
WHEREAS, the Corporation has reserved 100,000 shares of Common Stock
for distribution pursuant to the Plan; and
WHEREAS, the Committee has authority to administer and amend the Plan;
NOW, THEREFORE, IT IS DECLARED, that, effective as of February 3, 1998,
the Plan shall be amended as follows:
1. The Plan is hereby amended to add new Section 2.7.1 immediately
following Section 2.7, as follows:
"2.7.1. Common Stock. "Common Stock" means the common stock of
the Company."
2. Section 2.9 of the Plan shall be deleted in its entirety and the
following shall be inserted in lieu thereof:
"2.9. Distribution. Distribution means the payment in cash or
shares of the Common Stock and/or the deferral amount payable in cash
or shares of Common Stock resulting from a Bonus Award or a Bonus Bank
or from a combination thereof."
3. The Plan is hereby amended to add a new Section 2.16.1 immediately
following Section 2.17, as follows:
"2.16.1 Fair Market Value. The "Fair Market Value" per share
of the Common Stock shall be determined in good faith by the Committee
in accordance with the following provisions: (i) if the shares of
Common Stock are listed for trading on the New York Stock Exchange or
the American Stock Exchange or included in the Nasdaq National Market,
the Fair Market Value shall
<PAGE> 10
be the closing sales price of the shares on the New York Stock Exchange
or the American Stock Exchange or as reported in the Nasdaq National
Market (as applicable) on the date immediately preceding the date as of
which the valuation is being made, or if there is no transaction on
such date, then on the trading date nearest preceding such date for
which closing price information is available and, provided further, if
the shares are quoted on the Nasdaq National Market, the Fair Market
Value shall be the mean between the high bid and low asked quotations
in the Nasdaq stock market on the date immediately preceding the date
as of which the valuation is being made; or (ii) if the shares of
Common Stock are not listed or reported in any of the foregoing, then
Fair Market Value shall be determined by the Committee 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."
4. The Plan is hereby amended to add a Section 5.4 immediately
following Section 5.3:
"5.4 Form of Distributions.
(i) The Committee shall have sole discretion to
determine whether distributions which are otherwise due and
payable shall be paid in cash or shares of Common Stock and to
determine whether such distributions shall be paid on a
current basis or on a deferred or installment basis (subject
to the provisions of Section 4.7 herein). The Committee shall
also have sole discretion to determine whether, and to what
extent, interest shall accrue on distributions that are paid
on a deferred or installment basis.
(ii) Distributions that are made in the form of
Common Stock shall be valued so that the Fair Market Value of
such shares of Common Stock equals that portion of the dollar
value of the participant's Bonus Award or Bonus Bank which the
Committee has determined shall be paid in Common Stock.
Valuation of the Common Stock shall be made on the first
trading day in December of each year. Certificates for shares
of Common Stock which are due and distributable to a
participant shall be issued to the participant (or his
beneficiary) as soon as practicable following the date such
distributions are due.
(iii) The distribution of shares of Common Stock
shall be subject to all applicable laws, rules and
regulations, and to such approval by any governmental or other
agencies, as may be required. No shares of Common Stock shall
be issued or distributed under the Plan unless and until all
legal requirements applicable to such issuance or distribution
have, in the opinion of counsel to the Company, been complied
with. In connection with any such issuance, distribution or
transfer, the person acquiring shares of Common Stock shall,
if requested by the Company, give assurances satisfactory to
the Company in respect to such matters as the Company may deem
desirable to assure compliance with all applicable legal
requirements.
(iv) To the extent required pursuant to Rule 16b-3
adopted under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or any successor statute or rule,
distributions in the form of Common Stock to persons subject
to Section 16 of the Exchange Act may not be disposed of for a
period of six months from the date of distribution of such
shares of Common Stock."
5. The following sentence shall be added to Section 7.1 after the last
sentence of such section, with the remainder of Section 7.1 being unchanged:
"Notwithstanding the foregoing, the Company may elect to segregate
assets in a trust or otherwise for the purpose of making payments under
the Plan, but such assets shall remain subject to the claims of
creditors of the Company and participants shall have no interest in or
claim against such assets as beneficiaries or otherwise."
<PAGE> 11
IN WITNESS WHEREOF, this Declaration of Amendment is executed on behalf
of Insteel Industries, Inc. as of the day and year first above written.
INSTEEL INDUSTRIES, INC.
By: /s/ H.O. Woltz III
--------------------------------------
H.O. Woltz III
President and Chief Executive Officer
ATTEST:
/s/ Gary D. Kniskern
- ----------------------------
Gary D. Kniskern
Secretary
[Corporate Seal]
<PAGE> 1
EXHIBIT 99.2
<PAGE> 2
DESCRIPTION OF
INSTEEL INDUSTRIES, INC.
DIRECTOR COMPENSATION PLAN
The Board of Directors has approved, subject, in part, to shareholder
approval, that the Insteel Industries, Inc. Director Compensation Plan be
adopted, effective February 3, 1998. The plan provides for the remuneration of
nonemployee directors for their service on the Board, as summarized below.
ANNUAL RETAINER AWARD
Under the plan, an annual retainer award will be paid to nonemployee
directors for service on the Board of Directors. The amount of the annual
retainer award for each director will be determined before (or as soon as
practicable following) the start of the retainer year by the Board (subject to
certain limitations, discussed below), and the amount of annual retainer awards
may vary from year to year. The retainer year will begin on the date of the
Annual Meeting of Shareholders at which directors are elected and end on the
date of the next following Annual Meeting of Shareholders at which directors are
elected. The retainer award may be paid in cash or in shares of Common Stock of
the Company, or a combination of cash and Common Stock, as determined by the
Board.
The designated cash portion of the retainer will be paid in equal
quarterly installments on or about March 31, June 30, September 30 and December
31. The designated stock portion of the retainer will be paid at the annual
meeting of the Board of Directors following the Annual Meeting of Shareholders
at which directors are elected. Each director's annual stock award will equal
the number of shares of Common Stock that have a fair market value equal (or as
close as possible) to the dollar value of the annual retainer award that has
been denominated in Common Stock. The fair market value will be determined as of
the close of business on the last trading day of the previous calendar year.
Nonemployee directors who are elected or appointed during a retainer year will
also be eligible for annual retainer awards as determined in the Board's
discretion, subject to plan terms. Unless otherwise provided by the Board in
connection with a grant of an award, each annual retainer award granted under
the plan shall be fully vested as of the date of grant of the award, except that
no director shall be entitled to any cash award quarterly installment payable
after the effective date of his or her resignation or removal as a director.
The Board has determined that the annual retainer award for each
nonemployee director for the retainer year commencing at the 1998 Annual Meeting
of Shareholders will be $4,800 and that this amount will be payable in cash only
(subject to adjustment by the Board in accordance with the plan). Pursuant to
the plan, the Board has authority to increase or otherwise adjust the amount of
an annual retainer award, including the amounts of each award payable in cash
and in stock, from year to year, subject, however, to the limitation that no
more than 50,000 newly issued shares will be available for distribution under
the plan. Shares distributed under the plan may be such newly issued shares or
shares acquired by open market or private purchases.
ADMINISTRATION
The plan will be administered by the Board of Directors, or upon its
delegation, by the Executive Committee of the Board. The plan may be amended,
suspended or terminated at any time by the Board, provided that (i) the consent
of a participant is necessary if any such action would adversely affect the
director's rights with respect to awards or fees previously earned, and (ii)
shareholder approval is required of an amendment only if required by applicable
laws, rules or regulations.
EFFECT ON DIRECTORS STOCK OPTION PLAN
Stock Options will continue to be granted to nonemployee directors as
specified in the 1994 Directors Stock Option Plan of Insteel Industries, Inc.
Under this plan, non-employee directors annually receive options to purchase
2,000 shares of Common Stock of the Company.
<PAGE> 3
RESTRICTED STATUS OF SHARES
Resale by the directors of the shares distributed to them under the
plan will be subject to Rule 144 under the Securities Act of 1933, as amended.
Under that Rule, directors holding shares issued pursuant to the plan may not
resell such shares on the open market for a period of one year after issuance,
unless the issuance of the shares under the plan is registered by the Company
with the Securities and Exchange Commission. After such one-year period, the
shares may be sold, as long as the Company is current with its periodic
reporting filings with the Commission and the director complies with certain
other regulatory matters in connection with the sale. If the issuance of the
shares under the plan is registered with the Commission, directors of the
Company, as "affiliates" of the Company, will nevertheless be required to comply
with Rule 144 in connection with any resale of such shares, except that the one
year holding period requirement of the Rule will not apply.
SHAREHOLDER APPROVAL FOR STOCK ISSUANCE
The rules of the New York Stock Exchange, on which the shares of Common
Stock are listed, require shareholder approval of the issuance of Common Stock
under the Plan. The Board of Directors believes that stock ownership by
directors should be encouraged and that it is in the best interests of the
Company to establish director compensation programs that are competitive with
other companies in order to attract the most qualified individuals for service
on the Board. For these reasons, the Board recommends that shareholders approve
this plan. The plan, coupled with the director stock option plans described
elsewhere in this Proxy Statement, will increase ownership of the Company's
stock by non-employee directors, will enhance their interest in the affairs of
the Company and will reward their service with potential increased value.
The shares covered by the plan will be listed on the New York Stock
Exchange subject to notice of issuance in accordance with the plan. Since the
shares will be issued as partial compensation, they will be fully paid when
issued.
