<PAGE> 1
SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
WORTHINGTON INDUSTRIES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable
(2) Aggregate number of securities to which transaction applies:
Not Applicable
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
Not Applicable
(4) Proposed maximum aggregate value of transaction:
Not Applicable
(5) Total fee paid:
Not Applicable
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
Not Applicable
(2) Form, Schedule or Registration Statement No.:
Not Applicable
(3) Filing Party:
Not Applicable
(4) Date Filed:
Not Applicable
<PAGE> 2
WORTHINGTON INDUSTRIES, INC.
1205 DEARBORN DRIVE
COLUMBUS, OHIO 43085
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of
WORTHINGTON INDUSTRIES, INC.:
Notice is hereby given that the 1998 Annual Meeting of Shareholders of
Worthington Industries, Inc. (the "Company") will be held at the Worthington
Industries Training Center, 905 Dearborn Drive, Columbus, Ohio on September 24,
1998 at 2:00 P.M., local time. The meeting is being held for the following
purposes:
1. To elect four directors, each for a term of three years.
2. To consider and vote upon a proposal (the "Reincorporation
Proposal") which provides, among other things, for the change of
the Company's state of incorporation from Delaware to Ohio through
a merger of the Company into Worthington Industries, Inc., an Ohio
corporation and a wholly-owned subsidiary of the Company
("Worthington Ohio"), and for related changes to the Company's
organizational documents.
3. To ratify the selection of the firm of Ernst & Young LLP as
auditors of the Company for the fiscal year ending May 31, 1999.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
PLEASE COMPLETE, SIGN AND PROMPTLY RETURN YOUR PROXY IN THE ENCLOSED
ENVELOPE. THIS WILL NOT PREVENT YOU FROM VOTING IN PERSON AT THE MEETING.
IT WILL, HOWEVER, HELP ASSURE A QUORUM AND AVOID ADDED PROXY SOLICITATION
COSTS.
Very truly yours,
CHARLES D. MINOR, Secretary
August 20, 1998
<PAGE> 3
WORTHINGTON INDUSTRIES, INC.
1205 DEARBORN DRIVE
COLUMBUS, OHIO 43085
(614) 438-3210
------------------------------
PROXY STATEMENT
------------------------------
The enclosed Proxy is being solicited by the Board of Directors of
Worthington Industries, Inc. for use at the Annual Meeting of Shareholders (the
"Annual Meeting") to be held on September 24, 1998, or any adjournment(s)
thereof, and is being mailed to shareholders on or about August 20, 1998.
Without affecting any vote previously taken, the Proxy may be revoked by a
shareholder at any time before it is voted by delivering to the Company a
later-dated Proxy or by giving notice of revocation to the Company in writing or
in open meeting. All Proxies received prior to the Annual Meeting and not
revoked will be voted as specified thereon or, in the absence of specific
instructions to the contrary, will be voted (1) FOR the election as directors of
the nominees listed below under "ELECTION OF DIRECTORS"; (2) FOR the approval of
the Reincorporation Proposal as described below under "THE REINCORPORATION
PROPOSAL"; and (3) FOR the ratification of the selection of auditors.
The cost of soliciting the proxy will be borne by the Company. The Company
has retained Morrow & Company, Inc. to aid in the solicitation of proxies at a
fee of approximately $8,000 plus out-of-pocket expenses. Solicitation of proxies
may also be made by mail, personal interview, telephone, facsimile or telegraph
by the directors or regularly engaged officers and employees of the Company who
will not receive additional compensation for such activities.
As used herein, the term "Company" means Worthington Industries, Inc., the
Delaware corporation, or, where appropriate, Worthington Industries, Inc. and
its subsidiaries. The term "Common Shares" means shares of the Company's Common
Stock, $.01 par value.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
VOTING RIGHTS
The total number of outstanding Common Shares entitled to vote at the
Annual Meeting is 95,692,509 Common Shares. Only shareholders of record at the
close of business on August 3, 1998 are entitled to notice of and to vote at the
Annual Meeting or any adjournment(s) thereof. Each shareholder is entitled to
one vote for each Common Share held. There are no cumulative voting rights in
the election of directors.
Common Shares represented by signed Proxies that are returned to the
Company will be counted toward the quorum in all matters even though they are
marked as "Abstain," "Against" or "Withhold Authority" on one or more or all
matters or they are not marked at all. Broker/dealers, who hold their customers'
Common Shares in street name, may, under the applicable rules of the exchange
and other self-regulatory organizations of which the broker/dealers are members,
sign and submit Proxies for such Common Shares and may vote such Common Shares
on some matters, but broker/dealers may not vote such Common Shares on other
matters without specific instructions from the customer who owns such Common
Shares. Proxies signed and submitted by broker/dealers which have not been voted
on certain matters as described in the
1
<PAGE> 4
previous sentence are referred to as broker nonvotes. Such Proxies count toward
the establishment of a quorum. Abstentions, broker nonvotes and other shares not
voted will not be counted as shares voted on any of the proposals and the number
of shares on which a plurality or a majority is required will be reduced by the
number of broker nonvotes and shares not voted.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the only person known by the Company to be
the beneficial owner of more than five percent of the outstanding Common Shares
on August 3, 1998:
<TABLE>
<CAPTION>
COMMON
SHARES % OF COMMON
NAME AND ADDRESS OF BENEFICIALLY SHARES
BENEFICIAL OWNER OWNED OUTSTANDING
------------------- ------------ -----------
<S> <C> <C>
John H. McConnell.................................... 16,090,432(1) 16.8%
1205 Dearborn Drive
Columbus, Ohio 43085
</TABLE>
- ---------------
(1) Includes 13,402,982 Common Shares which are held of record by JDEL, Inc.
("JDEL"), a Delaware corporation, which is a wholly-owned subsidiary of
JMAC, Inc. ("JMAC"), a private investment company. Mr. McConnell is the
President of JDEL, and the directors of JDEL have given Mr. McConnell sole
voting and investment power with respect to the Common Shares of the Company
held by JDEL. JMAC is substantially owned, directly or indirectly, by John
P. McConnell and a family partnership of John H. McConnell, John P.
McConnell and their families. Also included are 40,000 Common Shares subject
to currently-exercisable options and 506,250 Common Shares held by John H.
McConnell's wife, as to which 506,250 Common Shares beneficial ownership is
disclaimed. The table does not include 2,428,312 Common Shares (2.5% of
Common Shares outstanding) held by an independent trustee, in trust for the
benefit of Mr. McConnell's wife, his adult daughter and his son, John P.
McConnell, over which Common Shares the trustee has investment and voting
power, subject to the approval of Mrs. McConnell. Beneficial ownership of
these 2,428,312 Common Shares is disclaimed.
ELECTION OF DIRECTORS
The Board of Directors has designated the nominees listed below for
election as directors of the Company for terms expiring in 2001. The enclosed
Proxy will be voted as specified thereon, or if no instructions are given, FOR
the following nominees; however, the persons designated as proxies reserve full
discretion to cast votes for other persons in the event the nominee who would
otherwise receive the votes is unable to serve. The Board of Directors has no
reason to believe that any of the nominees will be unable to serve.
Under Delaware law and the Company's By-Laws, the four nominees receiving
the greatest number of votes will be elected as directors. Common Shares as to
which the authority to vote is withheld will be counted for quorum purposes but
will not be counted toward the election of directors, or toward the election of
the individual nominees specified on the form of Proxy.
The following table sets forth the nominees for election to the Board of
Directors, the directors of the Company whose terms in office will continue, and
certain information, as of August 3, 1998, with respect to each nominee,
continuing director, executive officer named in the
2
<PAGE> 5
Summary Compensation Table who is not a nominee or continuing director and all
directors and executive officers as a group.
<TABLE>
<CAPTION>
DIRECTOR
CONTINUOUSLY PRINCIPAL COMMON SHARES
NAME AND AGE SINCE OCCUPATION BENEFICIALLY OWNED (1)
------------ ------------ ---------- ----------------------
<S> <C> <C> <C>
NOMINEES FOR TERMS EXPIRING IN 2001
John P. McConnell, 44 1990 Chairman and Chief Executive Officer 1,211,746(2)
Robert B. McCurry, 75 1972 Senior Advisor to President, Toyota Motor
Sales, USA, Inc. 50,455(3)
Gerald B. Mitchell, 70 1986 Retired Chairman and Chief Executive Officer,
Dana Corporation 2,584
Mary Schiavo, 42 1998 Attorney --
CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 1999
Peter Karmanos, Jr., 55 1997 Chairman, Chief Executive Officer and
Co-Founder of Compuware Corporation, which
develops and sells software products --
Pete A. Klisares, 62 1991 President and Chief Operating Officer of
Karrington Health, Inc., which operates
licensed assisted living residences 79,250
Donal H. Malenick, 59 1972 President and Chief Operating Officer 899,260
John H. McConnell, 75 1955 Chairman Emeritus and Founder 16,130,432(4)
James Petropoulos, 69 1976 Owner, James Petropoulos & Company, a
commercial real estate firm 249,013
CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 2000
John B. Blystone, 45 1997 Chairman, President & Chief Executive Officer
of SPX Corporation, which provides
components, service solutions and service
support to the motor vehicle industry 5,000
Charles R. Carson, 69 1986 Retired Senior Vice President, General
Electric Company 3,375
William S. Dietrich, 60 1996 Chairman, Dietrich Industries, Inc., a
subsidiary of the Company 22,000
John F. Havens, 71 1988 Private Investor, Retired Chairman of Banc
One Corporation 2,250
Charles D. Minor, 71 1962 Counsel, Vorys, Sater, Seymour and Pease LLP,
Attorneys at Law (5) 149,875(6)
NAMED EXECUTIVES, NON-DIRECTORS
Edward A. Ferkany, 61 N/A Executive Vice President 83,352
Ralph V. Roberts, 51 N/A Group President, The Worthington Steel
Company 17,327
Jay D. Wisner, 75 N/A President, The Gerstenslager Company, a
subsidiary of the Company 385,921
All directors and executive officers as a group (23 people).............................. 19,439,662(7)
</TABLE>
- ---------------
(1) All amounts are as of August 3, 1998. Unless otherwise indicated, each named
person has sole voting and investment power over the listed Common Shares,
or shares such power with his spouse. Common Shares subject to
currently-exercisable options are included in the shareholdings of the
executive officers, see "Executive Compensation -- Option Exercises and
Holdings." John H. McConnell (16.8%) and John P. McConnell (1.3%) are the
only directors, nominees or executive officers with beneficial ownership of
more than 1% of the Company's outstanding Common Shares.
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<PAGE> 6
(2) Included are 29,879 Common Shares held by John P. McConnell as custodian for
his minor children. Also includes 118,000 Common Shares held by The
McConnell Family Trust of which Mr. McConnell is co-trustee and has voting
and investment power. Also included are 149,428 Common Shares held in The
McConnell Educational Foundation, which benefits third parties, of which
John P. McConnell is a co-trustee and shares voting and investment power.
Beneficial ownership of these Common Shares is disclaimed. See also footnote
(1) under "Security Ownership of Certain Beneficial Owners."
(3) These 50,455 Common Shares are held by Mr. McCurry and his wife as trustees
of a family trust.
(4) See "Security Ownership of Certain Beneficial Owners."
(5) Vorys, Sater, Seymour and Pease LLP rendered legal services to the Company
during its last fiscal year and is rendering legal services to the Company
in the current fiscal year.
(6) Includes 47,000 Common Shares held by Mr. Minor's wife. Beneficial ownership
of these Common Shares is disclaimed.
(7) See Notes 1-6 above. These 19,439,662 Common Shares represent 20.3% of the
Company's outstanding Common Shares.
The principal occupation of each of the nominees and directors during the
past five years has been as indicated in the table above under "Principal
Occupation," except as follows:
John P. McConnell became Vice Chairman of the Company in June 1992. He was
named Chief Executive Officer in June, 1993, and Chairman of the Board in
September 1996. John P. McConnell is John H. McConnell's son.
John H. McConnell's principal occupation had been the Chief Executive
Officer of the Company from its founding in 1955 until May 31, 1993 at which
time he retired as CEO. He remained Chairman of the Board until September 1996
when he resigned that position and assumed the role of Chairman Emeritus and
Founder.
Mr. Klisares was Assistant to the Chairman of the Company from December
1991 until August 1993 and Executive Vice President from August 1993 to August
1997 when he was again named Assistant to the Chairman. In December, 1997, Mr.
Klisares resigned his position with the Company to become President and Chief
Operating Officer for Karrington Health, Inc.
Mr. Blystone was Vice President-General Manager of GE Superabrasives in
Columbus, Ohio from 1991 through 1994. In 1994, he became President and Chief
Executive Officer of Nuovo Pignone and The Europe Power Pole Plus of GE Power
Systems in Florence, Italy, a division of General Electric, positions which he
held until December 1995. At that time, Mr. Blystone accepted the positions of
Chairman, President and Chief Executive Officer of SPX Corporation.
Ms. Schiavo was Inspector General for the U. S. Department of
Transportation from 1990 through 1996. From 1997 through May 1998 she was
Enarson Professor of Public Policy, The Ohio State University. Ms. Schiavo is
also an author and consultant.
4
<PAGE> 7
The following directors and nominees are also directors of the companies
listed opposite their names:
<TABLE>
<S> <C>
Mr. Blystone......................... SPX Corporation
Mr. Dietrich......................... Carpenter Technologies Corporation; Mallard Fund
Mr. Havens........................... The W. W. Williams Company; Cardinal Health, Inc.;
Banc One Corporation (emeritus)
Mr. Klisares......................... Dominion Homes, Inc.; Huntington National Bank;
Karrington Health, Inc.; MPW Industrial Services Group
Inc.
Mr. J. H. McConnell.................. Karrington Health, Inc.
Mr. J. P. McConnell.................. Alltel Corporation
Mr. Mitchell......................... George Weston, Ltd. (Canada); West Point Stevens,
Inc.; Eastman Chemical Co.
</TABLE>
Four meetings of the directors of the Company were held during the fiscal
year ended May 31, 1998. Each incumbent director attended at least 75% of the
aggregate of (i) the total number of meetings of the directors and (ii) the
total number of meetings held by all committees of the directors on which he or
she served.
COMPENSATION OF DIRECTORS
Non-management directors are paid $6,000 per quarter plus $1,500 for each
attendance at board meetings and $1,000 ($1,500 for committee chairmen) for
attendance at meetings of committees of the directors.
The Company has adopted Deferred Compensation Plans pursuant to which
certain executive officers and directors have elected to defer a portion of
their bonuses or directors' fees. Under the Plans, participants may generally
elect to defer payment of these amounts until a specified date or until they are
no longer associated with the Company. Amounts deferred under these Plans accrue
interest at a rate equal to the percentage increase in the Company's book value
per share.
COMMITTEES OF DIRECTORS
The directors of the Company have an Audit Committee, whose members are
Messrs. Carson, Karmanos, Minor and Petropoulos and Katherine LeVeque, who is
retiring from the Board. The Committee met two times during fiscal 1998. Its
functions are to review the adequacy of the Company's system of internal
controls, to investigate the scope and adequacy of the work of the Company's
auditors, and to recommend to the directors a firm of accountants to serve as
the Company's auditors.
The directors of the Company have a Compensation and Stock Option
Committee. Members are Messrs. Blystone, Havens, Mitchell and McCurry. Mr.
Klisares serves as an ex officio member. The Committee met three times during
fiscal 1998. Its functions are to set and review all base and bonus compensation
for officers of the Company and to administer the Company's Stock Option and
Long-Term Incentive Plans.
The directors of the Company have a Nominating Committee, the members of
which are Messrs. Klisares, McCurry and John P. McConnell. The Committee met one
time during fiscal 1998. Its function is to recommend to the directors persons
to be nominated for election as directors. The Committee will consider nominees
recommended by shareholders, provided that such nominations are submitted in
writing not later than May 31 preceding the meeting to John P. McConnell, 1205
Dearborn Drive, Columbus, Ohio 43085. Each such submission must include a
5
<PAGE> 8
statement of the qualifications of the nominee, a consent signed by the nominee
evidencing a willingness to serve as a director if elected, and a commitment by
the nominee to meet personally with the Committee.
In accordance with the Company's By-Laws, any shareholder wishing to make a
nomination of a director otherwise than through the Nominating Committee must
give notice to the Secretary of the Company not less than 14 nor more than 50
days prior to the meeting at which directors will be elected, unless
shareholders are given less than 21 days' notice of the meeting, in which case
shareholder nominations would be permissible up to 7 days after the notice of
the meeting has been mailed. The notice of nomination must include the nominee's
name, address and principal occupation, the number of shares held beneficially
by such nominee and the nominating shareholder, a written consent of the
proposed nominee to serve if elected, and any other information concerning the
nominee required to be disclosed under the laws and regulations governing proxy
solicitations.
THE REINCORPORATION PROPOSAL
GENERAL
The Company's Board of Directors has unanimously approved, and for the
reasons described below, unanimously recommends that the Company's shareholders
approve a proposal (the "Reincorporation Proposal") which provides among other
things for the change of the Company's state of incorporation from Delaware to
Ohio. This change in the state of incorporation (the "Reincorporation") will be
accomplished through a merger (the "Merger") of the Company into Worthington
Industries, Inc. ("Worthington Ohio"), a wholly-owned subsidiary of the Company
which was recently formed as an Ohio corporation as a vehicle to effect the
Reincorporation. (The name of the surviving corporation following the Merger
will be Worthington Industries, Inc. and reference hereafter to Worthington Ohio
will, where appropriate, mean the surviving corporation.) For purposes of the
following discussion, the Company shall hereinafter sometimes be referred to as
"Worthington Delaware."
Upon consummation of the Merger, Worthington Ohio will succeed to all the
business, properties, assets and liabilities of Worthington Delaware and
Worthington Delaware's name; and the directors, officers and employees of
Worthington Delaware will all become directors, officers and employees of
Worthington Ohio. Outstanding Common Shares of Worthington Delaware (hereinafter
"Delaware Common Shares") will be converted into an equal number of common
shares, without par value, of Worthington Ohio (the "Ohio Common Shares").
Approval of the Reincorporation Proposal will not result in any change in the
name, business, management, location of the principal executive offices or other
facilities, capitalization, assets or liabilities of the Company. The Company's
Stock Option and Long-Term Incentive Plans will be continued by Worthington Ohio
and each outstanding option issued pursuant thereto will automatically be
converted into an option to purchase the same number of Ohio Common Shares at
the same option price per share and upon the same terms and subject to the same
conditions as set forth in such Plans. The Company's other employee benefit
plans and arrangements will also be continued by Worthington Ohio upon the same
terms and subject to the same conditions. See "Manner of Effecting the
Reincorporation" at page 14.
Since the Worthington Delaware Shares were designated as a Nasdaq National
Market security on the Record Date, under Section 262 of the DGCL, shareholders
of the Company who do not vote in favor of the Reincorporation Proposal will not
be entitled to appraisal rights in connection with the Reincorporation Proposal.
See "Manner of Effecting the Reincorporation" at page 14.
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<PAGE> 9
SUMMARY OF THE EFFECTS OF THE REINCORPORATION
The Reincorporation will change the law applicable to the Company's
corporate affairs from Delaware to Ohio law and will result in some differences
in shareholders' rights. The material differences between the Ohio General
Corporation Law (the "OGCL") and the DGCL are more fully discussed below.
Because the Company incorporated in Delaware, it is exposed to taxation not
only in Ohio, but also in Delaware, where it conducts no business. Following
payment of a one-time Ohio fee of $100,000 levied at the time of the
Reincorporation, Worthington Ohio's aggregate state tax liabilities, based on
present rates, will be approximately $120,000 per year less than that currently
paid by the Company. See "Reasons for the Proposed Reincorporation" at page 15.
The Reincorporation will also mean that the Company's corporate affairs
will be governed by the Amended Articles of Incorporation and Code of
Regulations of Worthington Ohio which are attached to this Proxy Statement as
Annex A and Annex B, respectively, and are herein referred to as the "New
Articles" and "New Regulations," respectively. The New Articles and New
Regulations will carry over many of the provisions of the Company's Certificate
of Incorporation (the "Present Charter") and By-Laws (the "Present By-Laws"),
and will also add certain additional provisions more fully discussed below.
Copies of the Present Charter and the Present By-Laws are available for
inspection at the office of the Company at the address set forth on the cover
page of this Proxy Statement and copies will be sent to shareholders upon
written request.
The following table briefly describes significant provisions of the DGCL
and the Present Charter and Present By-Laws applicable to Worthington Delaware
before the Reincorporation and significant provisions of the OGCL and the New
Articles and New Regulations applicable to Worthington Ohio after the
Reincorporation which are more fully described below and in "Certain Significant
Differences Between the Organizational Documents of Worthington Delaware and
Worthington Ohio" beginning at page 16 and "Comparison of Shareholders' Rights
Under Delaware and Ohio Law" beginning at page 17.
<TABLE>
<CAPTION>
PROVISIONS APPLICABLE TO
PROVISIONS APPLICABLE TO WORTHINGTON DELAWARE WORTHINGTON OHIO AFTER THE
BEFORE THE REINCORPORATION UNDER THE DGCL REINCORPORATION UNDER THE OGCL
AND THE PRESENT CHARTER AND PRESENT BY-LAWS AND THE NEW ARTICLES AND NEW REGULATIONS
- --------------------------------------------- ----------------------------------------
<S> <C>
1. Classified Board of Directors; directors 1. Classified Board of Directors; directors
serve three-year terms serve three-year terms
2. Advance notice of shareholder nominations 2. Advance notice of shareholder nominations
for election to the Board of Directors for election to the Board of Directors and
required of shareholder proposals relating to
business to be conducted at a meeting of
shareholders required
3. Subject to rights of any holders of 3. Subject to rights of any holders of
Preferred Shares, directors have sole Preferred Shares, number of directors may
authority to fix number of directors by be determined by affirmative vote of
affirmative vote of a majority of the shareholders holding 75% of voting power
whole authorized number of directors or by affirmative vote of a majority of
the whole authorized number of directors
4. Subject to rights of any holders of 4. Subject to rights of any holders of
Preferred Shares, vacancies in Board of Preferred Shares, vacancies in Board of
Directors may be filled solely by a Directors may be filled by a majority of
majority of directors then in office directors then in office or by
shareholders
</TABLE>
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<PAGE> 10
<TABLE>
<CAPTION>
PROVISIONS APPLICABLE TO
PROVISIONS APPLICABLE TO WORTHINGTON DELAWARE WORTHINGTON OHIO AFTER THE
BEFORE THE REINCORPORATION UNDER THE DGCL REINCORPORATION UNDER THE OGCL
AND THE PRESENT CHARTER AND PRESENT BY-LAWS AND THE NEW ARTICLES AND NEW REGULATIONS
- --------------------------------------------- ----------------------------------------
<S> <C>
5. Special meetings of shareholders may not 5. Special meetings of shareholders may be
be called by shareholders called by persons holding at least 50% of
the voting power
6. Present By-Laws may be amended by Board 6. New Regulations may be amended only by
of Directors without shareholder action shareholders
7. Action may not be taken by shareholders 7. Action may not be taken by shareholders
without a meeting without a meeting
8. Shareholders have no right of cumulative 8. Shareholders have no right of cumulative
voting in the election of directors voting in the election of directors
9. One-third of voting power constitutes 9. One-third of voting power constitutes
quorum for shareholder meeting called by quorum for shareholder meeting called by
Board of Directors; otherwise, majority of Board of Directors; otherwise, majority of
voting power required for a quorum voting power required for a quorum
10. Subject to rights of any holders of 10. Subject to rights of any holders of
Preferred Shares, directors may be Preferred Shares, directors may be
removed by shareholders, with or without removed by shareholders, with or without
cause, by vote of holders of 75% of cause, by vote of holders of 75% of
voting power or for cause, by vote of voting power or for cause, by vote of
three-fourths of entire Board of three- fourths of directors then in
Directors office
11. Article SIXTH of Present Charter requires 11. Article SEVENTH of New Articles requires
affirmative vote of 75% of voting power affirmative vote of 75% of voting power
(and a majority of the voting power (and a majority of the voting power
excluding the 15% shareholder in excluding the 15% shareholder in
question) for approval of a business question) for approval of a business
combination with a 15% shareholder (other combination with a 15% shareholder (other
than certain grandfathered holders) than certain grandfathered holders of
unless also approved by three-fourths of Delaware Common Shares) unless also
whole authorized number of directors (as approved by three-fourths of whole
long as a majority of directors acting on authorized number of directors (as long
matter are "Continuing Directors") as a majority of directors acting on
matter are "Continuing Directors")
12. Section 203 of DGCL prohibits business 12. Worthington Ohio has opted out of
combinations between Worthington Delaware coverage of Ohio Control Share
and a 15% shareholder for a period of Acquisition Statute and Ohio Merger
three years after the shareholder becomes Moratorium Statute
such, unless certain conditions are
satisfied
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
PROVISIONS APPLICABLE TO
PROVISIONS APPLICABLE TO WORTHINGTON DELAWARE WORTHINGTON OHIO AFTER THE
BEFORE THE REINCORPORATION UNDER THE DGCL REINCORPORATION UNDER THE OGCL
AND THE PRESENT CHARTER AND PRESENT BY-LAWS AND THE NEW ARTICLES AND NEW REGULATIONS
- --------------------------------------------- ----------------------------------------
<S> <C>
13. Affirmative vote of holders of 75% of 13. Affirmative vote of holders of 75% of
voting power required to adopt amendments voting power required to adopt amendments
to provisions of Present Charter to provisions of New Articles addressing
addressing classification of Board of classification of Board of Directors,
Directors, fixing of number of directors, fixing of number of directors, advance
advance notification of shareholder notification of shareholder nominations,
nominations, removal of directors and removal of directors and filling of
filling of vacancies, calling of special vacancies, calling of special meetings of
meetings of shareholders, requirement shareholders, requirement that
that shareholders take actions at a shareholders take actions at a meeting,
meeting, vote required for approval of vote required for approval of business
business combinations with 15% combinations with 15% shareholders (must
shareholders (must also include also include affirmative vote of majority
affirmative vote of majority of voting of voting power excluding 15%
power excluding 15% shareholder), factors shareholder), factors to be considered by
to be considered by directors in directors in evaluating significant
evaluating significant corporate corporate transactions and required vote
transactions, elimination of director for amendment of New Articles or New
liability for monetary damages and Regulations; otherwise, affirmative vote
required vote for amendment of Present of a majority of voting power required to
Charter or Present By-Laws; otherwise, adopt amendments to New Articles
affirmative vote of a majority of voting
power required to adopt amendments to
Present Charter
14. Affirmative vote of holders of 75% of 14. Affirmative vote of holders of 75% of
voting power required to adopt amendments voting power required to adopt amendments
to Present By-Laws to New Regulations unless three-fourths
of whole authorized number of directors
approves, in which case the required
affirmative vote is a majority of voting
power
15. Affirmative vote of not less than a 15. Affirmative vote of not less than a
majority of voting power required to majority of voting power required to
approve mergers and consolidations, approve mergers and consolidations,
approve the dissolution of Worthington approve the dissolution of Worthington
Delaware, or approve the sale, lease or Ohio, or approve the sale, lease,
exchange of all or substantially all of exchange, transfer or other disposition
the assets of Worthington Delaware; of all or substantially all of the assets
however, if a 15% shareholder is of Worthington Ohio; however, if a 15%
involved, the required vote is as shareholder is involved, the required
described in Item 11 above vote is as described in Item 11 above
</TABLE>
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<TABLE>
<CAPTION>
PROVISIONS APPLICABLE TO
PROVISIONS APPLICABLE TO WORTHINGTON DELAWARE WORTHINGTON OHIO AFTER THE
BEFORE THE REINCORPORATION UNDER THE DGCL REINCORPORATION UNDER THE OGCL
AND THE PRESENT CHARTER AND PRESENT BY-LAWS AND THE NEW ARTICLES AND NEW REGULATIONS
- --------------------------------------------- ----------------------------------------
<S> <C>
16. Personal liability of directors for 16. Director not liable for monetary damages
monetary damages for breach of fiduciary unless proved by clear and convincing
duty eliminated except in the instance of evidence that action or failure to act
(a) breach of duty of loyalty to was undertaken with deliberate intent to
Worthington Delaware or its shareholders, cause injury to, or with reckless
(b) acts or omissions not in good faith disregard for the best interest of,
or involving intentional misconduct or a Worthington Ohio
knowing violation of law, (c) the paying
of a dividend or the approval of a stock
repurchase illegal under the DGCL or (d)
any transaction from which director
derived improper personal benefit
17. Broad mandatory indemnification of 17. Broad mandatory indemnification of
directors and officers consistent with directors and officers consistent with
DGCL OGCL
18. Present Charter authorizes 150,000,000 18. New Articles authorize 150,000,000 Ohio
Delaware Common Shares, and 1,000,000 Common Shares, 500,000 Class A Preferred
shares of Preferred Stock, $1.00 par Shares, without par value, and 500,000
value Class B Preferred Shares, without par
value
</TABLE>
SIGNIFICANT CARRYOVER PROVISIONS
Authorized Preferred Shares
Under the Present Charter, Worthington Delaware is authorized to issue
1,000,000 shares of Preferred Stock, par value $1.00 per share (the "Delaware
Preferred Shares"). Under the New Articles, Worthington Ohio will be authorized
to issue 500,000 Class A Preferred Shares, without par value, and 500,000 Class
B Preferred Shares, without par value (collectively, the "Ohio Preferred
Shares"). The Present Charter and the New Articles authorize the Boards of
Directors of Worthington Delaware and Worthington Ohio, respectively, to issue
the Preferred Shares in one or more series and to establish the designations,
preferences and rights of each such series. The Board of Directors of
Worthington Delaware may establish the voting rights of each series of Delaware
Preferred Shares. The directors of Worthington Ohio have no such authority and,
until changed by the shareholders, each Class A Preferred Share issued by
Worthington Ohio will have one vote and each Class B Preferred Share issued by
Worthington Ohio will have ten votes on each matter submitted to holders of Ohio
Preferred Shares. See "Existing Charter Provisions With a Possible Anti-Takeover
Effect -- Authorized Preferred Shares" at page 33.
Classified Board; Shareholder Nominations
Both the Present Charter and Present By-Laws and the New Articles and New
Regulations provide for: (a) the classification of the Board of Directors into
three classes of directors so that each director serves for three years, with
one class being elected each year; and (b) the requirement that notice be given
of shareholder nominations for election to the Board of Directors in advance of
any meeting of shareholders called for the election of directors. These
provisions may be viewed as having a possible anti-takeover effect. See
"Existing Charter Provisions with a Possible Anti-Takeover Effect -- Classified
Board" and "-- Procedures for Making Nominations" at pages 29 and 30,
respectively.
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Amendment to Present Charter and New Articles; Amendment to Present By-Laws
and New Regulations
The Present Charter and the New Articles require the affirmative vote of
not less than 75% of the voting power of Worthington Delaware or Worthington
Ohio, respectively, in order to adopt amendments to the provisions of the
Present Charter and of the New Articles governing the classification of the
Board of Directors, the fixing of the number of directors, advance notification
of shareholder nominations, the removal of directors and filling of vacancies,
the required vote to approve business combinations with 15% shareholders (must
also include affirmative vote of a majority of the voting power excluding the
15% shareholder in question), the factors to be considered by directors in
evaluating significant corporate transactions, and the provisions of the Present
Charter and Present By-Laws and the New Articles and New Regulations governing
supermajority votes. A similar vote is required for the amendment of the
provisions of the Present Charter governing the elimination of director
liability for monetary damages. All other amendments to the Present Charter and
the New Articles require the affirmative vote of a majority of the voting power
of Worthington Delaware or Worthington Ohio, as appropriate. See "Comparison of
Shareholders' Rights under Delaware and Ohio Law -- Amendment to Present Charter
and New Articles" at page 17.
The Present Charter authorizes the Board of Directors to amend the Present
By-Laws and requires the affirmative vote of not less than 75% of the voting
power of Worthington Delaware in order for shareholders to adopt an amendment to
the Present By-Laws. The New Articles require the affirmative vote of 75% of the
voting power of Worthington Ohio in order to adopt an amendment to the New
Regulations, unless the amendment has been approved by three-fourths of the
authorized number of directors, in which case the amendment must be approved by
the affirmative vote of a majority of the voting power of Worthington Ohio.
Under the OGCL, the directors of Worthington Ohio do not have the authority to
amend the New Regulations. See "Certain Significant Differences Between the
Organizational Documents of Worthington Delaware and Worthington
Ohio -- Amendment to Present By-Laws and New Regulations" at page 16.
Special Vote for Business Combinations With 15% Shareholders
Under the Present Charter and the New Articles, the affirmative vote of 75%
of the voting power (and a majority of the voting power excluding the 15%
shareholder in question) of Worthington Delaware or Worthington Ohio, as
appropriate, is required for approval of mergers, business combinations and
other similar transactions ("Business Combinations") with the holder of at least
15% of the voting shares of Worthington Delaware or Worthington Ohio, as
appropriate, unless (a) the holder has been grandfathered under the applicable
provisions of the Present Charter or New Articles or (b) the Business
Combination has also been approved by three-fourths of the whole authorized
number of directors and a majority of the directors acting on the matter are
"Continuing Directors." See "Existing Charter Provisions with a Possible Anti-
Takeover Effect -- Special Vote for Certain Business Combinations" at page 30.
Constituencies Which May Be Considered By the Directors
The Present Charter and the New Articles give directors broad discretion to
consider a variety of constituencies in determining what is in the best
interests of Worthington Delaware or Worthington Ohio, as appropriate, including
employees, customers, suppliers and other constituents of the corporation and
its subsidiaries and the communities in which the corporation and its
subsidiaries operate or are located. See "Comparison of Director and Officer
Liability and Indemnification Under Delaware and Ohio Law" at page 25.
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<PAGE> 14
Cumulative Voting
The shareholders of Worthington Delaware do not have, and the shareholders
of Worthington Ohio will not have, the right of cumulative voting in the
election of directors. See "Comparison of Shareholders' Rights Under Delaware
and Ohio Law -- Cumulative Voting" at page 23.
Removal of Directors and Filling of Vacancies
Under the Present Charter and the New Articles, a director of Worthington
Delaware or Worthington Ohio, as appropriate, may be removed from office prior
to the expiration of such director's term by the shareholders, with or without
cause, by the holders of 75% of the voting power or for cause, by three-fourths
of the directors then in office. Both the Present Charter and the New Articles
and Regulations provide that vacancies in the Board of Directors may be filled
by a majority of the directors then in office. See "Existing Charter Provisions
with a Possible Anti-Takeover Effect -- Removal of Directors and Filing of
Vacancies" at page 32.
Pre-emptive Rights
Neither the shareholders of Worthington Delaware nor the shareholders of
Worthington Ohio have pre-emptive rights. See "Comparison of Shareholders'
Rights Under Delaware and Ohio Law -- Pre-emptive Rights" at page 25.
Shareholders Must Take Actions at a Meeting
The New Articles and the Present Charter do not permit actions to be taken
by the shareholders without a meeting. As a result, shareholders would be
assured of an opportunity to vote on matters coming before them at a duly called
meeting preceded by delivery to them of a proxy statement describing the action
proposed to be taken. See "Comparison of Shareholders' Rights Under Delaware and
Ohio Law -- Shareholders Must Take Actions at a Meeting" at page 23.
Quorum for Meetings of Shareholders
The Present By-Laws and the New Regulations provide that the holders of
one-third of the voting power of Worthington Delaware or Worthington Ohio,
respectively, must be present in person or by proxy to constitute a quorum at a
meeting of shareholders called by the Board of Directors. Otherwise, the holders
of a majority of the voting power of Worthington Delaware or Worthington Ohio,
as appropriate, must be present in order to constitute a quorum. See "Comparison
of Shareholders' Rights Under Delaware and Ohio Law -- Quorum for Meetings of
Shareholders" at page 23.
SIGNIFICANT CHANGES RESULTING FROM THE REINCORPORATION
The significant changes which would result from the reincorporation of
Worthington Delaware as an Ohio corporation are discussed in the paragraphs
which follow.
THE CHANGES DESCRIBED IN PARAGRAPHS l, 2 and 3 BELOW, MAY HAVE AN
ANTI-TAKEOVER IMPACT AND MAY MAKE TENDER OFFERS, PROXY CONTESTS AND CERTAIN
MERGERS MORE DIFFICULT. HOWEVER, THE INTENT OF THESE CHANGES IS NOT TO PREVENT
OFFERS TO ACQUIRE WORTHINGTON OHIO FROM BEING MADE. RATHER, THESE CHANGES ARE
DESIGNED TO ENCOURAGE POTENTIAL ACQUIRERS TO MAKE FINANCIALLY ATTRACTIVE
NON-COERCIVE OFFERS AND TO NEGOTIATE DIRECTLY WITH THE BOARD OF DIRECTORS.
1. Director Liability and Indemnification
The Ohio corporation laws would provide the directors of Worthington Ohio
with specific statutory direction to guide them in making decisions relating to
matters affecting the interests of
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<PAGE> 15
the corporation, including takeover proposals. These statutes codify the
directors' common law duty of care and, in part, their common law duty of
loyalty. In addition, a director of Worthington Ohio would be liable in damages
for actions taken (or not taken) as a director only if the plaintiff proved by
clear and convincing evidence that the director's action or failure to act was
done with deliberate intent to cause injury to, or with reckless disregard for
the best interests of, Worthington Ohio. Each officer and director of
Worthington Ohio would be entitled to advancement of litigation and similar
expenses related to lawsuits or claims arising out of such person's service. The
officers and directors of Worthington Ohio would also be entitled to a broad
right of indemnification against not only expenses but also judgments, fines and
amounts paid in settlement as long as their action or failure to act was not
done with deliberate intent to cause injury to, or with reckless disregard for
the best interest of, Worthington Ohio. See "Comparison of Director and Officer
Liability and Indemnification Under Delaware and Ohio Law" at page 26.
The Board of Directors may be deemed to have a conflict of interest in
recommending the adoption of the Reincorporation Proposal by the shareholders
because if the members of the Board of Directors of Worthington Ohio are sued in
their capacity as Board members, they may be able to take advantage of the broad
indemnification provisions of the New Regulations and the provisions of the OGCL
limiting their liability for monetary damages. The Board of Directors of
Worthington Delaware believes that a broad right of indemnification is necessary
to encourage and retain capable persons to serve as corporate directors. The
quality of a corporation's board of directors is a major factor in its long-term
success and any steps which improve the capacity of a corporation to attract and
retain the best possible directors is of considerable value to the shareholders.
The Board of Directors also believes that a broad right of indemnification and
limitations upon directors' liability for monetary damages are necessary to
promote the desirable end that directors will vigorously resist what they
consider unjustified suits and claims brought against them in their corporate
capacities. At the same time, the Board of Directors believes that directors
should not be completely immunized from personal liability resulting from
certain breaches of their duties by means of overly broad indemnification and
limitation of liability provisions. The indemnification provisions in the New
Regulations and the limitation of liability provisions of the OGCL attempt to
balance these competing concerns.
The Board of Directors of Worthington Delaware believes that the
indemnification provisions of the New Regulations are largely confirmatory of
the existing Ohio law. The Board recognizes that, notwithstanding any provision
in the New Regulations to the contrary, Worthington Ohio's ability to indemnify
pursuant to the provisions of the New Regulations, or pursuant to any
indemnification agreement, at all times would be subject to federal and state
public policy limitations which may prevent indemnification. The Board believes
that public policy would prevent indemnification for egregious intentional
wrongdoing, such as self-dealing or willful fraud. Insofar as indemnification
for liabilities under the Securities Act of 1933, as amended, may be permitted
under the indemnification provisions of the New Regulations, Worthington
Delaware understands that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy and is, therefore,
unenforceable.
Worthington Delaware is not aware of any current or past indemnification or
liability issues that will or could be presented to Worthington Ohio in the
event the Reincorporation Proposal is consummated.
2. Special Meetings
Under the Present By-Laws, a special meeting of shareholders may be called
by the Board of Directors. The Present By-Laws also authorize the Chairman of
the Board or the President to call special meetings of the shareholders of
Worthington Delaware. Under the New Regulations and consistent with the OGCL, a
special meeting of shareholders may be called by the Board of Directors or by
persons holding at least 50% of the voting shares of Worthington Ohio. In
addition, consistent with the OGCL, the New Regulations authorize the Chairman
of the Board, the
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<PAGE> 16
President (or the Vice President authorized to act in his absence, death or
disability) and the Secretary to call special meetings of Worthington Ohio's
shareholders. See "Comparison of Shareholders' Rights Under Delaware and Ohio
Law -- Special Meetings" at page 22.
3. Advance Notification of Shareholder Proposals Relating to Business to be
Conducted at Meeting of Shareholders
The Present By-Laws do not specifically address the requirement that
shareholders provide advance notification of proposals relating to business to
be conducted at a meeting of the shareholders. The New Regulations provide that
a shareholder must give notice of any proposal relating to business to be
conducted at a meeting of the shareholders in advance of such meeting. The
advance notification requirement provides an orderly procedure for the
notification of the Board of Directors of business that is to be presented at
shareholders' meetings. This will enable the Board of Directors to plan such
meetings and also, to the extent it deems it necessary or desirable, to inform
the shareholders, prior to a shareholders' meeting, of any new business that
will be presented at the meeting. The proposed procedure will, however, limit to
some degree the ability of shareholders to initiate discussion at a
shareholders' meeting and preclude the conducting of business at a particular
meeting if the proper notice procedures have not been followed. See "Certain
Significant Differences Between the Organizational Documents of Worthington
Delaware and Worthington Ohio -- Advance Notification of Shareholder Proposals"
at page 16.
4. No Amendment of New Regulations by Directors
The Present By-Laws may be amended by the Board of Directors without
shareholder action. Consistent with the OGCL, the New Regulations may be amended
only by the shareholders. See "Certain Significant Differences Between the
Organizational Documents of Worthington Delaware and Worthington
Ohio -- Amendment to Present By-Laws and New Regulations" at page 16.
MANNER OF EFFECTING THE REINCORPORATION
The following summary does not purport to be a complete description of the
Reincorporation Proposal and is qualified in its entirety by reference to the
New Articles, the New Regulations and the Agreement of Merger, dated as of
August 20, 1998 (the "Merger Agreement"), by and between Worthington Delaware
and Worthington Ohio, a copy of which is attached as Annex C.
The proposed Reincorporation will be effected by merging Worthington
Delaware with and into Worthington Ohio (the "Merger") pursuant to the terms of
the Merger Agreement. At the Effective Time (as defined in the Merger
Agreement), the separate corporate existence of Worthington Delaware will cease;
Worthington Ohio will succeed to all the business, properties, assets and
liabilities of Worthington Delaware and to Worthington Delaware's name; and the
directors, officers and employees of Worthington Delaware will become directors,
officers and employees of Worthington Ohio. Delaware Common Shares issued and
outstanding immediately prior to the Effective Time will, by virtue of the
Merger, be converted into an equal number of fully paid and non-assessable Ohio
Common Shares. Each of the Ohio Common Shares will have the same terms as the
Delaware Common Shares, subject to the differences arising by virtue of the
differences between Delaware and Ohio law and between the provisions of the
Present Charter and Present By-Laws and the New Articles and New Regulations.
From and after the Effective Time, each holder of a certificate
representing Delaware Common Shares (a "Delaware Certificate") will be deemed
for all purposes to be the holder of the number of Ohio Common Shares into which
the Delaware Common Shares represented by such holder's Delaware Certificate(s)
have been converted. Such Delaware Certificates will continue to represent Ohio
Common Shares and need not be surrendered for certificates representing Ohio
Common Shares. IT WILL NOT BE NECESSARY FOR SHAREHOLDERS OF WORTHINGTON
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DELAWARE TO SURRENDER THEIR DELAWARE CERTIFICATES FOR CERTIFICATES REPRESENTING
OHIO COMMON SHARES, ALTHOUGH THEY MAY DO SO IF THEY WISH. Each holder of a
Delaware Certificate outstanding immediately prior to the Effective Time will
receive upon surrender of his Delaware Certificate for cancellation, a new
certificate representing the same number of Ohio Common Shares.
Approval of the Reincorporation Proposal will not result in any change in
the name, business, management, location of the principal executive offices or
other facilities, capitalization, assets or liabilities of the Company. The Ohio
Common Shares will continue to be traded without interruption on The Nasdaq
National Market. Worthington Delaware's Stock Option and Long-Term Incentive
Plans will be continued by Worthington Ohio and each outstanding option issued
pursuant thereto will automatically be converted into an option to purchase the
same number of Ohio Common Shares at the same option price per share and upon
the same terms and subject to the same conditions as set forth in such plans.
Worthington Delaware's other employee benefit plans and arrangements will also
be continued by Worthington Ohio upon the same terms and subject to the same
conditions. Worthington Ohio will also assume all of the obligations of
Worthington Delaware under (a) the Indenture, dated as of May 15, 1996, as
supplemented, of Worthington Delaware to PNC Bank, Ohio, National Association,
as Trustee, and the Notes issued thereunder; and (b) the Worthington Industries,
Inc. Dividend Reinvestment and Stock Purchase Plan (the "DRIP").
It is anticipated that the Merger will become effective as soon as
practicable following shareholder approval. However, the Merger Agreement
provides that the Merger may be abandoned by the Board of Directors of
Worthington Delaware prior to the Effective Time, either before or after
shareholder approval, if the Board determines that such abandonment is in the
best interests of Worthington Delaware. The Board of Directors has made no
determination as to any circumstances which may prompt a decision to abandon the
proposed Reincorporation. In addition, the Merger Agreement may be amended prior
to the Effective Time, either before or after shareholder approval, provided
that the Merger Agreement may not be amended after shareholder approval if such
amendment would (i) alter or change the number or kind of shares or other
property to be received by shareholders of Worthington Delaware in the Merger,
(ii) alter or change any term of the New Articles or the New Regulations, or
(iii) alter or change any of the terms and conditions of the Merger Agreement if
such alteration or change would adversely affect the shareholders of Worthington
Delaware.
SINCE THE DELAWARE COMMON SHARES WERE DESIGNATED AS A NASDAQ NATIONAL
MARKET SECURITY ON THE RECORD DATE, SHAREHOLDERS OF WORTHINGTON DELAWARE WHO DO
NOT VOTE IN FAVOR OF THE REINCORPORATION PROPOSAL WILL NOT BE ENTITLED TO
APPRAISAL RIGHTS IN CONNECTION WITH THE REINCORPORATION PROPOSAL.
REASONS FOR THE PROPOSED REINCORPORATION
A major reason for incorporation under Ohio law is that the overall state
tax liability should decrease. Because Worthington Delaware incorporated in
Delaware, it is exposed to taxation not only in Ohio, but also in Delaware,
where it conducts no business. Following payment of a one-time Ohio fee of
$100,000, paid to the Ohio Secretary of State at the time of the filing of the
New Articles, Worthington Ohio's overall state tax liability, based on present
rates, will be approximately $120,000 per year less than that currently paid by
Worthington Delaware.
Another major reason for incorporation under Ohio law is that by expressly
broadening the scope of judgment and discretion which may be exercised by them,
it affords directors of Ohio corporations a better environment than does
Delaware in which to perform their duties. Both Ohio and Delaware law require
directors in the performance of their duties to be careful and disinterested and
to act in good faith, following appropriate consideration, in the best interests
of the corporation and its shareholders. Ohio law, however, addresses the
specifics of the obligations of directors more clearly than does Delaware in
several very important areas. For example, it
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provides explicit guidelines regarding the types of considerations which are
appropriate in corporate governance generally and, in particular, in the
evaluation of efforts to take over control. It also provides that a person
challenging the actions of directors, including actions involving a change in
control, has the burden of proving by clear and convincing evidence that the
directors have acted with deliberate intent to cause injury to the corporation
or with reckless disregard for the best interests of the corporation. The Ohio
statutes also provide that in most cases directors may be assured of the
advancement of funds to them by their corporation in connection with their
defense of litigation in which they are involved by reason of the performance of
their duties as directors. These provisions are believed by the Board of
Directors of Worthington Delaware to be of value to the shareholders by
providing a greater degree of assurance to a director regarding the range of
discretion and judgment which such director may exercise. The advantages and
disadvantages of the provisions of the OGCL and the New Regulations governing
indemnification and limitations upon directors' liability for monetary damages
are more fully discussed in "Significant Changes Resulting from the
Reincorporation -- Director Liability and Indemnification" at page 12.
Approval of the Reincorporation Proposal would also make available to the
shareholders the greater substantive rights and protections provided to
shareholders by the OGCL. For example, under the OGCL, only shareholders have
the authority to adopt, amend or repeal the corporation's regulations. Moreover,
under the OGCL, shareholders having 50% of the voting power are guaranteed the
right to call a special meeting of shareholders and shareholders are guaranteed
the right to fix the number of directors and fill vacancies in the Board of
Directors.
CERTAIN SIGNIFICANT DIFFERENCES BETWEEN THE ORGANIZATIONAL DOCUMENTS OF
WORTHINGTON DELAWARE AND WORTHINGTON OHIO
The New Articles and New Regulations differ from the Present Charter and
Present By-Laws in several significant respects. The most important of these
differences are described below.
AMENDMENT TO PRESENT BY-LAWS AND NEW REGULATIONS
The by-laws of a Delaware corporation may be amended by the shareholders
and, if the certificate of incorporation so provides, by the Board of Directors.
The Present Charter provides that the Board may make, repeal, alter, amend and
rescind the Present By-Laws without shareholder action, except so far as by-laws
adopted by the shareholders otherwise provide. The Present Charter requires the
affirmative vote of 75% of the voting power to approve an amendment, alteration,
repeal or rescission of the Present By-Laws if such amendment, alteration,
repeal or rescission is to be adopted by the shareholders rather than by the
Board of Directors.
The regulations of an Ohio corporation may be amended only by the
corporation's shareholders. The New Articles require the affirmative vote of 75%
of the voting power to approve an amendment, alteration, change or repeal of the
New Regulations unless it has been approved by three-fourths of the authorized
number of directors, in which case the required affirmative vote is a majority
of the voting power.
ADVANCE NOTIFICATION OF SHAREHOLDER PROPOSALS
The Present By-Laws do not specifically address the requirement that
shareholders provide advance notification of proposals relating to business to
be conducted at a meeting of the shareholders. The New Regulations provide that
a shareholder must give advance notice of any proposal relating to business to
be conducted at a meeting. To be timely, a shareholder's notice must be received
at the principal executive offices of Worthington Ohio not less than 30 days
prior to the meeting; provided, however, that if less than 40 days' notice of
the meeting is given or made to the shareholders, such notice must be so
received not later than the close of business on the tenth day following the day
on which the notice of the meeting was mailed. The shareholder's
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notice must set forth in writing as to each matter the shareholder proposes to
bring before the meeting: (1) a brief description of the business to be brought
before the meeting and the reasons for conducting such business at the meeting;
(2) the name and address, as they appear on Worthington Ohio's books, of the
shareholder of record proposing such business; (3) the class and number of
shares of Worthington Ohio that are beneficially owned by such shareholder; and
(4) any material interest of the shareholder in such proposal. A shareholder
will also be required to comply with all applicable requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations thereunder governing shareholder proposals. The determination as
to whether the notice provisions have been met will be made by the presiding
officer at the meeting. This provision applies only to new business and not to
other reports of officers, directors, or committees of the Board of Directors.
The federal proxy rules specify what constitutes timely submission for a
shareholder proposal to be included in the proxy statement. Such rules also
specify when a shareholder proposal, for which inclusion in the proxy statement
has not been sought, must be submitted or management proxies will be entitled to
use their discretionary voting authority should such proposal then be raised.
The advance notification requirements of the New Regulations are intended to
further an orderly procedure for the notification of the Board of Directors of
business that is to be presented at shareholders' meetings. This will enable the
Board of Directors to plan such meetings and also, to the extent it deems it
necessary or desirable, to inform the shareholders, prior to a shareholders'
meeting, of any new business that will be presented at the meeting. The Board of
Directors will also be able to make a recommendation or statement of its
position to enable the shareholders to better determine whether they desire to
attend the meeting or grant a proxy to the Board of Directors as to the
disposition of any such business. The proposed provision does not give the Board
of Directors any power to approve or disapprove the business that shareholders
desire to be conducted at the meeting, but it does provide for a more orderly
procedure for conducting the meeting.
The proposed procedure may limit to some degree the ability of shareholders
to initiate discussion at a shareholders' meeting. It will also preclude the
conducting of business at a particular meeting if the proper notice procedures
have not been followed. This will also have the effect of discouraging belated
attempts by third-parties to begin ill-considered, disruptive discussions at a
shareholders' meeting. Nothing in the proposed procedure precludes discussion by
any shareholder of any business properly brought before a shareholders' meeting.
COMPARISON OF SHAREHOLDERS' RIGHTS UNDER DELAWARE AND OHIO LAW
The rights of shareholders of Worthington Ohio will be governed by the OGCL
rather than the DGCL. The OGCL and the DGCL differ in a number of respects, and
it is not practical to summarize all of such differences here. However, the
following is a summary of certain significant differences between the provisions
of these laws as they might affect the rights and interests of shareholders of
Worthington Delaware, based on the provisions contained in the New Articles and
New Regulations.
AMENDMENT TO PRESENT CHARTER AND NEW ARTICLES
Under the DGCL, the directors of a corporation must adopt a resolution
setting forth a proposed amendment to the corporation's certificate of
incorporation, declaring its advisability and either calling a special meeting
of the shareholders entitled to vote thereon to consider the proposed amendment
or directing that the proposed amendment be considered at the next annual
meeting of shareholders. An amendment must be adopted by the affirmative vote of
the holders of a majority of the outstanding shares entitled to vote thereon, or
by a greater vote as provided in the certificate of incorporation. The Present
Charter requires the affirmative vote of the holders of 75% of the voting power
of Worthington Delaware in respect of the proposed amendment of the
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<PAGE> 20
provisions addressing the classification of the Board of Directors, the fixing
of the number of directors, the advance notification of shareholder nominations,
the removal of directors and the filling of vacancies, the calling of special
meetings of the shareholders, the requirement that shareholders take actions at
a meeting, the vote required for approval of business combinations with 15%
shareholders (must also include the affirmative vote of a majority of the voting
power excluding the 15% shareholder in question), the factors to be considered
by the directors in evaluating significant corporate transactions, the
elimination of director liability for monetary damages and the required vote for
the amendment of the Present Charter or Present By-Laws. Other amendments must
be approved by the affirmative vote of the holders of a majority of the voting
power.
Under the OGCL, an amendment to the articles must be adopted by the
affirmative vote of the holders of shares entitling them to exercise two-thirds
of the voting power of the corporation on the proposal, or a different
proportion but not less than a majority of the voting power, as provided in the
articles. The New Articles require the affirmative vote of the holders of 75% of
the voting power of Worthington Ohio in respect of the proposed amendment of the
provisions addressing the classification of the Board of Directors, the fixing
of the number of directors, the advance notification of shareholder nominations,
the removal of directors and the filing of vacancies, the calling of special
meetings of shareholders, the requirement that shareholders take actions at a
meeting, the vote required for approval of business combinations with 15%
shareholders (must also include the affirmative vote of a majority of the voting
power excluding the 15% shareholder in question), the factors to be considered
by the directors in evaluating significant corporate transactions and the
required vote for the amendment of the New Articles and the New Regulations.
Other amendments must be approved by the affirmative vote of the holders of a
majority of the voting power.
MERGERS AND CONSOLIDATIONS
Under the DGCL, an agreement of merger or consolidation must be approved
and declared advisable by the directors of each constituent corporation and
adopted by the affirmative vote of the holders of a majority of the outstanding
shares entitled to vote thereon, or by a greater vote as provided in the
certificate of incorporation. The Present Charter requires the affirmative vote
of the holders of 75% of the voting power of Worthington Delaware (and a
majority of the voting power excluding the 15% shareholder) if the merger or
consolidation involves a 15% shareholder of Worthington Delaware, unless (a) the
holder has been grandfathered under the Present Charter or (b) the merger or
consolidation has been approved by three-fourths of the authorized number of
directors. Otherwise, the required vote will be a majority of the voting power.
Under the DGCL, the separate vote of any class of shares is not required.
Additionally, the DGCL provides that, unless its certificate of incorporation
provides otherwise, no vote of the shareholders of the surviving corporation is
required to approve a merger if (i) the agreement of merger does not amend in
any respect the corporation's certificate of incorporation, (ii) each share
outstanding immediately prior to the effective date of the merger is to be an
identical outstanding or treasury share of the surviving corporation after the
effective date of the merger, and (iii) the number of common shares of the
surviving corporation to be issued in the merger plus the number of common
shares into which any other securities to be issued in the merger are initially
convertible does not exceed 20% of its common shares outstanding immediately
prior to the effective date of the merger. Under the DGCL, the merger of a
90%-owned subsidiary into its parent corporation need only be approved by the
board of directors of the parent corporation.
Under the OGCL, an agreement of merger or consolidation must be approved by
the directors of each constituent corporation and adopted by the shareholders of
each constituent Ohio corporation (other than the surviving corporation in the
case of a merger) holding at least two-thirds of the corporation's voting power,
or a different proportion but not less than a majority of the voting power, as
provided in the articles. The New Articles require the affirmative vote of the
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holders of 75% of the voting power of Worthington Ohio (and a majority of the
voting power excluding the 15% shareholder) if the merger or consolidation
involves a 15% shareholder of Worthington Ohio, unless (a) the holder has been
grandfathered under the New Articles or (b) the merger or consolidation has been
approved by three-fourths of the authorized number of directors. Otherwise, the
required vote will be a majority of the voting power. In the case of a merger,
the agreement must also be adopted by the shareholders of the surviving
corporation by similar vote, if one or more of the following conditions exist:
(a) the articles or regulations of the surviving corporation then in effect
require that the agreement be adopted by the shareholders or by the holders of a
particular class of shares of that corporation; (b) the agreement conflicts with
the articles or regulations of the surviving corporation then in effect, or
changes the articles or regulations, or authorizes any action that, if it were
being made or authorized apart from the merger, would otherwise require adoption
by the shareholders or by the holders of a particular class of shares of that
corporation; (c) the merger involves the issuance or transfer by the surviving
corporation to the shareholders of the other constituent corporation or
corporations of such number of shares of the surviving corporation as will
entitle the holders of the shares immediately after the consummation of the
merger to exercise one-sixth or more of the voting power of that corporation in
the election of directors; or (d) the agreement of merger makes such change in
the directors of the surviving corporation as would otherwise require action by
the shareholders or by the holders of a particular class of shares of that
corporation. Under the OGCL, the merger of a 90%-owned subsidiary into its
parent corporation need only be approved by the board of directors of each
constituent Ohio corporation.
OTHER CORPORATE TRANSACTIONS
The DGCL does not require shareholder approval in the case of combinations
and majority share acquisitions, and provides for a majority vote on the
disposition of all or substantially all of a corporation's assets and on
dissolutions, unless a greater vote is provided for in the certificate of
incorporation. The Present Charter requires the affirmative vote of the holders
of 75% of the voting power of Worthington Delaware (and a majority of the voting
power excluding the 15% shareholder in question) if the transaction involves a
non-grandfathered 15% shareholder of Worthington Delaware and has not been
approved by three-fourths of the authorized number of directors. Otherwise, the
required vote will be a majority of the voting power.
Subject to certain exceptions, under the OGCL, the approval of two-thirds
of the voting power of the corporation, or a different proportion (not less than
a majority of the corporation's voting power) as provided in the articles, is
required for (i) the consummation of combinations and majority share
acquisitions involving the transfer or issuance by the acquiring corporation of
such number of shares as would entitle the holders thereof to exercise at least
one-sixth of the voting power of such corporation in the election of directors
immediately after the consummation of such transaction, (ii) the disposition of
all or substantially all of the corporation's assets other than in the regular
course of business and (iii) voluntary dissolutions. The New Articles requires
the affirmative vote of the holders of 75% of the voting power of Worthington
Ohio (and a majority of the voting power excluding the 15% shareholder in
question) if the transaction involves a non-grandfathered 15% shareholder of
Worthington Ohio and has not been approved by three-fourths of the authorized
number of directors. Otherwise, the required vote will be a majority of the
voting power.
ANTI-TAKEOVER STATUTES
Section 203 of the DGCL, designed primarily to regulate the second step of
a two-tiered takeover attempt, applies to a broad range of "business
combinations" between a Delaware corporation, such as Worthington Delaware, and
an "interested shareholder". That Section defines a "business combination" as
including mergers, consolidations, sales and other dispositions of 10% or more
of the assets, issuances of stock and almost any related party transaction. An
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"interested shareholder" is defined to include any person (other than the
corporation or any of its majority-owned subsidiaries) who beneficially owns,
directly or indirectly, 15% or more of the outstanding voting stock of a
corporation. Delaware law prohibits a corporation from engaging in a business
combination with an interested shareholder for a period of three years following
the time that the shareholder became an interested shareholder, unless (a) the
board of directors approved either the business combination or the transaction
which resulted in the shareholder's becoming an interested shareholder before
the person became an interested shareholder; (b) upon consummation of the
transaction which resulted in the shareholder's becoming an interested
shareholder, such shareholder owned at least 85% of the voting stock outstanding
when the transaction began, excluding for purposes of determining the number of
shares outstanding those shares owned by persons who are directors and also
officers of the corporation and by employee stock plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer; or (c)
the board of directors approved the business combination at or after the time
the shareholder became an interested shareholder and the business combination
was approved by at least 66 2/3% of the outstanding voting stock not owned by
such shareholder at a meeting of the shareholders. Worthington Delaware has not
taken any action to opt out of the restrictions contained in Delaware's business
combination law.
Under the OGCL, unless the corporation's articles or regulations otherwise
provide, any "control share acquisition" of an "issuing public corporation" may
be made only with the prior authorization of its shareholders in accordance with
the Ohio Control Share Acquisition Statute. Worthington Ohio qualifies as an
issuing public corporation.
Section 1701.831 of the OGCL (the "Ohio Control Share Acquisition Statute")
requires shareholder approval of any proposed "control share acquisition" of
Worthington Ohio. A "control share acquisition" is the acquisition, directly or
indirectly, by any person (including any individual, partnership, corporation,
limited liability company, society, association or two or more persons having a
joint or common interest) of shares of a corporation that, when added to all
other shares of the corporation that may be voted, directly or indirectly, by
the acquiring person, would entitle such person to exercise or direct the
exercise of one-fifth or more (but less than one-third) of the voting power of
the corporation in the election of directors or one-third or more (but less than
a majority) of such voting power or a majority or more of such voting power. The
control share acquisition must be approved in advance by the holders of at least
a majority of the outstanding voting shares represented at a meeting at which a
quorum is present and by the holders of a majority of the portion of the
outstanding voting shares represented at such a meeting excluding the voting
shares owned by the acquiring shareholder and certain "interested shares,"
including shares owned by officers elected or appointed by the directors of
Worthington Ohio and by directors of Worthington Ohio who are also employees of
Worthington Ohio. "Interested shares" also include those shares acquired by a
person or group between the date of the first public disclosure of a proposed
control share acquisition or change-in-control transaction and the record date
of the special meeting of shareholders to be held pursuant to the Ohio Control
Share Acquisition Statute. Shares acquired during that period by a person or
group will be deemed "interested shares" only if (i) the amount paid for the
shares by such person or group exceeds $250,000 or (ii) the number of shares
acquired by such person or group exceeds 1/2 of 1% of the outstanding voting
shares.
Pursuant to Section 6.02 of the New Regulations, Worthington Ohio has opted
out of the Ohio Control Share Acquisition Statute. The acquisition of even a
small number of shares would require shareholder approval if such acquisition
would cause an existing shareholder to increase his holdings to any of the
levels contemplated by the Ohio Control Share Acquisition Statute. Although its
stated purpose is to give shareholders of Ohio corporations a reasonable
opportunity to express their views on a proposed shift in control (thereby
reducing the coercion inherent in an unfriendly takeover), the Ohio Control
Share Acquisition Statute applies not only to tradi-
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tional tender offers but also to open market purchases, privately-negotiated
transactions and original issuances by an Ohio corporation, whether friendly or
unfriendly. The procedural requirements of the Ohio Control Share Acquisition
Statute could render approval of any control share acquisition difficult, if not
impossible, in that a majority of the voting power of Worthington Ohio,
excluding "interested shares," must be voted in favor of the acquisition. The
Board of Directors believes that it is in the best interests of Worthington Ohio
and its shareholders that Worthington Ohio have the flexibility to engage in
privately-negotiated transactions that might otherwise be precluded if the Ohio
Control Share Acquisition Statute applied to Worthington Ohio.
Unless the corporation's articles otherwise provide, Chapter 1704 of the
OGCL (the "Merger Moratorium Statute") prohibits an Ohio corporation that is a
reporting company under the Exchange Act (Worthington Ohio will be such a
reporting company) from engaging in a wide range of business combinations and
other transactions (including mergers, consolidations, asset sales and other
dispositions of assets, loans, disproportionate distributions of property and
disproportionate issuances or transfers of shares or rights to acquire shares)
with a person that owns, alone or with others, shares representing at least 10%
of the voting power of the corporation (an "MMS Interested Shareholder") for a
period of three years after such person becomes an MMS Interested Shareholder
unless, prior to the date that the MMS Interested Shareholder became such, the
directors approved either the transaction or the acquisition of the
corporation's shares that resulted in the person's becoming an MMS Interested
Shareholder. Following the three-year moratorium period, the corporation may
engage in covered transactions with an MMS Interested Shareholder only if, among
other things, (i) the transaction receives the approval of the holders of
two-thirds of all the voting shares (or such other proportion as provided in the
articles) and the approval of the holders of a majority of the voting shares
held by persons other than an MMS Interested Shareholder and its affiliates or
associates or (ii) the remaining shareholders receive an amount for their shares
equal to the higher of the highest amount paid in the past by the MMS Interested
Shareholder for the corporation's shares or the amount that would be due the
shareholders if the corporation were to dissolve. Among other differences,
unlike Delaware, Ohio does not include an exception to the three-year moratorium
on transactions with a significant shareholder in circumstances in which the
significant shareholder acquires more than 85% of the outstanding shares of a
corporation in a transaction that results in the significant shareholder
becoming an MMS Interested Shareholder, and Ohio does not permit the directors
or shareholders to approve a transaction during the three-year merger moratorium
period.
Pursuant to Article ELEVENTH of the New Articles, Worthington Ohio has
opted out of the Merger Moratorium Statute. Although the Merger Moratorium
Statute is designed to prevent many of the self-dealing activities that often
accompany highly-leveraged acquisitions by prohibiting an MMS Interested
Shareholder from using the corporation or its assets or shares for his special
benefit, it also presents a myriad of potential pitfalls for unwary
shareholders. Close attention to the impact of common corporate actions, such as
the grant of employee stock options and loans to MMS Interested Shareholders in
the ordinary course of business, is necessary to determine whether such actions
are encompassed by the Merger Moratorium Statute. As noted above, John H.
McConnell is the beneficial owner of 16.8% of the outstanding Delaware Common
Shares and would become an MMS Interested Shareholder of Worthington Ohio upon
consummation of the Reincorporation. The Board of Directors believes that
Worthington Ohio should have the flexibility to enter into transactions with Mr.
McConnell and other persons who may become MMS Interested Shareholders in the
ordinary course of the business of Worthington Ohio.
The Board of Directors of Worthington Delaware believes that the threat to
Worthington Ohio from unfriendly takeovers will be minimized by the
concentration of a significant number of Worthington Ohio Common Shares in the
officers and directors of Worthington Ohio and by the supermajority voting
requirements of Article SEVENTH of the New Articles. For the reasons discussed
above, the Board believes that the additional protection from unfriendly
takeovers
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afforded by the Ohio Control Share Acquisition Statute and the Merger Moratorium
Statute is currently outweighed by the procedural complications and the
obstacles to friendly transactions created by those Statutes. Accordingly, the
New Articles and the New Regulations provide that those Statutes do not apply to
Worthington Ohio.
Section 1707.041 of the Ohio Revised Code provides in part that no offeror
may make a control bid pursuant to a tender offer or a request or invitation for
tenders unless, before the offeror commences a control bid, it files with the
Ohio Division of Securities (the "Securities Division") and the target company
certain information in respect of the offeror, his ownership of Worthington
Ohio's shares, the source and amount of funds used or to be used in acquiring
shares of Worthington Ohio, and his plans for Worthington Ohio (including, among
other things, plans to terminate employee benefit plans, close any plant or
facility, or reduce the work force). If the Securities Division determines that
the offeror's disclosures are inadequate, it must act within five calendar days
from the date of the offeror's filing to issue a suspension order. If a bid is
suspended, a hearing must be held within ten calendar days from the date of the
Securities Division's suspension order. The hearing procedure must be completed
no later than fourteen calendar days after the date on which the suspension was
imposed. A control bid is the purchase of or offer to purchase any equity
security of Worthington Ohio from a resident of Ohio if (i) after the purchase
of such security, the offeror would directly or indirectly be the beneficial
owner of more than 10% of any class of the issued and outstanding equity
securities of Worthington Ohio or (ii) the offeror is Worthington Ohio, there is
a pending control bid by a person other than Worthington Ohio, and the number of
the issued and outstanding shares of Worthington Ohio would be reduced by more
than 10%. Section 1707.041 does not apply when the offeror or the target company
is a public utility, a public utility holding company, a bank, a bank holding
company or a savings and loan holding company and the control bid is subject to
approval by the appropriate federal regulatory agency or when the offer is made
to not more than 50 persons.
Unless the corporation's articles or regulations otherwise provide, Section
1707.043 of the Ohio Revised Code (the "Profit Recovery Statute") permits an
Ohio corporation to recover any profit realized from the disposition of equity
securities of the corporation by a person or group who made a proposal to
acquire control of the corporation within eighteen months before the disposition
of the equity securities. Certain profits are not recoverable pursuant to the
Profit Recovery Statute, including profits that do not exceed $250,000 in the
aggregate, profits with respect to securities that were acquired prior to April
11, 1990 or more than eighteen months prior to the date on which the acquisition
proposal was made, and profits realized by a person or group that establishes in
court that its motives were not manipulative. Neither the New Articles nor the
New Regulations provide that the Profit Recovery Statute will not apply to
Worthington Ohio and its equity securities.
SPECIAL MEETINGS
Under the DGCL, a special meeting of shareholders may be called by the
board of directors or by such person or persons as may be authorized by the
certificate of incorporation or by-laws. Under the Present By-Laws, a special
meeting of shareholders of Worthington Delaware may be called by the Board of
Directors, the Chairman of the Board or the President.
Under the OGCL, persons who may call a special meeting of shareholders
include the chairman of the board, the president, or, in case of the president's
absence, death, or disability, the vice president authorized to exercise the
authority of the president; the directors by action at a meeting or a majority
of the directors acting without a meeting; persons holding 25% or more of the
voting power of all shares entitled to vote, unless the articles or regulations
specify a smaller or larger portion, but not more than 50%; or such other
officers or persons as the articles or regulations may authorize. The New
Regulations, in addition to authorizing the Chairman of the Board, the President
(or, in the event of his absence, death or disability, the Vice President
authorized to exercise the authority of the President), the Secretary or the
Board of Directors to
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call a special meeting of shareholders, authorize a special meeting of
shareholders to be called by persons holding at least 50% of all shares
outstanding and entitled to vote thereat.
SHAREHOLDERS MUST TAKE ACTIONS AT A MEETING
Under the DGCL, unless the certificate of incorporation provides otherwise,
any action which may be authorized or taken at a meeting of the shareholders may
be authorized or taken without such meeting, and without prior notice and
without a vote, by written consent of the holders of shares of outstanding stock
having the votes necessary to authorize or take such an action at a meeting at
which all shares entitled to vote thereon were present and voted. The Present
Charter provides that actions may not be taken by the shareholders of
Worthington Delaware without a meeting.
Under the OGCL, unless the articles or regulations prohibit the
authorization or taking of any action of the shareholders without a meeting, any
action which may be authorized or taken at a meeting of the shareholders may be
authorized or taken without such meeting by the written approval of all the
shareholders entitled to notice of such meeting. The New Articles provide that
actions may not be taken by the shareholders of Worthington Ohio without a
meeting.
QUORUM FOR MEETINGS OF SHAREHOLDERS
Under the DGCL, the certificate of incorporation or by-laws may specify the
number of shares and/or the amount of other securities having voting power the
holders of which must be present or represented by proxy at any meeting in order
to constitute a quorum for the transaction of any business. However, in no event
may a quorum consist of less than one-third of the shares entitled to vote at
the meeting. In the absence of such a specification, a majority of the shares
entitled to vote, present in person or represented by proxy, will constitute a
quorum. The Present By-Laws provide that the holders of one-third of the voting
power of Worthington Delaware must be present in person or by proxy to
constitute a quorum at a meeting of shareholders called by the Board of
Directors. Otherwise, the holders of a majority of the voting power of
Worthington Delaware must be present in order to constitute a quorum.
Under the OGCL, unless the articles or regulations otherwise provide, the
shareholders present in person or by proxy at any meeting of shareholders will
constitute a quorum. The New Regulations provide that the holders of one-third
of the voting power of Worthington Ohio must be present in person or by proxy to
constitute a quorum at a meeting of shareholders called by the Board of
Directors. Otherwise, the holders of a majority of the voting power of
Worthington Ohio must be present in order to constitute a quorum.
CUMULATIVE VOTING
Where cumulative voting is permitted, each share is entitled to as many
votes as there are directors to be elected and each shareholder may cast all his
votes for a single candidate or distribute such votes among two or more
candidates. Under the DGCL, cumulative voting is permitted only if it is
provided for in the certificate of incorporation. The Present Charter does not
provide for cumulative voting.
Under the OGCL, unless specifically eliminated by an amendment to the
corporation's articles, or in the case of a merger, in the constituent
corporations' agreement of merger, cumulative voting in the election of
directors is mandatory if written notice is given by any shareholder to the
president, a vice president or the secretary of the corporation, not less than
48 hours before a meeting held for the purpose of electing directors (if the
meeting notice has been given at least 10 days prior thereto, and otherwise not
less than 24 hours before the meeting), that the shareholder desires that the
vote for the election of directors be cumulative, and if an announcement of the
giving of such notice is made upon the convening of the meeting by the chairman
or secretary or by or on behalf of the shareholder giving such notice. The
Merger
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Agreement provides that at and after the Effective Time, no shareholders of
Worthington Ohio will be entitled to vote cumulatively in the election of
directors of Worthington Ohio and Article THIRTEENTH of the New Articles
pursuant to the Merger Agreement also expressly eliminates cumulative voting.
SUBJECT TO THE PROVISIONS OF THE NEW ARTICLES GOVERNING THE REMOVAL OF DIRECTORS
BY THE SHAREHOLDERS, AN EFFECT OF THE ELIMINATION OF CUMULATIVE VOTING WOULD BE
BOTH TO (A) PERMIT A MAJORITY OF A QUORUM OF THE VOTING POWER IN THE ELECTION OR
REMOVAL OF DIRECTORS TO ELECT OR REMOVE EVERY DIRECTOR; AND (B) PRECLUDE A
MINORITY OF A QUORUM OF THE VOTING POWER IN THE ELECTION OR REMOVAL OF DIRECTORS
FROM ELECTING OR PREVENTING THE REMOVAL OF ANY DIRECTOR. However, the
elimination of cumulative voting for the shareholders of Worthington Ohio as an
Ohio corporation does not represent any substantive change in the voting rights
of the shareholders of Worthington Delaware as a Delaware corporation.
CLASS VOTING
The DGCL requires voting by separate classes only with respect to
amendments to the certificate of incorporation which adversely affect the
holders of such classes or which increase or decrease the aggregate number of
authorized shares or the par value of the shares of any such classes. Under the
OGCL, holders of a particular class of shares are entitled to vote as a separate
class if the rights of such class are affected by mergers, consolidations or
amendments to the articles.
APPRAISAL RIGHTS
Under the DGCL, appraisal rights are available only in connection with
statutory mergers or consolidations. Even in such cases, unless the certificate
of incorporation otherwise provides (and the Present Charter does not so
provide), the DGCL does not recognize dissenters' rights for any class or series
of stock which is either listed on a national securities exchange or designated
as a national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or held of record by more than
2,000 shareholders except that appraisal rights are available for holders of
stock who, by the terms of the agreement of merger or consolidation, are
required to accept anything except (i) shares of the corporation surviving or
resulting from the merger or consolidation, (ii) shares of any other corporation
which at the effective time of the merger or consolidation are either listed on
a national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000 shareholders,
(iii) cash in lieu of fractional shares described in the foregoing clauses (i)
and (ii), or (iv) any combination of shares and cash in lieu of fractional
shares described in the foregoing clauses (i), (ii) or (iii).
Under the OGCL, dissenting shareholders are entitled to appraisal rights in
connection with the lease, sale, exchange, transfer or other disposition of all
or substantially all of the assets of a corporation and in connection with
amendments to its articles which change the rights of shareholders in a
substantially prejudicial manner. In addition, shareholders of an Ohio
corporation being merged or consolidated into a new corporation are also
entitled to appraisal rights. Shareholders of an acquiring corporation are
entitled to appraisal rights in a merger, combination or majority share
acquisition in which such shareholders are entitled to voting rights.
DIVIDENDS
A Delaware corporation may pay dividends out of any surplus and, if it has
no surplus, out of any net profits for the fiscal year in which the dividend is
declared and/or the preceding fiscal year provided that such payment will not
reduce capital below the amount of capital represented by all classes of shares
having a preference upon the distribution of assets.
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An Ohio corporation may pay dividends in an amount which does not exceed
the combination of the surplus of the corporation and the difference between (a)
the reduction in surplus that results from the immediate recognition of the
transition obligation under Statement of Financial Accounting Standards No. 106
("SFAS No. 106") issued by the Financial Accounting Standards Board and (b) the
aggregate amount of the transition obligation that would have been recognized as
of the date of the declaration of a dividend or distribution if the corporation
had elected to amortize its recognition of the transition obligation under SFAS
No. 106. No dividend may be paid to the holders of shares of any class in
violation of the rights of the holders of shares of any other class, or when a
corporation is insolvent or there is reasonable ground to believe that by such
payment it would be rendered insolvent. An Ohio corporation must notify its
shareholders if a dividend is paid out of capital surplus.
REPURCHASES
Under the DGCL, a corporation may repurchase its common shares out of
capital if no preferred shares are outstanding, the common shares will be
retired upon their acquisition and the capital of the corporation will be
reduced in accordance with the applicable provisions of the DGCL. Otherwise,
common shares are to be purchased out of surplus.
Under the OGCL, a corporation may repurchase its own shares if authorized
to do so by its articles or under certain other circumstances but may not do so
if immediately thereafter its assets would be less than its liabilities plus its
stated capital, if any, or if the corporation is insolvent or would be rendered
insolvent by such a purchase. Article FIFTH of the New Articles permits
Worthington Ohio to repurchase shares to the extent permitted by law.
PRE-EMPTIVE RIGHTS
Under the DGCL, shareholders have no pre-emptive rights unless such rights
are expressly granted to them by the certificate of incorporation. The Present
Charter does not grant pre-emptive rights to the shareholders of Worthington
Delaware.
With few exceptions, the OGCL grants pre-emptive rights to shareholders of
an Ohio corporation, unless specifically denied in the articles. The New
Articles specifically deny pre-emptive rights to shareholders of Worthington
Ohio.
REVOCABILITY OF PROXIES
Under the DGCL, a duly executed proxy is irrevocable if it states that it
is irrevocable and if, and only so long as, it is coupled with an interest.
Under the OGCL, a duly executed proxy is revocable unless such appointment is
coupled with an interest, except that proxies given in connection with the
shareholder authorization of a control share acquisition are revocable at all
times prior to the obtaining of such shareholder authorization, whether or not
coupled with an interest.
COMPARISON OF DIRECTOR AND OFFICER LIABILITY AND INDEMNIFICATION UNDER DELAWARE
AND OHIO LAW
Delaware
Section 102(b)(7) of the DGCL permits a Delaware corporation to limit or
eliminate a director's personal liability to the corporation or its shareholders
for monetary damages for breach of fiduciary duty as a director except in the
instance of (i) a breach of the director's duty of loyalty to the corporation or
its shareholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) the payment of a
dividend or the approving of a stock repurchase or redemption which is illegal
under the DGCL, or (iv) any transaction from which the director derived an
improper personal benefit. Article FIFTH of the
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Present Charter eliminates the personal liability of the directors of
Worthington Delaware to the fullest extent permitted by Section 102(b)(7) of the
DGCL.
Under Section 145 of the DGCL, directors, officers and other employees and
individuals may be indemnified against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation -- a
"derivative action") if they acted in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of the corporation,
and, regarding any criminal action or proceeding, had no reasonable cause to
believe their conduct was unlawful. A similar standard is applicable in the case
of derivative actions, except that indemnification only extends to expenses
(including attorneys' fees) incurred in connection with defense or settlement of
such actions. The DGCL requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. To the extent that a present or former officer or director
of the corporation is successful on the merits or otherwise in defense of any
action, suit or proceeding, including derivative actions, brought against such
person or in defense of any claim, issue or matter asserted in any such
proceeding, indemnification for expenses (including attorneys' fees) is mandated
by the DGCL. Advancement of such expenses (i.e., payment prior to a
determination on the merits) incurred by a director or officer is permissive
only and such person must repay such expenses if it is ultimately determined
that such person is not entitled to indemnification. Section 145 of the DGCL
states that the indemnification provided thereby is not exclusive of any other
rights to which any person seeking indemnification may be entitled under any
by-law, agreement, vote of shareholders or disinterested directors or otherwise.
The Present By-Laws provide for broader indemnification than specifically
afforded by Section 145 of the DGCL and require that any officer or director of
Worthington Delaware made a party to any action, suit or proceeding by reason of
the fact that such person is or was a director, officer, employee or agent of
Worthington Delaware or of any entity which such person served as such at the
request of Worthington Delaware, be indemnified by Worthington Delaware against
expenses (including attorneys' fees, filing fees, court reporters' fees and
transcript costs), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, if such person acted in good faith and in a manner which such person
reasonably believed to be in, or not opposed to, the best interests of
Worthington Delaware, and, with respect to any criminal action or proceeding,
had no reason to believe the conduct was unlawful. Court approval is required
before there can be any indemnification where the person seeking indemnification
has been found liable for gross negligence or intentional misconduct in the
performance of such person's duty to Worthington Delaware. The Present By-Laws
cite a presumption that a director or officer acted in good faith and in a
manner such person reasonably believed to be in, or not opposed to, the best
interests of Worthington Delaware, and with respect to any criminal matter, that
no officer or director had reasonable cause to believe his or her conduct was
unlawful.
Consistent with Section 145 of the DGCL, to the extent that an officer or
director otherwise eligible to be indemnified is successful on the merits or
otherwise, indemnification for expenses (including attorneys' fees, filing fees,
court reporters' fees and transcript costs) is mandated by the Present By-Laws.
In addition, advancement of such expenses incurred by officers and directors is
required by the Present By-Laws as long as any such person agrees to repay such
expenses (a) if it is ultimately determined that such person is not entitled to
indemnification or (b) if a director or officer has been found liable, in a
derivative action, for gross negligence or intentional misconduct in the
performance of such person's duty to Worthington Delaware, unless and only to
the extent the applicable court determines indemnification is appropriate.
Section 145 of the DGCL also grants express power to a Delaware corporation
to purchase liability insurance for its directors, officers, employees and
agents, regardless of whether any such
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individual is otherwise eligible for indemnification by the corporation.
Similarly, the Present By-Laws permit Worthington Delaware to purchase such
insurance for directors, officers, employees or agents of Worthington Delaware.
Ohio
Under Section 1701.13(E) of the Ohio Revised Code, directors, officers,
employees and agents of Ohio corporations have an absolute right to
indemnification for expenses (including attorneys' fees) actually and reasonably
incurred by them to the extent they are successful in defense of any action,
suit or proceeding, including derivative actions, brought against them, or in
defense of any claim, issue or matter asserted in any such proceeding. A
director, officer, employee or agent is entitled to such indemnification if such
person's success is "on the merits or otherwise", thus mandating indemnification
if the indemnitee is successful on the merits or if the indemnitee is
successful, for example, in asserting a procedural defense, such as a claim that
the action is barred by the applicable statute of limitations or if the
indemnitee is released pursuant to a negotiated settlement without making
payment or providing other consideration. Directors (but not officers, employees
or agents) are entitled to mandatory payment of expenses by the corporation as
they are incurred, in advance of the final disposition of the action, suit or
proceeding, provided the director agrees to cooperate with the corporation
concerning the matter and to repay the amount advanced if it is proved by clear
and convincing evidence that the director's act or failure to act was done with
deliberate intent to cause injury to the corporation or with reckless disregard
for the corporation's best interests.
The OGCL, like the DGCL, permits a corporation to indemnify directors,
officers, employees or agents of the corporation in circumstances where
indemnification is not mandated by the statute if certain statutory standards
are satisfied. A corporation may grant indemnification in actions other than
derivative actions if the indemnitee has acted in good faith and in a manner the
indemnitee reasonably believed to be in, or not opposed to, the best interests
of the corporation, and with respect to any criminal action or proceeding, had
no reasonable cause to believe the indemnitee's conduct was unlawful. Such
indemnification is permitted against expenses (including attorneys' fees) as
well as judgments, fines and amounts paid in settlement actually and reasonably
incurred by the indemnitee.
An Ohio corporation may also provide indemnification in derivative actions
for attorneys' fees and expenses actually and reasonably incurred in connection
with the defense or settlement of an action if the officer, director, employee
or agent acted in good faith and in a manner such person reasonably believed to
be in, or not opposed to, the best interests of the corporation. Ohio law does
not expressly authorize indemnification against judgments, fines and amounts
paid in settlement in such actions. The corporation may not indemnify a
director, officer, employee or agent in such actions for attorneys' fees and
expenses if such person is adjudged to be liable to the corporation for
negligence or misconduct in the performance of such person's duties to the
corporation, unless and only to the extent that a court determines that, despite
the adjudication of liability, such person is fairly and reasonably entitled to
indemnity.
Section 1701.13(E) of the OGCL, like Section 145 of the DGCL, states that
the indemnification provided thereby is not exclusive of any other rights
granted to those persons seeking indemnification under the articles, the
regulations, any agreement, a vote of the shareholders or disinterested
directors, or otherwise.
The OGCL grants express power to an Ohio corporation to purchase and
maintain insurance or furnish similar protection, including, but not limited to,
trust funds, letters of credit and self-insurance, for director, officer,
employee or agent liability, regardless of whether that individual is otherwise
eligible for indemnification by the corporation.
The New Regulations provide for broader indemnification than specifically
afforded under Section 1701.13(E) of the Ohio Revised Code. The New Regulations
provide that Worthington
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Ohio must indemnify officers and directors against expenses (including
attorneys' fees, filing fees, court reporters' fees and transcript costs),
judgments, fines and amounts paid in settlement incurred in connection with any
pending, threatened or completed action (whether criminal, civil, administrative
or investigative) by reason of the fact that any such individual is or was a
director, officer, employee, agent or volunteer of Worthington Ohio or is or was
serving at the request of Worthington Ohio as a director, trustee, officer,
employee, member, manager, agent or volunteer of another corporation or other
entity so long as such individual's act or omission was not occasioned by such
individual's intent to cause injury to, or by such individual's reckless
disregard for the best interests of, Worthington Ohio and, with respect to any
criminal matter, such individual had no reasonable cause to believe such
individual's conduct was unlawful. The New Regulations forbid Worthington Ohio
from indemnifying an officer or director if such person is adjudged to be liable
for an act or omission occasioned by such person's deliberate intent to cause
injury to, or by such person's reckless disregard for the best interests of,
Worthington Ohio unless and only to the extent a court, in view of all the
circumstances, concludes that such person is fairly and reasonably entitled to
such indemnity as the court deems proper. The New Regulations recite a
presumption (which may only be rebutted by clear and convincing evidence) that
no act or omission by a director or officer was occasioned by an intent to cause
injury to, or by a reckless disregard for the best interests of, Worthington
Ohio, and with respect to any criminal matter, that no director or officer had
reasonable cause to believe his or her conduct was unlawful.
Because of these presumptions, Worthington Ohio believes that a director or
officer will not have the initial burden of showing that he or she did not
intend to cause injury to Worthington Ohio. In addition, the New Regulations
require Worthington Ohio to advance expenses on behalf of officers and directors
if they agree in writing to repay such amounts if they are not successful on the
merits or otherwise and it is proved by clear and convincing evidence that the
relevant action or failure to act was occasioned by the deliberate intent to
cause injury to, or with reckless disregard for the best interests of,
Worthington Ohio.
The New Regulations state that the indemnification provided thereby is not
exclusive of any other rights to which any person seeking indemnification may be
entitled. Additionally, the New Regulations provide that Worthington Ohio may
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee, agent or volunteer of Worthington Ohio, or who is
or was serving another entity at the request of Worthington Ohio, against any
liability asserted against such person and incurred by such person in such
capacity, or arising out of such person's status as such, whether or not
Worthington Ohio would have the obligation or power to indemnify such person
under the New Regulations. The New Regulations also authorize Worthington Ohio
to purchase and maintain trust funds, letters of credit or self-insurance on
behalf of any person who is or was a director, officer, employee, agent or
volunteer of Worthington Ohio or who is or has served another entity at the
request of Worthington Ohio.
Ohio has codified the directors' common law duty of care and, in part,
their common law duty of loyalty. Section 1701.59(B) of the Ohio Revised Code
provides in pertinent part:
A director shall perform his duties as a director, including his
duties as a member of any committee of the directors upon which he may
serve, in good faith, in a manner he reasonably believes to be in or not
opposed to the best interests of the corporation, and with the care that an
ordinarily prudent person in a like position would use under similar
circumstances.
Under Ohio law, a director is not liable for monetary damages unless it is
proved by clear and convincing evidence that such director's action or failure
to act was undertaken with deliberate intent to cause injury to the corporation
or with reckless disregard for the best interests of the corporation. This
higher standard of proof must be met in any action brought against a director
for breach of such director's duties, including any action involving or
affecting (i) a change or
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potential change in control of the corporation, (ii) a termination or potential
termination of a director's service to the corporation as a director or (iii) a
director's service in any other position or relationship with the corporation.
The higher standard of proof, however, does not affect the liability of
directors for unlawful loans, dividends or distributions under Section 1701.95
of the Ohio Revised Code. There is no comparable provision limiting the
liability of officers, employees or agents of Ohio corporations.
Worthington Delaware is not aware of any current or past indemnification or
liability issues that will or could be presented to Worthington Ohio in the
event the Reincorporation Proposal is consummated.
Ohio law provides specific statutory authority for directors, in
determining what they reasonably believe to be in the best interests of the
corporation, to consider, in addition to the interests of the corporation's
shareholders, other factors such as the interests of the corporation's
employees, suppliers, creditors and customers; the economy of the state and
nation; community and societal considerations; the long-term and the short-term
interests of the corporation and its shareholders; and the possibility that
these interests may be best served by the continued independence of the
corporation. Delaware law contains no similar specific statutory authority.
The Present Charter and the New Articles authorize the Boards of Directors
of Worthington Delaware and Worthington Ohio, respectively, to consider a
variety of constituencies in determining what is in the best interests of
Worthington Delaware and Worthington Ohio, respectively, and their shareholders
when evaluating any offer of another party to (1) make a tender or exchange
offer for any equity securities of the corporation, (2) merge or consolidate the
corporation with another corporation or (3) purchase or otherwise acquire all or
substantially all of the property and assets of the corporation. The Boards of
Directors are to consider the social and economic effects of any such
transaction on the employees, customers, suppliers and other constituencies of
the corporation and its subsidiaries and on the communities in which they
operate or are located. The Board of Directors of Worthington Delaware believes
that the statutory authority provided by the OGCL will provide additional
guidance to the directors of Worthington Ohio in making decisions relating to
all matters affecting the interests of Worthington Ohio and its shareholders.
EXISTING CHARTER PROVISIONS WITH A POSSIBLE ANTI-TAKEOVER EFFECT
Both the Present Charter and Present By-Laws and the New Articles and New
Regulations contain some provisions which may be viewed as having a possible
anti-takeover effect.
CLASSIFIED BOARD
Both the Present Charter and the New Articles and New Regulations contain
provisions for a classified Board. The classified Board provisions are intended
to promote the likelihood of continuity and stability in the composition of the
respective Boards of Directors and in the policies formulated by them. The Board
of Directors of Worthington Delaware believes that this, in turn, has permitted
it, and will permit Worthington Ohio's Board of Directors, to continue to
represent the interests of all shareholders, including responding to
circumstances created by demands or actions by a minority shareholder or group.
One effect of the respective classified Board provisions is to extend to a
minimum of two annual meetings of shareholders the time required for a majority
of the members of the Board to stand for election. Accordingly, at any time, at
least two-thirds of the directors will most likely have had prior experience as
directors.
The classification of the Boards of Directors of Worthington Delaware and
Worthington Ohio may discourage certain mergers, tender offers and other future
takeover attempts which some or a majority of the shareholders may deem to be in
their best interests because it would operate to delay the ability to obtain
control of the Board in a relatively short period of time. The delay
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arises because it will take a minimum of two annual meetings of shareholders to
elect a majority of the Board. In addition, a classified Board would generally
delay shareholders who do not like the policies of the Board of Directors from
removing a majority of the Board for two years, unless such shareholders obtain
the requisite vote.
PROCEDURES FOR MAKING NOMINATIONS
Both the Present By-Laws and the New Regulations provide that a shareholder
nomination for election to the Board of Directors must be made in writing and
must be received at the principal executive offices not less than 14 days nor
more than 50 days prior to any meeting of shareholders called for the election
of directors; provided, however, that if less than 21 days' notice of the
meeting is given to the shareholders, such nomination must be so received not
later than the close of business on the seventh day following the day on which
the notice of the meeting was mailed. Such notification must contain the
following information to the extent known to the notifying shareholder: (a) the
name, age, business address and residence address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the number of shares
beneficially owned by the proposed nominee and by the notifying shareholder; (d)
the name and address of the notifying shareholder; and (e) any other information
required to be disclosed with respect to a nominee for election as a director in
proxy solicitations pursuant to Regulation 14A under the Exchange Act or any
successor statute, rule or provision. Nominations which the chairman of the
meeting determines are not made in accordance with the Present By-Laws or the
New Regulations, as appropriate, would be disregarded.
The purpose of the nomination provisions is to avoid the possibility of a
surprise nomination that would preclude management from investigating and the
shareholders from adequately assessing the competence, experience, integrity and
other relevant factors concerning the qualifications of the proposed nominee. In
the absence of such provisions, nominations could be made from the floor and
such nominees could be elected to the Board without furnishing information about
such nominees to the shareholders in advance for their consideration in
accordance with the Exchange Act, if such persons do not solicit proxies or
limit their proxy solicitation to fewer than ten persons. The Board of Directors
of the Company believes that shareholders are entitled to know basic information
about the qualifications of persons nominated for election as directors and that
the nomination provisions substantially assist management in ensuring the
availability of such information.
A possible adverse effect of the nomination provisions may be that a person
otherwise qualified to serve as a director and who is proposed for nomination
and election by holders of a sufficient number of the outstanding voting shares
to elect one director may not be nominated or elected due to inadvertence. Also,
the nomination provisions may make it easier for incumbent directors to solicit
proxies to resist a dissident slate of directors and thus retain their status as
directors, even when the dissident nominations might be in the best interests of
the corporation and its shareholders. In this sense, the nomination provisions
can be viewed as advantageous to incumbent directors and executive officers and
may discourage takeover attempts. However, the Board of Directors believes that
the benefits to the shareholders of the nomination provisions outweigh any
possible disadvantages and that the nomination provisions are reasonable rules
to govern the nominating process.
SPECIAL VOTE FOR CERTAIN BUSINESS COMBINATIONS
Article SIXTH of the Present Charter and Article SEVENTH of the New
Articles (the "Supermajority Voting Provisions") are intended to give greater
assurance that shareholders receive equitable treatment in the event of certain
transactions involving Worthington Delaware or Worthington Ohio, as appropriate,
or a subsidiary thereof and a beneficial owner of 15% or more of the outstanding
voting stock.
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The Supermajority Voting Provisions provide that Business Combinations (as
defined below) between Worthington Delaware or Worthington Ohio, as appropriate,
or a subsidiary thereof, and a Substantial Shareholder (as defined below)
require the affirmative vote of the holders of not less than 75% of the capital
stock entitled to vote generally in the election of directors (the "Voting
Stock"); provided that such affirmative vote must include the affirmative vote
of a majority of all then outstanding shares of Voting Stock not beneficially
owned by the Substantial Shareholder. Three-fourths of the authorized number of
directors may, in all such cases, determine not to require such supermajority
vote, but only if a majority of the directors in office and acting upon such
matter are "Continuing Directors" (as defined). Such determination may be made
either before or after any Substantial Shareholder in question achieves such
status.
A "Substantial Shareholder" generally is defined as the "beneficial owner"
(as defined) of 15% or more of the outstanding shares of Voting Stock. A
Substantial Shareholder does not include Worthington Delaware or Worthington
Ohio, as appropriate, any subsidiary thereof, any employee benefit plan thereof,
the trustees of any such plan or any affiliate of Worthington Delaware or
Worthington Ohio, as appropriate, owning in excess of 10% of the outstanding
Delaware Common Shares on the relevant grandfathering date. By virtue of the
fact that John H. McConnell owned in excess of 10% of the outstanding Delaware
Common Shares on August 3, 1998, he would be excluded by definition from being
deemed a "Substantial Shareholder" of Worthington Ohio and he is currently
excluded from being deemed a "Substantial Shareholder" of Worthington Delaware.
A "Business Combination" subject to the Supermajority Voting Provisions
includes: a merger or consolidation involving Worthington Delaware or
Worthington Ohio, as appropriate, or any subsidiary thereof and a Substantial
Shareholder; a sale, lease or other disposition of a "substantial part" of the
assets of Worthington Delaware or Worthington Ohio, as appropriate, or any
subsidiary thereof (that is, assets constituting in excess of 10% of the book
value of the total consolidated assets of Worthington Delaware or Worthington
Ohio, as appropriate) to a Substantial Shareholder; an issuance of equity
securities of Worthington Delaware or Worthington Ohio, as appropriate, to a
Substantial Shareholder for consideration aggregating $25,000,000 or more; a
liquidation or dissolution of Worthington Delaware or Worthington Ohio, as
appropriate (if as of the record date for the determination of shareholders
entitled to vote with respect thereto, any person is a Substantial Shareholder);
and a reclassification or recapitalization of securities (including any reverse
stock split) of Worthington Delaware or Worthington Ohio, as appropriate, or any
subsidiary thereof or a reorganization, in any case having the effect, directly
or indirectly, of increasing the percentage interest of a Substantial
Shareholder in any class of equity securities of Worthington Delaware or
Worthington Ohio, as appropriate, or such subsidiary.
A "Continuing Director" is defined as any individual serving as a director
of Worthington Ohio at the Effective Time of the Merger, or any individual
elected or appointed prior to the time the Substantial Shareholder in question
acquires such status, or an individual designated as a Continuing Director
(prior to his initial election or appointment) by three-fourths of the
authorized number of directors, but only if a majority thereof then consists of
Continuing Directors.
The Supermajority Voting Provisions are intended to provide some assurance
that the remaining shareholders of Worthington Delaware or Worthington Ohio, as
appropriate, would be treated fairly in the event that another corporation (or
other shareholder) acquires control of Worthington Delaware or Worthington Ohio
and seeks to eliminate the remaining shareholders through a forced merger or
similar transaction. The Board has observed situations in corporate takeovers
involving payment of cash to acquire a controlling equity interest in a company
followed by a payment to the remaining shareholders of a price for their shares
that is lower than the price to acquire control or that is in a different form
of consideration. In such two-step acquisitions, shareholders who do not act
quickly must accept the price paid in the second step. Because the Substantial
Shareholder's dominant influence controls both sides of the negotiations,
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the terms of such transactions may not reflect arm's-length bargaining and,
therefore, may not assure fair treatment of the public shareholders remaining
after the first step of the transaction. The Board considers that tactics such
as two-step acquisitions are unfair to a target company's shareholders.
Although federal securities laws and regulations applicable to business
combinations require that disclosure be made to shareholders of the terms of
such a transaction, these laws do not assure shareholders that the financial
terms of the business combination will be fair to them or that they can
effectively present its consummation. Moreover, the statutory right of the
remaining shareholders of a corporation to dissent in connection with business
combinations and to receive the "fair value" of their shares in cash (i.e.,
dissenters' rights) may involve significant expense to dissenting shareholders,
may not take into account elements of value deemed important by some
shareholders and may not be available to some cases.
The Board of Directors believes that requiring a party interested in
completing a Business Combination to obtain a 75% shareholder vote would
increase the likelihood that such party would negotiate the terms of the
Business Combination directly with the Board of Directors in advance of its
acquisition of a substantial number of shares of the Corporation. In the event
of a proposed acquisition, the Board of Directors believes that the interest of
shareholders would be best served by a transaction that results from
negotiations based upon careful consideration of the proposed terms, such as the
price to be paid minority shareholders (if applicable) and tax effects of the
transaction. Although there can be no certainty as to the result of any
particular negotiation, the Board believes that the effect of promoting
negotiations of any proposed acquisition with the Board of Directors will be in
the best interests of the shareholders.
Under those circumstances in which the Supermajority Voting Provisions
would apply, a minority of the shareholders may prevent the consummation of a
transaction favored by a majority of shareholders. As a practical matter, the
requirement of a 75% vote may also mean that the type of Business Combination to
which the Supermajority Voting Provisions are addressed might not be
accomplished by the controlling entity while there remains any widely dispersed
public market in Voting Stock.
Despite the belief of the Board as to the benefits to Worthington Delaware,
Worthington Ohio and their respective shareholders of the Supermajority Voting
Provisions, some shareholders may find the Supermajority Voting Provisions
disadvantageous to the extent that they discourage takeovers which are not
approved by the Continuing Directors but in which shareholders might receive,
for at least some of their shares, a substantial premium above the market price
at the time a tender offer or other acquisition transaction is made. Thus,
shareholders who might wish to participate in a tender offer may not be afforded
the opportunity to do so.
To the extent that the Supermajority Voting Provisions discourage takeovers
that would result in a change of management, those changes will be less likely
to occur. Further, if the Supermajority Voting Provisions have the effect of
giving management more bargaining power in negotiations with a potential
acquiror, they could result in management's using the bargaining power not only
to try to negotiate a favorable price for an acquisition but also to negotiate
more favorable terms for management. However, the Board believes that the
advantages of encouraging potential acquirors to negotiate with the Board
outweigh any resulting disadvantages.
REMOVAL OF DIRECTORS AND FILLING OF VACANCIES
Under the Present Charter and the New Articles and New Regulations, subject
to the rights of holders of preferred shares, a director may be removed from
office prior to the expiration of his or her term, with or without cause, by the
affirmative vote of the holders of 75% of the voting power or for cause, by the
affirmative vote of three-fourths of the directors then in office. Subject to
the rights of holders of preferred shares, vacancies in the Board of Directors
and any newly-created directorships resulting from any increase in the number of
directors may be filled by the Board of
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Directors, acting by the vote of a majority of the directors then in office,
even if less than a quorum. A director elected to the Board to fill a vacancy
would hold office for the unexpired portion of the term of the director whose
place has been filled. A director elected by the Board to fill a newly-created
directorship resulting from an increase in the numbers of directors would hold
office until the next election of the class for which the director was elected.
These provisions are designed to limit the ability of a shareholder to gain
control of the Board of Directors by removing directors and filling the
resulting vacancies. The Board of Directors believes that these provisions
enhance the likelihood of continuity within the Board of Directors (although
such continuity has not presented problems in the past), thereby facilitating
long-range planning in the best interests of shareholders.
AUTHORIZED PREFERRED SHARES
Under the Present Charter, Worthington Delaware is authorized to issue
1,000,000 Delaware Preferred Shares. None of such Delaware Preferred Shares have
been issued. Under the New Articles, Worthington Ohio will be authorized to
issue 500,000 Class A Preferred Shares and 500,000 Class B Preferred Shares. The
Present Charter and the New Articles authorize the Boards of Directors of
Worthington Delaware and Worthington Ohio, respectively, to issue the Preferred
Shares in one or more series and to establish the designations, preferences and
rights of each such series. The Board of Directors of Worthington Delaware may
establish the voting rights of each series of Delaware Preferred Shares. The
directors of Worthington Ohio have no such authority and, until changed by the
shareholders, each Class A Preferred Share issued by Worthington Ohio will have
one vote and each Class B Preferred Share issued by Worthington Ohio will have
ten votes on each matter submitted to holders of Ohio Preferred Shares. The
Board of Directors of Worthington Delaware believes that it is desirable and in
the best interests of the Company and its shareholders to retain flexibility in
determining the voting rights to be afforded holders of Ohio Preferred Shares
similar to that now afforded to the Board of Directors of Worthington Delaware.
The Delaware Preferred Shares are, and the Ohio Preferred Shares will be,
available, free from any pre-emptive rights, for issuance from time to time, to
such persons and for such considerations as the Board of Directors may
determine, without requiring further action by the shareholders except to the
extent required by the New Articles, by law or by The Nasdaq Stock Market (or
any securities exchange on which Worthington Ohio's equity securities may then
be listed). The Delaware Preferred Shares have been, and the Ohio Preferred
Shares will be, available for issuance from time to time for any proper
corporate purpose, including, without limitation, issuance in public or private
sales for cash as a means of obtaining capital for use in the corporation's
business and operations, issuance as part or all of the consideration required
to be paid for acquisitions of other business properties and issuance as a share
dividend. The Board of Directors does not intend to issue any Ohio Preferred
Shares except on terms which the Board deems to be in the best interests of
Worthington Ohio and its shareholders. Depending on the terms thereof, the
issuance of Ohio Preferred Shares may or may not have a dilutive effect on the
equity interest and/or voting power of the then-existing shareholders of
Worthington Ohio.
Although the Board of Directors has no present intent to do so, authorized
but unissued Ohio Preferred Shares may be issued as a defense to an attempted
takeover. For example, the Board of Directors may sell a block of Ohio Preferred
Shares to persons who are loyal to current management, thereby diluting the
share ownership of persons seeking to obtain control. Furthermore, since
Articles SEVENTH, NINTH and TENTH of the New Articles require the affirmative
vote of holders of shares entitling them to exercise not less than 75% of the
voting power of Worthington Ohio to adopt certain amendments to the New Articles
or New Regulations (including the provisions of the New Articles and New
Regulations pertaining to the right of a shareholder to nominate an individual
for election as a director of Worthington Ohio, the number of directors, the
right of shareholders to remove directors from office and fill vacancies in the
Board of Directors, the classified Board or the calling of special meetings of
the shareholders), or
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to adopt mergers and certain other transactions involving a 15% shareholder of
Worthington Ohio, the Board could (within the limits imposed by Ohio law) issue
new Ohio Preferred Shares to purchasers who, together with other shareholders of
Worthington Ohio, might block such a 75% vote.
The Board has no present knowledge of any present or past efforts to gain
control of the Company and has not received any indication from any party that
such party is interested in acquiring the Company.
FEDERAL INCOME TAX
CONSEQUENCES OF THE REINCORPORATION
Worthington Delaware has been advised by Ernst & Young LLP, the independent
auditors and tax advisors for Worthington Delaware, that for Federal income tax
purposes, the Reincorporation will constitute a reorganization under Section 368
of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"),
and that, consequently, the holders of Delaware Common Shares will not recognize
any gain or loss as a result of the Merger. For Federal income tax purposes,
each shareholder of Worthington Delaware will retain the same tax basis in his
Ohio Common Shares as he had in the corresponding Delaware Common Shares held by
him immediately prior to the Effective Time, and his holding period for his Ohio
Common Shares will include the period during which he held the corresponding
Delaware Common Shares.
Although it is not anticipated that state or local income tax consequences
will vary from the Federal income tax consequences described above, shareholders
should consult their own tax advisors as to the effect of the reorganization
under state, local or foreign income tax laws.
Worthington Delaware further has been advised by Ernst & Young LLP that
Worthington Ohio will not recognize any gain, loss or income for Federal income
tax purposes as a result of the Reincorporation and Merger and that it will
succeed, without adjustment, to the tax attributes of Worthington Delaware.
The tax advice of Ernst & Young LLP addresses only the issues specifically
identified in the first and third paragraphs above and is based upon
representations of management that have not been independently verified. Ernst &
Young LLP has assumed no responsibility to update its advice as a result of any
changes in applicable laws or rulings of the Internal Revenue Service.
VOTE REQUIRED; BOARD RECOMMENDATION
Pursuant to the DGCL and the Present Charter, the affirmative vote of the
holders of a majority of the outstanding Delaware Common Shares entitled to vote
thereon is required for approval of the Reincorporation Proposal.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE REINCORPORATION
PROPOSAL AND UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF WORTHINGTON
DELAWARE VOTE FOR THE REINCORPORATION PROPOSAL. A vote FOR the Reincorporation
Proposal will constitute approval of the Merger Agreement and the transactions
contemplated thereby.
Unless otherwise directed, the persons named in the enclosed proxy will
vote the Delaware Common Shares represented by all proxies received prior to the
Annual Meeting, and not properly revoked, in favor of the Reincorporation
Proposal.
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EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth information for the fiscal years ended May
31, 1998, 1997 and 1996 as to cash compensation paid by the Company, as well as
certain other compensation paid or accrued for those years, to the Company's
Chief Executive Officer ("CEO") and its four other most highly compensated
executives (collectively, the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION ------------------------------------------
NAME AND PRINCIPAL YEAR ENDED -------------------- SECURITIES UNDERLYING ALL OTHER
POSITION LAST FISCAL YEAR MAY 31 SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
------------------------- ---------- --------- -------- --------------------- ------------------
<S> <C> <C> <C> <C> <C>
John P. McConnell 1998 400,000 494,550 60,000 8,491
Chairman and CEO 1997 325,000 470,000 60,000 7,069
1996 300,000 402,100 -- 6,384
Donal H. Malenick 1998 260,000 370,325 30,000 526,103
President and COO 1997 260,000 350,075 30,000 396,185
1996 260,000 332,275 -- 445,532
Edward A. Ferkany 1998 175,000 267,100 10,000 93,747
Executive Vice President 1997 175,000 252,000 20,000 69,552
1996 175,000 239,200 -- 73,020
Ralph V. Roberts* 1998 118,333 260,933 10,000 7,502
Vice President-Corporate 1997 100,000 199,261 -- 904
Development 1996 -- -- -- --
Jay D. Wisner** 1998 50,000 353,000 -- 19,346
President/The 1997 50,000 389,340 -- 6,461
Gerstenslager Company 1996 -- -- -- --
</TABLE>
- ---------------
*Mr. Roberts served as President of WAVE, a joint venture between the Company
and Armstrong World Industries, Inc., from its formation in June 1992 until he
became Vice President -- Corporate Development in June 1997.
**Mr. Wisner became an employee of the Company on February 21, 1997, which is
the date the Company acquired The Gerstenslager Company. Income information is
based on an entire fiscal year.
Any amounts deferred under the deferred compensation plan (see
"Compensation of Directors") for the Named Executives are included in the
"Bonus" column. For fiscal 1998, Messrs. Malenick and Ferkany had $513,976 and
$82,958, respectively, in interest accrued on amounts in their Deferred
Compensation Plan accounts which are included in "All Other Compensation."
The Named Executives, except Mr. Wisner, participate in the Company's
Deferred Profit Sharing Plan (the "Deferred Plan"), together with substantially
all of the other regular full-time employees of the Company except those
represented by labor unions. Mr. Wisner participates in a similar plan which
covers substantially all salaried employees of The Gerstenslager Company, a
subsidiary of the Company, of which Mr. Wisner is President. Contributions are
based on profits and are allocated quarterly to employee accounts based upon
total compensation and length of service. Distributions under the two Deferred
Plans are generally deferred until retirement, death or total and permanent
disability. Allocations under the Deferred Plans for the 1998 fiscal year for
the benefit of Messrs. McConnell ($6,630), Malenick ($6,703), Ferkany ($6,645),
Roberts ($6,645) and Wisner ($17,090) are included as "All Other Compensation."
35
<PAGE> 38
Also included in "All Other Compensation" for the 1998 fiscal year are the
following costs of providing term life insurance for the benefit of the Named
Executives: Messrs. McConnell ($1,861); Malenick ($5,424); Ferkany ($4,145);
Roberts ($857); and Wisner ($2,256).
OPTION GRANTS
The following table sets forth information with respect to individual
grants of stock options made to the Named Executives during the fiscal year
ended May 31, 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
COMMON SHARES % OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS TO EXERCISE OR FOR OPTION TERM (1)
OPTIONS EMPLOYEES BASE PRICE EXPIRATION ---------------------
NAME GRANTED (#) IN FY ($/SH) DATE 5%($) 10%($)
---- ------------- ---------- ----------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
J. P. McConnell....... 60,000(2) 12.90 18.5625 11/20/07 700,431 1,775,030
D. H. Malenick........ 30,000(2) 6.45 18.5625 11/20/07 350,215 887,515
E. A. Ferkany......... 10,000(2) 2.15 18.5625 11/20/07 116,738 295,838
R. V. Roberts......... 10,000(2) 2.15 18.5625 11/20/07 116,738 295,838
J. D. Wisner.......... -- -- -- -- -- --
</TABLE>
- ---------------
(1) The amounts reflected in this table represent certain assumed rates of
appreciation only, and assume the options are held until their expiration
date. Actual realized values, if any, on option exercises will be dependent
upon the actual appreciation in the price of the Common Shares of the
Company between the grant date and the date they are exercised. There can be
no assurances that the Potential Realizable Values reflected in this table
will be achieved.
(2) The options become exercisable in 20% per year increments on each
anniversary of their effective date. In the event of a change in control of
the Company (as defined in the applicable plan), unless the Board of
Directors explicitly provides otherwise, all stock options which have been
outstanding at least six months before the date of such change in control
become fully exercisable.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executives concerning the exercise of stock options during the fiscal year ended
May 31, 1998 and unexercised stock options held as of June 1, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF COMMON SHARES VALUE (1) OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT 6/1/98 AT 6/1/98 ($)
SHARES -------------------------- --------------------------
ACQUIRED ON VALUE (1) NOT NOT
NAME EXERCISE (#) REALIZED ($) EXERCISABLE EXERCISABLE EXERCISABLE EXERCISABLE
---- ------------ ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
J. P. McConnell...... -0- -0- 118,000 52,000 -0- -0-
D. H. Malenick....... -0- -0- 62,000 38,000 -0- -0-
E. A. Ferkany........ -0- -0- 30,000 60,500 -0- 335,250
R. V. Roberts........ 6,750 80,745 11,200 13,800 -0- 74,500
J. D. Wisner......... -0- -0- -0- -0- -0- -0-
</TABLE>
- ---------------
(1) Pre-tax value based on the spread between the exercise price and the closing
price of $17.625 per share on May 29, 1998, the last working day of the
Company's fiscal year.
36
<PAGE> 39
LONG-TERM INCENTIVE PLAN AWARDS
The following table sets forth information with respect to incentive awards
made to the Named Executives during the fiscal year ended May 31, 1998 under the
Company's Long-Term Incentive Plan.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS
-----------------------------------
PERFORMANCE OR OTHER PERIOD UNTIL THRESHOLD TARGET MAXIMUM
NAME MATURATION OR PAYOUT ($) ($) ($)
---- --------------------------------- ------------- ------- -------
<S> <C> <C> <C> <C>
One year period ended 5/31/98 30,000 60,000 90,000
J. P. McConnell Two year period ended 5/31/99 70,000 140,000 210,000
Three year period ended 5/31/00 115,000 230,000 345,000
One year period ended 5/31/98 15,000 30,000 45,000
D. H. Malenick Two year period ended 5/31/99 30,000 60,000 90,000
Three year period ended 5/31/00 50,000 100,000 150,000
One year period ended 5/31/98 7,500 15,000 22,500
E. A. Ferkany Two year period ended 5/31/99 15,000 30,000 45,000
Three year period ended 5/31/00 25,000 50,000 75,000
One year period ended 5/31/98 5,000 10,000 15,000
R. V. Roberts Two year period ended 5/31/99 10,000 20,000 30,000
Three year period ended 5/31/00 17,500 35,000 52,500
J. D. Wisner -- -- -- --
</TABLE>
Payouts of awards are tied to achieving specified target levels of return
on equity and specified targeted earnings per share growth for the performance
period, with each performance measure carrying a 50% weighting. 50% of the
target amount will be earned if 100% of the targeted return on equity is
attained and 50% of the targeted amount will be earned if 100% of the targeted
earnings per share growth rate is attained. 50% of the threshold amount will be
earned if 85.7% of the targeted return on equity is attained and 50% of the
threshold amount will be earned if 75% of the targeted earnings per share growth
rate is attained. 50% of the maximum amount will be earned if 114.3% of the
targeted return on average equity is attained, and 50% of the maximum amount
will be earned if 125% of the targeted earnings per share growth rate is
attained. Under the Plan, payouts will generally be made in August following the
end of the period. Performance awards may be paid in cash, shares, other
property or any combination thereof, in the sole discretion of the Compensation
and Stock Option Committee at the time of payment. No payouts were made for the
one year performance period ending May 31, 1998.
EXECUTIVE COMPENSATION REPORT AND PERFORMANCE GRAPH
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Exchange
Act, that might incorporate future filings, including this Proxy Statement, in
whole or in part, the following Committee Report and the information under
"COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN" shall not be incorporated by
reference into any such filings.
37
<PAGE> 40
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
ON EXECUTIVE COMPENSATION
General Compensation Philosophy
A basic philosophy of Worthington Industries, Inc. is that all regular
full-time, nonunion employees of the Company have a meaningful portion of their
total compensation tied to the profitability of the Company. In furtherance of
this philosophy, all such employees in general participate in either the
Company's cash profit sharing plan or the executive cash bonus plan (the "Bonus
Plan") which has been in place since the 1960's. Cash profit sharing, which
covers the majority of the Company's employees, is computed as a fixed
percentage of quarterly profits.
The Company's CEO, its other executive officers and certain other key
employees, participate in the Bonus Plan. Under the Bonus Plan, bonuses paid to
participants are computed as a percentage of the Company's income before taxes,
but after adjustment for contributions to the Company's Deferred Plan. The total
amount of bonuses paid to all participants in the Bonus Plan may not exceed 15%
of the Company's pre-tax income. Bonuses are paid quarterly based upon the
quarterly financial results and generally account for in excess of 45% of a
participant's total compensation.
Compensation for Executives
Since bonus payments account for such a large percentage of total
compensation and since bonuses are tied to the Company's profitability, the
largest variable in determining total compensation of the CEO, the executive
officers, and other participants in the Bonus Plan is the profitability of the
Company. However, bonuses can be adjusted, up or down, based on the individual's
performance, subjectively determined by his or her supervisor, the CEO or the
Compensation and Stock Option Committee (the "Compensation Committee") as
appropriate.
In setting base salaries for the CEO and the executive officers, the
Compensation Committee, which is comprised of outside directors, has reviewed
information regarding compensation paid by other manufacturing companies of
similar size to officers with similar responsibilities. It is the Compensation
Committee's intent to set base salaries at levels so that when the Company
performs well, the bonus payments (which are tied to Company income) would put
Company officers in the upper range of total compensation being paid to officers
of comparable companies. Conversely, should the Company's performance be below
that of comparable companies, total executive compensation would fall below the
average compensation range.
Performance of the CEO
Consistent with the philosophy behind the Bonus Plan, profitability of the
Company has been the primary variable in the compensation paid to John P.
McConnell, the Company's CEO. In the past few years, the CEO has led the Company
through significant change and positioning for the future. During that time, the
Company has undertaken a number of major strategic actions which the
Compensation Committee believes will have a significant positive impact on the
Company's long-term future. These included acquisitions, the formation of joint
ventures and significant investments in new plants and equipment. This year, the
Company completed a significant foreign acquisition, started up two major steel
processing and one joint venture facility and completed a strategic review of
the Company's customs products and cast products segments, pointed toward
divesting those operations. The Compensation Committee believes that these
actions, headed by the CEO and the management team, are in the best long-term
interest of the Company.
As reported in past years, the Compensation Committee believes that the
Company's CEO's total compensation was below that of CEO's of comparable
companies. Accordingly, effective March 1, 1997, the Compensation Committee
increased the base salary of the CEO to move his
38
<PAGE> 41
compensation closer to that provided by comparable companies. Likewise, the
implementation of the long-term incentive program discussed below, enables the
Compensation Committee to add long-term incentive pay to the CEO's compensation
package to make it more competitive with that provided by comparable companies,
while at the same time further tying the CEO's compensation to Company
performance.
For the year, the Company's earnings per share (before extraordinary item)
increased 7%, while earnings per share from continuing operations increased 23%.
Mr. McConnell's total compensation increased primarily due to the increase in
base wages implemented in fiscal 1997. His bonus compensation increased 5%,
consistent with the Company's overall earnings for the year.
Bonuses and Stock Options
Although the Bonus Plan is tied to current profitability, the Company has
found it to provide a balance between incentives for current and long-term
profitability. Since the payment is based on current year income, the incentive
toward current profitability is obvious. However, since future compensation for
the officers will continue to be based in large part on the Bonus Plan, the Plan
also provides incentives to assure the long-term profitability of the Company.
Long-term incentives are also provided through stock options granted under
the Company's Stock Option and 1997 Long-Term Incentive Plans. The Compensation
Committee views stock options as particularly appropriate long-term incentives
because stock options align the interests of the employee/option holder with
those of the shareholder by providing value to the employee tied directly to
stock price increases. Although the terms of the Company's 1990 Stock Option
Plan and Long-Term Incentive Plan are flexible, all options granted in the past
ten years have been granted at 100% of the market value on the date of grant.
The Company granted options to the CEO and other Named Executives effective
November 20, 1997 as shown under "Option Grants." Pricing for these options was
100% of the fair market value on their effective date. The last previous option
grant to officers was effective February 28, 1997. Pursuant to the long-term
incentive program discussed below, the Compensation Committee currently intends
to consider annual stock option grants for the CEO and other selected
executives. The Compensation Committee will continue to review the appropriate
time for option grants for other employees. Among the factors which were
considered for prior grants and which are likely to be considered for any new
grants would be the position held by the participant in the Company, individual
performance and the timing and amounts of previous grants.
Long-Term Incentive Plan
The Compensation Committee believes that providing long-term compensation
tied to sustained financial achievement is an appropriate method to motivate and
reward the Company's top executive officers. In the past, stock options were the
only long-term incentive compensation provided by the Company and the
Compensation Committee believes that the Company was not competitive with
comparable companies in providing long-term compensation to its executives.
Accordingly, the Company's 1997 Long-Term Incentive Plan ("LTIP") was
recommended and adopted last year. Pursuant to the LTIP, the Compensation
Committee has implemented a long-term incentive program beginning with the
awards granted in fiscal 1998 as set forth under "Long-Term Incentive Awards."
This program anticipates consideration of (i) annual stock option grants and
(ii) long-term incentive awards based on achieving measurable criteria
performance over a multiple year period, with payment in cash, stock or stock
awards for achievement of those goals. The Compensation Committee intends to
review awards granted for periods ending after fiscal 1998 to appropriately
reflect the discontinuance of certain of the Company's operations.
39
<PAGE> 42
Tax Deductibility
Section 162(m) of the Internal Revenue Code limits deductions for
compensation paid to a publicly-held corporation's five most highly compensated
executive officers to $1,000,000 per year per executive officer, excluding
"performance based compensation" meeting certain requirements. Federal
regulations issued under Section 162(m) define the provisions which compensatory
plans must contain to qualify for the "performance based" exemption under
Section 162(m). The Company's 1990 Stock Option Plan has been amended so as to
qualify for the exemption. The Compensation Committee intends to tailor the
incentive programs under the LTIP to also qualify for the exemption. Since no
officer's annual salary, plus bonuses, have approached $1,000,000, the
Compensation Committee has not attempted to revise the Bonus Plan to satisfy the
conditions for the exemption, but it may re-examine the matter if compensation
paid thereunder would not otherwise be deductible under Section 162(m) and such
provisions would not distort or discourage the existing incentives for
performance that enhance the value of the Company. In all cases, however,
whether or not some portion of a covered executive officer's compensation is tax
deductible, the Company will continue to carefully consider the net cost and
value to the Company of its compensation policies.
COMPENSATION AND STOCK OPTION COMMITTEE
John F. Havens, Chairman
John B. Blystone
Robert B. McCurry
Gerald B. Mitchell
Pete A. Klisares ex officio member
40
<PAGE> 43
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
The following graph compares the five year cumulative return from investing
$100 at May 31, 1993 in the Company's Common Shares, the S&P 500 index of
companies and the S&P Industrials index of companies, with dividends assumed to
be reinvested when received. The S&P Industrials index includes a broad range of
manufacturers. Because of the diversity of the Company's business, it is felt
that comparison with this broader index is appropriate.
<TABLE>
<CAPTION>
Measurement Period S&P
(Fiscal Year Covered) WTHG S&P 500 INDUST.
<S> <C> <C> <C>
1993 100 100 100
1994 102.36 104.26 104.65
1995 109.78 125.31 127.40
1996 108.80 160.94 163.76
1997 101.86 208.28 209.14
1998 99.84 272.20 269.94
</TABLE>
RATIFICATION OF SELECTION OF
INDEPENDENT AUDITORS
Management will present at the Annual Meeting a resolution calling for the
ratification of the appointment of the firm of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending May 31, 1999. It is expected
that a representative of Ernst & Young LLP will be present at the Annual Meeting
and will be given the opportunity to make a statement and to respond to
appropriate questions. That firm has audited the accounts of the Company since
1964.
SHAREHOLDER PROPOSALS
Any shareholder of the Company who intends to submit a proposal to the
Company at the 1999 Annual Meeting of Shareholders must submit such proposal to
the Company at its corporate offices not later than April 22, 1999 for inclusion
in the Company's Proxy Statement and form of Proxy relating to that meeting. If
a shareholder intends to present a proposal at the 1999 Annual Meeting of
Shareholders, but has not sought the inclusion of such proposal in the Company's
Proxy Statement and form of Proxy, such proposal must be received by the Company
at its corporate offices prior to July 6, 1999 or the Company's management
proxies for the 1999 Annual Meeting will be entitled to use their discretionary
voting authority should such proposal then be raised, without any discussion of
the matter in the Company's Proxy Statement or form of Proxy.
41
<PAGE> 44
10-K REPORT
Consolidated financial statements for Worthington Industries, Inc. and its
subsidiaries are included the Worthington Industries, Inc. Annual Report to
Shareholders which is attached as Appendix I to this Proxy Statement. Additional
copies of these statements and the Company's Annual Report on Form 10-K for the
year ended May 31, 1998 (excluding exhibits, unless such exhibits have been
specifically incorporated by reference therein) may be obtained from the
Company's Shareholder Relations Department at 1205 Dearborn Drive, Columbus, OH
43085. The Form 10-K is also on file with the Securities and Exchange
Commission, Washington, D.C. 20549.
OTHER MATTERS
Management knows of no other business which may be brought before the
Annual Meeting. However, if any other matter shall properly come before the
Annual Meeting, it is the intention of the persons named in the enclosed form of
Proxy to vote such Proxy in accordance with their best judgment on such matters.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS
WHO DO NOT EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON ARE URGED TO FILL IN,
SIGN AND RETURN THE PROXY IN THE ENCLOSED, SELF-ADDRESSED STAMPED ENVELOPE.
By order of the Board of Directors
CHARLES D. MINOR, Secretary
Dated: August 20, 1998
42
<PAGE> 45
ANNEX A
AMENDED ARTICLES OF INCORPORATION OF
WORTHINGTON INDUSTRIES, INC.
A-1
<PAGE> 46
AMENDED ARTICLES OF INCORPORATION
OF
WORTHINGTON INDUSTRIES, INC.
FIRST: The name of the Corporation shall be Worthington Industries,
Inc.
SECOND: The place in Ohio where the principal office of the
Corporation is to be located is in the City of Columbus, County of
Franklin.
THIRD: The purpose for which the Corporation is formed is to engage in
any lawful act or activity for which corporations may be formed under
Sections 1701.01 to 1701.98 of the Ohio Revised Code.
FOURTH: I. Capital Stock. The total number of shares which the
Corporation shall have authority to issue is One Hundred Fifty-one Million
(151,000,000) shares, of which One Hundred Fifty Million (150,000,000),
each without par value, shall be of a class designated "Common Shares,"
Five Hundred Thousand (500,000), each without par value, shall be of a
class designated "Class A Preferred Shares" and Five Hundred Thousand
(500,000), each without par value, shall be of a class designated "Class B
Preferred Shares." The Class A Preferred Shares and the Class B Preferred
Shares are sometimes collectively referred to herein as the "Preferred
Shares."
II. Preferred Shares. The Board of Directors is authorized to provide
for the issuance from time to time in one or more series of any number of
authorized and unissued Class A Preferred Shares and Class B Preferred
Shares. Subject to the provisions of this ARTICLE FOURTH and the
limitations prescribed by law, the board of directors is expressly
authorized to adopt amendments to these Amended Articles of Incorporation
in respect of any unissued or treasury Class A Preferred Shares and Class B
Preferred Shares and thereby establish or change the number of shares to be
included in each such series and to fix the designation and relative
rights, preferences, qualifications and limitations or restrictions of the
shares of each such series. The authority of the board of directors with
respect to each series shall include, but not be limited to, determination
of the following:
A. The distinctive designation of such series and the number of
shares which shall constitute such series;
B. The rate of dividends payable on shares of such series, the
conditions upon which such dividends shall be payable (including whether
they shall be payable in preference to, or in another relation to, the
dividends payable on any other class or classes or series of shares) and
the date from which dividends shall be cumulative in the event the board
of directors determines that dividends shall be cumulative;
C. Whether such series shall have conversion privileges and, if so,
the terms and conditions of such conversion, including, but not limited
to, provision for adjustment of the conversion rate upon such events and
in such manner as the board of directors shall determine;
D. Whether or not the shares of such series shall be redeemable
and, if so, the terms and conditions of such redemption, including the
date or dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary
under different conditions and at different redemption dates;
E. Whether such series shall have a sinking fund for the redemption
or purchase of shares of that series and, if so, the terms and amounts
of such sinking fund;
A-2
<PAGE> 47
F. The rights of the shares of such series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment in
respect of shares of that series; and
G. Any other relative rights, preferences and limitations of such
series which shall not be inconsistent with this ARTICLE FOURTH.
Subject to the provisions of any applicable law, the holders of
outstanding Class A Preferred Shares and the holders of outstanding Class B
Preferred Shares shall possess voting power for the election of directors
and for all other purposes, each holder of record of Class A Preferred
Shares being entitled to one vote for each Class A Preferred Share standing
in the name of such shareholder on the books of the Corporation and each
holder of record of Class B Preferred Shares being entitled to ten votes
for each Class B Preferred Share standing in the name of such shareholder
on the books of the Corporation.
III. Common Shares. The board of directors of the Corporation is
authorized, subject to limitations prescribed by law and the provisions of
this ARTICLE FOURTH, to provide for the issuance from time to time of any
number of authorized and unissued Common Shares, and shall determine the
terms under which and the consideration for which the Corporation shall
issue its Common Shares.
A. Subject to the provisions of any applicable law, at every
meeting of the shareholders, each holder of Common Shares shall be
entitled to one vote, in person or by proxy, for each Common Share
standing in the name of such shareholder on the books of the
Corporation, on each matter on which the Common Shares are entitled to
vote.
B. Subject to the rights of holders of the Preferred Shares, the
holders of the Common Shares shall be entitled to receive, when and as
declared by the board of directors, out of the assets of the Corporation
which are by law available therefor, dividends payable in cash, in
property, or in shares and the holders of the Preferred Shares shall not
be entitled to participate in any such dividends (unless otherwise
provided by the board of directors in any resolution providing for the
issue of a series of Class A Preferred Shares or of Class B Preferred
Shares).
C. In the event of any dissolution, liquidation or winding up of
the affairs of the Corporation, either voluntarily or involuntarily, the
holders of the Common Shares shall be entitled, after payment or
provision for payment in full of the debts and other liabilities of the
Corporation and the amounts to which the holders of the Preferred Shares
shall be entitled, to share ratably in the remaining assets of the
Corporation available for distribution to its shareholders to the
exclusion of the Preferred Shares (unless otherwise provided by the
board of directors in any resolution providing for the issue of a series
of Class A Preferred Shares or of Class B Preferred Shares). Neither the
merger or consolidation of the Corporation, nor the sale, lease or
conveyance of all or part of its assets, shall be deemed to be a
liquidation, dissolution or winding up of the affairs of the Corporation
within the meaning of this Subparagraph III(C).
IV. No Pre-emptive Rights. No holder of shares of this Corporation of
any class shall have, as such, as a matter of right, the pre-emptive right
to subscribe for or purchase any part of any new or additional issue of
shares of any class whatsoever, or of securities or other obligations
convertible into or exchangeable for any shares of any class whatsoever or
which by warrants or otherwise entitle the holders thereof to subscribe for
or purchase any shares of any class whatsoever, whether now or hereafter
authorized and whether issued for cash or other consideration or by way of
dividend.
FIFTH: The directors of the Corporation shall have the power to cause
the Corporation from time to time and at any time to purchase, hold, sell,
transfer or otherwise deal with (A) shares of any class or series issued by
it, (B) any security or other obligation of the
A-3
<PAGE> 48
Corporation which may confer upon the holder thereof the right to convert
the same into shares of any class or series authorized by the articles of
the Corporation, and (C) any security or other obligation which may confer
upon the holder thereof the right to purchase shares of any class or series
authorized by the articles of the Corporation. The Corporation shall have
the right to repurchase, if and when any shareholder desires to sell, or on
the happening of any event is required to sell, shares of any class or
series issued by the Corporation. The authority granted in this ARTICLE
FIFTH of these Amended Articles of Incorporation shall not limit the
plenary authority of the directors to purchase, hold, sell, transfer or
otherwise deal with shares of any class or series, securities or other
obligations issued by the Corporation or authorized by its articles.
SIXTH: All of the authority of the Corporation shall be exercised by
or under the direction of the board of directors except as otherwise
provided in these Amended Articles of Incorporation or the Regulations of
the Corporation or required by law. For the management of the business and
for the conduct of the affairs of the Corporation, and in further creation,
definition, limitation and regulation of the power of the Corporation and
of its directors and of its shareholders, it is further provided as
follows:
I. Elections of directors need not be by written ballot unless the
Regulations of the Corporation shall so provide.
II. Subject to the rights of the holders of any class or series of
shares of the Corporation having a preference over the Common Shares as to
dividends or upon liquidation to elect additional directors under specific
circumstances, the number of directors of the Corporation shall be fixed
from time to time by or in accordance with the provisions of the
Regulations of the Corporation. The directors, other than those who may be
elected by the holders of any class or series of shares of capital stock
having preference over the Common Shares as to dividends or upon
liquidation, shall be classified, with respect to the time for which they
severally hold office, into three classes, as nearly equal in number as
possible, as shall be provided in the manner specified in the Regulations
of the Corporation, one class to hold office initially for a term expiring
at the annual meeting of shareholders to be held in 1999, another class to
hold office initially for a term expiring at the annual meeting of
shareholders to be held in 2000, and another class to hold office initially
for a term expiring at the annual meeting of shareholders to be held in
2001, with the members of each class to hold office until their successors
are duly elected and qualified. At each annual meeting of the shareholders
of the Corporation, the successors to the class of directors whose term
expires at that meeting shall be elected to hold office for a term expiring
at the annual meeting of shareholders held in the third year following the
year of their election.
III. Advance notice of nominations for the election of directors,
other than by the board of directors or a committee thereof, shall be given
in the manner provided in the Regulations of the Corporation.
IV. Subject to the rights of the holders of any class or series of
shares of capital stock of the Corporation having a preference over the
Common Shares as to dividends or upon liquidation to elect directors under
specified circumstances, newly created directorships resulting from any
increase in the number of directors and any vacancies on the board of
directors resulting from death, resignation, disqualification, removal or
other cause may be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the
board of directors. Any director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the class
of directors in which the new directorship was created or the vacancy
occurred and until such director's successor shall have been elected and
qualified. No reduction in the number of directors constituting the board
of directors shall shorten the term of any incumbent director.
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V. Subject to the rights of the holders of any class or series of
shares of capital stock of the Corporation having a preference over the
Common Shares as to dividends or upon liquidation to elect directors under
specified circumstances, (i) any director, or the entire board of
directors, may be removed from office, with or without cause, but only by
the affirmative vote of the holders of record of outstanding shares
representing at least 75% of the votes entitled to be cast by the holders
of all then outstanding shares of Voting Stock (as defined in ARTICLE
SEVENTH hereof), voting together as a single class, and entitled to vote in
respect thereof, and (ii) any director may be removed from office, but only
for cause, by the affirmative vote of three-fourths (3/4) of the directors
then in office.
VI. Any action required or permitted to be taken by the shareholders
of the Corporation must be effected at a duly called annual or special
meeting of such shareholders and may not be effected by any consent in
writing by such shareholders.
SEVENTH: I. Capitalized terms used herein are defined in Paragraph IV
of this ARTICLE SEVENTH.
II. In addition to any affirmative vote required by law or under any
other provision of these Amended Articles of Incorporation or the
Regulations of the Corporation or otherwise, and except as otherwise
expressly provided in this Article SEVENTH:
A. any merger or consolidation of this Corporation or any
Subsidiary with or into (i) any Substantial Shareholder or (ii) any
other corporation (whether or not itself a Substantial Shareholder)
which, after such merger or consolidation, would be an Affiliate of a
Substantial Shareholder, or
B. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions) to
or with any Substantial Shareholder of any Substantial Part of the
assets of this Corporation or of any Subsidiary, or
C. the issuance or transfer by this Corporation or by any
Subsidiary (in one transaction or a series of related transactions) of
any Equity Securities of this Corporation or any Subsidiary to any
Substantial Shareholder in exchange for cash, securities or other
property (or a combination thereof) having an aggregate fair market
value of $25,000,000 or more, or
D. the adoption of any plan or proposal for the liquidation or
dissolution of this Corporation if, as of the record date for the
determination of shareholders entitled to notice thereof and to vote
thereon, any person shall be a Substantial Shareholder, or
E. any reclassification of securities (including any reverse stock
split) or recapitalization of this Corporation, or any reorganization,
merger or consolidation of this Corporation with any of its Subsidiaries
or any similar transaction (whether or not with or into or otherwise
involving a Substantial Shareholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
securities of any class of Equity Securities of this Corporation or any
Subsidiary which is directly or indirectly Beneficially Owned by any
Substantial Shareholder,
shall (except as otherwise expressly provided in these Amended Articles of
Incorporation) require the affirmative vote of the holders of not less than
75% of the votes entitled to be cast by all holders of all then outstanding
shares of Voting Stock; provided that such affirmative vote must include
the affirmative vote of the holders of shares of Voting Stock entitled to
cast a majority of the votes entitled to be cast by the holders of all then
outstanding shares of Voting Stock not beneficially owned by the
Substantial Shareholder in question. Each such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that
some lesser percentage may be specified, by law or in any agreement with
The Nasdaq Stock Market or any national securities exchange or otherwise.
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III. The provisions of this ARTICLE SEVENTH shall not be applicable
to any Business Combination, the terms of which shall be approved, either
in advance of or subsequent to a Substantial Shareholder having become a
Substantial Shareholder, by three-fourths (3/4) of the Whole Board, but
only if a majority of the members of the board of directors in office and
acting upon such matter shall be Continuing Directors.
IV. For the purpose of this ARTICLE SEVENTH:
A. A "Person" shall mean any individual, firm, corporation or other
entity.
B. The term "Business Combination" as used in this ARTICLE SEVENTH
shall mean any transaction which is described in any one or more of
Subparagraphs (A) through (E) of Paragraph II of this ARTICLE SEVENTH.
C. "Substantial Shareholder" shall mean any Person who or which, as
of the record date for the determination of shareholders entitled to
notice of and to vote on any Business Combination, or immediately prior
to the consummation of any such Business Combination:
(1) is the Beneficial Owner, directly or indirectly, of more
than fifteen percent (15%) of the shares of Voting Stock (determined
solely on the basis of the total number of shares of Voting Stock so
Beneficially Owned (and without giving effect to the number or
percentage of votes entitled to be cast in respect of such shares) in
relation to the total number of shares of Voting Stock then issued
and outstanding), or
(2) is an Affiliate of this Corporation and at any time within
three years prior thereto was the Beneficial Owner, directly or
indirectly, of more than fifteen percent (15%) of the then
outstanding Voting Stock (determined as aforesaid), or
(3) is an assignee of or has otherwise succeeded to any shares
of this Corporation which were at any time within three years prior
thereto Beneficially Owned by any Substantial Shareholder, and such
assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public offering
within the meaning of the Securities Act of 1933, as amended.
Notwithstanding the foregoing, a Substantial Shareholder shall not
include (i) this Corporation or any Subsidiary, (ii) any profit-sharing,
employee stock ownership or other employee benefit plan of this Corporation
or any Subsidiary or any trustee of or fiduciary with respect to any such
plan when acting in such capacity, or (iii) Persons who, on August 3, 1998
are Affiliates of this Corporation owning in excess of ten percent (10%) of
the outstanding shares of Common Stock of its parent corporation,
Worthington Industries, Inc., a Delaware corporation, and the respective
successors, executors, legal representatives, heirs and legal assigns
(provided that any such legal assign is such an Affiliate immediately prior
to assignment, transfer or other disposition to such assign) of such
Person.
D. "Beneficial Ownership" shall be determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended (or any successor rule or statutory provision)
or, if said Rule 13d-3 shall be rescinded and there shall be no
successor rule or statutory provision thereto, pursuant to said Rule
13d-3 as in effect on August 3, 1998; provided, however, that a Person
shall, in any event, also be deemed to be the "Beneficial Owner" of any
shares of Voting Stock:
(1) which such Person or any of its Affiliates or Associates
beneficially own, directly or indirectly, or
(2) which such Person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of
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time), pursuant to any agreement, arrangement or understanding (but
shall not be deemed to be the beneficial owner of any shares of
Voting Stock solely by reason of an agreement, arrangement or
understanding with this Corporation to effect a Business Combination)
or upon the exercise of conversion rights, exchange rights, warrants,
or options, or otherwise, or (ii) sole or shared voting or investment
power with respect thereto pursuant to any agreement, arrangement,
understanding, relationship or otherwise (but shall not be deemed to
be the beneficial owner of any shares of Voting Stock solely by
reason of a revocable proxy granted for a particular meeting of
shareholders, pursuant to a public solicitation of proxies for such
meeting, with respect to shares of which neither such Person nor any
such Affiliate or Associate is otherwise deemed the beneficial
owner), or
(3) which are beneficially owned, directly or indirectly, by any
other Person with which such first mentioned Person or any of its
Affiliates or Associates acts as a partnership, limited partnership,
syndicate or other group pursuant to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of this Corporation; and
provided further, however, that (i) no director or officer of this
Corporation, nor any Associate or Affiliate of any such director or
officer, shall, solely by reason of any or all such directors and
officers acting in their capacities as such, be deemed, for any
purposes hereof, to beneficially own any shares of Voting Stock
beneficially owned by any other such director or officer (or any
Associate or Affiliate thereof), and (ii) no employee stock ownership
or similar plan of this Corporation or any Subsidiary nor any trustee
with respect thereto, nor any Associate or Affiliate of any such
trustee, shall, solely by reason of such capacity of such trustee, be
deemed for any purposes hereof, to beneficially own any shares of
Voting Stock held under any such plan.
E. For purposes of computing the percentage Beneficial Ownership of
shares of Voting Stock of a Person in order to determine whether such
Person is a Substantial Shareholder, the outstanding shares of Voting
Stock shall include shares deemed owned by such Person through
application of Subparagraph (D) of this Paragraph IV but shall not
include any other shares of Voting Stock which may be issuable by this
Corporation pursuant to any agreement, or upon the exercise of
conversion rights, warrants or options, or otherwise. For all other
purposes, the outstanding shares of Voting Stock shall include only
shares of Voting Stock then outstanding and shall not include any shares
of Voting Stock which may be issuable by this Corporation pursuant to
any agreement, or upon the exercise of conversion rights, warrants or
options, or otherwise.
F. "Continuing Director" shall mean a Person who was a member of
the board of directors of the Corporation as of the effective date of
the merger of Worthington Industries, Inc., a Delaware corporation, with
and into this Corporation, or thereafter elected by the shareholders or
appointed by the board of directors of this Corporation prior to the
date of which the Substantial Shareholder in question became a
Substantial Shareholder, or a Person designated (before his initial
election or appointment as a director) as a Continuing Director by
three-fourths (3/4) of the Whole Board, but only if a majority of the
Whole Board shall then consist of Continuing Directors.
G. "Whole Board" shall mean the total number of directors which
this Corporation would have if there were no vacancies.
H. An "Affiliate" of a specified Person is a Person that directly,
or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified.
The term "Associate" used to indicate a relationship with any Person
shall mean (i) any corporation or organization (other than this
Corporation or a Subsidiary) of which such Person is an officer or
partner or is, directly or indirectly, the
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beneficial owner of ten percent (10%) or more of any class of Equity
Securities, (ii) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as
trustee or in a similar fiduciary capacity, and (iii) any relative or
spouse of such Person, or any relative of such spouse, who has the same
home as such Person, or is an officer or director of any corporation
controlling or controlled by such Person.
I. "Subsidiary" shall mean any corporation of which a majority of
any class of Equity Security is owned, directly or indirectly, by this
Corporation; provided, however, that for the purposes of the definition
of Substantial Shareholder set forth in Subparagraph (C) of this
Paragraph IV, the term "Subsidiary" shall mean only a corporation of
which a majority of each class of Equity Security is owned, directly or
indirectly, by this Corporation.
J. "Substantial Part" shall mean assets having a book value
(determined in accordance with generally accepted accounting principles)
in excess of ten percent (10%) of the book value (determined in
accordance with generally accepted accounting principles) of the total
consolidated assets of this Corporation, at the end of its most recent
fiscal year ending prior to the time the determination is made.
K. "Voting Stock" shall mean any shares of capital stock of this
Corporation entitled to vote generally in the election of directors.
L. "Equity Security" shall have the meaning given to such term
under Rule 3a11-1 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended, as in effect on August 3,
1998.
V. A majority of the Continuing Directors then in office shall have
the power to determine for the purposes of this ARTICLE SEVENTH, on the
basis of information known to them (i) the number of shares of Voting Stock
Beneficially Owned by any Person, (ii) whether a Person is an Affiliate or
Associate of another, (iii) whether the assets subject to any Business
Combination constitute a Substantial Part of the assets of the corporation
in question, and/or (iv) any other factual matter relating to the
applicability or effect of this ARTICLE SEVENTH.
VI. A majority of the Continuing Directors then in office shall have
the right to demand that any Person who is reasonably believed to be a
Substantial Shareholder (or holder of record shares of Voting Stock
Beneficially Owned by any Substantial Shareholder) supply this Corporation
with complete information as to (i) the record owner(s) of all shares
Beneficially Owned by such Person who is reasonably believed to be a
Substantial Shareholder, (ii) the number of, and class or series of, shares
Beneficially Owned by such Person who it is reasonably believed is a
Substantial Shareholder and held of record by each such record owner and
the number(s) of the share certificate(s) evidencing such shares, and (iii)
any other factual matter relating to the applicability or effect of this
ARTICLE SEVENTH, as may be reasonably requested of such Person, and such
Person shall furnish such information within 10 days after receipt of such
demand.
VII. Any determinations made by the board of directors, or by the
Continuing Directors, as the case may be, pursuant to this ARTICLE SEVENTH
in good faith and on the basis of such information and assistance as was
then reasonably available for such purpose shall be conclusive and binding
upon this Corporation and its shareholders, including any Substantial
Shareholder.
VIII. Nothing contained in this ARTICLE SEVENTH shall be construed to
relieve any Substantial Shareholder from any fiduciary obligation imposed
by law.
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EIGHTH: The board of directors of the Corporation, when evaluating any
offer of another party to (1) make a tender or exchange offer for any
Equity Security of the Corporation, (2) merge or consolidate the
Corporation with another corporation, or (3) purchase or otherwise acquire
all or substantially all of the properties and assets of the Corporation,
shall in connection with the exercise of its judgment in determining what
is in the best interests of the Corporation and its shareholders, give due
consideration to all relevant factors, including without limitation the
social and economic effects on the employees, customers, suppliers and
other constituents of the Corporation and its subsidiaries and on the
communities in which the Corporation and its subsidiaries operate or are
located and any other factors which the board of directors may consider
under Ohio law.
NINTH: I. Notwithstanding any other provisions of these Articles of
Incorporation or the Regulations of the Corporation (and notwithstanding
the fact that a lesser percentage may be specified by law or in any
agreement with The Nasdaq Stock Market or any national securities exchange
or in any other provision of these Amended Articles of Incorporation or the
Regulations of the Corporation), the affirmative vote of the holders of at
least 75% of the votes entitled to be cast by the holders of all then
outstanding shares of Voting Stock (as that term is defined in ARTICLE
SEVENTH hereof), shall be required to amend, alter, change or repeal, or
adopt any provisions inconsistent with, ARTICLE SIXTH, EIGHTH, NINTH or
TENTH of these Amended Articles of Incorporation, and the affirmative vote
of the holders of at least 75% of the votes entitled to be cast by the
holders of all then outstanding shares of Voting Stock, including the
holders of at least a majority of the votes entitled to be cast by the
holders of all then outstanding shares of Voting Stock of the Corporation
not beneficially owned by a Substantial Shareholder (as that term is
defined in ARTICLE SEVENTH), shall be required to amend, alter, change or
repeal, or adopt any provision inconsistent with, ARTICLE SEVENTH of these
Amended Articles of Incorporation.
II. Except as otherwise provided in these Amended Articles of
Incorporation, including without limitation Paragraph I of this ARTICLE
NINTH, the shareholders of the Corporation may, by the affirmative vote of
the holders of at least a majority of the votes entitled to be cast by the
holders of all then outstanding shares of the Voting Stock, amend, alter,
change or repeal any provision contained in these Amended Articles of
Incorporation.
TENTH: Notwithstanding any other provisions of these Amended Articles
of Incorporation or the Regulations of the Corporation (and notwithstanding
the fact that a lesser percentage may be specified by law or in any
agreement with The Nasdaq Stock Market or any national securities exchange
or any other provision of these Amended Articles of Incorporation or the
Regulations of the Corporation), the affirmative vote of the holders of at
least 75% of the votes entitled to be cast by the holders of all then
outstanding shares of Voting Stock (as that term is defined in ARTICLE
SEVENTH hereof), shall be required to amend, alter, change or repeal, or
adopt any provisions inconsistent with, the Regulations of the Corporation;
provided, however, that if such amendment, alteration, change or repeal has
been approved by three-fourths (3/4) of the Whole Board (as defined in
ARTICLE SEVENTH hereof), the shareholders may, by the affirmative vote of
the holders of at least a majority of the votes entitled to be cast by the
holders of all then outstanding shares of Voting Stock, approve such
amendment, alteration, change or repeal. Any amendment to these Amended
Articles of Incorporation which shall contravene the Regulations in
existence on the record date of the meeting of shareholders at which such
amendment is to be voted upon by the shareholders, shall require the
affirmative vote of the holders of at least 75% of the votes entitled to be
cast by the holders of all then outstanding shares of Voting Stock;
provided, however, that if such amendment has been approved by
three-fourths (3/4) of the Whole Board, the shareholders may approve such
amendment to these Amended Articles of Incorporation by the affirmative
vote of the holders of at least a majority of the votes entitled to be cast
by the holders of all then outstanding shares of Voting Stock.
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ELEVENTH: Chapter 1704 of the Ohio Revised Code shall not apply to the
Corporation.
TWELFTH: Notwithstanding any provision of the Ohio Revised Code
requiring for any purpose the vote, consent, waiver or release of the
holders of shares of the Corporation entitling them to exercise two-thirds
or any other proportion of the voting power of the Corporation or of any
class or classes of shares thereof, such action may be taken by the vote,
consent, waiver or release of the holders of shares entitling them to
exercise not less than a majority of the voting power of the Corporation or
of such class or classes, unless expressly provided otherwise by statute or
in these Amended Articles of Incorporation.
THIRTEENTH: Shareholders of the Corporation shall not have the right
to vote cumulatively in the election of directors.
FOURTEENTH: These Amended Articles of Incorporation take the place of
and supersede the existing Articles of Incorporation.
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ANNEX B
REGULATIONS
OF
WORTHINGTON INDUSTRIES, INC.
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CODE OF REGULATIONS
OF
WORTHINGTON INDUSTRIES, INC.
ARTICLE ONE
MEETINGS OF SHAREHOLDERS
Section 1.01. ANNUAL MEETINGS. The annual meeting of the shareholders for
the election of directors, for the consideration of reports to be laid before
such meeting and for the transaction of such other business as may properly come
before such meeting, shall be held on such date, at such time and at such place
as may be fixed from time to time by the directors.
Section 1.02. CALLING OF MEETINGS. Meetings of the shareholders may be
called only by the chairman of the board, the president, or, in case of the
president's absence, death or disability, the vice president authorized to
exercise the authority of the president; the secretary; the directors by action
at a meeting, or a majority of the directors acting without a meeting; or the
holders of at least fifty percent (50%) of all shares outstanding and entitled
to vote thereat.
Section 1.03. PLACE OF MEETINGS. Meetings of shareholders shall be held at
such place as the person or persons calling the meetings shall decide, unless
the board of directors decides that a meeting shall be held at some other place
and causes the notice thereof to so state.
Section 1.04. NOTICE OF MEETINGS. (A) Written notice stating the time,
place and purposes of a meeting of the shareholders shall be given either by
personal delivery or by mail not less than seven nor more than sixty days before
the date of the meeting, (1) to each shareholder of record entitled to vote at
the meeting, (2) by or at the direction of the president or the secretary. If
mailed, such notice shall be addressed to the shareholder at his address as it
appears on the records of the Corporation. Notice of adjournment of a meeting
need not be given if the time and place to which it is adjourned are fixed and
announced at such meeting. In the event of a transfer of shares after the record
date for determining the shareholders who are entitled to receive notice of a
meeting of shareholders, it shall not be necessary to give notice to the
transferee. Nothing herein contained shall prevent the setting of a record date
in the manner provided by law, the Articles or the Regulations for the
determination of shareholders who are entitled to receive notice of or to vote
at any meeting of shareholders or for any purpose required or permitted by law.
(B) Following receipt by the president or the secretary of a request in
writing, specifying the purpose or purposes for which the persons properly
making such request have called a meeting of the shareholders, delivered either
in person or by registered mail to such officer by any persons entitled to call
a meeting of shareholders, such officer shall cause to be given to the
shareholders entitled thereto notice of a meeting to be held on a date not less
than seven nor more than sixty days after the receipt of such request, as such
officer may fix. If such notice is not given within fifteen days after the
receipt of such request by the president or the secretary, then, and only then,
the persons properly calling the meeting may fix the time of meeting and give
notice thereof in accordance with the provisions of the Regulations.
Section 1.05. WAIVER OF NOTICE. Notice of the time, place and purpose or
purposes of any meeting of shareholders may be waived in writing, either before
or after the holding of such meeting, by any shareholder, which writing shall be
filed with or entered upon the records of such meeting. The attendance of any
shareholder, in person or by proxy, at any such meeting without protesting the
lack of proper notice, prior to or at the commencement of the meeting, shall be
deemed to be a waiver by such shareholder of notice of such meeting.
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Section 1.06. QUORUM. A meeting of the shareholders duly called shall not
be organized for the transaction of business unless a quorum is present. Except
as otherwise expressly provided by law, the Articles or the Regulations, (A) at
any meeting called by the board of directors, the presence in person or by proxy
of holders of record of voting shares entitling them to exercise at least
one-third of the voting power of the Corporation shall constitute a quorum for
such meeting and (B) at any meeting called other than by the Board of Directors,
the presence in person or proxy of holders of record of voting shares of the
Corporation entitling them to exercise at least a majority of the voting power
of the Corporation shall constitute a quorum for such meeting. The shareholders
present at a duly organized meeting can continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum. The holders of a majority of the voting shares represented at a
meeting, whether or not a quorum is present, or the chairman of the board, the
president, or the officer of the Corporation acting as chairman of the meeting,
may adjourn such meeting from time to time to such time (not more than 30 days
after the previously adjourned meeting) and place as they (or he) may determine,
without notice other than by announcement at the meeting of the time and place
of the adjourned meeting, and if a quorum is present at such adjourned meeting,
any business may be transacted as if the meeting had been held as originally
called.
Section 1.07. VOTES REQUIRED. At all elections of directors, the candidates
receiving the greatest number of votes shall be elected. Except as otherwise
required by law, the Articles or the Regulations, any other matter submitted to
the shareholders for their vote shall be decided by the vote of the holders of a
majority of the votes entitled to be cast by the holders of all then outstanding
voting shares, present in person or by proxy, and entitled to vote with respect
to such matter provided a quorum is present.
Section 1.08. NOTICE AND ORDER OF BUSINESS; PROCEDURE. (A) At any meeting
of the shareholders, only such business shall be conducted as shall have been
brought before the meeting (1) by or at the direction of the board of directors
or (2) by any shareholder of the Corporation who is a shareholder of record at
the time of giving of the notice provided for in this Subsection 1.08(A), who
shall be entitled to vote at such meeting and who complies with the notice
procedures set forth in this Subsection 1.08(A). For business to be properly
brought before a shareholder meeting by a shareholder, the shareholder must have
given timely notice thereof in writing to the secretary of the Corporation. To
be timely, a shareholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 30 days prior
to the meeting; provided, however, that in the event that less than 40 days'
notice or prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be received no later
than the close of business on the tenth day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made.
A shareholder's notice to the secretary shall set forth as to each matter the
shareholder proposes to bring before the meeting (1) a brief description of the
business desired to be brought before the meeting and the reasons for conducting
such business at the meeting, (2) the name and address, as they appear on the
Corporation's books, of the shareholder proposing such business, (3) the class
and number of shares of the Corporation which are beneficially owned by the
shareholder and (4) any material interest of the shareholder in such business.
Notwithstanding anything in the Regulations to the contrary, no business shall
be conducted at a shareholder meeting except in accordance with the procedures
set forth in this Subsection 1.08(A). The chairman of the meeting shall, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting and in accordance with the provisions of the
Regulations, and if he shall so determine, he shall so declare to the meeting
and any business not properly brought before the meeting shall not be
transacted. Notwithstanding the foregoing provisions of this Subsection 1.08(A),
a shareholder shall also comply with all applicable requirements of the
Securities Exchange Act of 1934, and the rules and regulations thereunder, with
respect to the matters set forth in this Subsection 1.08(A).
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(B) The order of business at any meeting of shareholders and all matters
relating to the manner of conducting the meeting shall be determined by the
officer of the Corporation acting as chairman of such meeting unless otherwise
determined by a vote of the holders of a majority of the voting shares of the
Corporation then outstanding, present in person or by proxy, and entitled to
vote at such meeting. Meetings shall be conducted in a manner designed to
accomplish the business of the meeting in a prompt and orderly fashion and to be
fair and equitable to all shareholders, but it shall not be necessary to follow
any manual of parliamentary procedure.
Section 1.09. SHAREHOLDERS ENTITLED TO VOTE. Each shareholder of record on
the books of the Corporation on the record date for determining the shareholders
who are entitled to vote at a meeting of shareholders shall be entitled at such
meeting to vote each share of the Corporation standing in his name on the books
of the Corporation on such record date. The directors may fix a record date for
the determination of the shareholders who are entitled to receive notice of and
to vote at a meeting of shareholders, which record date shall not be a date
earlier than the date on which the record date is fixed and which record date
may be a maximum of sixty days preceding the date of the meeting of
shareholders. The record date for the purpose of determining the shareholders
who are entitled to receive notice of and vote at a meeting of the shareholders
shall continue to be the record date for all adjournments of such meeting,
unless the directors or the persons who fixed the original record date fix
another date. Anything contained in these Regulations or elsewhere to the
contrary, unless otherwise authorized by law, the Corporation may not directly
or indirectly vote any shares issued by it and such shares shall not be
considered as outstanding for the purpose of computing the voting power of the
Corporation or of shares of any class.
Section 1.10. PROXIES. At meetings of the shareholders, any shareholder of
record entitled to vote thereat may be represented and may vote by a proxy or
proxies appointed by an instrument in writing signed by such shareholder, but
such instrument shall be filed with the secretary of the meeting before the
person holding such proxy shall be allowed to vote thereunder. No proxy shall be
valid after the expiration of eleven months after the date of its execution,
unless the shareholder executing it shall have specified therein the length of
time it is to continue in force.
Section 1.11. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders, the directors may appoint inspectors of election to act at such
meeting or any adjournment thereof; if inspectors are not so appointed, the
officer of the Corporation acting as chairman of any such meeting may make such
appointment. In case any person appointed as inspector fails to appear or act,
the vacancy may be filled only by appointment made by the directors in advance
of such meeting or, if not so filled, at the meeting by the officer of the
Corporation acting as chairman of such meeting. No other person or persons may
appoint or require the appointment of inspectors of election.
Section 1.12. ORGANIZATION. At each meeting of the shareholders, the
chairman of the board, or in the absence of the chairman of the board, the
president, or, in the absence of the president, any vice president or, in the
absence of the chairman, the president or a vice president, a chairman chosen by
a majority of the voting shares of the Corporation then outstanding, present in
person or by proxy, and entitled to vote at such meeting, shall act as chairman
of the meeting, and the secretary of the Corporation, or, if the secretary of
the Corporation shall not be present, the assistant secretary, or if the
secretary and the assistant secretary shall not be present, a person whom the
chairman of the meeting shall appoint, shall act as secretary of the meeting.
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ARTICLE TWO
DIRECTORS
Section 2.01. AUTHORITY AND QUALIFICATIONS. Except where the law, the
Articles or the Regulations otherwise provide, all authority of the Corporation
shall be vested in and exercised by its directors. Directors need not be
shareholders of the Corporation.
Section 2.02. NUMBER OF DIRECTORS AND TERM OF OFFICE.
(A) The number of directors of the Corporation may be determined at a
meeting of the shareholders called for the purpose of electing directors at
which a quorum is present, by the affirmative vote of the holders of shares
entitling them to exercise not less than 75% of the voting power of the
Corporation on such proposal; or by resolution adopted by the affirmative vote
of a majority of the Whole Board of Directors. As used in the Regulations, the
term "Whole Board of Directors" shall mean the total number of directors which
the Corporation would have if there were no vacancies. Notwithstanding the
foregoing, the number of directors shall in no event be fewer than three or more
than eighteen.
(B) The board of directors shall be divided into three classes as nearly
equal in number as the then fixed number of directors permits, with the term of
office of one class expiring each year. The election of each class of directors
shall be a separate election. At the first meeting of shareholders, directors of
one class shall be elected to hold office for a term expiring at the 1999 annual
meeting, directors of another class shall be elected to hold office for a term
expiring at the 2000 annual meeting and directors of another class shall be
elected to hold office for a term expiring at the 2001 annual meeting. At the
1999 annual meeting of shareholders and each succeeding annual meeting,
successors to the class of directors whose term then expires shall be elected to
hold office for a three-year term. A director shall hold office until the annual
meeting for the year in which his term expires and until his successor is duly
elected and qualified, or until his earlier resignation, removal from office or
death. In the event of any increase in the number of directors of the
Corporation, the additional directors shall be similarly classified in such a
manner that each class of directors shall be as equal in number as possible. In
the event of any decrease in the number of directors of the Corporation, such
decrease shall be effected in such a manner that each class of directors shall
be as equal in number as possible.
(C) The directors may fix or change the number of directors and may fill
any director's office that is created by an increase in the number of directors.
(D) No reduction in the number of directors shall of itself have the effect
of shortening the term of any incumbent director.
Section 2.03. NOMINATION AND ELECTION.
(A) Only persons who are nominated in accordance with the procedures set
forth in the Regulations shall be eligible to serve as directors of the
Corporation. Nominations of persons for election to the board of directors of
the Corporation may be made at a meeting of shareholders (1) by or at the
direction of the board of directors (or a committee thereof) or (2) by any
shareholder of the Corporation who is a shareholder of record at the time of
giving of notice provided for in this Subsection 2.03(A), who shall be entitled
to vote for the election of directors at the meeting and who complies with the
notice procedures set forth in this Section 2.03(A). Such nominations, other
than those made by or at the direction of the board of directors (or a committee
thereof), shall be made pursuant to timely notice in writing to the secretary of
the Corporation. To be timely, a shareholder's notice shall be delivered to or
mailed and received at the principal executive offices of the Corporation, not
less than 14 days nor more than 50 days prior to the meeting; provided, however,
that if less than 21 days' notice or prior public disclosure of the date of the
meeting is given or made to shareholders, notice by the shareholder to be timely
must be so received not later than the close of business on the seventh day
following the day on
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which such notice of the date of the meeting or such public disclosure was made.
Such shareholder's nomination shall set forth (1) as to each person whom the
shareholder proposes to nominate for election or re-election as a director, (i)
the name, age, business address and, if known, residence address of the proposed
nominee; (ii) the principal occupation or employment of the proposed nominee;
(iii) the number of shares of the Corporation which are beneficially owned by
the proposed nominee; and (iv) any other information relating to the proposed
nominee that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934 or any successor rule
or regulation (including such person's written consent to be named in the proxy
statement as a nominee and to serving as a director if elected); and (2) as to
the shareholder giving the notice (a) the name and address, as they appear on
the Corporation's books, of such shareholder and (b) the class and number of
shares of the Corporation which are beneficially owned by such shareholder. At
the request of the board of directors, any person nominated by the board of
directors for election as a director shall furnish to the secretary of the
Corporation that information required to be set forth in a shareholder's notice
of nomination which pertains to the nominee. No person shall be eligible to
serve as a director of the Corporation unless nominated in accordance with the
procedures set forth in the Regulations. The chairman of the meeting shall, if
the facts warrant, determine and declare to the meeting that a nomination was
not made in accordance with the procedures prescribed by the Regulations, and if
he shall so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded. Notwithstanding the foregoing provisions of
this Subsection 2.03(A), a shareholder shall also comply with all applicable
requirements of the Securities Exchange Act of 1934, and the rules and
regulations thereunder, with respect to the matters set forth in this Subsection
2.03(A).
(B) The election of directors shall be by ballot whenever requested by the
presiding officer of the meeting or by the holders of a majority of the voting
shares outstanding, entitled to vote at such meeting and present in person or by
proxy, but unless such request is made, the election shall be viva voce.
Section 2.04. RESIGNATION. Any director of the Corporation may resign at
any time by giving written notice to the chairman of the board, the president or
the secretary of the Corporation. Such resignation shall take effect at the time
specified therein, and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 2.05. REMOVAL. A director or directors may be removed from office
only in accordance with the provisions of the Articles. In case of any such
removal, a new director may be elected at the same meeting for the unexpired
term of each director removed. Failure to elect a director to fill the unexpired
term of any director removed shall be deemed to create a vacancy in the board.
Section 2.06. VACANCIES. The remaining directors, though less than a
majority of the Whole Board of Directors, may, by the vote of a majority of
their number, fill any vacancy in the board of directors for the unexpired term.
A vacancy in the board of directors exists within the meaning of this Section
2.05 in case the shareholders increase the authorized number of directors but
fail at the meeting at which such increase is authorized, or an adjournment
thereof, to elect the additional directors provided for, or in case the
shareholders fail at any time to elect the whole authorized number of directors.
Section 2.07. MEETINGS. Regular meetings of the board of directors may be
held at such intervals and at such time and place as shall from time to time be
determined by the board of directors. After such determination and notice
thereof has been once given to each person then a member of the board of
directors, regular meetings may be held at such intervals and time and place
without further notice being given. The directors shall hold such special
meetings as may from time to time be called, and such special meetings of
directors may be called only by the
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chairman of the board, the president or a majority of directors then in office.
All meetings of directors shall be held at the principal office of the
Corporation in the State of Ohio or at such other place within or without the
State of Ohio, as the directors may from time to time determine by a resolution.
Meetings of the directors may be held through any communications equipment if
all persons participating can hear each other and participation in a meeting
pursuant to this provision shall constitute presence at such meeting.
SECTION 2.08. NOTICE OF MEETINGS. Notice of the time and place of each
meeting of directors for which such notice is required by law, the Articles, the
Regulations or the By-Laws shall be given to each of the directors by at least
one of the following methods:
(A) In a writing mailed not less than three days before such meeting
and addressed to the residence or usual place of business of a director, as
such address appears on the records of the Corporation; or
(B) By telegraph, cable, radio, wireless, facsimilie transmission,
overnight delivery or a writing sent or delivered to the residence or usual
place of business of a director as the same appears on the records of the
Corporation, not later than the day before the date on which such meeting
is to be held; or
(C) Personally, by electronic mail or by telephone not later than the
day before the date on which such meeting is to be held.
Notice given to a director by any one of the methods specified in the
Regulations shall be sufficient, and the method of giving notice to all
directors need not be uniform. Notice of any meeting of directors may be given
only by the chairman of the board, the president or the secretary of the
Corporation. Any such notice need not specify the purpose or purposes of the
meeting. Notice of adjournment of a meeting of directors need not be given if
the time and place to which it is adjourned are fixed and announced at such
meeting.
SECTION 2.09. WAIVER OF NOTICE. Notice of any meeting of directors may be
waived in writing, either before or after the holding of such meeting, by any
director, which writing shall be filed with or entered upon the records of the
meeting. The attendance of any director at any meeting of directors without
protesting, prior to or at the commencement of the meeting, the lack of proper
notice, shall be deemed to be a waiver by him of notice of such meeting.
SECTION 2.10. QUORUM. A majority of the directors then in office shall be
necessary to constitute a quorum for a meeting of directors. The act of a
majority of the directors present at a meeting at which a quorum is present is
the act of the board, except as otherwise provided by law, the Articles or the
Regulations. At all meetings of the board of directors, each director shall have
one vote.
SECTION 2.11. EXECUTIVE COMMITTEE. The directors may create an executive
committee or any other committee of directors, to consist of not less than three
directors, and may authorize the delegation to such executive committee or other
committees of any of the authority of the directors, however conferred, other
than that of filling vacancies among the directors or in the executive committee
or in any other committee of the directors.
Such executive committee or any other committee of directors shall serve at
the pleasure of the directors, shall act only in the intervals between meetings
of the directors, and shall be subject to the control and direction of the
directors. Such executive committee or other committee of directors may act by a
majority of its members at a meeting or by a writing or writings signed by all
of its members.
Any act or authorization of any act by the executive committee or any other
committee within the authority delegated to it shall be as effective for all
purposes as the act or authorization of the directors. No notice of a meeting of
the executive committee or of any other committee of
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directors shall be required. A meeting of the executive committee or of any
other committee of directors may be called only by the chairman of the board,
the president or by a member of such executive or other committee of directors.
Meetings of the executive committee or of any other committee of directors may
be held through any communications equipment if all persons participating can
hear each other and participation in such a meeting shall constitute presence
thereat.
SECTION 2.12. COMPENSATION. Directors shall be entitled to receive as
compensation for services rendered and expenses incurred as directors, such
amounts as the directors, by the affirmative vote of a majority of those in
office, may determine.
SECTION 2.13. BY-LAWS. The directors may adopt, and amend from time to
time, By-Laws for their own government, which By-Laws shall not be inconsistent
with the law, the Articles or the Regulations.
SECTION 2.14. ACTION BY DIRECTORS WITHOUT A MEETING. Anything contained in
the Regulations to the contrary notwithstanding, any action which may be
authorized or taken at a meeting of the directors or of a committee of the
directors, as the case may be, may be authorized or taken without a meeting with
the affirmative vote or approval of, and in a writing or writings signed by, all
the directors, or all the members of such committee of the directors,
respectively, which writings shall be filed with or entered upon the records of
the Corporation.
ARTICLE THREE
OFFICERS
SECTION 3.01. OFFICERS. The officers of the Corporation to be elected by
the directors shall be a chairman of the board (who shall be a director), a
president, a secretary, a treasurer and, if desired, one or more vice presidents
and such other officers and assistant officers as the directors may from time to
time elect. Officers need not be shareholders of the Corporation, and may be
paid such compensation as the board of directors may determine. Any two or more
offices (other than the offices of president and vice president) may be held by
the same person, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity if such instrument is required by law, the
Articles, the Regulations or the By-Laws to be executed, acknowledged or
verified by two or more officers.
SECTION 3.02. TENURE OF OFFICE. The officers of the Corporation shall hold
office at the pleasure of the directors. Any officer of the Corporation may be
removed, either with or without cause, at any time, by the affirmative vote of a
majority of all the directors then in office; such removal, however, shall be
without prejudice to the contract rights, if any, of the person so removed.
SECTION 3.03. DUTIES OF THE CHAIRMAN OF THE BOARD. The chairman of the
board, if there be one, shall preside at all meetings of the shareholders and of
the board of directors. He shall be the chief executive officer of the
Corporation, and except where by law the signature of the president is required,
the chairman of the board shall possess the same power as the president to sign
all contracts, certificates and other instruments of the Corporation which may
be authorized by the board of directors. During the absence or disability of the
president, the chairman of the board shall exercise all the powers and discharge
all the duties of the president. The chairman of the board shall also perform
such duties and may exercise such other powers as from time to time may be
assigned to him by the Regulations or by the board of directors.
SECTION 3.04. DUTIES OF THE PRESIDENT. The president shall, subject to the
control of the board of directors, and, if there be one, the chairman of the
board, have general supervision of the
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business of the Corporation and shall see that all orders and resolutions of the
board of directors are carried in to effect. He shall execute all bonds,
mortgages, contracts and other instruments of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except that
the other officers of the Corporation may sign and execute documents when so
authorized by the Resolutions, the board of directors, the chairman or the
president. In the absence or disability of the chairman of the board, or if
there be none, the president shall preside at all meetings of the shareholders
and the board of directors. If there be no chairman of the board, the president
shall be the chief executive officer of the Corporation. The president shall
also perform such other duties and may exercise such other powers as from time
to time may be assigned to him by the Regulations or by the board of directors.
SECTION 3.05. DUTIES OF THE VICE PRESIDENTS. The vice presidents shall
perform such duties as are conferred upon them by the Regulations or as may from
time to time be assigned to them by the board of directors, the chairman of the
board or the president. At the request of the chairman of the board, in the
absence or disability of the president, the vice president designated by the
board of directors shall perform all the duties of the president, and when so
acting, shall have all the powers of the president. The authority of the vice
president to sign in the name of the Corporation all certificates for shares and
authorize deeds, mortgages, leases, bonds, contracts, notes and other
instruments, shall be coordinated with like authority of the president.
SECTION 3.06. DUTIES OF THE SECRETARY. It shall be the duty of the
secretary, or of an assistant secretary, if any, in case of the absence or
inability to act of the secretary, to keep minutes of all the proceedings of the
shareholders and the directors and to make a proper record of the same; to
perform such other duties as may be required by law, the Articles or the
Regulations; to perform such other and further duties as may from time to time
be assigned to him by the directors; and to deliver all books, paper and
property of the Corporation in his possession to his successor, or to the
chairman of the board or the president.
SECTION 3.07. DUTIES OF THE TREASURER. The treasurer, or an assistant
treasurer, if any, in case of the absence or inability to act of the treasurer,
shall receive and safely keep in charge all money, bills, notes, choses in
action, securities and similar property belonging to the Corporation, and shall
do with or disburse the same as directed by the chairman of the board, the
president or the directors; shall keep an accurate account of the finances and
business of the Corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, stated capital and shares, together with
such other accounts as may be required and hold the same open for inspection and
examination by the directors; shall give bond in such sum with such security as
the directors may require for the faithful performance of his duties; shall,
upon the expiration of his term of office, deliver all money and other property
of the Corporation in his possession or custody to his successor or to the
chairman of the board or the president; and shall perform such other duties as
from time to time may be assigned to him by the directors.
ARTICLE FOUR
SHARES
SECTION 4.01. CERTIFICATES. Certificates evidencing ownership of shares of
the Corporation shall be issued to those entitled to them. Each certificate
evidencing shares of the Corporation shall bear a distinguishing number; the
signatures of the chairman of the board, the president or a vice president, and
of the secretary or an assistant secretary, or the treasurer or an assistant
treasurer (except that when any such certificate is countersigned by an
incorporated transfer agent or registrar, such signatures may be facsimile,
engraved, stamped or printed); and such recitals as may be required by law.
Certificates evidencing shares of the Corporation shall be of such tenor and
design as the directors may from time to time adopt and may bear such recitals
as are permitted by law.
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SECTION 4.02. TRANSFERS. Where a certificate evidencing a share or shares
of the Corporation is presented to the Corporation or its proper agents with a
request to register transfer, the transfer shall be registered as requested if:
(1) An appropriate person signs on each certificate so presented or
signs on a separate document an assignment or transfer of shares evidenced
by each such certificate, or signs a power to assign or transfer such
shares, or when the signature of an appropriate person is written without
more on the back of each such certificate; and
(2) Reasonable assurance is given that the endorsement of each
appropriate person is genuine and effective; the Corporation or its agents
may refuse to register a transfer of shares unless the signature of each
appropriate person is guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934 or any
successor rule or regulation; and
(3) All applicable laws relating to the collection of transfer or
other taxes have been complied with; and
(4) The Corporation or its agents are not otherwise required or
permitted to refuse to register such transfer.
SECTION 4.03. TRANSFER AGENTS AND REGISTRARS. The directors may appoint one
or more agents to transfer or to register shares of the Corporation, or both.
SECTION 4.04. LOST, WRONGFULLY TAKEN OR DESTROYED CERTIFICATES. Except as
otherwise provided by law, where the owner of a certificate evidencing shares of
the Corporation claims that such certificate has been lost, destroyed or
wrongfully taken, the directors must cause the Corporation to issue a new
certificate in place of the original certificate if the owner:
(1) So requests before the Corporation has notice that such original
certificate has been acquired by a bona fide purchaser; and
(2) Files with the Corporation, unless waived by the directors, an
indemnity bond, with surety or sureties satisfactory to the Corporation, in
such sums as the directors may, in their discretion, deem reasonably
sufficient as indemnity against any loss or liability that the Corporation
may incur by reason of the issuance of each such new certificate; and
(3) Satisfies any other reasonable requirements which may be imposed
by the directors, in their discretion.
ARTICLE FIVE
INDEMNIFICATION AND INSURANCE
SECTION 5.01. INDEMNIFICATION. The Corporation shall indemnify any officer
or director of the Corporation who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (including, without
limitation, any action threatened or instituted by or in the right of the
Corporation), by reason of the fact that he is or was a director, officer,
employee, agent or volunteer of the Corporation, or is or was serving at the
request of the Corporation as a director, trustee, officer, employee, member,
manager, agent or volunteer of another corporation (domestic or foreign,
nonprofit or for profit), limited liability company, partnership, joint venture,
trust or other enterprise, against expenses (including, without limitation,
attorneys' fees, filing fees, court reporters' fees and transcript costs),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if his act or omission
giving rise to any claim for indemnification under this Section 5.01 was not
occasioned by his intent to cause injury to the Corporation or by his reckless
disregard for the best interests of
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the Corporation, and in respect of any criminal action or proceeding, he had no
reasonable cause to believe his conduct was unlawful. It shall be presumed that
no act or omission of a person claiming indemnification under this Section 5.01
that gives rise to such claim was occasioned by an intent to cause injury to the
Corporation or by a reckless disregard for the best interests of the Corporation
and, in respect of any criminal matter, that such person had no reasonable cause
to believe his conduct was unlawful; the presumption recited in this Section
5.01 can be rebutted only by clear and convincing evidence, and the termination
of any action, suit or proceeding by judgment, order, settlement or conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself, rebut
such presumption.
SECTION 5.02. COURT-APPROVED INDEMNIFICATION. Anything contained in the
Regulations or elsewhere to the contrary notwithstanding:
(A) the Corporation shall not indemnify any officer or director of the
Corporation who was a party to any completed action or suit instituted by
or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee, agent
or volunteer of the Corporation, or is or was serving at the request of the
Corporation as a director, trustee, officer, employee, member, manager,
agent or volunteer of another corporation (domestic or foreign, nonprofit
or for profit), limited liability company, partnership, joint venture,
trust or other enterprise, in respect of any claim, issue or matter
asserted in such action or suit as to which he shall have been adjudged to
be liable for an act or omission occasioned by his deliberate intent to
cause injury to the Corporation or by his reckless disregard for the best
interests of the Corporation, unless and only to the extent that the Court
of Common Pleas of Franklin County, Ohio or the court in which such action
or suit was brought shall determine upon application that, despite such
adjudication of liability, and in view of all the circumstances of the
case, he is fairly and reasonably entitled to such indemnity as such Court
of Common Pleas or such other court shall deem proper; and
(B) the Corporation shall promptly make any such unpaid
indemnification as is determined by a court to be proper as contemplated by
this Section 5.02.
SECTION 5.03. INDEMNIFICATION FOR EXPENSES. Anything contained in the
Regulations or elsewhere to the contrary notwithstanding, to the extent that an
officer or director of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section
5.01, or in defense of any claim, issue or matter therein, he shall be promptly
indemnified by the Corporation against expenses (including, without limitation,
attorneys' fees, filing fees, court reporters' fees and transcript costs)
actually and reasonably incurred by him in connection therewith.
SECTION 5.04. DETERMINATION REQUIRED. Any indemnification required under
Section 5.01 and not precluded under Section 5.02 shall be made by the
Corporation only upon a determination that such indemnification is proper in the
circumstances because the officer or director has met the applicable standard of
conduct set forth in Section 5.01. Such determination may be made only (A) by a
majority vote of a quorum consisting of directors of the Corporation who were
not and are not parties to, or threatened with, any such action, suit or
proceeding, or (B) if such a quorum is not obtainable or if a majority of a
quorum of disinterested directors so directs, in a written opinion by
independent legal counsel other than an attorney, or a firm having associated
with it an attorney, who has been retained by or who has performed services for
the Corporation, or any person to be indemnified, within the past five years, or
(C) by the shareholders, or (D) by the Court of Common Pleas of Franklin County,
Ohio or (if the Corporation is a party thereto) the court in which such action,
suit or proceeding was brought, if any; any such determination may be made by a
court under division (D) of this Section 5.04 at any time [including, without
limitation, any time before, during or after the time when any such
determination may be requested of, be under consideration by or have been denied
or disregarded by the disinterested directors under division (A) or by
independent legal counsel under division (B) or by the
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shareholders under division (C) of this Section 5.04]; and no failure for any
reason to make any such determination, and no decision for any reason to deny
any such determination, by the disinterested directors under division (A) or by
independent legal counsel under division (B) or by the shareholders under
division (C) of this Section 5.04 shall be evidence in rebuttal of the
presumption recited in Section 5.01. Any determination made by the disinterested
directors under division (A) or by independent legal counsel under division (B)
of this Section 5.04 to make indemnification in respect of any claim, issue or
matter asserted in an action or suit threatened or brought by or in the right of
the Corporation shall be promptly communicated to the person who threatened or
brought such action or suit, and within ten days after receipt of such
notification, such person shall have the right to petition the Court of Common
Pleas of Franklin County, Ohio or the court in which such action or suit was
brought, if any, to review the reasonableness of such determination.
SECTION 5.05. ADVANCES FOR EXPENSES. The provisions of Section
1701.13(E)(5)(a) of the Ohio Revised Code do not apply to the Corporation.
Expenses (including, without limitation, attorneys' fees, filing fees, court
reporters' fees and transcript costs) incurred in defending any action, suit or
proceeding referred to in Section 5.01 shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding to or on
behalf of the officer or director promptly as such expenses are incurred by him,
but only if such officer or director shall first agree, in writing, to repay all
amounts so paid in respect of any claim, issue or other matter asserted in such
action, suit or proceeding in defense of which he shall not have been successful
on the merits or otherwise if it is proved by clear and convincing evidence in a
court of competent jurisdiction that, in respect of any such claim, issue or
other matter, his relevant action or failure to act was occasioned by his
deliberate intent to cause injury to the Corporation or his reckless disregard
for the best interests of the Corporation, unless, and only to the extent that,
the Court of Common Pleas of Franklin County, Ohio or the court in which such
action or suit was brought shall determine upon application that, despite such
determination, and in view of all of the circumstances, he is fairly and
reasonably entitled to all or part of such indemnification.
SECTION 5.06. ARTICLE FIVE NOT EXCLUSIVE. The indemnification provided by
this Article FIVE shall not be exclusive of, and shall be in addition to, any
other rights to which any person seeking indemnification may be entitled under
the Articles, the Regulations, any agreement, a vote of disinterested directors,
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be an officer or director of the Corporation and shall inure
to the benefit of the heirs, executors, and administrators of such a person.
SECTION 5.07. INSURANCE. The Corporation may purchase and maintain
insurance, or furnish similar protection, including but not limited to trust
funds, letters of credit, or self-insurance, for or on behalf of any person who
is or was a director, officer, employee, agent or volunteer of the Corporation,
or is or was serving at the request of the Corporation as a director, trustee,
officer, employee, member, manager, agent or volunteer of another corporation
(domestic or foreign, nonprofit or for profit), limited liability company,
partnership, joint venture, trust or other enterprise, against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the obligation or
the power to indemnify him against such liability under the provisions of this
Article FIVE. Insurance may be purchased from or maintained with a person in
which the Corporation has a financial interest.
SECTION 5.08. CERTAIN DEFINITIONS. For purposes of this Article FIVE, and
as an example and not by way of limitation:
(A) A person claiming indemnification under this Article FIVE shall be
deemed to have been successful on the merits or otherwise in defense of any
action, suit or proceeding
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referred to in Section 5.01, or in defense of any claim, issue or other
matter therein, if such action, suit or proceeding shall be terminated as
to such person, with or without prejudice, without the entry of a judgment
or order against him, without a conviction of him, without the imposition
of a fine upon him and without his payment or agreement to pay any amount
in settlement thereof (whether or not any such termination is based upon a
judicial or other determination of the lack of merit of the claims made
against him or otherwise results in a vindication of him).
(B) References to an "other enterprise" shall include employee tax
benefit plans; references to a "fine" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its
participants or beneficiaries.
SECTION 5.09. VENUE. Any action, suit or proceeding to determine a claim
for, or for repayment to the Corporation of, indemnification under this Article
FIVE may be maintained by the person claiming such indemnification, or by the
Corporation, in the Court of Common Pleas of Franklin County, Ohio. The
Corporation and (by claiming or accepting such indemnification) each such person
consent to the exercise of jurisdiction over its or his person by the Court of
Common Pleas of Franklin County, Ohio in any such action, suit or proceeding.
ARTICLE SIX
MISCELLANEOUS
SECTION 6.01. AMENDMENTS. The Regulations may only be amended in accordance
with the provisions of the Articles.
SECTION 6.02. SECTION 1701.831 OF THE OHIO REVISED CODE NOT
APPLICABLE. Section 1701.831 of the Ohio Revised Code does not apply to control
share acquisitions of shares of the Corporation.
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ANNEX C
AGREEMENT OF MERGER
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AGREEMENT OF MERGER
AGREEMENT OF MERGER ("Merger Agreement"), dated as of August 20, 1998, by
and between WORTHINGTON INDUSTRIES, INC., a Delaware corporation ("WII
DELAWARE"), and WORTHINGTON INDUSTRIES, INC., an Ohio corporation ("WII OHIO").
WII DELAWARE and WII OHIO are hereinafter sometimes collectively referred to as
the "Constituent Corporations."
WITNESSETH:
WHEREAS, the authorized capital stock of WII OHIO consists of 150,000,000
Common Shares, each without par value, 1,000 of which are issued and outstanding
and owned by WII DELAWARE; 500,000 Class A Preferred Shares, each without par
value, none of which have been issued; and 500,000 Class B Preferred Shares,
each without par value, none of which have been issued; and
WHEREAS, WII DELAWARE, as the sole shareholder of WII OHIO, desires to
effect a merger of WII DELAWARE with and into WII OHIO pursuant to the
provisions of the General Corporation Law of the State of Delaware (the "DGCL")
and the General Corporation Law of the State of Ohio (the "OGCL"); and
WHEREAS, the respective Boards of Directors of WII DELAWARE and WII OHIO
have determined that it is advisable and in the best interest of each of such
corporations that WII DELAWARE merge with and into WII OHIO upon the terms and
subject to the conditions herein provided; and
WHEREAS, the Board of Directors of WII OHIO has, by resolution duly
adopted, approved this Merger Agreement and directed that it be executed by the
undersigned officers; and
WHEREAS, the Board of Directors of WII DELAWARE has, by resolution duly
adopted, approved this Merger Agreement and directed that it be executed by the
undersigned officers and that it be submitted to a vote of the stockholders of
WII DELAWARE;
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
the parties agree that WII DELAWARE shall be merged with and into WII OHIO and
that the terms and conditions of the merger, the mode of carrying the merger
into effect, the manner of converting the shares of the Constituent Corporations
and certain other provisions relating thereto shall be as hereinafter set forth.
ARTICLE I
THE MERGER
SECTION 1.01. SURVIVING CORPORATION. Subject to the terms and provisions of
this Merger Agreement, and in accordance with the DGCL and the OGCL, at the
Effective Time (as defined in Section 1.07 hereof), WII DELAWARE shall be merged
with and into WII OHIO (the "Merger"). WII OHIO shall be the surviving
corporation (hereinafter sometimes called the "Surviving Corporation") of the
Merger and shall continue its corporate existence under the laws of the State of
Ohio. At the Effective Time, the separate corporate existence of WII DELAWARE
shall cease.
SECTION 1.02. EFFECTS OF THE MERGER. At the Effective Time, the Merger
shall have the effects provided for herein and in Section 1701.82 of the OGCL
and Section 259 of the DGCL.
SECTION 1.03. ARTICLES OF INCORPORATION. As of the Effective Time, the
Articles of Incorporation of WII OHIO, as in effect immediately prior to the
Effective Time, shall be amended and replaced in their entirety by the Amended
Articles of Incorporation attached hereto as Annex I, which Amended Articles of
Incorporation shall become, at the Effective Time, the articles of incorporation
of the Surviving Corporation until thereafter duly amended in accordance with
the provisions thereof and applicable law.
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SECTION 1.04. REGULATIONS. As of the Effective Time, the Regulations of WII
OHIO, as in effect immediately prior to the Effective Time, shall be the
regulations of the Surviving Corporation until thereafter duly amended in
accordance with the provisions thereof, the articles of incorporation of the
Surviving Corporation and applicable law.
SECTION 1.05. DIRECTORS OF THE SURVIVING CORPORATION. At and after the
Effective Time and until changed in the manner provided in the regulations or
the articles of incorporation of the Surviving Corporation or as otherwise
provided by law, the number of directors of the Surviving Corporation shall be
the number of directors of WII DELAWARE immediately prior to the Effective Time.
At the Effective Time, each person who is a director of WII DELAWARE immediately
prior to the Effective Time shall become a director of the Surviving Corporation
and each such person shall serve as a director of the Surviving Corporation for
the balance of the term for which such person was elected a director of WII
DELAWARE and until his or her successor is duly elected and qualified in the
manner provided in the regulations or the articles of incorporation of the
Surviving Corporation or as otherwise provided by law or until his or her
earlier death, resignation or removal in the manner provided in the regulations
or the articles of incorporation of the Surviving Corporation or as otherwise
provided by law.
SECTION 1.06. OFFICERS OF THE SURVIVING CORPORATION. At the Effective Time,
each person who is an officer of WII DELAWARE immediately prior to the Effective
Time shall become an officer of the Surviving Corporation with each such person
to hold the same office in the Surviving Corporation, in accordance with the
regulations thereof, as he or she held in WII DELAWARE immediately prior to the
Effective Time.
SECTION 1.07. EFFECTIVE TIME. The Merger shall become effective in
accordance with the provisions of Section 1701.81 of the OGCL and Sections 252,
253 and 103 of the DGCL, upon the later to occur of (a) completion of the filing
of a certificate of merger with the Secretary of State of the State of Ohio, and
(b) completion of the filing of a certificate of merger with the Secretary of
State of the State of Delaware. The date and time when the Merger shall become
effective is herein referred to as the "Effective Time."
SECTION 1.08. CUMULATIVE VOTING. At and after the Effective Time, no holder
of shares of WII OHIO shall be entitled to vote cumulatively in the election of
directors.
SECTION 1.09. ADDITIONAL ACTIONS. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary or desirable
(a) to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, title to and possession of any property or right of WII DELAWARE
acquired or to be acquired by reason of, or as a result of, the Merger, or (b)
otherwise to carry out the purposes of this Merger Agreement, WII DELAWARE and
its proper officers and directors shall be deemed to have granted hereby to the
Surviving Corporation an irrevocable power of attorney to execute and deliver
all such proper deeds, assignments and assurances in law and to do all acts
necessary and proper to vest, perfect or confirm title to and the possession of
such property or rights in the Surviving Corporation and otherwise to carry out
the purposes of this Merger Agreement; and the proper officers and directors of
the Surviving Corporation are hereby fully authorized in the name of WII
DELAWARE or otherwise to take any and all such action.
ARTICLE II
MANNER, BASIS AND EFFECT OF CONVERTING SHARES
SECTION 2.01. CONVERSION OF SHARES. At the Effective Time:
(a) Each share of Common Stock, par value $0.01 per share (the "WII
Delaware Shares"), of WII Delaware issued and outstanding immediately prior
to the Effective Time shall, by virtue of the Merger and without any action
on the part of the holder thereof, be
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converted into one fully paid and nonassessable Common Share, without par
value (the "WII Ohio Common Shares"), of WII OHIO; and
(b) Each WII Delaware Share held in the treasury of WII DELAWARE
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of WII DELAWARE, be converted into one fully
paid and nonassessable WII Ohio Common Share and shall be held in the
treasury of the Surviving Corporation; and
(c) Each WII Ohio Common Share, issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, be canceled and retired and shall
cease to exist, and shall not be converted into shares of the Surviving
Corporation or the right to receive cash or any other property.
SECTION 2.02. EFFECT OF CONVERSION. At and after the Effective Time, each
share certificate which immediately prior to the Effective Time represented
outstanding WII Delaware Shares (a "Delaware Certificate") shall be deemed for
all purposes to evidence ownership of, and to represent, the number of WII Ohio
Common Shares into which the WII Delaware Shares represented by such Delaware
Certificate immediately prior to the Effective Time have been converted pursuant
to Section 2.01 hereof. The registered holder of any Delaware Certificate
outstanding immediately prior to the Effective Time, as such holder appears in
the books and records of WII DELAWARE or its transfer agent immediately prior to
the Effective Time, shall, until such Delaware Certificate is surrendered for
transfer or exchange, have and be entitled to exercise any voting and other
rights with respect to and to receive any dividends or other distributions on
the WII Ohio Common Shares into which the WII Delaware Shares represented by any
such Delaware Certificate have been converted pursuant to Section 2.01 hereof.
SECTION 2.03. EXCHANGE OF CERTIFICATES. Each holder of a Delaware
Certificate shall, upon the surrender of such Delaware Certificate to WII Ohio
or its transfer agent for cancellation after the Effective Time, be entitled to
receive from WII OHIO or its transfer agent a certificate (an "Ohio
Certificate") representing the number of WII Ohio Common Shares into which the
WII Delaware Shares represented by such Delaware Certificate have been converted
pursuant to Section 2.01 hereof. If any such Ohio Certificate is to be issued in
a name other than that in which the Delaware Certificate surrendered for
exchange is registered, it shall be a condition of such exchange that the
Delaware Certificate so surrendered shall be properly endorsed or otherwise in
proper form for transfer and that the person requesting such exchange shall
either pay any transfer or other taxes required by reason of the issuance of the
Ohio Certificate in a name other than that of the registered holder of the
Delaware Certificate surrendered, or establish to the satisfaction of WII OHIO
or its transfer agent that such tax has been paid or is not applicable.
SECTION 2.04. STOCK PLANS.
(a) Each option to purchase WII Delaware Shares granted under the
Worthington Industries, Inc. Amended 1980 Stock Option Plan, as amended (the
"1980 Plan"), the Worthington Industries, Inc. 1990 Stock Option Plan (the "1990
Plan") or the Worthington Industries, Inc. 1997 Long-Term Incentive Plan (the
"1997 Plan") which is outstanding immediately prior to the Effective Time shall,
by virtue of the Merger and without any action on the part of the holder of any
such option, be converted into and become an option to purchase the same number
of WII Ohio Common Shares as the number of WII Delaware Shares which were
subject to such option immediately prior to the Effective Time at the same
option price per share and upon the same terms and subject to the same
conditions as are in effect at the Effective Time. The Surviving Corporation
shall reserve for purposes of the 1980 Plan, the 1990 Plan and the 1997 Plan a
number of WII Ohio Common Shares equal to the number of WII Delaware Shares
reserved by WII DELAWARE for issuance under the 1980 Plan, the 1990 Plan and the
1997 Plan as of the Effective Time. As of the Effective Time, WII OHIO hereby
assumes the 1980 Plan, the 1990 Plan and the 1997 Plan and all obligations of
WII DELAWARE under the 1980 Plan, the 1990 Plan and the 1997 Plan including the
outstanding options and other awards granted pursuant thereto.
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(b) The Worthington Industries, Inc. Deferred Profit Sharing Plan (the
"Profit Sharing Plan") shall become an identical plan of the Surviving
Corporation at the Effective Time, automatically and without further act of
either of the Constituent Corporations or any participant thereunder, and each
person who is a participant under the Profit Sharing Plan shall thereafter
continue to participate thereunder upon identical terms and conditions;
provided, however, that at and after the Effective Time, each right to acquire
WII Delaware Shares shall thereafter be a right to acquire WII Ohio Common
Shares.
SECTION 2.05. INDENTURE. As of the Effective Time, WII OHIO hereby assumes
all of the obligations of WII DELAWARE under the Indenture, dated as of May 15,
1996, as supplemented, of WII DELAWARE to PNC Bank, Ohio, National Association,
as Trustee, and the Notes issued thereunder.
SECTION 2.06. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN. As of the
Effective Time, WII OHIO hereby assumes all of the obligations of WII DELAWARE
under the Worthington Industries, Inc. Dividend Reinvestment and Stock Purchase
Plan.
ARTICLE III
APPROVAL; AMENDMENT; TERMINATION; MISCELLANEOUS
SECTION 3.01. APPROVAL. This Merger Agreement shall be submitted for
approval by the stockholders of WII DELAWARE at a meeting of such stockholders.
SECTION 3.02. AMENDMENT. Subject to applicable law, this Merger Agreement
may be amended, modified or supplemented by written agreement of the Constituent
Corporations, after authorization of such action by the Boards of Directors of
the Constituent Corporations, at any time prior to the filing of certificates of
merger, as contemplated by Section 1.07 of this Merger Agreement, with the
Secretary of State of the State of Delaware and with the Secretary of State of
the State of Ohio, except that after the approval contemplated by Section 3.01
hereof, there shall be no amendments that would (a) alter or change the amount
or kind of shares or other property to be received by the holders of any class
or series of shares of either of the Constituent Corporations in the Merger, (b)
alter or change any term of the Amended Articles of Incorporation or Regulations
of WII OHIO, or (c) alter or change any of the terms and conditions of this
Merger Agreement if such alteration or change would adversely affect the holders
of any class or series of shares of either of the Constituent Corporations.
SECTION 3.03. ABANDONMENT. At any time prior to the filing of certificates
of merger, as contemplated by Section 1.07 of this Merger Agreement, with the
Secretary of State of the State of Delaware and with the Secretary of State of
the State of Ohio, this Merger Agreement may be terminated and the Merger may be
abandoned by the Board of Directors of either WII OHIO or WII DELAWARE, or both,
notwithstanding approval of this Merger Agreement by the stockholders of WII
DELAWARE.
SECTION 3.04. COUNTERPARTS. This Merger Agreement may be executed in one or
more counterparts, each of which shall be deemed to be a duplicate original, but
all of which, taken together, shall be deemed to constitute a single instrument.
SECTION 3.05. DESIGNATED AGENT IN DELAWARE. The Surviving Corporation
agrees that it may be served with process in the State of Delaware in any
proceeding for enforcement of any obligation of WII DELAWARE, as well as for
enforcement of any obligation of the Surviving Corporation arising from the
Merger, and the Surviving Corporation irrevocably appoints the Secretary of
State of the State of Delaware as its agent to accept service of process in any
such suit or other
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proceeding; a copy of such process shall be mailed by the Secretary of State of
the State of Delaware to:
Dale T. Brinkman, Esq.
1205 Dearborn Drive
Columbus, OH 43085-4769
IN WITNESS WHEREOF, WII DELAWARE and WII OHIO have caused this Merger
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
<TABLE>
<S> <C>
WORTHINGTON INDUSTRIES, INC.,
Attest: an Ohio corporation
By: /s/ Dale T. Brinkman By: /s/ Donal H. Malenick
------------------------------------------------ --------------------------------------------------
Dale T. Brinkman,
Assistant Secretary Its: President
--------------------------------------------------
WORTHINGTON INDUSTRIES, INC.,
Attest: a Delaware corporation
By: /s/ Dale T. Brinkman By: /s/ Donal H. Malenick
------------------------------------------------ --------------------------------------------------
Dale T. Brinkman,
Assistant Secretary Its: President
--------------------------------------------------
</TABLE>
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ANNEX I
The Amended Articles of Incorporation are included as Annex A to this Proxy
Statement.
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WORTHINGTON INDUSTRIES, INC.
PROXY
P
R
O The undersigned hereby constitutes and appoints John P. McConnell,
Donal H. Malenick and Charles D. Minor, or any of them, the proxy or
X proxies of the undersigned to vote at the Annual Meeting of
Shareholders of Worthington Industries, Inc. (the "Company") to be held
Y at the Worthington Industries, Inc. Training Center, 905 Dearborn
Drive, Columbus, Ohio on September 24, 1998 at 2:00 P.M. and at any
adjournments thereof, all of the shares of Common Stock of the Company
which the undersigned is entitled to vote at such meeting or any
adjournments thereof.
-----------
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
-----------
<PAGE> 76
[X] Please mark
votes as in
this example.
All Proxies previously given by the undersigned are hereby revoked. This
Proxy will be voted as specified. Unless otherwise specified, this Proxy
will be voted FOR Proposal Nos. 1, 2 and 3.
<TABLE>
<S> <C>
1. The election of four directors, each for a 2. To consider and vote upon a proposal (the FOR AGAINST ABSTAIN
term of three years, expiring in 2001. NOMINEES: "Reincorporation Proposal") which provides [ ] [ ] [ ]
John P. McConnell, Robert B. McCurry, Gerald B. among other things, for the change of the
Mitchell, Mary Schiavo. Company's state of incorporation from
MARK HERE Delaware to Ohio through a merger of the
FOR WITHHELD IF YOU PLAN [ ] Company into Worthington Industries, Inc.,
ALL [ ] [ ] FROM ALL TO ATTEND an Ohio corporation and a wholly-owned
NOMINEES NOMINEES THE MEETING subsidiary of the Company and for related
changes to the Company's organizational
MARK HERE documents.
[ ] FOR ADDRESS [ ]
-------------------------------------- CHANGE AND
For all Nominees Except As Noted Above NOTE AT LEFT 3. Ratification of the selection of the firm FOR AGAINST ABSTAIN
of Ernst & Young LLP as auditors for the [ ] [ ] [ ]
current fiscal year.
4. In their discretion, the Proxies are
authorized to vote upon such other
business (none known by the Company at
the time of solicitation of this Proxy)
as may properly come before the meeting
and any adjournments thereof.
If any changes are required to your address, please cross through
the current information and print the new information. The new
address will be used by the Transfer Agent for all future
communications, including proxies and dividend checks.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY. PLEASE SIGN AND DATE THIS PROXY ON THE LINES BELOW AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
Please sign your name exactly as it appears on this Proxy.
Executors, administrators, trustees, guardians, attorneys and
agents should give their full titles. If shareholder is a
corporation, sign in full corporate name by authorized officer.
Signature: Date: Signature: Date:
--------------------------- -------------- --------------------------- --------------
</TABLE>
<PAGE> 77
THE ANNUAL MEETING OF SHAREHOLDERS
WILL BE HELD
THURSDAY, SEPTEMBER 24, 1998 AT 2:00 P.M.
WORTHINGTON INDUSTRIES, INC.
TRAINING CENTER
905 DEARBORN DRIVE
COLUMBUS, OHIO
