Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by
the Registrant x
Filed by
a party other than the Registrant o
Check the
appropriate box:
o
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Preliminary
Proxy Statement
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o
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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x
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Definitive
Proxy Statement
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o
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Definitive
Additional Materials
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o
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Soliciting
Material under § 240.14a-12
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Worthington Industries, Inc.
(Name of
Registrant as Specified In Its Charter)
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
o
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
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(1)
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Title
of each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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o
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Fee
paid previously with preliminary materials
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o
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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200 Old
Wilson Bridge Road
August
19, 2010
Dear
Fellow Shareholders:
On behalf
of the Board of Directors and employees of Worthington Industries, Inc. (the
“Company”), I cordially invite all shareholders to be present at the 2010 Annual
Meeting of Shareholders (the “Annual Meeting”) of the Company to be held on
Thursday, September 30, 2010, at Worthington Industries Headquarters, 200 Old
Wilson Bridge Road, Columbus, Ohio 43085, beginning at 2:00 p.m., Eastern
Daylight Time.
Details
of the business to be conducted at the Annual Meeting are provided in the
accompanying Notice of Annual Meeting of Shareholders and Proxy Statement, which
you are urged to read carefully. The Company’s 2010 Annual Report to
Shareholders is also being delivered to you and provides additional information
regarding the financial results of the Company for the fiscal year ended May 31,
2010. If you were a shareholder of record at the close of business on
August 10, 2010, you are entitled to vote in person or by proxy at the Annual
Meeting.
It is
important that your common shares be voted on matters that come before the
Annual Meeting. Whether or not you plan to attend the Annual Meeting,
I urge you to participate by completing, signing, dating and returning your
proxy card in the envelope provided. The prompt return of your proxy
card will help ensure that as many common shares as possible are represented at
the Annual Meeting. Alternatively, registered shareholders may
transmit voting instructions for their common shares electronically through the
Internet or by telephone by following the simple instructions on the proxy
card. For those shareholders unable to attend the Annual Meeting, a
live audio web cast will be available via Internet link at
www.worthingtonindustries.com.
Your
continuing interest in our Company is greatly appreciated.
Sincerely,
/s/John
P. McConnell
JOHN P.
McCONNELL
Chairman
of the Board and Chief Executive Officer
WORTHINGTON
INDUSTRIES, INC.
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
OUR SHAREHOLDERS:
Notice is
hereby given that the Annual Meeting of Shareholders (the “Annual Meeting”) of
Worthington Industries, Inc. (the “Company”) will be held at 2:00 p.m.,
Eastern Daylight Time, on Thursday, September 30, 2010, at Worthington
Industries Headquarters located at 200 Old Wilson Bridge Road, Columbus, Ohio
43085. For those shareholders unable to attend in person, a live
audio web cast will be available via Internet link at
www.worthingtonindustries.com. The Annual Meeting is being held for
the following purposes:
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(1)
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To
elect three directors, each to serve for a term of three years to expire
at the 2013 Annual Meeting of Shareholders;
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(2)
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To
approve the Worthington Industries, Inc. 2010 Stock Option Plan;
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(3)
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To
ratify the selection of KPMG LLP as the independent registered public
accounting firm of the Company for the fiscal year ending May 31, 2011;
and
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(4)
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To
transact any other business which properly comes before the Annual Meeting
or any adjournment.
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Your
Board of Directors recommends that you vote “FOR” the election of each of
the three director nominees listed in the Company’s Proxy Statement for the
Annual Meeting under the caption “PROPOSAL 1: ELECTION OF DIRECTORS;”
“FOR” the approval of
the Worthington Industries, Inc. 2010 Stock Option Plan; and “FOR” the
ratification of the selection of KPMG LLP as the Company’s independent
registered public accounting firm for the fiscal year ending May 31, 2011.
If you
were a shareholder of record, as shown by the transfer books of the Company, at
the close of business on August 10, 2010, you will be entitled to receive notice
of, and to vote at, the Annual Meeting or any adjournment of the Annual
Meeting. A copy of the Company’s 2010 Annual Report to Shareholders
accompanies this Notice.
WHETHER
OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN AND DATE THE
ACCOMPANYING PROXY CARD AND RETURN IT IN THE POSTAGE-PAID ENVELOPE PROVIDED AS
PROMPTLY AS POSSIBLE. ALTERNATIVELY, REFER TO THE INSTRUCTIONS ON THE
PROXY CARD FOR DETAILS ABOUT TRANSMITTING YOUR VOTING INSTRUCTIONS
ELECTRONICALLY VIA THE INTERNET OR BY TELEPHONE. Returning the proxy
card or transmitting your voting instructions electronically does not deprive
you of your right to attend the Annual Meeting and to vote your common shares in
person in respect of the matters to be acted upon at the Annual Meeting.
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By
Order of the Board of Directors,
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/s/Dale
T. Brinkman
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Dale
T. Brinkman
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Secretary
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Columbus,
Ohio
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August
19, 2010
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To
obtain directions to attend the Annual Meeting and vote in person, please
call Kim Bertino of the Worthington Industries Investor Relations
Department, at (614) 840-4082.
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PROXY
STATEMENT FOR THE
ANNUAL
MEETING OF SHAREHOLDERS OF
WORTHINGTON
INDUSTRIES, INC.
To
Be Held on Thursday, September 30, 2010
TABLE
OF CONTENTS
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Page
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General
Information about Voting
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1
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Notice
Regarding Internet Availability of Proxy Materials
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3
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Security
Ownership of Certain Beneficial Owners and Management
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3
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Corporate
Governance
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7
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Proposal
1: Election of Directors
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10
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Transactions
with Certain Related Persons
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21
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Executive
Compensation
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24
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Compensation
of Directors
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49
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Equity
Compensation Plan Information
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52
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Proposal
2: Approval of the Worthington Industries, Inc. 2010 Stock
Option Plan
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54
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Proposal
3: Ratification of the Selection of Independent Registered
Public Accounting Firm
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61
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Audit
Committee Matters
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62
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Householding
of Annual Meeting Materials
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64
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Shareholder
Proposals For 2011 Annual Meeting
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65
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Future
Electronic Access to Proxy Materials and Annual Report
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66
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Annual
Report on Form 10-K
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66
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Other
Business
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66
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Worthington
Industries, Inc. 2010 Stock Option Plan
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Appendix
I
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WORTHINGTON
INDUSTRIES, INC.
200
Old Wilson Bridge Road
Columbus,
Ohio 43085
(614)
438-3210
www.worthingtonindustries.com
PROXY
STATEMENT
Dated: August
19, 2010
FOR
THE ANNUAL MEETING OF SHAREHOLDERS
To
Be Held On September 30, 2010
GENERAL
INFORMATION ABOUT VOTING
This
Proxy Statement, along with the accompanying proxy card, is being furnished to
shareholders of Worthington Industries, Inc. (the “Company”) in connection with
the solicitation of proxies, on behalf of the Board of Directors of the Company
(the “Board”), for use at the Annual Meeting of Shareholders (the “Annual
Meeting”) to be held on Thursday, September 30, 2010, at 2:00 p.m., Eastern
Daylight Time, or any adjournment thereof. The Annual Meeting will be
held at Worthington Industries Headquarters located at 200 Old Wilson Bridge
Road, Columbus, Ohio 43085. This Proxy Statement summarizes
information you will need in order to vote.
As used
in this Proxy Statement, the term “Company” means Worthington Industries, Inc.
or, where appropriate, Worthington Industries, Inc. and its
subsidiaries. The term “common shares” means the Company’s common
shares, without par value. Other than common shares, there are no
voting securities of the Company outstanding.
Voting
at the Annual Meeting
Only
shareholders of record at the close of business on August 10, 2010 (the “Record
Date”) are entitled to receive notice of, and to vote at, the Annual
Meeting. The Company is first sending or giving this Proxy Statement
and the accompanying proxy card to those shareholders on or about August 19,
2010. The total number of issued and outstanding common shares on the
Record Date entitled to vote at the Annual Meeting was
79,244,171. Each shareholder is entitled to one vote on each matter
voted upon at the Annual Meeting for each common share
held. Shareholders do not have cumulative voting rights in the
election of directors.
To ensure
that your common shares will be voted at the Annual Meeting, please complete,
sign, date and promptly return the accompanying proxy card. A return
envelope, which requires no postage if mailed in the United States, has been
provided for your use. Alternatively, you may transmit voting
instructions electronically via the Internet or by using the toll-free telephone
number stated on the proxy card. The deadline for transmitting voting
instructions electronically via the Internet or telephonically is 11:59 p.m.,
Eastern Daylight Time, on September 29, 2010. The Internet and
telephone voting procedures are designed to authenticate shareholders’
identities, to allow shareholders to give their voting instructions, and to
confirm that shareholders’ voting instructions have been properly
recorded. If you vote through the Internet or by telephone, you
should understand that there may be costs associated with electronic access,
such as usage charges from Internet access providers and/or telephone companies,
that will be borne by you.
Those
common shares represented by properly executed proxy cards that are received
prior to the Annual Meeting and not revoked, or by properly authenticated voting
instructions transmitted electronically via the Internet or by telephone prior
to the deadline for transmitting those instructions and not revoked, will be
voted as directed by the shareholders. The common shares represented
by all valid forms of proxy received prior to the Annual Meeting which do not
specify how the common shares should be voted will be voted as recommended by
the Board, as follows: “ FOR
” the ratification of the selection of KPMG LLP as the Company’s
independent registered public accounting firm for the fiscal year ending May 31,
2011, and except in the case of broker non-votes, “ FOR ” each of the three
director nominees listed below under the caption “PROPOSAL
1: ELECTION OF DIRECTORS;” and “ FOR ” the approval of the
Worthington Industries, Inc. 2010 Stock Option Plan described below under the
caption “PROPOSAL 2: APPROVAL OF THE WORTHINGTON INDUSTRIES, INC.
2010 STOCK OPTION PLAN.” No appraisal rights exist for any action
proposed by the Company to be taken at the Annual Meeting.
Voting
of Common Shares Held in “Street Name”
Under the
applicable sections of the New York Stock Exchange (“NYSE”) Listed Company
Manual (the “NYSE Rules”), the ratification of the Company’s independent
registered public accounting firm is considered a “routine” item upon which
broker/dealers, who hold their clients’ common shares in “street name” may vote
the common shares in their discretion on behalf of their clients if those
clients have not furnished voting instructions within the required time frame
before the Annual Meeting.
Under
applicable NYSE Rules, the uncontested election of directors, and the approval
of the Worthington Industries, Inc. 2010 Stock Option Plan are not considered
“routine” items and broker/dealers may not vote on any non-routine item without
voting instructions from their clients. A “broker non-vote” occurs
when a broker/dealer, who holds its client’s common shares in “street name,”
signs and submits a form of proxy for such common shares and fails to vote such
common shares on a non-routine matter for which the client does not provide any
voting instructions because the broker/dealer does not have the authority to
vote on non-routine matters without such voting
instructions. Accordingly, if your common shares are held in street
name and you do not provide voting instructions to your broker/dealer as to how
to vote on these matters, your common shares will not be voted on any proposals
on which your broker does not have discretionary authority to vote.
Solicitation
of Proxies
Although
the Company is soliciting proxies by mailing the proxy materials to
shareholders, proxies may be solicited by directors, officers and employees of
the Company by additional mailings, personal contact, telephone, electronic
mail, facsimile or telegraph without additional compensation. In
addition, the Company has retained Broadridge Financial Solutions (formerly
ADP), located in Edgewood, New York, to aid in the solicitation of proxies with
respect to common shares held by broker/dealers, financial institutions and
other custodians, fiduciaries and nominees, for a fee of approximately $17,000,
plus out-of-pocket expenses. The Company will reimburse its transfer
agent, Wells Fargo Shareowner Services, as well as broker/dealers, financial
institutions and other custodians, fiduciaries and nominees, who are record
holders of common shares not beneficially owned by them, for their reasonable
costs in forwarding proxy materials to the beneficial owners of the common
shares entitled to vote at the Annual Meeting. The Company will bear
the costs of preparing, assembling, printing and mailing this Proxy Statement,
the accompanying proxy card and any other related materials, as well as all
other costs incurred in connection with the solicitation of proxies on behalf of
the Board, other than the Internet access fees and telephone service fees
described above.
Right
to Revoke Proxy
If you
are a registered shareholder, you may revoke your proxy at any time before it is
actually voted at the Annual Meeting by giving written notice of revocation to
the Secretary of the Company, by accessing the Internet site or using the
toll-free number stated on the proxy card prior to the deadline for transmitting
voting instructions electronically and telephonically and electing revocation as
instructed or by attending the Annual Meeting and giving notice of revocation in
person. You may also change your vote by choosing one of the
following options: executing and returning to the Company a later-dated proxy
card prior to or at the Annual Meeting; voting in person at the Annual Meeting;
submitting a later-dated electronic vote through the designated Internet site
prior to the deadline for transmitting voting instructions electronically; or
voting by telephone at a later date using the toll-free telephone number stated
on the proxy card prior to the deadline for transmitting voting instructions
telephonically. Attending the Annual Meeting will
not, by itself, revoke your previously-appointed proxy.
Quorum
and Tabulation of Voting Results
The
results of shareholder voting will be tabulated by the inspector of election
appointed by the Board for the Annual Meeting. A quorum for the
Annual Meeting is one-third of the outstanding common shares entitled to vote at
the Annual Meeting. Common shares represented by properly-executed
proxy cards returned to the Company prior to the Annual Meeting or represented
by properly-authenticated electronic votes recorded through the Internet or by
telephone will be counted toward the establishment of a quorum for the Annual
Meeting whether they are marked “Abstain,” “Against,” “For,” “For All,”
“Withhold All,” “For All Except,” or not at all.
NOTICE
REGARDING INTERNET AVAILABILITY OF PROXY MATERIALS
Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting of Shareholders of
Worthington Industries, Inc. to be Held on September 30, 2010:
This Proxy Statement, the Notice of Annual Meeting of
Shareholders and the Company’s 2010 Annual Report to Shareholders are available
at www.proxyvote.com.
To obtain
directions to attend the Annual Meeting and vote in person, please call Kim
Bertino of the Worthington Industries Investor Relations Department, at (614)
840-4082.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table furnishes as of the Record Date (unless otherwise noted below),
with respect to each person who is known to the Company to be the beneficial
owner of more than 5% of the outstanding common shares of the Company, the name
and address of such owner and the number and percentage of common shares
beneficially owned (as determined under Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)).
Name and Address of Beneficial Owner
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Amount and
Nature of
Beneficial Ownership
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Percent of
Outstanding
Common Shares (1)
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John
P. McConnell
200
Old Wilson Bridge Road
Columbus,
OH 43085
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18,047,279
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(2)
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22.5
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%
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Southeastern
Asset Management, Inc.
Longleaf
Partners Small-Cap Fund
O.
Mason Hawkins
6410
Poplar Ave., Suite 900
Memphis,
TN 38119
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6,708,400
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(3)
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8.5
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%
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BlackRock,
Inc.
40
East 52 nd
Street
New
York, NY 10022
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5,023,488
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(4)
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6.4
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%
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(1)
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The
“Percent of Outstanding Common Shares” is based on the sum of
79,244,171 common shares outstanding on the Record Date and the
number of common shares, if any, as to which the named person has the
right to acquire beneficial ownership upon the exercise of options which
are currently exercisable or which will first become exercisable within 60
days after the Record Date (collectively, “Currently Exercisable
Options”).
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(2)
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Includes
12,415,982 common shares held of record by JDEL, Inc. (“JDEL”), a Delaware
corporation. JDEL is a wholly-owned subsidiary of JMAC, Inc.
(“JMAC”), a private investment company substantially owned, directly or
indirectly, by Mr. McConnell and members of his family. The
directors of JDEL have granted Mr. McConnell sole voting and dispositive
power with respect to these 12,415,982 common shares. JDEL has
the right to receive the dividends from and the proceeds from the sale of
such 12,415,982 common shares. Includes 2,428,312 common shares
held of record by an independent corporate trustee in trust for the
benefit of Mr. McConnell and his sister. The independent
corporate trustee has voting and dispositive power; however, the
independent corporate trustee’s investment decisions are subject to the
prior approval or disapproval of Mr. McConnell, and accordingly Mr.
McConnell may be deemed to “share” dispositive power with the independent
corporate trustee. Mr. McConnell has the right to change the
trustee; however, any successor trustee appointed by
Mr. McConnell must be an independent corporate
trustee. Includes 79,225 common shares held by Mr. McConnell as
custodian for the benefit of his four children. Includes 3,329
common shares held by Mr. McConnell’s wife as custodian for the benefit of
her son. Includes 123,000 common shares held by The McConnell
Educational Foundation for the benefit of third parties, of which Mr.
McConnell is one of three trustees and shares voting and dispositive
power. Mr. McConnell disclaims beneficial ownership of these
123,000 common shares. Includes 118,000 common shares held by
The McConnell Family Trust of which Mr. McConnell is co-trustee and has
sole voting and dispositive power. Includes 255,875 common
shares held by the Margaret R. McConnell Trust f/b/o Margaret Kollis of
which Mr. McConnell is trustee and has sole voting and dispositive
power. Includes 442,600 common shares held by Mr. McConnell in
his capacity as co-executor of the Estate of John H.
McConnell. Mr. McConnell holds shared voting and investment
power over such 442,600 common shares. Also includes 983,000
common shares subject to Currently Exercisable Options. As of
August 10, 2010, 13,457,566 common shares held by JDEL, the Estate of John
H. McConnell and Mr. McConnell had been pledged as security to various
financial institutions, in connection with both investment and personal
loans.
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(3)
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Information
is based on Amendment No. 2 to Schedule 13G (the “Southeastern
Schedule 13G Amendment”) jointly filed with the Securities and Exchange
Commission (the “SEC”) on February 5, 2010 by Southeastern Asset
Management, Inc., a registered investment adviser (“Southeastern”),
Longleaf Partners Small-Cap Fund, a registered investment company and a
series of Longleaf Partners Fund Trust (“Longleaf”), and Mr. O. Mason
Hawkins (“Hawkins”), Chairman of the Board and Chief Executive Officer of
Southeastern. With respect to the 6,708,400 common shares
reported to be beneficially owned at December 31,
2009: Southeastern reported shared voting power and shared
dispositive power as to 6,581,000 common shares and sole dispositive
power, but no voting power, as to 127,400 common shares; and Longleaf
reported shared voting power and shared dispositive power as to 6,581,000
common shares. The common shares covered by the Southeastern
Schedule 13G Amendment were reported to be owned legally by Southeastern’s
investment advisory clients and none were owned directly or indirectly by
Southeastern or by Hawkins for his own account. In the event
Hawkins could be deemed to be a controlling person of Southeastern as a
result of his official positions with Southeastern, or ownership of its
voting securities, Hawkins expressly disclaimed the existence of such
control.
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(4)
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Information
is based on the Schedule 13G (the “BlackRock Schedule 13G”) filed
with the SEC on January 29, 2010 by BlackRock, Inc.
(“BlackRock”). With respect to the 5,023,488 common shares
reported to be beneficially owned at December 31, 2009, BlackRock reported
sole voting power and sole dispositive power as to all 5,023,488 common
shares.
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The
following table furnishes the number and percentage of outstanding common shares
beneficially owned (as determined under Rule 13d-3 under the Exchange Act) by:
(a) each current director of the Company; (b) each of the Company’s
director nominees; (c) each individual named in the “Fiscal 2010 Summary
Compensation Table” (the “named executive officers” or “NEOs”); and (d) all
current directors and executive officers of the Company as a group, in each case
as of the Record Date. The address of each of the current executive
officers and directors of the Company is c/o Worthington Industries, Inc., 200
Old Wilson Bridge Road, Columbus, Ohio 43085.
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Amount and Nature of
Beneficial Ownership (1)
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Name of Beneficial Owner
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Number of Common Shares
Presently Held and Which Can
Be Acquired Upon Exercise of
Currently Exercisable Options
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Percent of
Outstanding
Common
Shares (2)
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Theoretical Common Shares
Credited to Accounts in the
Company’s Deferred
Compensation Plans (3)
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Kerrii
B. Anderson
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5,436
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(4)
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*
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|
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—
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John
B. Blystone
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73,655
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(5)(6)
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|
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*
|
|
|
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—
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Michael
J. Endres
|
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117,650
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(5)(7)
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|
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*
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|
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39,305
|
|
Harry
A. Goussetis (8)
|
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149,292
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(9)
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|
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*
|
|
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9,584
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Peter
Karmanos, Jr.
|
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105,550
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(5)(10)
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|
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*
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|
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49,021
|
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John
R. Kasich
|
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55,550
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(5)(11)
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*
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14,287
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John
P. McConnell (8)
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18,047,279
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(12)
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22
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%
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—
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Carl
A. Nelson, Jr.
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53,550
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(5)(13)
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|
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*
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—
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Sidney
A. Ribeau
|
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55,550
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(5)(14)
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|
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*
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12,311
|
|
B.
Andrew Rose (8)
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|
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89,053
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(15)
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|
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*
|
|
|
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—
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Mark
A. Russell (8)
|
|
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112,491
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(16)
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*
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75,954
|
|
Mary
Schiavo
|
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59,561
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(5)(17)
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*
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845
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George
P. Stoe (8)
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229,978
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(18)
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*
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59,128
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|
All
Current Directors and Executive Officers as a Group (20 people)
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19,903,018
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(19)
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25
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%
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263,842
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|
* Denotes
ownership of less than 1% of the outstanding common shares.
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(1)
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Except
as otherwise indicated by footnote, each named beneficial owner has sole
voting power and sole dispositive power over the listed common shares or
shares such power with his or her spouse.
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(2)
|
The
“Percent of Outstanding Common Shares” is based on the sum of
(a) 79,244,171 common shares outstanding on the Record Date and
(b) the number of common shares, if any, as to which the named person
or group has the right to acquire beneficial ownership upon the exercise
of Currently Exercisable Options.
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(3)
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This
column lists the theoretical common shares credited to the bookkeeping
accounts of the named executive officers participating in the Worthington
Industries, Inc. Amended and Restated 2005 Non-Qualified Deferred
Compensation Plan (Restatement effective as of December 2008) and the
Worthington Industries, Inc. Non-Qualified Deferred Compensation Plan,
effective March 1, 2000 (collectively, the “Employee Deferral Plans”)
and also lists the theoretical common shares credited to the bookkeeping
accounts of the directors of the Company participating in the Worthington
Industries, Inc. Amended and Restated 2005 Deferred Compensation Plan for
Directors (Restatement effective as of December 2008) and the Worthington
Industries, Inc. Deferred Compensation Plan for Directors, as Amended and
Restated, effective June 1, 2000 (collectively, the “Director
Deferral Plans”). These theoretical common shares are not
included in the beneficial ownership totals. Under the terms of
both the Employee Deferral Plans and the Director Deferral Plans,
participants do not beneficially own, nor do they have voting or
dispositive power with respect to, theoretical common shares credited to
their respective bookkeeping accounts. While the participants
in the Employee Deferral Plans and the participants in the Director
Deferral Plans have an economic interest in the theoretical common shares
credited to their respective bookkeeping accounts, each participant’s only
right with respect to his or her bookkeeping account(s) (and the amounts
credited thereto) is to receive a distribution of cash equal to the fair
market value of the theoretical common shares credited to his or her
bookkeeping account(s) as of the latest valuation date determined in
accordance with the terms of the Employee Deferral Plans or the Director
Deferral Plans, as appropriate. For further information
concerning the Employee Deferral Plans, please see the discussion under
the caption “EXECUTIVE COMPENSATION –– Compensation Discussion and
Analysis –– Compensation Components –– Non-Qualified Deferred
Compensation” beginning on page 35 of this Proxy Statement and for further
information concerning the Director Deferral Plans, please see the
discussion under the caption “COMPENSATION OF DIRECTORS –– Director
Deferral Plans” beginning on page 49 of this Proxy Statement.
|
|
(4)
|
Includes
436 common shares held by Ms. Anderson’s spouse, who has sole voting power
and sole dispositive power as to the 436 common
shares. Beneficial ownership of these 436 common shares is
disclaimed by Ms. Anderson.
|
|
(5)
|
Includes
for each of the following directors of the Company an award of 2,900
restricted common shares made to such director on September 30,
2009: Mr. Endres; Mr. Karmanos; Mr. Kasich; Mr. Nelson; Mr.
Ribeau; and Ms. Schiavo. Mr. Blystone received an award of
restricted shares covering 4,350 common shares on that same date in
connection with his position as Lead Independent Director. The
restricted shares will be held in escrow by the Company and may not be
sold, transferred, pledged, assigned or otherwise alienated or
hypothecated until the restrictions thereon have
lapsed. Generally, the restrictions on the restricted shares
will lapse and the restricted shares will become fully vested one year
from the date of grant, on September 30, 2010, subject to the terms of
each restricted share award. Each director may exercise any
voting rights associated with the restricted shares during the restriction
period. In addition, any dividends or distributions paid with
respect to the common shares underlying the restricted shares will be held
by the Company in escrow during the restriction period and, at the end of
the restriction period, will be distributed or forfeited in the same
manner as the restricted shares with respect to which they were
paid. For further information concerning the terms of the
restricted shares granted to directors, please see the discussion under
the caption “COMPENSATION OF DIRECTORS –– Equity Grants” beginning on page
50 of this Proxy Statement.
|
|
(6)
|
Includes
51,925 common shares subject to Currently Exercisable Options.
|
|
(7)
|
Includes
10,000 common shares held by Mr. Endres’ wife, who has sole voting power
and sole dispositive power as to the 10,000 common
shares. Beneficial ownership of these 10,000 common shares is
disclaimed by Mr. Endres. Also includes 37,950 common shares
subject to Currently Exercisable Options.
|
|
(8)
|
Individual
named in the “Fiscal 2010 Summary Compensation Table” on page 39 of this
Proxy Statement.
|
|
(9)
|
Includes
127,500 common shares subject to Currently Exercisable Options.
|
|
(10)
|
Includes
61,600 common shares held by Mr. Karmanos as trustee for a living trust
and 43,950 common shares subject to Currently Exercisable Options.
|
|
(11)
|
Includes
47,950 common shares subject to Currently Exercisable Options.
|
|
(12)
|
See
footnote (2) to preceding table.
|
|
(13)
|
Includes
36,950 common shares subject to Currently Exercisable Options.
|
|
(14)
|
Includes
43,950 common shares subject to Currently Exercisable Options.
|
|
(15)
|
Includes
20,000 common shares held by Mr. Rose as custodian for his two
children. Also includes 11,000 common shares subject to
Currently Exercisable Options.
|
|
(16)
|
Includes
98,000 common shares subject to Currently Exercisable Options.
|
|
(17)
|
Includes
41,950 common shares subject to Currently Exercisable Options.
|
|
(18)
|
Includes
223,000 common shares subject to Currently Exercisable Options.
|
|
(19)
|
The
number of common shares shown as beneficially owned by the Company’s
current directors and executive officers as a group includes
2,293,425 common shares subject to Currently Exercisable Options.
|
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires that the Company’s directors and executive
officers and greater-than-10% beneficial owners of the Company’s outstanding
common shares file reports with the SEC reporting their initial beneficial
ownership of common shares and any subsequent changes in their beneficial
ownership. Specific due dates for such reports have been established
by the SEC and the Company is required to disclose in this Proxy Statement any
late report or known failure to file a required report. To the
Company’s knowledge, based solely on a review of the copies of the reports
furnished to the Company and written representations that no other reports were
required, the Company believes that, during the fiscal year ended May 31,
2010 (“Fiscal 2010”), all Section 16(a) filing requirements applicable to the
Company’s directors and executive officers and greater-than-10% beneficial
owners of the Company’s outstanding common shares were complied with, except for
Harry A. Goussetis and George P. Stoe, executive officers of the Company, who
each filed one late Form 4 reporting one transaction and Mark A. Russell, an
executive officer of the Company, who filed two late Forms 4, each reporting one
transaction.
CORPORATE
GOVERNANCE
Corporate
Governance Guidelines
Upon the
recommendation of the Nominating and Governance Committee, in accordance with
applicable NYSE Rules, the Board has adopted the Corporate Governance Guidelines
to promote the effective functioning of the Board and its committees and to
reflect the Company’s commitment to the highest standards of corporate
governance. The Board, with the assistance of the Nominating and
Governance Committee, periodically reviews the Corporate Governance Guidelines
to ensure they comply with all applicable requirements.
The
Corporate Governance Guidelines are available on the “Corporate Governance” page
of the “Investor Relations” section of the Company’s web site located at
www.worthingtonindustries.com.
Code
of Conduct
In
accordance with applicable NYSE Rules and the applicable rules and regulations
of the SEC (the “SEC Rules”), the Board adopted the Worthington Industries, Inc.
Code of Conduct (the “Code of Conduct”), which is available on the “Corporate
Governance” page of the “Investor Relations” section of the Company’s web site
located at www.worthingtonindustries.com.
Director
Independence
Pursuant
to the Corporate Governance Guidelines, a director is determined to be an
independent director if he or she is independent of management and has no
material relationship with the Company (or any of its subsidiaries) either
directly or as a partner, shareholder or officer of an organization that has
such a relationship with the Company (or any of its subsidiaries), as
affirmatively determined by the Board. The Board observes all
additional criteria for independence established by NYSE or required under SEC
Rules or other governing laws and regulations.
The Board
has been advised of the nature and extent of any direct or indirect personal and
business relationships between the Company (including its subsidiaries) and
Kerrii Anderson, individually (the “Independent Nominee”), or John B. Blystone,
Michael J. Endres, Peter Karmanos, Jr., John R. Kasich, Carl A. Nelson, Jr.,
Sidney A. Ribeau or Mary Schiavo, individually (collectively, the
“Independent Directors”), or any entities for which the Independent Nominee or
any Independent Director is a partner, officer, employee or
shareholder. The Board has reviewed, considered and discussed such
relationships, and the compensation that the Independent Nominee and each
Independent Director receives, directly or indirectly, from the Company, in
order to determine whether the Independent Nominee and each Independent Director
meet the independence requirements of the Corporate Governance Guidelines, the
applicable NYSE Rules and the applicable SEC Rules. The Board has
affirmatively determined that (a) neither the Independent Nominee nor any of the
Independent Directors has any relationship with the Company, either directly or
indirectly, including, without limitation, any commercial, industrial, banking,
consulting, legal, accounting, charitable or familial relationship, which:
(i) interfered or may interfere with his or her independence from
management and the Company or the exercise of his or her independent judgment;
(ii) impaired or would be inconsistent with a determination of independence
under applicable NYSE Rules and SEC Rules or (iii) would impair his or her
independence under the Corporate Governance Guidelines, and that (b) the
Independent Nominee would qualify if elected to the Board, and each of the
Independent Directors qualifies, as an “Independent Director” under the
Corporate Governance Guidelines. As required by applicable NYSE
Rules, the Independent Directors represent a majority of the Company’s
directors. Mr. McConnell does not qualify as independent under
applicable NYSE Rules or SEC Rules or the Corporate Governance Guidelines
because he is an executive officer of the Company.
Barring
any unusual circumstances, the Board has determined that a director’s
independence would not be impaired if: (a) the director is an
executive officer or an employee (or his or her immediate family member is an
executive officer or employee) of a company that makes payments to, or receives
payments from, the Company for property or services performed in the ordinary
course of business in an amount which, in any single fiscal year, does not
exceed the greater of $1 million or 2% of the Company’s or such other company’s
consolidated gross revenues; (b) the Company makes contributions to a charitable
organization for which the director (or his or her immediate family member)
serves as either a member of the board or an executive officer if the
contributions, in any single fiscal year, do not exceed the greater of $1
million or 2% of such charitable organization’s consolidated gross revenues; or
(c) the Company uses facilities (dining, clubs, etc.) in which the director is a
greater than 5% owner if charges to the Company are consistent with charges paid
by others and are fair, reasonable and consistent with similar services
available for similar facilities.
The Board
specifically considered a number of circumstances in the course of reaching the
conclusion that the Independent Nominee and each of the current Independent
Directors qualifies as independent under the Corporate Governance Guidelines as
well as applicable NYSE Rules and SEC Rules, including the relevant
relationships described below under the caption “TRANSACTIONS WITH CERTAIN
RELATED PERSONS” beginning on page 21 of this Proxy Statement.
On April
13, 2010, Mr. Endres, through his related trust, purchased $100,000 principal
amount of the Company’s 6.50% Notes due 2020 in the Company’s underwritten
public offering of $150 million aggregate principal amount of its 6.50% Notes
due 2020 completed on April 13, 2010.
Nominating
Procedures
The
Board’s Nominating and Governance Committee has responsibility for providing
oversight on a broad range of issues surrounding the composition and operation
of the Board, including identifying candidates qualified to become directors and
recommending director nominees to the Board.
When
considering candidates for the Board, the Nominating and Governance Committee
evaluates the entirety of each candidate’s credentials but does not have
specific eligibility requirements or minimum qualifications which must be met by
a Nominating and Governance Committee recommended nominee and has not adopted a
formal policy with regard to the consideration of diversity
in identifying director nominees. However, the Corporate
Governance Guidelines provide that the retirement age for directors is 70, and a
director is to submit his or her resignation to be effective at the conclusion
of the three-year term immediately after attaining age 70. The
Nominating and Governance Committee considers those factors it deems
appropriate, including, but not limited to, independence, judgment, skill,
diversity, strength of character, experience with businesses and organizations
of comparable size or scope, experience as an executive of or adviser to public
and private companies, experience and skill relative to other Board members,
specialized knowledge or experience, and the desirability of the candidate’s
membership on the Board and any committees of the Board. Depending on
the current needs of the Board, the Nominating and Governance Committee may
weigh certain factors more or less heavily. The Nominating and
Governance Committee does, however, believe that all members of the Board should
have strong character and integrity, a reputation for working constructively
with others, sufficient time to devote to Board matters and no conflict of
interest that would interfere with his or her performance as a director.
The
Nominating and Governance Committee considers candidates for the Board from any
reasonable source, including shareholder recommendations, but does not evaluate
candidates differently based on the source of the
recommendation. Pursuant to its charter, the Nominating and
Governance Committee has the authority to retain consultants and search firms to
assist with the process of identifying and evaluating director candidates and to
approve the fees and other retention terms for any such consultant or search
firm. The Nominating and Governance Committee has never used a
consultant or search firm for such purpose, and, accordingly, the Company has
paid no such fees.
Shareholders
may recommend director candidates for consideration by the Nominating and
Governance Committee by sending the recommendation to the Chair of the
Nominating and Governance Committee, in care of the Company, to the Company’s
executive offices at 200 Old Wilson Bridge Road, Columbus, Ohio
43085. The recommendation must include the candidate’s name, age,
business address, residence address and principal occupation. The
recommendation must also describe the qualifications, attributes, skills or
other qualities possessed by the recommended director candidate. A
written statement from the candidate consenting to serve as a director, if
elected, and a commitment by the candidate to meet personally with Nominating
and Governance Committee members must accompany any such recommendation.
The
Board, taking into account the recommendations of the Nominating and Governance
Committee, selects nominees for election as directors at each Annual Meeting of
Shareholders. In addition, shareholders wishing to nominate directors
for election may do so, provided they comply with the nomination procedures set
forth in the Company’s Code of Regulations and applicable SEC
Rules. In order to nominate an individual for election as a director
at a meeting, a shareholder must give written notice of the shareholder’s
intention to make such nomination. The notice must be sent to the
Company’s Secretary, either delivered in person to, or mailed to and received
at, the Company’s principal executive offices at 200 Old Wilson Bridge Road,
Columbus, Ohio 43085 not less than 14 days or more than 50 days prior to any
meeting called for the election of directors. However, if notice or
public disclosure of the date of the meeting is given or made less than 21 days
prior to the meeting, the shareholder notice must be received by the Company’s
Secretary not later than the close of business on the seventh day following the
day on which notice of the date of the meeting was mailed or publicly
disclosed. The Company’s Secretary will deliver any shareholder
notice received in a timely manner to the Nominating and Governance Committee
for review. Each shareholder notice must include the following
information as to each individual the shareholder proposes to nominate for
election or re-election as a director: (a) the name, age,
business address and, if known, residence address of the proposed nominee;
(b) the principal occupation or employment of the proposed nominee;
(c) the number of common shares of the Company beneficially owned by the
proposed nominee; and (d) any other information relating to the proposed
nominee that is required to be disclosed concerning nominees in proxy
solicitations under applicable SEC Rules, including the individual’s written
consent to be named in the proxy statement as a nominee and to serve as a
director, if elected. The nominating shareholder must also provide
(i) the name and address of the nominating shareholder and (ii) the
number of common shares of the Company beneficially owned by the nominating
shareholder. No individual may be elected as a director unless he or
she has been nominated by a shareholder in the manner described above or by the
Board or the Nominating and Governance Committee of the Board.
Compensation
Committee Interlocks and Insider Participation
The
Compensation and Stock Option Committee of the Board (the “Compensation
Committee”) is currently comprised of John B. Blystone (Chair), Michael J.
Endres, Peter Karmanos, Jr. and John R. Kasich. Each of Messrs.
Blystone, Endres, Karmanos and Kasich also served on the Compensation Committee
throughout Fiscal 2010. None of the members of the Compensation
Committee is a present or past employee or officer of the
Company. During Fiscal 2010 and through the date of this Proxy
Statement, none of the Company’s executive officers has served on the board of
directors or compensation committee (or other committee performing equivalent
functions) of any other entity, one of whose executive officers served on the
Company’s Board or Compensation Committee. Mr. Karmanos is the only
member of the Compensation Committee who has a relationship with the Company
requiring disclosure under Item 404 of SEC Regulation S-K.
During
Fiscal 2010, the Company paid Compuware Corporation (“Compuware”), a software
development company of which Mr. Karmanos is Chairman of the Board, Chief
Executive Officer and a 5.4% shareholder, approximately $1.6 million, primarily
for Compuware’s Covisint EDI service and for Compuware’s services providing
software quality assurance and for project management services in connection
with the Company’s Oracle ERP system and other projects. Mr. Karmanos serves as
a director of the Company. Compuware was selected for these services from a
number of competing service providers which had responded to the Company’s
request for proposal and were interviewed by the Company. Compuware’s selection
was based on a number of factors including price, experience and capabilities.
Compuware supplies its Covisint services the for the Company’s EDI
communications. Compuware also supplies resources for project coordination,
organization and testing, and generally assists the Company in ensuring that the
Oracle ERP system is installed, tested, operated and integrated with the
Company’s information technology system in a proper manner. Compuware also
provides general information technology consulting services, as requested by the
Company. The payments made to Compuware for Fiscal 2010 amounted to
approximately 0.18% of Compuware’s consolidated total revenues for its most
recent fiscal year, and approximately 0.08% of the Company’s consolidated net
revenues for Fiscal 2010.
Communications
with the Board
The Board
believes it is important for shareholders and other interested persons to have a
process by which to send communications to the Board and its individual members,
including the Lead Independent Director. Accordingly, shareholders and other
interested persons who wish to communicate with the Board, the non-management
directors as a group, the Lead Independent Director or any other individual
director may do so by addressing such correspondence to the name(s) of the
specific director(s), to the “Non-Management Directors” as a whole or to the
“Board of Directors” as a whole, and sending it in care of the Company, to the
Company’s executive offices at 200 Old Wilson Bridge Road, Columbus, Ohio 43085.
The mailing envelope must contain a clear notation indicating that the enclosed
correspondence is a “Shareholder/Interested Person – Non-Management Director
Communication,” “Shareholder/Interested Person – Board Communication,”
“Shareholder/Interested Person – Lead Independent Director Communication,” or
“Shareholder/Interested Person – Director Communication,” as appropriate. All
such correspondence must identify the author as a shareholder or other
interested person (identifying such interest) and clearly indicate whether the
communication is directed to all members of the Board, to the Non-Management
Directors as a whole or to a certain specified individual director(s). Copies of
all such correspondence will be circulated to the appropriate director(s).
Correspondence marked “personal and confidential” will be delivered to the
intended recipient(s) without opening. There is no screening process in respect
of communications from shareholders or other interested persons. The process for
forwarding communications to the appropriate Board member(s) has been approved
by the Company’s Independent Directors.
Questions,
complaints and concerns may also be submitted to Company directors by telephone
through the Business Ethics Help Line by calling 877-263-9893 inside the United
States and 770-613-6395 outside the United States.
PROPOSAL
1: ELECTION OF DIRECTORS
There are
nine director positions on the Board – three in the class whose terms
expire at the Annual Meeting and who are to be elected for terms expiring at the
Annual Meeting of Shareholders in 2013; three in the class whose terms expire at
the Annual Meeting of Shareholders in 2011; and three in the class whose terms
expire at the Annual Meeting of Shareholders in 2012.
The Board
proposes that the three director nominees named in the summary below, be elected
as directors at this Annual Meeting of Shareholders. Each individual
elected as a director at the Annual Meeting will hold office for a three-year
term, expiring at the Annual Meeting of Shareholders in 2013 and until his or
her successor is duly elected and qualified, or until his or her earlier death,
resignation or removal from office. The individuals named as proxies
in the form of proxy solicited by the Board intend to vote the common shares
represented by the proxies received under this solicitation for the Board’s
nominees, unless otherwise instructed on the form of proxy. If any
nominee becomes unable to serve or for good cause will not serve as a candidate
for election as a director, the individuals designated to vote the proxies will
have full discretion to vote the common shares represented by the proxies they
hold for the election of the remaining nominees and for the election of any
substitute nominee designated by the Board, following recommendation by the
Nominating and Governance Committee. The Board has no reason to
believe that any of the nominees of the Board will be unable to serve or for
good cause will not serve as a director of the Company if elected.
Information Concerning Nominees and
Directors
The
information set forth below, concerning the age, principal occupation, other
affiliations and business experience of each director has been furnished to the
Company by such director as of August 10, 2010. Except where otherwise
indicated, each director has had the same principal occupation for the last five
years. There are no family relationships among any of the current
directors, director nominees and executive officers of the Company.
Nominees
Standing for Election to the Board at the Annual Meeting
Kerrii
B. Anderson
Kerrii B.
Anderson, age 53, has been a private investor and board advisor since September
2008. Prior to that time, she served as Chief Executive Officer and
President of Wendy’s International, Inc., a restaurant operating and franchising
company, from November 2006 until September 2008 when that company merged with
Triarc Companies, Inc. to form Wendy’s/Arby’s Group, Inc. She served
as Wendy’s Interim Chief Executive Officer and President from April to November
2006 and as its Executive Vice President and Chief Financial Officer from 2000
to April 2006. Previously, Ms. Anderson served as Senior Vice
President and Chief Financial Officer of M/I Schottenstein Homes, Inc. (now
known as M/I Homes, Inc.), a builder of single-family homes, from 1987 to 2000.
Ms. Anderson also serves as a member of the board of directors of Chiquita
Brands International, where she is a member of the Audit Committee and the
Compensation Committee, Laboratory Corporation of America Holdings, where she is
chairperson of the Audit Committee and a member of the Compensation Committee,
and P. F. Chang’s China Bistro, Inc., where she is a member of the Audit
Committee. Ms. Anderson serves on the Finance Committee of The Columbus
Foundation and OhioHealth Corporation. Ms. Anderson also
previously served as a member of the board of directors and Audit Committee of
Lancaster Colony Corporation from 1998 through 2005. She served as a
director of Wendy’s International, Inc. from 2006 until September 30, 2008.
Ms. Anderson has a strong record of leadership in operations and strategy. She
is a Certified Public Accountant and would qualify as an “audit committee
financial expert,” as defined by applicable SEC Rules, given her experience as
Chief Executive Officer and Chief Financial Officer of Wendy’s International,
Inc. and Chief Financial Officer of M/I Schottenstein Homes, Inc. She has
extensive corporate governance experience through her service on other public
company boards. Her extensive experience in accounting and financial
reporting and analysis and prior experience as a chief executive officer of a
public company and chief financial officer of several public companies, in
addition to other public company board service, make Ms. Anderson particularly
well-suited to become one of our directors and a member of the Audit Committee
if she is elected to the Board.
John
P. McConnell
John P.
McConnell, age 56, has served as the Company’s Chief Executive Officer since
June 1993, as a director of the Company continuously since 1990, and as Chairman
of the Board of the Company since September 1996. He has also served
in various positions with Worthington Industries since 1975. Mr.
McConnell also serves as the Chair of the Executive Committee. He
served as director of Alltel Corp. from 1990 to November 16, 2007, and as Chair
of its Compensation Committee and member of Audit Committee for part of that
time.
Mr. McConnell brings solid public
company and overall management and operations experience as Chief Executive
Officer and Chairman of the Board. In addition, in his more than 30
years of service to the Company, Mr. McConnell has served in various roles with
the Company spanning not only executive management, but prior to that time, in
production, sales, human resources and management at plant, business unit and
corporate levels.
Mary
Schiavo
Mary
Schiavo, age 54, has served continuously as a director of the Company since 1998
and is a member of the Audit Committee and the Nominating and Governance
Committee. Ms. Schiavo has been a partner in the law firm of Motley
Rice LLC, since October 2003. Ms. Schiavo was an attorney with a law
firm in Los Angeles, California, from 2002 to October 2003. Ms.
Schiavo served as a professor at The Ohio State University, College of
Engineering, Department of Aerospace Engineering and Aviation and also as a
Consultant for NBC News from 1997 to 2002. Ms. Schiavo served as Inspector
General for the U. S. Department of Transportation for six years, Assistant
Secretary of Labor of the U.S. for one year and as a White House Fellow for one
year. Ms. Schiavo was responsible with auditing and oversight
responsibility over a multibillion dollar government agency. Ms.
Schiavo has gained in-depth knowledge of the Company’s business and structure
from her more than ten years of service as a director. Ms. Schiavo
received a B.A. from Harvard University, a Masters of Arts from The
Ohio State University, and a Juris Doctor from New York University.
She was previously an elected director of the Harvard University Alumni
Association and a member of the President's Council on Integrity and Efficiency
in the federal government. Ms. Schiavo’s legal and governmental
experience enable her to bring a unique and valuable perspective to the Board.
Directors
Whose Terms Continue Until the 2011 Annual Meeting of Shareholders
Michael
J. Endres
Michael
J. Endres, age 62, has served continuously as a director of the Company since
1999 and is a member of the Executive Committee, the Audit Committee and the
Compensation Committee. Mr. Endres serves as a partner in Stonehenge
Financial Holdings, Inc., a private equity investment firm he co-founded in
August 1999. His duties include, among other things, the examination of
specific company financial characteristics, balance sheet and income statement
analysis, as well as industry growth rates and trends, and managing the
acquisition and disposition of firm's investments. Mr. Endres has served
as a director of Huntington Bancshares Incorporated since April 26, 2003 and a
member of its Executive Committee and the Risk Committee. Mr. Endres has
served as a director of Tim Hortons Inc. since 2006 and as Chair of the Audit
Committee and a member of the Executive Committee. Mr. Endres served as a
director for ProCentury Corporation from 2003 to 2007 during which time he
served on the Compensation Committee. He serves on the Board of OhioHealth
Corporation and on the Advisory Board for the American Heart Association
(Central Ohio Chapter). Mr. Endres received a B.S. from Miami
University. Mr. Endres has a depth of experience in equity investing,
business development, strategic initiatives and acquisitions, financial
analysis, leadership and management, and as a director of various public
companies. This experience, along with this financial expertise and
his history as a director with the Company make him a valuable asset to the
Board and its various committees.
Peter
Karmanos, Jr.
Peter
Karmanos, Jr., age 67, has served continuously as a director of the Company
since 1997, is the Chair of the Nominating and Governance Committee and is a
member of the Executive Committee and the Compensation Committee. Mr.
Karmanos has held the position of Chairman of the Board, Chief Executive
Officer, Co- Founder and director of Compuware, a software development company
since its inception in April 1973. Mr. Karmanos served as President
of Compuware Corporation from October 2003 to March 2008. Mr. Karmanos has the
entrepreneurial spirit that built a billion dollar company from a start-up and
the business acumen of the Chairman and Chief Executive Officer of an S&P
500 corporation. Mr. Karmanos has also served as a director for
Taubman Centers, Inc. since 2000 and is also a member of their Compensation
Committee. He serves as a director for the Barbara Ann Karmanos
Cancer Institute, Detroit Renaissance, North American Hockey League, Detroit 300
Conservancy and Care Tech Solutions. Mr. Karmanos has a wealth of
public company management and information technology experience. This
includes extensive skill and background dealing with the growth, operation and
management of a large public company as its co-founder and Chief Executive
Office. In addition, his skills and expertise in information technology bring
valuable insight to the Board.
Carl
A. Nelson, Jr.
Carl A.
Nelson, Jr., age 65, has served continuously as a director of the Company since
2004, and is the Chair of the Audit Committee. Mr. Nelson was a partner
with Arthur Andersen, LLP and retired in February 2002 after 31 years of
service. Mr. Nelson had served as Managing Partner of the Arthur Andersen
Columbus, Ohio office, and was the leader of the firm’s consulting services for
the products industry in the United States. Mr. Nelson was a director of
Dominion Homes Inc. and served as Chair of the Audit Committee and a member of
the Governance Committee from 2003 until June 2008, when he chaired a special
committee of the board to take the company private. Currently, Mr. Nelson
serves on the board of Star Leasing, a $70 million ESOP owned company that
leases semi trailers through ten facilities across seven states. He has
served on the board or has been an investor in several other small
businesses. Mr. Nelson is a Certified Public Accountant and a member of
The Ohio Society of Certified Public Accountants and the American Institute of
Certified Public Accountants. Mr. Nelson received his BS in Accounting from The
Ohio State University and a Masters of Business Administration from the
University of Wisconsin. Mr. Nelson has taught in the MBA and executive
education programs at The Ohio State University and is a member of the Dean’s
Advisory Council for the Fisher College of Business at Ohio State. Mr.
Nelson has significant public company accounting and financial expertise. Mr.
Nelson has vast experience as a business consultant on a variety
of projects involving areas such as large scale
technology implementation, defining strategic initiatives, strategic
planning and significant change requirements. As an audit committee
financial expert, Mr. Nelson has served the Board well as the Chairman of the
Audit Committee since 2004.
Directors
Whose Terms Continue Until the 2012 Annual Meeting of Shareholders
John
B. Blystone
John B.
Blystone, age 57, has served continuously as a director of the Company since
1997 and as the Lead Independent Director of the Company since January
2007. He is the Chair of the Compensation Committee and a member of
the Executive Committee. Mr. Blystone served as Chairman of the
Board, President and Chief Executive Officer of SPX Corporation, a global
provider of technical products and systems, industrial products and services,
flow technology, cooling technologies and services and service solutions, from
December 1995 to December 9, 2004, when he retired; and as a director of SPX
Corp. from December 1995 to December 9, 2004. From 1991 to 1995, Mr.
Blystone served in various managerial and operating roles of The General
Electric Company. In August 2010, Mr. Blystone was named
Chairman of the Board of Freedom Group, Inc., which manufactures and markets
firearms, ammunition, and related products. Mr. Blystone served as
Chairman of the Board of Inrange Technologies Corporation from 2000 to
2003. Mr. Blystone serves as a director for Blystone Consulting, LLC
and Blystone Investments, LLC and as General Partner of Blystone Capital
Partners. Mr. Blystone graduated from the University of
Pittsburgh. Mr. Blystone has extensive business experience in
managing and operating both domestic and international operations, including as
a chief executive officer of a large public company. He has expertise
in acquisitions, financial and business analysis, and in generally managing
issues that face a large public company. Mr. Blystone’s business
acumen, his long service on our Board, and his collegial style and leadership
resulted in his election as the Lead Independent Director of the Company.
John
R. Kasich
John R.
Kasich, age 58, has served continuously as a director of the Company since 2001
and is a member of the Compensation Committee and the Nominating and Governance
Committee. Mr. Kasich has served as an associate of Schottenstein Stores
Corporation, a retail holding company, since November 2008. From 2001
to May 2010, Mr. Kasich served as a contributor to the Fox News Channel and,
from January 2001 to 2008, he served as a Managing Director at Lehman
Brothers’/Barclays Capital’s investment banking group. Mr. Kasich was
a member of the U.S. House of Representatives from 1982 to 2000. Mr.
Kasich served as a member of the U.S. House of Representatives, representing
Ohio's 12th Congressional District, from 1983 to 2000, and as Chairman of the
House Budget Committee from 1995 to 2000. He served as the Chief Architect of
the Balanced Budget Act of 1997, which helped eliminate the federal budget
deficits. Prior to serving in the U.S. Congress, he was an Ohio State Senator
for four years. He has served as a director of Invacare Corporation since 2001,
and as Chair of its Nominating Committee. He served as a director of Instinet
Group Incorporated from June 2001 to 2005. Mr. Kasich is the former host of the
program "Heartland with John Kasich" on the Fox News Channel. He is a graduate
of The Ohio State University. Mr. Kasich brings the perspective of a
successful businessman, a successful politician, and a news
commentator. He provides the Board the benefit of his experience
relating to business development, business transactions and financing, along
with his expertise in matters relating to governmental regulations, public
policy and governmental affairs.
Sidney
A. Ribeau
Sidney A.
Ribeau, age 62, has served continuously as a director of the Company since 2000
and is a member of the Audit Committee and the Nominating and Governance
Committee. Dr. Ribeau became President of Howard University on August 1,
2008, and served as President and Chief Executive Officer of Bowling Green State
University for more than 13 years prior to that time. Dr. Ribeau has more
than 10 years of audit committee experience as well as compensation
expertise. Dr. Ribeau serves on the Board of Trustees of Teachers
Insurance and Annuity Association (“TIAA”) and as Chair of the TIAA Human
Resources Committee. Dr. Ribeau served as a director and as a member of the
Audit Committee for Convergys Corporation from August 2001 through 2008.
Dr. Ribeau served as a director and member of Compensation, Governance and
Nominating Committees at The Andersons from February 1997 through September
2008. Dr. Ribeau served as a Director for the American Council on
Education’s National Diversity Group, Toledo Symphony, and Greater Toledo Urban
League. Dr. Ribeau also served as a Trustee for Regional Growth
Partnerships. Dr. Ribeau received his Bachelor's degree in English and
Speech Education from Wayne State University in 1971 and his Master's and
Doctorate degrees in Communications from the University of Illinois .
Dr. Ribeau brings extensive experience in managing the issues that face
large public institutions. His background as the leader of a billion
dollar organization and as an educator and administrator enables him to provide
insight relative to management, educational, financial, human resources and
public policy matters.
Required
Vote and Board’s Recommendation
Under
Ohio law and the Company’s Code of Regulations, the three nominees for election
to the Board receiving the greatest number of votes “FOR” their election will be
elected as directors of the Company.
Except in
the case of broker non-votes, common shares represented by properly-executed and
returned proxy cards or properly-authenticated electronic voting instructions
recorded through the Internet or by telephone will be voted “FOR” the election of the
Board’s nominees, unless authority to vote for one or more of the nominees is
withheld. Common shares as to which the authority to vote is withheld
will not be counted toward the election of directors or the election of the
individual nominees specified on the form of proxy. Proxies may not
be voted for more than three nominees.
THE BOARD RECOMMENDS THAT THE
SHAREHOLDERS OF THE COMPANY VOTE “FOR” THE ELECTION OF EACH OF THE DIRECTOR
NOMINEES NAMED ABOVE.
Meetings
of the Board
The Board
held six meetings during Fiscal 2010, including regularly scheduled and special
meetings. During Fiscal 2010, each incumbent director attended at
least 75% of the aggregate of (a) the total number of meetings held by the
Board and (b) the total number of meetings held by all committees of the
Board on which such director served.
The Board
and management of the Company are committed to effective corporate governance
practices. The Corporate Governance Guidelines describe the governance
principles and procedures by which the Board functions. The Board annually
reviews and updates, as appropriate, the Corporate Governance Guidelines and the
charters of the various committees of the Board in response to corporate
governance developments, including applicable NYSE Rules and SEC Rules, and
recommendations by directors in connection with Board and committee evaluations.
In accordance with the Corporate Governance Guidelines and applicable NYSE
Rules, non-management directors of the Company, who are also all “independent”
directors, as defined by the Corporate Governance Guidelines and applicable NYSE
Rules and SEC Rules, meet (without management present) at regularly scheduled
executive sessions at least twice per year and at such other times as the
directors deem necessary or appropriate. These executive sessions are
typically held in conjunction with regularly scheduled Board meetings and are
led by the Lead Independent Director, and appropriate feedback from these
sessions is given to the CEO. The non-management directors met in
executive session after each of the four regularly scheduled Board meetings held
in Fiscal 2010.
Board
Member Attendance at Annual Meetings of the Shareholders
The
Company does not have a formal policy with respect to attendance by our
directors at the annual meetings of the shareholders. However,
directors are encouraged to attend annual meetings of the shareholders, and the
Board’s schedule provides for its quarterly meetings to fall in March, June,
September and December. It is anticipated that the September meeting
of the Board will occur on or about the date of the Annual Meeting, and
directors are encouraged to attend the Annual Meeting if their schedules
permit. Three of the eight then-incumbent directors attended the
Company’s Annual Meeting of Shareholders in 2009.
Board
Leadership Structure
The
Company is led by John P. McConnell, who has served as Chief Executive Officer
since June 1993, as a director of the Company since 1990, and as Chairman of the
Board of the Company since September 1996. The Company's Board
is currently comprised of Mr. McConnell and seven non-management directors (with
an eighth non-management director to be elected at the Annual
Meeting). John Blystone is the Company’s Lead Independent Director.
The Board
has four standing committees: Audit, Compensation, Executive and Nominating and
Governance. Each of the Audit Committee, Compensation Committee and
Nominating and Governance Committee is chaired by a separate Independent
Director. Detailed information on each Board committee is contained
in the section captioned “Committees of the Board.”
The
Company does not have a fixed policy regarding whether the offices of Chairman
of the Board and Chief Executive Officer should be vested in the same person or
two different people. The Board has determined that the most effective
leadership structure for the Company at the present time is for the Chief
Executive Officer to also serve as the Chairman, coupled with a Lead Independent
Director, independent chairs for our Audit, Compensation and Nominating and
Governance Committees and regularly scheduled executive sessions of the
non-management directors of the Board.
The Board
believes that the currently combined role of Chairman and Chief Executive
Officer promotes the development and execution of our business strategy and
facilitates information flow between management and the Board, which are
essential to effective governance. The Board believes that its strong governance
practices, including its supermajority of Independent Directors, the combination
of the Chairman and Chief Executive Officer roles, and its clearly defined Lead
Independent Director responsibilities, provide an appropriate balance among
strategy development, operational execution and independent oversight of the
Company.
The Board
periodically reviews our leadership structure and retains the authority to
modify the structure, as and when appropriate, to address our then current
circumstances.
Lead
Independent Director
In
January 2007, the Company established a Lead Independent Director position and
appointed John Blystone as the Lead Independent Director.
A copy of
the Company's Lead Independent Director Charter, which has been reviewed and
approved by the Board, is available on the "Corporate Governance" page of the
“Investor Relations” section of the Company’s web site located at
www.worthingtonindustries.com. In addition to the other duties more
fully described in the Company’s Lead Independent Director Charter, the Lead
Independent Director is responsible for:
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advising
the Chairman of the Board and Chief Executive Officer as to the
appropriate schedule of Board meetings, seeking to ensure that the
non-management directors can perform their duties responsibly while not
interfering with ongoing Company operations;
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consulting
with the Chairman of the Board regarding the information, agenda and
meeting schedules for the Board and Board committee meetings, and
approving same;
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advising
the Chairman of the Board as to the quality, quantity and timeliness of
the information submitted to the Board by the Company’s management that is
necessary or appropriate for the non-management directors to effectively
and responsibly perform their duties;
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recommending
to the Chairman of the Board the retention of advisers and consultants who
report directly to the Board;
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assisting
the Board, the Nominating and Governance Committee and the officers of the
Company in ensuring compliance with and implementation of the Corporate
Governance Guidelines;
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calling
meetings of the non-management directors, and developing the agenda for
and serving as chairman of the executive sessions of the Board’s
non-management directors;
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serving
as principal liaison between the non-management directors and the Chairman
of the Board and Chief Executive Officer on sensitive issues;
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working
with the Nominating and Governance Committee and the Chairman of the Board
and Chief Executive Officer to recommend the membership of the various
Board committees, as well as the selection of committee chairs;
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serving
as chair of meetings of the Board when the Chairman of the Board is not
present; and
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performing
such other duties as the Board may determine.
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Committees
of the Board
The Board
has four standing committees: the Executive Committee, the Audit Committee, the
Compensation Committee and the Nominating and Governance
Committee. The charter for each committee has been reviewed and
approved by the Board and is available on the “Corporate Governance” page of the
“Investor Relations” section of the Company’s web site located at
www.worthingtonindustries.com.
Committees
of the Board
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Executive
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Audit
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Compensation
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Nominating and
Governance
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John
B. Blystone*
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X
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Chair
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Michael
J. Endres*
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X
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X Ä
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X
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Peter
Karmanos, Jr.*
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X
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X
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Chair
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John
R. Kasich*
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X
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X
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John
P. McConnell
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Chair
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Carl
A. Nelson, Jr.*
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X
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Chair
Ä
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Sidney
A. Ribeau*
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X
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X
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Mary
Schiavo*
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X
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X
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* Independent
director under NYSE Rules
Ä
Audit Committee Financial Expert
Executive
Committee
The
Executive Committee acts in place of, and on behalf of, the Board in the
intervals between meetings of the Board. The Executive Committee has
all of the authority of the Board, other than the authority (a)
to fill vacancies on the Board or on any committee of the Board, (b)
to amend the Company’s Code of Regulations, (c) that has been delegated by
the Board exclusively to other committees of the Board, and (d) that applicable
law or the Company’s governing documents do not permit to be delegated to a
committee of the Board.
Audit
Committee
The Board
has determined that each member of the Audit Committee qualifies as an
Independent Director under the applicable NYSE Rules and under SEC
Rule 10A-3. The Board believes each member of the Audit
Committee is qualified to discharge his or her duties on behalf of the Company
and satisfies the financial literacy requirement of the NYSE
Rules. The Board has also determined that each of Messrs. Endres and
Nelson qualifies as an “audit committee financial expert” as that term is
defined in Item 407(d)(5) of SEC Regulation S-K by virtue of his
experience, including that described on pages 12 and 13 of this Proxy Statement.
No member of the Audit Committee serves on the audit committee of more than two
other public companies.
At least
annually, the Audit Committee evaluates its performance, reviewing and assessing
the adequacy of its charter and recommending any proposed changes to the full
Board, as necessary, to reflect changes in regulatory requirements,
authoritative guidance and evolving practices.
The Audit
Committee was established in accordance with Section 3(a)(58)(A) of the Exchange
Act. The Audit Committee is organized and conducts its business
pursuant to a written charter adopted by the Board which sets forth the Audit
Committee’s duties and responsibilities. The primary responsibility
of the Audit Committee is to assist the Board in the oversight of the financial
and accounting functions, controls, reporting processes and audits of the
Company. Specifically, the Audit Committee, on behalf of the Board,
monitors and evaluates: (a) the integrity and quality of the
Company’s financial statements; (b) the Company’s compliance with legal and
regulatory requirements, including the financial reporting process; (c) the
Company’s systems of disclosure controls and procedures and internal control
over financial reporting and its accounting and financial controls; (d) the
qualifications and independence of the Company’s independent registered public
accounting firm; (e) the performance of the Company’s internal audit
function and its independent registered public accounting firm; and (f) the
annual independent audit of the Company’s financial statements. The
Audit Committee also prepares the report that the SEC Rules require to be
included in the Company’s annual proxy statement.
The Audit
Committee’s charter sets forth the duties and responsibilities of the Audit
Committee, which include:
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selecting,
evaluating and, where appropriate, replacing the Company’s independent
registered public accounting firm for each fiscal year and approving the
audit engagement, including fees and terms, and non-audit engagements, if
any, of the Company’s independent registered public accounting firm;
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reviewing
the independence, qualifications and performance of the Company’s
independent registered public accounting firm;
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reviewing
and approving in advance both audit and permitted non-audit services to be
provided by the Company’s independent registered public accounting firm;
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setting
and maintaining hiring policies for employees or former employees of the
Company’s independent registered public accounting firm;
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monitoring
the performance, and ensuring the rotation, of the lead and concurring
partners of the Company’s independent registered public accounting firm;
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reviewing,
with the Company’s financial management, internal auditors and independent
registered public accounting firm, the Company’s accounting procedures and
policies and audit plans, including staffing, professional services to be
provided, audit procedures to be used, and fees to be charged by the
Company’s independent registered public accounting firm;
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reviewing
the activities of the internal auditors and the Company’s independent
registered public accounting firm;
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preparing
an annual report for inclusion in the Company’s proxy statement;
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reviewing with the Company’s independent
registered public accounting firm the
attestation report of the Company’s independent registered public
accounting firm on the effectiveness of the
Company’s internal control over financial reporting filed with the
Company’s Form 10-K;
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establishing
procedures for the receipt, retention and treatment of complaints received
by the Company regarding accounting, internal accounting controls or
auditing matters, as well as the confidential, anonymous submissions by
employees of the Company of concerns regarding questionable accounting or
auditing matters;
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receiving
reports concerning any non-compliance with the Company’s Code of Conduct
by any officers or directors of the Company and approving, if appropriate,
any waivers therefrom;
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approving,
if appropriate, any “related person” transactions with respect to the
Company’s directors or executive officers;
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directing
and supervising any special investigations into matters which may come
within the scope of its duties; and
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other
matters required by the Financial Accounting Standards Board, the American
Institute of Certified Public Accountants, the Public Company Accounting
Oversight Board, the SEC, NYSE and other similar bodies or agencies which
could have an effect on the Company's financial statements.
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Pursuant
to its charter, the Audit Committee has the authority to engage and terminate
such counsel and other consultants as it deems appropriate to carry out its
functions, including the sole authority to approve the fees and other terms of
such consultants’ retention.
The Audit
Committee met six times during Fiscal 2010. The Audit Committee’s
report relating to Fiscal 2010 begins on page 62.
Compensation
Committee
The Board
has determined that each member of the Compensation Committee qualifies as an
Independent Director under the applicable NYSE Rules. All members of
the Compensation Committee other than Mr. Karmanos also qualify as “outside
directors” for purposes of Section 162(m) of the Internal Revenue Code of 1986,
as amended (the “Internal Revenue Code”), and as “non-employee directors” for
purposes of Rule 16b-3 under the Exchange Act. Mr. Karmanos abstains
from voting on matters where his failure to qualify as an “outside director” or
a “non-employee director” is relevant.
The
Compensation Committee periodically reviews and reassesses the adequacy of its
charter and recommends any proposed changes to the full Board, as necessary, to
reflect changes in regulatory requirements, authoritative guidance and evolving
practices. The Compensation Committee evaluates its performance at
least annually.
The
Compensation Committee’s charter sets forth the duties and responsibilities of
the Compensation Committee, which include:
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discharging
the Board’s responsibilities relating to compensation of the Company’s CEO
and executive management;
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reviewing
and approving, if it has been deemed appropriate, the Company’s peer
companies and data sources for purposes of evaluating the Company’s
compensation competitiveness and establishing appropriate competitive
positioning of the levels and mix of compensation elements;
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preparing,
producing, reviewing and/or discussing with the Company’s management, as
appropriate, such reports and other information required by applicable
law, rules, regulations or other standards with respect to executive and
director compensation including those required for inclusion in the
Company’s proxy statement and/or annual
report on Form 10-K;
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reviewing,
and advising the Board with respect to, Board compensation;
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administering
the Company’s stock option and other equity-based incentive compensation
plans and its other executive incentive compensation programs as well as
any other plans and programs which the Board designates;
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reviewing
incentive compensation arrangements to confirm that incentive pay does not
encourage unnecessary risk taking and reviewing the relationship between
risk management policies and practices, corporate strategy and executive
management compensation; and
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carrying
out such other roles and responsibilities as the Board may designate or
delegate to the Compensation Committee.
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Pursuant
to its charter, the Compensation Committee has the authority to retain
compensation consultants, legal counsel and other consultants, as it deems
appropriate to carry out its functions, including the sole authority to approve
the fees and other retention terms for any such consultants.
The
Compensation Committee met three times during Fiscal 2010. The
Compensation Discussion and Analysis regarding Executive Compensation for Fiscal
2010 begins on page 24, and the Compensation Committee Report for Fiscal 2010 is
on page 38.
Nominating
and Governance Committee
The Board
has determined that each member of the Nominating and Governance Committee
qualifies as an Independent Director under the applicable NYSE
Rules. The Nominating and Governance Committee periodically reviews
and assesses the adequacy of its charter and recommends any proposed changes to
the full Board, as necessary, to reflect changes in regulatory requirements,
authoritative guidance and evolving practices. The Nominating and
Governance Committee evaluates its performance at least annually.
Under the
terms of its charter, the Nominating and Governance Committee is to:
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develop
principles of corporate governance and recommend them to the Board for its
approval;
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periodically
review the principles of corporate governance approved by the Board to
ensure that they remain relevant and are being complied with;
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annually
review the Corporate Governance Guidelines and recommend to the Board for
its approval any changes to the Corporate Governance Guidelines that the
Nominating and Governance Committee deems appropriate;
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periodically
review the Articles of Incorporation and Code of Regulations of the
Company and recommend to the Board any changes thereto that the Nominating
and Governance Committee deems appropriate;
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review
the procedures and communication plans for shareholder meetings and ensure
that required information regarding the Company is adequately presented;
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review,
and make recommendations to the Board regarding, the composition and size
of the Board in order to ensure that the Board has the proper expertise
and its membership consists of persons with sufficiently diverse
backgrounds;
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recommend
criteria for the selection of Board members and Board committee members;
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review
and recommend Board policies on age and term limits for Board members;
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plan
for continuity on the Board as existing Board members retire or rotate off
the Board;
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with
the participation of the Chairman of the Board, identify and recruit
candidates for Board membership and arrange for appropriate interviews and
inquiries into the qualifications of the candidates;
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evaluate
Board candidates recommended by shareholders and periodically review the
procedures used by the Nominating and Governance Committee in such
evaluation process;
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identify
and recommend individuals to be nominated for election as directors by the
shareholders and to fill vacancies on the Board;
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with
the Compensation Committee, provide for an annual review of succession
plans for the Chairman of the Board and Chief Executive Officer in the
case of his resignation, retirement or death;
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evaluate
the performance of current Board members proposed for re-election, and
recommend to the Board as to whether members of the Board should stand for
re-election;
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review
and recommend to the Board an appropriate course of action upon the
resignation of a current Board member or upon other vacancies on the
Board;
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oversee
an annual evaluation of the Board as a whole;
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conduct
an annual evaluation of the Nominating and Governance Committee;
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oversee
the evaluation of the other Board committees and of management;
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with
the Chairman of the Board, periodically review the charter and composition
of each Board committee and make recommendations to the Board for the
creation of additional Board committees or the change in mandate or
dissolution of Board committees;
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with
the Chairman of the Board, recommend to the Board individuals to be chairs
and members of Board committees; and
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ensure
that each Board committee is comprised of members with the appropriate
qualities, skills and experience for the tasks of the committee and that
each committee conducts the required number of meetings and makes
appropriate reports to the Board on its activities and findings.
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To the
extent not otherwise delegated to the Audit Committee, the Nominating and
Governance Committee is also to:
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review
the relationships between the Company and each director, whether direct or
as a partner, officer or equity owner of an organization that has a
relationship with the Company, for conflicts of interest (all members of
the Board are required to report any such relationships to the corporate
general counsel);
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address
actual and potential conflicts of interest a Board member may have and
issue to the Board member having an actual or potential conflict of
interest instructions on how to conduct himself/herself in matters before
the Board which may pertain to such an actual or potential conflict of
interest; and
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make
appropriate recommendations to the Board concerning determinations
necessary to find a director to be an Independent Director.
|
The
Nominating and Governance Committee met two times during Fiscal 2010.
Board’s
Role in Risk Oversight
Our
management is principally responsible for defining, identifying and assessing
the various risks facing our Company, formulating risk management policies and
procedures and managing our risk exposures on a day-to-day basis. A
risk committee, comprised of senior executives, directs this
process. Management provides the Board an annual risk assessment with
quarterly updates. The Board’s responsibility is to oversee our risk management
processes by understanding and evaluating management’s identification,
assessment and management of the Company’s critical risks.
The Board
as a whole has responsibility for this risk oversight, assisted by the Audit
Committee and the Compensation Committee. Areas of focus include
strategic, operational, liquidity, market, financial, reporting, succession,
compensation, compliance and other risks. The Audit Committee is
tasked with oversight of financial, reporting and compliance risk management,
the Compensation Committee is tasked with oversight of compensation risk
management, and the Board as a whole oversees all other risk management.
TRANSACTIONS
WITH CERTAIN RELATED PERSONS
Review,
Approval or Ratification of Transactions with Related Persons
The
Company’s policy with respect to related person transactions is addressed in the
Company’s written Related Person Transaction Policy (the “Policy”), which
supplements the Company’s written Code of Conduct provisions addressing
“conflicts of interest.” As described in the Code of Conduct,
conflicts of interest can arise when an employee’s or a director’s personal or
family relationships, financial affairs or an outside business involvement may
adversely influence the judgment or loyalty required in performance of his or
her duties to the Company. In cases where there is an actual or even
the appearance of a conflict of interest, the individual involved is required to
notify his or her supervisor or the Company’s Ethics Officer. The
supervisor will then consult with management and the Ethics Officer as
appropriate. The Code of Conduct provides that any action or
transaction in which the personal interest of an executive officer or a director
may be in conflict with those of the Company is to be reported to the Audit
Committee. The Audit Committee shall investigate and, if it is
determined that such action or transaction would constitute a violation of the
Code of Conduct, the Audit Committee is authorized to take any action it deems
appropriate.
The
Policy was adopted by the Board and is administered by the Audit Committee and
the Company’s General Counsel. The Policy applies to any transaction,
arrangement or relationship, or any series of similar transactions, arrangements
or relationships, in which: the Company participates, directly or indirectly;
the amount involved exceeds or is expected to exceed $120,000; and a “related
person” has, had or will have a direct or indirect material
interest. Under the Policy, a “related person” is any person:
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who
is or was an executive officer, a director or a director nominee of the
Company, or an immediate family member of any such individual; or
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who
is or was the beneficial owner of more than 5% of the Company’s
outstanding common shares, or an immediate family member of any such
individual.
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All
related person transactions are to be brought to the attention of the Company’s
management who will then refer each matter to the Company’s General Counsel and
the Audit Committee. Each director, director nominee or executive
officer of the Company must notify the Company’s General Counsel in writing of
any interest that such individual or an immediate family member of such
individual has, had or may have, in a related person transaction. In
addition, any related person transaction proposed to be entered into by the
Company must be reported to the Company’s General Counsel by the employee of the
Company who has authority over the transaction. On an annual basis,
each director, director nominee and executive officer of the Company will
complete a questionnaire designed to elicit information about existing and
potential related person transactions. Any potential related person
transaction that is raised will be analyzed by the Company’s General Counsel, in
consultation with management and with outside counsel, as appropriate, to
determine whether the transaction, arrangement or relationship does, in fact,
qualify as a related person transaction requiring review by the Audit Committee
under the Policy.
Under the
Policy, all related person transactions (other than those deemed to be
pre-approved or ratified under the terms of the Policy) will be referred to the
Audit Committee for approval (or disapproval), ratification, revision or
termination. Whenever practicable, a related person transaction is to be
reviewed and approved or disapproved by the Audit Committee prior to the
effectiveness or consummation of the transaction. If the Company’s
General Counsel determines that advance consideration of a related person
transaction is not practicable, the Audit Committee will review and, in its
discretion, may ratify the transaction at the Audit Committee’s next
meeting. However, the Company’s General Counsel may present a related
person transaction arising between meetings of the Audit Committee to the Chair
of the Audit Committee who may review and approve (or disapprove) the
transaction, subject to ratification by the Audit Committee at its next meeting
if appropriate. If the Company becomes aware of a related person
transaction not previously approved under the Policy, the Audit Committee will
review the transaction, including the relevant facts and circumstances, at its
next meeting and evaluate all options available to the Company, including
ratification, revision, termination or rescission of the transaction, and take
the course of action the Audit Committee deems appropriate under the
circumstances.
No
director may participate in any approval or ratification of a related person
transaction in which the director or an immediate family member of the director
is involved. The Audit Committee may only approve or ratify those
transactions the Committee determines to be in the Company’s best
interest. In making this determination, the Audit Committee will
review and consider all relevant information available to it, including:
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the
related person’s interest in the transaction;
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the
terms (including the amount involved) of the transaction;
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the
amount of the related person’s interest in the transaction;
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whether
the transaction was undertaken in the ordinary course of the Company’s
business;
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whether
the terms of the transaction are fair to the Company and no less favorable
to the Company than terms that could be reached with an unrelated third
party;
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the
business reasons for the transaction and its potential benefits to the
Company;
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the
impact of the transaction on the related person’s independence; and
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whether
the transaction would present an improper conflict of interest for any
director, director nominee or executive officer of the Company, taking
into account the size of the transaction, the overall financial position
of the related person, the direct or indirect nature of the related
person’s interest in the transaction and the ongoing nature of any
proposed relationship and any other factors the Audit Committee deems
relevant.
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Any
related person transaction previously approved or ratified by the Audit
Committee or otherwise already existing that is ongoing in nature is to be
reviewed by the Audit Committee annually.
Under the
terms of the Policy, the following related person transactions are deemed to be
pre-approved or ratified (as appropriate) by the Audit Committee even if the
aggregate amount involved would exceed $120,000:
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interests
arising solely from ownership of the Company’s common shares if all
shareholders receive the same benefit on a pro rata basis (i.e.,
dividends);
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compensation
to an executive officer of the Company, as long as the executive officer
is not an immediate family member of another executive officer or director
of the Company and the compensation has been approved by the Compensation
Committee or is generally available to the Company’s employees;
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compensation
to a director for services as a director if the compensation is required
to be reported in the Company’s proxy statements;
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interests
deriving solely from a related person’s position as a director of another
entity that is a party to the transaction;
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interests
deriving solely from the related person’s direct or indirect ownership of
less than 10% of the equity interest (other than a general partnership
interest) in another person which is a party to the transaction; and
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transactions
involving competitive bids.
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In
addition, the Audit Committee will presume that the following transactions do
not involve a material interest:
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transactions
in the ordinary course of business with an entity for which a related
person serves as an executive officer, provided (i) the affected
related person did not participate in the decision of the Company to enter
into the transaction and (ii) the amount involved in any related
category of transactions in a 12-month period is not greater than the
lesser of (a) $1,000,000 or (b) 2% of the other entity’s gross
revenues for its most recently completed fiscal year or (c) 2% of the
Company’s consolidated gross revenues for its most recently completed
fiscal year;
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donations,
grants or membership payments to nonprofit organizations, provided
(a) the affected related person did not participate in the decision
of the Company to make such payments and (b) the amount in a 12-month
period does not exceed the lesser of $1,000,000 or 2% of the recipient’s
gross revenues for its most recently completed fiscal year; and
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Company
use of facilities (such as dining facilities and clubs) if the charges for
such use are consistent with charges paid by unrelated third parties and
are fair, reasonable and consistent with similar services available for
similar facilities.
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Transactions
with Related Persons
The
Company is a party to certain agreements relating to the rental of aircraft to
and from JMAC, Inc., a private investment company (“JMAC”) and McAir, Inc.
(“McAir”), a corporation wholly-owned by the John H. McConnell
Trust. Following the death of his father, John H. McConnell,
beneficial ownership of certain family-owned businesses and common shares
transferred to John P. McConnell, Chairman of the Board and Chief Executive
Officer of the Company. Under the agreements with JMAC and McAir, the Company
may lease aircraft owned by JMAC and McAir as needed for a rental fee per
flight; and under the agreements with the Company, JMAC and McAir are allowed to
lease aircraft operated by the Company, on a per-flight basis, when the Company
is not using the aircraft. The Company also makes its pilots
available to McAir and JMAC for a per-day charge. The rental fees
paid to and by the Company under the per-flight rental agreements are set based
on Federal Aviation Administration (“FAA”) regulations. The Company
believes the rental fees set in accordance with such FAA regulations for Fiscal
2010 exceeded the direct operating costs of the aircraft for such
flights. Also, based on quotes for similar services provided by
unrelated third parties, the Company believes that the rental rates paid to
McAir and JMAC are no less favorable to the Company than those that could be
obtained from unrelated third parties.
For
Fiscal 2010, (a) the Company paid an aggregate amount of $210,728 under the
McAir lease agreement and (b) the Company received an aggregate amount of
$17,291 from JMAC, $9,100 from McAir, and $23,600 from payments received from
Blue Jackets Air, LLC for airplane rental and pilot services. Blue Jackets
Air, LLC primarily provides air transportation services for the Columbus Blue
Jackets, a professional hockey team of which John P. McConnell is the majority
owner.
During
Fiscal 2010, the Company, either directly or through business expense
reimbursement, paid approximately $86,505 to Double Eagle Club, a private golf
club owned by the McConnell Family (the “Club”). The Company uses the
Club’s facilities for Company functions and meetings, and for meetings,
entertainment and overnight lodging for customers, suppliers and other business
associates. Amounts charged by the Club to the Company are no less
favorable to the Company than those that are charged to unrelated members of the
Club.
During
Fiscal 2010, the Company paid Compuware, a software development company of which
Mr. Karmanos is Chairman of the Board, Chief Executive Officer and a 5.4%
shareholder, approximately $1.6 million, primarily for Compuware’s Covisint EDI
service and for Compuware’s services providing software
quality assurance and
for project management services in connection with the Company’s Oracle
ERP system and other projects. Mr. Karmanos serves as a director of
the Company. Compuware was selected for these services from a number
of competing service providers which had responded to the Company’s request for
proposal and were interviewed by the Company. Compuware’s selection
was based on a number of factors including price, experience and
capabilities. Compuware supplies its Covisint services for the
Company’s EDI communications. Compuware also supplies resources for
project coordination, organization and testing, and generally assists the
Company in ensuring that the Oracle ERP system is installed, tested, operated
and integrated with the Company’s information technology system in a proper
manner. Compuware also provides general information technology
consulting services, as requested by the Company. The payments made
to Compuware for Fiscal 2010 amounted to approximately 0.18% of Compuware’s
consolidated total revenues for its most recent fiscal year, and approximately
0.08% of the Company’s consolidated net revenues for Fiscal 2010.
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Role
of the Compensation Committee
The
Compensation Committee reviews and administers the compensation for the Chief
Executive Officer (“CEO”) and other members of executive management, including
the named executive officers (“NEOs”) identified in the “Fiscal 2010 Summary
Compensation Table” appearing on page 39 of this Proxy Statement. The
Compensation Committee also oversees the Company’s annual incentive plan for
executives, long-term incentive plan, stock option plans, and non-qualified
deferred compensation plans.
The
Compensation Committee is comprised of four directors who qualify as
“independent” under the applicable NYSE Rules and SEC Rules, and who are free
from any relationship (including disallowed consulting, advisory or other
compensatory arrangements) prohibited by applicable law, rules or regulations or
that, in the opinion of the Board, would interfere with the exercise of his or
her independent judgment as a member of the Committee. Messrs.
Blystone, Endres and Kasich also qualify as “outside directors” for purposes of
Section 162(m) of the Internal Revenue Code and as “non-employee directors” for
purposes of Rule 16b-3 under the Exchange Act. Since Mr. Karmanos may
not qualify as an outside director for purposes of Section 162(m) or as a
non-employee director for purposes of Rule 16b-3, he abstains from voting on
Section 162(m) and Rule 16b-3 related matters.
The
Compensation Committee operates under a written charter adopted by the Board, a
copy of which is posted on the “Corporate Governance” page of the “Investor
Relations” section of the Company’s web site located at
www.worthingtonindustries.com. Among its other duties, the
Compensation Committee is responsible for setting and administering the policies
that govern executive compensation. These include: reviewing and
approving the compensation philosophy and guidelines for the Company’s executive
management; reviewing and approving if deemed appropriate, peer companies and
data sources for evaluation purposes; reviewing and approving corporate goals
and objectives, including performance goals, relevant to CEO and executive
management compensation; evaluating the CEO’s performance in light of the
corporate goals and objectives; setting the CEO’s compensation, including the
types of compensation; setting or making recommendations with respect to the
amount and types of compensation for the Company’s other executive officers and
directors, as appropriate; reviewing incentive compensation arrangements to
confirm incentive pay does not encourage unnecessary risk taking; and producing,
reviewing and/or discussing with management, as appropriate, the reports and
other information required by applicable law, rules, regulations or other
standards with respect to executive and director compensation.
The
Compensation Committee has sole authority to retain and terminate such
compensation consultants, legal counsel and other consultants, as it deems
appropriate to fulfill its responsibilities, including sole authority to approve
the fees and other terms of consultants’ retention. The Compensation
Committee has retained an independent compensation consultant, Towers Watson,
for the purpose of assisting the Committee in fulfilling its responsibilities,
including providing advice on the amount and form of executive and director
compensation. Management also periodically retains Towers Watson to
provide advice to the Company with respect to compensation matters not solely
related to executive officers or directors.
While the
Compensation Committee retains Towers Watson, in carrying out assignments for
the Compensation Committee, Towers Watson may interact with the Company’s
management including the Vice President-Human Resources, the Vice
President-Administration, General Counsel and Secretary and the Vice
President-Chief Financial Officer and their respective staffs in order to obtain
information. In addition, Towers Watson may, in its discretion, seek
input and feedback from management regarding its work product prior to
presentation to the Compensation Committee in order to confirm information or
address certain issues.
The
agendas for the Compensation Committee’s meetings are determined by the
Committee’s Chair with assistance from the CEO, the Vice President-Human
Resources and the Vice President-Administration, General Counsel and
Secretary. These individuals, with input from the Compensation
Committee’s compensation consultant, make compensation recommendations for the
NEOs and other top executive officers. After each regularly scheduled
meeting, the Compensation Committee may meet in executive
session. When meeting in executive session, the Compensation
Committee will generally have a session with the CEO only, a session with the
compensation consultant only, and conclude with a members-only
session. The Compensation Committee Chair reports on Committee
actions to the full Board at the following Board meeting.
Stock
Ownership Guidelines
In order
to further emphasize the stake that the Company’s directors and officers have in
fulfilling the goal of building and increasing shareholder value, and to deepen
the resolve of executive leadership to fulfill that goal, in August 2004, the
Company established stock ownership guidelines for directors and senior
executives. These guidelines were adjusted in March 2008 due to the
implementation of the Company’s new compensation program discussed
below. Target ownership levels are structured as a multiple of the
executive’s annual base salary or the director’s annual retainer, as applicable,
with directors and the CEO set at five times, the Chief Financial Officer and
the Chief Operating Officer set at 3.5 times, business unit Presidents,
Executive Vice Presidents and Senior Vice Presidents set at 2.5 times, and other
senior executives set at 1.25 times. For purposes of these
guidelines, stock ownership includes common shares held directly or indirectly,
common shares held in an officer’s 401(k) plan account(s) and theoretical common
shares credited to the bookkeeping account of an officer or a director in one of
the Company’s non-qualified deferred compensation plans. Each covered
officer or director is expected to attain the targeted level by August 2011 or
within five years from the date he or she is promoted to the position, whichever
is later. According to the Stock Ownership Guidelines, once an
executive reaches the targeted ownership levels, and so long as those shares are
retained and the individual remains subject to the same guideline level, there
is no obligation to purchase additional shares as a result of fluctuations in
stock price.
Company
Compensation Philosophy
A basic
philosophy of the Company has long been that employees should have a meaningful
portion of their total compensation tied to performance and that the Company
should use incentives which are intended to drive and reward
performance. In furtherance of this philosophy, most full-time,
non-union employees of the Company participate in some form of incentive
compensation program. These programs include cash profit-sharing
programs, which compute payouts based on a fixed percentage of profits, and
bonus programs that primarily tie bonuses to the operating results of the
Company or the applicable business unit.
Executive
Compensation Philosophy and Objectives
The
Company’s objectives with respect to executive compensation are to attract and
retain highly qualified executives, to align the interest of management with the
interest(s) of shareholders and to provide incentives, based primarily on
Company performance, for reaching established Company goals and
objectives. To achieve these objectives, the Compensation Committee
has determined that total compensation for executives will exhibit three
characteristics:
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It
will be competitive in the aggregate using broad-based business
comparators to gauge the competitive market;
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It
will be performance-oriented and highly leveraged, with a substantial
portion of the total compensation tied to performance, primarily that of
the Company and/or that of the applicable business unit; and
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It
will promote long-term careers at the Company.
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The
Company’s practice has long been that executive compensation be highly
leveraged. The Company’s compensation program emphasizes performance
based compensation (pay-at-risk) that promotes the achievement of short-term and
long-term Company objectives. The Company believes it is appropriate
to provide a balance between incentives for current short-term performance and
incentives for long-term profitability of the Company. The Company’s
executive compensation program, therefore, includes both a short-term cash
incentive bonus program and a long-term incentive compensation
program. The Company also believes it appropriate for long-term
incentives to have a cash compensation component and an equity-based
compensation component, which incentivizes executives to drive Company
performance and aligns their interest with those of the Company’s
shareholders. Individual components of executive pay are discussed
below.
In
fulfilling its responsibilities, the Compensation Committee annually reviews
certain market compensation information with the assistance of its independent
compensation consultant, Towers Watson, who is directly engaged by the Committee
to prepare the information. This includes information regarding
compensation paid to officers with similar responsibilities by a broad-based
group of more than 400 companies (the “comparator group”). The
comparator group is comprised predominantly of manufacturing companies
maintained in the executive compensation data base of Towers Watson at the time
the study is conducted with revenues between $1 billion and $10
billion. Changes in the comparator group occur as companies begin or
cease participation in the data base, due to a sale, merger or acquisition of
the companies included, due to an increase or decrease in revenues, or for other
reasons. The Compensation Committee neither selects nor specifically
considers the individual companies which are in the comparator
group. For comparison purposes, due to variance in size of the
companies in the comparator group, regression analysis, which is an objective
analytical tool used to determine the relationship between data, is used to
adjust data. The Compensation Committee believes that using this
broad-based comparator group minimizes the effects of changes to the group due
to changes in data base participation, mergers/acquisitions, or other reasons,
lessens the impact a single entity can have on the overall data, provides more
consistent results and better reflects the market in which the Company competes
for executive talent.
A list of
the entities in the comparator group can be obtained by contacting the Human
Resources Department of the Company at Worthington Industries, Inc., 200 Old
Wilson Bridge Road, Columbus, Ohio 43085, Attention: Eric M.
Smolenski, Vice President-Human Resources.
During
its review process, the Compensation Committee meets directly with the
compensation consultant and reviews comparator group information with respect to
base salaries, short-term cash incentive bonuses and long-term incentive
compensation programs. The Compensation Committee considers
comparator group information provided by the compensation consultant as an
important factor in determining the appropriate levels and mix of executive
compensation.
Base
salaries of the NEOs and other executives generally fall below market median
comparables developed from the comparator group, although the actual base
salaries of the NEOs and other executives vary from individual to individual and
position to position due to factors such as time in the position, performance,
experience, internal equity and other factors the Committee deems
appropriate. Target short-term cash incentive bonus opportunities to
be paid to the NEOs and other executives for achieving targeted levels of
performance are generally above what the compensation consultant considers
market median for annual bonuses because base salaries are intentionally set
below market median comparables and bonus performance targets are generally
based upon stretch performance goals, as compared to expected
performance. Long-term incentive compensation opportunities of the
NEOs and other executives generally fall in the range of market median developed
by the compensation consultant. While comparator group information is
a factor considered in setting compensation, where a specific NEOs or other
executive’s annual cash incentive bonus and long-term incentive compensation
falls relative to the market median developed from the comparator group will
vary based upon the factors listed above. Annual cash incentive
bonuses and long-term incentive compensation actually paid will vary
significantly depending on Company and/or business unit performance during the
applicable year(s).
The
Compensation Committee uses tally sheets as a tool to assist in its review of
executive compensation. These tally sheets contain the components of
the CEO’s and other NEOs’ current and historical total compensation, including
base salary, short-term cash incentive bonuses and long-term incentive
compensation. These tally sheets also show the estimated compensation
that would be received by the CEO and other NEOs under certain scenarios,
including in connection with a change in control of the Company.
While
prior compensation or amounts realized or realizable from prior awards are given
some consideration, the Compensation Committee believes that the current and
future performance of the Company and the executive officers should be the most
significant factors in setting the compensation for the Company’s executive
officers.
The CEO’s
performance is annually evaluated by the Compensation Committee and/or the full
Board. The criteria considered include: overall Company
performance; overall leadership; the CEO’s performance in light of, and his
development and stewardship of, the Company’s philosophy and its current and
long-term strategic plans, goals and objectives; development of an effective
senior management team; appropriate positioning of the Company for future
success; and effective communications with the Board and
stakeholders. At the request of Mr. McConnell, his base salary and
overall compensation have been well below market levels. The
Compensation Committee also evaluates the performance of the other NEOs, as
appropriate, when annually reviewing and setting executive compensation levels.
Compensation
Risk Analysis
Our executive compensation programs are
designed to be balanced, with a focus on both achieving consistent, solid
year-to-year financial results and growing shareholder value over the long
term. The highest amount of compensation can be attained under these
programs, taken as a whole, through consistently strong performance over
sustained periods of time. This provides strong incentives for
achieving success over the long-term and avoiding excessive risk taking in the
short-term.
The Company has long believed that
compensation incentives, based primarily upon Company earnings or similar
performance measures, have played a vital role in the success of the
Company. Making profit sharing, bonuses and/or other incentive
payments broadly available to all levels of non-union employees has fostered an
ownership mentality throughout the workforce which has resulted in long-term
employment and a desire to drive consistent financial
performance. The Company’s culture, aided by this ownership
mentality, is focused on striving to continually improve performance and achieve
long-term success without engaging in excessive risk taking.
Although
the Company’s compensation practices have long been more leveraged than general
market compensation practices, we do not believe, for a number of reasons, that
our compensation incentives encourage excessive risk taking that may conflict
with the long-term best interest of the Company and its
shareholders. First, we believe base salaries are a sufficient
component of total compensation so that excessive risk taking is not
necessary. In December 2007, the Company revised its compensation
program to increase base wages and moderate short-term incentive compensation to
support this position. Second, the performance and economic value
added goals under our annual short-term performance plan are based upon
realistic earnings and economic value added levels reviewed and approved by the
Board that we believe participants can attain without taking inappropriate risks
or materially deviating from normal operations, expected continuous improvement
or approved strategy. Third, our long-term cash performance awards
and performance share awards are based upon performance over three-year periods
which mitigates against the taking of short-term risk. Fourth, in
setting targets for short-term bonus and long-term incentive compensation,
restructuring and non-recurring items are generally eliminated, which limits
rewards for risky behavior outside the ordinary course of
business. Fifth, stock options generally contain a five-year
incremental vesting schedule and provide rewards based on the long-term
performance of our common shares.
The Company has also instituted stock
ownership guidelines to drive stock ownership among executives, again aligning
their interests with the interests of our shareholders and the long-term growth
in the value of the Company’s common shares. This is most evident by
the shareholdings of our CEO, John P. McConnell, who is by far the Company’s
largest shareholder. His potential financial reward for the long-term
growth in the value of the Company’s common shares far outweighs any short-term
compensation he may receive from any excessive short-term risk taking.
Cash
Compensation Paid in Fiscal 2010
Cash
compensation paid to the Company’s executives, including the NEOs, was down
significantly in Fiscal 2009 due to the economic recession and its impact on the
Company’s markets. Short-term cash incentive bonus thresholds for
Fiscal 2009 were attained only at Worthington Cylinders and the WIBS business
units. In Fiscal 2010, cash compensation paid to the Company’s
executives, including the NEOs, rebounded as the Company’s actions in response
to depressed market conditions were rewarded and short-term incentive bonuses
were earned for the fiscal year. Due to the impact of the recession
on the Company’s performance in Fiscal 2009, none of the long-term incentive
compensation thresholds were reached for the three-year performance periods,
ended May 31, 2010 or May 31, 2009.
The
Compensation Committee has been impressed with management’s attitude and
performance in response to the recession and the resulting difficult market
conditions. Aided by the transformation plan which management
developed and began implementing during Fiscal 2008, the Company has taken
difficult steps to reduce costs, including facility closures and workforce
reductions, to improve efficiencies and to right size various
operations. It implemented a focused sales effort, a consolidated
sourcing and supply chain strategy, and took other actions to place the Company
in a solid competitive position. Management also took interim cost
cutting measures, some of which had an adverse impact on its compensation, to
assist the Company through the difficult economic environment. For
instance, management instituted base wage decreases throughout the Company in
the first quarter of Fiscal 2010 with the highest percentage decreases generally
taken by the executives, including a 25% decrease for the CEO and 20% decreases
for the President and Chief Operating Officer, Vice President - Chief Financial
Officer, and the President of The Worthington Steel Company. These
reductions were taken despite the fact that bonuses were not generally paid for
Fiscal 2009.
Executive
cash compensation paid during the last two fiscal years is consistent with the
Company’s philosophy that executive compensation be tied to
results. Paid compensation was down significantly in Fiscal 2009,
even though weak Company results were driven primarily by the recession and
resulting market conditions. The Compensation Committee is pleased
that bonuses were earned for Fiscal 2010 as a result of improved financial
performance.
Change
in Executive Compensation Program
Effective
December 1, 2007, the Compensation Committee revised the Company’s executive
compensation program. The changes to the executive compensation
program primarily involved a change in the overall mix of compensation by
increasing base (fixed) compensation and moderating incentive (variable)
compensation, while still remaining more highly leveraged than typical market
practices. Base salaries were moved closer to market levels (but kept
at the lower end of market) and targeted bonuses were appropriately decreased in
light of the base salary increase.
Under the
revised executive compensation program (the “New Compensation Program”), annual
cash incentive bonuses are non-discretionary and are tied to specific targeted
amounts (threshold, target, and maximum) based on operating income, earnings per
share and economic value added, with the intended result being that there would
likely be a lower annual cash incentive bonus paid when performance is weak (
i.e., below target) and
a higher annual cash incentive bonus paid when performance is strong ( i.e., above target).
Compensation
Components
Base
Salaries
Base
salaries for the NEOs and other executive officers are set to reflect the duties
and responsibilities inherent to each position, individual levels of experience,
performance, market compensation information, internal equity among positions in
the Company, and the Compensation Committee’s judgment. The
Compensation Committee annually reviews information regarding compensation paid
by the comparator group to executives with similar
responsibilities. It is the Compensation Committee’s intent, in
general, to set base salaries at the low end of market median levels, with
consideration given to the other factors listed above, and have total annual
cash compensation be driven by bonuses.
Consistent
with the New Compensation Program, the Compensation Committee raised base
salaries of the NEOs and other executives in December 2007 and/or June
2008. During its annual compensation review in June 2009, the
Compensation Committee made no change in executive base salaries in light of
prevailing economic and market conditions. In response to the
economic recession and prevailing market conditions, the Company implemented
base salary decreases throughout the Company effective for the first quarter of
Fiscal 2010 which included decreases for the CEO, the President and Chief
Operating Officer, the Vice President-Chief Financial Officer, and the President
of The Worthington Steel Company. Base salaries were reinstated to
prior levels effective August 9, 2009, as business conditions began to improve.
In June
2010, the Compensation Committee increased the base salaries for most executives
in the range of 3%. The increase was somewhat higher for a few
executives whose base salaries were lower relative to market due to their
shorter time in their position. The Committee did not increase the
base salary of Mr. McConnell, the CEO, at his request.
Short-Term
Incentive Compensation
Until
December 1, 2007, the NEOs and certain other key employees of the Company
participated in the Company’s old executive bonus program (the “Old Bonus Plan”)
in which discretionary quarterly bonuses were paid to participants based largely
on corporate, business unit or operating unit results, and individual
performance. Although operating results were the largest factor in
determining the amount of the bonus under the Old Bonus Plan, an individual’s
bonus could be adjusted up or down based on the individual’s performance as
determined by the individual’s manager, the CEO or the Compensation Committee,
as applicable.
Under the
New Compensation Program, short-term cash incentive bonus awards for corporate
executives are now generally tied to achieving specified levels (threshold,
target and maximum) of corporate economic value added and earnings per share (in
each case excluding restructuring charges and non-recurring items) for the
applicable performance periods of 12 months or less, with each performance
measure carrying a 50% weighting. For business unit executives, the
corporate earnings per share measure carries a 20% weighting, business unit
operating income carries a 30% weighting, and business unit economic value added
carries a 50% weighting. For performance falling between threshold
and target or between target and maximum, the award is prorated. If
threshold levels are not reached for any performance measure, no bonus will be
paid. Short-term cash incentive bonus payouts will be made within a
reasonable time following the end of the performance period in cash, unless the
Board specifically provides for a different form of payment. In the
event of a change in control of the Company followed by the termination of the
participant’s employment during the relevant performance period, the short-term
cash incentive bonus award of the participant would be considered to be earned
at target and payable as of the date of termination of employment.
Short-term
cash incentive bonuses earned under the New Compensation Program for the twelve
months of Fiscal 2010; the first six months and the 12 months of Fiscal 2009,
and for the six-month period ending May 31, 2008 are shown in the “Fiscal 2010
Summary Compensation Table” on page 39 of this Proxy Statement as short-term
incentive bonus awards within “Non-Equity Incentive Plan Compensation.”
Effective
June 29, 2010, the Compensation Committee granted, under the Worthington
Industries, Inc. Annual Incentive Plan for Executives (the “Annual Incentive
Plan”), annual cash incentive bonus awards to the NEOs for the 12-month period
ending May 31, 2011. These annual cash incentive bonus awards for
Fiscal 2011 are shown in the “Annual Cash Incentive Bonus Awards Granted in
Fiscal 2011” table on page 47 of this Proxy Statement.
Long-Term
Incentive Compensation
The
Compensation Committee has implemented a long-term incentive compensation
program for the NEOs and other executive officers, which consists of: (a) annual
option grants; (b) long-term performance share awards based on achieving
measurable financial results over a multiple-year period; and (c) long-term cash
performance awards based on achieving measurable financial results over a
multiple-year period. Long-term performance share awards and
long-term cash performance awards are made under the Worthington Industries,
Inc. Amended and Restated 1997 Long-Term Incentive Plan (the “1997
LTIP”). Options are generally granted under one of the Company’s
stock option plans or under the 1997 LTIP. All of these plans have
been approved by the Company’s shareholders.
The sizes
of long-term cash performance awards, performance share awards and option grants
are generally set based upon market median values for the comparator group, the
officer’s time in the position, internal equity, performance and other such
factors as the Compensation Committee deems appropriate.
The
Compensation Committee believes that using a blend of options, long-term
performance share awards and long-term cash performance awards represents a
particularly appropriate and balanced method of motivating and rewarding senior
executives. Options align the interests of employee option holders
with those of shareholders by providing value tied to the stock price
appreciation. Cash performance awards motivate long-term results
because their value is tied to sustained financial achievement over a
multiple-year period. Performance share awards blend both of these
features because the number of performance shares received is tied to sustained
financial achievement over a multiple-year period, and the value of those
performance shares is tied to the price of the Company’s common
shares. The Compensation Committee believes the combination of the
three forms of incentive compensation is superior to a reliance upon only one
form and is consistent with the Company’s compensation philosophy and
objectives.
The
Compensation Committee generally approves annual option awards at its June
meeting. The option grants are generally made effective in July,
after the Company has reported its earnings for the prior fiscal
year. Long-term performance share awards and long-term cash
performance awards have been based on performance over a three-fiscal-year
period beginning with the first day of the first fiscal year in that
period. An explanation of the calculation of the compensation expense
relative to the equity-based long-term incentive compensation is set forth under
the heading “Equity-Based Long-Term Incentive Compensation Accounting” on page
34 of this Proxy Statement.
Neither
the Company nor the Compensation Committee has backdated stock option grants to
obtain lower exercise prices.
Options
Options
are generally awarded annually to the NEOs and a select group of
executives. It has been the practice of the Company to award options
to a broader group of key employees every three years and options may also be
granted at other times to selected key employees and to selected new key
employees when their employment begins. In practice, the number of
common shares covered by an option award generally depends upon the employee’s
position and external market data. Options provide employees with the
opportunity to participate in increases in shareholder value as a result of
stock price appreciation, and to further the Company’s objective of aligning the
interest of management with the interests of shareholders.
All
options granted to employees since 1984 have been non-qualified stock options,
which generally vest at a rate of 20% per year with full vesting at the end of
five years. In the event an optionee’s employment terminates as a
result of retirement, death or total disability, any unexercised options
outstanding and exercisable on that date will remain exercisable by the optionee
or, in the event of death, by the optionee’s beneficiary, until the earlier of
either the fixed expiration date, as stated in the option award agreement, or,
depending on the type of option, either 12 or 36 months after the last day of
employment due to retirement, death or disability. Should termination
occur for any reason other than retirement, death or disability, all unexercised
options will be forfeited. In the event of a change in control of the
Company (as defined in the respective option plans), all options then
outstanding will become fully vested and exercisable as of the date of the
change in control. The Compensation Committee may allow an optionee
to elect, during the 60-day period following a change in control, to surrender
an option or a portion thereof in exchange for a cash payment equal to the
excess of the change in control price per share over the exercise price per
share.
The
option grants to the NEOs in Fiscal 2010 are detailed in the “Grants of
Plan-Based Awards for Fiscal 2010” table on page 42 of this Proxy
Statement. For purposes of the Grants of Plan-Based Awards for Fiscal
2010 table, options are valued based on their grant date fair value and
calculated in accordance with Financial Accounting Standards Board Accounting
Standards Codification Topic 718 (“ASC 718”) (formerly Statement of Financial
Accounting Standards No. 123 (revised 2004), “Share-Based
Payment”). This value for options is also reported in the “Option
Awards” column of the “Fiscal 2010 Summary Compensation Table” on page 39 of
this Proxy Statement.
Effective
July 16, 2009, the Company made annual awards of options for Fiscal 2010 to 34
employees to purchase an aggregate of 692,250 common shares, with an exercise
price equal to $13.25, the fair market value of the common shares on the grant
date. Of those options granted, 345,000 common shares were covered by
options awarded to the current NEOs.
Between
July 16, 2009 and May 31, 2010, the Company made awards of options to 87
employees to purchase an aggregate of 227,500 common shares, with exercise
prices equal to the fair market value of the common shares on the respective
grant dates, which ranged from $13.39 to $16.25. None of these
options were granted to NEOs. These options were granted to employees
not covered by the July 16, 2009 grant and included employees who started
employment with the Company or started in new positions with the Company.
Effective
July 2, 2010, the Company made a broad-based award of options for Fiscal 2011 to
966 employees to purchase an aggregate of 2,316,300 common shares, with an
exercise price equal to $12.05, the fair market value of the common shares on
the grant date. Of those options granted, 314,500 common shares were
covered by options awarded to the current NEOs. Information on the
options awarded to the current NEOs is shown in the “Long-Term Performance
Awards and Option Awards Granted in Fiscal 2011” table on page 48 of this Proxy
Statement.
Performance
Awards – General
Beginning
in Fiscal 1998, the Company has awarded a select group of key executives,
including the NEOs, long-term cash performance awards based upon results over a
prospective three-year performance period. Starting with the
three-year performance period that began on June 1, 2006, the Company reduced
the size of the targeted option awards to executives and added long-term
performance share awards.
Payouts
of the long-term cash performance awards and the long-term performance share
awards for corporate executives are generally tied to achieving specified levels
(threshold, target and maximum) of cumulative corporate economic value added and
earnings per share growth over the performance period, with each performance
measure carrying a 50% weighting. For business unit executives,
cumulative corporate economic value added and earnings per share growth measures
together carry a 50% weighting, and business unit operating income targets are
weighted 50%. If the performance level falls between threshold and
target or between target and maximum, the award is prorated. Payouts,
if any, would generally be made in the quarter following the end of the
applicable performance period. Calculation of the Company results and
attainment of performance measures are made solely by the Compensation Committee
based upon the Company’s consolidated financial statements. The
Compensation Committee may make changes and adjustments in calculating the
performance measures to take into account or eliminate restructuring charges
or unusual or non-recurring events, including, without limitation,
changes in tax and accounting rules and regulations, extraordinary gains and
losses, mergers and acquisitions, and purchases or sales of substantial assets,
provided that, if Section 162(m) of the Internal Revenue Code would be
applicable to the payout of the award, any such change or adjustment, if not
provided for when the targets are set, must be permissible under Section
162(m). These performance measurements are chosen because the
Compensation Committee believes that: (i) the earnings per share growth metric
strongly correlates with the Company’s growth in equity value; (ii) operating
income at a business unit ties directly into Company earnings per share growth;
and (iii) the cumulative corporate economic value added target, which is driven
by net operating profit in excess of the cost of capital employed, keeps
management focused on the most effective use of existing assets and pursuing
only those growth opportunities which provide returns in excess of the cost of
capital.
The
Company has used these, or similar performance measures, since long-term cash
performance awards were first granted for the performance period ended May 31,
1998. The Company’s overall performance levels reached at least
threshold in five out of the 13 three-year performance periods which have ended
on or prior to May 31, 2010.
Three-year
performance levels (threshold, target and maximum) are generally set based upon
achieving set levels of (i) cumulative economic value generated over the
three-year performance period and (ii) compounded growth in Company earnings per
share or business unit operating income from the levels attained in the fiscal
year prior to the start of the performance period ( i.e. Fiscal 2008 levels were
used to set the three-year performance period ending May 31,
2011). No threshold levels were attained and no payouts were made to
executive officers for the three-year performance period ended May 31,
2010, with respect to either long-term cash performance awards or performance
share awards. Based on the Company’s performance for Fiscal 2009,
Fiscal 2010 and Fiscal 2011 (through the date of this Proxy Statement), and in
particular the decline in results caused by the recession, it appears that it
will be very difficult for the Company to attain the threshold performance
measures applicable to the NEOs for the three-year period ending May 31, 2011.
Performance
Share Awards
The
Compensation Committee granted performance share awards for the first time
beginning with the awards granted for the three-fiscal-year period beginning
June 1, 2006. The performance share program provides grants of
long-term performance share awards to selected key executives, which are earned
only if the specified performance objectives discussed above under “Performance
Awards – General” are met over a three-year period. Performance share
awards are intended to reward executives for achieving pre-established financial
goals over a three-year period while at the same time rewarding them for any
increase in common share price, since the value of the common shares earned will
depend upon the common share price at the end of the three-year performance
period. The awards also facilitate stock ownership among the
executives by delivering full-value common shares (if the financial targets are
met) and are less dilutive to shareholders than options.
The
performance measures for the performance share awards are discussed in the prior
section, “Performance Awards – General.” All performance share awards
are paid in common shares. No common shares are awarded if none of the
three-year financial threshold measures are met. Common shares which
are earned, if any, are issued to participants after the Company’s financial
results for the three-year period are finalized and the Compensation Committee
has determined which performance levels have been attained. In
general, termination of employment results in termination of
awards. However, if termination is due to death, disability or
retirement, a pro rata payout will be made for performance periods ending 24
months or less after termination of employment based on the number of months of
employment completed by the participant during the performance period before the
effective date of termination, provided that the applicable performance goals
are achieved. No payout will be made for performance periods ending
more than 24 months after termination of employment. Unless the Board
specifically provides otherwise, in the event of a change in control of the
Company, all performance share awards would be considered to be earned and
payable in full at the maximum level and immediately settled or
distributed. For the three-year performance share awards granted in
Fiscal 2011, the change in control must be followed by a termination of
employment for this provision to apply.
No
long-term performance share awards were earned for the three-year performance
period ended May 31, 2010, because none of the threshold levels were
attained. Long-term performance share awards granted in Fiscal 2010
for the three-year performance period ending May 31, 2012 can be found in the
table headed “Grants of Plan-Based Awards for Fiscal 2010” on page 42 of this
Proxy Statement. An explanation of the calculation of the
compensation expense relative to those awards is set forth under the heading
“Equity-Based Long-Term Incentive Compensation Accounting” below. If
the performance criteria are met, the performance shares earned would generally
be issued in the quarter following the end of the performance period.
Information
on long-term performance share awards granted in Fiscal 2011 for the three-year
performance period ending May 31, 2013 is shown in the “Long-Term Performance
Awards and Option Awards Granted in Fiscal 2011” table on page 48 of this Proxy
Statement.
Long-Term
Cash Performance Awards
Three-year
cash performance awards are intended to reward executives for achieving
pre-established financial goals over a three-fiscal-year
period. These long-term cash performance awards are granted to
selected key executives and are earned only if the specified performance
objectives, as discussed above, are met over the three-year performance
period. Three-year cash performance awards may be paid in cash,
common shares or any combination thereof, as determined by the Compensation
Committee at the time of payment. If the performance criteria are
met, payouts would generally be made in the quarter following the end of the
performance period.
The
performance measures for the long-term cash performance awards are discussed
above under “Performance Awards – General.” Nothing is paid under the
long-term cash performance awards if none of the three-year financial threshold
measures are met. In general, termination of employment results in
termination of awards. However, if termination is due to death,
disability or retirement, a pro rata payout will be made for performance periods
ending 24 months or less after termination of employment based on the number of
months of employment completed by the participant during the performance period
before the effective date of termination, provided that the applicable
performance goals are achieved. No payout will be made for
performance periods ending more than 24 months after termination of
employment. Unless the Compensation Committee specifically provides
otherwise at the time of grant, in the event of a change in control of the
Company, all long-term cash performance awards would be considered to be earned
and payable in full at the maximum level, and immediately settled or
distributed. For the three-year cash performance awards granted in Fiscal 2011,
the change in control must be followed by a termination of employment for this
provision to apply.
No
long-term cash performance awards were earned for the three-year performance
period ended May 31, 2010, as none of the threshold levels were attained.
Long-term
cash performance awards granted in Fiscal 2010 for the three-year performance
period ending May 31, 2012 can be found in the “Grants of Plan-Based Awards for
Fiscal 2010” table on page 42 of this Proxy Statement.
Information
on long-term cash performance awards granted in Fiscal 2011 for the three-year
performance period ending May 31, 2013 can be found in the table headed
“Long-Term Performance Awards and Option Awards Granted in Fiscal 2011” on page
48 of this Proxy Statement.
Claw
Back Policy
The
Company does not have a specific claw back policy. If the Company is
required to restate its earnings as a result of non-compliance with a financial
reporting requirement due to misconduct, under Section 304 of the Sarbanes-Oxley
Act of 2002 (“SOX”), the CEO and the Chief Financial Officer would have to
reimburse the Company for any bonus or other incentive-based or equity-based
compensation received by them from the Company during the twelve-month period
following the first filing with the SEC of the financial document that embodied
the financial reporting requirement, and any profits realized from the sale of
common shares during that twelve-month period, to the extent required by SOX.
Equity-Based
Long-Term Incentive Compensation Accounting
The
accounting treatment for equity-based long-term incentive compensation is
governed by ASC 718, which the Company adopted effective June 1,
2006. Options are valued using the Black-Scholes pricing model based
upon the grant date price per common share underlying the option award, the
expected life of the option, risk-free interest rate, dividend yield, and
expected volatility. In adopting ASC 718, the Company selected the
modified prospective transition method, which requires that compensation expense
be recorded prospectively over the remaining vesting period of the options on a
straight-line basis using the fair value of options on the date of grant and the
assumptions set forth above. Further information concerning the
valuation of options and the assumptions used in that valuation is contained in
“Note A – Summary of Significant Accounting Policies – Stock-Based Compensation”
and “Note F – Stock-Based Compensation” of the Notes to Consolidated Financial
Statements in “Item 8. – Financial Statements and Supplementary Data” of the
Company’s Annual Report on Form 10-K for Fiscal 2010 filed on July 30, 2010
(the “2010 Form 10-K”).
Long-term
performance share awards payable in common shares are initially valued using the
grant date price per common share based on the target award, and a compensation
expense is recorded prospectively over the performance period on a straight-line
basis. This amount is then adjusted on a quarterly basis based upon
an estimate of the performance level anticipated to be achieved for the
performance period in light of actual and forecasted results.
Long-term
cash performance awards are initially valued at the target level, and a
compensation expense is recorded prospectively over the performance period on a
straight-line basis. This amount is then adjusted on a quarterly
basis based on an estimate of the performance level anticipated to be achieved
for the performance period in light of actual and forecasted results.
Deferred
Profit Sharing Plan
The NEOs
participate in the Worthington Industries, Inc. Deferred Profit Sharing Plan
(the “DPSP”), together with most other full-time, non-union employees of the
Company. The DPSP is a 401(k) plan and is the Company’s primary
retirement plan. Contributions made by the Company to participant
accounts under the DPSP are generally based on 3% of eligible compensation which
includes base salaries, profit sharing, bonus and performance bonus payments,
overtime and commissions, up to the maximum limit set by the Internal Revenue
Service (“IRS”) from year to year ($245,000 for calendar 2010). In
addition, the NEOs and other participants in the DPSP may elect to make
voluntary contributions up to set IRS limits. These voluntary
contributions are generally matched by Company contributions of 50% of the first
4% of eligible compensation contributed by the participant. Due to
economic conditions, the Company suspended making matching contributions
effective June 1, 2009, but reinstated them beginning August 19,
2009. Distributions under the DPSP are generally deferred until
retirement, death or total and permanent disability.
Non-Qualified
Deferred Compensation
The NEOs
and other highly compensated employees are eligible to participate in the
Worthington Industries, Inc. Amended and Restated 2005 Non-Qualified Deferred
Compensation Plan (the “2005 NQ Plan”). The 2005 NQ Plan is a
voluntary, non-tax qualified, unfunded deferred compensation plan available only
to select highly compensated employees for the purpose of providing deferred
compensation, and thus potential tax benefits, to these employees.
Under the
2005 NQ Plan, executive officers of the Company may defer the payment of up to
50% of their base salary, bonus and/or short-term cash incentive bonus
awards. Amounts deferred are credited to the participants’ accounts
under the 2005 NQ Plan at the time the base salary or bonus compensation would
have otherwise been paid. In addition, the Company may make
discretionary employer contributions to the participants’ accounts in the 2005
NQ Plan. In recent years, the Company has made Company contributions
in order to provide the same percentage of retirement-related deferred
compensation to executives compared to other employees that would have been made
but for the IRS limits on annual compensation that may be considered under the
DPSP. For the 2009 calendar year, the Company made contributions to
the 2005 NQ Plan for participants equal to (i) 3% of an executive’s annual
compensation (base plus bonus) in excess of the IRS maximum; and (ii) a
matching contribution of 50% of the first 4% of annual compensation contributed
by the executive to a Company retirement plan to the extent not matched by the
Company under the DPSP. Participants in the 2005 NQ Plan may elect to
have their accounts invested at a rate reflecting (a) the increase or
decrease in the fair market value per share of the Company’s common shares with
dividends reinvested, (b) a fixed rate which is set annually by the
Compensation Committee (3.91% for Fiscal 2010), or (c) returns on any funds
available for investment under the DPSP. Employee accounts are fully
vested under the 2005 NQ Plan. Payouts under the 2005 NQ Plan are
made in cash, as of a specified date selected by the participant or when the
participant is no longer employed by the Company, either in a lump sum or
installment payments, all chosen by the participant at the time the deferral is
elected. The Compensation Committee may permit hardship withdrawals
from a participant’s accounts under defined guidelines. In the event
of a defined change in control, the participants’ accounts under the 2005 NQ
Plan will generally be paid out as of the date of the change in control.
Contributions
or deferrals for the period before January 1, 2005, are maintained under the
Worthington Industries, Inc. Non-Qualified Deferred Compensation Plan, effective
March 1, 2000 (the “2000 NQ Plan”). Contributions and deferrals for
periods on or after January 1, 2005, are maintained under the 2005 NQ Plan,
which was adopted to replace the 2000 NQ Plan in order to comply with the
provisions of the then newly-adopted Section 409A of the Internal Revenue Code
applicable to non-qualified deferred compensation plans. Among other
things, the provisions of Section 409A generally are more restrictive with
respect to the timing of deferral elections and the ability of participants to
change the time and manner in which accounts will be paid. The 2005
NQ Plan and the 2000 NQ Plan are collectively referred to as the “Employee
Deferral Plans.”
Perquisites
The
Company makes club memberships available to NEOs and other executives because it
believes that such memberships can be useful for business entertainment
purposes. In 2007, the Company elected to no longer provide
executives with leased Company vehicles and generally eliminated leased Company
vehicles for all employees unless a substantial portion of their business time
involved travel, as is the case with those individuals in outside sales.
For
security reasons, the CEO is encouraged to use Company airplanes for personal
travel and the CEO reimburses the Company in an amount that approximates the
incremental costs to the Company associated with those flights. Other
NEOs who use the Company airplanes for personal use are charged an amount equal
to the SIFL rate set forth in the regulations promulgated by the United States
Department of the Treasury (“Treasury Regulations”), which is generally less
than the Company’s incremental costs.
Other
Company Benefits
The
Company provides employees, including the NEOs, a variety of employee welfare
benefits including medical benefits, disability benefits, life insurance,
accidental death and dismemberment insurance, and the DPSP noted
above. These benefits are generally provided to employees on a
Company-wide basis.
Change
in Control
The
Company’s stock option plans generally provide that, unless the Board or the
Compensation Committee provides otherwise, upon a change in control of the
Company, all options then outstanding will become fully vested and exercisable
as of the date of the change in control. In addition, the
Compensation Committee may allow the optionee to elect, during the 60-day period
from and after the change in control, to surrender the options or a portion
thereof in exchange for a cash payment equal to the excess of the change in
control price per share over the exercise price per share.
For
purposes of the Company’s stock option plans (the 1997 LTIP and the Amended and
Restated 2003 Stock Option Plan), a change in control will be deemed to have
occurred when any person, alone or together with its affiliates or associates,
has acquired or obtained the right to acquire the beneficial ownership of 25% or
more of the Company’s outstanding common shares, unless such person
is: (a) the Company; (b) any employee benefit plan of the Company or
a trustee of or fiduciary with respect to any such plan when acting in that
capacity; or (c) any person who, on the date the applicable plan became
effective, was an affiliate of the Company owning in excess of 10% of the
Company’s outstanding common shares and the respective successors, executors,
legal representatives, heirs and legal assigns of such person (an “Acquiring
Person Event”). In addition, in the case of options granted under the
Amended and Restated 2003 Stock Option Plan, a change in control will also be
deemed to have occurred if there is a change in the composition of the Board
with the effect that a majority of the directors are not “continuing directors”
(as defined in the Amended and Restated 2003 Stock Option Plan).
If a
change in control had occurred on May 31, 2010, the value of the unvested
options which would have vested upon the change in control (based upon (a) the
difference, if any, between (i) the closing market price of the Company’s common
shares on May 28, 2010, the last business day of Fiscal 2010 ($14.72),
and (ii) the per share exercise price of each such option, multiplied
by (b) the number of common shares subject to the unvested portion of each such
option), for each of the NEOs would have totaled:
John
P. McConnell
|
|
$
|
220,500
|
|
George
P. Stoe
|
|
$
|
117,600
|
|
B.
Andrew Rose
|
|
$
|
93,720
|
|
Mark
A. Russell
|
|
$
|
58,800
|
|
Harry
A. Goussetis
|
|
$
|
51,450
|
|
Long-term
cash performance awards and long-term performance share awards provide that,
unless the Board or the Compensation Committee provides otherwise, upon a change
in control of the Company, all such awards would be considered earned and
payable in full at the maximum amounts and would be immediately settled or
distributed. For the three-year performance award granted in Fiscal
2011, the change in control must be followed by a termination of employment for
this provision to apply.
For
purposes of the 1997 LTIP (under which the long-term cash performance awards and
long-term performance share awards have been granted), a change in control will
be deemed to have occurred when there is an Acquiring Person Event.
If a
change in control had occurred on May 31, 2010, the aggregate value of the
long-term cash performance awards and the long-term performance share awards
(based on the May 28, 2010 closing market price of the Company’s
common shares of $14.72) which would have been paid to each of the NEOs would
have totaled:
John
P. McConnell
|
|
$
|
8,537,000
|
|
George
P. Stoe
|
|
$
|
5,722,880
|
|
B.
Andrew Rose
|
|
$
|
1,343,642
|
|
Mark
A. Russell
|
|
$
|
2,649,960
|
|
Harry
A. Goussetis
|
|
$
|
2,024,840
|
|
Short-term
cash incentive bonus awards provide that if during a performance period,
(a) a change in control of the Company (as defined in the relevant plan)
occurs and (b) the participant’s employment with the Company terminates on
or after the change in control, the participant’s award would be considered
earned and payable as of the date of the participant’s termination of employment
in the amount designated as target for such award and would be settled or
distributed following the date of the participant’s termination of
employment. The target amounts for the short-term cash incentive
bonus awards granted to the NEOs for the 12-month performance period ended
May 31, 2010, are shown in the “Grants of Plan-Based Awards for Fiscal
2010” table on page 42 of this Proxy Statement.
Under the
Employee Deferral Plans, participants’ accounts will generally be paid out as of
the date of the change in control. See the “Non-Qualified Deferred
Compensation for Fiscal 2010” table on page 46 of this Proxy Statement for
further information.
The
Compensation Committee believes that these change in control provisions are
appropriate and well within market norms, particularly because the Company has
no formal employment contracts or other formal change in control provisions
relative to the NEOs or other executives.
Tax
Deductibility
Section
162(m) of the Internal Revenue Code generally limits the deduction that the
Company may take for certain remuneration paid in excess of $1,000,000 to any
“covered employee” of the Company in any one taxable year. Currently, Section
162(m) of the Internal Revenue Code only applies to the Company’s CEO as well as
the three other highest compensated officers of the Company (not including the
Company’s Chief Financial Officer). Compensation which qualifies as “qualified
performance-based compensation” within the meaning of Section 162(m) of the
Internal Revenue Code and the related Treasury Regulations will not be taken
into account in determining whether this $1,000,000 deduction limitation has
been exceeded. Awards granted under the Company’s stock option plans generally
qualify as “qualified performance-based compensation” under Section 162(m) of
the Internal Revenue Code. The Compensation Committee intends to tailor the
long-term incentive programs under the 1997 LTIP and the short-term cash
incentive bonus awards granted to executive officers under the Annual Incentive
Plan to so qualify. The Compensation Committee believes that the annual cash
incentive bonus awards granted for Fiscal 2011 under the Annual Incentive Plan
as well as the long-term cash performance awards and long-term performance share
awards granted for the three-year period ending May 31, 2013, under the 1997
LTIP will qualify for the “qualified performance-based compensation” exemption
under Section 162(m). Please see the description of these awards under the
captions “Annual Cash Incentive Bonus Awards Granted in Fiscal 2011” beginning
on page 47 of this Proxy Statement and “Long-Term Performance Awards and Option
Awards Granted in Fiscal 2011” beginning on page 48 of this Proxy Statement.
The
Compensation Committee intends to continue to examine the best method to pay
incentive compensation to executive officers, which will include consideration
of the application of Section 162(m) of the Internal Revenue Code. In
all cases, whether or not some portion of a covered employee’s compensation is
tax deductible, the Compensation Committee will continue to carefully consider
the net cost and value to the Company of its compensation policies.
Compensation
Committee Report
The
Compensation Committee has reviewed the Compensation Discussion and Analysis
(“CD&A”) contained in this Proxy Statement and discussed CD&A with
management.
Based
upon such review and discussion, the Compensation Committee recommended to the
full Board, and the Board approved, that the CD&A be included in this Proxy
Statement and incorporated by reference into the 2010 Form 10-K.
The
foregoing report is provided by the Compensation Committee of the Board:
|
Compensation
Committee
|
|
|
|
John
B. Blystone, Chair
|
|
Michael
J. Endres
|
|
Peter
Karmanos, Jr.
|
|
John
R. Kasich
|
Fiscal
2010 Summary Compensation Table
The following table lists, for each of
Fiscal 2010, Fiscal 2009 and Fiscal 2008, the compensation of the Company’s CEO,
the Company’s Chief Financial Officer (“CFO”) and the Company’s three other most
highly compensated executive officers during Fiscal 2010 (the “NEOs”).
Fiscal
2010 Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity Incentive Plan
Compensation
|
|
|
Change in
Pension Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term / Long-Term
|
|
|
and
|
|
|
|
|
|
|
|
Name and
Principal
Position
During
2010 Fiscal Year
|
|
Fiscal
Year
|
|
Salary
($)(1)
|
|
|
Bonus
($)
(1)(2)
|
|
|
Stock
Awards
($) (3)
|
|
|
Option
Awards
($) (4)
|
|
|
Short-Term
Incentive
Bonus
Award
($) (1)(5)
|
|
|
3-year
Performance
Award
($)(6)
|
|
|
Nonqualified
Deferred
Compensation
Earnings
($)(7)
|
|
|
All Other
Compensation
($)(8)
|
|
|
Total ($)
|
|
John
P. McConnell,
|
|
2010
|
|
|
571,154
|
|
|
|
-0-
|
|
|
|
634,150
|
|
|
|
727,500
|
|
|
|
1,124,053
|
|
|
|
-0-
|
|
|
|
316
|
|
|
|
26,809
|
|
|
|
3,083,982
|
|
Chairman
of the Board and Chief
|
|
2009
|
|
|
600,000
|
|
|
|
-0-
|
|
|
|
623,700
|
|
|
|
557,000
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
3,234
|
|
|
|
64,510
|
|
|
|
1,848,444
|
|
Executive
Officer
|
|
2008
|
|
|
550,000
|
|
|
|
18,200
|
|
|
|
741,000
|
|
|
|
694,000
|
|
|
|
781,626
|
|
|
|
-0-
|
|
|
|
3,396
|
|
|
|
37,274
|
|
|
|
2,825,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George
P. Stoe,
|
|
2010
|
|
|
528,846
|
|
|
|
-0-
|
|
|
|
288,250
|
|
|
|
388,000
|
|
|
|
864,116
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
42,190
|
|
|
|
2,111,402
|
|
President
and
|
|
2009
|
|
|
550,000
|
|
|
|
-0-
|
|
|
|
356,400
|
|
|
|
334,200
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
72,752
|
|
|
|
1,313,352
|
|
Chief
Operating Officer
|
|
2008
|
|
|
428,269
|
|
|
|
180,600
|
|
|
|
333,450
|
|
|
|
312,300
|
|
|
|
508,950
|
|
|
|
29,167
|
|
|
|
-0-
|
|
|
|
54,835
|
|
|
|
1,847,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B.
Andrew Rose,
|
|
2010
|
|
|
336,538
|
|
|
|
-0-
|
|
|
|
138,360
|
|
|
|
194,000
|
|
|
|
351,267
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
104,145
|
|
|
|
1,124,310
|
|
Vice
President
|
|
2009
|
|
|
175,000
|
|
|
|
50,000
|
|
|
|
137,787
|
|
|
|
83,550
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
69,955
|
|
|
|
516,292
|
|
and
Chief Financial Officer (9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
A. Russell,
|
|
2010
|
|
|
370,192
|
|
|
|
-0-
|
|
|
|
126,830
|
|
|
|
194,000
|
|
|
|
930,304
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
18,098
|
|
|
|
1,639,424
|
|
President,
The
|
|
2009
|
|
|
385,000
|
|
|
|
-0-
|
|
|
|
142,560
|
|
|
|
167,100
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
35,824
|
|
|
|
730,484
|
|
Worthington
Steel Company
|
|
2008
|
|
|
302,370
|
|
|
|
263,551
|
|
|
|
185,250
|
|
|
|
208,200
|
|
|
|
305,506
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
1,264,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harry
A. Goussetis,
|
|
2010
|
|
|
306,114
|
|
|
|
-0-
|
|
|
|
103,770
|
|
|
|
169,750
|
|
|
|
335,902
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
23,067
|
|
|
|
938,603
|
|
President,
Worthington
|
|
2009
|
|
|
307,000
|
|
|
|
-0-
|
|
|
|
115,830
|
|
|
|
125,325
|
|
|
|
205,308
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
41,907
|
|
|
|
795,370
|
|
Cylinder
Corporation
|
|
2008
|
|
|
234,423
|
|
|
|
168,750
|
|
|
|
160,550
|
|
|
|
156,150
|
|
|
|
206,067
|
|
|
|
120,833
|
|
|
|
-0-
|
|
|
|
42,843
|
|
|
|
1,089,616
|
|
|
(1)
|
The
amounts shown in these columns include that portion of salaries, bonuses
and short-term incentive bonus awards the NEOs elected to defer pursuant
to the DPSP or the 2005 NQ Plan. Amounts deferred to the 2005
NQ Plan are shown in the “Non-Qualified Deferred Compensation for Fiscal
2010” table beginning on page 46 of this Proxy Statement.
|
|
(2)
|
The
amounts shown in this column for Fiscal 2008 include the amount of bonuses
paid to the NEOs with respect to the first six months of Fiscal 2008 under
the Old Bonus Plan which is described under the caption “Compensation
Discussion and Analysis – Compensation Components – Short-Term Incentive
Compensation” beginning on page 29 of this Proxy Statement. The
amount shown for Fiscal 2009 for Mr. Rose reflects the guaranteed bonus
payment made to Mr. Rose in connection with his appointment as the
Company’s CFO.
|
|
(3)
|
The
amounts shown in this column represent the aggregate grant date fair value
of the performance share awards granted to the NEOs under the 1997 LTIP in
Fiscal 2010, Fiscal 2009 and Fiscal 2008, as computed in accordance with
ASC 718 as of the date the performance share awards were granted. These
were calculated based upon the “target” award and the closing price of the
common shares on the date of the grant: $11.53 for the Fiscal 2010 awards;
$17.82 for the Fiscal 2009 awards; and $24.70 for the Fiscal 2008 awards.
The value of the awards shown would have been double the amount listed in
this column if the “maximum” award had been used instead of the “target”
award. For Mr. Rose, the amount for Fiscal 2009 also includes $59,050, the
aggregate grant date fair value of a restricted share award granted to him
in Fiscal 2009, as computed in accordance with ASC 718. The amounts shown
in this column exclude the impact of estimated forfeitures, as required by
SEC Rules. The performance measures associated with the performance share
awards are described under the caption “Compensation Discussion and
Analysis – Compensation Components – Performance Awards – General”
beginning on page 32 of this Proxy Statement. The “Grants of Plan-Based
Awards for Fiscal 2010” table on page 42 of this Proxy Statement provides
information on performance share awards granted in Fiscal 2010. See “Note
A – Summary of Significant Accounting Policies” and “Note F – Stock-Based
Compensation” of the Notes to Consolidated Financial Statements in “Item
8. – Financial Statements and Supplementary Data” of the 2010 Form 10-K
for assumptions used and additional information regarding the performance
share awards and Mr. Rose’s restricted shares award. Due to the impact of
the recession on the Company’s results, particularly in Fiscal 2009, no
performance share awards were paid from the grant in Fiscal 2008, and it
is unlikely any performance shares will be paid from the grant in Fiscal
2009.
|
|
(4)
|
The
amounts shown in this column represent the aggregate grant date fair value
of the option awards granted to the NEOs in Fiscal 2010, Fiscal 2009 and
Fiscal 2008, as computed in accordance with ASC 718. The
amounts shown in this column exclude the impact of estimated forfeitures,
as required by SEC Rules. See “Note A – Summary of Significant
Accounting Policies” and “Note F – Stock-Based Compensation” of the Notes
to Consolidated Financial Statements in “Item 8. – Financial Statements
and Supplementary Data” of the Company’s 2010 Form 10-K for assumptions
used and additional information regarding the options. The
“Grants of Plan-Based Awards for Fiscal 2010” table on page 42 of this
Proxy Statement provides information on option awards granted in Fiscal
2010.
|
|
(5)
|
The
amounts shown in this column include: (i) cash performance awards
earned by Mr. McConnell under the Old Bonus Plan in the aggregate amount
of $147,595 for Fiscal 2008, based on corporate earnings per share
performance for the first two quarters of Fiscal 2008; (ii) for each
NEO, the short-term cash incentive bonus award payments earned for the
performance period encompassing the last six months of Fiscal 2008;
(iii) for Mr. Goussetis, the short-term cash incentive bonus award
payments earned with respect to the Pressure Cylinders business unit for
performance periods in Fiscal 2009 (threshold performance levels were not
attained in the Corporate or Steel business units for performance periods
in Fiscal 2009); and (iv) for each NEO, the short-term cash incentive
bonus award payments earned for Fiscal 2010.
|
|
(6)
|
The
amounts shown in this column reflect the cash performance awards earned by
the NEO for the three-year performance periods ended May 31, 2010 (for
Fiscal 2010), May 31, 2009 (for Fiscal 2009) and May 31, 2008 (for
Fiscal 2008) and, for Mr. Stoe, for the time he served as President of the
Company’s Pressure Cylinders business unit, achievement of the specified
maximum level of operating income from the Pressure Cylinders business
unit for the three-year performance period ended May 31, 2008 (for Fiscal
2008).
|
|
(7)
|
The
fixed rate applicable to the Employee Deferral Plans for Fiscal 2010,
Fiscal 2009 and Fiscal 2008 exceeded 120% of the corresponding applicable
federal long-term rate (the “Applicable Comparative Rate”) by an annual
rate equal to 0.96% for Fiscal 2010, 0.91% for Fiscal 2009, and 1.08% for
Fiscal 2008. The amounts shown in this column represent the
amount by which earnings on accounts of the NEOs in the Employee Deferral
Plans invested at the fixed rate exceeded the Applicable Comparative Rate
(generally the amount invested under the fixed rate fund multiplied by
0.96% for Fiscal 2010, 0.91% for Fiscal 2009, and 1.08% for Fiscal 2008).
|
|
(8)
|
The
following table describes each component of the “All Other Compensation”
column for each of Fiscal 2010, Fiscal 2009 and Fiscal 2008.
|
All
Other Compensation Table
Name
|
|
Fiscal
Year
|
|
Company
Contributions to
401(k) Plan
($)(a)
|
|
|
Company
Contributions to
2005 NQ Plan
($)(b)
|
|
|
Group Term Life
Insurance Premium
Paid ($)(c)
|
|
|
Tax
Gross-Up
Payments
($)
|
|
|
Perquisites
($)(d)
|
|
John
P. McConnell
|
|
2010
|
|
|
12,250
|
|
|
|
13,182
|
|
|
|
1,377
|
|
|
|
0
|
|
|
|
N/A
|
|
|
|
2009
|
|
|
12,462
|
|
|
|
32,521
|
|
|
|
1,530
|
|
|
|
0
|
|
|
|
17,997
|
|
|
|
2008
|
|
|
10,585
|
|
|
|
25,159
|
|
|
|
1,530
|
|
|
|
0
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George
P. Stoe
|
|
2010
|
|
|
12,248
|
|
|
|
12,142
|
|
|
|
1,377
|
|
|
|
0
|
|
|
|
16,423
|
|
|
|
2009
|
|
|
16,193
|
|
|
|
41,015
|
|
|
|
1,530
|
|
|
|
0
|
|
|
|
14,014
|
|
|
|
2008
|
|
|
9,817
|
|
|
|
29,302
|
|
|
|
1,530
|
|
|
|
0
|
|
|
|
14,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B.
Andrew Rose
|
|
2010
|
|
|
18,661
|
|
|
|
477
|
|
|
|
1,377
|
|
|
|
0
|
|
|
|
83,630
|
|
|
|
2009
|
|
|
0
|
|
|
|
0
|
|
|
|
1,530
|
|
|
|
0
|
|
|
|
68,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
A. Russell
|
|
2010
|
|
|
9,263
|
|
|
|
7,458
|
|
|
|
1,377
|
|
|
|
0
|
|
|
|
N/A
|
|
|
|
2009
|
|
|
11,644
|
|
|
|
22,650
|
|
|
|
1,530
|
|
|
|
0
|
|
|
|
N/A
|
|
|
|
2008
|
|
|
3,559
|
|
|
|
0
|
|
|
|
1,530
|
|
|
|
0
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harry
A. Goussetis
|
|
2010
|
|
|
12,250
|
|
|
|
9,440
|
|
|
|
1,377
|
|
|
|
0
|
|
|
|
N/A
|
|
|
|
2009
|
|
|
11,635
|
|
|
|
17,336
|
|
|
|
1,530
|
|
|
|
0
|
|
|
|
11,406
|
|
|
|
2008
|
|
|
7,888
|
|
|
|
19,000
|
|
|
|
1,530
|
|
|
|
0
|
|
|
|
14,425
|
|
|
(a)
|
The
amounts in this column include Company contributions and matching Company
contributions made under the DPSP with respect to the applicable fiscal
year to the accounts of the NEOs. The DPSP is described under
the caption “Compensation Discussion and Analysis – Compensation
Components – Deferred Profit Sharing Plan” beginning on page 35 of this
Proxy Statement.
|
|
(b)
|
The
amounts in this column include Company contributions and matching Company
contributions made under the 2005 NQ Plan with respect to the applicable
fiscal year to the accounts of the NEOs. See the “Non-Qualified
Deferred Compensation for Fiscal 2010” table on page 46 of this Proxy
Statement for more information concerning the contributions made by the
Company under the 2005 NQ Plan for Fiscal 2010.
|
|
(c)
|
The
amounts in this column represent the dollar value of the group term life
insurance premiums paid by the Company on behalf of the NEOs during each
of Fiscal 2010, Fiscal 2009 and Fiscal 2008.
|
|
(d)
|
Perquisites
for Fiscal 2010 include dues and similar fees paid by the Company for club
memberships used by the NEOs for both business and personal
use. Perquisites for Fiscal 2010 also include relocation fees
and expenses of approximately $76,000 for Mr. Rose and personal use of
Company aircraft of $8,737 for Mr. Stoe. The reported aggregate
incremental cost of personal use of Company aircraft is based on the
direct costs associated with operating a flight, including fuel, landing
fees, pilot and flight attendant fees, on-board catering and trip-related
hangar costs and excluding the value of the disallowed corporate income
tax deductions associated with the personal use of the
aircraft. Due to the fact that Company-owned aircraft is used
primarily for business travel, the reported aggregate incremental cost
excluded fixed costs which do not change based on usage, including
depreciation and monthly management fees. The column shows N/A
when the aggregate value of the perquisites and other personal benefits
received by the NEO for the applicable year was less than $10,000.
|
|
(9)
|
Effective
December 1, 2008, Mr. Rose was appointed as the Company’s Chief Financial
Officer.
|
Grants
of Plan-Based Awards
The
following table provides information about the equity and non-equity awards
granted to the NEOs in Fiscal 2010.
Grants
of Plan-Based Awards for Fiscal 2010
Name
|
|
Grant
Date
|
|
Compen-
sation
Committee
Approval
Date
|
|
|
|
Non
Estimated
Equity
Future Payouts
Incentive
Under Non-Equity
Plan
Incentive
Awards:
Plan Awards
|
|
|
Estimated Future Payouts Under Equity
Incentive Plan Awards (3)
|
|
|
All Other Option
Awards:
Number of
Common Shares
Underlying Options
(4)
|
|
|
Exercise
or
Base
Price
of
Option
Awards
($/Sh)
(4)
|
|
|
Grant Date
Fair Value of
Stock and
Option
Awards ($)(5)
|
|
|
|
|
|
|
|
|
|
Number of
Units of Rights (#)
|
|
Thres-
hold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
Threshold
(# of
Common
Shares)
|
|
|
Target
(# of
Common
Shares)
|
|
|
Maximum
(# of Common
Shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
06/01/09
|
|
06/23/09
|
|
(1)
|
|
|
|
|
475,000
|
|
|
|
950,000
|
|
|
|
1,900,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
06/01/09
|
|
06/23/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,500
|
|
|
|
55,000
|
|
|
|
110,000
|
|
|
|
|
|
|
|
|
|
|
John
P. McConnell |
|
07/16/09
|
|
06/23/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
13.25
|
|
|
|
727,500
|
|
|
|
06/01/09
|
|
06/23/09
|
|
(2)
|
|
|
|
|
400,000
|
|
|
|
800,000
|
|
|
|
1,600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
06/01/09
|
|
06/23/09
|
|
(1)
|
|
|
|
|
400,000
|
|
|
|
800,000
|
|
|
|
1,600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
06/01/09
|
|
06/23/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
|
|
|
25,000
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George
P. Stoe |
|
07/16/09
|
|
06/23/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,000
|
|
|
|
13.25
|
|
|
|
388,000
|
|
|
|
06/01/09
|
|
06/23/09
|
|
(2)
|
|
|
|
|
307,500
|
|
|
|
615,000
|
|
|
|
1,230,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
06/01/09
|
|
06/23/09
|
|
(1)
|
|
|
|
|
112,500
|
|
|
|
225,000
|
|
|
|
450,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
06/01/09
|
|
06/23/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
|
|
12,000
|
|
|
|
24,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B.
Andrew Rose |
|
07/16/09
|
|
06/23/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
13.25
|
|
|
|
194,000
|
|
|
|
06/01/09
|
|
06/23/09
|
|
(2)
|
|
|
|
|
125,000
|
|
|
|
250,000
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
06/01/09
|
|
06/23/09
|
|
(1)
|
|
|
|
|
175,000
|
|
|
|
350,000
|
|
|
|
700,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
06/01/09
|
|
06/23/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,500
|
|
|
|
11,000
|
|
|
|
22,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
A. Russell
|
|
07/16/09
|
|
06/23/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
13.25
|
|
|
|
194,000
|
|
|
|
06/01/09
|
|
06/23/09
|
|
(2)
|
|
|
|
|
237,500
|
|
|
|
475,000
|
|
|
|
950,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
06/01/09
|
|
06/23/09
|
|
(1)
|
|
|
|
|
137,500
|
|
|
|
275,000
|
|
|
|
550,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
06/01/09
|
|
06/23/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,500
|
|
|
|
9,000
|
|
|
|
18,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harry A.
Goussetis |
|
07/16/09
|
|
06/23/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
|
13.25
|
|
|
|
169,750
|
|
|
|
06/01/09
|
|
06/23/09
|
|
(2)
|
|
|
|
|
156,500
|
|
|
|
313,000
|
|
|
|
626,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
These
rows show the potential payouts under cash performance awards granted to
the NEOs under the 1997 LTIP for the three-year performance period from
June 1, 2009 to May 31, 2012. Payouts of long-term cash performance awards
for corporate executives are tied to achieving specified levels
(threshold, target and maximum) of cumulative corporate economic value
added for the three-year period and earnings per share growth over the
performance period, with each performance measure carrying a 50%
weighting. For Messrs. Russell and Goussetis, business unit executives,
cumulative corporate economic value added and earnings per share growth
measures together carry a 50% weighting, and business unit operating
income targets are weighted 50%. No cash is paid if none of the three-year
threshold financial measures are met. If the performance levels fall
between threshold and target or between target and maximum, the award is
prorated. For further information on the terms of the long-term cash
performance awards, see the discussion under the captions “Compensation
Discussion and Analysis – Compensation Components – Performance Awards –
General” and “– Long-Term Cash Performance Awards” beginning on pages 32
and 33, respectively, of this Proxy Statement. For information on the
effect of a change in control, see the discussion under the caption
“Compensation Discussion and Analysis – Change in Control” beginning on
page 36 of this Proxy Statement.
|
|
(2)
|
These
rows show the potential payouts which could have been earned under
short-term cash incentive bonus awards based on achievement of specified
levels of performance for the twelve months ended May 31, 2010. Payouts of
these awards for corporate executives were generally tied to achieving
specified levels (threshold, target and maximum) of corporate economic
value added and earnings per share for the twelve-month performance period
with each performance measure carrying a 50% weighting. For Messrs.
Russell and Goussetis, business unit executives, the corporate earnings
per share measure carried a 20% weighting, business unit operating income
carried a 30% weighting and business unit economic value added carried a
50% weighting. If the performance level fell between threshold and target
or between target and maximum, the award was to be prorated. If threshold
levels were not achieved for any performance measure, no payout was to be
made. For Fiscal 2010, the NEOs earned the amounts shown in the “2010”
rows of the “Short-Term Incentive Bonus Award” column of the “Fiscal 2010
Summary Compensation Table.”
|
|
(3)
|
These
columns show the potential payouts under performance share awards granted
to the NEOs under the 1997 LTIP for the three-year performance period from
June 1, 2009 to May 31, 2012. Payouts of performance share awards for
corporate executives are tied to achieving specified levels (threshold,
target and maximum) of cumulative corporate economic value added for the
three-year period and earnings per share growth over the performance
period, with each performance measure carrying a 50% weighting. For
Messrs. Russell and Goussetis, as business unit executives, cumulative
corporate economic value added and earnings per share growth measures
together carry a 50% weighting, and business unit operating income targets
are weighted 50%. No common shares are awarded if none of the three-year
financial threshold measures are met. If the performance level falls
between threshold and target or between target and maximum, the award is
prorated. For further information on the terms of the performance share
awards, including those applicable to a change in control, see the
discussion under the captions “Compensation Discussion and Analysis –
Change in Control” beginning on page 36 of this Proxy Statement and
“Compensation Discussion and Analysis – Compensation Components –
Performance Awards – General” and “ – Performance Share Awards” beginning
on pages 32 and 33, respectively, of this Proxy Statement.
|
|
(4)
|
All
reported options were granted as of July 16, 2009 under the Worthington
Industries, Inc. Amended and Restated 2003 Stock Option Plan (the “2003
Stock Option Plan”) with exercise prices equal to the fair market value of
the underlying common shares on the date of grant. The options become
exercisable in increments of 20% per year on each anniversary of their
grant date. For further information on the terms of the options, see the
discussion under the caption “Compensation Discussion and Analysis –
Compensation Components – Options” beginning on page 31 of this Proxy
Statement. For information on the effect of a change in control, see the
discussion under the caption “Compensation Discussion and Analysis –
Change in Control” beginning on page 36 of this Proxy Statement.
|
|
(5)
|
This
column shows the grant date fair value computed in accordance with ASC 718
of the stock and option awards granted to the NEOs in Fiscal 2010.
Generally, the grant date fair value of the options is the aggregate
amount the Company would include as a compensation expense in its
consolidated financial statements over each award’s five-year vesting
schedule. The fair value of each option on the grant date was $4.85. See
“Note A – Summary of Significant Accounting Policies” and “Note F –
Stock-Based Compensation” of the Notes to Consolidated Financial
Statements in “Item 8. – Financial Statements and Supplementary Data” of
the 2010 Form 10-K for the method (Black-Scholes) used in calculating the
fair value of the option awards and additional information regarding the
awards.
|
Outstanding
Equity Awards at Fiscal Year-End
The
following table summarizes the outstanding option awards, performance share
awards and restricted share awards held by the NEOs as of May 31,
2010. For additional information about these equity awards, see the
discussion under the captions “Compensation Discussion and Analysis –
Compensation Components – Long-Term Incentive Compensation,” “– Options,” “–
Performance Awards – General” and “– Performance Share Awards” beginning on
pages 30, 31, 32, and 33, respectively, of this Proxy Statement.
Outstanding
Equity Awards at Fiscal Year-End for Fiscal 2010
Option Awards (1)
|
|
Stock Awards
|
Name
|
|
No. of
Common
Shares
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
No. of
Common
Shares
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
|
|
|
Option
Exercise
Price
|
|
Option
Expiration
Date
|
|
No. of
Shares or
Units of
Stock
that Have
Not
Vested
(#)
|
|
|
Market
Value of
Shares of
Units of
Stock
That
Have Not
Vested
($)
|
|
|
Equity
Incentive Plan
Awards: No. of
Unearned
Shares, Units
or Other Rights
That Have Not
Vested (#)
(2)
|
|
|
Equity Incentive
Plan Awards:
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested ($) (3)
|
|
Equity
Incentive
Plan
Awards:
Performance
Period
Ending
Date
|
John
P. McConnell
|
|
|
74,000
|
|
|
|
0
|
|
|
|
|
|
$
|
9.30
|
|
03/29/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
0
|
|
|
|
|
|
$
|
15.15
|
|
06/02/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
0
|
|
|
|
|
|
$
|
15.26
|
|
06/01/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
175,000
|
|
|
|
0
|
|
|
|
|
|
$
|
19.20
|
|
05/31/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160,000
|
|
|
|
40,000
|
|
|
(4)
|
|
|
$
|
17.01
|
|
05/31/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78,000
|
|
|
|
52,000
|
|
|
(5)
|
|
|
$
|
18.17
|
|
05/31/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
60,000
|
|
|
(6)
|
|
|
$
|
22.73
|
|
07/01/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
80,000
|
|
|
(7)
|
|
|
$
|
20.21
|
|
06/30/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
150,000
|
|
|
(8)
|
|
|
$
|
13.25
|
|
07/15/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,500
|
|
|
|
257,600
|
|
05/31/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,500
|
|
|
|
404,800
|
|
05/31/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George
P. Stoe
|
|
|
40,000
|
|
|
|
0
|
|
|
|
|
|
$
|
15.26
|
|
06/01/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
0
|
|
|
|
|
|
$
|
19.20
|
|
05/31/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,000
|
|
|
|
8,000
|
|
|
(4)
|
|
|
$
|
17.01
|
|
05/31/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,000
|
|
|
|
18,000
|
|
|
(5)
|
|
|
$
|
18.17
|
|
05/31/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000
|
|
|
|
27,000
|
|
|
(6)
|
|
|
$
|
22.73
|
|
07/01/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
|
|
|
48,000
|
|
|
(7)
|
|
|
$
|
20.21
|
|
06/30/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
80,000
|
|
|
(8)
|
|
|
$
|
13.25
|
|
07/15/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
147,200
|
|
05/31/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
|
|
|
184,000
|
|
05/31/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B.
Andrew Rose
|
|
|
3,000
|
|
|
|
12,000
|
|
|
(9)
|
|
|
$
|
11.81
|
|
11/30/2018
|
|
|
5,000
|
|
|
$
|
59,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
40,000
|
|
|
(8)
|
|
|
$
|
13.25
|
|
07/15/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,084
|
|
|
|
30,669
|
|
05/31/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
|
|
88,320
|
|
05/31/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
A. Russell
|
|
|
60,000
|
|
|
|
40,000
|
|
|
(10)
|
|
|
$
|
18.41
|
|
02/11/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
|
|
|
18,000
|
|
|
(6)
|
|
|
$
|
22.73
|
|
07/01/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
|
|
24,000
|
|
|
(7)
|
|
|
$
|
20.21
|
|
06/30/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
40,000
|
|
|
(8)
|
|
|
$
|
13.25
|
|
07/15/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
58,880
|
|
05/31/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,500
|
|
|
|
80,960
|
|
05/31/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harry
A. Goussetis
|
|
|
14,000
|
|
|
|
0
|
|
|
|
|
|
$
|
15.15
|
|
06/02/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
0
|
|
|
|
|
|
$
|
15.26
|
|
06/01/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
0
|
|
|
|
|
|
$
|
19.20
|
|
05/31/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,000
|
|
|
|
4,000
|
|
|
(4)
|
|
|
$
|
17.01
|
|
05/31/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000
|
|
|
|
12,000
|
|
|
(5)
|
|
|
$
|
18.17
|
|
05/31/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
13,500
|
|
|
(6)
|
|
|
$
|
22.73
|
|
07/01/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,500
|
|
|
|
18,000
|
|
|
(7)
|
|
|
$
|
20.21
|
|
06/30/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
35,000
|
|
|
(8)
|
|
|
$
|
13.25
|
|
07/15/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,250
|
|
|
|
47,840
|
|
05/31/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,500
|
|
|
|
66,240
|
|
05/31/2012
|
|
(1)
|
All
options outstanding as of May 31, 2010 were granted under the 1997 LTIP or
the 2003 Stock Option Plan with exercise prices equal to the fair market
value of the underlying common shares on the date of grant. The
options become exercisable in increments of 20% per year on each
anniversary of their grant date for the first five years. In
the event of a change in control of the Company (as defined in each of the
plans), unless the Board or the Compensation Committee explicitly provides
otherwise, all options outstanding immediately before the date of such a
change in control will become fully vested and exercisable. In
the event an optionee’s employment terminates as a result of retirement,
death or total disability, any options outstanding and exercisable on that
date will remain exercisable by the optionee or, in the event of death, by
his beneficiary, until the earlier of the fixed expiration date, as stated
in the option award agreement, or either 12 or 36 months, depending on the
option, after the last day of employment due to retirement, death or
disability. Should termination occur for any reason other than
retirement, death or disability, the unexercised options will be
forfeited.
|
|
(2)
|
The
amounts shown in this column assume that the performance share awards
granted for each of the three-year periods ending May 31, 2011 and May 31,
2012 will be earned at the threshold amount based upon achieving the
specified performance levels. See the “Estimated Future Payouts
Under Equity Incentive Plan Awards” columns of the “Long-Term Performance
Awards and Option Awards Granted in Fiscal 2011” table on page 48 of this
Proxy Statement for the threshold, target and maximum performance share
amounts that may be received for the performance period ending May 31,
2012.
|
|
(3)
|
The
amounts shown in this column are calculated assuming that the related
performance share awards for each of the three-year periods ending May 31,
2011 and May 31, 2012 will be earned at the threshold amount based upon
achieving the specified performance levels and multiplying such amount by
the closing price of the common shares ($14.72) on May 28, 2010, the last
business day of Fiscal 2010.
|
|
(4)
|
Unexercisable
options vested on June 1, 2010.
|
|
(5)
|
Unexercisable
options vested 50% on June 1, 2010, and will vest 50% on June 1, 2011.
|
|
(6)
|
Unexercisable
options vested 33.33% on July 2, 2010, and will vest 33.33% on
July 2, 2011 and 33.33% on July 2, 2012.
|
|
(7)
|
Unexercisable
options vested 25% on July 1, 2010, and will vest 25% on July 1, 2011, 25%
on July 1, 2012, and 25% on July 1, 2013.
|
|
(8)
|
Unexercisable
options vested 20% on July 16, 2010, and will vest 20% on July 16, 2011,
20% on July 16, 2012, 20% on July 16, 2013, and 20% on July 16, 2014.
|
|
(9)
|
Unexercisable
options will vest 25% on December 1, 2010, 25% on December 1,
2011, 25% on December 1, 2012, and 25% on December 1, 2013.
|
|
(10)
|
Unexercisable
options will vest 50% on February 12, 2011, and 50% on February 12, 2012.
|
Option
Exercises and Stock Vested
The
following table sets forth information about options exercised by John P.
McConnell in Fiscal 2010, including the number of common shares acquired upon
exercise and the value realized. No stock awards held by the NEOs
vested in Fiscal 2010.
Option
Exercises and Stock Vested for Fiscal 2010
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Common Shares
Acquired on
Exercise (#)
|
|
|
Value Realized on
Exercise ($)
|
|
|
Number of Shares
Acquired on
Vesting (#)
|
|
|
Value Realized on
Vesting ($)
|
|
John
P. McConnell
|
|
|
70,000
|
|
|
|
287,000
|
|
|
|
|
|
|
|
|
|
George
P. Stoe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B.
Andrew Rose
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
A. Russell
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harry
A. Goussetis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Qualified
Deferred Compensation
As
discussed above in “Compensation Discussion and Analysis – Compensation
Components – Non-Qualified Deferred Compensation” beginning on page 35 of this
Proxy Statement, the Company maintains two Employee Deferral Plans which provide
for the deferral of compensation on a basis that is not tax-qualified
– the 2000 NQ Plan and the 2005 NQ Plan. Contributions and
deferrals for the period from March 1, 2000 to January 1, 2005 are
maintained under the 2000 NQ Plan. Contributions and deferrals for
periods on or after January 1, 2005 are maintained under the 2005 NQ Plan,
which was adopted to replace the 2000 NQ Plan in order to comply with the
provisions of Section 409A of the Internal Revenue Code. The terms of
the 2005 NQ Plan, which are discussed below, are similar to those of the 2000 NQ
Plan but are more restrictive with respect to the timing of deferral elections
and the ability of participants to change the time and manner in which accounts
will be paid. The Employee Deferral Plans are intended to supplement
the 401(k) plans sponsored by the Company.
Only
select highly compensated employees of the Company, including the NEOs, are
eligible to participate in the Employee Deferral Plans. As of August
10, 2010, approximately 92 employees of the Company were eligible to participate
in the 2005 NQ Plan and 36 employees of the Company had accounts in the 2000 NQ
Plan.
Under the
2005 NQ Plan, participants may defer the payment of up to 50% of their base
salary, bonus and/or short-term cash incentive bonus awards. Deferred amounts
are credited to the participants’ accounts under the 2005 NQ Plan at the time
the base salary or bonus compensation would have otherwise been paid. In
addition, the Company may make discretionary employer contributions to
participants’ accounts in the 2005 NQ Plan. For the 2009 calendar year, in order
to provide the same percentage of retirement-related deferred compensation
contributions to participants compared to other employees that would have been
made but for the IRS limits on annual compensation that may be considered under
tax-qualified plans, the Company made contributions to participants’ accounts
under the 2005 NQ Plan equal to (i) 3% of a participant’s annual compensation
(base salary plus bonus) in excess of the IRS maximum and (ii) a matching
contribution of 50% of the first 4% of annual compensation contributed by the
participant to a Company retirement plan to the extent not matched by the
Company under the DPSP.
Participants
in the 2005 NQ Plan may elect to have their accounts invested at a rate
reflecting (a) the increase or decrease in the fair market value per share of
the Company’s common shares with dividends reinvested, (b) a fixed rate which is
set annually by the Compensation Committee (3.91% for Fiscal 2010), or (c)
returns on any funds available for investment under the DPSP.
Employee
accounts are fully vested under the 2005 NQ Plan. Payouts under the
2005 NQ Plan are made in cash, as of a specified date selected by the
participant or, subject to the timing requirements of Section 409A of the
Internal Revenue Code, when the participant is no longer employed by the
Company, either in a lump sum or in installment payments, all as chosen by the
participant at the time the deferral election is made. The
Compensation Committee may permit hardship withdrawals from a participant’s
account under the 2005 NQ Plan in accordance with defined
guidelines. In the event of a change in control of the Company, the
aggregate balance of each participant’s account will be accelerated and paid out
as of the date of the change in control unless otherwise determined by
three-fourths of the members of the Board.
The
following table provides information concerning the participation by the NEOs in
the Employee Deferral Plans for Fiscal 2010.
Non-Qualified
Deferred Compensation for Fiscal 2010
Name
|
|
Name of Plan
|
|
Executive
Contributions in
Fiscal 2010 ($) (1)
|
|
|
Company
Contributions in
Fiscal 2010 ($)(2)
|
|
|
Aggregate Earnings in
Fiscal 2010 ($) (3)
|
|
|
Aggregate
Withdrawals/
Distributions ($)
|
|
|
Aggregate Balance
at
May 31, 2010 ($)(4)
|
|
John
P. McConnell
|
|
2000
NQ Plan
|
|
|
0
|
|
|
|
0
|
|
|
|
11,193
|
|
|
|
0
|
|
|
|
292,566
|
|
|
|
2005
NQ Plan
|
|
|
0
|
|
|
|
13,182
|
|
|
|
4,589
|
|
|
|
0
|
|
|
|
131,621
|
|
George
P. Stoe
|
|
2000
NQ Plan
|
|
|
0
|
|
|
|
0
|
|
|
|
2,037
|
|
|
|
0
|
|
|
|
22,639
|
|
|
|
2005
NQ Plan
|
|
|
0
|
|
|
|
12,142
|
|
|
|
136,898
|
|
|
|
0
|
|
|
|
1,540,566
|
|
B.
Andrew Rose
|
|
2000
NQ Plan
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2005
NQ Plan
|
|
|
0
|
|
|
|
477
|
|
|
|
2
|
|
|
|
0
|
|
|
|
479
|
|
Mark
A. Russell
|
|
2000
NQ Plan
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2005
NQ Plan
|
|
|
185,096
|
|
|
|
7,458
|
|
|
|
35,900
|
|
|
|
0
|
|
|
|
538,980
|
|
Harry
A. Goussetis
|
|
2000
NQ Plan
|
|
|
0
|
|
|
|
0
|
|
|
|
1,984
|
|
|
|
0
|
|
|
|
26,502
|
|
|
|
2005
NQ Plan
|
|
|
0
|
|
|
|
9,440
|
|
|
|
7,024
|
|
|
|
0
|
|
|
|
113,528
|
|
|
(1)
|
The
amounts in this column reflect contributions to the 2005 NQ Plan during
Fiscal 2010 as a result of deferrals of salary, bonuses and/or short-term
cash incentive bonus awards which would otherwise have been paid to the
NEO. These amounts are also included in the “Salary,” “Bonus” or
“Short-Term Incentive Bonus Award” columns, respectively, for Fiscal 2010
in the “Fiscal 2010 Summary Compensation Table” on page 39 of this Proxy
Statement.
|
|
(2)
|
These
contributions are also included in the “All Other Compensation” column for
Fiscal 2010 in the “Fiscal 2010 Summary Compensation Table” on page 39 of
this Proxy Statement.
|
|
(3)
|
Amount
included for Mr. McConnell is the $316 listed for Fiscal 2010 in the
“Change in Pension Value and Nonqualified Deferred Compensation Earnings”
column of the “Fiscal 2010 Summary Compensation Table” on page 39 of this
Proxy Statement which represents the amount by which earnings in Fiscal
2010 on his accounts in the Employee Deferral Plans invested at the fixed
rate exceeded the Applicable Comparable Rate.
|
|
(4)
|
The
amounts included in the “Aggregate Balance at May 31, 2010” column
represent contributions by the Company or the NEO and credited to the
NEOs’ accounts under the 2000 NQ Plan or the 2005 NQ Plan, and earnings on
those accounts. Of these amounts, contributions by the Company or the NEO
have been included in prior Summary Compensation Tables, or would have
been included in prior Summary Compensation Tables had the current
disclosure rules been in effect at the time of such contributions and the
NEO been an NEO at that time. The total amount of these Company and NEO
contributions to these plans which are included in this column are as
follows: (a) Mr. McConnell — $314,883; (b) Mr. Stoe— $1,546,831; (c) Mr.
Rose — $477; (d) Mr. Russell — $455,943; and (e) Mr. Goussetis — $143,152.
|
Annual
Cash Incentive Bonus Awards Granted In Fiscal 2011
The
following supplemental table sets forth the annual cash incentive bonus awards
granted to the NEOs under the Annual Incentive Plan in Fiscal 2011 as of the
date of this Proxy Statement.
Annual
Cash Incentive Bonus Awards Granted in Fiscal 2011
Name
|
|
Annual Cash Incentive Bonus Awards for Twelve-
Month Performance Period Ending May 31, 2011(1)
|
|
|
|
Threshold ($)
|
|
|
Target ($)
|
|
|
Maximum ($)
|
|
John
P. McConnell
|
|
|
412,000
|
|
|
|
824,000
|
|
|
|
1,648,000
|
|
George
P. Stoe
|
|
|
317,000
|
|
|
|
634,000
|
|
|
|
1,268,000
|
|
B.
Andrew Rose
|
|
|
160,000
|
|
|
|
320,000
|
|
|
|
640,000
|
|
Mark
A. Russell
|
|
|
250,000
|
|
|
|
500,000
|
|
|
|
1,000,000
|
|
Harry
A. Goussetis
|
|
|
161,250
|
|
|
|
322,500
|
|
|
|
645,000
|
|
|
(1)
|
Payouts
of these annual cash incentive bonus awards for corporate executives are
generally tied to achieving specified levels (threshold, target and
maximum) of corporate economic value added and earnings per share (in each
case excluding restructuring charges and non-recurring items) for the
twelve-month performance period with each performance measure carrying a
50% weighting. For Messrs. Russell and Goussetis, business unit
executives, the corporate earnings per share measure carries a 20%
weighting, business unit operating income carries a 30% weighting, and
business unit economic value added carries a 50% weighting. If
the performance level falls between threshold and target or between target
and maximum, the award is prorated. If threshold levels are not
reached for any performance measure, no annual cash incentive bonus will
be paid. Annual cash incentive bonus award payouts will be made
within a reasonable time following the end of the performance
period. In the event of a change in control of the Company
(followed by termination of the participant’s employment during the
relevant performance period), all annual cash incentive bonus awards would
be considered to be earned at target, payable in full, and immediately
settled or distributed.
|
Long-Term
Performance Awards and Option Awards Granted in Fiscal 2011
The
following supplemental table sets forth the long-term performance awards
(consisting of cash performance awards and performance share awards) for the
three-year period ending May 31, 2013 and the option awards granted to the NEOs
in Fiscal 2011 through the date of this Proxy Statement.
Long-Term
Performance Awards and Option Awards Granted in Fiscal 2011
|
|
Cash Performance Awards for Three-Year Period
Ending May 31, 2013 (1)
|
|
|
Performance Share Awards for Three-Year Period Ending
May 31, 2013 (1)
|
|
|
Option
Awards:
|
|
|
|
|
Name
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
Threshold
(# of Common
Shares)
|
|
|
Target
(# of Common
Shares)
|
|
|
Maximum
(# of Common
Shares)
|
|
|
Number of
Common
Shares
Underlying
Options
(2)
|
|
|
Exercise or
Base Price
of
Option
Awards
($/Sh) (2)
|
|
|
|
|
475,000
|
|
|
|
950,000
|
|
|
|
1,900,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
P. McConnell |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,750
|
|
|
|
49,500
|
|
|
|
99,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135,000
|
|
|
$
|
12.05
|
|
|
|
|
400,000
|
|
|
|
800,000
|
|
|
|
1,600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George
P. Stoe |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,250
|
|
|
|
22,500
|
|
|
|
45,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72,000
|
|
|
$
|
12.05
|
|
|
|
|
175,000
|
|
|
|
350,000
|
|
|
|
700,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B.
Andrew Rose |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
|
|
12,000
|
|
|
|
24,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
$
|
12.05
|
|
|
|
|
175,000
|
|
|
|
350,000
|
|
|
|
700,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
A. Russell |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
10,000
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,000
|
|
|
$
|
12.05
|
|
|
|
|
137,500
|
|
|
|
275,000
|
|
|
|
550,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harry
A. Goussetis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
8,000
|
|
|
|
16,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,500
|
|
|
$
|
12.05
|
|
|
(1)
|
These
columns show the potential payouts under the cash performance awards and
the performance share awards granted to the NEOs under the 1997 LTIP for
the three-year performance period from June 1, 2010 to May 31,
2013. Payouts of cash performance awards and performance share
awards for corporate executives are tied to achieving specified levels
(threshold, target and maximum) of cumulative corporate economic value
added for the three-year period and earnings per share growth over the
performance period, with each performance measure carrying a 50%
weighting. For Messrs. Russell and Goussetis, as business unit
executives, cumulative corporate economic value added and earnings per
share growth measures together carry a 50% weighting, and business unit
operating income targets are weighted 50%. No awards are paid
or distributed if none of the three-year threshold financial measures are
met. If the performance levels fall between threshold and
target or between target and maximum, the award is
prorated. For further information on the terms of the cash
performance awards and the performance share awards, see the discussion
under the captions “Compensation Discussion and Analysis – Compensation
Components – Performance Awards – General” “– Performance Share Awards”
and “– Long-Term Cash Performance Awards” beginning on pages 32, 33 and
33, respectively, of this Proxy Statement. For information on
the effect of a change in control, see the discussion under the caption
“Compensation Discussion and Analysis – Change in Control” beginning on
page 36 of this Proxy Statement.
|
|
(2)
|
All
options were granted effective as of July 2, 2010 under the 1997 LTIP with
exercise prices equal to the fair market value of the underlying common
shares on the date of grant. The options become exercisable
over five years in increments of 20% per year on each anniversary of their
grant date. For further information on the terms of the
options, see the discussion under the caption “Compensation Discussion and
Analysis – Compensation Components – Options” beginning on page 31 of this
Proxy Statement. For information on the effect of a change in
control, see the discussion under the caption “Compensation Discussion and
Analysis — Change in Control” beginning on page 36 of this Proxy
Statement.
|
COMPENSATION
OF DIRECTORS
The
Compensation Committee annually reviews, with the assistance of Towers Watson,
certain market information provided by Towers Watson concerning compensation
(both cash and non-cash) paid to directors. Based upon such information, the
Company’s past practices concerning directors’ compensation and such other
information as the Compensation Committee deems appropriate, the Compensation
Committee makes recommendations to the Board with respect to directors’
compensation. Following consideration of such recommendations, the compensation
payable to the directors is set by the entire Board.
Information
provided by Towers Watson for Fiscal 2009 indicated that director compensation
(both the cash portion and the equity portion) was below the market median level
of the Company’s comparator group. For Fiscal 2009, upon the recommendation of
the Compensation Committee, the Board increased the number of common shares
covered by options and restricted stock awards in the equity portion of director
compensation but elected to leave the cash portion unchanged. Information
provided by Towers Watson for Fiscal 2010 indicated that director compensation
(both the cash portion and the equity portion) continued to be below the market
median level of the Company’s comparator group. For Fiscal 2010, upon the
recommendation of the Compensation Committee, the Board increased the number of
common shares covered by options and restricted stock awards in the equity
portion of director compensation but elected to leave the cash portion
unchanged.
Cash
Compensation
The
following table sets forth the cash compensation payable to the Company’s
non-employee directors for Fiscal 2010. Directors who are employees
of the Company receive no additional compensation for serving as members of the
Board or as members of Board committees. All directors are reimbursed
for out-of-pocket expenses incurred in connection with serving as directors,
including travel expenses.
Annual
Retainer
|
|
$
|
45,000 |
|
Lead
Independent Director Annual Retainer
|
|
$
|
25,000 |
|
Attendance
at a Board Meeting (including telephonic meetings)
|
|
$
|
1,500 |
|
Audit
Committee Chair Annual Retainer
|
|
$
|
10,000 |
|
Committee
Chair (other than Audit) Annual Retainer
|
|
$
|
7,500 |
|
Attendance
at a Board Committee Meeting (including telephonic meetings)
|
|
$
|
1,500 |
|
Director
Deferral Plans
The
Company maintains two Director Deferral Plans which provide for deferral of
directors’ fees on a basis that is not tax-qualified. The Worthington
Industries, Inc. Deferred Compensation Plan for Directors, as Amended and
Restated effective June 1, 2000 (the “Directors 2000 NQ Plan”) governs deferrals
prior to January 1, 2005. Deferrals with respect to the period on or
after January 1, 2005 are governed by the Worthington Industries, Inc. Amended
and Restated 2005 Deferred Compensation Plan for Directors (Restatement
effective as of December 2008) (the “Directors 2005 NQ Plan”) which was adopted
in order to comply with the provisions of Section 409A of the Internal Revenue
Code applicable to non-qualified deferred compensation plans. The
terms of the Directors 2005 NQ Plan, which are discussed below are similar to
those of the Directors 2000 NQ Plan, but are generally more restrictive with
respect to the timing of deferral elections and the ability of participants to
change the time and manner in which accounts will be paid.
Under the
Directors 2005 NQ Plan, non-employee directors are able to defer payment of all
or a portion of their directors’ fees until a specified date or until they are
no longer associated with the Company. Any fees deferred are credited
to the director’s account at the time the fees would have otherwise been
paid. Participants in the Director 2005 NQ Plan may elect to have
their accounts invested at a rate reflecting (a) the increase or decrease in the
fair market value per share of the Company’s common shares with dividends
reinvested, (b) a fixed rate (3.91% for Fiscal 2010) which is set annually by
the Compensation Committee, or (c) rates of return on any of the funds available
for investment under the DPSP. The Directors 2005 NQ Plan, as well as
the Directors 2000 NQ Plan, are administered by the Compensation
Committee. All accounts are fully vested. The Compensation
Committee may permit hardship withdrawals from a participant’s account under the
Directors 2005 NQ Plan under defined guidelines. In the event of a
defined change in control, participants’ accounts under the Directors 2005 NQ
Plan will be accelerated and paid out as of the date of change in control.
Equity
Grants
Under the
Worthington Industries, Inc. Amended and Restated 2006 Equity Incentive Plan for
Non-Employee Directors (the “2006 Directors Equity Plan”), the Board may grant
non-qualified stock options, restricted stock, restricted stock units, stock
appreciation rights and whole common shares to non-employee directors of the
Company. Awards under the 2006 Directors Equity Plan are made by the
Board in its discretion.
On
September 30, 2009, each individual then serving as a non-employee director
(other than Mr. Blystone) was granted: (a) an option to purchase 9,750 common
shares, with an exercise price equal to the fair market value of the common
shares on the grant date ($13.90); and (b) an award of 2,900 restricted
shares. As Lead Independent Director, Mr. Blystone was granted on
September 30, 2009: (a) an option to purchase 14,625 common shares, with an
exercise price equal to the fair market value of the common shares on the grant
date ($13.90); and (b) an award of 4,350 restricted shares.
Each
option granted to the non-employee directors has a ten-year term and becomes
vested and fully exercisable on September 30, 2010. Upon a business
combination or change in control (as defined in the 2006 Directors Equity Plan),
each option will become vested and fully exercisable. Vesting of an
option also accelerates upon death, total disability or retirement after a
non-employee director attains age 65 or has served at least nine years as a
member of the Board. If a non-employee director becomes totally
disabled or dies while serving on the Board, he or she (or, in the event of
death, his or her beneficiary) has three years from the date of the occurrence
to exercise any vested options, subject to the stated term of the
options. In the event a non-employee director retires after he or she
has attained age 65 or has served at least nine years as a member of the Board,
the non-employee director may exercise any vested options for a period of three
years after the date of retirement, subject to the stated term of the
options. If a non-employee director ceases to be a member of the
Board for cause (as defined in the 2006 Directors Equity Plan), all options
terminate immediately. If a non-employee director ceases to be a
member of the Board for any reason other than those listed above, the
non-employee director’s vested options may be exercised for a period of one year
following the date of termination of service, subject to the stated term of the
options, and any unvested options will be forfeited as of the date of
termination of service.
Each
restricted share granted to the non-employee directors on September 30, 2009
vests on September 30, 2010. Upon a business combination or change in
control, all restricted shares will become fully vested. In the case
of death, total disability or retirement, all restricted shares will also
immediately become fully vested. If a non-employee director’s service
on the Board terminates for any other reason, unvested restricted shares will be
forfeited. During the time between the grant date and the vesting
date, a non-employee director may exercise full voting rights in respect of the
restricted shares and will be credited with any dividends paid on the restricted
shares (which dividends will be distributed with the restricted shares if they
vest, or forfeited if the restricted shares are forfeited).
The Board
has taken action providing that each individual serving as a non-employee
director on September 30, 2010 (including each director nominee elected at the
Annual Meeting) will be granted immediately following the Annual Meeting: (a) an
option to purchase 9,750 common shares (14,625 for Mr. Blystone to reflect his
position as Lead Independent Director), with an exercise price equal to the fair
market value of the common shares on the grant date and with terms identical to
the terms of the options granted on September 30, 2009 and (b) an award of 2,900
restricted shares (4,350 for Mr. Blystone to reflect his position as Lead
Independent Director), with terms which would be the same as those applicable to
the restricted shares awarded on September 30, 2009. Each option granted to the
non-employee directors immediately following the Annual Meeting will become
vested and fully exercisable on the first to occur of September 30, 2011 or the
date of the annual meeting of shareholders in 2011. Similarly, each restricted
share granted to the non-employee directors immediately following the Annual
Meeting will vest on the first to occur of September 30, 2011 or the date of the
annual meeting of shareholders in 2011.
Director
Compensation for Fiscal 2010
The
following table sets forth information concerning the compensation earned by the
Company’s non-employee directors during Fiscal 2010.
Director
Compensation for Fiscal 2010 (1)
Name
|
|
Fees
Earned or
Paid in
Cash
($)(2)
|
|
|
Stock
Awards
($)(3)
|
|
|
Option
Awards
($)(4)
|
|
|
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings (5)
|
|
|
Total ($)
|
|
John
B. Blystone (6)
|
|
|
90,100
|
|
|
|
60,465
|
|
|
|
70,931
|
|
|
|
-0-
|
|
|
|
221,496
|
|
Michael
J. Endres
|
|
|
66,000
|
|
|
|
40,310
|
|
|
|
47,288
|
|
|
|
-0-
|
|
|
|
153,598
|
|
Peter
Karmanos, Jr.
|
|
|
65,100
|
|
|
|
40,310
|
|
|
|
47,288
|
|
|
|
-0-
|
|
|
|
152,698
|
|
John
R. Kasich
|
|
|
60,300
|
|
|
|
40,310
|
|
|
|
47,288
|
|
|
|
-0-
|
|
|
|
147,898
|
|
Carl
A. Nelson
|
|
|
71,800
|
|
|
|
40,310
|
|
|
|
47,288
|
|
|
|
-0-
|
|
|
|
159,398
|
|
Sidney
A. Ribeau
|
|
|
63,000
|
|
|
|
40,310
|
|
|
|
47,288
|
|
|
|
246
|
|
|
|
150,844
|
|
Mary
Schiavo
|
|
|
61,800
|
|
|
|
40,310
|
|
|
|
47,288
|
|
|
|
319
|
|
|
|
149,717
|
|
|
(1)
|
John
P. McConnell, the Company’s Chairman of the Board and CEO is not included
in this table because he was an employee of the Company during Fiscal 2010
and received no additional compensation for his services as a
director. The compensation received by Mr. McConnell as an
employee of the Company is shown in the “Fiscal 2010 Summary Compensation
Table” on page 39 of this Proxy Statement.
|
|
(2)
|
Represents
cash earned in Fiscal 2010 for annual retainer fees and Board and Board
committee meeting fees in accordance with the cash compensation program
discussed under the caption “Compensation of Directors — Cash
Compensation” beginning on page 49 of this Proxy Statement.
|
|
(3)
|
The
amounts shown in this column represent the aggregate grant date fair value
of the restricted share awards granted to the non-employee directors in
Fiscal 2010, as computed in accordance with ASC 718. These
amounts exclude the impact of estimated forfeitures, as required by SEC
Rules. See “Note F – Stock-Based Compensation” of the Notes to
Consolidated Financial Statements in “Item 8. – Financial Statements and
Supplementary Data” of the Company’s 2010 Form 10-K for assumptions used
and additional information regarding the restricted stock
awards. The restricted stock awards granted to the non-employee
directors on September 30, 2009 (which were the only restricted share
awards granted during, and outstanding at the end of, Fiscal 2010)
covering 2,900 common shares (4,350 for Mr. Blystone) had a grant date
fair value of $13.90 per share (the closing price of the common shares on
that date).
|
|
(4)
|
The
amounts shown in this column represent the aggregate grant date fair value
of the options granted to the non-employee directors in Fiscal 2010, as
computed in accordance with ASC 718. These amounts exclude the
impact of estimated forfeitures, as required by SEC Rules. See
“Note A – Summary of Significant Accounting Policies” and “Note F –
Stock-Based Compensation” of the Notes to Consolidated Financial
Statements in “Item 8. – Financial Statements and Supplementary Data” of
the Company’s 2010 Form 10-K for the valuation method and assumptions used
and additional information regarding the options. The grant
date fair value of the options granted to the non-employee directors on
September 30, 2009 was $47,288 covering 9,750 common shares ($70,931
covering 14,625 common shares for Mr. Blystone), computed in accordance
with ASC 718. The outstanding options held by the non-employee directors
at the end of Fiscal 2010 covered the following number of common
shares: Mr. Blystone – 51,925 common shares; Mr. Endres –
37,950 common shares; Mr. Karmanos – 47,950 common shares; Mr. Kasich –
47,950 common shares; Mr. Nelson – 36,950 common shares; Mr. Ribeau –
43,950 common shares; and Ms. Schiavo – 47,950 common shares.
|
|
(5)
|
The
fixed rate applicable to the Director Deferral Plans for Fiscal 2010
exceeded the Applicable Comparative Rate by an amount equal to
0.96%. The amounts shown in this column represent the amount by
which earnings on accounts of the named directors in the Director Deferral
Plans invested at the fixed rate exceeded the Applicable Comparative Rate
(generally the amount invested under the fixed rate fund multiplied by
0.96%).
|
|
(6)
|
Mr.
Blystone is the Company’s Lead Independent Director.
|
EQUITY
COMPENSATION PLAN INFORMATION
The
Company maintains five equity compensation plans (the “Equity Plans”) under
which common shares are authorized for issuance to eligible directors, officers
and employees: (a) the 1990 Stock Option Plan; (b) the 1997
LTIP; (c) the Worthington Industries, Inc. Amended and Restated 2000 Stock
Option Plan for Non-Employee Directors (Restatement effective as of November 1,
2008) (the “2000 Directors Option Plan”); (d) the 2003 Stock Option Plan;
and (e) the 2006 Directors Equity Plan. Each Equity Plan has
been approved by the shareholders of the Company.
The
following table shows for the Equity Plans, as a group, the number of common
shares issuable upon the exercise of outstanding options and upon payout of
outstanding performance share awards, the weighted-average exercise price of
outstanding options, and the number of common shares remaining available for
future issuance, excluding common shares issuable upon exercise of outstanding
options or upon payout of outstanding performance share awards, in each case as
of May 31, 2010.
Equity
Compensation Plan Information
Plan Category
|
|
Number Of Common
Shares To Be Issued
Upon Exercise Of
Outstanding Options,
Warrants And Rights
|
|
|
Weighted-Average
Exercise Price Of
Outstanding Options,
Warrants And Rights
|
|
|
Number Of Common Shares
Remaining Available For
Future Issuance Under Equity
Compensation Plans [Excluding
Common Shares Reflected In
Column (a)]
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
Equity
compensation plans approved by shareholders
|
|
|
6,982,474
|
(1)
|
|
$
|
17.67
|
(2)
|
|
|
4,560,986
|
(3)
|
Equity
compensation plans not approved by shareholders
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
TOTAL
|
|
|
6,982,474
|
(1)
|
|
$
|
17.67
|
(2)
|
|
|
4,560,986
|
(3)
|
|
(1)
|
Includes
251,370 common shares issuable upon exercise of outstanding options
granted under the 1990 Stock Option Plan, 688,000 common shares issuable
upon exercise of outstanding options granted under the 1997 LTIP, 113,000
common shares issuable upon exercise of the outstanding options granted
under the 2000 Directors Option Plan, 4,891,700 common shares issuable
upon exercise of outstanding options granted under the 2003 Stock Option
Plan, and 227,825 common shares issuable upon exercise of outstanding
options granted under the 2006 Directors Equity Plan. Also includes
810,579 common shares which represent the maximum number of common shares
which may be paid out in respect of outstanding performance share awards
granted under the 1997 LTIP.
|
|
Does
not include 1,963,386 common shares which represent the maximum amount of
common shares which may be paid out in respect of outstanding cash
performance awards granted under the 1997 LTIP which were outstanding as
of May 31, 2010, because to date all such awards have been paid in cash.
If all long-term cash performance awards granted under the 1997 LTIP which
were outstanding as of May 31, 2010, were paid out at their maximum amount
and the Compensation Committee were to elect to make all payments in the
form of common shares, then, based on the closing price ($14.72) of the
Company’s common shares on May 28, 2010, the last business day of Fiscal
2010, the number of common shares which would be issued upon payout of the
cash performance awards would be 1,963,386 common shares. The number of
common shares, if any, actually issued with respect to long-term cash
performance awards granted under the 1997 LTIP would be based on (i) the
percentage of the cash performance awards determined by the Compensation
Committee to be paid in common shares rather than cash, (ii) the actual
performance level (i.e., threshold, target or maximum) used to determine
the payout in respect of each long-term cash performance award and (iii)
the price of the Company’s common shares at the time of payout.
|
|
(2)
|
Represents
the weighted-average exercise price of options outstanding under the
Equity Plans as of May 31, 2010. Also see note (1) above
with respect to performance share awards and long-term cash performance
awards granted under the 1997 LTIP. The weighted-average
exercise price does not take these awards into account.
|
|
(3)
|
Includes
1,011,049 common shares available under the 1990 Stock Option Plan,
2,688,891 common shares available under the 1997 LTIP, 1,499,450 common
shares available under the 2003 Stock Option Plan, and 172,175 common
shares available under the 2006 Directors Equity Plan. In addition to
options, performance share awards and long-term cash performance awards,
the 1997 LTIP authorizes the Compensation Committee to grant awards in the
form of stock appreciation rights, restricted stock, performance units,
dividend equivalents, and other stock unit awards that are valued in whole
or in part by reference to, or are otherwise based on, the Company’s
common shares or other property. The number shown in this column reflects
the backing out of 810,579 common shares representing the maximum number
of common shares which may be paid out in respect of outstanding
performance share awards granted under the 1997 LTIP as described in the
first paragraph of note (1) above. In addition to options, the 2006
Directors Equity Plan authorizes the Board to grant awards in the form of
restricted stock, restricted stock units, stock appreciation rights and
whole common shares. No common shares remain available for grants of
future awards under the 2000 Directors Option Plan.
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PROPOSAL
2: APPROVAL OF
THE
WORTHINGTON INDUSTRIES, INC.
2010
STOCK OPTION PLAN
General
The Board
proposes that the shareholders approve the adoption of the Worthington
Industries, Inc. 2010 Stock Option Plan (the “2010 Plan”). On June
30, 2010, upon the recommendation of the Compensation Committee, the Board
adopted the 2010 Plan, subject to approval by the shareholders.
The
purpose of the 2010 Plan is to promote and advance the long-term interests of
the Company and its shareholders by enabling the Company and its subsidiaries to
attract, retain and reward employees and to strengthen the mutuality of interest
between employees and shareholders of the Company. The 2010 Plan is
designed to accomplish this purpose through the grant of options to purchase
common shares of the Company to selected employees. Options may be
granted as either incentive stock options, as defined in Section 422 of the
Internal Revenue Code (“ISOs”), or non-qualified stock options (“NSOs” ).
The
Company currently maintains three equity compensation plans (the “Existing
Employee Equity Plans”) under which common shares are authorized for issuance to
eligible officers and employees: (a) the 1990 Stock Option Plan;
(b) the 1997 LTIP; and (c) the 2003 Stock Option Plan. The
Existing Employee Equity Plans will remain in effect if the 2010 Plan is
approved, but the 1990 Stock Plan will be frozen so that no new options may be
issued under that Plan. The Company also maintains two equity
compensation plans (the “Existing Director Equity Plans”) under which common
shares are authorized for issuance to eligible directors: (x) the 2000
Director Option Plan, under which no common shares remain available for future
grants; and (y) the 2006 Directors Equity Plan. Please see the
section captioned “EQUITY COMPENSATION PLAN INFORMATION” for further information
regarding the Existing Employee Equity Plans and the Existing Director Equity
Plans.
As
of August 10, 2010:
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·
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1990 Stock
Option Plan :
249,570 common shares were covered by outstanding
options, which options had a weighted-average exercise price of $13.00 and
a weighted-average remaining term of 1.71 years; if the 2010 Plan is
approved, no new options may be granted under the 1990 Stock
Plan. If the 2010 Plan is not approved, 1,011,049 common shares
will remain available for new option grants.
|
|
·
|
1997 LTIP
: 1,536,000
common shares were covered by outstanding options, which options had a
weighted-average exercise price of $13.03 and a weighted-average remaining
term of 6.33 years; a maximum of 810,579 common shares may be paid out in
respect of outstanding performance share awards; and 1,842,588 common
shares remained available for new award grants or the payment of cash
awards. (Common shares may be paid out in respect of outstanding cash
performance awards at the election of the Compensation Committee with the
number of common shares to be determined based on the closing price of the
Company’s common shares at the time of payment).
|
|
·
|
2003 Stock
Option Plan: 6,330,000 common shares were covered by
outstanding options, which options had a weighted-average exercise price
of $16.95 and a weighted-average remaining term of 7.22 years; and 61,150
common shares remained available for new option grants.
|
The
Compensation Committee believes that option grants are vital to the interests of
the Company and its shareholders as they play an important role in the ability
of the Company to attract and retain its employees. The Compensation Committee
believes that options represent a particularly effective form of incentive
compensation, as they align the interests of the employee option holders with
those of the shareholders, providing value tied to the price of the Company’s
common shares.
It has
been a practice of the Company to award options annually to the NEOs and a
select group of executives, and to award options to a much broader group of key
employees every three years. Options may also be granted at other
times to select key employees and select new key employees when their employment
begins. In practice, the number of common shares covered by an
individual option award has generally depended on the employee’s position and
external market data.
Since the
adoption of the 2003 Stock Option Plan, nearly all employee stock options have
been granted under that Plan. The Compensation Committee made a broad-based
grant of options effective July 2, 2010 to a group of 966 employees. This grant
effectively left no common shares available for future grants under the 2003
Stock Option Plan (other than those which may become available due to
forfeitures of outstanding options or as a result of outstanding options not
being fully exercised before expiration). In addition, some of the options
granted effective July 2, 2010 were granted under the 1997 LTIP. The
Compensation Committee would prefer not to grant options under the 1997 LTIP, in
order to leave common shares authorized but unissued under the 1997 LTIP
available for awards other than stock options or for the payment of performance
awards.
Based on
the Company’s past practices of issuing options covering an average of
approximately 1,275,000 common shares per year for the last eight years,
including fiscal 2011 (an average of approximately 1,321,000 common shares per
year for the last three years), the Company believes that the 6,000,000 common
shares authorized under the 2010 Plan would be sufficient in order to allow the
Company to grant options for the next five years, depending on the
number of common shares which would again become available to grant due to
forfeitures or for other reasons, and a change in the option granting practices
by the Compensation Committee. The 6,000,000 common share
authorization under the 2003 Stock Option Plan has been sufficient to permit the
Company to award substantially all of the options granted over the last seven
years.
As noted
above, if the 2010 Plan is approved, no new options will be issued under the
1990 Stock Option Plan. New options may be granted under the 2003
Stock Option Plan, if common shares again become available due to forfeitures or
other reasons. Options would not generally be issued under the 1997
LTIP and common shares authorized under the 1997 LTIP would generally be used
for other awards (middle management, supervisory and technical and professional
employees).
The
following summary of the material features of the 2010 Plan, a copy of which is
attached to this Proxy Statement as Appendix I, does not purport to be complete
and is qualified in its entirety by the terms of the 2010 Plan.
Administration
of the 2010 Plan
The 2010
Plan will be administered by the Compensation Committee. The
Compensation Committee is composed in accordance with, and governed by, the
Compensation Committee’s charter as approved from time to time by the Board and
subject to the applicable NYSE Rules, and other corporate governance documents
of the Company.
The
Compensation Committee has the sole authority to: (a) interpret the 2010
Plan and any award agreement; (b) adopt, amend and rescind rules and
regulations relating to the 2010 Plan; (c) make all other decisions
(including whether a participant has incurred a disability) and take or
authorize actions necessary or advisable for the administration and
interpretation of the 2010 Plan; (d) correct any defect, supply any
omission or reconcile any inconsistency in the 2010 Plan or in any award
agreement; (e) decide which employees will be granted options; and
(f) specify the type of option to be granted and the terms upon which an
option will be granted, including the date(s) on which an option may vest, the
acceleration of any such vesting date(s) and the expiration date of an
option. Any action by the Compensation Committee will be final,
binding and conclusive.
The
Compensation Committee may designate individuals other than members of the
Compensation Committee to carry out its responsibilities (including, without
limitation, the granting of options) under such conditions and limitations as
the Compensation Committee may prescribe. However, the Compensation
Committee may not delegate its authority related to the granting of options to
employees subject to Section 16 of the Exchange Act or Section 162(m) of the
Internal Revenue Code or delegate its authority if such delegation is prohibited
by an equity award granting policy of the Company.
Eligibility
Eligibility
to participate in the 2010 Plan is limited to employees of the Company and its
subsidiaries. As of the date of this Proxy Statement, approximately 1,000
employees were eligible to receive option grants if selected by the Compensation
Committee. All grants of options under the 2010 Plan will be made in the
discretion of the Compensation Committee. No determination has been made
regarding the identity of the employees who may be granted options or the number
of common shares to be covered by options which may be granted to employees in
the future. Options granted under the 2010 Plan will be based on a subjective
determination of the relative current and future contribution that each employee
has made or may make to the Company. As a result, options previously granted
under the Existing Employee Equity Plans may not be reflective of future option
grants under the 2010 Plan.
No
employee may, in any one year, be granted options under the 2010 Plan covering
more than 250,000 common shares, subject to adjustment for changes in
capitalization as described below.
Common
Shares Subject to 2010 Plan
A total
of 6,000,000 common shares will be available for issuance under the 2010 Plan,
of which no more than 500,000 may be subject to ISO awards. The
common shares delivered upon exercise of options granted under the 2010 Plan may
be either authorized and unissued common shares or common shares which have been
reacquired by the Company. No fractional common shares will be issued
under the 2010 Plan. For the purpose of computing the total
number of common shares available for options under the 2010 Plan, the number of
common shares subject to issuance upon exercise or settlement of options at the
grant date of such options will be counted.
In
addition, certain common shares which had been subject to options will again be
available for grant under the 2010 Plan, in particular: (a) common shares
subject to the portion of an option that is forfeited, terminated or unexercised
before expiration; (b) common shares subject to the portion of an option that is
settled in cash or other than through the issuance of common shares; and (c)
common shares granted through the assumption of, or in substitution for,
outstanding awards granted by another entity to individuals who become employees
of the Company as a result of a merger, consolidation, acquisition or other
corporate transaction involving such other entity and the Company.
In the
event of any change in capitalization affecting the Company’s common shares,
such as a stock dividend, stock split, recapitalization (including payment of an
extraordinary dividend), merger, consolidation, spin-off, split-up, distribution
of assets to shareholders, combination or exchange of shares or other form of
reorganization, or any other change affecting the common shares or the price
thereof, such proportionate adjustments, if any, as the Board in its discretion
may deem appropriate to reflect such change will be made with respect to the
aggregate number of common shares for which options may be granted in the future
under the 2010 Plan, the maximum number of common shares which may be subject to
options granted to any participant in any one calendar year, the number of
common shares covered by each outstanding option, and the exercise price in
respect of each outstanding option.
Terms
and Conditions of Options
The
Compensation Committee may grant options at any time during the term of the 2010
Plan in such number, and upon such terms and conditions, as it determines. The
exercise price of each option will in no event be less than the fair market
value (i.e., the closing price on NYSE) of the common shares underlying the
option on the grant date. On August 10, 2010, the closing price of the common
shares on NYSE was $14.96. The exercise price of an option may be paid in cash,
by tendering common shares already owned by the participant prior to the
exercise date, by a cashless exercise (including delivery or surrender of
outstanding vested awards, by withholding common shares otherwise issuable in
connection with the exercise of a vested option or through a broker-assisted
arrangement) or through a combination of these methods.
The
Compensation Committee may determine the vesting period applicable to each
option grant. Unless otherwise determined by the Compensation
Committee, no option may vest earlier than 12 months after the grant date and an
option will become exercisable as to 20% of the common shares subject to the
option after each of the first through the fifth anniversaries of the grant
date.
The
Compensation Committee will determine the period during which each option will
remain exercisable (which may not exceed ten years) and any other terms and
conditions of the option, all of which will be reflected in an award
agreement. The award agreement will specify whether the option is
intended to be an ISO or a NSO.
Special
Rules Applicable to ISOs
An ISO
granted to an employee who owns common shares possessing more than 10% of the
voting power of the Company (a “10% Owner”) will have an exercise price of at
least 110% of the fair market value of the underlying common shares on the grant
date and will not be exercisable for a period of more than five years after the
grant date.
The
common shares in respect of which ISOs granted under the 2010 Plan and all other
option plans of the Company are first exercisable by any participant during any
calendar year may not have a fair market value (determined at the grant date) in
excess of $100,000 or the then applicable limit under the Internal Revenue Code.
Effect
of Termination of Employment
Generally,
unless otherwise determined by Compensation Committee, no option may be
exercised unless, at the time of exercise, the participant has been in the
continuous employment of the Company, except when the participant’s termination
is due to retirement, disability or death or follows a change in control.
Death or Disability
Unless
otherwise determined by the Compensation Committee, if a participant’s
employment terminates due to death or disability: (a) any outstanding
vested options will remain exercisable until the earlier of (i) the
expiration date of the options or (ii) 36 months after the date
of termination (12 months in the case of ISOs); and (b) any unvested
options will be forfeited.
Unless
the Compensation Committee specifies otherwise, a participant will be considered
disabled if the participant is unable to perform his or her normal duties for a
period of at least six months due to a physical or mental infirmity (or, for
ISOs, the participant is disabled for purposes of Section 22(e)(3) of the
Internal Revenue Code).
Retirement
Unless
otherwise determined by the Compensation Committee, if a participant’s
employment terminates due to retirement: (a) any outstanding vested options
will remain exercisable until the earlier of (i) the expiration date of the
options or (ii) 36 months after the date of termination (three months for
ISOs); and (b) any unvested options will be forfeited. Unless
the Compensation Committee specifies otherwise, retirement for a participant
will occur if he or she is deemed to have retired under the Company’s normal
policies.
Other Termination
Unless
otherwise specified by the Committee, if a participant’s employment terminates
other than due to the participant’s death, disability or retirement, any
outstanding options (whether or not vested) will be forfeited. The Compensation
Committee may determine when a participant’s employment is terminated for
purposes of this provision.
Forfeiture
of Options
Unless
otherwise determined by the Compensation Committee, options granted under the
2010 Plan are subject to forfeiture if a participant breaches certain
restrictive covenants. Such a breach will occur if a participant: (a) violates
any non-competition covenant, any employee non-solicitation covenant or any
similar agreement or covenant in favor of the Company, without the Compensation
Committee’s written consent; (b) deliberately engages in any activity the
Compensation Committee concludes has caused or may cause harm to the interests
of the Company; (c) discloses confidential and proprietary information relating
to the Company’s business affairs, without the Compensation Committee’s written
consent; or (d) fails to return property (other than personal property). In
addition, if a participant or former participant violates any non-competition
covenant, any employee non-solicitation covenant or any similar agreement or
covenant in favor of the Company, the Compensation Committee may require that
the participant or former participant return to the Company the economic value
of any options realized or obtained (measured at the exercise date) during the
period beginning on that date which is six months prior to the earlier of (i)
the date the participant’s employment terminated or (ii) the date the
participant engaged in the prohibited activity.
Restriction
on Repricing
The 2010
Plan provides that no previously issued option may be repriced without the
approval of shareholders. For purposes of this restriction,
“repricing” includes any act that is a “repricing” under applicable NYSE Rules.
Transferability
of Options
A
participant may not transfer an option except by will or the laws of descent and
distribution and during a participant’s lifetime, only the participant or his or
her guardian or legal representative may exercise an option.
Tax
Withholding
The
Compensation Committee is authorized to withhold or collect any amount required
by law, rule or regulation to be withheld with respect to a taxable event
arising with respect to an option granted under the 2010 Plan. Unless
otherwise determined by the Compensation Committee, a participant may elect to
satisfy the withholding requirement, in whole or in part, by having the Company
withhold common shares, or by tendering already owned common shares, having a
fair market value on the date the tax is to be determined equal to the minimum
statutory total tax that would be imposed on the transaction.
Term,
Amendment and Termination of 2010 Plan
The Board
or the Compensation Committee may amend, terminate or suspend the 2010 Plan at
any time except to the extent that approval of the Company’s shareholders is
required to satisfy applicable requirements imposed by: (a) Rule 16b-3
under the Exchange Act; (b) applicable requirements of the Internal Revenue
Code; or (c) the rules of any securities exchange, market or other
quotation system on or through which the Company’s securities are then listed or
traded. Also, no Plan amendment may: (i) result in the loss of a
Compensation Committee member’s status as a “non-employee director” (as defined
in Rule 16b-3 under the Exchange Act) with respect to any employee benefit plan
of the Company; (ii) cause the 2010 Plan to fail to meet requirements
imposed by Rule 16b-3; or (iii) without the consent of the affected
participant, adversely affect any option granted before the amendment.
Change
in Control
At the
time an option is granted under the 2010 Plan by the Compensation Committee, the
Compensation Committee may provide that such option will become fully vested and
exercisable as a result of a Change in Control (as defined below), either alone,
or in conjunction with some other event, such as a termination of employment,
whether or not the option is then vested or exercisable. If the Committee does
not provide for some other provision with respect to a Change in Control, then
the option will provide that, subject to the provisions of Section (11) of the
2010 Plan, in the event of a Change in Control, the portion of the option at
that time outstanding will become fully vested and exercisable if the
participant’s employment is terminated at any time within the two years
following a Change in Control, as of the date of such termination.
A “Change
in Control” will be deemed to occur: (a) when any “acquiring person” (as
defined in the 2010 Plan), alone or together with the acquiring person’s
affiliates and associates, has acquired or obtained the right to acquire,
directly or indirectly, beneficial ownership of 25% or more of the Company’s
common shares then outstanding; or (b) when the “continuing directors” (as
defined in the 2010 Plan) no longer constitute a majority of the
Board. For purposes of the 2010 Plan, the term “acquiring person”
excludes the Company, any employee benefit plan of the Company or any trustee or
fiduciary for such an employee benefit plan when acting in that capacity, or any
person who, on the date the shareholders approve the 2010 Plan, is an affiliate
of the Company beneficially owning in excess of 10% of the outstanding common
shares (and the successors, executors, legal representatives, heirs and legal
assigns of such person).
In
addition, during the 60-day period from and after a Change in Control, the
Compensation Committee may allow participants to surrender all or any portion of
an option (whether or not exercisable and in lieu of payment of the exercise
price) to the Company and receive cash in an amount equal to the amount by which
the change in control price per share exceeds the exercise price of the
option. The “change in control price per share” is the price
per common share (a) paid by the acquiring person in connection with the
transaction that results in the change in control; or (b) at any time after
the change in control and before the participant elects to surrender all or any
portion of an option, the fair market value of the common shares.
The
foregoing provisions will not apply (i) if the Compensation Committee so
determines at the time of grant of an option or (ii) to any change in control
when expressly provided otherwise by a three-fourths vote of the “whole board”
(as defined in the 2010 Plan), but only if a majority of the members of the
Board then in office and acting upon such matter are “continuing directors.”
Awards
to Foreign Nationals
Options
may be granted to employees who are foreign nationals or employed outside the
United States, or both, on such terms and conditions different from those
specified in the 2010 Plan as may, in the judgment of the Compensation
Committee, be necessary or desirable in order to recognize differences in local
law or tax policy. The Compensation Committee also may impose
conditions on the exercise or vesting of options in order to minimize the
Company’s obligation with respect to tax equalization for employees on
assignments outside their home country.
U.S.
Federal Income Tax Consequences
The
following is a brief summary of the general U.S. federal income tax consequences
to the Company and to U.S. taxpayers of options granted under the 2010 Plan.
This summary is based on U.S. federal income tax laws and Treasury Regulations
in effect on the date of this Proxy Statement and does not purport to be a
complete description of the U.S. federal income tax laws and Treasury
Regulations. This discussion does not address state, local or foreign income tax
rules or other U.S. tax provisions, such as employment, estate or gift taxes. A
participant’s particular situation may be such that some variation of the basic
rules is applicable to him or her. In addition, the U.S. federal income tax laws
and Treasury Regulations frequently have been revised and may be changed again
at any time. This summary does not constitute tax advice.
ISOs
ISOs are
intended to qualify for special treatment available under Section 422 of the
Internal Revenue Code. A participant will not recognize taxable
income when an ISO is granted and the Company will not receive a deduction at
that time. A participant will not recognize ordinary income upon the
exercise of an ISO provided that the participant was, without a break in
service, an employee of the Company during the period beginning on the grant
date of the ISO and ending on the date three months prior to the date of
exercise (one year prior to the date of exercise if the participant’s employment
is terminated due to death or disability).
If the
participant does not sell or otherwise dispose of the common shares acquired
upon the exercise of an ISO within two years from the grant date of the ISO or
within one year after the participant receives the common shares, then, upon
disposition of such common shares, any amount realized in excess of the exercise
price will be taxed to the participant as a capital gain, and the Company will
not be entitled to a corresponding deduction. The participant
generally will recognize a capital loss to the extent that the amount realized
is less than the exercise price.
If the
foregoing holding period requirements are not satisfied, the participant
generally will recognize ordinary income at the time of the disposition of the
common shares in an amount equal to the lesser of (a) the excess of the
fair market value of the common shares on the exercise date over the exercise
price or (b) the excess, if any, of the amount realized upon disposition of
the common shares over the exercise price, and the Company will be entitled to a
corresponding deduction. Any amount realized in excess of the value
of the common shares on the date of exercise will be capital gain. If
the amount realized is less than the exercise price, the participant generally
will recognize a capital loss equal to the excess of the exercise price over the
amount realized upon the disposition of the common shares.
The rules
that generally apply to ISOs do not apply when calculating any alternative
minimum tax liability. The rules affecting the application of the
alternative minimum tax are complex, and their effect depends on individual
circumstances, including whether a participant has items of adjustment other
than those derived from ISOs.
NSOs
A
participant will not recognize any income when a NSO is granted, and the Company
will not receive a deduction at that time. However, when a NSO is
exercised, a participant will recognize ordinary income equal to the excess, if
any, of the fair market value of the common shares that the participant
purchased on the date of exercise over the exercise price. If a
participant uses common shares or a combination of common shares and cash to pay
the exercise price of a NSO, the participant will recognize ordinary income
equal to the value of the excess of the number of common shares that the
participant purchases over the number of common shares that the participant
surrenders, less any cash the participant uses to pay the exercise
price. When a NSO is exercised, the Company will be entitled to a
deduction equal to the ordinary income that the participant recognizes.
If the
amount a participant receives upon disposition of the common shares that the
participant acquired by exercising a NSO is greater than the aggregate exercise
price that the participant paid (increased by any ordinary income recognized
upon exercise), the excess will be treated as a long-term or short-term capital
gain, depending on whether the participant held the common shares for more than
one year after the participant acquired them by exercising the
NSO. Conversely, if the amount a participant receives upon
disposition of the common shares that the participant acquired by exercising a
NSO is less than the aggregate exercise price the participant paid (increased by
any ordinary income recognized upon exercise), the difference will be treated as
a long-term or short-term capital loss, depending on whether the participant
held the common shares for more than one year after the participant acquired
them by exercising the NSO.
Section
162(m)
Section
162(m) of the Internal Revenue Code disallows a deduction for any compensation
paid to certain “covered employees” during any year in excess of $1,000,000
unless the compensation constitutes “qualified performance-based
compensation.” Options granted to employees under the 2010 Plan are
intended to constitute “qualified performance-based compensation” under Section
162(m) of the Internal Revenue Code.
Section
409A
Section
409A of the Internal Revenue Code imposes certain restrictions on amounts
deferred under non-qualified deferred compensation plans and a 20% additional
tax on amounts that are subject to, but do not comply with, Section 409A of the
Internal Revenue Code. Section 409A of the Internal Revenue Code
includes a broad definition of non-qualified deferred compensation plans, which
includes certain types of equity incentive compensation. The Company
intends for options granted under the 2010 Plan to be exempt from the
requirements of Section 409A of the Internal Revenue Code and the Treasury
Regulations promulgated thereunder.
Recommendation
and Vote to Approve the 2010 Plan
The
proposal to approve the 2010 Plan will be submitted to the shareholders in the
form of the following resolution:
RESOLVED , that the
Worthington Industries, Inc. 2010 Stock Option Plan (the “2010 Plan”) as set
forth in Appendix I to the Proxy Statement of the Company for the Annual Meeting
of Shareholders held on September 30, 2010 be, and the same hereby is, approved.
THE
COMPANY’S BOARD RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY VOTE “FOR” THE
APPROVAL OF THE 2010 PLAN.
Shareholder
approval of the 2010 Plan will require the affirmative vote of the holders of a
majority of the votes entitled to be cast by the holders of all then outstanding
common shares, present in person or by proxy, and entitled to vote on the
proposal; provided that the total vote cast on the proposal represents over 50%
of all common shares entitled to vote on the proposal. Under
applicable NYSE Rules, broker non-votes will not be treated as votes
cast. Abstentions will be treated as votes cast and will have the
effect of a vote “ AGAINST
” the proposal.
PROPOSAL
3: RATIFICATION OF THE SELECTION OF
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit
Committee of the Company’s Board has selected KPMG LLP (“KPMG”) to serve as the
Company’s independent registered public accounting firm for the fiscal year
ending May 31, 2011, and recommends that the shareholders of the Company vote
for the ratification of that selection. KPMG audited the Company’s
consolidated financial statements as of and for the fiscal years ended May 31,
2010, and May 31, 2009, and the effectiveness of the Company’s internal
control over financial reporting as of May 31, 2010 and May 31,
2009. Representatives of KPMG are expected to be present at the
Annual Meeting and will be given the opportunity to make a statement if they so
desire and to respond to appropriate questions.
The
selection of the Company’s independent registered public accounting firm is made
annually by the Audit Committee. The Company has determined to submit
the selection of the independent registered public accounting firm to the
shareholders for ratification because of such firm’s role in reviewing the
quality and integrity of the Company’s consolidated financial statements and
internal control over financial reporting. Before selecting KPMG, the
Audit Committee carefully considered that firm’s qualifications as the
independent registered public accounting firm for the Company and the audit
scope.
Recommendation
and Vote Required to Ratify Selection of KPMG
THE AUDIT COMMITTEE AND THE BOARD
RECOMMEND THAT THE SHAREHOLDERS OF THE COMPANY VOTE “FOR” THE RATIFICATION OF
THE SELECTION OF KPMG.
The
affirmative vote of the holders of a majority of the votes entitled to be cast
by the holders of all then outstanding common shares, present in person or by
proxy, and entitled to vote on the proposal, is required to ratify the selection
of KPMG as the Company’s independent registered public accounting firm for the
fiscal year ending May 31, 2011. The effect of an abstention is the
same as a vote “AGAINST” the proposal. Even if the selection of KPMG
is ratified by the shareholders, the Audit Committee, in its discretion, could
decide to terminate the engagement of KPMG and to engage another firm if the
Audit Committee determines such action is necessary or desirable. If
the selection of KPMG is not ratified, the Audit Committee will reconsider (but
may decide to maintain) the selection.
AUDIT
COMMITTEE MATTERS
Report
of the Audit Committee for the Fiscal Year Ended May 31, 2010
The Audit
Committee oversees the Company’s financial and accounting functions, controls,
reporting processes and audits on behalf of the Board in accordance with the
Audit Committee’s written charter. The Audit Committee is responsible for
providing independent, objective oversight of the integrity and quality of the
Company’s consolidated financial statements, the qualifications and independence
of the Company’s independent registered public accounting firm, the performance
of the Company’s internal auditors and independent registered public accounting
firm and the annual independent audit of the Company’s consolidated financial
statements. Management has the primary responsibility for the preparation,
presentation and integrity of the Company’s consolidated financial statements
and the reporting process, for the appropriateness of the accounting principles
and reporting policies that are used by the Company, for the establishment and
maintenance of effective systems of disclosure controls and procedures and
internal control over financial reporting, and for the preparation of the annual
report on management’s assessment of the effectiveness of the Company’s internal
control over financial reporting. The Company’s independent registered public
accounting firm, KPMG, is responsible for auditing the Company’s annual
consolidated financial statements included in the Company’s Annual Report on
Form 10-K in accordance with the standards of the Public Company Accounting
Oversight Board (United States) and issuing its report thereon based on such
audit, for issuing an audit report on the effectiveness of the Company’s
internal control over financial reporting, and for reviewing the Company’s
unaudited interim consolidated financial statements included in the Company’s
Quarterly Reports on Form 10-Q.
In
fulfilling its oversight responsibilities, the Audit Committee reviewed with
management the Company’s audited consolidated financial statements, as of and
for the fiscal year ended May 31, 2010 and discussed with management the
quality, not just the acceptability, of the accounting principles as applied in
the Company’s financial reporting, the reasonableness of significant judgments
and accounting estimates, and the clarity and completeness of disclosures in the
consolidated financial statements.
In
fulfilling its oversight responsibilities, the Audit Committee met with
management, the Company’s internal auditors and KPMG throughout the year. Since
the beginning of the fiscal year, the Audit Committee met with the Company’s
internal auditors and KPMG, with and without management present, to discuss the
overall scope of their respective annual audit plans, the results of their
respective audits, the effectiveness of the Company’s internal control over
financial reporting, including management’s and KPMG’s reports thereon and the
bases for the conclusions expressed in those reports, and the overall quality of
the Company’s financial reporting. Throughout that period, the Audit Committee
reviewed management’s plan for documenting and testing controls, the results of
the documentation and testing, any deficiencies discovered and the resulting
remediation of the deficiencies. In addition, the Audit Committee reviewed and
discussed with KPMG all matters required by auditing standards generally
accepted in the United States, including those described in Statement on
Auditing Standards No. 114, The Auditor’s Communication With Those Charged With
Governance, as amended.
The Audit
Committee has discussed with KPMG the independence of that firm from management
and the Company. The Audit Committee has received from KPMG the written
disclosures and the letter from KPMG required by applicable requirements of the
Public Company Accounting Oversight Board regarding KPMG’s communications with
the Audit Committee concerning independence. The Audit Committee has discussed
with KPMG any relationships with or services to the Company or the Company’s
subsidiaries that may impact the objectivity and independence of KPMG, and the
Audit Committee has satisfied itself as to the independence of KPMG.
Management
and KPMG have represented to the Audit Committee that the Company’s audited
consolidated financial statements, as of and for the fiscal year ended
May 31, 2010, were prepared in accordance with accounting principles
generally accepted in the United States, and the Audit Committee has reviewed
and discussed those audited consolidated financial statements with management
and KPMG.
Based on
the Audit Committee’s reviews and discussions referred to above and the Audit
Committee’s review of the report of KPMG to the Audit Committee, the Audit
Committee recommended to the Board that the Company’s audited consolidated
financial statements be included (and the Board approved such inclusion) in the
Company’s Annual Report on Form 10-K for Fiscal 2010 filed with the SEC on July
30, 2010. The Audit Committee has also selected KPMG as the Company’s
independent registered public accounting firm for the fiscal year ending May 31,
2011 and recommends that the shareholders ratify such selection.
The
foregoing report is provided by the Audit Committee of the Company’s Board:
Audit
Committee
Carl A.
Nelson, Jr., Chair
Michael
J. Endres
Sidney A.
Ribeau
Mary
Schiavo
Pre-Approval
of Services Performed by the Independent Registered Public Accounting Firm
Under
applicable SEC Rules, the Audit Committee is to pre-approve the audit and
non-audit services performed by the independent registered public accounting
firm in order to ensure that the performance of these services does not impair
the firm’s independence from the Company. The SEC Rules specify the
types of non-audit services that independent registered public accounting firms
may not provide to their audit clients and establish the Audit Committee’s
responsibility for administration of the engagement of the independent
registered public accounting firm.
Consistent
with applicable SEC Rules, the charter of the Audit Committee requires that the
Audit Committee review and pre-approve all audit services and permitted
non-audit services provided by the independent registered public accounting firm
to the Company or any of its subsidiaries. The Audit Committee may
delegate pre-approval authority to one or more designated members of the Audit
Committee and, if it does, the decision of that member or members must be
reported to the full Audit Committee at its next regularly scheduled meeting.
All
requests or applications for services to be provided by the independent
registered public accounting firm must be submitted to the Audit Committee by
both the independent registered public accounting firm and the Company’s Chief
Financial Officer and must include a joint statement as to whether, in their
view, the request or application is consistent with the SEC Rules governing
auditor independence.
Independent
Registered Public Accounting Firm Fees
Fees
billed for services rendered by KPMG for each of Fiscal 2010 and Fiscal 2009
were as follows:
Type of Fees
|
|
Fiscal 2010
|
|
|
Fiscal 2009
|
|
Audit
Fees
|
|
$
|
1,587,881
|
|
|
$
|
1,747,765
|
|
Audit-Related
Fees
|
|
|
150,453
|
|
|
|
1,200
|
|
Tax
Fees
|
|
|
59,077 |
|
|
|
135,964 |
|
Total
|
|
$
|
1,797,411 |
|
|
$
|
1,884,929 |
|
All of the services rendered by KPMG to
the Company and the Company’s subsidiaries during Fiscal 2010 and Fiscal 2009
were pre-approved by the Audit Committee.
In
accordance with applicable SEC Rules, “Audit Fees” are fees for professional
services rendered for: the audit of the Company’s consolidated financial
statements; the review of the interim consolidated financial statements included
in the Company’s Forms 10-Q; the audit of the Company’s internal control over
financial reporting with the objective of obtaining reasonable assurance about
whether effective internal control over financial reporting was maintained in
all material respects; and services that are normally provided by the
independent registered public accounting firm in connection with statutory and
regulatory filings or engagements for the applicable fiscal years.
“Audit-Related
Fees” are fees for assurance and related services that are reasonably related to
the performance of the audit or review of the Company’s consolidated financial
statements that are not reported under “Audit Fees.” The Fiscal 2010
“Audit-Related Fees” also included fees related to work performed in connection
with the underwritten public offering of the Company’s $150 million aggregate
principal amount of its 6.50% Notes due 2020 completed on April 13, 2020 and the
related Form S-3 filed to register those 6.50% Notes.
“Tax
Fees” are fees for professional services rendered for tax compliance, tax advice
and tax planning, and in Fiscal 2009 included fees for an international tax
project.
HOUSEHOLDING
OF ANNUAL MEETING MATERIALS
The SEC
has implemented rules regarding the delivery of proxy materials (i.e., annual
reports and proxy statements) to households. This method of delivery,
often referred to as “householding,” would permit the Company to send a single
annual report and/or a single proxy statement to any household at which two or
more registered shareholders reside if the Company reasonably believes such
shareholders are members of the same family or otherwise share the same address
or that one shareholder has multiple accounts. The householding
process may also be used for the delivery of Notices of Internet Availability of
Proxy Materials, when applicable. In each case, the shareholder(s)
must consent to the householding process in accordance with applicable SEC
Rules. Each shareholder would continue to receive a separate notice
of any meeting of shareholders and proxy card. The householding
procedure reduces the volume of duplicate information shareholders receive and
reduces the Company’s expenses. The Company may institute householding in the
future and will notify registered shareholders affected by householding at that
time. Registered shareholders sharing an address may request delivery
of a single copy of annual reports to shareholders, proxy statements and Notices
of Internet Availability of Proxy Materials by contacting the Investor Relations
Department of the Company at Worthington Industries, Inc., 200 Old Wilson Bridge
Road, Columbus, Ohio 43085, Attention: Catherine M. Lyttle, Vice
President-Communications and Investor Relations.
Many
broker/dealers and other holders of record have instituted
householding. If your family has one or more “street name” accounts
under which you beneficially own common shares of the Company, you may have
received householding information from your broker/dealer, financial institution
or other nominee in the past. Please contact the holder of record
directly if you have questions, require additional copies of this Proxy
Statement or the Company’s 2010 Annual Report to Shareholders or wish to revoke
your decision to household and thereby receive multiple copies of the Company’s
proxy materials. You should also contact the holder of record if you
wish to institute householding.
SHAREHOLDER
PROPOSALS FOR 2011 ANNUAL MEETING
Shareholders
of the Company seeking to bring business before an annual meeting of
shareholders (an “annual meeting”) or to nominate candidates for election as
directors at an annual meeting must provide timely notice thereof in writing to
the Company’s Secretary. Under Section 1.08(A) of the Company’s Code of
Regulations, to be timely, a shareholder’s notice with respect to business to be
brought before an annual meeting must be delivered to, or mailed and received
at, the principal executive offices of the Company not less than 30 days prior
to an annual meeting. However, if less than 40 days’ notice or prior public
disclosure of the date of the meeting is given or made to shareholders, the
shareholder’s notice must be received no later than the close of business on the
tenth day following the day on which such notice of the date of the meeting was
mailed or such public disclosure was made. In order for a shareholder’s notice
to be in proper form, it must include: (a) a brief description of the business
the shareholder desires to bring before an annual meeting; (b) the reasons for
conducting the proposed business at an annual meeting; (c) the name and address
of the proposing shareholder; (d) the number of common shares beneficially owned
by the proposing shareholder; and (e) any material interest of the proposing
shareholder in the business to be brought before an annual meeting. The
requirements applicable to nominations are described above in “CORPORATE
GOVERNANCE – Nominating Procedures” beginning on page 8 of this Proxy Statement.
A
shareholder seeking to bring business before an annual meeting must also comply
with all applicable SEC Rules. Under SEC Rule 14a-8, proposals of shareholders
intended to be presented at the Company’s 2011 Annual Meeting must be received
by the Company no later than April 21, 2011, to be eligible for inclusion in the
Company’s proxy materials relating to the 2011 Annual Meeting. Upon receipt of a
shareholder proposal, the Company will determine whether or not to include the
proposal in the proxy materials in accordance with applicable SEC Rules.
The SEC
has promulgated rules relating to the exercise of discretionary voting authority
pursuant to proxies solicited by the Board. Generally, a proxy may confer
discretionary authority to vote on any matters brought before an annual meeting
if the Company did not have notice of the matter at least 45 days before the
date on which the Company first sent its proxy materials for the prior year’s
annual meeting and a specific statement to that effect is made in the proxy
statement or proxy card. If during the prior year, the Company did not hold an
annual meeting, or if the date of the meeting has changed more than 30 days from
the prior year, then notice must not have been received a reasonable time before
the Company mails its proxy materials for the current year. Any written notice
required as described in this paragraph must have been given by July 7, 2010,
for matters to be brought before the 2010 Annual Meeting. Any written notice
required as described in this paragraph must be given by July 5, 2011 for
matters to be brought before the 2011 Annual Meeting.
Any
written notice to be given with respect to matters set forth in the three prior
paragraphs of this “SHAREHOLDER PROPOSALS FOR 2011 ANNUAL MEETING” section
should be sent to the Company’s Secretary, Dale T. Brinkman, Worthington
Industries, Inc., 200 Old Wilson Bridge Road, Columbus, Ohio 43085 or by fax to
(614) 840-3706.
The
Company’s 2011 Annual Meeting of Shareholders is currently scheduled to be held
on September 29, 2011.
FUTURE
ELECTRONIC ACCESS TO PROXY MATERIALS AND ANNUAL REPORT
Registered
shareholders can further reduce the costs incurred by the Company in mailing
proxy materials by consenting to receive all future proxy statements, proxy
cards, annual reports to shareholders and Notices of Internet Availability of
Proxy Materials electronically via e-mail or the Internet. To sign up for
electronic delivery of future proxy materials, you must vote your common shares
electronically via the Internet by logging on to www.proxyvote.com and, when
prompted, indicate that you agree to receive or access shareholder
communications electronically in future years. You will be responsible for any
fees or charges that you would typically pay for access to the Internet.
ANNUAL
REPORT ON FORM 10-K
Audited
consolidated financial statements for Worthington Industries, Inc. and its
subsidiaries for Fiscal 2010 are included in the 2010 Annual Report to
Shareholders which is being delivered with this Proxy Statement. Additional
copies of these financial statements and the Company’s Annual Report on Form
10-K for Fiscal 2010 (excluding exhibits) may be obtained, without charge, by
sending a written request to the Company’s Investor Relations Department at 200
Old Wilson Bridge Road, Columbus, Ohio 43085, Attention: Catherine M. Lyttle,
Vice President-Communications and Investor Relations. The Company’s Annual
Report on Form 10-K for Fiscal 2010 is also available on the Company’s web site
located at www.worthingtonindustries.com and can also be found on the SEC web
site located at www.sec.gov.
OTHER
BUSINESS
As of the
date of this Proxy Statement, the Board knows of no business that will be
presented for action by the shareholders at the Annual Meeting other than those
matters discussed in this Proxy Statement. However, if any other
matter requiring a vote of the shareholders properly comes before the Annual
Meeting, the individuals acting under the proxies solicited by the Board will
vote and act according to their best judgment in light of the conditions then
prevailing, to the extent permitted under applicable law.
This
Proxy Statement and the accompanying proxy card have been approved by the Board
and are being mailed and delivered to shareholders by its authority.
|
By
Order of the Board of Directors,
|
|
|
|
/s/Dale
T. Brinkman
|
|
|
Dated: August
19, 2010
|
Dale
T. Brinkman,
|
|
Secretary
|
APPENDIX
I
WORTHINGTON
INDUSTRIES, INC.
2010
STOCK OPTION PLAN
1.
Purpose
This Plan
is intended to promote and advance the long-term interests of Worthington and
its shareholders by enabling the Company to attract, retain and reward Employees
and to strengthen the mutuality of interest between Employees and Worthington’s
shareholders. This Plan is designed to accomplish this purpose by granting Stock
Options to selected Employees thereby providing a financial incentive to pursue
the long-term growth, profitability and financial success of the Company.
2.
Definitions
When used
in this Plan, the following terms have the meanings given to them in this
section unless another meaning is expressly provided elsewhere in this Plan or
clearly required by the context. When applying these definitions, the form of
any term or word will include any of its other forms.
(a) “Act”
shall mean the Securities Exchange Act of 1934, as amended.
(b) “Award”
or “Awards” shall mean a grant of a Stock Option made to a Participant under
Section 6 of this Plan.
(c) “Award
Agreement” shall mean the written agreement between Worthington and each
Participant that describes the terms and conditions of each Award.
(d) “Beneficiary”
shall mean the person designated by a Participant pursuant to Section
13(b). Neither the Company nor the Committee is required to infer a
Beneficiary from any other source.
(e) “Board”
shall mean the Board of Directors of Worthington.
(f) “Code”
shall mean the Internal Revenue Code of 1986, as amended, and any applicable
regulations or rulings issued under the Code.
(g) “Committee”
shall mean the Board’s Compensation and Stock Option Committee (or the Board
committee which succeeds to the appropriate duties of such Compensation and
Stock Option Committee) which also constitutes a “compensation committee” within
the meaning of Treasury Regulation §1.162-27(c)(4). The Committee will be
comprised of at least three individuals who meet the following qualifications:
(i) such individual is “independent” for purposes of the rules of any securities
exchange, market or other quotation system on or through which the Common Shares
are then listed or traded; and (ii) such individual may not receive remuneration
from the Company in any capacity other than as a director, except as permitted
under applicable laws, rules and regulations. In addition, at least
two members of the Committee must each qualify as (A) an “outside director,” as
defined in Treasury Regulation §1.162-27(e)(3)(i) and (B) a “non-employee
director” within the meaning of Rule 16b-3 under the Act. Any member
of the Committee who does not qualify as an outside director or is not a
non-employee director shall be deemed to abstain on all matters as to which such
qualification would be relevant.
(h) “Common
Shares” shall mean the Common Shares, without par value, of Worthington or any
security of Worthington issued in substitution, in exchange or in lieu thereof.
(i) “Company”
shall mean Worthington and its Subsidiaries, collectively.
(j) “Disability”
shall mean, unless otherwise specified by the Committee and reflected in the
Award Agreement:
(i) With
respect to a Non-Qualified Stock Option, the Participant’s inability to perform
his or her normal duties for a period of at least six months due to a physical
or mental infirmity; or
(ii) With
respect to an Incentive Stock Option, as defined in Section 22(e)(3) of the
Code.
(k) “Effective
Date” shall mean the date this Plan is approved by Worthington’s shareholders.
(l)
“Employee” shall mean any individual who, on an applicable Grant Date, is
a common law employee of the Company. An individual who is classified as other
than a common law employee of the Company but who is subsequently reclassified
as a common law employee of the Company for any reason and on any basis will be
treated as a common law employee of the Company only from the date of that
determination and will not retroactively be reclassified as an Employee for any
purpose under this Plan.
(m) “Exercise
Price” shall mean the price at which a Participant may exercise a Stock Option.
(n) “Fair
Market Value” shall mean the value of one Common Share on any relevant date,
determined under the following rules:
(i) If
the Common Shares are traded on a securities exchange, market or other quotation
system on or through which “closing prices” are reported, the reported “closing
price” on the relevant date if it is a trading day, otherwise on the next
trading day;
(ii) If
the Common Shares are traded over-the-counter with no reported closing price,
the mean between the lowest bid and the highest asked prices on that quotation
system on the relevant date if it is a trading day, otherwise on the next
trading day; or
(iii) If
neither (i) nor (ii) applies, the fair market value as determined by the
Committee in good faith with respect to Incentive Stock Options and the fair
market value as determined through the reasonable application of a reasonable
valuation method, taking into account all information material to the value of
Worthington, that satisfies the requirements of Section 409A of the Code, with
respect to Non-Qualified Stock Options.
(o) “Grant
Date” shall mean the date as of which an Award is granted to a Participant.
(p) “Incentive
Stock Option” shall mean any Stock Option granted pursuant to the provisions of
Section 6 of this Plan that is intended to be and is specifically designated as
an “incentive stock option” within the meaning of Section 422 of the Code.
(q) “Non-Qualified
Stock Option” shall mean any Stock Option granted under Section 6 of this Plan
that is not an Incentive Stock Option.
(r) “Participant”
shall mean an Employee or former Employee of the Company who has been granted an
Award under this Plan and who has an Award still outstanding.
(s) “Plan”
shall mean this Worthington Industries, Inc. 2010 Stock Option Plan, as set
forth herein and as it may hereafter be amended.
(t) “Retirement”
shall mean, unless the Committee specifies otherwise in the Award Agreement, the
retirement of the Employee under the Company’s normal policies.
(u) “Stock
Option” shall mean an Award to purchase Common Shares granted pursuant to the
provisions of Section 6 of this Plan.
(v)
“Subsidiary” shall mean any corporation, partnership, limited liability company
or other form of entity of which Worthington owns, directly or indirectly, 50%
or more of the total combined voting power of all classes of stock, if the
entity is a corporation, or of the capital or profits interests, if the entity
is a partnership or another form of entity; or any other entity in which
Worthington has a 20% or greater direct or indirect equity interest and which is
designated as a Subsidiary by the Committee for purposes of this Plan; provided,
however that:
(i) No
Employee of a Subsidiary may be granted an Incentive Stock Option unless the
Subsidiary is also a “subsidiary”, as defined in Section 424 of the Code; and
(ii) No
Employee of a Subsidiary may be granted a Non-Qualified Stock Option unless the
Subsidiary and Worthington would be considered a single employer under Sections
414(b) and 414(c) of the Code, but modified as permitted by Treasury Regulation
§1.409A-1(b)(5)(iii)(E)(1).
(w) “Ten-Percent
Owner” shall mean any Employee who, at the time an Incentive Stock Option is
granted, owns more than 10% of the outstanding voting shares of Worthington or
any Subsidiary. For purposes of determining ownership of voting shares, an
Employee shall be deemed to own all shares which are attributable to such
Employee under Section 424(d) of the Code, including, but not limited to, shares
owned, directly or indirectly, by or for the Employee’s brothers and sisters
(whether by whole or half blood), spouse, ancestors and lineal descendants.
(x) “Termination”
or “Terminated” shall mean, unless otherwise specified by the Committee and
reflected in the Award Agreement, cessation of the employee-employer
relationship between an Employee and the Company for any reason.
(y) “Treasury
Regulations” shall mean any regulations issued by the Department of Treasury
and/or the Internal Revenue Service under the Code.
(z) “Worthington”
shall mean Worthington Industries, Inc.
3.
Participation
To become
a Participant, each Employee receiving an Award must: (a) sign and return an
Award Agreement to Worthington; and (b) comply with any other terms and
conditions as may be imposed by the Committee.
4.
Administration
(a)
Committee Duties. The Committee shall administer this Plan and shall have all
powers appropriate and necessary to that purpose, including the authority to:
(i) interpret this Plan and any Award Agreement; (ii) adopt, amend and rescind
rules and regulations relating to this Plan; (iii) make all other decisions
(including whether a Participant has incurred a Disability) and take or
authorize actions necessary or advisable for the administration and
interpretation of this Plan; (iv) correct any defect, supply any omission or
reconcile any inconsistency in this Plan or in any Award Agreement; (v)
consistent with the terms of this Plan, decide which Employees will be granted
Awards; and (vi) consistent with the terms of this Plan, specify the type of
Award to be granted and the terms, not inconsistent with this Plan, upon which
an Award will be granted, including the dates on which Awards may vest and be
exercised, the acceleration of any such dates and the expiration date of any
Award. Any action by the Committee will be final, binding and conclusive for all
purposes and upon all persons.
(b)
Delegation. The Committee may designate individuals other than members of the
Committee to carry out its responsibilities (including, without limitation, the
granting of Awards) under such conditions and limitations as the Committee may
prescribe; provided, however, that the Committee may not delegate its authority:
(i) with regard to selection for participation of, and the granting of Awards
to, individuals subject to Sections 16(a) and 16(b) of the Act or Section 162(m)
of the Code; or (ii) when otherwise prohibited by any equity award granting
policy of Worthington that may be in effect from time to time.
(c) Award
Agreement. At the time any Award is made, Worthington will prepare
and deliver an Award Agreement to each affected Participant. The Award Agreement
will describe: (i) the type of Award and when and how it may be exercised; (ii)
the effect of exercising the Award; and (iii) any other applicable terms and
conditions affecting the Award.
(d) Restriction
on Repricing. Regardless of any other provision of this Plan, neither
the Company nor the Committee may “reprice” (as defined under rules issued by
the securities exchange, market or other quotation system on or through which
the Common Shares are then listed or traded) any Stock Option without the prior
approval of the shareholders of Worthington.
5.
Duration of, and
Common Shares Subject to, Plan
(a) Term
of Plan. This Plan will become effective upon the Effective Date and
shall remain in effect until terminated by the Board; provided, however, that no
Stock Option may be granted under this Plan more than ten years after the
Effective Date and no Incentive Stock Option may be granted later than June 29,
2020.
(b) Common
Shares Subject to Plan. The maximum number of Common Shares in
respect of which Awards may be granted under this Plan, subject to adjustment as
provided in Section 10 of this Plan, is 6,000,000 Common
Shares. Notwithstanding the foregoing, in no event shall more than
500,000 Common Shares be cumulatively available for Awards of Incentive Stock
Options under this Plan. No Participant may be granted Awards under
this Plan in any one calendar year with respect to more than 250,000 Common
Shares. Termination of the Plan shall not preclude the Company from
complying with the terms of Awards outstanding on the date of termination.
(c) Common
Share Usage. For the purpose of computing the total number of Common
Shares available for Awards under this Plan, there shall be counted against the
foregoing limitations the number of Common Shares subject to issuance upon
exercise or settlement of Awards as of the dates on which such Awards are
granted. The following Common Shares which were previously subject to Awards
shall again be available for Awards under the Plan: (i) Common Shares subject to
the portion of an Award that is forfeited, terminated or unexercised before
expiration; (ii) Common Shares subject to the portion of an Award that is
settled in cash or other than through the issuance of Common Shares; (iii)
Common Shares granted through the assumption of, or in substitution for,
outstanding awards granted by a company to individuals who become Employees as a
result of a merger, consolidation, acquisition or other corporate transaction
involving such company and the Company. Common Shares which may be
issued under this Plan may be either authorized and unissued Common Shares or
previously issued Common Shares which have been reacquired by Worthington. No
fractional Common Shares shall be issued under this Plan.
6.
Grant of Stock
Options
(a) Eligibility. Individuals
eligible for Awards under this Plan shall consist of all Employees of the
Company.
(b) Stock
Options. Stock Options may be granted under this Plan by the
Committee in the form of Incentive Stock Options or Non-Qualified Stock Options,
and such Stock Options shall be subject to the following terms and conditions
and such additional terms and conditions, not inconsistent with the express
provisions of this Plan, as the Committee shall deem desirable, whether at the
date of grant or thereafter:
(i) Exercise
Price. The Exercise Price per Common Share purchasable upon exercise
of a Stock Option shall be determined by the Committee at the time of grant, but
in no event shall the Exercise Price of a Stock Option be less than 100% of the
Fair Market Value of the Common Shares on the Grant Date of such Stock Option;
provided, however, that the Exercise Price shall not be less than 110% of the
Fair Market Value of the Common Shares on such Grant Date with respect to any
Incentive Stock Option granted to a Ten-Percent Owner.
(ii) Vesting. Unless
otherwise specified by the Committee, the right of a Participant to exercise a
Stock Option granted under this Plan shall not vest prior to that date which is
12 months after the Grant Date. Unless otherwise determined by the
Committee, a Participant may exercise a vested Stock Option as follows:
|
(A)
|
At
any time after 12 months from the Date of Grant, as to 20% of the Common
Shares originally subject to the Stock Option;
|
|
(B)
|
At
any time after 24 months from the Date of Grant, as to 40% of the Common
Shares originally subject to the Stock Option;
|
|
(C)
|
At
any time after 36 months from the Date of Grant, as to 60% of the Common
Shares originally subject to the Stock Option;
|
|
(D)
|
At
any time after 48 months from the Date of Grant, as to 80% of the Common
Shares originally subject to the Stock Option; and
|
|
(E)
|
At
any time after 60 months from the Date of Grant, as to 100% of the Common
Shares originally subject to the Stock Option.
|
Subject
to the other provisions of this Plan, the portion of any Stock Option which
becomes exercisable shall remain exercisable until the date of expiration of the
term of the Stock Option.
(iii) Stock
Option Term. Unless otherwise specified by the Committee, each Stock
Option shall expire on the tenth anniversary of the Grant Date; provided that
any Incentive Stock Option granted to a Ten-Percent Owner shall expire no later
than the fifth anniversary of the Grant Date.
(iv)
Continuous Employment. Subject to the provisions of Section 7 of this Plan, a
Participant may not exercise any portion of a Stock Option granted under this
Plan unless, at the time of such exercise, the Participant has been in the
continuous employment of the Company since the date such Stock Option was
granted. The Committee may decide in each case when service as an Employee shall
be considered Terminated and whether leaves of absence for government or
military service, illness, temporary disability or other reasons shall be deemed
not to interrupt continuous employment for purposes of this paragraph.
(c) $100,000
Limit for Incentive Stock Options. With respect to an Incentive Stock
Option granted under this Plan, the aggregate Fair Market Value (determined as
of the Grant Date of the Incentive Stock Option) of the number of Common Shares
with respect to which all Incentive Stock Options held by the Participant are
exercisable for the first time by the Participant during any calendar year
(under all option plans of the Company) shall not exceed $100,000 or such other
limit as may be required by the Code.
7.
Effect of Termination
(a) Retirement. Unless
otherwise specified by the Committee, all vested and exercisable Awards that are
outstanding upon the Retirement of a Participant, may be exercised at any time
before the earlier of: (i) the expiration date specified in the Award Agreement;
or (ii) 36 months (three months in the case of Incentive Stock Options)
beginning on the Retirement date. All unvested and unexercisable
portions of Awards outstanding upon the Retirement of a Participant shall be
forfeited; provided, however, that the Committee may, in its sole discretion,
elect to make any unvested and unexercisable portion of an Award exercisable as
of the Retirement date of the Participant.
(b) Death
or Disability. Unless otherwise specified by the Committee, all
vested and exercisable Awards that are outstanding when a Participant is
Terminated because of death or Disability, may be exercised by the Participant
or the Participant’s Beneficiary at any time before the earlier of: (i) the
expiration date specified in the Award Agreement; or (ii) 36 months (12 months
in the case of an Incentive Stock Option) beginning on the date of death or
Termination because of Disability. All unvested and unexercisable
portions of Awards outstanding upon the death or Termination for Disability of a
Participant shall be forfeited; provided, however, that the Committee may, in
its sole discretion, elect to make any unvested and unexercisable portion of an
Award exercisable as of the date of death or Termination for Disability.
(c) Termination. Unless
otherwise specified by the Committee, any Awards that are outstanding (whether
or not vested and exercisable) when a Participant is Terminated for any reason
not described in Section 7(a), Section 7(b) or Section 7(d) of this Plan will be
forfeited.
(d) Termination
after Change in Control. Unless otherwise specified by the Committee,
all vested and exercisable Awards that are outstanding when a Participant is
Terminated within the two years following a Change in Control (as defined in
Section 11(b) of this Plan), or which become vested and exercisable upon such
Termination, may be exercised by the Participant at any time before the earlier
of: (i) the expiration date specified in the Award Agreement; or (ii)
12 months (three months in the case of Incentive Stock Options) after the date
of Termination.
8.
Forfeitures
(a) Limits
on Exercisability. Regardless of any other provision of this Plan and
unless the otherwise specified by the Committee, a Participant will forfeit all
outstanding Awards if the Participant:
(i) Without
the Committee’s written consent, which may be withheld for any reason or for no
reason, violates any non-competition covenant, any employee non-solicitation
covenant, or any similar agreement or covenant of the Participant in favor of
the Company;
(ii) Deliberately
engages in any action that the Committee concludes has caused or may cause harm
to the interests of the Company;
(iii) Without
the Company’s written consent, which may be withheld for any reason or for no
reason, and other than as permitted by Company policy, discloses confidential
and proprietary information relating to the Company’s business affairs (“Trade
Secrets”), including technical information, product information and formulae,
processes, business and marketing plans, strategies, customer information and
other information concerning the Company’s products, promotions, developments,
financing, expansion plans, business policies and practices, salaries and
benefits and other forms of information considered by the Company to be
proprietary and confidential and in the nature of Trade Secrets; or
(iv) When
requested by the Company, fails to return all property (other than personal
property owned by the Participant), including keys, notes, memoranda, writings,
lists, files, reports, customer lists, correspondence, tapes, disks, cards,
surveys, maps, logs, machines, technical data, formulae or any other tangible
property or document and any and all copies, duplicates or reproductions that
have been produced by, received by or otherwise been submitted to the
Participant in the course of the Participant’s employment with the Company.
(b) Forfeiture
of Exercised Awards. In the event a Participant or former Participant
violates any non-competition covenant, any employee non-solicitation covenant,
or any similar agreement or covenant of the Participant or former Participant in
favor of the Company, the Committee, in its sole discretion, may require such
Participant or former Participant, to return to the Company the economic value
of any Award which is realized or obtained (measured at the date of exercise) by
such Participant or former Participant at any time during the period:
(i) beginning on that date which is six months prior to the earlier
of (A) the date of such Participant’s or former Participant’s Termination, or
(B) the date any such violation occurs.
9.
Method of Exercise
The
vested and exercisable portion(s) of a Stock Option may be exercised, in whole
or in part, by giving written notice of exercise to Worthington specifying the
number of Common Shares to be purchased, which, if required by the Committee,
shall be in a form specified by the Committee. Such notice shall be accompanied
by payment in full of the Exercise Price. Unless otherwise specified
by the Committee and reflected in the Award Agreement, the Exercise Price may be
paid: (a) in cash or its equivalent; (b) by tendering Common Shares already
owned by the Participant prior to the exercise date; (c) by a cashless exercise
(including by delivering or surrendering outstanding vested and exercisable
Awards, by withholding Common Shares which would otherwise be issued in
connection with the exercise of a vested and exercisable Stock Option, or
through a broker-assisted arrangement to the extent permitted by applicable
laws, rules or regulations); or (d) through any combination of the methods
described in subparagraphs (a), (b) and (c) (in each case, valuing Common Shares
at Fair Market Value on the date of exercise). The Committee shall determine
acceptable methods for tendering Common Shares (including by attestation if
permitted by applicable laws, rules or regulations) and delivering or
surrendering outstanding vested and exercisable Awards and may impose such
conditions on the use of Common Shares or outstanding Awards to exercise Stock
Options as it deems appropriate.
10. Adjustments
Upon Changes In Capitalization, Etc.
(a) The
existence of this Plan and the Awards granted hereunder shall not affect or
restrict in any way the right or power of the Board or the shareholders of
Worthington to make or authorize any adjustment, recapitalization,
reorganization or other change in Worthington’s Common Shares, its capital
structure or its business, any merger or consolidation of Worthington, any issue
of bonds, debentures, preferred or prior preference shares ahead of or affecting
Worthington’s capital stock or the rights thereof, the dissolution or
liquidation of Worthington or any sale or transfer of all or any part of
Worthington’s assets or business, or any other corporate act or proceeding.
(b) In
the event of any change in capitalization affecting the Common Shares of
Worthington, such as a stock dividend, stock split, recapitalization (including
payment of an extraordinary dividend), merger, consolidation, spin-off,
split-up, distribution of assets to shareholders, combination or exchange of
shares or other form of reorganization, or any other change affecting the Common
Shares or the price thereof, such proportionate adjustments, if any, as the
Board in its discretion may deem appropriate to reflect such change shall be
made with respect to the aggregate number of Common Shares for which Awards in
respect thereof may be granted under this Plan, the maximum number of Common
Shares which may be subject to Awards granted to any Participant in any one
calendar year, the number of Common Shares covered by each outstanding Award,
and the Exercise Price in respect of each outstanding Awards. Any
such adjustments shall comply with the requirements of Section 409A of the Code,
to the extent applicable.
11. Change
in Control Provisions
(a)
Effects of Change in Control. At the time a Stock Option is granted under the
Plan by the Committee, the Committee may include in the Award Agreement for such
Stock Option a provision pursuant to which such Stock Option shall become fully
vested and exercisable as a result of a Change in Control (as defined in Section
11(b) below), either alone, or in conjunction with some other event, such as a
Termination, whether or not the Stock Option is then vested or exercisable. If
the Committee does not include in the Award Agreement for a Stock Option any
other provision with respect to the result of a Change in Control, then the
Award Agreement shall be deemed to provide that, subject to the provisions of
this Section 11, if a Change in Control occurs and a Participant is Terminated
at any time within the two years following the Change in Control, the portion of
the Stock Option outstanding and unexercised as of the date of such Termination
shall immediately become fully vested and exercisable.
(i) A
“Change in Control” of Worthington shall have occurred when any Acquiring Person
(other than (A) the Company, (B) any employee benefit plan of the Company or any
trustee of or fiduciary with respect to any such employee benefit plan when
acting in such capacity, or (C) any person who, on the Effective Date of this
Plan, was an Affiliate of Worthington beneficially owning in excess of 10% of
the outstanding Common Shares of Worthington and the respective successors,
executors, legal representatives, heirs and legal assigns of such person), alone
or together with the Acquiring Person’s Affiliates and Associates, has acquired
or obtained the right to acquire, in each case directly or indirectly, the
beneficial ownership of 25% or more of the Common Shares then outstanding); or
the Continuing Directors no longer constitute a majority of the Board.
(ii) “Acquiring
Person” means any person (any individual, firm, corporation or other entity) who
or which, together with all Affiliates and Associates of such person, has
acquired or obtained the right to acquire, in each case directly or indirectly,
the beneficial ownership of 25% or more of the Common Shares then outstanding.
(iii) “Affiliate”
and “Associate” shall have the respective meanings ascribed to such terms in
Rule 12b-2 of the General Rules and Regulations under the Act.
(iv) “Change
in Control Price Per Share” shall mean the price per Common Share (A) paid by
the Acquiring Person in connection with the transaction that results in the
Change in Control; or (B) at any time after the Change in Control and before the
Participant exercises his or her election under Section 11(c), the Fair Market
Value of the Common Shares.
(v) “Continuing
Director” means any individual who was a member of the Board on the Effective
Date of this Plan or thereafter elected by the shareholders of Worthington or
appointed by the Board prior to the date as of which the Acquiring Person became
an Acquiring Person or an individual designated (before his or her initial
election or appointment as a director) as a Continuing Director by three-fourths
of the Whole Board, but only if a majority of the Whole Board shall then consist
of Continuing Directors.
(vi) “Whole
Board” means the total number of directors which Worthington would have if there
were no vacancies in respect of the Board.
(c) Change
in Control Cash-Out. Notwithstanding any other provision of this
Plan, during the 60-day period from and after a Change in Control (the “Exercise
Period”), if the Committee shall determine at, or at any time after, the time of
grant of a Stock Option, a Participant holding a Stock Option shall have the
right, whether or not the Stock Option is fully exercisable and in lieu of the
payment of the Exercise Price for the Common Shares being purchased under the
Stock Option and by giving notice to Worthington, to elect (within the Exercise
Period) to surrender all or any portion of the Stock Option to Worthington and
to receive cash, within 30 days of such notice, in an amount equal to the amount
by which the Change in Control Price per Share on the date of such election
shall exceed the Exercise Price per Common Share under the Stock Option
multiplied by the number of Common Shares granted under the Stock Option as to
which the right granted under this Section 11(c) shall have been exercised.
(d)
Alternative Awards. Section 11(a) of this Plan will not apply to the extent that
the Committee reasonably concludes in good faith before the Change in Control
occurs that Awards will be honored or assumed or new rights substituted for the
Awards (collectively, “Alternative Awards”) by the Participant’s employer (or
the parent or a subsidiary of that employer) immediately after the Change in
Control, provided that any Alternative Award must:
(i) Be
based on stock that is (or, within 60 days of the Change in Control, will be)
traded on an established securities exchange, market or other quotation system;
(ii) Provide
the Participant rights and entitlements substantially equivalent to or better
than the rights, terms and conditions of the Award for which it is substituted,
including an identical or better exercise or vesting schedule and identical or
better timing and methods of payment; and
(iii) Have
substantially equivalent economic value to the Award (determined at the time of
the Change in Control) for which it is substituted.
(e) Provisions
Not Applicable. The provisions of this Section 11 shall not apply (i) if the
Committee determines at the time of grant of an Award that such Section shall
not apply in respect of such Award or (ii) to any Change in Control when
expressly provided otherwise by a three-fourths vote of the Whole Board, but
only if a majority of the members of the Board then in office and acting upon
such matter shall be Continuing Directors.
12. Amendment,
Modification and Termination of Plan
The Board
or the Committee may terminate, suspend or amend this Plan at any time without
shareholder approval except to the extent that shareholder approval is required
to satisfy applicable requirements imposed by: (a) Rule 16b-3 under the Act, or
any successor rule or regulation; (b) applicable requirements of the Code; or
(c) the rules of any securities exchange, market or other quotation system on or
through which the Company’s securities are then listed or traded. Also, no Plan
amendment may: (i) result in the loss of a Committee member’s status as a
“non-employee director” as defined in Rule 16b-3 under the Act, or any successor
rule or regulation, with respect to any employee benefit plan of the Company;
(ii) cause this Plan to fail to meet requirements imposed by Rule 16b-3; or
(iii) without the consent of the affected Participant, adversely affect any
Award granted before the amendment. Nothing in this Section 12
will restrict the Committee’s right to exercise the discretion retained in the
various provisions of this Plan.
13. Miscellaneous
(a) Assignability. Except
as described in this Section 13(a) and Section 13(b) of this Plan, an Award may
not be transferred except by will or the laws of descent and distribution and,
during the Participant’s lifetime, may be exercised only by the Participant, the
Participant’s guardian or legal representative.
(b) Beneficiary
Designation. Each Participant may name a Beneficiary or Beneficiaries
(who may be named contingently or successively) to receive or to exercise any
vested and exercisable Award that is unexercised at the Participant’s death.
Each designation made will revoke all prior designations made by the same
Participant, must be made on a form prescribed by the Committee and will be
effective only when filed in writing with the Committee. If a Participant has
not made an effective Beneficiary designation, the deceased Participant’s
Beneficiary will be the deceased Participant’s estate. The identity of a
Participant’s designated Beneficiary will be based only on the information
included in the latest beneficiary designation form completed and filed by the
Participant with the Committee and will not be inferred from any other evidence.
(c) No
Guarantee of Employment or Participation. Nothing in this Plan may be
construed as: (i) interfering with or limiting the right of the Company to
Terminate any Employee’s employment at any time, with or without cause; (ii)
conferring on any Employee any right to continue as an employee of the Company;
or (iii) guaranteeing that any Employee will receive any Awards.
(d) Withholding. The
Company shall have the power and the right to deduct, withhold or collect any
amount required by law, rule or regulation to be withheld with respect to any
taxable event arising with respect to an Award granted under this
Plan. This amount may, as determined by the Company in its sole
discretion, be: (i) withheld from other amounts due to the
Participant; (ii) withheld from the value of any Award being settled or any
Common Shares being transferred in connection with the exercise or settlement of
an Award; (iii) withheld from the vested and exercisable portion of any
Award (including the Common Shares transferable thereunder), whether or not
being exercised or settled at the time the taxable event arises; or (iv)
collected directly from the Participant. Unless otherwise determined
by the Committee, a Participant may elect to satisfy the withholding
requirement, in whole or in part, by having the Company withhold Common Shares
having a Fair Market Value on the date the tax is to be determined equal to the
minimum statutory total tax that could be imposed on the transaction; provided
that such Common Shares would otherwise be distributable to the Participant at
the time of the withholding and if such Common Shares are not otherwise
distributable at the time of the withholding, provided that the Participant has
a vested right to distribution of such Common Shares at such
time. All such elections shall be irrevocable and made in writing and
shall be subject to any terms and conditions that the Committee, in its sole
discretion, deems appropriate.
(e) Indemnification. Each
individual who is or was a member of the Committee or of the Board will be
indemnified and held harmless by Worthington against and from any loss, cost,
liability or expense that may be imposed upon or reasonably incurred by such
individual in connection with or resulting from any claim, action, suit or
proceeding to which such individual may be made a party or in which such
individual may be involved by reason of any action taken or failure to take
action under this Plan against such individual as a Committee member and against
and from any and all amounts paid, with Worthington’s approval, by such
individual in settlement of any matter related to or arising from this Plan as a
Committee member or paid by such individual in satisfaction of any judgment in
any action, suit or proceeding relating to or arising from this Plan against
such individual as a Committee member, but only if such individual gives
Worthington an opportunity, at its own expense, to handle and defend the matter
before such individual undertakes to handle and defend it in his or her own
behalf. The right of indemnification described in this Section 13(e) is not
exclusive and is independent of any other rights of indemnification to which the
individual may be entitled under Worthington’s organizational documents, by
contract, as a matter of law or otherwise.
(f)
Requirements of Law. The grant of Awards and the issuance of Common Shares under
this Plan will be subject to all applicable laws, rules and regulations and to
all required approvals of any governmental agencies or any securities exchange,
market or other quotation system on or through which the Common Shares are then
listed or traded. Also, no Common Shares will be issued under this Plan unless
Worthington is satisfied that the issuance of those Common Shares will comply
with applicable federal and state securities laws. Certificates for Common
Shares delivered under this Plan may be subject to any stock transfer orders and
other restrictions that the Committee believes to be advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
any securities exchange, market or other quotation system on or through which
the Common Shares are then listed or traded, or any other applicable federal or
state securities law. The Committee may cause a legend or legends to be placed
on any certificates issued under this Plan to make appropriate reference to
restrictions within the scope of this Section 13(f).
(g)
Other Company Benefit and Compensation Programs. Payments and other
benefits received by a Participant under an Award made pursuant to this Plan
shall not be deemed a part of a Participant’s regular, recurring compensation
for purposes of the termination indemnity or severance pay law of any state or
country and shall not be included in, nor have any effect on, the determination
of benefits under any other employee benefit plan or similar arrangement
provided by the Company unless expressly so provided by such other plan or
arrangement, or except where the Committee expressly determines that an Award or
portion of an Award should be included to accurately reflect competitive
compensation practices or to recognize that an Award has been made in lieu of a
portion of competitive annual cash compensation. This Plan notwithstanding, the
Company may adopt such other compensation programs and additional compensation
arrangements as it deems necessary to attract, retain and reward Employees for
their service with the Company.
(h) Cost
of Plan. The costs and expenses of administering this Plan shall be
borne by the Company.
(i)
Governing Law. The validity, construction and
effect of this Plan and all rules, regulations and actions hereunder shall be
governed by and construed in accordance with the laws (other than laws governing
conflicts of laws) of the State of Ohio and applicable federal laws.
(j)
Section 409A of the Code. This Plan is
intended to be exempt from the requirements of Section 409A of the Code and the
Treasury Regulations promulgated thereunder and shall be interpreted,
administered and operated accordingly. Nothing in this Plan should be construed
as a guarantee or entitlement of any particular tax treatment to a Participant.
None of the Board, the Committee, the Company or any other person shall have any
liability with respect to a Participant in the event that this Plan fails to
comply with the requirements of Section 409A of the Code.
(k) Requirements
of Law. The grant of Awards and the issuance of Common Shares shall
be subject to all applicable laws, rules and regulations (including applicable
federal and state securities laws) and to all required approvals of any
governmental agencies or any securities exchange, market or other quotation
system. Without limiting the foregoing, the Company shall have no
obligation to issue Common Shares under the Plan prior to: (i) receipt of
any approvals from any governmental agencies or any securities exchange, market
or quotation system that the Committee deems necessary; and (ii) completion
of registration or other qualification of the Common Shares under any applicable
federal or state law or ruling of any governmental agency that the Committee
deems necessary.
(l)
Legends. Certificates for
Common Shares delivered under this Plan may be subject to such stock transfer
orders and other restrictions that the Committee deems advisable under the
rules, regulations and other requirements of the Securities and Exchange
Commission, any securities exchange, market or quotation system on or through
which the Common Shares are then listed or traded, or any other applicable
federal or state securities law. The Committee may cause a legend or
legends to be placed on any certificates issued under this Plan to make
appropriate reference to restrictions within the scope of this
Section 13(l).
(m) Uncertificated
Common Shares. To the extent that this Plan provides for the issuance
of certificates to reflect the transfer of Common Shares, the transfer of Common
Shares may be effected on a noncertificated basis, to the extent not prohibited
by applicable law or the applicable rules of any securities exchange, market or
quotation system on or through which the Common Shares are then listed or
traded.
(n) Rights
as a Shareholder. Except as otherwise provided in this Plan or in a
related Award Agreement, a Participant shall have none of the rights of a
shareholder with respect to Common Shares covered by an Award unless and until
the Participant becomes the record holder of such Common Shares.
(o) Successors
and Assigns. This Plan shall be binding on all successors and assigns
of the Company and each Participant, including without limitation, the estate of
such Participant and the executor, administrator or trustee of such estate, or
any receiver or trustee in bankruptcy or representative of the Participant’s
creditors.
(p) Savings
Clause. In the event that any provision of this Plan shall be held
illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining provisions of this Plan, and this Plan shall be construed
and enforced as if the illegal or invalid provision had not been included.
(q) Foreign
Nationals. Awards
may be granted to Employees who are foreign nationals or employed outside the
United States, or both, on such terms and conditions different from those
specified in the Plan as may, in the judgment of the Committee, be necessary or
desirable in order to recognize differences in local law or tax
policy. The Committee also may impose conditions on the exercise or
vesting of Awards in order to minimize the Company’s obligation with respect to
tax equalization for Employees on assignments outside their home country.