Table of Contents

LOGO

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 2008

OR

 

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                              to                             

Commission File Number 001-08399

WORTHINGTON INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

 

Ohio      31-1189815
(State or other jurisdiction of incorporation or organization)      (I.R.S. Employer Identification No.)
200 Old Wilson Bridge Road, Columbus, Ohio      43085
(Address of principal executive offices)      (Zip Code)

(614) 438-3210

 

(Registrant’s telephone number, including area code)

Not applicable

 

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES x   NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer x

   Accelerated filer                  ¨

Non-accelerated filer   ¨ (Do not check if a smaller reporting company)

   Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ¨   NO x

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the Issuer’s classes of common stock, as of the latest practicable date.

As of December 31, 2008, 78,856,287 of the registrant’s common shares, without par value, were outstanding.


Table of Contents

TABLE OF CONTENTS

 

Safe Harbor Statement

   ii

Part I. Financial Information

  

Item 1.

  

Financial Statements (Unaudited)

  
  

Consolidated Balance Sheets –
November 30, 2008 and May 31, 2008

   1
  

Consolidated Statements of Earnings –
Three and Six Months Ended November 30, 2008 and 2007

   2
  

Consolidated Statements of Cash Flows –
Three and Six Months Ended November 30, 2008 and 2007

   3
  

Notes to Consolidated Financial Statements

   4

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

   12

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

   26

Item 4.

  

Controls and Procedures

   26

Part II. Other Information

  

Item 1.

  

Legal Proceedings

   27

Item 1A.

  

Risk Factors

   27

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

   27

Item 3.

  

Defaults Upon Senior Securities (Not applicable)

   27

Item 4.

  

Submission of Matters to a Vote of Security Holders (Not applicable)

   28

Item 5.

  

Other Information (Not applicable)

   28

Item 6.

  

Exhibits

   29

Signatures

   30

Index to Exhibits

   31

 

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SAFE HARBOR STATEMENT

Selected statements contained in this Quarterly Report on Form 10-Q, including, without limitation, in “PART I – Item 2. –Management’s Discussion and Analysis of Financial Condition and Results of Operations,” constitute “forward-looking statements” as that term is used in the Private Securities Litigation Reform Act of 1995 (the “Act”). These forward-looking statements include, without limitation, statements relating to:

   

business plans or to future or expected performance, sales, operating results and earnings per share;

   

projected capacity and working capital needs;

   

demand trends;

   

pricing trends for raw materials and finished goods;

   

anticipated capital expenditures and asset sales;

   

anticipated improvements and efficiencies in operations, sales and sourcing and the results thereof;

   

projected timing, results, costs, charges and expenditures related to headcount reductions and facility dispositions, shutdowns and consolidations;

   

the alignment of operations with demand;

   

the ability to take advantage of future opportunities, new products and markets;

   

expectations for Company and customer inventories, jobs and orders;

   

expectations for the economy and markets;

   

expected benefits from turnaround plans, cost reduction efforts and other new initiatives;

   

expectations for improving margins and increasing shareholder value; and

   

effects of judicial rulings; and other non-historical matters.

Because they are based on beliefs, estimates and assumptions, forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from those projected. Any number of factors could affect actual results, including, without limitation, those that follow:

   

product demand and pricing;

   

changes in product mix, product substitution and market acceptance of the Company’s products;

   

fluctuations in pricing, quality or availability of raw materials (particularly steel), supplies, transportation, utilities and other items required by operations;

   

effects of facility closures and the consolidation of operations;

   

the effect of financial difficulties, consolidation and other changes within the steel, automotive, construction and related industries;

   

failure to maintain appropriate levels of inventories;

   

the effect of national, regional and worldwide economic conditions generally and within major product markets, including a prolonged or substantial economic downturn;

   

financial difficulties (including bankruptcy filings) of original equipment manufacturers, end-users and customers, suppliers, joint venture partners and others with whom the Company does business;

   

the ability to realize targeted expense reductions from head count reductions, facility closures and other cost reduction efforts;

   

the ability to realize other cost savings and operational, sales and sourcing improvement and efficiencies on a timely basis;

   

the overall success of, and the ability to integrate, newly-acquired businesses and achieve synergies therefrom;

   

capacity levels and efficiencies within facilities and within the industry as a whole;

   

the effect of disruption in the business of suppliers, customers, facilities and shipping operations due to adverse weather, casualty events, equipment breakdowns, acts of war or terrorist activities or other causes;

   

changes in customer demand, inventories, spending patterns, product choices, and supplier choices;

   

risks associated with doing business internationally, including economic, political and social instability, and foreign currency exposure;

   

the ability to improve and maintain processes and business practices to keep pace with the economic, competitive and technological environment;

   

adverse claims experience with respect to workers compensation, product recalls or liability, casualty events or other matters;

   

deviation of actual results from estimates and/or assumptions used by the Company in the application of its significant accounting policies;

   

level of imports and import prices in the Company’s markets;

   

the impact of judicial rulings and governmental regulations, both in the United States and abroad; and

   

other risks described from time to time in the Company’s filings with the Securities and Exchange Commission, including those described in “PART I – Item 1A. – Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2008.

We note these factors for investors as contemplated by the Act. It is impossible to predict or identify all potential risk factors. Consequently, you should not consider the foregoing list to be a complete set of all potential risks and uncertainties. Any forward-looking statements in this Quarterly Report on Form 10-Q are based on current information as of the date of this Form 10-Q, and we assume no obligation to correct or update any such statements in the future, except as required by applicable law.

 

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PART I. FINANCIAL INFORMATION

Item 1. - Financial Statements

WORTHINGTON INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

 

     November 30,
2008
   May 31,
2008

Assets

     

Current assets:

     

Cash and cash equivalents

   $ 26,443    $ 73,772

Receivables, less allowances of $8,882 and $4,849 at November 30, 2008 and May 31, 2008

     312,019      384,354

Inventories:

     

Raw materials

     243,875      350,256

Work in process

     74,335      123,106

Finished products

     141,646      119,599
             

Total inventories

     459,856      592,961

Assets held for sale

     1,841      1,132

Deferred income taxes

     53,086      17,966

Prepaid expenses and other current assets

     35,866      34,785
             

Total current assets

     889,111      1,104,970

Investments in unconsolidated affiliates

     137,518      119,808

Goodwill

     97,808      183,523

Other assets

     40,804      29,786

Property, plant & equipment, net

     529,724      549,944
             

Total assets

   $ 1,694,965    $ 1,988,031
             

Liabilities and shareholders’ equity

     

Current liabilities:

     

Accounts payable

   $ 266,228    $ 356,129

Notes payable

     125,979      135,450

Accrued compensation, contributions to employee benefit plans and related taxes

     40,621      59,619

Dividends payable

     13,408      13,487

Other accrued items

     80,962      68,545

Income taxes payable

     26,595      31,665
             

Total current liabilities

     553,793      664,895

Other liabilities

     52,759      49,785

Long-term debt

     245,400      245,000

Deferred income taxes

     79,513      100,811
             

Total liabilities

     931,465      1,060,491

Minority interest

     37,893      42,163

Shareholders’ equity

     725,607      885,377
             

Total liabilities and shareholders’ equity

   $ 1,694,965    $ 1,988,031
             

See notes to consolidated financial statements.

 

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WORTHINGTON INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

(In thousands, except per share)

 

     Three Months Ended
November 30,
    Six Months Ended
November 30,
 
           2008                 2007                 2008                 2007        

Net sales

   $ 745,350     $ 713,664     $ 1,658,572     $ 1,472,619  

Cost of goods sold

     799,769       643,654       1,561,089       1,323,824  
                                

Gross margin

     (54,419 )     70,010       97,483       148,795  

Selling, general and administrative expense

     48,340       53,928       111,742       108,272  

Goodwill impairment

     96,943       —         96,943       —    

Restructuring charges

     11,936       4,601       20,688       9,038  
                                

Operating income (loss)

     (211,638 )     11,481       (131,890 )     31,485  

Other income (expense):

        

Miscellaneous expense

     (1,260 )     (2,431 )     (1,752 )     (3,339 )

Interest expense

     (6,550 )     (5,370 )     (12,119 )     (10,008 )

Equity in net income of unconsolidated affiliates

     11,033       14,927       36,043       29,912  
                                

Earnings (loss) before income taxes

     (208,415 )     18,607       (109,718 )     48,050  

Income tax expense (benefit)

     (43,761 )     3,867       (13,688 )     13,142  
                                

Net earnings (loss)

   $ (164,654 )   $ 14,740     $ (96,030 )   $ 34,908  
                                

Average common shares outstanding—basic

     78,802       81,366       78,910       82,722  
                                

Earnings (loss) per share—basic

   $ (2.09 )   $ 0.18     $ (1.22 )   $ 0.42  
                                

Average common shares outstanding—diluted

     78,802       82,358       78,910       83,717  
                                

Earnings (loss) per share—diluted

   $ (2.09 )   $ 0.18     $ (1.22 )   $ 0.42  
                                

Common shares outstanding at end of period

     78,809       81,567       78,809       81,567  

Cash dividends declared per share

   $ 0.17     $ 0.17     $ 0.34     $ 0.34  

See notes to consolidated financial statements.

 

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WORTHINGTON INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 

     Three Months Ended
November 30,
    Six Months Ended
November 30,
 
           2008                 2007                 2008                 2007        

Operating activities

        

Net earnings (loss)

   $ (164,654 )   $ 14,740     $ (96,030 )   $ 34,908  

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

        

Depreciation and amortization

     16,011       15,736       32,379       31,222  

Goodwill impairment

     96,943       -       96,943       -  

Restructuring charges, non-cash

     2,946       2,730       2,946       2,730  

Provision for deferred income taxes

     (50,915 )     4,729       (50,171 )     6,476  

Equity in net income of unconsolidated affiliates, net of distributions

     2,967       (227 )     (7,543 )     (512 )

Minority interest in net income of consolidated subsidiaries

     908       1,989       1,562       3,987  

Net loss on assets

     152       550       10       2,942  

Stock-based compensation

     1,319       828       2,603       1,762  

Excess tax benefits - stock-based compensation

     -       (1,688 )     (355 )     (2,248 )

Changes in assets and liabilities:

        

Receivables

     64,170       12,201       79,446       25,564  

Inventories

     209,936       (2,066 )     140,286       637  

Prepaid expenses and other current assets

     (3,770 )     (1,846 )     (5,737 )     (128 )

Other assets

     2,485       (559 )     655       (352 )

Accounts payable and accrued expenses

     (118,996 )     (26,069 )     (113,191 )     (9,745 )

Other liabilities

     (2,850 )     868       (4,808 )     (494 )
                                

Net cash provided by operating activities

     56,652       21,916       78,995       96,749  
                                

Investing activities

        

Investment in property, plant and equipment, net

     (15,455 )     (10,116 )     (30,239 )     (26,621 )

Acquisitions, net of cash acquired

     -       (2,241 )     (40,225 )     (2,241 )

Investment in unconsolidated affiliates

     (2,850 )     (47,043 )     (3,138 )     (47,043 )

Proceeds from sale of assets

     1,858       246       5,308       292  

Sales of short-term investments

     -       -       -       25,562  
                                

Net cash used by investing activities

     (16,447 )     (59,154 )     (68,294 )     (50,051 )
                                

Financing activities

        

Net proceeds from (payments on) short-term borrowings

     (73,589 )     6,200       (17,386 )     61,550  

Principal payments on long-term debt

     -       -       (248 )     -  

Proceeds from issuance of common shares

     (19 )     8,314       1,743       13,048  

Excess tax benefits - stock-based compensation

     -       1,688       355       2,248  

Payments to minority interest

     (1,536 )     (4,320 )     (3,216 )     (6,720 )

Repurchase of common shares

     -       -       (12,402 )     (87,310 )

Dividends paid

     (13,393 )     (13,776 )     (26,876 )     (28,237 )
                                

Net cash used by financing activities

     (88,537 )     (1,894 )     (58,030 )     (45,421 )
                                

Increase (decrease) in cash and cash equivalents

     (48,332 )     (39,132 )     (47,329 )     1,277  

Cash and cash equivalents at beginning of period

     74,775       78,686       73,772       38,277  
                                

Cash and cash equivalents at end of period

   $ 26,443     $ 39,554     $ 26,443     $ 39,554  
                                

See notes to consolidated financial statements.

 

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WORTHINGTON INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Three and Six Month Periods Ended November 30, 2008 and November 30, 2007

(Unaudited)

NOTE A – Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of Worthington Industries, Inc. and consolidated subsidiaries (collectively, “we”, “our”, “Worthington” or the “Company”). Spartan Steel Coating, LLC (owned 52%) is fully consolidated with the equity owned by the other joint venture member shown as minority interest on the consolidated balance sheets, and its portion of net earnings (loss) included in miscellaneous expense. Investments in unconsolidated affiliates are accounted for using the equity method. Significant intercompany accounts and transactions are eliminated. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“United States”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended November 30, 2008, are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2009 (“fiscal 2009”). For further information, refer to the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the fiscal year ended May 31, 2008 (“fiscal 2008”) of Worthington Industries, Inc. (the “2008 Form 10-K”).

Recently Issued Accounting Standards: In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R) (“SFAS No. 158”), to improve financial reporting regarding defined benefit pension and other postretirement plans. We adopted the recognition provisions of SFAS No. 158 at May 31, 2007. The measurement date provision of SFAS No. 158 is effective at May 31, 2009, and is not expected to materially impact our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS No. 141(R)”) , to improve the relevance, representational faithfulness and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. SFAS No. 141(R) applies prospectively to business combinations after May 31, 2009, and is not expected to materially impact our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests In Consolidated Financial Statements – an amendment of ARB No. 51 (“SFAS No. 160”) , to improve the relevance, comparability and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for the noncontrolling interest (minority interest) in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 is effective June 1, 2009, and will require a change in the presentation of the minority interest in the consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133 (“SFAS No. 161”) , to improve the transparency of financial reporting by requiring enhanced disclosures about derivative and hedging activities. SFAS No. 161 is effective December 1, 2008.

 

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NOTE B – Segment Operations

Summarized financial information for our reportable segments is shown in the following table:

 

     Three Months Ended
November 30,
    Six Months Ended
November 30,
 
(in thousands)          2008                 2007                 2008                 2007        

Net sales

        

Steel Processing

   $ 351,565     $ 344,230     $ 811,479     $ 700,084  

Metal Framing

     180,353       182,415       413,285       380,486  

Pressure Cylinders

     142,400       133,214       290,799       269,812  

Other

     71,032       53,805       143,009       122,237  
                                

Consolidated

   $ 745,350     $ 713,664     $ 1,658,572     $ 1,472,619  
                                

Operating income (loss)

        

Steel Processing

   $ (71,851 )   $ 10,267     $ (27,454 )   $ 20,246  

Metal Framing

     (153,981 )     (16,045 )     (133,022 )     (24,048 )

Pressure Cylinders

     20,168       17,431       38,822       35,396  

Other

     (5,974 )     (172 )     (10,236 )     (109 )
                                

Consolidated

   $ (211,638 )   $ 11,481     $ (131,890 )   $ 31,485  
                                

Pre-tax restructuring charges

        

Steel Processing

   $ 461     $ (106 )   $ 473     $ 1,096  

Metal Framing

     4,370       3,557       5,650       4,439  

Pressure Cylinders

     -       -       7       -  

Other

     7,105       1,150       14,558       3,503  
                                

Consolidated

   $ 11,936     $ 4,601     $ 20,688     $ 9,038  
                                
(in thousands)    November 30,
2008
    May 31,
2008
             

Total assets

        

Steel Processing

     641,567     $ 942,885      

Metal Framing

     319,424       527,446      

Pressure Cylinders

     359,181       437,159      

Other

     374,793       80,541      
                    

Consolidated

   $ 1,694,965     $ 1,988,031      
                    

 

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NOTE C – Comprehensive Income

The components of total comprehensive income (loss), net of tax, were as follows:

 

     Three Months Ended
November 30,
    Six Months Ended
November 30,
 
(in thousands)          2008                 2007                 2008                 2007        

Net earnings (loss)

   $ (164,654 )   $ 14,740     $ (96,030 )   $ 34,908  

Foreign currency translation

     (16,063 )     6,696       (23,143 )     8,826  

Cash flow hedges

     (4,699 )     (4,724 )     (6,042 )     (8,727 )

Other

     -       6       -       (289 )
                                

Total comprehensive income (loss)

   $ (185,416 )   $ 16,718     $ (125,215 )   $ 34,718  
                                

NOTE D – Stock-Based Compensation

We granted non-qualified stock options during the six months ended November 30, 2008, covering 559,450 common shares under our stock-based compensation plans. The weighted average option price of $19.44 per share was equal to the weighted average of the market prices of the underlying common shares at the grant dates. The fair value of these stock options, based on the Black-Scholes option-pricing model, calculated at the grant dates, was $5.57 per share. The calculated pre-tax stock-based compensation expense for these stock options, after an estimate for forfeitures, is $2,605,000, which will be recognized on a straight-line basis over the five-year vesting period of the stock options. The following assumptions were used to value the stock options:

 

Dividend yield

   3.4 %

Expected term (years)

   6.0  

Expected volatility

   35.1 %

Risk-free interest rate

   3.5 %

The expected volatility is based on the historical volatility of the common shares of Worthington Industries, Inc., and the risk-free interest rate is based on the United States Treasury strip rate for the expected term of the stock options. The expected term was developed using the historical exercise experience.

We granted 17,850 restricted shares of common stock during the six months ended November 30, 2008, under our stock-based compensation plans. The fair value of these restricted shares was $17.11 per share, the market price of the underlying common shares at the grant date. The calculated pre-tax stock-based compensation expense for these restricted shares is $305,000, which will be recognized on a straight-line basis over the one-year vesting period.

NOTE E – Employee Pension Plans

The following table summarizes the components of net periodic pension cost for our defined benefit plans for the periods indicated:

 

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     Three Months Ended
November 30,
    Six Months Ended
November 30,
 
(in thousands)          2008                 2007                 2008                 2007        

Defined benefit plans:

        

Service cost

   $ 220     $ 251     $ 451     $ 498  

Interest cost

     326       299       666       594  

Expected return on plan assets

     (306 )     (321 )     (612 )     (642 )

Net amortization and deferral

     55       60       110       120  
                                

Net pension cost of defined benefit plans

   $ 295     $ 289     $ 615     $ 570  
                                

No contributions will be required to fund our defined benefit pension plans in fiscal 2009. Pension plan assets declined significantly during the recent market downturn. This is not expected to have a material affect on our future pension expense.

NOTE F – Income Taxes

Income tax expense (benefit) for the first six months of fiscal 2009 and fiscal 2008 reflects an estimated annual effective income tax rate of 0.6% and 28.0%, respectively. The unusually low estimated effective tax rate for fiscal 2009 is attributable to substantial domestic losses that are taxed at rates different than those used for our international income. During the first quarter of fiscal 2009, we estimated that the annual effective tax rate would be 30.5%. The significant reduction in the estimated rate is primarily due to the losses in domestic operations generated by the inventory write-down. To the extent that actual pre-tax results for the year differ from the forecast estimates applied at the end of the most recent interim period, the actual tax rate recognized in fiscal 2009 could be materially different from the forecasted rate as of the end of the second quarter of fiscal 2009.

Income tax expense (benefit) for the first six months of fiscal 2009 was calculated using the estimated annual effective income tax rate for fiscal 2009. The income tax benefit for the second quarter also included $13,562,000 associated with the goodwill write-off, which has been treated as a discrete item. Income tax expense for the first six months of fiscal 2008 was calculated using the estimated annual effective income tax rate for fiscal 2008, and included a $504,000 adjustment to reduce other estimated tax liabilities and deferred tax valuation allowances.

NOTE G – Investments in Unconsolidated Affiliates

Our investments in affiliated companies, which are not controlled through majority ownership or otherwise, are accounted for using the equity method. At November 30, 2008, these equity investments, and the percentage interest owned, consisted of: Worthington Armstrong Venture (50%), TWB Company, L.L.C. (45%), Worthington Specialty Processing (51%), Aegis Metal Framing, LLC (60%), Accelerated Building Technologies, LLC (50%), Serviacero Planos, S.A. de C.V. (50%), and LEFCO Worthington, LLC (49%).

We received distributions from unconsolidated affiliated companies totaling $28,500,000 during the six months ended November 30, 2008. Combined financial information for these affiliated companies is summarized in the following table:

 

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(in thousands)              November 30,
2008
   May 31,
2008

Cash

         $ 80,529    $ 79,538

Other current assets

           236,939      225,469

Noncurrent assets

           213,887      194,169

Other current liabilities

           116,510      124,258

Long-term debt

           100,608      101,411

Other noncurrent liabilities

           28,103      34,394
     Three Months Ended
November 30,
   Six Months Ended
November 30,
(in thousands)          2008                2007                2008                2007      

Net sales

   $ 204,519    $ 187,856    $ 440,645    $ 349,638

Gross margin

     46,968      47,602      120,117      94,975

Depreciation and amortization

     4,121      3,127      8,080      6,325

Interest expense

     1,013      2,213      2,002      4,391

Income tax expense

     5,307      1,648      10,215      4,016

Net earnings

     28,659      30,090      79,719      60,063

On June 2, 2008, we made an additional capital contribution of $392,000 to Viking & Worthington Steel Enterprise, LLC (“VWSE”). The other member in the joint venture did not make its contribution as required by the operating agreement. As a result, we now own 100% of VWSE, which has been fully consolidated in our financial statements since the beginning of fiscal 2009. VWSE has closed its manufacturing operations and its business will be handled by the consolidated operations of the Steel Processing segment.

On October 1, 2008, we expanded and modified Worthington Specialty Processing (“WSP”), our joint venture with United States Steel Corporation (“U.S. Steel”). U.S. Steel contributed ProCoil Company L.L.C., its steel processing facility in Canton, Michigan, and we contributed Worthington Steel Taylor, our steel processing subsidiary in Taylor, Michigan, with a book value of $13,851,000, and $2,500,000 of cash. After the contributions, we own 51% and U.S. Steel owns 49% of WSP. The joint venture will continue to be accounted for using the equity method as both parties have equal voting rights.

During October 2008, we sold our 49% equity interest in Canessa Worthington Slovakia s.r.o. for approximately $3,700,000 to the Magnetto Group, the other member of the joint venture.

During December 2008, we signed an agreement to sell our 60% equity interest in Aegis Metal Framing, LLC for approximately $24,000,000 to MiTek Industries, Inc., the other member of the joint venture.

NOTE H – Restructuring

In the first quarter of fiscal 2008, we announced actions that became part of a comprehensive Transformation Plan (the “Plan”) with the overall goal to increase the Company’s sustainable earnings potential. The Plan is being implemented over a three-year period and focuses on cost reduction, margin expansion and organizational capability improvements, which are expected to drive excellence in three core competencies: sales, operations and supply chain management. The Plan is comprehensive in scope and includes aggressive diagnostic and implementation phases in the Steel Processing and Metal Framing business segments.

To assist in the development and implementation of the Plan, a consulting firm has been retained. To date, the following actions have been taken:

 

   

On September 25, 2007, we announced the closure or downsizing of five locations in our Metal Framing segment. These actions were completed as of May 31, 2008.

 

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During the first quarter of fiscal 2009, the Metal Framing corporate offices were moved from Pittsburgh and Blairsville, Pennsylvania, to Columbus, Ohio.

 

   

Headcount was reduced through a combination of voluntary retirement and severance packages.

 

   

On October 23, 2008, we announced the closure of two facilities, one Steel Processing (Louisville, Kentucky) and one Metal Framing (Renton, Washington), and headcount reductions of 282. The Louisville facility is scheduled to close by May 31, 2009, and the Renton facility was closed as of December 31, 2008.

 

   

On December 5, 2008, we announced the closure and suspension of operations at three Metal Framing facilities and headcount reductions in Steel Processing of 186 and Metal Framing of 125. The Lunenburg, Massachusetts, facility is scheduled to close by February 28, 2009, and operations suspended in Miami, Florida, by February 28, 2009 and Phoenix, Arizona, by January 31, 2009.

At this point, we anticipate that a total of $57,000,000 million in charges will be incurred over the life of the Plan. This includes $12,800,000 in early retirement and severance benefits, $9,700,000 in incremental depreciation resulting from a revision of the useful life of certain assets, $32,700,000 in professional fees, and $1,800,000 for lease termination and other closure costs. To date, $38,799,000 has been recorded as restructuring charges in the consolidated statements of earnings: $18,111,000 was incurred in fiscal 2008, and $20,688,000 was incurred during the first six months of fiscal 2009. The balance will be incurred over the remainder of fiscal 2009 and the first six months of fiscal 2010. Restructuring charges for the first six months of fiscal 2009 are summarized as follows:

 

(in thousands)    5/31/2008
Liability
   Expense    Payments     Adjustments    11/30/2008
Liability

Early retirement and severance

   $ 1,143    $ 2,343    $ (1,063 )   $ -    $ 2,423

Other costs

     1,710      15,399      (9,917 )     -      7,192
                                   
   $ 2,853      17,742    $ (10,980 )   $ -    $ 9,615
                               

Non-cash charges

        2,946        
                 

Total

      $ 20,688        
                 

Cash expenditures of $10,980,000, associated with implementing the Plan, were paid during the first six months of fiscal 2009. Certain cash payments associated with lease terminations may be paid over the remaining lease terms.

NOTE I – Business Interruption

On January 5, 2008, Severstal North America, Inc. (“Severstal”) experienced a furnace outage. Severstal is a primary steel supplier to, and a minority partner in, our Spartan Steel Coating, LLC joint venture. Severstal is also a steel supplier to Steel Processing locations and to our Pressure Cylinders segment. Business interruption losses have been and may continue to be incurred through the end of fiscal 2009 in the form of lost sales and added costs for material, freight, scrap, and other items. As of November 30, 2008, the additional expenses incurred for material costs, freight, and scrap in excess of our deductible, have been offset by proceeds from our insurance company. However, no proceeds have been recorded to offset the lost sales. This offset will be recorded upon the final settlement of the insurance claim.

NOTE J – Acquisitions

On June 2, 2008, Worthington purchased substantially all of the assets of The Sharon Companies Ltd. business (“Sharon Stairs”) for $37,150,000. Sharon Stairs designs and manufactures steel egress stair systems for the commercial construction market, and operates one manufacturing facility in Akron, Ohio. It operates as part of Worthington Integrated Building Systems, LLC (“WIBS”). The purchase price was allocated to the acquired assets and assumed liabilities based on their estimated fair values at the date of acquisition, with goodwill representing the

 

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excess of the purchase price over the fair value allocated to the net assets. Intangibles consisting mostly of customer list, trades names and technology, will be amortized straight-line over a weighted average life of 13 years.

The allocation was as follows:

 

(in thousands)     

Current assets

   $ 8,520

Intangibles

     12,440

Property, plant and equipment, net

     2,500
      

Total assets

     23,460

Current liabilities

     3,841

Other liabilities

     19

Long-term debt

     400
      

Identifiable net assets

     19,200

Goodwill

     17,950
      

Total purchase price

   $ 37,150
      

Cash flows used to determine the purchase price included strategic and synergistic benefits (investment value) specific to us, which resulted in a purchase price in excess of the fair value of identifiable assets. Since the fair values assigned to the acquired assets could only assume strategies and synergies of market participants, that additional investment value specific to us was included in goodwill. The purchase price included fair values of other assets that were not identifiable, not separately recognizable per accounting rules (e.g. assembled workforce), or of immaterial value. The purchase price also included a going-concern element that represented our ability to earn a higher rate of return on a group of assets than would be expected on the separate assets as determined during the valuation process.

On July 31, 2008, our Worthington Steelpac Systems, LLC subsidiary purchased the assets of Laser Products (“Laser”) for $3,425,000. Laser is a steel rack fabricator primarily serving the auto industry with locations in North Lewisburg, Ohio, and Greensburg, Indiana. The purchase price was allocated to working capital, fixed assets and customer list. This list will be amortized straight-line over ten years.

Pro forma results, including the acquired businesses described above since the beginning of fiscal 2009, would not be materially different than actual results.

NOTE K – Fair Value

Effective June 1, 2008, we adopted SFAS No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 was effective for our financial assets and liabilities after May 31, 2008, and will be effective for our non-financial assets and liabilities after May 31, 2009. Adoption of SFAS No. 157 for our financial assets and liabilities did not have a material impact on our consolidated financial statements. Adopting SFAS No. 157 for our non-financial assets and liabilities is not expected to materially impact our consolidated financial statements.

SFAS No. 157 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value should be determined based on assumptions that market participants would use in pricing an asset or liability. SFAS No. 157 uses a three-tier hierarchy that classifies assets and liabilities based on the inputs used in the valuation methodologies. In accordance with SFAS No. 157, we measured our commodity, interest rate, and foreign currency derivatives at fair value. We classified these as level 2 assets and liabilities for purposes of SFAS No. 157 as they are based upon models utilizing market observable inputs and credit risk.

At November 30, 2008, our financial assets and liabilities measured at fair value on a recurring basis were as follows:

 

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(in thousands)    Quoted Prices
in Active
Markets
(Level 1)
   Significant
Other Observable
Inputs (Level 2)
   Significant
Unobservable
Inputs
(Level 3)
   Totals

Assets

           

Foreign currency derivative contracts

   $ -    $ 704    $ -    $ 704

Commodity derivative contracts

     -      164      -      164
                           

Total assets

   $ -    $ 868    $ -    $ 868
                           

Liabilities

           

Foreign currency derivative contracts

   $ -    $ 364    $ -    $ 364

Interest rate derivative contracts

     -      8,892      -      8,892

Commodity derivative contracts

     -      7      -      7
                           

Total liabilities

   $ -    $ 9,263    $ -    $ 9,263
                           

NOTE L – Inventory

During the three months ended November 30, 2008, we recorded an inventory write-down adjustment totaling $98,021,000. Of this amount, $94,853,000 related to the consolidated operations of the Steel Processing and Metal Framing segments and was recorded in cost of goods sold, while $3,168,000 related to our portion of the loss recorded by our Mexican steel processing joint venture, and was recorded in equity in net income of unconsolidated affiliates. These adjustments were necessitated by the speed and severity of the recent decline in demand and steel pricing.

NOTE M – Goodwill Impairment

Due to industry changes, weakness in the construction market, and the depressed results in the Metal Framing segment over the last year, we have tested this business segment for impairment on a quarterly basis. Given the significant decline in the economy during the second quarter and its impact on the construction market, we revised the forecasted cash flows and discount rate assumptions used in our previous valuations of this business segment. The forecasted cash flows were revised downward due to the significant decline in, and the future uncertainty of, the economy. The discount rate, based on our current cost of debt and equity capital, was changed due to the increased risk in our forecast. After reviewing the revised valuation and the fair value estimates of the remaining assets, it was determined that the value of the business no longer supported its $96,943,000 goodwill balance. As a result, the full amount was written off in the second quarter ended November 30, 2008. If any adjustment to this estimated write-off is required due to the final determination of the fair values of the remaining assets, it will be recorded in the third quarter of fiscal 2009.

 

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Item 2. - Management’s Discussion and Analysis of Financial Condition and Results of Operations

Selected statements contained in this “Item 2. – Management’s Discussion and Analysis of Financial Condition and Results of Operations” constitute “forward-looking statements” as that term is used in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based, in whole or in part, on management’s beliefs, estimates, assumptions and currently available information. For a more detailed discussion of what constitutes a forward-looking statement and of some of the factors that could cause actual results to differ materially from such forward-looking statements, please refer to the “Safe Harbor Statement” in the beginning of this Quarterly Report on Form 10-Q and “Part I – Item 1A. – Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended May 31, 2008.

Introduction

The following discussion and analysis of market and industry trends, business strategy, and the results of operations and financial position of Worthington Industries, Inc., together with its subsidiaries (collectively, “we,” “our,” “Worthington,” or our “Company”), should be read in conjunction with our consolidated financial statements included in “Item 1. – Financial Statements.” Our Annual Report on Form 10-K for the fiscal year ended May 31, 2008 (“fiscal 2008”) includes additional information about our Company, our operations and our financial position and should be read in conjunction with this Quarterly Report on Form 10-Q.

We are primarily a diversified metal processing company focused on value-added steel processing and manufactured metal products. As of November 30, 2008, excluding our joint ventures, we operated 46 manufacturing facilities worldwide, principally in three reportable business segments: Steel Processing, Metal Framing and Pressure Cylinders. Other business segments, which are immaterial for purposes of separate disclosure, include Automotive Body Panels, Construction Services and Steel Packaging. We also held equity positions in 8 joint ventures, which operated 22 manufacturing facilities worldwide.

Overview

While there are many factors which generally affect our results, the current quarter was most affected by the financial crisis and the recession. Demand throughout most sectors of the economy decreased significantly in the second quarter, and construction and automotive, our two largest markets, were hit particularly hard. As a result of the large drop in demand, market steel prices, which reached record levels in the first quarter, experienced a severe and rapid decline in the second. This change in the market compressed margins in the second quarter, as high priced inventory was sold into declining price markets and resulted in two large one-time adjustments to our financial results: (1) a $98.0 million write-down of our steel inventories to the lower of cost or market; and (2) a $96.9 million write-off of the goodwill associated with our Metal Framing segment.

Market & Industry Overview

 

For the three months ended November 30, 2008, our sales breakdown by end user market is illustrated by the chart below.

 

         LOGO

  

Substantially all of the sales of our Metal Framing and Construction Services segments, as well as approximately 25% of the sales of our Steel Processing segment, are to the construction market, both residential and non-residential. We estimate that approximately 10% of our consolidated sales, or one-fourth of our construction market sales, are to the residential market. While the market price of steel significantly impacts this business, there are other key indicators that are meaningful in analyzing construction market demand including U.S. gross domestic product (“GDP”), the Dodge Index of construction contracts, and trends in the relative price of framing lumber and steel. Construction is also the predominant end market for our joint venture WAVE. The sales of WAVE are not consolidated in our results; however, adding our ownership percentage of WAVE’s construction market sales to our reported sales would not materially change the breakdown in the chart.

 

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The automotive industry is the largest consumer of flat-rolled steel and thus the largest end market for our Steel Processing segment. Approximately half of the sales of our Steel Processing segment, and substantially all of the sales of our Automotive Body Panels segment, are to the automotive market. North American vehicle production, primarily by Chrysler, Ford and General Motors (the “Big Three automakers”), has a considerable impact on the customers within these two segments. These segments are also impacted by the market price of steel and, to a lesser extent, the market price of commodities used in their operations, such as zinc, natural gas and diesel fuel. The majority of the sales from two of our unconsolidated joint ventures also go to the automotive end market. These sales are not consolidated in our results; however, adding our ownership percentage of joint venture automotive market sales to our reported sales would not materially change the sales breakdown in the previous chart.

The sales of our Pressure Cylinders and Steel Packaging segments, and approximately 30% of the sales of our Steel Processing segment, are to other markets such as agricultural, appliance, leisure and recreation, distribution and transportation, HVAC, lawn and garden, and consumer specialty products. Given the many different product lines that make up these sales and the wide variety of end markets, it is very difficult to detail the key market indicators that drive this portion of our business. However, we believe that the trend in U.S. GDP growth is a good economic indicator for analyzing these segments.

We use the following information to monitor our cost and major end markets:

 

     Three Months Ended Nov. 30,     Six Months Ended Nov. 30,  
     2008     2007     Inc /
(Dec)
    2008     2007     Inc /
(Dec)
 

U.S. GDP (% growth year-over-year)

     0.8 %     2.5 %     -1.7 %     1.0 %     2.4 %     -1.4 %

Hot-Rolled Steel ($ per ton) 1

   $ 873     $ 523     $ 350     $ 970     $ 523     $ 447  

Big Three Auto Build (000’s vehicles) 2

     1,829       2,418       (589 )     3,580       4,703       (1,123 )

No. America Auto Build (000’s vehicles) 2

     3,161       3,982       (821 )     6,277       7,736       (1,459 )

Dodge Index

     105       117       (12 )     112       126       (14 )

Framing Lumber ($ per 1,000 board ft) 3

   $ 243     $ 267       ($24 )   $ 258     $ 283       ($25 )

Zinc ($ per pound) 4

   $ 0.63     $ 1.27       ($0.64 )   $ 0.73     $ 1.42       ($0.69 )

Natural Gas ($ per mcf) 5

   $ 7.45     $ 6.37     $ 1.08     $ 9.43     $ 6.63     $ 2.80  

Retail Diesel Prices, All Types ($ per gallon) 6

   $ 3.53     $ 3.14     $ 0.39     $ 4.05     $ 2.99     $ 1.06  

 

 

1 CRU Index; period average     2 CSM Autobase     3 Random Lengths; period average     4 LME Zinc; period average

5 NYMEX Henry Hub Natural Gas; period average     6 Energy Information Administration; period average

U.S. GDP growth rate trends are generally indicative of the strength in demand and, in many cases, pricing for our products. Historically, we have seen that decreasing U.S. GDP growth rates year-over-year can have a negative effect on our results, as a weaker economy generally hurts demand and pricing for our products. Conversely, the opposite is also generally true. Changes in U.S. GDP growth rates can also signal changes in conversion costs related to production and selling, general and administrative (“SG&A”) expenses.

In recent quarters, the market price of hot-rolled steel has been the most significant factor impacting selling prices and has materially impacted earnings. In a rising price environment, our results are generally favorably impacted as lower-priced material, purchased in previous periods, flows through cost of goods sold, while our selling prices increase at a faster pace to cover current replacement costs. On the other hand, when steel prices fall, we typically have higher-priced material flowing through cost of goods sold while selling prices compress to what the market will bear, negatively impacting our results. While in the second quarter of fiscal 2009, average market prices for steel exceeded those of the prior year quarter, they declined rapidly and significantly from the first quarter of fiscal 2009. The dramatic decrease in price, coupled with deteriorating demand, required us to make a lower-of-cost-or-market adjustment of $98.0 million to inventory.

No single customer contributed more than 4% of our consolidated net sales for the quarter. While our automotive business is largely driven by the production schedules of the Big Three automakers, our customer base is much broader and includes many of their suppliers as well. Production has declined for nearly all domestic automakers in recent quarters and is currently severely depressed due to the uncertain financial markets, declining demand and recessionary economic climate. Because of lower production and higher inventories of unsold cars, automakers and their suppliers have extended seasonal shutdowns for many lines from a typical two week period to

 

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several weeks. We continue to pursue customer diversification beyond the Big Three automakers and their suppliers, and, in recent quarters, we have increased our business in stronger markets such as energy and agriculture.

The Dodge Index represents the value of total construction contracts, including residential and non-residential building construction. This overall index serves as a broad indicator of the construction markets in which we participate, as it tracks actual construction starts. The relative price of framing lumber, an alternative construction material with which we compete, can also affect our Metal Framing segment, as certain applications may permit the use of this alternative building material.

The market trends of certain other commodities such as zinc, natural gas and diesel fuel can be important to us as they represent a significant portion of our cost of goods sold, both directly through our plant operations and indirectly through transportation and freight expense. Although these costs decreased in the second quarter, the impact was dwarfed by the negative impacts of lower demand and the dramatic decline in steel prices.

Transformation Plan

Cost reduction efforts, announced in the first quarter of fiscal 2008, grew into a broader program called the Transformation Plan in the fourth quarter of fiscal 2008. The Transformation Plan includes a focus on cost reduction, margin expansion and organizational capability improvements, as well as an effort to develop excellence in three core competencies: sales, operations and supply chain management. The Transformation Plan is comprehensive in scope and includes aggressive diagnostic and implementation phases in our Steel Processing and Metal Framing business segments. The goal of the Transformation Plan is to increase our Company’s sustainable earnings potential over the next three years.

The initial cost reduction effort identified opportunities for $39.0 million in annual savings in overhead expense reductions, early retirements, and plant closures, exclusive of the expenses related to achieving these savings. To date, $26.1 million of the $39.0 million in annual savings have been implemented, of which $7.6 million was realized in the first half of fiscal 2009. Restructuring charges associated with the Transformation Plan totaled $20.7 million in the first half of fiscal 2009. Additional charges are expected during the life of the Transformation Plan including charges for professional fees, facility closures and employee relocation.

State of our Business & Outlook

Our results reflect the rapid decline in demand and steel pricing associated with the financial crisis and its impact on end markets. Steel pricing, which had increased significantly since January 2008, reached its peak in the summer, as mills raised prices and imposed surcharges due to the tight supply and high input costs. At the start of our second quarter, as the financial crisis took hold, demand and pricing began to soften, and then collapsed as the quarter progressed. This resulted in the challenge of selling higher priced inventory into a rapidly declining price market, while demand was shrinking significantly. As a result of the decline in the market value of a significant portion of our inventory, we recorded an inventory write-down of $98.0 million during the second quarter. In addition, Metal Framing’s decreasing results, driven by the declining economy and construction market deterioration, caused a reconsideration of key assumptions used in previous valuations to support its goodwill balance. After reviewing these assumptions, it was determined that the value of the business no longer supported the goodwill balance, and we recorded a goodwill impairment charge of $96.9 million.

We have continued to focus on reducing costs, maximizing asset utilization and driving improvements in our operations, for which we have seen positive results. However, given the current market and economic conditions, particularly those related to our Steel Processing and Metal Framing segments, we face difficulties in the next quarter in addition to normal seasonal slowness. In response to the challenging environment, we have taken, or announced, the following actions this fiscal year:

 

   

Workforce reductions of nearly 600 in our Steel Processing and Metal Framing segments through a combination of plant closures and layoffs.

 

   

The closure of three facilities, one Steel Processing (Louisville, Kentucky) and two Metal Framing (Renton, Washington, and Lunenburg, Massachusetts). In addition, two Metal Framing facilities will

 

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suspend operations indefinitely (Miami, Florida and Phoenix, Arizona). See “Note [H] – Restructuring” for more information on headcount reductions and facility closures.

 

   

The sale of our interests in two joint ventures: our 49% equity interest in Canessa Worthington Slovokia s.r.o.; and our 60% equity interest in Aegis Metal Framing, LLC. See “Note [G] – Investments in Unconsolidated Affiliates” for more information on these actions.

 

   

Expansion and modification to our WSP joint venture with U.S. Steel, consolidating steel processing operations in eastern Michigan. U.S. Steel contributed its Procoil operation, and we contributed our Taylor operation plus $2.5 million, increasing our ownership from 50% to 51%.

We will continue to pursue opportunities for enhancing margins, developing new customers, improving our supply chain and, where necessary, restructuring our business to match demand.

Results of Operations

Second Quarter – Fiscal 2009 Compared to Fiscal 2008

Consolidated Operations

The following table presents consolidated operating results:

 

     Three Months Ended November 30,  
Dollars in millions    2008     % of
Net sales
   2007     % of
Net sales
   Increase/
(Decrease)
 

Net sales

   $ 745.4     100.0%    $ 713.7     100.0%    $ 31.7  

Cost of goods sold

     799.8     107.3%      643.7     90.2%      156.1  
                              

Gross margin

     (54.4 )   -7.3%      70.0     9.8%      (124.4 )

Selling, general and administrative expense

     48.3     6.5%      53.9     7.6%      (5.6 )

Goodwill impairment & restructuring charges

     108.9     14.6%      4.6     0.6%      104.3  
                              

Operating income (loss)

     (211.6 )   -28.4%      11.5     1.6%      (223.1 )

Miscellaneous expense

     (1.3 )   -0.2%      (2.4 )   -0.3%      (1.1 )

Interest expense

     (6.6 )   -0.9%      (5.4 )   -0.8%      1.2  

Equity in net income of unconsolidated affiliates

     11.0     1.5%      14.9     2.1%      (3.9 )

Income tax (expense) benefit

     43.8     5.9%      (3.9 )   -0.5%      (47.7 )
                              

Net earnings (loss)

   $ (164.7 )   -22.1%    $ 14.7     2.1%    $ (179.4 )
                              

Net earnings for the second quarter of fiscal 2009 decreased $179.4 million from the prior year, resulting in a loss of $164.7 million. An abrupt and dramatic decline in demand, particularly in our two largest customer end markets, construction and automotive, adversely impacted sales and led to significant and rapid decreases in market steel prices during the quarter. As a result, we wrote-down our inventory by $98.0 million and wrote-off $96.9 in goodwill.

 

   

Net sales increased $31.7 million from the prior year to $745.4 million. Higher average selling prices increased sales $154.5 million year-over-year. The higher prices were a direct result of increases in the average market price of hot-rolled steel. Volumes decreased from last year, which reduced net sales by $122.8 million, most notably in our Metal Framing and Steel Processing segments where demand declined dramatically in the construction and automotive sectors.

 

   

Gross margin decreased $124.4 million from the prior year, mostly as a result of the $94.8 million inventory write-down in our Steel Processing and Metal Framing segments. The inventory write-down was made due to the rapid decline in average hot-rolled steel pricing in the second quarter and weakened demand. Gross margin was also negatively impacted by reduced volume ($12.1 million), decreased spread between average selling prices and material cost ($8.9 million), and higher conversion and distribution costs, which increased $8.6 million.

 

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SG&A expense decreased $5.6 million from the prior year, primarily due to reduced compensation expense, as profit sharing was down significantly due to the lower earnings. Offsetting the decrease was an increase of $2.9 million in bad debt reserves for specific troubled accounts. As a percent of net sales, SG&A expense decreased to 6.5% from 7.6% in last year’s second quarter.

 

   

Goodwill impairment and restructuring charges totaled $108.9 million, and consisted of the $96.9 million goodwill impairment charge in our Metal Framing segment and $12.0 million of restructuring charges related to the Transformation Plan, which includes previously announced layoffs and facility closures.

 

   

Interest expense increased $1.2 million over the prior year as average short-term borrowings rose to support higher working capital needs associated with the higher steel prices.

 

   

Equity in net income of unconsolidated affiliates of $11.0 million declined $3.9 million from $14.9 million in the prior year. Equity income decreased primarily as a result of an inventory write-down at Serviacero Planos, S.A. de C.V. (“Serviacero Worthington”), our Mexican steel processing joint venture. Our share of that write-down was $3.2 million. WAVE continued to contribute the majority of the equity earnings, as its earnings declined only 8% from last year’s second quarter. See “Note [G] – Investments in Unconsolidated Affiliates” for more financial information on our unconsolidated affiliates.

 

   

Due to the quarterly loss, an income tax benefit of $43.8 million was recorded, representing 21.0% of the pre-tax loss. This compares to the $3.9 million tax expense, or 20.8% of pre-tax income, recorded in the prior year quarter.

Segment Operations

Steel Processing

The following table presents a summary of operating results for our Steel Processing segment for the periods indicated:

 

     Three Months Ended November 30,  
Dollars in millions    2008     % of
Net sales
   2007     % of
Net sales
   Increase/
(Decrease)
 

Net sales

   $     351.6     100.0%    $     344.2     100.0%    $     7.4  

Cost of goods sold

     404.0     114.9%      312.0     90.6%      92.0  
                              

Gross margin

     (52.4 )   -14.9%      32.2     9.4%      (84.6 )

Selling, general and administrative expense

     19.0     5.4%      22.0     6.4%      (3.0 )

Restructuring charges

     0.5     0.1%      (0.1 )   0.0%      0.6  
                              

Operating income (loss)

   $ (71.9 )   -20.4%    $ 10.3     3.0%    $ (82.2 )
                              

Material cost

   $ 349.8        $ 262.1        $ 87.7  

Tons shipped (in thousands)

     545          840          (295 )

Net sales and operating income (loss) highlights were as follows:

 

   

Net sales increased $7.4 million from the prior year to $351.6 million. The increase in net sales was due to higher average pricing (up 29%) and a product mix more heavily weighted to direct rather than tolling business (up 7%). This was almost entirely offset by reduced volume (down 35%). Economic conditions have weakened demand in all customer groups, especially automotive and construction.

 

   

Operating income fell $82.2 million to an operating loss of $71.9 compared to operating income of $10.3 million last year, primarily as a result of a $56.9 million inventory write-down, along with increased conversion costs and reduced volumes due to lower demand. The inventory write-down was necessitated by the significant decline in the market pricing of steel and deteriorating demand.

 

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Metal Framing

The following table presents a summary of operating results for our Metal Framing segment for the periods indicated:

 

     Three Months Ended November 30,  
Dollars in millions    2008     % of
Net sales
   2007     % of
Net sales
   Increase/
(Decrease)
 

Net sales

   $     180.4     100.0%    $     182.4     100.0%    $ (2.0 )

Cost of goods sold

     220.7     122.3%      180.1     98.7%      40.6  
                              

Gross margin

     (40.3 )   -22.3%      2.3     1.3%      (42.6 )

Selling, general and administrative expense

     12.4     6.9%      14.8     8.1%      (2.4 )

Goodwill impairment & restructuring charges

     101.3     56.2%      3.6     2.0%      97.7  
                              

Operating loss

   $ (154.0 )   -85.4%    $ (16.1 )   -8.8%    $ (137.9 )
                              

Material cost

   $ 185.1        $ 138.2        $ 46.9  

Tons shipped (in thousands)

     119          163          (44 )

Net sales and operating loss highlights were as follows:

 

   

Net sales decreased $2.0 million from the prior year to $180.4 million, as higher average pricing, up 35%, was nearly offset by a 27% decline in volume.

 

   

Operating loss increased $137.9 million from $16.1 million last year to $154.0 million. The decline was caused by a goodwill impairment charge of $96.9 million, an inventory write-down of $37.9 million and restructuring charges of $4.4 million. As previously announced, in response to the decline in demand, four facilities are being closed or idled, and headcount is being reduced by nearly 300.

Pressure Cylinders

The following table presents a summary of operating results for our Pressure Cylinders segment for the periods indicated:

 

     Three Months Ended November 30,  
Dollars in millions    2008    % of
Net sales
   2007    % of
Net sales
   Increase/
(Decrease)
 

Net sales

   $     142.4    100.0%    $     133.2    100.0%    $ 9.2  

Cost of goods sold

     112.0    78.7%      103.7    77.9%      8.3  
                            

Gross margin

     30.4    21.3%      29.5    22.1%      0.9  

Selling, general and administrative expense

     10.2    7.2%      12.1    9.1%      (1.9 )
                            

Operating income

   $ 20.2    14.2%    $ 17.4    13.1%    $ 2.8  
                            

Material cost

   $ 67.8       $ 60.8       $ 7.0  

Units shipped (in thousands)

     10,373         10,677         (304 )

Net sales and operating income highlights were as follows:

 

   

Net sales of $142.4 million increased $9.2 million. Higher average selling prices offset weaker foreign currencies relative to the U.S. dollar and fewer units shipped.

 

   

Operating income increased $2.8 million from last year to $20.2 million. Gross margin declined to 21.3% of sales from 22.1% due to increased material costs. SG&A expense declined due to lower corporate allocated costs, resulting in an improvement in operating income to 14.2% of sales from 13.1%.

 

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Other

The “Other” category includes our Automotive Body Panels, Construction Services and Steel Packaging segments, which are immaterial for purposes of separate disclosure, along with income and expense items not allocated to the business segments. The following table presents a summary of operating results for the periods indicated:

 

     Three Months ended November 30,  
Dollars in millions    2008     % of
Net sales
   2007     % of
Net sales
   Increase/
(Decrease)
 

Net sales

   $       71.0     100.0%    $       53.8     100.0%    $     17.2  

Cost of goods sold

     63.1     88.9%      47.9     89.0%      15.2  
                              

Gross margin

     7.9     11.1%      5.9     11.0%      2.0  

Selling, general and administrative expense

     6.8     9.6%      5.0     9.3%      1.8  

Restructuring charges

     7.1     10.0%      1.1     2.0%      6.0  
                              

Operating loss

   $ (6.0 )   -8.5%    $ (0.2 )   -0.4%    $ (5.8 )
                              

Net sales and operating loss highlights were as follows:

 

   

Net sales rose $17.2 million to $71.0 million for the second quarter. Most of the increase was attributable to improved volumes in our Construction Services segment, while our Automotive Body Panels and Steel Packaging segments recognized smaller volume increases.

 

   

The operating loss widened by $5.8 million compared to last year, due to $7.1 million in restructuring charges, compared to $1.1 million in the prior year quarter. These charges include certain professional fees related to the Transformation Plan as well as early retirement and severance costs largely for corporate employees.

Year to Date - Fiscal 2009 Compared to Fiscal 2008

Consolidated Operations

The following table presents consolidated operating results:

 

     Six Months ended November 30,  
Dollars in millions    2008     % of
Net sales
   2007     % of
Net sales
   Increase/
(Decrease)
 

Net sales

   $ 1,658.6     100.0%    $ 1,472.6     100.0%    $     186.0  

Cost of goods sold

     1,561.1     94.1%      1,323.8     89.9%      237.3  
                              

Gross margin

     97.5     5.9%      148.8     10.1%      (51.3 )

Selling, general and administrative expense

     111.8     6.7%      108.3     7.4%      3.5  

Goodwill impairment & restructuring charges

     117.6     7.1%      9.0     0.6%      108.6  
                              

Operating income (loss)

     (131.9 )   -8.0%      31.5     2.1%      (163.4 )

Miscellaneous expense

     (1.7 )   -0.1%      (3.3 )   -0.2%      (1.6 )

Interest expense

     (12.1 )   -0.7%      (10.0 )   -0.7%      2.1  

Equity in net income of unconsolidated affiliates

     36.0     2.2%      29.9     2.0%      6.1  

Income tax (expense) benefit

     13.7     0.8%      (13.1 )   -0.9%      (26.8 )
                              

Net earnings (loss)

   $ (96.0 )   -5.8%    $ 35.0     2.4%    $ (131.0 )
                              

Our year-to-date net loss of $96.0 million for fiscal 2009 represented a $131.0 million decrease in net earnings from the prior year as a result of the inventory write-down and goodwill impairment discussed earlier.

 

   

Net sales increased by $186.0 million from the prior year to $1,658.6 million. Higher average selling prices in nearly all business segments increased sales by $345.1 million, as the average market price of hot-rolled steel reached record highs in the first quarter of fiscal 2009, before experiencing a rapid, significant

 

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decline in the second quarter. Higher average selling prices were partially offset by decreased volumes of $159.1 million in our Steel Processing and Metal Framing segments.

 

   

Gross margin decreased $51.3 million from the prior year largely due to the $94.8 million inventory write-down, along with increased conversion costs ($26.6 million) and decreased volumes ($9.7 million). These declines were offset by increased spread between average selling prices and material costs of $79.9 million, realized in the first quarter. The inventory write-down, taken by our Steel Processing and Metal Framing segments, was necessitated by the rapid decline in average hot-rolled steel pricing in the second quarter of fiscal 2009 and weakened demand.

 

   

SG&A expense increased $3.5 million from the prior year, but declined as a percent of net sales, from 7.4% to 6.7%. We increased our reserve for bad debts by $2.9 million, primarily in our Steel Processing and Automotive Body Panels segments, for specific troubled accounts.

 

   

Goodwill impairment of $96.9 million and restructuring charges of $20.7 million for the first six months of fiscal 2009 compared to $9.0 million in restructuring charges last year. The restructuring charges related to the Transformation Plan, and include the previously announced layoffs and facility closures.

 

   

Miscellaneous expense decreased primarily due to the lower results at our consolidated joint venture, Spartan Steel Coating, LLC. Miscellaneous expense is where we deduct our minority partner’s interest in this consolidated joint venture. In addition, foreign currency gains from our European operations were lower than in the prior year period.

 

   

Interest expense increased $2.1 million compared to the prior year-to-date period as average short-term borrowings rose to support higher working capital needs in both the first and second quarters of this year.

 

   

Equity in net income of unconsolidated affiliates increased $6.1 million from last year’s results due to record results in the first quarter of fiscal 2009. Earnings were driven by strong performance at WAVE and the contribution of Serviacero Worthington, which began in the second quarter of last year, partially offset by our portion ($3.2 million) of Serviacero Worthington’s inventory write-down.

 

   

Due to the pre-tax loss for the six-month period, an income tax benefit of $13.7 million, or 12.5% of the pre-tax loss, was recorded in the current year. This compares to the $13.1 million tax expense, or 27.4% of the pre-tax income, recorded in the comparable prior year period.

 

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Segment Operations

Steel Processing

The following table presents a summary of operating results for our Steel Processing segment for the periods indicated:

 

     Six Months Ended November 30,  
Dollars in millions    2008     % of
Net sales
   2007    % of
Net sales
   Increase/
(Decrease)
 

Net sales

   $     811.5     100.0%    $     700.1    100.0%    $ 111.4  

Cost of goods sold

     792.7     97.7%      634.1    90.6%      158.6  
                             

Gross margin

     18.8     2.3%      66.0    9.4%      (47.2 )

Selling, general and administrative expense

     45.7     5.6%      44.7    6.4%      1.0  

Restructuring charges

     0.5     0.1%      1.1    0.2%      (0.6 )
                             

Operating income (loss)

   $ (27.4 )   -3.4%    $ 20.2    2.9%    $ (47.6 )
                             

Material cost

   $ 680.7        $ 532.3       $ 148.4  

Tons shipped (in thousands)

     1,297          1,650         (353 )

Net sales and operating income (loss) highlights are as follows:

 

   

Net sales increased by $111.4 million from the prior year to $811.5 million. Higher average selling prices contributed $215.3 million to the overall increase while lower volumes reduced sales by $103.9 million. Average selling prices in fiscal 2009 reflected, in part, the record high market prices of hot-rolled steel reached during the period, before the rapid decline in the second quarter.

 

   

Operating income decreased $47.6 million compared to the prior year, resulting in an operating loss of $27.4 million. A write-down of $56.9 million was made to inventory in the second quarter, negatively impacting cost of goods sold. The write-down was necessitated by the significant decline in the market pricing of steel and deteriorating demand.

Metal Framing

The following table presents a summary of operating results for our Metal Framing segment for the periods indicated:

 

     Six Months Ended November 30,  
Dollars in millions    2008     % of
Net sales
   2007     % of
Net sales
   Increase/
(Decrease)
 

Net sales

   $       413.3     100.0%    $       380.5     100.0%    $         32.8  

Cost of goods sold

     414.1     100.2%      369.9     97.2%      44.2  
                              

Gross margin

     (0.8 )   -0.2%      10.6     2.8%      (11.4 )

Selling, general and administrative expense

     29.6     7.2%      30.2     7.9%      (0.6 )

Goodwill impairment & restructuring charges

     102.6     24.8%      4.4     1.2%      98.2  
                              

Operating loss

   $ (133.0 )   -32.2%    $ (24.0 )   -6.3%    $ (109.0 )
                              

Material cost

   $ 337.9        $ 283.7        $ 54.2  

Tons shipped (in thousands)

     271          338          (67 )

Net sales and operating loss highlights are as follows:

 

   

Net sales for the first six months rose $32.8 million from the prior year to $413.3 million. Increased average selling prices of $106.0 million more than offset the impact of lower volumes, which were down $73.2 million versus the same period a year ago.

 

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Operating loss widened by $109.0 million in the first six months of the current fiscal year compared to the prior year due to a $96.9 million goodwill impairment charge, an inventory write-down of $37.9 million, and restructuring charges of $5.7 million. Improved profitability in the first quarter helped to offset these charges.

Pressure Cylinders

The following table presents a summary of operating results for our Pressure Cylinders segment for the periods indicated:

 

     Six Months Ended November 30,  
Dollars in millions    2008    % of
Net sales
   2007    % of
Net sales
   Increase/
(Decrease)
 

Net sales

   $     290.8    100.0%    $     269.8    100.0%    $ 21.0  

Cost of goods sold

     229.2    78.8%      209.6    77.7%      19.6  
                            

Gross margin

     61.6    21.2%      60.2    22.3%      1.4  

Selling, general and administrative expense

     22.8    7.8%      24.8    9.2%      (2.0 )
                            

Operating income

   $ 38.8    13.3%    $ 35.4    13.1%    $ 3.4  
                            

Material cost

   $ 137.8       $ 125.1       $ 12.7  

Units shipped (in thousands)

     22,520         22,215         305  

Net sales and operating income highlights are as follows:

 

   

Net sales grew $21.0 million from the prior year to a record $290.8 million primarily due to selling price increases driven by higher raw material costs.

 

   

Operating income increased $3.4 million from the prior year to $38.8 million due to favorable spread between average selling prices and material costs and lower SG&A expenses. Gross margin as a percent of net sales declined due to increased raw material steel costs.

Other

The “Other” category includes our Automotive Body Panels, Construction Services and Steel Packaging segments, which are immaterial for purposes of separate disclosure, and also includes income and expense items not allocated to the business segments.

The following table presents a summary of operating results for the periods indicated:

 

     Six Months Ended November 30,  
Dollars in millions    2008     % of
Net sales
   2007     % of
Net sales
   Increase/
(Decrease)
 

Net sales

   $     143.0     100.0%    $     122.2     100.0%    $       20.8  

Cost of goods sold

     125.1     87.5%      110.2     90.2%      14.9  
                              

Gross margin

     17.9     12.5%      12.0     9.8%      5.9  

Selling, general and administrative expense

     13.5     9.4%      8.6     7.0%      4.9  

Restructuring charges

     14.6     10.2%      3.5     2.9%      11.1  
                              

Operating loss

   $ (10.2 )   -7.1%    $ (0.1 )   -0.1%    $ (10.1 )
                              

Net sales and operating loss highlights are as follows:

 

   

Net sales increased $20.8 million over the prior year as a result of increased sales in all segments, but primarily in Construction Services, which grew with the acquisition of Sharon Stairs in June 2008. Sharon Stairs contributed $9.7 million in net sales for the first half of fiscal 2009.

 

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The operating loss widened to $10.2 million for the first six months compared to near break-even results in the comparable period of fiscal 2008. Restructuring charges related to the Transformation Plan negatively impacted earnings by $14.6 million compared to $3.5 million in the prior year, offset by increased profitability in our Construction Services segment. Although our Construction Services segment has been negatively impacted by the downturn in overall construction activity, it is growing as a result of its military end market.

Liquidity and Capital Resources

Despite the weak results and the weak economic environment, we were able to generate cash during the second quarter of fiscal 2009. We reduced short-term borrowings by $73.6 million, funded $15.5 million of capital expenditures, paid $13.4 million in dividends, and reduced the amount outstanding under our revolving trade accounts receivable securitization facility from $100 million to $60 million. The following table is a summary of our consolidated cash flows for the year-to-date period:

 

     Six Months Ended
November 30,
 
(in millions)    2008     2007  

Net cash provided by operating activities

   $ 79.0     $ 96.7  

Net cash used by investing activities

     (68.3 )     (50.0 )

Net cash used by financing activities

     (58.0 )     (45.4 )
                

Increase (decrease) in cash and cash equivalents

     (47.3 )     1.3  

Cash and cash equivalents at beginning of period

     73.8       38.3  
                

Cash and cash equivalents at end of period

   $ 26.5     $ 39.6  
                

We believe we have access to adequate resources to meet our needs for normal operating costs, mandatory capital expenditures, mandatory debt redemptions, dividend payments and working capital for our existing businesses. These resources include cash and cash equivalents, cash provided by operating activities, and unused lines of credit. Given the current uncertainty in the financial markets, our access to the capital markets may be limited.

Operating Activities

Our business is cyclical and cash flows from operating activities may fluctuate during the year and from year-to-year due to economic conditions. We rely on cash and short-term financing to meet cyclical increases in working capital needs. Cash requirements generally rise during periods of increased economic activity or increasing raw material prices due to higher levels of inventory and accounts receivable. During economic slowdowns, or periods of decreasing raw material costs, cash requirements generally decrease as a result of the reduction of inventories and accounts receivable. With lower cash requirements, we are typically able to reduce, or eliminate, short-term debt.

During the first six months of fiscal 2009, net cash provided by operating activities decreased $17.8 million from the same period of fiscal 2008. This was due to lower net income. However, there was significant cash generated by a large decrease in inventories and receivables, partially offset by a decrease in accounts payable, resulting from lower raw material costs compared to those reported in the same period last year. Consolidated net working capital was $340.5 million at November 30, 2008, compared to $440.1 million at May 31, 2008.

As noted above, while an economic slowdown adversely affects sales, it generally decreases working capital needs. As the impact or ramifications of the current economic slowdown become known, we will continue to adjust operating activities and cash needs accordingly. We have identified actions we can take to conserve cash, as necessary, and trigger points at which to take these actions. These trigger points are largely influenced by our forecasted liquidity.

 

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Investing Activities

Net cash used by investing activities increased $18.2 million for the first six months of fiscal 2009, primarily due to proceeds from the sale of short-term investments in the prior year.

Capital expenditures represent cash used for investment in property, plant and equipment and increased $3.6 million from the prior year. We anticipate that our fiscal 2009 capital spending, excluding acquisitions, will be slightly higher than depreciation for the year. The major projects underway involve expanding capacity at our Delta, Ohio, steel galvanizing plant and our Austrian high-pressure cylinder plant.

Investment activities are largely discretionary and future investment activities could be reduced significantly or eliminated as economic conditions warrant.

Financing Activities

The net cash used by financing activities increased by $12.6 million. This was primarily due to a decrease in short-term borrowings partially offset by lower common share repurchases and proceeds from issuance of common shares.

Our credit ratings at November 30, 2008, were unchanged from those reported as of May 31, 2008. On December 16, 2008, Standard and Poor’s revised its outlook on the Company to negative from stable. At the same time, they affirmed our ‘BBB’ corporate credit rating.

Long-term debt – As of November 30, 2008, we were in compliance with our long-term debt covenants and expect to remain compliant in the future. Our long-term debt agreements do not include ratings triggers or material adverse change provisions. We are examining our options to pre-fund the 6.70% Notes due December 2009, although our options may be limited by the current financing environment.

Short-term debt – We maintain a $435.0 million five-year revolving credit facility, which expires in May 2013, except for a $35.0 million commitment by one lender, which expires in September 2010. We were in compliance with our short-term debt covenants at November 30, 2008. Our short-term debt agreements do not include ratings triggers or material adverse change provisions. Borrowings under this revolver have maturities of less than one year but can be reborrowed during the term of the facility. We have the option to borrow at rates equal to an applicable margin over the LIBOR, Prime or Fed Funds rates. The applicable margin is determined by our credit rating. At November 30, 2008, borrowings under the facility bore interest at rates based on LIBOR. We had $310.0 million available to us under this facility at November 30, 2008, compared to $309.6 million available to us at May 31, 2008.

Our most restrictive debt covenants require us to maintain an interest coverage ratio (adjusted EBITDA divided by interest expense, on a trailing 12-month basis) of at least 3.25 times and total indebtedness to total capital of not more than 55%.

We also have a $100.0 million revolving trade accounts receivable securitization facility, of which $60.0 million was utilized at November 30, 2008, and $100.0 million at May 31, 2008 (see the description that follows under “Off-Balance Sheet Arrangements”). The securitization facility is backed by a committed liquidity facility that expires during January 2009. We are in the process of renewing the committed liquidity facility with PNC Bank (subject to bank credit approval and documentation) and we expect this to be completed prior to expiration of the current liquidity facility.

We also have $30.0 million of uncommitted credit lines available at the discretion of several banks. These facilities are established with major domestic banks and accrue interest at variable rates, which are primarily LIBOR-based. We had $30.0 million available to us under these lines at November 30, 2008, and May 31, 2008. Since these lines are discretionary, we do not count on them for a consistent source of liquidity.

 

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We also provided $9.1 million in letters of credit for third party beneficiaries as of November 30, 2008. The letters of credit secure potential obligations of our insurance providers. These letters can be drawn at any time at the option of the beneficiaries.

Common shares – We declared a quarterly dividend during the second quarter of fiscal 2009 of $0.17 per common share, unchanged from the first quarter of fiscal 2009. Dividends paid on our common shares totaled $26.9 million and $28.2 million in the first six months of fiscal 2009 and fiscal 2008. We currently have no material contractual or regulatory restrictions on the payment of dividends.

In the first six months of fiscal 2009, we purchased 650,000 common shares for a total of $12.4 million. These purchases were made under the authorization to repurchase up to 10,000,000 common shares announced in September 2007. A total of 8,449,500 common shares were available under this repurchase authorization as of November 30, 2008. Future purchases may occur from time to time on the open market or in private transactions, with consideration given to the market price of the common shares, the nature of other investment opportunities, cash flow from operations and general economic conditions.

Dividend Policy

Dividends are declared at the discretion of our Board of Directors. The Board reviews the dividend quarterly and establishes the dividend rate based upon our financial condition, results of operations, capital requirements, current and projected cash flows, business prospects and other relevant factors. While we have paid a dividend every quarter since becoming a public company in 1968, there is no guarantee that payments will continue in the future.

Contractual Cash Obligations and Other Commercial Commitments

Our contractual cash obligations and other commercial commitments have not changed significantly from those disclosed in “Part II - Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Cash Obligations and Other Commercial Commitments” of our 2008 Form 10-K.

Off-Balance Sheet Arrangements

We maintain a $100.0 million revolving trade accounts receivable securitization facility which expires in January 2011. Transactions under the facility have been accounted for as a sale under the provisions of SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities . Pursuant to the terms of the facility, certain of our subsidiaries sell their accounts receivable without recourse, on a revolving basis, to Worthington Receivables Corporation (“WRC”), a wholly-owned, consolidated, bankruptcy-remote subsidiary. In turn, WRC may sell without recourse, on a revolving basis, up to $100.0 million of undivided ownership interests in this pool of accounts receivable to a multi-sell, asset-backed commercial paper conduit (the “Conduit”). Purchases by the Conduit are financed with the sale of A1/P1 commercial paper. We retain an undivided interest in this pool and are subject to risk of loss based on the collectability of the receivables from this retained interest. Because the amount eligible to be sold excludes receivables more than 90 days past due, receivables offset by an allowance for doubtful accounts because of bankruptcy or other cause, receivables from foreign customers, concentrations over limits with specific customers and certain reserve amounts, we believe additional risk of loss is minimal. The book value of the retained portion of the pool of accounts receivable approximates fair value. Accounts receivable sold under this facility are excluded from accounts receivable in the consolidated financial statements. As of November 30, 2008 and May 31, 2008, $60.0 million and $100.0 million, respectively, of undivided ownership interests in this pool of accounts receivable had been sold.

Recently Issued Accounting Standards

Effective June 1, 2008, we adopted SFAS No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 was effective for our financial assets and liabilities after May 31, 2008, and will be effective for our

 

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non-financial assets and liabilities after May 31, 2009. Adopting SFAS No. 157 for our non-financial assets and liabilities is not expected to materially impact our consolidated financial statements.

In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and 132(R ) (“SFAS No. 158”), to improve financial reporting regarding defined benefit pension and other postretirement plans. We adopted the recognition provisions of SFAS No. 158 at May 31, 2007. The measurement date provision of SFAS No. 158 is effective at May 31, 2009, and is not expected to materially impact our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS No. 141(R)”) , to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. SFAS No. 141(R) applies prospectively to business combinations after May 31, 2009, and is not expected to materially impact our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests In Consolidated Financial Statements - an amendment of ARB No. 51 (“SFAS No. 160”) , to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for the noncontrolling interest (minority interest) in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 is effective June 1, 2009, and will require a change in the presentation of the minority interest in the consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133 (“SFAS No. 161”) , to improve the transparency of financial reporting by requiring enhanced disclosures about derivative and hedging activities. SFAS No. 161 is effective December 1, 2008.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. We continually evaluate our estimates, including those related to our valuation of receivables, intangible assets, accrued liabilities, income and other tax accruals, and contingencies and litigation. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. These results form the basis for making judgments about the carrying values of assets and liabilities that are not readily obtained from other sources. Critical accounting policies are defined as those that require our significant judgments and involve uncertainties that could potentially result in materially different results under different assumptions and conditions. Although actual results historically have not deviated significantly from those determined using our estimates, our financial position or results of operations could be materially different if we were to report under different conditions or to use different assumptions in the application of such policies. Our critical accounting policies have not significantly changed from those discussed in “Part II - Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” of our 2008 Form 10-K.

We review our receivables on an ongoing basis to ensure that they are properly valued and collectible. Based on this review, we have increased our allowance for uncollectible accounts by $4.0 million to $8.9 million since our prior fiscal year end. This increase is principally tied to customers in the automotive industry and, based on our current information, we believe it is sized appropriately. However, if the economic environment deteriorates further, particularly in the automotive and construction markets where our exposure is greatest, additional reserves may be required.

 

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Our inventory is valued at the lower of cost or market, with cost determined using a first-in, first-out method. As previously mentioned, the rapid decline in steel prices resulted in a situation where our inventories were recorded at values in excess of current market prices, which required a $98.0 million write-down in the value of our inventories. The calculation of this write-down required the significant use of estimates to determine the replacement cost, cost to complete, normal profit margin and ultimate selling price of the inventory.

We recognize revenue upon transfer of title and risk of loss provided evidence of an arrangement exists, pricing is fixed and determinable, and the ability to collect is probable. As of November 30, 2008, and May 31, 2008, we had deferred $9.3 million and $9.1 million, respectively, of revenue related to pricing disputes.

We review the carrying value of our long-lived assets, including intangible assets, whenever events or changes in circumstances indicate that the carrying value of an asset or a group of assets may not be recoverable. As a result of this review, we recorded a goodwill impairment charge of $96.9 million in the second quarter of fiscal 2009 related to the declining economy and markets of the Metal Framing segment.

Item 3. - Quantitative and Qualitative Disclosures About Market Risk

Market risks have not changed significantly from those disclosed in “Part II – Item 7A. – Quantitative and Qualitative Disclosures About Market Risk” of our 2008 Form 10-K.

Item 4. - Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures [as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)] that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Management, with the participation of our principal executive officer and our principal financial officer, performed an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q (the fiscal quarter ended November 30, 2008). Based on that evaluation, our principal executive officer and our principal financial officer have concluded that such disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control Over Financial Reporting

There were no changes that occurred during the period covered by this Quarterly Report on Form 10-Q (the fiscal quarter ended November 30, 2008) in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II. OTHER INFORMATION

Item 1. – Legal Proceedings

Various legal actions, which generally have arisen in the ordinary course of business, are pending against the Company. None of this pending litigation, individually or collectively, is expected to have a material adverse effect on our financial position, results of operations or cash flows.

Item 1A. – Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed in “PART I - Item 1A. – Risk Factors” of the Annual Report on Form 10-K of Worthington Industries, Inc. for the fiscal year ended May 31, 2008 (the “2008 Form 10-K”), as filed with the Securities and Exchange Commission on July 30, 2008, and available at www.sec.gov or at www.worthingtonindustries.com. The risk factors facing the Company have not changed significantly from those disclosed in our 2008 Form 10-K. These risk factors could materially affect our business, financial condition or future results. The risk factors described in our 2008 Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, also may materially affect our business, financial condition and/or future results.

Item 2. – Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about purchases made by, or on behalf of, Worthington Industries, Inc. or any “affiliated purchaser” (as defined in Rule 10b – 18(a) (3) under the Securities Exchange Act of 1934, as amended) of common shares of Worthington Industries, Inc. during each month of the fiscal quarter ended November 30, 2008:

 

Period

   Total Number
of Common
Shares
Purchased
   Average Price
Paid per
Common
Share
   Total Number of
Common Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
   Maximum Number of
Common Shares that
May Yet Be
Purchased Under the
Plans or Programs (1)

September 1-30, 2008

   -    -    -    8,449,500

October 1-31, 2008

   -    -    -    8,449,500

November 1-30, 2008

   -    -    -    8,449,500
                 

Total

   -    -    -   
                 

 

(1)

On September 26, 2007, Worthington Industries, Inc. announced that the Board of Directors had authorized the repurchase of up to 10,000,000 of Worthington Industries, Inc.’s outstanding common shares. A total of 8,449,500 common shares remained available under this repurchase authorization as of November 30, 2008. The common shares available for purchase under this authorization may be purchased from time to time, with consideration given to the market price of the common shares, the nature of other investment opportunities, cash flows from operations and general economic conditions. Repurchases may be made on the open market or through privately negotiated transactions.

Item 3. – Defaults Upon Senior Securities

Not applicable

 

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Item 4. – Submission of Matters to a Vote of Security Holders

Not applicable

Item 5. – Other Information

Not applicable

 

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Table of Contents

Item 6. – Exhibits

Exhibits

 

10.1    Form of Non-Qualified Stock Option Award Agreement under the Worthington Industries, Inc. 2006 Equity Incentive Plan for Non-Employee Directors (now known as the Worthington Industries, Inc. Amended and Restated 2006 Equity Incentive Plan for Non-Employee Directors) entered into by Worthington Industries, Inc. in order to evidence the grant of non-qualified stock options to non-employee directors of Worthington Industries, Inc. on September 24, 2008 [Incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Worthington Industries, Inc. for the quarterly period ended August 31, 2008 (SEC File No. 1-8399)]
10.2    Form of Restricted Stock Award Agreement under the Worthington Industries, Inc. 2006 Equity Incentive Plan for Non-Employee Directors (now known as the Worthington Industries, Inc. Amended and Restated 2006 Equity Incentive Plan for Non-Employee Directors) entered into by Worthington Industries, Inc. in order to evidence the grant of restricted stock to non-employee directors of Worthington Industries, Inc. on September 24, 2008 [Incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Worthington Industries, Inc. for the quarterly period ended August 31, 2008 (SEC File No. 1-8399)]
10.3    Form of Restricted Stock Award Agreement under the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan to be entered into by Worthington Industries, Inc. in order to evidence the grant of restricted stock to employees of Worthington Industries, Inc.
10.4    Worthington Industries, Inc. Annual Incentive Plan for Executives (approved by shareholders on September 24, 2008) [Incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Worthington Industries, Inc., dated and filed on September 30, 2008 (SEC File No. 1-8399)]
10.5    Worthington Industries, Inc. Amended and Restated 2005 Deferred Compensation Plan for Directors (Restatement effective December 2008)
10.6    Worthington Industries, Inc. Amended and Restated 2003 Stock Option Plan (Restatement effective November 1, 2008)
10.7    Worthington Industries, Inc. Amended and Restated 2000 Stock Option Plan for Non-Employee Directors (Restatement effective November 1, 2008)
10.8    Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan (Restatement effective November 1, 2008)
10.9    Worthington Industries, Inc. Amended and Restated 2006 Equity Incentive Plan for Non-Employee Directors (Restatement effective November 1, 2008)
10.10    Worthington Industries, Inc. Amended and Restated 2005 Non-Qualified Deferred Compensation Plan (Restatement effective December 2008)
31.1    Rule 13a - 14(a) / 15d - 14(a) Certification (Principal Executive Officer)
31.2    Rule 13a - 14(a) / 15d - 14(a) Certification (Principal Financial Officer)
32.1    Section 1350 Certification of Principal Executive Officer
32.2    Section 1350 Certification of Principal Financial Officer

 

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Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

      WORTHINGTON INDUSTRIES, INC.
Date:  January 9, 2009    

By:

 

/s/ B. Andrew Rose

     

B. Andrew Rose,

Vice President and Chief Financial Officer

(On behalf of the Registrant and as Principal

Financial Officer)

 

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Table of Contents

INDEX TO EXHIBITS

 

Exhibit

  

Description

  

Location

10.1      Form of Non-Qualified Stock Option Award Agreement under the Worthington Industries, Inc. 2006 Equity Incentive Plan for Non-Employee Directors (now known as the Worthington Industries, Inc. Amended and Restated 2006 Equity Incentive Plan for Non-Employee Directors) entered into by Worthington Industries, Inc. in order to evidence the grant of non-qualified stock options to non-employee directors of Worthington Industries, Inc. on September 24, 2008    Incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Worthington Industries, Inc. for the quarterly period ended August 31, 2008 (SEC File No. 1-8399)
10.2      Form of Restricted Stock Award Agreement under the Worthington Industries, Inc. 2006 Equity Incentive Plan for Non-Employee Directors (now known as the Worthington Industries, Inc. Amended and Restated 2006 Equity Incentive Plan for Non-Employee Directors) entered into by Worthington Industries, Inc. in order to evidence the grant of restricted stock to non-employee directors of Worthington Industries, Inc. on September 24, 2008    Incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Worthington Industries, Inc. for the quarterly period ended August 31, 2008 (SEC File No. 1-8399)
10.3      Form of Restricted Stock Award Agreement under the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan to be entered into by Worthington Industries, Inc. in order to evidence the grant of restricted stock to employees of Worthington Industries, Inc.    Filed herewith
10.4      Worthington Industries, Inc. Annual Incentive Plan for Executives (approved by shareholders on September 24, 2008)    Incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Worthington Industries, Inc., dated and filed on September 30, 2008 (SEC File No. 1-8399)
10.5      Worthington Industries, Inc. Amended and Restated 2005 Deferred Compensation Plan for Directors (Restatement effective December 2008)    Filed herewith
10.6      Worthington Industries, Inc. Amended and Restated 2003 Stock Option Plan (Restatement effective November 1, 2008)    Filed herewith
10.7      Worthington Industries, Inc. Amended and Restated 2000 Stock Option Plan for Non-Employee Directors (Restatement effective November 1, 2008)    Filed herewith
10.8      Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan (Restatement effective November 1, 2008)    Filed herewith
10.9      Worthington Industries, Inc. Amended and Restated 2006 Equity Incentive Plan for Non-Employee Directors (Restatement effective November 1, 2008)    Filed herewith
10.10    Worthington Industries, Inc. Amended and Restated 2005 Non-Qualified Deferred Compensation Plan (Restatement effective December 2008)    Filed herewith

 

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Table of Contents
31.1      Rule 13a - 14(a) / 15d - 14(a) Certification (Principal Executive Officer)    Filed herewith
31.2      Rule 13a - 14(a) / 15d - 14(a) Certification (Principal Financial Officer)    Filed herewith
32.1      Section 1350 Certification of Principal Executive Officer    Filed herewith
32.2      Section 1350 Certification of Principal Financial Officer    Filed herewith

 

32

Exhibit 10.3

WORTHINGTON INDUSTRIES, INC.

AMENDED AND RESTATED 1997 LONG-TERM INCENTIVE PLAN

RESTRICTED STOCK AWARD AGREEMENT ISSUED TO

__________________________

Worthington Industries, Inc. (“Worthington” and together with its subsidiaries, the “Company”) believes that its business interests are best served by extending you an opportunity to earn additional compensation based on the growth of the Company’s business. To this end, you have been granted restricted common shares, without par value (“Shares”), of Worthington (“Restricted Stock”), subject to the terms and conditions described in the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan (“Plan”) and this Restricted Stock Award Agreement (“Award Agreement”).

This Award Agreement describes many features of your Restricted Stock and the conditions you must meet before the restrictions on your Restricted Stock will lapse. Any capitalized terms not otherwise defined in this Award Agreement have the same meanings as in the Plan.

To ensure you fully understand the terms and conditions of your Restricted Stock, you should:

 

   

Read the Plan and this Award Agreement carefully;

 

   

Contact Dale T. Brinkman at 614-438-3001 if you have any questions about your Restricted Stock;

 

   

Sign both the Award Agreement and extra signature page; and

 

   

Return the signed extra signature page to the Award Agreement no later than                      to Dale Brinkman.

Nature of Your Restricted Stock

You have been granted Restricted Stock. If you satisfy the conditions described in the Plan and this Award Agreement, the restrictions imposed on your Restricted Stock will lapse.

Grant Date: Your Shares of Restricted Stock were granted on                      .

Number of Shares of Restricted Stock: You have been granted              Shares of Restricted Stock.

Settlement of Your Restricted Stock

Until the dates shown below or the events described below, your Shares of Restricted Stock will be held in escrow by Worthington and, except as described below, may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated. At the end of the Restriction Period (as described below), these Shares either will be distributed to you or forfeited, depending on whether or not you satisfy the conditions described in this Award Agreement and in the Plan. Any fractional Share of Restricted Stock will be settled in cash.

Normal Restriction Period: Normally, and subject to your continued service as an employee, the restrictions on your Restricted Stock will lapse and the Shares of Restricted Stock will become fully vested on                      .

 

33


How Your Restricted Stock Might Be Settled Before the Last Day of the Normal Restriction Period: Upon a Business Combination or a Change in Control, the restrictions on your Restricted Stock will lapse and the Shares of Restricted Stock will become fully vested.

How Termination Will Affect Your Restricted Stock:

Death, Disability or Retirement . If you terminate due to Death, Disability or Retirement, the Restricted Stock will become fully vested on the Termination Date.

Termination for Any Reason Other than Death, Disability or Retirement . If you terminate for any reason other than Death, Disability or Retirement, the Restricted Stock will be forfeited on the Termination Date.

Other Ways in Which Your Restricted Stock May Be Forfeited: Your Restricted Stock will be forfeited if you:

 

  [1]

Without the consent of Worthington’s executive management, become associated with, employed by, render services to, or own any interest in (other than any non-substantial interest, as determined by the Committee), any business that is in competition with the Company or with any business in which the Company has a substantial interest as determined by the Committee.

 

  [2]

Deliberately engage in any action that could harm the Company, as determined by the Compensation Committee.

Settling Your Restricted Stock

If all applicable conditions have been met, your Restricted Stock will be released from escrow and distributed to you as soon as administratively feasible after the last day of the Restriction Period.

Other Rules Affecting Your Restricted Stock

Rights During the Restriction Period: During the Restriction Period (and even though the Shares of Restricted Stock are held in escrow until they are settled), you may exercise any voting rights associated with your Restricted Stock. Any dividends or other distributions paid with respect to your Restricted Stock will be held by Worthington as escrow agent during the Restriction Period and will be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid. At the end of the Restriction Period, such dividends or other distributions will be distributed to you or forfeited as provided above with respect to the Restricted Stock as to which they were paid.

Beneficiary Designation: You may name a beneficiary or beneficiaries to receive any Restricted Stock that is settled after you die. This may be done only on the attached Beneficiary Designation Form and by following the rules described in that form. This form need not be completed now and is not required as a condition of receiving your Restricted Stock. If you die without completing a Beneficiary Designation Form or if you do not complete that form correctly, your beneficiary will be your surviving spouse or, if you do not have a surviving spouse, your estate.

Transferring Your Restricted Stock: Normally, your Restricted Stock may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated. However, as described above, you may complete a Beneficiary Designation Form to name a beneficiary or beneficiaries to receive any Restricted Stock that is settled after you die. It may also be possible for you to transfer your Restricted Stock to certain Permissible Transferees, contact Dale T. Brinkman at the address or number given above if you are interested in transferring your Restricted Stock to a Permissible Transferee.

Governing Law: This Award Agreement will be construed in accordance with and governed by the laws (other than laws governing conflicts of laws) of the State of Ohio.

 

34


Other Agreements: Your Restricted Stock will be subject to the terms of any other written agreements between you and the Company to the extent that those other agreements do not directly conflict with the terms of the Plan or this Award Agreement.

Adjustments to Your Restricted Stock: Your Restricted Stock will be adjusted, if appropriate, to reflect any change to the Company’s capital structure after the Grant Date (e.g., the number of Shares of Restricted Stock will be adjusted to reflect a Share Split).

Other Rules: Your Restricted Stock is subject to more rules described in the Plan. You should read the Plan carefully to ensure you fully understand all the terms and conditions of this Restricted Stock. In the event of a conflict between the terms of the Plan and the terms of this Award Agreement, the terms of the Plan will govern.

Your Acknowledgment of Restricted Stock Conditions

By signing below, you acknowledge and agree that:

 

   

A copy of the Plan has been made available to you; and

 

   

You understand and accept the terms and conditions placed on your Restricted Stock.

 

[Grantee’s Name]     WORTHINGTON INDUSTRIES, INC.

By:

 

[Grantee’s Name]

   

By:

   
         

Dale T. Brinkman,

Vice President-Administration

Date

 

signed:

       

Date

 

signed:

   

 

35

Exhibit 10.5

WORTHINGTON INDUSTRIES, INC.

AMENDED AND RESTATED

2005 DEFERRED COMPENSATION PLAN FOR DIRECTORS

Section 1.         Purpose

Worthington Industries, Inc. established this deferred compensation plan to provide the Directors of Worthington Industries, Inc. with the option to defer the payment of their Directors Fees. The Plan is effective as to Directors Fees which are paid with respect to fees earned on or after January 1, 2005. The Plan is being amended and restated to comply with Code Section 409A effective as of December 2008.

Section 2.         Definitions

2.1 “Account” shall mean the bookkeeping account on which the amount of Directors Fees that is deferred by a Participant shall be recorded and credited with investment gains or losses in accordance with the Plan.

2.2 “Beneficiary” shall mean the person designated by a Participant in accordance with the Plan to receive payment of any remaining balance in his Account in the event of the Participant’s death.

2.3 “Board of Directors” shall mean the Board of Directors of the Company.

2.4 “Code” means the Internal Revenue Code of 1986, as amended.

2.5 “Committee” shall mean the committee appointed by the Board of Directors to administer the Plan. If no committee is specifically named by the Board of Directors to administer the Plan, the “Committee” shall mean the Compensation Committee of the Board of Directors.

2.6 “Company” shall mean Worthington Industries, Inc., an Ohio corporation, its corporate successors and the surviving corporation resulting from any merger or acquisition of Worthington Industries, Inc. with or by any corporation or corporations.

2.7 “Date of Deferral” shall mean the date to which payment of the Participant’s Directors Fees is deferred in accordance with this Plan. Subject to the terms of the following sentence, the Date of Deferral shall be the earliest of (i) the date selected by the Participant in the Election Form, which date must be at least one year after the end of the Plan Year with respect to which the payment would otherwise be made, (ii) the date of the Participant’s death, or (iii) the date the Participant Separates from Service as a Director. Notwithstanding the foregoing, in no event shall a Participant’s Date of Deferral extend beyond the later of his 70th birthday or the date he Separates from Service as a Director. Unless the Participant elects a different Date of Deferral, his Date of Deferral shall be the date he Separates from Service as a Director.

2.8 “Director” shall mean any member of the Board of Directors of the Company who is not an employee of the Company.

2.9 “Directors Fees” shall mean fees owed to the Directors by the Company for their services as Directors including retainers, board meeting fees, committee meeting fees and other similar fees, if any.

2.10 “Election Form” means the written form or other method pursuant to which the Participant elects the amount of his Directors Fees to be deferred into the Plan, the Date of Deferral, the deemed investment and/or the form of payment for such amounts.

 

36


2.11 “401(k) Plan” shall mean the Worthington Industries Deferred Profit Sharing Plan, as in effect from time to time.

2.12 “IRS Regulations” shall mean the laws and regulations adopted by Congress or issued by the U.S. Department of Treasury or the Internal Revenue Service under the Code.

2.13 “Participant” shall mean any Director who has elected to defer payment of all or any portion of his Directors Fees in accordance with the Plan and who still has an Account under the Plan.

2.14 “Plan” shall mean the “Worthington Industries, Inc. Amended and Restated 2005 Deferred Compensation Plan for Directors” as set forth herein, as the same may be amended from time to time.

2.15 “Plan Year” shall mean the calendar year.

2.16 “Separates from Service” means a “separation from service” of a Director within the meaning IRS Regulations §1.409A-1(h).

2.17 “Unforeseeable Emergency” means a severe financial hardship to the Participant within the meaning of IRS Regulations §1.409A-3(i)(3) resulting from (a) an illness or accident of the Participant or the Participant’s spouse, Beneficiary, or dependent (as defined in Code Section 152, without regard to Code Sections 152(b)(1), (b)(2) and (d)(1)(B)), (b) loss of the Participant’s property due to casualty, or (c) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

2.18 “Valuation Date” shall mean the date the Accounts in the Plan are adjusted to reflect earnings and losses in accordance with the hypothetical investment directions, as set from time to time by the Committee.

Section 3.         Administration

3.1         Power of the Committee

The Plan shall be administered by the Committee. The Committee shall have full power to construe and interpret the Plan, to establish and amend rules and regulations for administration of the Plan, and to take any and all actions necessary or desirable to effectuate or carry out the Plan.

The Committee may exercise the powers hereby granted in its sole and absolute discretion. No member of the Committee shall be personally liable for any actions taken by the Committee unless the member’s action involves willful misconduct. The Committee may delegate to others certain aspects of the management and operational responsibilities of the Plan including the employment of advisors and the delegation of ministerial duties to qualified individuals.

3.2         Actions Final

All actions taken by the Committee under or with respect to the Plan shall be final and binding on all persons. No member of the Committee shall be liable for any action taken or determination made in good faith.

3.3         Books and Records

The books and records to be maintained for the purpose of the Plan shall be maintained by the officers and employees of the Company at the Company’s expense and subject to the supervision and control of the Committee. The Company may hire a third party to maintain all or a part of the Plan’s books and records.

3.4         Action by the Committee

The Committee shall act by a majority of its members at the time in office, and such action may be taken either by vote at a meeting or in writing. If a Participant is serving as a member of the Committee, he shall not be entitled to

 

37


vote on matters specifically relating to his rights under the Plan; provided, however, that this provision shall not prevent such person from voting on matters which, although they may affect his rights, relate to Participants in general.

3.5         Indemnification of Committee

The Company shall indemnify the members of the Committee against any and all claims, losses, damages, expenses, including attorney’s fees, incurred by them, and any liability, including any amounts paid in settlement with their approval, arising from their action or failure to act, except when the same is judicially determined to be attributable to their willful misconduct.

Section 4.         Eligibility and Participation

4.1         Eligibility

Each Director is eligible to become a Participant in the Plan. Participants are those Directors who elect to defer Directors Fees under the Plan. A Director’s eligibility to defer Directors Fees shall cease when he dies or otherwise ceases to be a Director of the Company.

4.2         Election to Defer

Any Director who desires to defer the payment of any portion of his Directors Fees for any Plan Year must complete and deliver an Election Form to the Committee (in substantially the form approved by the Committee from time to time) no later than December 31 of the immediately preceding Plan Year in which the applicable fee is earned. (Retainers shall be earned commencing the first day of the fiscal year, the fiscal quarter or other period as to which they relate. Meeting fees shall be earned by attendance at the meeting). Notwithstanding the foregoing, and in the discretion of the Committee, a Participant may elect to defer any portion of Directors Fees by completing and delivering an Election Form to the Committee no later than 30 days after the Participant first becomes eligible to participate in this Plan with respect to any Directors Fees for which services will be performed after such election is made. For this purpose, a Participant is first eligible to participate in this Plan if he is not a participant in any other arrangement that, along with this Plan, would be treated as a single nonqualified deferred compensation plan within the meaning of IRS Regulations §1.409A-1(c)(2).

Any election made pursuant to this Section 4.2 shall be irrevocable once such Plan Year begins.

4.3         The Election Form

A Participant shall designate on an Election Form (i) the portion of his Directors Fees he desires to defer, (ii) the Date of Deferral, and (iii) the method of payment of his Account. Payment of the Account shall be made in accordance with Section 6. The Participant shall also designate the investment option selected for his Account on an Election Form. The elections described in the first sentence of this Section 4.3 must be made no later than the date described in Section 4.2.

If a Participant makes no election as to the form of payment, that Participant’s form of payment shall be a lump sum.

4.4         Sub-Accounts

In the event a Participant makes different elections as to the method of payment or as to the time for commencement of payments with respect to Directors Fees deferred for different fees, for purposes of determining the amounts to be paid under each election, the Participant shall be treated as if he had a separate sub-account for Directors Fees deferred pursuant to the differing elections.

Section 5.         Deferred Compensation Account

5.1         Crediting Fees

 

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The Directors Fees which a Participant elects to defer shall be treated as if they were set-aside in an Account on the date the Directors Fees would otherwise have been paid to the Participant.

5.2         Investment Options – General

Until changed by amendment, the investment options available under the Plan shall be those available under the 401(k) Plan as in effect from time to time.

5.3         Selection of Investment Option

The Participant shall select the investment option for his Account in an Election Form. The Participant may change the investment option for his Account as of the time permitted under the 401(k) Plan for the same investment option.

Section 6.         Payment of Deferred Compensation

6.1         General

The amount of a Participant’s Account or subaccount maintained with respect to the amount deferred, as the case may be, shall be paid to the Participant, within a reasonable time, not to exceed 90 days, after the Participant’s Date of Deferral, in a lump sum or in a number of substantially equal annual installments (not more than 12), as designated by the Participant in his Election Form. A Participant, subject to approval by the Committee, may change the form of payment of his Account or his Deferral Date by filing an amended Election Form with the Committee; provided, however, that any such change to an existing election (i) may not take effect until at least 12 months after the date on which such Election Form is filed; and (ii) the payment with respect to which such election is made must be deferred (other than a distribution upon death or an Unforeseeable Emergency) for a period of not less than five years from the date such payment would otherwise have been paid (or in the case of installment payments treated as a single payment, five years from the date the first amount was scheduled to be paid); and (iii) any election affecting a distribution to be made at a specified time or pursuant to a fixed schedule must be made not less than 12 months before the date the amount was scheduled to be paid (or in the case of installment payments treated as a single payment, 12 months before the date the first amount was scheduled to be paid).

6.2         Death

(a) In the event of the death of a Participant, the amount of the Account shall be paid to his Beneficiary, within a reasonable time, not to exceed 90 days, after the Participant’s death.

(b) Each Participant may name one or more Beneficiaries and may also name one or more contingent Beneficiaries by making a written designation in a form acceptable to the Committee. A Participant’s Beneficiary designation may be changed at any time prior to his death by execution and delivery of a new Beneficiary designation form. The Beneficiary designation on file with the Company at the time of the Participant’s death which bears the latest date shall govern.

(c) Payments to a Beneficiary shall be made in the same form as designated by the Participant in his Election Form. In the case of a Beneficiary of a Participant who is receiving installment payments at the time of his death, the number of annual installments may not exceed the annual installments remaining to be paid to the Participant.

(d) If no Beneficiary survives the Participant, the amount in the Deferred Compensation Account shall be paid in a lump sum to the Participant’s estate.

(e) If the Beneficiary dies after the death of the Participant, any amount otherwise payable to the Beneficiary shall be paid in a lump sum to the Beneficiary’s estate.

 

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6.3         Unforeseeable Emergency

A Participant may request a distribution from all or part of his Account upon the occurrence of an Unforeseeable Emergency. As a condition of receiving a distribution under this Section 6.3, the Participant must file a written application with the Committee specifying the nature of the Unforeseeable Emergency, the amount needed to address the Unforeseeable Emergency and supplying any other information the Committee, in its discretion, may need to ensure that the conditions specified in this Section 6.3 are satisfied. The Committee shall, in its sole discretion, determine whether an Unforeseeable Emergency exists and distribute an amount to the Participant which shall not be greater than the amount reasonably necessary to satisfy the emergency need (plus the amount necessary to pay any Federal, state, local or foreign income taxes or penalties reasonably anticipated to result from the distribution) or, if less, the value of the Participant’s Account as of the distribution date.

A distribution on account of an Unforeseeable Emergency may not be made to the extent that such emergency is or may be relieved through a cancellation of deferrals under this Plan, reimbursement or compensation from insurance or otherwise, by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not cause a severe financial hardship.

6.4         Effect of Change in Control

(a) Notwithstanding any provision to the contrary contained herein, but subject to the following sentence, in the event of a Change in Control, the Plan shall be terminated and each Participant’s Account shall be paid out as of such date in a lump sum.

(b) For purposes of this Section 6.4, the following terms shall have the meanings set forth below:

 

  (i)

A “Change in Control” with respect to the Company occurs on the earliest date that (1) a Person or Group acquires ownership of stock of the Company that, together with stock held by such Person or Group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company; or (2) any Person or Group (other than John P. McConnell or a group controlled by John P. McConnell) acquires (or has acquired during the 12 month period ending of the date of the most recent acquisition by such Person or Group) ownership of stock of the Company possessing 35% or more of the total voting power of the stock of the Company; or (3) a majority of the members of the Board of Directors of the Company is replaced during any twelve-month period by Directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board of Directors prior to the date that such appointments or elections are made; or (4) any Person or Group (other than an Excluded Person) acquires (or has acquired) during the twelve-month period ending on the date of the most recent acquisition by such Person or Group, assets from the Company that have a total Gross Market Value equal to or more than 65% of the total Gross Market Value of all of the assets of the Company immediately prior to such acquisition or acquisitions.

Notwithstanding the foregoing, no event shall be considered a Change in Control if it would not be considered a “change in control event” within the meaning IRS Regulations §1.409A-3(i)(5).

 

  (ii)

“Excluded Person” means (1) a shareholder of the Company in exchange for or with respect to its stock; (2) the Company, any wholly owned Company Subsidiary, or any entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by the Company; (3) a Person or Group that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding stock of the Company; or (4) an entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person described in Section 6.4(b)(ii)(2).

 

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  (iii)

“Gross Market Value” means the value of the assets of the Company or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

 

  (iv)

“Group” shall mean more than one Person acting as a “group” as interpreted in accordance with IRS Regulation §1.409A-3(i)(5).

 

  (v)

“Person” means any individual, firm, corporation, or other entity.

(c) In all cases, the provisions of and definitions used in this Section 6.4 shall be interpreted in accordance with the provisions of IRS Regulation §1.409A-3(i)(5).

6.5         Changes to Deferral Date or Form of Payment.

On or before December 31, 2008, a Participant may change the form of payment of his Account or Deferral Date (based on the choices described in this Section 6) by filing an amended Election Form with the Committee on or before December 31, 2008; provided, however, that: (i) such election will not apply to any amount otherwise payable in 2008; and (ii) such election may not cause an amount to be paid in 2008 that would not otherwise be payable in 2008. Such election must be made in a form prescribed by the Committee. After December 31, 2008, any distribution election may be changed only as provided in Section 6.1.

Section 7.         Amendments

The Board of Directors may from time to time amend, suspend or terminate any or all of the provisions of this Plan; provided that no such amendment, suspension, or termination shall adversely affect in any material respect any right of any Participant to receive any amount payable pursuant to the Plan (unless the affected Participant consents in writing to the application of that amendment) but this provision shall not restrict the authority of the Board of Directors to change or limit investment options. The Board of Directors may terminate the Plan at any time, provided, however, that no termination shall in and of itself cause an acceleration of the distribution of Accounts under the Plan, except as may otherwise be provided in the applicable IRS Regulations. Any such amendment to or termination of the Plan shall be in writing.

Section 8.         Miscellaneous Provisions

8.1         Non-Assignability of Benefits

No Participant, Beneficiary or distributee of benefits under the Plan shall have any power or right to transfer, assign, anticipate, hypothecate or otherwise encumber any part or all of the amounts payable hereunder, which are expressly declared to be unassignable and non-transferable. Any such attempted assignment or transfer shall be void. No amount payable hereunder shall, prior to actual payment hereof, be subject to seizure by any creditor of any such Participant, Beneficiary or other distributee for the payment of any debt, judgment, or other obligation, by a proceeding at law or in equity, nor transferable by operation of law in the event of the bankruptcy, insolvency or death of such Participant, Beneficiary or other distributee hereunder.

8.2         Withholding

All deferrals and payments provided for hereunder shall be subject to applicable withholding and other deductions as shall be required of the Company under any applicable local, state or federal law.

8.3         No Trust Created

Nothing contained in this Plan, and no action taken pursuant to its provisions by either party hereto, shall create, nor be construed to create, a trust of any kind or a fiduciary relationship between the Company and the Participant, his Beneficiary, or any other person. The Company may establish a “grantor trust” (so-called “Rabbi Trust”) which is within the jurisdiction of the courts of the United States and is permitted by IRS Regulations to aid in meeting the

 

41


obligations created under this Plan, but the Company intends that the assets of any such trust will at all times remain subject to the claims of the Company’s general creditors and that the existence of any such Rabbi Trust will not alter the characterization of the Plan as “unfunded” for purposes of the Employee Retirement Income Security Act of 1974, and will not be construed to provide income to any Participant prior to actual payment under this Plan.

8.4         Unsecured General Creditor Status of Director

The payments to a Participant, his Beneficiary or any other distributee hereunder shall be made from assets which shall continue, for all purposes, to be a part of the general, unrestricted assets of the Company; no person shall have or acquire any interest in any such assets by virtue of the provisions of this Plan. The obligation hereunder shall be an unfunded and unsecured promise to pay money in the future. To the extent that the Participant, a Beneficiary, or other distributee acquires a right to receive payments from the Plan under the provisions hereof, such right shall be no greater than the right of any unsecured general creditor of the Company. No such person shall have nor acquire any legal or equitable right, interest or claim in or to any property or assets of any Company; provided , however , that, to the extent the Company is unable to make the payment, the obligation to make such payment shall be the obligation of all affiliates and subsidiaries of the Company, regardless of whether such affiliate or subsidiary was an affiliate or subsidiary of the Company at the time the Directors Fee’s to which the claim relates were credited to the claiming Participant’s Account.

In the event that, in its discretion, the Company purchases an insurance policy or policies insuring the life of the Participant (or any other property) to allow the Company to recover the cost of providing the benefits, in whole, or in part, hereunder, neither the Participant, his Beneficiary or other distributee shall have nor acquire any rights whatsoever therein or in the proceeds therefrom. The Company shall be the sole owner and beneficiary of any such policy or policies and, as such, shall possess and may exercise all incidents of ownership therein. Except to the extent the Company may establish a Rabbi Trust as described in Section 8.3, no such policy, policies or other property shall be held in any trust for a Participant, Beneficiary or other distributee or held as collateral security for any obligation hereunder. The existence of any such Rabbi Trust does not give a Participant, Beneficiary or other distributee, any interest, direct or beneficial, in any policy, policies or other property held in such a trust. A Participant’s participation in the underwriting or other steps necessary to acquire such policy or policies may be required by the Committee and, if required, shall not be a suggestion of any beneficial interest in such policy or policies to a Participant.

8.5         Binding Effect

This Plan shall be binding on each Participant and his heirs and legal representatives and on the Company and its successors and assigns.

8.6         Governing Laws

All provisions of the Plan shall be construed in accordance with the laws of Ohio, except to the extent pre-empted by federal law.

8.7         Code Section 409A

This Plan is intended to comply with the requirements of Code Section 409A and the IRS Regulations promulgated thereunder and, to the maximum extent permitted by law, shall be interpreted, administered and operated accordingly. Nothing herein shall be construed as an entitlement to or guarantee of any particular tax treatment to a Participant, and none of the Company, Committee or any other person shall have any liability with respect to any failure to comply with Code Section 409A. The Company may accelerate the time or schedule of payment of a Participant’s Account at any time this Plan fails to meet the requirements of Code Section 409A. Such payment may not exceed the amount required to be included in income as a result of the failure to comply with Code Section 409A.

 

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Exhibit 10.6

WORTHINGTON INDUSTRIES, INC.

AMENDED AND RESTATED

2003 STOCK OPTION PLAN

 

  1.

Purpose

This Plan is intended to promote and advance the long-term interest 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. The 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. This Plan is amended and restated effective November 1, 2008.

 

  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” means the written agreement between Worthington and each Participant that describes the terms and conditions of each Award.

(d) “Beneficiary” shall mean the person a Participant designates to receive (or exercise) any Plan benefits (or rights) that are unpaid (or unexercised) when the Participant dies. A Beneficiary may be designated only by following the procedures described in Section 14(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 persons (i) each of whom is (A) an outside director, as defined in Treasury Regulation §1.162-27(e)(3)(i); (B) a “non-employee” director within the meaning of Rule 16b-3 under the Act; and (C) “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) none of whom may receive remuneration from the Company in any capacity other than as a director, except as permitted under applicable laws, rules and regulations.

 

43


(h) “Common Shares” shall mean the Common Shares, without par value, of Worthington or any security of Worthington issued in substitution, 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 any Award other than an Incentive 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 September 25, 2003, the date this Plan was 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. A worker who is classified as other than a common law employee 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 only from the date of that determination and will not retroactively be reclassified as an Employee for any purpose of 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 an exchange, 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 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.

 

44


(s) “Plan” shall mean this Worthington Industries, Inc. Amended and Restated 2003 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 the 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.

(xi) “Treasury Regulations” shall mean any regulations issued by the Department of Treasury and/or Internal Revenue Service under the Code.

(xii) “Worthington” shall mean Worthington Industries, Inc.

 

  3.

Participation

To become a Participant, each Employee receiving an Award must (a) sign an Award Agreement; and (b) comply with any other terms and conditions as may be imposed by the Committee. The prospective recipient of any Award under the Plan shall not, with respect to such Award, be deemed to have become a Participant, or to have any rights with respect to such Award, until and unless such recipient shall have executed an Award Agreement or other instrument evidencing the Award and delivered a fully executed copy thereof to Worthington, and otherwise complied with the then applicable terms and conditions.

 

  4.

Administration

(a) Committee Duties. The Committee shall administer the Plan and shall have all powers appropriate and necessary to that purpose. Consistent with the Plan’s objectives, the Committee may adopt, amend and rescind rules and regulations relating to the Plan and has complete discretion to make all other decisions (including whether a Participant has incurred a Disability) and take or authorize actions

 

45


necessary or advisable for the administration and interpretation of the Plan. Any action by the Committee will be final, binding and conclusive for all purposes and upon all persons.

(b) Consistent with the terms of the Plan, the Committee will:

(i) Decide which Employees will be granted Awards; and

(ii) Specify the type of Award to be granted and the terms, not inconsistent with the Plan, upon which an Award will be granted.

(c) Delegation. The Committee may designate persons other than members of the Committee to carry out its responsibilities (including, without limitation, the granting of Awards) under such conditions and limitations as it may prescribe, except that the Committee may not delegate its authority with regard to selection for participation of, and the granting of Awards to, persons subject to Section 16(a) and 16(b) of the Act or Section 162(m) of the Code.

(d) 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.

(e) 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 then are 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. The Plan became effective on 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 August 20, 2013.

(b) Common Shares Subject to Plan. The maximum number of Common Shares in respect of which Awards may be granted under the Plan, subject to adjustment as provided in Section 11 of the Plan, is 7,000,000 Common Shares. Notwithstanding the foregoing, in no event shall more than 1,000,000 Common Shares be cumulatively available for Awards of Incentive Stock Options under the Plan. No Participant may be granted Awards under the Plan in any one calendar year with respect to more than 250,000 Common Shares.

For the purpose of computing the total number of Common Shares available for Awards under the 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 Common Shares which were previously subject to Awards shall again be available for Awards under the Plan if any such Awards are forfeited, terminated, unexercised before expiration, or settled in cash or otherwise than the issuance of Common Shares. In addition, if Common Shares are used as full or partial payment to Worthington by a Participant of the Exercise Price upon exercise of a Stock Option, the number of Common Shares so used shall again be available for Awards under the Plan.

 

46


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 the Plan.

 

  6.

Grant of Stock Options

(a) Eligibility. Persons eligible for Awards under the Plan shall consist of all Employees of the Company.

(b) Stock Options. Stock Options may be granted under the 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:

(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 and reflected in the Award Agreement, a Participant may not exercise a Stock Option granted under the Plan prior to that date which is 12 months after the Grant Date. Unless otherwise determined by the Committee, the Participant may exercise such Stock Option as follows:

(A) At any time after such 12 months, as to 20% of the Common Shares originally subject to the Stock Option;

(B) At any time after 24 months from the Grant Date, as to 40% of the Common Shares originally subject to the Stock Option;

(C) At any time after 36 months from the Grant Date, as to 60% of the Common Shares originally subject to the Stock Option;

(D) At any time after 48 months from the Grant Date, as to 80% of the Common Shares originally subject to the Stock Option; and

(E) At any time after 60 months from the Grant Date, as to 100% of the Common Shares originally subject to the Stock Option.

(iii) Stock Option Term. Unless otherwise specified by the Committee and reflected in the Award Agreement, each Stock Option shall expire ten years after the Grant Date; provided that any Incentive Stock Option granted to a Ten-Percent Owner shall expire no later than five years after the Grant Date.

Subject to the other provisions of this Plan, any Stock Option which becomes exercisable shall remain exercisable until the date of expiration of the term of the Stock Option.

Subject to the provisions of Section 7, a Participant may not exercise any part 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 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.

 

47


  7.

Impact of Termination

(a) Retirement. Unless otherwise specified by the Committee and reflected in the Award Agreement, all Awards that are outstanding and exercisable upon the Retirement of an Employee, 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. The Committee may, in its sole discretion, elect to make any unvested portion of the Award exercisable as of the Retirement date of the Participant.

(b) Death or Disability. Unless otherwise specified by the Committee and reflected in the Award Agreement, all Awards that are outstanding and exercisable when an Employee 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. The Committee may, in its sole discretion, elect to make any unvested portion of the Award exercisable as of the date of death or Termination for Disability.

(c) Termination. Unless otherwise specified by the Committee and reflected in the Award Agreement, any Awards that are outstanding when an Employee is Terminated for any reason not described in Sections 7(a) and 7(b) will be forfeited.

 

  8.

Forfeitures

(a) Limits on Exercisability/Forfeiture of Exercised Awards. Regardless of any other provision of this Plan and unless the Committee specifies otherwise as reflected in the Award Agreement, a Participant who fails to comply with this Section 8(a) will forfeit all outstanding Awards.

The forfeiture described in this Section will apply 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, 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 Committee’s written consent, which may be withheld for any reason or for no reason, 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, development, 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) Fails to return all property (other than personal property), 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) In the event a Participant or former Participant violates any non-competition covenant, 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

 

48


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 beginning on that date which is six months prior to the earlier of (i) the date of such Participant’s or former Participant’s Termination; or (ii) the date any such violation occurs.

 

  9.

Method of Exercise

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. Such notice shall be accompanied by payment in full of the Exercise Price in cash or, unless otherwise specified by the Committee and reflected in the associated Award Agreement, in its sole discretion, in Common Shares already owned by the Participant prior to the exercise date or by delivering or surrendering outstanding vested and exercisable Awards (including through the withholding of Common Shares which would otherwise be issued in connection with the exercise of a vested and exercisable Stock Option) or any combination thereof (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 law, 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.

Special Rule for Incentive Stock Options

With respect to an Incentive Stock Option granted under the 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 Incentive Stock Options are exercisable for the first time by a 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. No Incentive Stock Option may be granted after August 20, 2013.

 

  11.

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 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, merger, consolidation, split-up, 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 the 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 outstanding Awards.

(c) The Committee may also make such adjustments in the number of Common Shares covered by, and the price or other value of any outstanding Awards in the event of a spin-off or other distribution (other than normal cash dividends) of Worthington’s assets to shareholders.

Any adjustment made pursuant to this Section 11 shall be made in accordance with the requirements of Section 409A of the Code, to the extent applicable.

 

49


  12.

Change in Control Provisions

(a) Effects of Change in Control. Subject to the provisions of Section 12(c), in the event of a Change in Control (as defined below) of Worthington, all Stock Options then outstanding shall become fully vested and exercisable as of the date of the Change in Control, whether or not then exercisable.

(b) Definitions.

(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 the Plan, was an Affiliate of Worthington 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 its Affiliates and Associates, has acquired or obtained the right to acquire 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 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 12(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.

(c) Change in Control Cash-Out. Notwithstanding any other provision of the 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 part 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 (the “Spread”) multiplied by the number of Common Shares granted under the Stock Option as to which the right granted under this Section 12(c) shall have been exercised.

(d) Alternative Awards. Section 12(a) 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

 

50


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 market;

(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 12 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.

 

  13.

Amendment, Modification and Termination of Plan

The Board or the Committee may terminate, suspend or amend the 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 on which the Company’s securities are 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 the 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. However, nothing in this Section 13 will restrict the Committee’s right to exercise the discretion retained in the various provisions of this Plan.

 

  14.

Miscellaneous

(a) Assignability. Except as described in this Section 14(a) and Section 14(b), 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 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 by the Participant 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; (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.

 

51


(d) Tax Withholding. The Company will withhold from other amounts owed to a Participant, or require the Participant to remit to the Company, an amount sufficient to satisfy federal, state and local withholding tax requirements on any Award, exercise or cancellation of an Award or purchase of Common Shares. If these amounts are not to be withheld from other payments due to the Participant (or if there are no other payments due to the Participant), the Company will defer payment of cash or issuance of Common Shares until the earlier of: (i) 30 days after the settlement date; or (ii) the date the Participant remits the required amount.

If the Participant has not remitted the required amount within 30 days after the settlement date, the Company will permanently withhold from the value of the Awards to be distributed the minimum amount required to be withheld to comply with applicable federal, state and local income, wage and employment taxes and distribute the balance to the Participant.

Unless otherwise specified by the Committee and reflected in the associated Award Agreement, a Participant may elect, subject to such conditions as the Committee establishes, to reimburse the Company for this tax withholding obligation through one or more of the following methods:

(i) By having Common Shares otherwise issuable under the Plan withheld by the Company (but only to the extent of the minimum amount that must be withheld to comply with applicable state, federal and local income, employment and wage tax laws);

(ii) By delivering to the Company previously acquired Common Shares that the Participant already owned;

(iii) By remitting cash to the Company; or

(iv) By remitting a personal check immediately payable to the Company.

(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 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 14(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 will be subject to all applicable laws, rules and regulations and to all required approvals of any governmental agencies or national securities exchange, market or other quotation system. 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 or other recognized market or quotation system upon 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 14(f).

 

52


(g) No Right to Employment. Neither the adoption of this Plan nor the granting of any Award shall confer upon any Employee of the Company any right to continued employment with the Company, nor shall it interfere in any way with the right of the Company to Terminate any of its Employees at any time, with or without cause.

(h) 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.

(i) Cost of Plan. The costs and expenses of administering this Plan shall be borne by the Company.

(j) Governing Law. 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.

(k) Section 409A of the Code. The 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 the 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.

 

53

Exhibit 10.7

WORTHINGTON INDUSTRIES, INC.

AMENDED AND RESTATED

2000 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS

 

1.

PURPOSE

The purpose of the Worthington Industries, Inc. Amended and Restated 2000 Stock Option Plan for Non-Employee Directors is to promote the interests of the Company and its shareholders by (a) increasing the proprietary interest of Eligible Directors in the growth and performance of the Company by granting such Eligible Directors options to purchase Common Shares of the Company and (b) encouraging the Eligible Directors to remain as directors of the Company and put forth maximum efforts for the success of the Company. The Plan is amended and restated effective as of November 1, 2008.

 

2.

DEFINITIONS

As used in the Plan, the following terms shall have the meanings set forth below:

 

  (a)

“Acquiring Person” means any Person who or which, together with all of its Affiliates and Associates, has acquired or obtained the right to acquire the beneficial ownership of 25% or more of the Common Shares then outstanding.

 

  (b)

“Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.

 

  (c)

“Board” shall mean the Board of Directors of the Company.

 

  (d)

“Change in Control” shall have occurred when any Person (other than (A) the Company or any Subsidiary of the Company, (B) any employee benefit plan of the Company or of any Subsidiary of the Company or any trustee of or fiduciary with respect to any such plan when acting in such capacity, or (C) any Person who, on the Effective Date of the Plan, was an Affiliate of the Company and owning in excess of 10% of the outstanding Common Shares of the Company and the respective successors, executors, legal representatives, heirs and legal assigns of such Person), alone or together with its Affiliates and Associates, has acquired or obtained the right to acquire the beneficial ownership of 25% or more of the Common Shares then outstanding.

 

  (e)

“Continuing Director” means any individual who was a member of the Board on the Effective Date of the Plan or thereafter elected by the shareholders of the Company or appointed by the Board prior to the date as of which the Acquiring Person became a Substantial Shareholder (as such term is defined in Article SEVENTH of the Company’s Amended Articles of Incorporation), or an individual designated (before his 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.

 

  (f)

“Change in Control Exercise Period” shall have the meaning set forth in paragraph (ii) of Subsection 6(d) of the Plan.

 

  (g)

“Change in Control Price Per Common Share” shall mean the price per Common Share (i) paid by the Acquiring Person in connection with the transaction that results in the Change in Control; or (ii) at any time after the Change in Control and before the Eligible Director exercises his/her election under paragraph (ii) of Subsection 6(d), the Fair Market Value of the Common Shares.

 

54


  (h)

“Change in Control Spread” shall have the meaning set forth in paragraph (ii) of Subsection 6(d) of the Plan.

 

  (i)

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and any successor provisions thereto.

 

  (j)

“Company” shall mean Worthington Industries, Inc., an Ohio corporation, together with any successor thereto.

 

  (k)

“Common Shares” shall mean the common shares, without par value, of the Company.

 

  (l)

“Director Option” shall mean a Non-Qualified Stock Option granted to each Eligible Director under the provisions of the Plan without any action by the Board.

 

  (m)

“Director Retirement” shall mean the retirement of an Eligible Director from service on the Board after having (i) attained the age of 65 or (ii) served at least nine years as a member of the Board, unless the Board specifies a shorter period of required service which shall in no event be fewer than six years.

 

  (n)

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time, and any successor provisions thereto.

 

  (o)

“Effective Date” shall mean September 28, 2000.

 

  (p)

“Eligible Director” shall mean, on any date, an individual who is serving as a member of the Board but shall not include any individual who is an employee of the Company or of any Subsidiary or Affiliate of the Company.

 

  (q)

The “Fair Market Value” of a Common Share on any relevant date for purposes of any provision of the Plan shall be the last reported sales price of a Common Share as shown on the national securities exchange on which the Company’s Common Shares are then traded, or, if there are no reported sales on such date, then the last reported sales price on the next preceding day on which such a sale was transacted.

 

  (r)

“For Cause” shall mean removal from office for cause in accordance with Article SIXTH of the Company’s Amended Articles of Incorporation and the Ohio General Corporation Law.

 

  (s)

“Non-Qualified Stock Option” shall mean a right to purchase Common Shares from the Company that is granted under the Plan and is not intended to meet the requirements of Section 422 of the Code or any successor provision thereto.

 

  (t)

“Option Agreement” shall mean any written agreement, contract or other document evidencing any Director Option granted under the Plan.

 

  (u)

“Permissible Transferee” shall mean any member of the immediate family of an Eligible Director, any trust, whether revocable or irrevocable, solely for the benefit of members of the Eligible Director’s immediate family, or any partnership or limited liability company whose only partners or members are members of the Eligible Director’s immediate family.

 

  (v)

“Person” shall mean any individual, corporation, partnership, limited liability company, association, joint-stock company, trust, unincorporated organization, government or political subdivision thereof or other entity.

 

  (w)

“Plan” shall mean the Worthington Industries, Inc. Amended and Restated 2000 Stock Option Plan for Non-Employee Directors, as the same may be amended from time to time.

 

55


  (x)

“SEC” shall mean the Securities and Exchange Commission or any successor thereto and shall include the staff thereof.

 

  (y)

“Subsidiary” shall mean any corporation which, on the date of determination, qualified as a subsidiary of the Company under Section 424(f) of the Code. In addition, the term “Subsidiary” shall include any trade or business that is under common control with the Company, as determined under Section 414(c) of the Code.

 

  (z)

“Total Disability” shall be deemed to be the inability, by reason of a medically determinable physical or mental impairment, to engage in any substantial gainful activity, for a period of 180 days after its commencement and such condition, in the opinion of a physician selected by the Company and reasonably acceptable to the Eligible Director or his/her legal representative, is total and permanent.

 

  (aa)

“Treasury Regulations” means any regulations issued by the Department of Treasury and/or Internal Revenue Service under the Code.

 

  (bb)

“Whole Board” means the total number of directors which the Company would have if there were no vacancies.

 

3.

ADMINISTRATION

(a) The Plan shall be administered by the Board.

(b) The Board shall have full power and authority in its discretion, subject to and not inconsistent with the express provisions of the Plan, to administer the Plan and to exercise all the power and authority specifically granted to the Board under the Plan or necessary or advisable, in the sole and absolute discretion of the Board, in the administration of the Plan including, without limitation, the authority to: interpret and construe any provision of the Plan or any Director Option granted under the Plan; make all required or appropriate determinations under the Plan or any Director Option granted under the Plan; adopt, amend and rescind such rules and regulations relating to the Plan as the Board shall determine in its discretion subject to the express provisions of the Plan; and make all other determinations deemed by the Board necessary or advisable for the administration of the Plan. Notwithstanding the preceding sentence, the Board shall have no discretion with respect to the selection of members of the Board to receive Director Options, the number of Common Shares subject to any Director Option, the purchase price per Common Share under each Director Option or the timing of grants of Director Options under the Plan.

(c) The interpretation and construction of any provision of the Plan or any Director Option granted under the Plan and all determinations by the Board in each case shall be final, binding and conclusive with respect to all interested parties, unless otherwise determined by the Board. No member of the Board shall be personally liable for any action, failure to act, determination, interpretation or construction made in good faith with respect to the Plan or any Director Option or transaction under the Plan.

(d) Nothing contained in the Plan, nor any Director Option granted pursuant to the Plan, nor shall confer upon any Eligible Director any right to continue as a director of the Company nor limit in any way the right of the shareholders of the Company to remove him/her as a director in accordance with the Company’s Amended Articles of Incorporation and the Ohio General Corporation Law.

The validity, construction and effect of the Plan and any rules and regulations relating to the Plan and any Option Agreement evidencing a Director Option granted under the Plan shall be determined in accordance with the laws of the State of Ohio.

 

4.

ELIGIBILITY

 

56


The class of individuals eligible to receive grants of Director Options shall be the Eligible Directors.

 

5.

COMMON SHARES SUBJECT TO THE PLAN

Subject to adjustment as provided in Section 7 of the Plan, an aggregate of 250,000 Common Shares shall be available for issuance under the Plan. The Common Shares deliverable upon the exercise of Director Options may be made available from authorized but unissued Common Shares or issued Common Shares which have been reacquired by the Company. If any Director Option granted under the Plan shall terminate for any reason without having been exercised in full, the Common Shares subject to, but not delivered under, such Director Option shall be available for issuance under the Plan.

 

6.

GRANT, TERMS AND CONDITIONS OF DIRECTOR OPTIONS

(a) On the date an Eligible Director is first elected or appointed to the Board prior to September 25, 2003, such Eligible Director shall be granted a Director Option to purchase 4,000 Common Shares; provided, however, in respect of the first election to the Board of Eligible Directors prior to the Effective Date, such Director Option shall be granted on the Effective Date. On the date an Eligible Director is first elected or appointed to the Board on or after September 25, 2003, such Eligible Director shall be granted a Director Option to purchase 5,000 Common Shares. Notwithstanding the foregoing, no Director Option shall be granted pursuant to this Plan on or after September 27, 2006.

(b) On the date on which each annual meeting of the shareholders of the Company is held in 2001 and in 2002, each Eligible Director who has served as a director of the Company for more than six months and will continue to serve as a member of the Board on and after such date, shall receive a grant of a Director Option to purchase 2,000 Common Shares. On the date on which each annual meeting of shareholders of the Company is held, beginning with the annual meeting to be held in 2003, each Eligible Director who served as a director of the Company for more than six months and will continue to serve as a member of the Board on and after such date, shall receive a grant of a Director Option to purchase 4,000 Common Shares. Notwithstanding the foregoing, no Director Option shall be granted pursuant to this Plan on or after September 27, 2006.

(c) The Director Options granted shall have the following terms and conditions:

(i) Purchase Price. The purchase price per Common Share deliverable upon the exercise of each Director Option shall be 100% of the Fair Market Value per Common Share on the date the Director Option is granted.

(ii) Payment. Director Options may be exercised only upon payment of the purchase price thereof in full. Such payment may be made in cash, or its equivalent, or, unless otherwise specified by the Board and reflected in the associated Option Agreement(s), by tendering, either by actual delivery of Common Shares or by attestation, Common Shares acceptable to the Board, by the withholding of Common Shares which would otherwise be issued in connection with the exercise of the Director Option, or by a combination of the foregoing, provided that the combined value of all cash and cash equivalents and the Fair Market Value of any Common Shares so tendered to the Company as of the date of such tender or so withheld by the Company as of the date of such withholding is at least equal to the purchase price of the Common Shares underlying the portion of the Director Option being exercised.

Unless otherwise specified by the Board and reflected in the associated Option Agreement(s), an Eligible Director may elect to pay the purchase price upon the exercise of a Director Option by irrevocably authorizing a third party to sell Common Shares (or a sufficient number of Common Shares) acquired upon exercise of the Director Option and remit to the Company a sufficient portion of the sale proceeds to pay the entire purchase price and tax withholding resulting from such exercise.

(iii) Vesting and Term of Director Options. Each Director Option granted pursuant to the Plan shall become vested and fully exercisable on the first to occur of (A) the first anniversary of the date of grant or (B) as to any Director Option granted as of the date of an annual meeting of shareholders of the

 

57


Company, the date on which the next annual meeting of shareholders of the Company is held following the date of grant, provided that in each case the Eligible Director who was granted the Director Option is a director of the Company on the relevant date or the Eligible Director’s term as a director of the Company is ending on the relevant date. Once vested, each Director Option shall be exercisable until the earlier of ten years from the date of grant and the expiration of the applicable period described in paragraph (iv) below.

(iv) Termination of Service as Eligible Director.

(A) Upon termination of an Eligible Director’s service as a director of the Company for any reason other than death, Director Retirement, Total Disability or For Cause, all outstanding Director Options held by such Eligible Director, to the extent then exercisable, shall be exercisable in whole or in part for a period of one year from the date upon which the Eligible Director ceases to be a member of the Board, provided that in no event shall the Director Options be exercisable beyond the period provided for in paragraph (iii) of Subsection 6(c) above. Notwithstanding the foregoing, the Board shall have the right to accelerate the exercisability of any outstanding Director Option, in its discretion, upon the termination of an Eligible Director’s service on the Board.

(B) If an Eligible Director shall die while serving as a director of the Company, all outstanding Director Options held by such Eligible Director (whether or not then exercisable by their terms) shall become immediately exercisable in full by the Eligible Director’s estate or by the Person who acquires the right to exercise such Director Options upon the Eligible Director’s death by bequest or inheritance. Such exercise may occur at any time within three years after the date of the Eligible Director’s death, provided that in no event shall such Director Options be exercisable beyond the period provided for in paragraph (iii) of Subsection 6(c) above.

(C) If an Eligible Director’s service as a director of the Company ceases as a result of the Eligible Director’s becoming Totally Disabled, all outstanding Director Options held by such Eligible Director (whether or not then exercisable by their terms) shall become immediately exercisable in full. Such exercise may occur at any time within three years after the Eligible Director’s service as a director of the Company has ceased, provided that in no event shall such Director Options be exercisable beyond the period provided for in paragraph (iii) of Subsection 6(c) above.

(D) If an Eligible Director’s service as a director of the Company ceases due to a Director Retirement, all outstanding Director Options held by such Eligible Director (whether or not then exercisable by their terms) shall become immediately exercisable in full. Such exercise may occur at any time within three years after the date of the Director Retirement, provided that in no event shall such Director Options be exercisable beyond the period provided for in paragraph (iii) of Subsection 6(c) above.

(E) If an Eligible Director’s service as a director of the Company is terminated For Cause, each of the Director Options of such Eligible Director shall be cancelled on the date the Eligible Director ceases to be a director of the Company.

(v) Assignability of Director Options. With the permission of the Board, an Eligible Director who has been granted a Director Option under the Plan, may transfer such Director Option to a revocable inter vivos trust as to which the Eligible Director is the settlor or may transfer such Director Option to a Permissible Transferee. Any such transferee shall remain subject to all of the terms and conditions applicable to such Director Option and subject to the rules and regulations prescribed by the Board. A Director Option may not be retransferred by a Permissible Transferee except by will or the laws of descent and distribution and then only to another Permissible Transferee. Other than as described above, no Director Option may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by an Eligible Director otherwise than by will or the laws of descent and distribution, or pursuant to a qualified domestic relations order, and during the lifetime of the Eligible Director to whom a Director

 

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Option is granted, the Director Option may be exercised only by the Eligible Director or by the Eligible Director’s guardian or legal representative.

(vi) Option Agreement. Each Director Option granted under the Plan shall be evidenced by an Option Agreement with the Company which shall contain the terms and provisions set forth in the Plan and shall otherwise be consistent with the provisions of the Plan.

(d) Change in Control Provisions.

(i) Notwithstanding any other provision of the Plan to the contrary, but subject to the provisions of paragraph (iv) of this Subsection 6(d), in the event of a Change in Control, any Director Options outstanding as of the date such Change in Control is determined to have occurred, and which are not then exercisable, shall become fully exercisable.

(ii) Notwithstanding any other provision of the Plan, during the 60-day period from and after a Change in Control (the “Change in Control Exercise Period”), if the Board shall determine at, or at any time after, the time of grant, an Eligible Director holding a Director Option shall have the right, whether or not the Director Option is fully exercisable and in lieu of the payment of the purchase price for the Common Shares being purchased under the Director Option and by giving notice to the Company, to elect (within the Change in Control Exercise Period) to surrender all or part of the Director Option to the Company 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 Common Share on the date of such election shall exceed the purchase price per Common Share under the Director Option (the “Change in Control Spread”) multiplied by the number of Common Shares granted under the Director Option as to which the right granted under this paragraph (ii) shall have been exercised.

(iii) The provisions of this Subsection 6(d) shall not apply (A) if the Board determines at the time of grant that such Section shall not apply or (B) 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 matters shall be Continuing Directors.

 

7.

ADJUSTMENT AND CHANGES IN COMMON SHARES

(a) In the event that the outstanding Common Shares shall be changed into or exchanged for a different kind of shares, other securities or other property of the Company or of another corporation or other entity or for cash (whether by reason of merger, consolidation, recapitalization, reclassification, split-up, combination of shares or otherwise) or if the number of Common Shares of the Company shall be increased through the payment of a share dividend, then unless such change results in the termination of all outstanding Director Options granted pursuant to the Plan, there shall be substituted for or added to each Common Share subject to the Director Option, the number and kind of shares, other securities or other property and the amount of cash into which each outstanding Common Share of the Company shall be changed, or for which each such Common Share shall be exchanged, or to which the holder of each Common Share shall be entitled, as the case may be. The Director Option shall also be appropriately amended as to the purchase price and other terms as may be necessary to reflect the foregoing events. Fractional shares resulting from any adjustment in the Director Options pursuant to this Section 7 shall be rounded down to the nearest whole number of shares. Notwithstanding the foregoing, any such adjustment pursuant to this Section 7(a) shall be made in accordance with the requirements of Section 409A of the Code, to the extent applicable.

(b) Notice of any adjustment shall be given by the Company to each holder of a Director Option which shall have been so adjusted, provided that such adjustment (whether or not such notice is given) shall be effective and binding for all purposes of the Plan and any Option Agreements issued under the Plan.

(c) The grant of Director Options under the Plan shall in no way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

 

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8.

NO RIGHTS AS SHAREHOLDERS

Neither an Eligible Director nor any holder or beneficiary of any Director Option shall be, or have any of the rights and privileges of, a shareholder of the Company in respect of any Common Shares purchasable upon the exercise of any Director Option, in whole or in part, unless and until ownership of such Common Shares shall have been recorded in the share transfer books of the Company. To the extent that the Plan provides for issuance of certificates to reflect the issuance of Common Shares, the issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any national securities exchange on which the Common Shares are then listed or traded.

 

9.

PLAN AMENDMENTS

The Board may amend, alter, suspend, discontinue or terminate the Plan or any portion thereof at any time, in its sole and absolute discretion; provided that no such amendment, alteration, suspension, discontinuation or termination shall be made without shareholder approval if such approval is necessary to comply with any tax or regulatory requirement, including for these purposes any approval requirement which is a prerequisite for exemptive relief from Section 16(b) of the Exchange Act for which or with which the Board deems it necessary or desirable to qualify or comply.

 

10.

TAX WITHHOLDING

The Company shall have the power to withhold, or require an Eligible Director to remit to the Company, an amount sufficient to satisfy federal, state and local tax withholding requirements on any Director Option granted under the Plan, and the Company may withhold payment of cash or issuance of Common Shares until such requirements are satisfied. Unless otherwise specified by the Board and reflected in the associated Option Agreement(s), an Eligible Director may elect, subject to such conditions as the Board shall impose, (a) to have Common Shares otherwise issuable under the Plan withheld by the Company or (b) to tender, either by actual delivery of Common Shares or by attestation, Common Shares acceptable to the Board, in each case having a Fair Market Value sufficient to satisfy all or part of the Eligible Director’s estimated total federal, state and local tax obligations associated with the transaction.

 

11.

REQUIREMENTS OF LAW

The granting of Director Options and the issuance of Common Shares upon exercise of Director Options shall be subject to all applicable laws, rules and regulations, and to such approval by any governmental agencies or national securities exchanges as may be required. Notwithstanding the foregoing, no Common Shares shall be issued under the Plan unless the Company is satisfied that such issuance will be in compliance with applicable federal and state securities laws. Certificates for Common Shares delivered under the Plan may be subject to such stock transfer orders and other restrictions as the Board may deem advisable under the rules, regulations and other requirements of the SEC, any national securities exchange upon which the Common Shares are then listed or traded, or any applicable federal or state securities laws. The Board may cause a legend or legends to be placed on any such certificate to make appropriate reference to such restrictions.

 

12.

SEVERABILITY

If any provision of the Plan or any Director Option is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or as to any Person or Director Option or would disqualify the Plan or any Director Option under any law deemed applicable by the Board, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Board, materially altering the intent of the Plan or the Director Option, such provision shall be stricken as to such jurisdiction, Person or Director Option and the remainder of the Plan and any such Director Options shall remain in full force and effect.

 

13.

INDEMNIFICATION

 

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Each individual who is or shall have been a member of the Board shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by him/her in connection with or resulting from any claim, action, suit or proceeding to which he/she may be made a party or in which he/she may be involved by reason of any action taken or failure to act by the Board under the Plan and against and from any and all amounts paid by him/her in settlement thereof, with the Company’s approval, or paid by him/her in satisfaction of any judgment in any such action, suit or proceeding against him/her, provided he/she shall give the Company an opportunity, at its own expense, to handle and defend the same before he/she undertakes to handle and defend it on his/her own behalf. The foregoing right of indemnification shall not be exclusive and shall be independent of any other rights of indemnification to which such individuals may be entitled under the Company’s Amended Articles of Incorporation or Code of Regulations, by contract, or as a matter of law.

 

14.

EFFECTIVE DATE AND DURATION OF PLAN

The Plan became effective upon approval by the Company’s shareholders on the Effective Date and was approved by the Company’s shareholders as amended on September 25, 2003. The Plan is being amended for compliance with the requirements of Section 409A of the Code effective as of November 1, 2008. The Plan shall terminate the day following the tenth annual meeting of shareholders of the Company at which directors are elected succeeding the Effective Date unless the Plan is terminated by exhaustion of the Common Shares available for issuance under the Plan. Notwithstanding the foregoing, no Director Option may be granted pursuant to this Plan on or after September 27, 2006. Director Options outstanding on the date the Plan is terminated shall continue to have force and effect in accordance with the provisions of the Option Agreements evidencing such Director Options.

 

15.

SECTION 409A

The 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 the Plan should be construed as a guarantee or entitlement of any particular tax treatment to an Eligible Director. None of the Company, the Board or any other Person shall have any liability with respect to any Eligible Director in the event that the Plan fails to comply with the requirements of Section 409A of the Code.

 

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Exhibit 10.8

WORTHINGTON INDUSTRIES, INC.

AMENDED AND RESTATED

1997 LONG-TERM INCENTIVE PLAN

SECTION 1. PURPOSE . The purposes of the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan (the “Plan”) are to encourage selected key employees of the Company to acquire a proprietary and vested interest in the growth and performance of the Company, to generate an increased incentive to contribute to the Company’s future success and prosperity, thus enhancing the value of the Company for the benefit of shareholders, and to enhance the ability of the Company to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability of the Company depends. This Plan became effective on the Effective Date and is being amended and restated effective as of November 1, 2008 for purposes of Section 409A of the Code.

SECTION 2. ADMINISTRATION. The Plan shall be administered by the Committee. The Committee shall have full power and authority, subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board, to: (i) select the Employees of the Company to whom Awards may from time to time be granted hereunder; (ii) determine the type or types of Award to be granted to each Participant hereunder; (iii) determine the number of Shares to be covered by each Award granted hereunder; (iv) determine the terms and conditions, not inconsistent with the provisions of the Plan, of any Award granted hereunder; (v) determine whether, to what extent and under what circumstances Awards may be settled in cash, Shares or other property or canceled or suspended; (vi) interpret and administer the Plan and any instrument or agreement entered into under the Plan; (vii) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (viii) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan. Decisions of the Committee shall be final, conclusive and binding upon all Persons, including the Company, any Participant, any shareholder, and any Employee of the Company. A majority of the members of the Committee may determine its actions and fix the time and place of its meetings.

SECTION 3. DURATION OF, AND SHARES SUBJECT TO PLAN.

(a) Term . The Plan shall remain in effect until terminated by the Board, provided, however, that no Incentive Stock Option may be granted after more than 10 years after the Effective Date.

(b) Shares Subject to the Plan . The maximum number of Shares in respect of which Awards may be granted under the Plan, subject to adjustment as provided in Section 3(c) of the Plan, is 4,500,000 Shares. Notwithstanding the foregoing, in no event shall more than 1,000,000 Shares be cumulatively available for Awards of Incentive Stock Options under the Plan and provided further that no Participant may be granted Awards in any one calendar year with respect to more than 200,000 Shares.

For the purpose of computing the total number of Shares available for Awards under the Plan, there shall be counted against the foregoing limitations the number of Shares subject to issuance upon exercise or settlement of Awards as of the dates on which such Awards are granted. Shares which were previously subject to Awards shall again be available for Awards under the Plan if any such Awards are forfeited, terminated, expire unexercised, settled in cash or property other than Shares or exchanged for other Awards (to the extent of such forfeiture, termination or expiration of such Awards), or if the Shares subject thereto can otherwise no longer be issued. Further, any Shares which are used as full or partial payment to Worthington by a Participant of the option price of Shares upon exercise of an Option shall again be available for Awards under the Plan.

Shares which may be issued under the Plan may be either authorized and unissued Shares or issued Shares which have been reacquired by Worthington. No fractional Shares shall be issued under the Plan.

(c) Changes in Shares . In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, stock split, reverse stock split, spin off, exchange of shares or similar transaction or other change in corporate structure or capitalization affecting the Shares or the price thereof, such adjustments and other

 

62


substitutions shall be made to the Plan and to Awards as the Committee in its sole discretion deems equitable or appropriate, including without limitation such adjustments in the aggregate number, class and kind of Shares which may be delivered under the Plan, in the aggregate or to any one Participant, in the number, class, kind and option or exercise price of Shares subject to outstanding Options, Stock Appreciation Rights or other Awards granted under the Plan, and in the number, class and kind of Shares subject to Awards granted under the Plan (including, if the Committee deems appropriate, the substitution of similar options to purchase the shares of, or other awards denominated in the shares of, another company) as the Committee may determine to be appropriate in its sole discretion, provided that the number of Shares or other securities subject to any Award shall always be a whole number. Any adjustment made pursuant to this Section 3(c) shall be made consistent with the requirements of Section 409A of the Code, to the extent applicable.

SECTION 4. ELIGIBILITY. Any Employee (excluding any member of the Committee) shall be eligible to be selected as a Participant.

SECTION 5. OPTIONS. Options may be granted hereunder to Participants, either alone or in addition to other Awards granted under the Plan. Any Option granted under the Plan shall be evidenced by an Award Agreement in such form as the Committee may from time to time approve. Any such Option shall be subject to the following terms and conditions and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall deem desirable. The provisions of Options need not be the same with respect to each Participant.

(a) Option Price. The option price per Share purchasable upon exercise of an Option shall be determined by the Committee in its sole discretion; provided that such option price shall not be less than the Fair Market Value of the Share on the date of the grant of the Option.

(b) Option Period. The term of each Option shall be fixed by the Committee in its sole discretion; provided that no Incentive Stock Option shall be exercisable after the expiration of ten years from the date the Incentive Stock Option is granted.

(c) Exercisability. Options shall be exercisable at such time or times as determined by the Committee at or subsequent to grant. Unless otherwise determined by the Committee at or subsequent to grant, no Incentive Stock Option shall be exercisable during the year ending on the day before the first anniversary date of the granting of the Incentive Stock Option.

(d) Method of Exercise. Subject to the other provisions of the Plan and any applicable Award Agreement, any Option may be exercised by the Participant in whole or in part at such time or times, and the Participant may make payment of the option price in such form or forms, including, without limitation, payment by delivery of cash, Shares already owned by the Participant or other consideration (including, where permitted by law, by delivery or surrender of outstanding vested and exercisable Awards, including through the withholding of Shares which would otherwise be issued in connection with the exercise of a vested and exercisable Option, having a Fair Market Value on the exercise date equal to the total option price, or by any combination of cash, Shares and other consideration unless the Committee may otherwise specify in the applicable Award Agreement.

(e) Incentive Stock Options. In accordance with rules and procedures established by the Committee, the aggregate Fair Market Value (determined as of the time of grant) of the Shares with respect to which Incentive Stock Options held by any Participant which are exercisable for the first time by such Participant during any calendar year under the Plan (and under any other benefit plans of the Company or of any parent or subsidiary corporation of the Company) shall not exceed $100,000 or, if different, the maximum limitation in effect at the time of grant under Section 422 of the Code, or any successor provision, and any Treasury Regulations promulgated thereunder. The terms of any Incentive Stock Option granted hereunder shall comply in all respects with the provisions of Section 422 of the Code, or any successor provision, and any Treasury Regulations promulgated thereunder.

SECTION 6. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be granted hereunder to Participants, either alone or in addition to other Awards granted under the Plan, and may, but need not, relate to a specific Option granted under Section 5. The provisions of Stock Appreciation Rights need not be the

 

63


same with respect to each Participant. Any Stock Appreciation Right related to a Nonstatutory Stock Option may be granted at any time thereafter before exercise, termination or expiration of such Nonstatutory Stock Option. Any Stock Appreciation Right related to an Incentive Stock Option must be granted at the same time such Incentive Stock Option is granted. In the case of any Stock Appreciation Right related to any Option, the Stock Appreciation Right or applicable portion thereof shall terminate and no longer be exercisable upon the termination or exercise of the related Option, except that a Stock Appreciation Right granted with respect to less than the full number of Shares covered by a related Option shall not be reduced until the number of Shares subject to the exercise or termination of the related Option exceeds the number of Shares not covered by the Stock Appreciation Right. Any Option related to any Stock Appreciation Right shall no longer be exercisable to the extent the related Stock Appreciation Right has been exercised. The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it shall deem appropriate.

SECTION 7. RESTRICTED STOCK.

(a) Issuance. Restricted Stock Awards may be issued hereunder to Participants, either alone or in addition to other Awards granted under the Plan, for such consideration as determined by the Committee in its sole discretion and the Committee may issue such Awards for no consideration or for such minimum consideration as may be required by applicable law. Restricted Stock Awards shall contain such limitations, terms and conditions and other provisions as determined by the Committee in its sole discretion. The provisions of Restricted Stock Awards need not be the same with respect to each Participant.

(b) Registration. Any Restricted Stock issued hereunder may be evidenced in such manner as the Committee in its sole discretion shall deem appropriate, including, without limitation, book-entry registration or issuance of a stock certificate or certificates. In the event any stock certificate is issued in respect of shares of Restricted Stock awarded under the Plan, such certificate shall be registered in the name of the Participant, and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award.

(c) Forfeiture. Except as otherwise determined by the Committee at the time of grant, upon termination of employment for any reason during the restriction period, all shares of Restricted Stock still subject to restriction shall be forfeited by the Participant and reacquired by Worthington, for the purchase price paid by the Participant or such other consideration (or no consideration) as set by the Committee as part of the terms and conditions of the Award, provided that except as provided in Section 11, in the event of a Participant’s retirement, permanent disability, other termination of employment or death, or in cases of special circumstances, the Committee may, in its sole discretion, waive in whole or in part any or all remaining restrictions with respect to such Participant’s shares of Restricted Stock. Unrestricted Shares, evidenced in such manner as the Committee shall deem appropriate, shall be issued to the Participant after the period of forfeiture, as determined or modified by the Committee, shall expire.

SECTION 8. PERFORMANCE AWARDS. Performance Awards may be issued hereunder to Participants, either alone or in addition to other Awards granted under the Plan, for such consideration as determined by the Committee, in its sole discretion, and the Committee may issue such Performance Awards for no consideration or for such minimum consideration as may be required by applicable law. The performance criteria to be achieved during any Performance Period, the length of the Performance Period and the other terms and conditions and provisions with respect to the Performance Award shall be determined by the Committee upon the grant of each Performance Award. Except as provided in Section 10, Performance Awards will be distributed only after the end of the relevant Performance Period. Performance Awards may be paid in cash, Shares or any combination thereof, in the sole discretion of the Committee at the time of payment. The performance levels to be achieved for each Performance Period and the amount of the Award to be distributed shall be conclusively determined by the Committee. Performance Awards may be paid in a lump sum or in installments following the close of the Performance Period. The maximum value of the property, including cash, that may be paid or distributed to any Participant pursuant to a grant of Performance Units made in any one calendar year shall be $2,500,000. The provisions of Performance Awards need not be the same with respect to each Participant.

SECTION 9. OTHER STOCK UNIT AWARDS.

 

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(a) Other Stock Unit Awards Administration. Other Awards of Shares and other Awards that are valued in whole or in part by reference to, or are otherwise based on, Shares or other property (“Other Stock Unit Awards”) may be granted hereunder to Participants, either alone or in addition to other Awards granted under the Plan. Other Stock Unit Awards may be paid in Shares, cash or any other form of property as the Committee shall determine.

(b) Terms and Conditions. Other Stock Unit Awards granted under this Section 9 may be issued for such consideration as determined by the Committee in its sole discretion, and the Committee may issue such Awards for no consideration or for such minimum consideration as may be required by applicable law. Shares (including securities convertible into Shares) purchased pursuant to a purchase right awarded under this Section 9 shall be purchased for such consideration as the Committee shall in its sole discretion determine, which shall not be less than the Fair Market Value of such Shares or other securities as of the date such purchase right is awarded. The terms and conditions and other provisions with respect to Other Stock Unit Awards shall be determined by the Committee. The provisions of Other Stock Unit Awards need not be the same with respect to each Participant.

SECTION 10. CHANGE IN CONTROL PROVISIONS.

(a) Impact of Event. Notwithstanding any other provision of the Plan to the contrary, but subject to the provisions of Section 10(d), in the event of a Change in Control:

(i) Any Options and Stock Appreciation Rights outstanding as of the date such Change in Control is determined to have occurred, and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, that in the case of a Participant holding a Stock Appreciation Right who is actually subject to Section 16(b) of the Exchange Act, such Stock Appreciation Right shall not become fully vested and exercisable unless it shall have been outstanding for at least six months at the date such Change in Control is determined to have occurred.

(ii) The restrictions applicable to any Restricted Stock shall lapse, and such Restricted Stock shall become free of all restrictions and become fully vested and transferable to the full extent of the original grant.

(iii) All Performance Awards shall be considered to be earned and payable in full, and any other restriction shall lapse and such Performance Awards shall be immediately settled or distributed.

(iv) The restrictions and other conditions applicable to any Other Stock Unit Awards or any other Awards shall lapse, and such Other Stock Unit Awards or such other Awards shall become free of all restrictions or conditions and become fully vested and transferable to the full extent of the original grant.

(b) Change in Control Cash-Out . Notwithstanding any other provision of the 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, a Participant holding an Option shall have the right, whether or not the Option is fully exercisable and in lieu of the payment of the option price for the Shares being purchased under the Option and by giving notice to Worthington, to elect (within the Exercise Period) to, surrender all or part of the 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 purchase price per Share under the Option (the “Spread”) multiplied by the number of Shares granted under the Option as to which the right granted under this Section 10(b) shall have been exercised.

(c) Provisions not Applicable. The provisions of this Section 10 shall not apply (i) if the Committee determines at the time of grant that such Section shall not apply 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 matters shall be Continuing Directors.

SECTION 11. CODE SECTION 162(m) PROVISIONS.

 

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(a) Applicability. Notwithstanding any other provisions of the Plan, if the Committee determines at the time Restricted Stock, a Performance Award or an Other Stock Unit Award is granted to a Participant that such Participant is, or is likely to be at the time such Participant recognizes income for federal income tax purposes in connection with such Award a Covered Employee then the Committee may provide that this Section 11 is applicable to such Award.

(b) Performance Goals. If an Award is subject to this Section 11, then the lapsing of restrictions thereon and the distribution of cash or Shares pursuant thereto, as applicable, shall be subject to the achievement of one or more objective performance goals established by the Committee, which shall be based on the attainment of one or any combination of the following: specified levels of earnings per share from continuing operations, operating income; revenues; gross margin; return on operating assets; return on equity; economic value added; stock price appreciation; total stockholder return (measured in terms of stock price appreciation and dividend growth); or cost control, of the Company or an affiliate, business unit or division of the Company for or within which the Participant is primarily employed. Such performance goals also may be based upon attaining specified levels of performance under one or more of the measures described above relative to the performance of other corporations. Such performance goals shall be set by the Committee within the time period prescribed by, and shall otherwise comply with the requirements of, Section 162(m) of the Code and the Treasury Regulations promulgated thereunder.

(c) Limitations on Adjustments. Notwithstanding any provision of this Plan other than Section 10, with respect to any Award that is subject to this Section 11, the Committee may not adjust upwards the amount payable pursuant to such Award, nor may it waive the achievement of the applicable performance goals except in the case of the death or disability of the Participant.

(d) Other Restrictions. The Committee shall have the power to impose such other restrictions on Awards subject to this Section 11 as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements for “performance-based compensation” within the meaning of Section 162(m)(4)(B) of the Code or any successor provision.

SECTION 12. AMENDMENTS AND TERMINATION. The Board may amend, alter or discontinue the Plan, but no amendment, alteration, or discontinuation shall be made that would impair the rights of a Participant under an Award theretofore granted, without the Participant’s consent, or that without the approval of the shareholders of Worthington would:

(a) except as is provided in Section 3(c) of the Plan, increase the total number of Shares reserved for the purpose of the Plan; or

(b) change the employees or class of employees eligible to participate in the Plan.

The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, but no such amendment shall impair the rights of any Participant without the Participant’s consent.

SECTION 13. GENERAL PROVISIONS.

(a) No Assignment. Unless the Committee determines otherwise at the time the Award is granted, no Award, and no Shares subject to Awards described in Section 9 which have not been issued or as to which any applicable restriction, performance period has not lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered, except by will or by the laws of descent and distribution; provided that, if so determined by the Committee, a Participant may, in the manner established by the Committee, designate a beneficiary to exercise the rights of the Participant with respect to any Award upon the death of the Participant. Each Award shall be exercisable, during the Participant’s lifetime, only by the Participant or, if permissible under applicable law, by the Participant’s guardian or legal representative.

(b) Term of Awards. The term of each Award shall be for such period of months or years from the date of its grant as may be determined by the Committee; provided that in no event shall the term of any Incentive

 

66


Stock Option or any Stock Appreciation Right related to any Incentive Stock Option exceed a period of 10 years from the date of its grant.

(c) No Right to Award. No Employee or Participant shall have any claim to be granted any Award under the Plan and there is no obligation for uniformity of treatment of Employees or Participants under the Plan.

(d) Written Agreement Required. The prospective recipient of any Award under the Plan shall not, with respect to such Award, be deemed to have become a Participant, or to have any rights with respect to such Award, until and unless such recipient shall have executed an agreement or other instrument evidencing the Award and delivered a fully executed copy thereof to Worthington, and otherwise complied with the then applicable terms and conditions.

(e) Adjustments. Except as provided in Section 11, the Committee shall be authorized to make adjustments in Performance Award criteria or in the terms and conditions of other Awards in recognition of unusual or nonrecurring events affecting the Company or its financial statements or changes in applicable laws, regulations or accounting principles. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem desirable to carry it into effect. In the event Worthington shall assume outstanding employee benefit awards or the right or obligation to make future awards in connection with the acquisition of another corporation or business entity, the Committee may, in its discretion, make such adjustments in the terms of Awards under the Plan as it shall deem appropriate.

(f) Cancellations and Forfeitures. The Committee shall have full power and authority to determine whether, to what extent, and under what circumstances, any Award shall be canceled or suspended. In particular, but without limitation, all outstanding Awards to any Participant shall be canceled if the Participant, without the consent of the Committee, while employed by the Company or after termination of such employment, becomes associated with, employed by, renders services to, or owns any interest in (other than any nonsubstantial interest, as determined by the Committee), any business that is in competition with the Company or with any business in which the Company has a substantial interest as determined by the Committee.

In the event a Participant terminates his or her employment with the Company for any reason whatsoever, and within 18 months after the date thereof becomes associated with, employed by, renders services to, or owns any interest in (other than any nonsubstantial interest, as determined by the Committee), any business that is in competition with the Company or with any business in which the Company has a substantial interest as determined by the Committee, the Committee, in its sole discretion, may require such 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 at any time during the period beginning on that date which is six months prior to the date of such Participant’s termination of employment with the Company.

(g) Securities Laws Restrictions. No Shares shall be issued under the Plan unless counsel for Worthington shall be satisfied that such issuance will be in compliance with applicable Federal and state securities laws. All certificates for Shares delivered under the Plan pursuant to any Award shall be subject to such stock-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable Federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

(h) Payment Requirements. Except as otherwise required in any applicable Award Agreement or by the terms of the Plan, recipients of Awards under the Plan shall not be required to make any payment or provide consideration other than the rendering of services.

(i) Withholding. Worthington shall be authorized to withhold from any Award granted or payment due under the Plan the amount of withholding taxes due in respect of an Award or payment hereunder and to take such other action as may be necessary in the opinion of Worthington to satisfy all obligations for the payment of such taxes. The Committee shall be authorized to establish procedures for election by Participants to satisfy such withholding taxes by delivery of, or directing Worthington to retain, Shares, unless otherwise specified by the Committee in the Award Agreement.

 

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(j) Other Arrangements. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is otherwise required, and such arrangements may be either generally applicable or applicable only in specific cases.

(k) Applicable Law. The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Ohio and applicable Federal law.

(l) Invalid Provisions. If any provision of this Plan is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan, it shall be stricken and the remainder of the Plan shall remain in full force and effect.

(m) 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.

(n) No Right to Employment. Neither the adoption of the Plan nor the granting of any Award shall confer upon any employee of the Company any right to continued employment with the Company, nor shall it interfere in any way with the right of the Company to terminate the employment of any of its employees at any time, with or without cause.

(o) Treatment as Compensation for Other Purposes. Payments and other benefits received by a Participant under an Award made pursuant to the 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 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 arrangements, 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. Awards under the Plan may be made in combination with or in tandem with, or as alternatives to, grants, awards or payments under any other Company plans. The 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.

SECTION 14. EFFECTIVE DATE OF THE PLAN. The Plan became effective on the Effective Date. The performance goals described in Section 11 of the Plan were reapproved by Worthington’s shareholders at the annual meeting of Worthington’s shareholders held on September 25, 2003 and again at the annual meeting of Worthington’s shareholders held on September 24, 2008.

SECTION 15. DEFINITIONS. As used in the Plan, the following terms shall have the meanings set forth below:

(a) “Acquiring Person” means any Person (any individual, firm, corporation or other entity) who or which, together with all Affiliates and Associates, has acquired or obtained the right to acquire the beneficial ownership of 25% or more of the Shares then outstanding.

(b) “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act

(c) “Award” shall mean any Option, Stock Appreciation Right, Restricted Stock Award, Performance Share, Performance Unit, Other Stock Unit Award, or any other right, interest, or option relating to Shares granted pursuant to the provisions of the Plan.

 

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(d) “Award Agreement” shall mean any written agreement, contract, or other instrument or document evidencing any Award granted by the Committee hereunder.

(e) “Board” shall mean the Board of Directors of Worthington

(f) A “Change in Control” shall have occurred when any Person (other than (i) the Company, (ii) any employee benefit plan of the Company or any trustee of or fiduciary with respect to any such plan when acting in such capacity, or (iii) any Person who, on the Effective Date of the Plan, was an Affiliate of the Company owning in excess of 10% of the outstanding shares of Worthington and the respective successors, executors, legal representatives, heirs and legal assigns of such Person), alone or together with its Affiliates and Associates, has acquired or obtained the right to acquire the beneficial ownership of 25% or more of the Shares then outstanding; provided, however, that with respect to any Award subject to Section 409A of the Code that is settled or distributed upon the occurrence of a Change in Control, no settlement or distribution of such Award shall be made unless the Change in Control also constitutes a “change in control event” within the meaning of Section 409A of the Code.

(g) “Change in Control Price Per Share” shall mean the price per Share (i) paid by the Acquiring Person in connection with the transaction(s) that results in the Change in Control; or (ii) at any time after the Change in Control and before the Participant exercises his election under Section 10(b), the Fair Market Value of the Shares.

(h) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.

(i) “Committee” shall mean the Compensation and Stock Option Committee of the Board, composed of no fewer than three directors, each of whom is a Non-Employee Director and an “outside director” within the meaning of Section 162(m) of the Code.

(j) “Company” shall mean Worthington Industries, Inc. a Delaware corporation, its subsidiaries, direct or indirect. Subsidiaries of the Company shall include any entity of which the Company owns 50% or more; provided, however, that with respect to any Award subject to Section 409A, “Company” shall mean Worthington and its subsidiaries with whom Worthington would be considered a single employer under Sections 414(b) and (c) of the Code[, but modified as permitted by Treasury Regulation §1.409A-1(b)(5)(iii)(E)(1)].

(k) “Continuing Director” means any person who was a member of the Board on the Effective Date of the 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 a Substantial Shareholder (as such term is defined in Article Seventh of Worthington’s Amended Articles of Incorporation) or, a Person designated (before his initial election or employment 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

(l) “Covered Employee” shall mean a “covered employee” within the meaning of Section 162(m)(3) of the Code.

(m) “Effective Date” shall mean September 18, 1997.

(n) “Employee” shall mean any salaried employee of the Company. Unless otherwise determined by the Committee in its sole discretion, for purposes of the Plan, an Employee shall be considered to have terminated employment and to have ceased to be an Employee if his or her employer ceases to be a subsidiary of Worthington, even if he or she continues to be employed by such employer.

(o) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto.

 

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(p) “Fair Market Value” The value of one Share on any relevant date, determined under the following rules:

[1] If the Shares are traded on an exchange or recognized market or quotation system on 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;

[2] If the Shares are traded over-the-counter with no reported closing price, the mean between the highest bid and the lowest asked prices on the relevant date, if it is a trading day, otherwise on the next trading day; or

[3] If neither subsections [1] or [2] of this definition apply, the fair market value as determined by the Board in good faith and consistent with any applicable provisions under the Code, except with respect to Options and SARs, in which event the fair market value as determined by the reasonable application of a reasonable valuation method taking into account all information material to the value of the Company satisfying the requirements of Code §409A.

(q) “Incentive Stock Option” shall mean an Option granted under Section 5 hereof that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto.

(r) “Non-Employee Director” shall have the meaning set forth in Rule 16b-3(b)(3) promulgated by the Securities and Exchange Commission under the Exchange Act or any successor definition adopted by the Securities and Exchange Commission.

(s) “Nonstatutory Stock Option” shall mean an Option granted under Section 5 hereof that is not intended to be an Incentive Stock Option.

(t) “Option” shall mean any right granted to a Participant under the Plan allowing such Participant to purchase Shares at such price or prices and during such period or periods as the Committee shall determine.

(u) “Other Stock Unit Award” shall mean any right granted to a Participant by the Committee pursuant to Section 9 hereof.

(v) “Participant” shall mean an Employee who is selected by the Committee to receive an Award under the Plan.

(w) “Performance Award” shall mean any Award of Performance Shares or Performance Units pursuant to Section 8 hereof.

(x) “Performance Period” shall mean that period established by the Committee at the time any Performance Award is granted or at any time thereafter during which any performance goal(s) specified by the Committee with respect to such Performance Award are to be measured.

(y) “Performance Share” shall mean any grant pursuant to Section 8 hereof of a unit valued by reference to a designated number of Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including, without limitation, cash, Shares, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter.

(z) “Performance Unit” shall mean any grant pursuant to Section 8 hereof of a unit valued by reference to a designated amount of property other than Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including, without limitation, cash, Shares, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter.

 

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(aa) “Person” shall mean any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, limited liability company, other entity or government or political subdivision thereof.

(bb) “Restricted Stock” shall mean any Share issued with the restriction that the holder may not sell, transfer, pledge, or assign such Share and with such other restrictions as the Committee, in its sole discretion, may impose (including, without limitation, any restriction on the right to vote such Share, and the right to receive any cash dividends), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate.

(cc) “Restricted Stock Award” shall mean an award of Restricted Stock under Section 7 hereof.

(dd) “Shares” shall mean the common shares, without par value, of Worthington and such other securities of Worthington as the Committee may from time to time determine.

(ee) “Stock Appreciation Right” shall mean any right granted to a Participant pursuant to Section 6 hereof to receive, upon exercise by the Participant, the excess of (i) the Fair Market Value of one Share on the date of exercise over (ii) the grant price of the right on the date of grant, or if granted in connection with an outstanding Option on the date of grant of the related Option, as specified by the Committee in its sole discretion, which, other than in the case of substitute Awards, shall not be less than the Fair Market Value of one Share on such date of grant of the right or the related Option, as the case may be. Any payment by Worthington in respect of such right may be made in cash, Shares, other property, or any combination thereof, as the Committee, in its sole discretion, shall determine.

(ff) “Treasury Regulations” means any regulations promulgated by the Department of Treasury and/or Internal Revenue Service under the Code.

(gg) “Whole Board” means the total number of directors which Worthington would have if there were no vacancies

(hh) “ Worthington ” shall mean Worthington Industries, Inc., an Ohio corporation.

SECTION 16. SECTION 409A. This Plan is intended to comply with or be exempt from the requirements of Section 409A of the Code and the Treasury Regulations promulgated thereunder, as applicable, 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 Company, the Board, the Committee or any other Person shall any liability with respect to any Participant in the event this Plan fails to comply with the requirements of Section 409A of the Code.

 

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Exhibit 10.9

WORTHINGTON INDUSTRIES, INC.

AMENDED AND RESTATED

2006 EQUITY INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS

1.00 PURPOSE

The Plan is intended to foster and promote the long-term financial success of the Company and Related Entities and to increase shareholder value by [1] providing Participants an opportunity to acquire and maintain an ownership interest in the Company and [2] encouraging Participants to remain as directors of the Company and put forth the maximum efforts for the success of the Company and Related Entities. This Plan is amended and restated effective as of November 1, 2008.

2.00 DEFINITIONS

When used in the Plan, the following words, terms and phrases have the meanings given to them in this section unless another meaning is expressly provided elsewhere in the Plan or clearly required by the context. When applying these definitions and any other word, term or phrase used in the Plan, the form of any definition or of any word, term or phrase will include any and all of its other forms.

Act . The Securities Exchange Act of 1934, as amended, or any successor statute of similar effect, even if the Company is not subject to the Act.

Annual Meeting. The annual meeting of the Company’s shareholders.

Award. Any Option, Restricted Stock, Restricted Stock Unit, Stock Appreciation Right or Whole Share granted under the Plan.

Award Agreement. The written or electronic agreement between the Company and each Participant that describes the terms and conditions of each Award. If there is a conflict between the terms of the Plan and the terms of any Award Agreement, the terms of the Plan will govern.

Board. The Company’s board of directors.

Business Combination. A “Business Combination” means the following: [1] the date that any Person, or more than one Person acting as a group, acquires ownership of stock of the Company that, together with the stock of the Company held by such Person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of the Company; [2] the date that any Person, or more than one Person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or group), ownership of stock of the Company possessing 30 percent or more of the total voting power of the stock of the Company; [3] the date that a majority of the members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election; or [4] the date that any Person or more than one Person acting as a group acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or group) assets from the Company that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisition. The definition of Business Combination shall be interpreted in a manner consistent with the definition of “change in control event” under Code §409A and Treasury Regulation §1.409A-3(i)(5).

Cause. Unless otherwise specified in the associated Award Agreement, removal from office for cause in accordance with Article SIXTH of the Company’s Amended Articles of Incorporation and the Ohio General Corporation Law.

Change in Control. Unless otherwise specified in the associated Award Agreement, a “Change in Control” will occur when any Person (other than [1] the Company or any Related Entity, [2] any employee benefit plan of the Company or any Related Entity or any trustee of or fiduciary with respect to any such plan when acting in such capacity, or [3] any Person who, on the Effective Date, was an Affiliate of the Company and owning in excess of ten

 

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percent of the outstanding Shares and the respective successors, executors, legal representatives, heirs and legal assigns of such Person), alone or together with its Affiliates and Associates, has acquired or obtained the right to acquire the beneficial ownership of 25 percent or more of Shares then outstanding. For purposes of this definition, “Affiliate” and “Associate” will have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Act.

Code. The Internal Revenue Code of 1986, as amended or superseded after the Effective Date, and any applicable rulings or regulations issued under the Code.

Company. Worthington Industries, Inc., an Ohio corporation, and any and all successors to it.

Director. A Person who, on an applicable Grant Date, [1] is an elected member of the Board (or has been appointed to the Board to fill an unexpired term and will continue to serve at the expiration of that term only if elected by shareholders) and [2] is not a Person who performs services for the Company or any Related Entity as a common-law employee. A Person’s status as a Director will be determined as of the Grant Date of each Award made to that Person.

Disability. Unless otherwise specified in the associated Award Agreement:

[1] With respect to the payment, exercise or settlement of any Award that is (or becomes) subject to Code §409A, [a]  the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months or [b]  the Participant is determined to be totally disabled by the Social Security Administration or the Railroad Retirement Board; and

[2] With respect to a Participant’s right to exercise or receive settlement of any Award or with respect to the payment, exercise or settlement of any Award not described in subsection [1] of this definition, the inability, by reason of a medically determinable physical or mental impairment, to engage in substantial gainful activity, for a period of 180 days after its commencement and such condition, in the opinion of a physician selected by the Company and reasonably acceptable to the Participant or the Participant’s legal representative, is total and permanent.

Effective Date. September 27, 2006.

Exercise Price. The amount, if any, a Participant must pay to exercise an Option or the amount upon which the value of a Stock Appreciation Right is based.

Expiration Date. The last date that an Option or Stock Appreciation Right may be exercised.

Fair Market Value. The value of one Share on any relevant date, determined under the following rules:

[1] If the Shares are traded on an exchange or recognized market or quotation system on 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;

[2] If the Shares are traded over-the-counter with no reported closing price, the mean between the highest bid and the lowest asked prices on the relevant date, if it is a trading day, otherwise on the next trading day; or

[3] If neither subsections [1] or [2] of this definition apply, the fair market value as determined by the Board in good faith and consistent with any applicable provisions under the Code, except with respect to Options and SARs, in which event the fair market value as determined by the reasonable application of a reasonable valuation method taking into account all information material to the value of the Company satisfying the requirements of Code §409A.

Grant Date. The date an Award is granted.

Option. An Award granted under Section 6.00.

Participant. Any Director to whom an Award has been granted and which is still outstanding.

Person. Any individual, corporation, partnership, limited liability company, association, joint-stock company, trust, unincorporated organization, government or political subdivision thereof or other entity.

 

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Plan. The Worthington Industries, Inc. Amended and Restated 2006 Equity Incentive Plan for Non-Employee Directors.

Prior Plan. The Worthington Industries, Inc. Amended and Restated 2000 Stock Option Plan for Non-Employee Directors, as amended from time to time. On or after September 27, 2006 no further awards will be issued under the Prior Plan, although awards may be granted under the Prior Plan before September 27, 2006 and the Prior Plan will remain in effect after September 27, 2006 for purposes of determining any grantee’s right to awards issued under the Prior Plan before that date.

Related Entity. Any entity that is or becomes related to the Company through common ownership as determined under Code §414(b) or (c), but modified as permitted under Treasury Regulations issued under any Code section relevant to the purpose for which the definition is applied.

Restricted Stock. An Award granted under Section 8.00.

Restricted Stock Unit. An Award granted under Section 9.00.

Restriction Period. The period over which the Board will determine if a Participant has met conditions placed on Restricted Stock or Restricted Stock Units.

Retirement. Unless otherwise specified in the associated Award Agreement, the retirement of a Director from service on the Board after having [1] attained the age of 65 or [2] served at least nine years as a member of the Board, unless the Board specifies a shorter period of required service which will in no event be fewer than six years.

Separation from Service. A “separation from service” as defined under Code §409A.

Shares. Common shares, without par value, of the Company or any security of the Company issued in substitution, exchange or in place of these common shares.

Stock Appreciation Right (“SAR”). An Award granted under Section 10.00.

Termination. A termination of the Director’s service on the Board for any reason.

Treasury Regulations. Any regulations promulgated by the Department of Treasury and/or Internal Revenue Service under the Code.

Whole Share. An Award granted under Section 7.00.

3.00 PARTICIPATION

3.01 Awards.

[1] Consistent with the terms of the Plan and subject to Section 3.01[2], the Board will [a] decide which Directors will be granted Awards and [b] establish the types of Awards to be granted and the terms and conditions relating to those Awards.

[2] The Board may establish different terms and conditions [a] for each type of Award, [b] for each Participant receiving the same type of Award and [c] for the same Participant for each Award received, whether or not those Awards are granted at different times.

[3] Subject to the limitations set forth in Section 4.04, in the sole discretion of the Board, and consistent with the terms and conditions of the Plan and applicable law, Awards also may be made in assumption of, or in substitution for, outstanding awards previously granted by the Company or any Related Entity or a company acquired by the Company or with which the Company combines.

3.02 Conditions of Participation. By accepting an Award, each Participant agrees:

[1] To be bound by the terms of the Award Agreement and the Plan and to comply with other terms and conditions imposed on the Award; and

[2] That the Board may amend the Plan and any Award Agreement without any additional consideration to the extent necessary to avoid penalties arising under Code §409A, even if those amendments reduce, restrict or eliminate rights granted under the Plan or an outstanding Award Agreement.

 

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4.00 ADMINISTRATION

4.01 Duties. The Board is responsible for administering the Plan and has all powers appropriate and necessary to that purpose. Consistent with the Plan’s objectives, the Board may adopt, amend and rescind rules and regulations relating to the Plan and has complete discretion to make all other decisions necessary or advisable for the administration and interpretation of the Plan. Any action by the Board will be final, binding and conclusive for all purposes and upon all Persons.

4.02 Delegation of Duties. In its sole discretion, the Board may delegate any ministerial duties associated with the Plan to any Person that it deems appropriate. However, the Board may not delegate any discretionary duties assigned to it or those duties that the Board is required to discharge to comply with applicable laws and regulations.

4.03 Award Agreement. As soon as administratively feasible after the Grant Date, the Board will prepare and deliver an Award Agreement to each affected Participant. The Award Agreement will describe:

[1] The terms of the Award, including, to the extent applicable, [a] the type of Award, [b] when and how the Award may be exercised, [c] any Exercise Price associated with the Award and [d] how the Award will or may be settled; and

[2] To the extent different from the terms of the Plan, any other terms and conditions affecting the Award.

4.04 Restriction on Repricing. No Award (including Options and SARs) may be “repriced.” For purposes of this restriction, “repricing” means any of the following or any other action that has the same effect: [1] lowering the Exercise Price of an Option or SAR after it is granted; [2] any other action that is treated as a repricing under generally accepted accounting principles; [3] canceling an Option or SAR at a time when its Exercise Price exceeds the Fair Market Value of the underlying Shares, in exchange for another Option, SAR, Restricted Stock or other Award, unless the cancellation and exchange occurs in connection with a merger, acquisition, spin-off or other similar corporate transaction; or [4] any other action that has the effect of “repricing” an Award, as defined under the rules of the securities exchange or other recognized market or quotation system on which the Shares are then listed or traded.

5.00 LIMITS ON SHARES SUBJECT TO AWARDS

5.01 Number of Authorized Shares. Subject to Section 5.03, the aggregate number of Shares reserved and available for Awards or which may be used to provide a basis of measurement for or to determine the value of an Award shall be:

[1] 200,000 Shares, which Shares shall be available for any Award; and

[2] The sum of the following, which shall be available only for Options:

[a] 200,000 Shares; plus

[b] The number of Shares that, on the Effective Date, are authorized and available to be granted under the Prior Plan, but which are not then subject to outstanding awards under the Prior Plan; plus

[c] The number of Shares that, on the Effective Date, are subject to awards issued under the Prior Plan, but which are subsequently forfeited under the terms of the Prior Plan without receipt of any consideration.

Shares described in Section 5.01[1] may be subject to any Awards issued under the terms and conditions described in the Plan and Award Agreements issued under the Plan. Shares described in Section 5.01[2] may only be subject to Options issued under the terms and conditions described in the Plan and Award Agreements issued under the Plan. Shares subject to Options shall be allocated to the Shares reserved and available for Options under Section 5.01[2] to the extent they are still available prior to being allocated to Shares available under Section 5.01[1].

The Shares to be delivered under the Plan may consist, in whole or in part, of treasury Shares or authorized but unissued Shares not reserved for any other purpose.

5.02 Adjustment in Number of Authorized Shares. As appropriate, the limits imposed under Sections 5.01 will be:

 

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[1] Conditionally reduced by the number of Shares underlying each Award; and

[2] Absolutely reduced by [a] the number of Shares issued upon the exercise or settlement of an Award other than a SAR, [b] the number of Shares subject to each SAR however settled and [c] a number of Shares equal to [i] the cash amount paid by the Company upon the exercise or settlement of an Award (other than an Option or SAR) that, under the applicable Award Agreement, was originally to be settled in Shares, divided by [ii] the Fair Market Value of a Share on the date of that exercise or settlement transaction; and

[3] Increased by the number of Shares subject to (or associated with) any Award (or part of an Award) that, for any reason, is forfeited, cancelled, terminated, relinquished, exchanged or otherwise settled without issuing Shares or without the payment of cash or any other consideration.

The number of Shares (if any) withheld to pay any Exercise Price or to satisfy any tax withholding obligation associated with the exercise or settlement of an Award (or part of an Award) will not be recredited to the number of authorized Shares.

5.03 Adjustment in Capitalization. If, after the Effective Date, there is a Share dividend or Share split, recapitalization (including payment of an extraordinary dividend), merger, consolidation, combination, spin-off, distribution of assets to shareholders, exchange of Shares or other similar corporate change affecting Shares, the Board will appropriately adjust [1] the number of Shares that may be issued subject to Awards that may or will be granted to Participants during any period, [2] the aggregate number of Shares available for Awards or subject to outstanding Awards (as well as any Share-based limits imposed under the Plan), [3] the respective Exercise Price, number of Shares and other limitations applicable to outstanding or subsequently granted Awards and [4] any other factors, limits or terms affecting any outstanding or subsequently granted Awards; provided, however, that any adjustment pursuant to this Section 5.03 shall be made in accordance with the rules of Code §409A, to the extent applicable.

6.00 OPTIONS

6.01 Nature of Award. An Option gives a Participant the right to purchase a specified number of Shares if the terms and conditions described in the Plan and the associated Award Agreement (including paying the Exercise Price) are met before the Expiration Date. However, an Option will be forfeited to the extent that the applicable terms and conditions have not been met before the Expiration Date or to the extent that the Option is not exercised before the Expiration Date. All Options granted under this Section 6.00 will be nonqualified stock options and are not intended to meet the requirements of Code §422.

6.02 Granting Options. At any time during the term of the Plan, the Board may grant Options to Directors. The Award Agreement associated with each Option grant will describe the Exercise Price, the Expiration Date (which may never be later than the tenth anniversary of the Grant Date), the first date that the Option may be exercised, procedures for exercising the Option and any other terms and conditions affecting the Option.

6.03 Exercise Price. Except to the extent necessary to implement Section 3.01[3], each Option will bear an Exercise Price at least equal to the Fair Market Value of a Share on the Grant Date.

6.04 Exercising Options. An Option may be exercised only if all applicable terms and conditions have been met before the Expiration Date and only by sending to the Board (or its designee) a completed exercise notice (in the form prescribed by the Board) along with payment of the Exercise Price in accordance with the method or methods described in the associated Award Agreement. In addition to any other method or methods which may be described in the associated Award Agreement, payment of the Exercise Price may be made in cash, or its equivalent, or, unless otherwise specified by the Board and reflected in the associated Award Agreement(s), by tendering, either actual delivery of Shares or by attestation, Shares acceptable to the Board, by the withholding of Shares which would otherwise be issued in connection with the exercise of the Option, or by a combination of the foregoing; provided that the combined value of all cash and cash equivalents and the Fair Market Value of any Shares so tendered to the Company as of the date of such tender or so withheld by the Company as of the date of such withholding is at least equal to the Exercise Price borne by the Option being exercised.

6.05 Rights Associated With Options. Unless otherwise specified in the associated Award Agreement, a Participant will have no voting or dividend rights with respect to the Shares underlying an unexercised Option.

 

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7.00 WHOLE SHARES

At any time during the term of the Plan, the Board may grant Whole Shares to Directors. Whole Shares may be granted on any basis and subject to any terms and conditions that the Board believes to be appropriate.

8.00 RESTRICTED STOCK

8.01 Nature of Award. Restricted Stock are Shares issued on the Award’s Grant Date which are subject to specified restrictions on transferability and forfeitability. Any restrictions on transferability and forfeitability will lapse at the end of the associated Restriction Period only if the terms and conditions specified in the Plan and the associated Award Agreement are met during the Restriction Period. However, Restricted Stock will be forfeited to the extent that applicable terms and conditions have not been met before the end of the Restriction Period.

8.02 Granting Restricted Stock. At any time during the term of the Plan, the Board may grant Restricted Stock to Directors. The Award Agreement associated with each Restricted Stock grant will describe the terms and conditions that must be met during the Restriction Period if the Award is to be earned and settled and any other terms and conditions affecting the Restricted Stock.

8.03 Earning Restricted Stock. Restricted Stock will be held by the Company as escrow agent and will be:

[1] Forfeited, if the applicable terms and conditions have not been met; or

[2] Released from escrow and distributed to the Participant as soon as administratively feasible after the last day of the Restriction Period, but in no event later than the 15th day of the third month following the later of the end of the calendar year or the Company’s taxable year in which the Restricted Stock is no longer subject to a substantial risk of forfeiture, if the applicable terms and conditions have been met.

Any fractional Share of Restricted Stock will be settled in cash.

8.04 Rights Associated With Restricted Stock. During the Restriction Period and unless otherwise specified in the associated Award Agreement:

[1] Each Participant to whom Restricted Stock has been issued may exercise full voting rights associated with that Restricted Stock; and

[2] Any dividends and other distributions paid with respect to such Restricted Stock will be held by the Company as escrow agent during the Restriction Period. At the end of the Restriction Period, such dividends or other distributions will be distributed to the affected Participant or forfeited as provided in Section 8.03 with respect to the Restricted Stock as to which they were paid. No interest or other accretion will be credited with respect to any dividends or other distributions held in this escrow account. If any dividends or other distributions are paid in Shares, those Shares will be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which such dividends or other distributions were paid.

9.00 RESTRICTED STOCK UNITS

9.01 Nature of Award. Restricted Stock Units give a Participant the unfunded, unsecured right to receive a specified number of Shares (or cash equal to the Fair Market Value of those Shares) in the future if the terms and conditions described in the Plan and the associated Award Agreement are met during the Restriction Period. However, Restricted Stock Units will be forfeited to the extent that applicable terms and conditions have not been met before the end of the Restriction Period.

9.02 Granting Restricted Stock Units. At any time during the term of the Plan, the Board may grant Restricted Stock Units to Directors. The Award Agreement associated with each Restricted Stock Unit grant will describe the terms and conditions that must be met during the Restriction Period if the Award is to be earned and settled, the form in which the Award will be settled if it is earned and any other terms and conditions affecting the Restricted Stock Units.

9.03 Earning Restricted Stock Units. Restricted Stock Units will be:

[1] Forfeited, if the applicable terms and conditions have not been met; or

[2] Settled in the manner described in Section 9.04, if the applicable terms and conditions have been met.

 

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9.04 Settling Restricted Stock Units. As soon as administratively feasible after the applicable terms and conditions have been met, but in no event later than the 15th day of the third month following the later of the end of the calendar year or the Company’s taxable year in which the Restricted Stock Units are no longer subject to a substantial risk of forfeiture, Restricted Stock Units will be settled [1] in full Shares equal to the number of Restricted Stock Units to be settled plus cash equal to the Fair Market Value of any fractional Share subject to a Restricted Stock Unit being settled, [2] for cash equal to the number of Restricted Stock Units to be settled, multiplied by the Fair Market Value of a Share on the settlement date, or [3] in a combination of Shares and cash computed under subsections 9.04[1] and [2]. The method of settling Restricted Stock Units will be described in the associated Award Agreement.

9.05 Rights Associated With Restricted Stock Units. Unless specified otherwise in the associated Award Agreement, a Participant will have no voting or dividend rights with respect to the Shares underlying Restricted Stock Units that have not been settled.

10.00 STOCK APPRECIATION RIGHTS

10.01 Nature of Award. A SAR gives a Participant the right to receive the difference between the Exercise Price of the SAR and the Fair Market Value of a Share on the date the SAR is exercised, but only if the terms and conditions described in the Plan and the associated Award Agreement are met before the Expiration Date. However, a SAR will be forfeited to the extent that applicable terms and conditions have not been met before the Expiration Date or to the extent that the SAR is not exercised before the Expiration Date.

10.02 Granting SARs. At any time during the term of the Plan, the Board may grant SARs to Directors. The Award Agreement associated with each SAR grant will describe the Exercise Price, the Expiration Date (which may never be later than the tenth anniversary of the Grant Date), the first date that the SAR may be exercised, procedures for exercising the SAR, the form in which the SAR will be settled if the SAR is earned and any other terms and conditions affecting the SAR.

10.03 Exercise Price. Except to the extent necessary to implement Section 3.01[3], each SAR will bear an Exercise Price at least equal to the Fair Market Value of a Share on the Grant Date.

10.04 Exercising and Settling SARs. SARs may be exercised only if all applicable terms and conditions have been met before the Expiration Date and only by sending to the Board (or its designee) a completed exercise notice (in the form prescribed by the Board). As soon as administratively feasible after the SARs are exercised, SARs will be settled in [1] full Shares equal to [a][i] the difference between the Fair Market Value of a Share on the date the SARs are exercised and the Exercise Price, multiplied by [ii] the number of SARs being exercised, and divided by [iii] the Fair Market Value of a Share on the date the SARs are exercised, plus [b] cash equal to the Fair Market Value of any fractional Share subject to the SARs being exercised, [2] cash equal to [a] the difference between the Fair Market Value of a Share on the date the SARs are exercised and the Exercise Price, multiplied by [b] the number of SARs being exercised or [3] a combination of full Shares and cash computed under subsections 10.04[1] and [2]. The method of settling SARs will be specified in the associated Award Agreement.

10.05 Rights Associated With SARs. Unless specified otherwise in the associated Award Agreement, a Participant will have no voting or dividend rights with respect to the Shares underlying an unexercised SAR.

11.00 TERMINATION/BUY OUT

11.01 Effect of Termination on Awards. Unless specified otherwise in the associated Award Agreement or the Plan, the following treatment will apply to Awards upon a Termination:

[1] Death, Disability or Retirement. If a Participant Terminates due to death, Disability or Retirement:

[a] All Options and SARs then held by the Participant (whether or not then exercisable) will become fully vested and exercisable on the Termination date and may be exercised at any time before the earlier of [i] the Expiration Date specified in the Award Agreement or [ii] the third anniversary of the Termination date.

[b] All Restricted Stock and Restricted Stock Units granted to the Participant will become fully vested on the Termination date.

[c] All Whole Shares granted to the Participant will be subject to the terms and conditions, if any, described in the associated Award Agreement.

 

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[2] Termination for Cause. If a Participant Terminates for Cause, all Awards that are outstanding (whether or not then exercisable) will be forfeited on the Termination date.

[3] Termination for any Other Reason. If a Participant Terminates for any reason not described in Section 11.01[1] or [2], [a] all Options and SARs that are outstanding on the Termination date and which are then vested and exercisable may be exercised at any time before the earlier of [i] the Expiration Date specified in the Award Agreement or [ii] the first anniversary of the Termination date and [b] all Options and SARs that are not then vested and exercisable and all other Awards that are outstanding will be forfeited on the Termination date. Notwithstanding the foregoing, the Board will have the right, in its sole discretion, to accelerate the vesting or exercisability of any Award upon a Participant’s Termination.

11.02 Code §409A. Regardless of any other provision in the Plan or the associated Award Agreement, if a Participant becomes entitled to the payment, exercise or settlement of any Award that is subject to Code §409A upon the Participant’s Termination, the payment, exercise or settlement of such Award will not be made or permitted before the Participant Separates from Service.

11.03 Other Limits on Exercisability or Settlement . Unless otherwise specified in the associated Award Agreement or other written agreement between the Participant and the Company or any Related Entity and regardless of any other Plan provision, all Awards granted to a Participant that have not been exercised or settled will be forfeited if the Participant:

[1] Without the Board’s written consent, which may be withheld for any reason or for no reason, serves (or agrees to serve) as an officer, director, consultant or employee of any proprietorship, partnership, corporation, limited liability company or other entity or becomes the owner of a business or a member of a partnership that competes with the Company or a Related Entity or renders any service to entities that compete with the Company or a Related Entity; or

[2] Deliberately engages in any action that the Board concludes could harm the Company or any Related Entity.

11.04 Buy Out of Awards. The Board, in its sole discretion, may offer to buy for cash or by substitution of another Award (but only to the extent that the offer and the terms of the offer do not, and on their face are not likely to, generate penalties under Code §409A, violate any other applicable law or violate the provisions of Section 4.04) any or all outstanding Awards held by any Participant, other than an Award subject to Code §409A, whether or not exercisable, by providing to that Participant written notice (“Buy Out Offer”) of its intention to exercise the rights reserved in this section and other information, if any, required to be included under applicable securities laws. If a Buy Out Offer is made, the Company will transfer to each Participant accepting the offer the value of the Award to be purchased or exchanged. The Company will complete any buy out made under this section as soon as administratively feasible, but no later than 60 days, after the date of the Participant’s acceptance of the Buy Out Offer. For purposes of this Section 11.04, the value of the Award subject to a Buy Out Offer shall be: (1) in the case of an Option or SAR, the difference between (a) the aggregate Fair Market Value, as of the date of the Buy Out Notice, of the Shares underlying each exercisable Option or SAR (or portion of each Option or SAR) to be cancelled and (b) the aggregate Exercise Price associated with each such exercisable Option or SAR (or portion thereof) to be cancelled, and (2) in the case of any other Award, the aggregate Fair Market Value, as of the date of the Buy Out Notice, of the Shares subject to the Award.

12.00 EFFECT OF BUSINESS COMBINATION OR CHANGE IN CONTROL

Upon a Business Combination or a Change in Control, and unless otherwise specified in the associated Award Agreement, all of a Participant’s Awards will become fully vested and exercisable.

13.00 AMENDMENT AND TERMINATION OF PLAN AND AWARD AGREEMENTS

13.01 Termination, Suspension or Amendment of the Plan. The Board may terminate, suspend or amend the Plan at any time without shareholder approval except to the extent that shareholder approval is required to satisfy requirements imposed by [1] applicable law or [2] any securities exchange, market or other quotation system on or through which the Company’s securities are listed or traded. Also, no termination, suspension or amendment may, without the consent of the affected Participant (and except as specifically provided in the Plan or the Award Agreement), adversely affect any Award granted before the termination, suspension or amendment. However,

 

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nothing in this section will restrict the Board’s right to amend the Plan without any additional consideration to affected Participants to the extent necessary to avoid penalties to the Participants arising under Code §409A, even if those amendments reduce, restrict or eliminate rights granted under the Plan or any Award Agreement before those amendments are adopted.

13.02 Amendment and Termination of Award Agreements. Without the mutual, written consent of both the Company and the affected Participant, once issued, an Award Agreement may not be amended except as specifically provided in the Plan or the Award Agreement. However, nothing in this section will restrict the Board’s right to amend an Award Agreement without additional consideration to the affected Participant to the extent necessary to avoid penalties to the Participant arising under Code §409A, even if those amendments reduce, restrict or eliminate rights granted under the Award Agreement before those amendments are adopted.

14.00 MISCELLANEOUS

14.01 Assignability. Except as described in this section or as provided in Section 14.02, an Award may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, except by will or the laws of descent and distribution and, during a Participant’s lifetime, may be exercised only by the Participant or the Participant’s guardian or legal representative. However, with the permission of the Board, a Participant or a specified group of Participants may transfer Awards to a revocable inter vivos trust of which the Participant is the settlor, or may transfer Awards to any member of the Participant’s immediate family, any trust, whether revocable or irrevocable, established solely for the benefit of the Participant’s immediate family, any partnership or limited liability company whose only partners or members are members of the Participant’s immediate family or an organization described in Code §501(c)(3) (“Permissible Transferees”). Any Award transferred to a Permissible Transferee will continue to be subject to all of the terms and conditions that applied to the Award before the transfer and to any other rules prescribed by the Board. A Permissible Transferee may not retransfer an Award except by will or the laws of descent and distribution and then only to another Permissible Transferee.

14.02 Beneficiary Designation. Each Participant may name a beneficiary or beneficiaries (who may be named contingently or successively) to receive or to exercise any vested Award that is unpaid or unexercised at the Participant’s death. Unless otherwise provided in the beneficiary designation, each designation made will revoke all prior designations made by the same Participant, must be made on a form prescribed by the Board and will be effective only when filed in writing with the Board. If a Participant has not made an effective beneficiary designation, the deceased Participant’s beneficiary will be his or her surviving spouse or, if none, 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 by the Participant and will not be inferred from any other evidence.

14.03 No Guarantee of Continuing Services. Except as otherwise specified in the Plan, nothing in the Plan may be construed as:

[1] Conferring on any Participant any right to continue as a Director;

[2] Guaranteeing that any Director will be selected to be a Participant; or

[3] Guaranteeing that any Participant will receive any future Awards.

14.04 Tax Withholding. The Company will withhold or collect any amount required to be remitted by the Company in advance payment of any taxes associated with the vesting, exercise or settlement of any Award. This amount may be [1] withheld from other amounts due to the Participant, [2] withheld from the value of any Award being settled or any Shares being transferred in connection with the exercise or settlement of an Award or from any compensation or other amount owing to the Participant or [3] collected directly from the Participant.

14.05 Indemnification. Each individual who is or was a member of the Board (or to whom any duties have been delegated under Section 4.02) is entitled, in good faith, to rely on or to act upon any report or other information furnished by any executive officer, other officer or other employee of the Company or any Related Entity, the Company’s independent auditors, consultants or any other agents assisting in the administration of the Plan. Board members (and any Person to whom any duties have been delegated under Section 4.02) and any officer of the Company or any Related Entity acting at the direction or in behalf of the Board or a delegee will not be personally liable for any action or determination taken or made in good faith with respect to the Plan and will, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any act or determination just described.

 

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14.06 No Limitation on Compensation. Nothing in the Plan is to be construed to limit the right of the Company or any Related Entity to establish other plans or to pay compensation to its directors, in cash or property, in a manner not expressly authorized under the Plan.

14.07 Requirements of Law. The grant of Awards and the issuance of Shares will 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 national securities exchange, market or other quotation system. Certificates for Shares delivered under the Plan may be subject to any stock transfer orders and other restrictions that the Board believes to be advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any securities exchange or other recognized market or quotation system upon which the Shares are then listed or traded, or any other applicable federal or state securities law. The Board may cause a legend or legends to be placed on any certificates issued under the Plan to make appropriate reference to restrictions within the scope of this section.

14.08 Governing Law. The Plan, and all agreements and notices hereunder, will be construed in accordance with and governed by the laws (other than laws governing conflicts of laws) of the State of Ohio.

14.09 No Impact on Benefits. Awards are not compensation for purposes of calculating a Participant’s rights under any employee benefit plan that does not specifically require the inclusion of Awards in calculating benefits.

14.10 Term of the Plan. The Plan will be effective on the Effective Date. Subject to Section 13.00, the Plan will terminate on the date following the tenth Annual Meeting at which Directors are elected succeeding the Effective Date; provided, however, that any Award outstanding on the day the Plan is terminated will continue to have force and effect in accordance with the provisions of the Plan and the Award Agreement.

14.11 Rights as Shareholders. Unless otherwise specified in the associated Award Agreement or as otherwise specifically provided in the Plan, Shares acquired through an Award [1] will bear all dividend and voting rights associated with all Shares and [2] will be transferable, subject to applicable federal securities laws, the requirements of any national securities exchange or other recognized market or quotation system on which Shares are then listed or traded or any blue sky or state securities laws.

14.12 Successors. The Plan will be binding on all successors and assigns of the Company and a Participant, including without limitation, the estate of the Participant and the executor, administrator or trustee of the estate, or any receiver or trustee in bankruptcy or representative of the Participant’s creditors.

14.13 Code §409A. It is intended the Plan be exempt from Code §409A and the Treasury Regulations promulgated thereunder, and the Plan shall be interpreted, administered and operated accordingly. Nothing herein shall be construed as an entitlement to or guarantee of any particular tax treatment to a Participant. None of the Company, the Board, or any other Person shall have any liability with respect to a Participant in the event the Plan fails to comply with the requirements of Code §409A.

 

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Exhibit 10.10

WORTHINGTON INDUSTRIES, INC.

AMENDED AND RESTATED

2005 NON-QUALIFIED DEFERRED COMPENSATION PLAN

(RESTATEMENT EFFECTIVE DECEMBER 2008)

 

 

 

 

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ARTICLE I – INTRODUCTION

 

1.1

Name and Adoption of Plan.

The Company originally adopted the Plan effective as of the Effective Date, as amended on November 17, 2005. The Company extends the Plan to any Company Subsidiary that adopts the Plan, subject to the terms described in Section 1.7. Effective as of the Restatement Effective Date, the Company amends and restates the Plan as described herein.

 

1.2

Purposes of Plan.

The purpose of the Plan is to provide deferred compensation for a select group of management or highly compensated employees of the Employers.

 

1.3

“Top Hat” Pension Benefit Plan.

The Plan is an “employee pension benefit plan” within the meaning of ERISA Section 3(2). The Plan is maintained, however, for a select group of management or highly compensated employees and, therefore, is exempt from Parts 2, 3 and 4 of Title 1 of ERISA. The Plan is not intended to qualify under Code Section 401(a).

 

1.4

Plan Unfunded.

The Plan is unfunded. All benefits will be paid from Employers’ general assets, which will continue to be subject to the claims of Employers’ creditors as described in Section 11.6.

 

1.5

Effective Date.

January 1, 2005.

 

1.6

Administration.

The Plan shall be administered by the Committee.

 

1.7

Participating Employers.

The Company may designate any Company Subsidiary as an Employer in the Plan.

As a condition to becoming an Employer, each Company Subsidiary shall be deemed to (a) designate the Committee as the entity responsible for Plan administration, (b) delegate to the Company, the Committee and the Executive Committee all power and authority to interpret, amend or terminate the Plan, as described in this document, and to discharge the duties and responsibilities described in Article VIII, (c) subject to Section 11.6, agree to make the payment of any Plan benefits accrued by its Employees under the Plan, and (d) comply with Section 11.4. An entity that ceases to be a Company Subsidiary will nevertheless remain responsible for any liabilities arising from or attributable to periods during which it was an Employer.

Notwithstanding the foregoing, any Company Subsidiary that was an Employer immediately prior to the Restatement Effective Date shall remain an Employer unless and until such Company Subsidiary ceases to be an Employer under this Plan.

ARTICLE II - DEFINITIONS AND CONSTRUCTION

 

2.1

Definitions.

For purposes of the Plan, the following words and phrases shall have the respective meanings set forth below, unless their context clearly requires a different meaning:

 

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Account ” means the bookkeeping account maintained by the Committee on behalf of each Participant pursuant to Article VI.

Affiliated Company ” means any Company Subsidiary with whom the Company, would be considered a single employer under Code Sections 414(b) and (c).

Annual Bonus Compensation ” means Bonus Compensation paid with respect to any service performed during an Annual Bonus Period.

Annual Bonus Period” means any Bonus Period of twelve months for which Bonus Compensation is determined.

Base Salary ” means the base rate of cash compensation paid by the Employers to or for the benefit of a Participant for services rendered or labor performed on or after the Effective Date including base pay a Participant could have received in cash in lieu of (i) deferrals pursuant to Section 4.1 or (ii) contributions made on his behalf to any qualified retirement or cafeteria plan maintained by the Employers for that Participant.

Base Salary Deferral ” means the amount of a Participant’s Base Salary which the Participant elects to have withheld on a pre-tax basis from his Base Salary and credited to his Account pursuant to Section 4.1. However, no Participant may defer any portion of his Base Salary that is earned before the later of the Effective Date or the first day of the Plan Year following the date that he files a properly completed Election Form with the Committee.

Beneficiary ” means the person or persons designated by the Participant in accordance with Section 7.2.

Bonus Compensation ” means the amount awarded to a Participant for a Bonus Period under the Employer’s Executive Bonus Program, Cash Profit Sharing, Amended and Restated 1997 Long-Term Incentive Plan, Annual Incentive Plan for Executives or a similar plan, including any amount the Participant could have received under such plan in cash in lieu of (i) deferrals pursuant to Section 4.1 or (ii) contributions made on his behalf to any qualified retirement or cafeteria plan maintained by the Employer for the Participant.

Bonus Deferral ” means the amount of a Participant’s Bonus Compensation which the Participant elects to have withheld on a pre-tax basis from his Bonus Compensation and credited to his account pursuant to Section 4.1.

Bonus Period ” means any fiscal quarter of the Company or such other period of twelve months or less for which Bonus Compensation is determined.

Code ” means the Internal Revenue Code of 1986, as amended, or any successor thereto, together with the rules, regulations and interpretations promulgated thereunder.

Committee ” means the committee appointed to administer the Plan in accordance with Article VIII.

Company ” means Worthington Industries, Inc. and any successor thereto.

Company Subsidiary ” means (i) any entity which is at least 100% owned, directly or indirectly, by the Company, and (ii) any other entity which is at least 40% owned, directly or indirectly, by the Company and which is designated as a Company Subsidiary for purposes of this Plan by the Company. Indirect ownership will be determined by applying rules issued under IRS Regulations §1.414(c)(4).

Deferral Date ” means the earliest of (a) the date selected by the Participant as his Deferral Date in the Election Form, which date (if not the Participant’s Separation From Service) must be at least one year after the end of the Bonus Period or pay period with respect to which the payment would otherwise be made; (b) the date of the Participant’s death; or (c) in the event of a Separation From Service for reasons other than Retirement, the Participant’s Separation From Service. If no Deferral Date is selected by the Participant, the Participant shall be deemed to have selected a Deferral Date which is the Participant’s Separation From Service.

 

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Deferrals ” means Base Salary Deferrals, Bonus Deferrals and Employer Contributions.

Directors ” means the Board of Directors of the Company.

Effective Date ” as set forth in Section 1.5.

Election Form ” means the written agreement(s) or other form(s) or method(s), adopted from time to time for the Plan, pursuant to which the Participant designates his Beneficiary; elects the amount of his Base Salary and/or his Bonus Compensation to be deferred into the Plan; the Deferral Date; the deemed investment and/or the form of payment for such amounts. The form of the Election Form(s) may be established and changed by the Committee at any time.

Employee ” means any common-law employee of an Employer.

Employer ” means the Company or a Company Subsidiary which has become a participating Employer in the Plan. A Company Subsidiary shall cease to be an Employer at such time as agreed between the Company and the Company Subsidiary or, if earlier, the date an Employer ceases to be a Company Subsidiary.

Employer Contribution ” means the amount, as determined by each Employer, credited by the Committee to the Account of a Participant as an Employer Contribution.

ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

Executive Committee ” means the Executive Committee of the Directors.

401(k) Plan ” means the Worthington Industries, Inc. Deferred Profit Sharing Plan, as in effect from time to time.

Highest Paid Employees ” means those employees who are considered to be “specified employees” of the Company or any Company Subsidiary within the meaning of IRS Regulations §1.409A-1(i).

IRS Regulations ” means the laws and regulations adopted by Congress, the United States Department of Treasury or Internal Revenue Service from time to time.

Partial-Year Bonus Compensation ” means Bonus Compensation paid with respect to services performed during a Partial-Year Bonus Period.

Partial-Year Bonus Period ” means any Bonus Period of less than twelve months for which Bonus Compensation is determined.

Participant ” means each Employee who has been selected for participation in the Plan and who has become a Participant pursuant to Article III.

Plan ” means this Worthington Industries, Inc. Amended and Restated 2005 Non-Qualified Deferred Compensation Plan, as amended from time to time.

Plan Year ” means the twelve consecutive month period commencing January 1 of each year and ending on December 31.

Restatement Effective Date ” means December 2008.

Retirement ” means, with respect to a Participant, a Separation From Service when such Participant’s age and years of service, as determined under the provisions of the 401(k) Plan, equals or exceeds 65.

Separation From Service ” means (i) with respect to a Participant whose Employer is the Company or an Affiliated Company, a “separation from service” within the meaning of IRS Regulations §1.409A-1(h) by the Participant from the Company and all Affiliated Companies or (ii) with respect to a Participant whose Employer is not the Company or an Affiliated Company, a “separation from service” within the meaning of

 

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IRS Regulations §1.409A-1(h) by the Participant from the Participant’s Employer and all entities with whom the Participant’s Employer would be treated as a single employer under Code Sections 414(b) and (c).

Unforeseeable Emergency ” means a severe financial hardship to the Participant within the meaning of IRS Regulations §1.409A-3(i)(3) resulting from (a) an illness or accident of the Participant or the Participant’s spouse, Beneficiary or dependent (as defined in Code Section 152, without regard to Sections 152(b)(1), (b)(2) and (d)(1)(B) thereof), (b) loss of the Participant’s property due to casualty, or (c) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

Valuation Date ” means the date the Accounts in the Plan are adjusted to reflect earnings and losses in accordance with the hypothetical investment directions, as set from time to time by the Committee.

 

2.2

Number and Gender.

Wherever appropriate herein, words used in the singular shall be considered to include the plural and words used in the plural shall be considered to include the singular. The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender.

 

2.3

Headings.

The headings of Articles and Sections herein are included solely for convenience, and if there is any conflict between such headings and the rest of the Plan, the text shall control.

ARTICLE III - PARTICIPATION AND ELIGIBILITY

 

3.1

Participation.

Participants in the Plan are those Employees who are both (a) members of a select group of highly compensated or management Employees of their Employer, as determined by the Committee, and (b) selected by the Committee, in its sole discretion, to be Participants. The Committee shall notify each Participant of his selection as a Participant and the time his participation may start which shall be effective as described in Section 3.2. A Participant shall remain eligible to continue participation in the Plan until his participation ceases as set forth below in Section 3.3.

 

3.2

Commencement of Participation.

An Employee may commence participation in the Plan on the later of (i) the date the Committee approves his participation or (ii)(A) with respect to Base Salary and Partial-Year Bonus Deferrals, as of the beginning of the Plan Year immediately following the date he returns to the Committee a properly completed Election Form or (B) with respect to Annual Bonus Deferrals as of the beginning of the Annual Bonus Period. However, none of the Company, the Employer, the Committee, the Plan or any other person shall be liable to any person if the Committee inadvertently fails to notify him of his eligibility to be a Participant.

An Employee who was participating in this Plan on the Effective Date shall remain a Participant unless and until he ceases to be a Participant in accordance with Section 3.3.

 

3.3

Cessation of Participation.

Notwithstanding any provision herein to the contrary, an individual who has become a Participant in the Plan shall cease to be a Participant hereunder effective as of the earliest of the date (a) he dies, (b) he otherwise ceases to be an Employee of at least one of the Employers, (c) he ceases to be a member of his Employer’s select group of highly compensated or management employees but remains an Employee of any Employer, (d) he is designated by the Committee as no longer a Participant or (e) his Employer ceases to be a Company Subsidiary or an Employer (but only if he is then an Employee of the affected Employer); provided, however, that any Deferral elections effective for the Plan Year in which participation ceases shall remain effective to the extent required by IRS Regulations. The Committee or the Company will

 

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notify a Participant who is still an Employee if he is no longer eligible to be a Participant. A person who has ceased to actively participate in the Plan as described in this Section will continue to be entitled to all rights and benefits (and subject to all limitations) described in the Plan other than the right to make additional Base Salary or Bonus Deferrals or to receive additional Employer Contributions.

ARTICLE IV – DEFERRALS

 

4.1

Deferrals by Participant.

Any Participant who desires to defer any portion of his Base Salary and/or Bonus Compensation must complete and deliver an Election Form to the Committee in such form as may then be prescribed and at the time set forth below.

(a) Base Salary . The Election Form to defer Base Salary for any Plan Year must be filed no later than December 31 of the immediately preceding Plan Year.

(b) Partial-Year Bonus Compensation . The Election Form to defer Partial-Year Bonus Compensation for any Plan Year must be filed no later than December 31 of the immediately preceding Plan Year in which the Partial-Year Annual Bonus Period begins.

(c) Annual Bonus Compensation . The Election Form to defer Annual Bonus Compensation for any Plan Year must be filed no later than the date that is six (6) months before the end of the performance period on which the Performance Bonus is based (or, if earlier, the date on which such Annual Bonus Compensation becomes readily ascertainable).

(d) Revocation of Deferral Elections . Except as provided in Section 7.4, a Base Salary Deferral and/or Bonus Deferral shall be irrevocable after the last day on which a Base Salary Deferral and/or Bonus Deferral may be made, as set forth above. The Committee, in its discretion, may set limits on the amount of Base Salary and/or Bonus Compensation that may be deferred under the Plan; provided that any changes in such limits may not apply to any Plan Year for which deferral elections have become irrevocable.

 

4.2

Time of Crediting of Deferrals.

Base Salary Deferrals and Bonus Deferrals shall be credited to the Account of each Participant at the same time as the Base Salary or Bonus Compensation would have otherwise been paid.

 

4.3

Employer Contributions.

The Employer may determine, in its sole discretion, to make Employer Contributions for any Participant or Participants as it elects. The amount of any Employer Contribution to be made for any Participant shall be determined in such manner as his Employer shall, in its sole discretion, deem appropriate and may be a different amount (or no amount) for each Plan Year and for each Participant. Employer Contributions shall be in the form of a credit to the Participant’s Account.

 

4.4

Timing of Employer Contributions.

Employer Contributions will be credited to the Participant’s Account as of the date specified by the Employer or, if no date is specified, as soon as administratively practical after they are declared.

A Participant shall be notified within a reasonable time of any Employer Contribution to be made on his behalf under the Plan.

 

4.5

Vesting.

A Participant shall be fully vested in his Account at all times except to the extent that the Employer establishes a deferred vesting schedule to apply to Employer Contributions made on or after the time the deferred vesting schedule is established.

 

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ARTICLE V - EARNINGS

 

5.1

Earnings and Investment.

Amounts credited to a Participant’s Account shall be credited with earnings and losses based on hypothetical investment directions made (or deemed to be made) by the Participant in accordance with investment options and procedures adopted and amended by the Committee from time to time. Any amounts credited to a Participant’s Account to which a Participant does not provide investment direction (or as to which no direction is permitted) shall be credited with earnings as if the Participant shall have elected the investment option provided for in the Plan or determined from time to time by the Committee for cases where no investment option is made. A Participant’s Account shall be adjusted as of each Valuation Date to reflect earnings and losses. The Committee retains the right to change, amend or eliminate investment options and procedures as it shall deem appropriate in its sole discretion.

 

5.2

Earnings after Cessation of Participation.

If the amount in a Participant’s Account is to be paid in installments, the amount remaining in the Account shall continue to be credited with earnings and losses based upon the Participant’s hypothetical investment elections, but the Committee may, in its sole discretion, limit the investment options that are available for such Account.

If a former Participant who is no longer an Employee (or is employed by an entity that ceases to be an Employer or a Company Subsidiary) still has an Account in the Plan, the amount in the Account shall continue to be credited with earnings and losses based upon the Participant’s hypothetical investment elections, but the Committee may, in its sole discretion, limit the investment options that are available for such Account.

ARTICLE VI – ACCOUNTS

 

6.1

Establishment of Accounts.

The Committee will establish a separate bookkeeping account for each Participant. Such account shall be credited with the Base Salary Deferrals and Bonus Deferrals made by the Participant pursuant to Section 4.1, and Employer Contributions made by the Employer pursuant to Section 4.3 and credited or charged, as the case may be, with the hypothetical investment results determined pursuant to Article V and taxes described in Section 6.4.

 

6.2

Subaccounts.

Within each Participant’s bookkeeping account, separate subaccounts shall be maint