As filed with the Securities and Exchange Commission on April 17, 1995
Registration No. 33-57623
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2 TO
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
LA-Z-BOY CHAIR COMPANY
(Exact Name of Registrant as Specified in Its Charter)
MICHIGAN
(State or Other Jurisdiction of Incorporation or Organization)
2512 38-0751137
(Primary Standard Industrial (I.R.S. Employer Identification No.)
Classification Code Number)
1284 NORTH TELEGRAPH ROAD, MONROE, MICHIGAN 48161, (313) 242-1444
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
FREDERICK H. JACKSON Copies to:
VICE PRESIDENT FINANCE DAVID D. JOSWICK, ESQ.
LA-Z-BOY CHAIR COMPANY MILLER, CANFIELD, PADDOCK AND STONE, P.L.C.
1284 NORTH TELEGRAPH ROAD 150 WEST JEFFERSON, SUITE 2500
MONROE, MICHIGAN 48161 DETROIT, MICHIGAN 48226
(313) 242-1444 (313) 963-6420
(Name, Address, Including
Zip Code, and Telephone
Number, Including Area Code,
of Agent for Service)
Approximate date of commencement of proposed sale of securities to public: As
soon as practicable after registration statement becomes effective.
If the securities being registered on this form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. / /
This Registration Statement shall become effective in accordance with Section
8(a) of the Securities Act of 1933 or on such date as the Commission, acting
pursuant to said Section 8(a), may determine.<PAGE>
<TABLE>
<CAPTION>
LA-Z-BOY CHAIR COMPANY
Cross-Reference Sheet Between Items in
Form S-4 and Proxy Statement/Prospectus Pursuant to
Item 501(b) of Regulation S-K
Item No. Form S-4 Caption Heading in Prospectus
- ---------- ----------------------------- --------------------------------------------------------
<S> <C> <C>
A. INFORMATION ABOUT THE
TRANSACTION
Item 1. Forepart of Registration Cover Page of Registration Statement; Cross Reference
Statement and Outside Front Sheet; Outside Front Cover Page of Proxy
Cover Page of Statement/Prospectus
Prospectus
Item 2. Inside Front and Outside Back Table of Contents; Available Information
Cover Pages of Prospectus
Item 3. Risk Factors, Ratio of Earnings Introduction; Summary; The Merger and Related
to Fixed Charges and Other Transactions; Pro Forma Condensed Combined Financial
Information Information; The Companies; England/Corsair, Inc.;
La-Z-Boy Chair Company
Item 4. Terms of the Transaction Introduction; Summary; The Meeting; The Merger and
Related Transactions; Management of the Surviving
Corporation After the Merger; Description of La-Z-Boy
Capital Stock; Description of the La-Z-Boy Notes;
Description of Indenture; Description of the Performance
Units; Comparison of Shareholder Rights and Charter
Documents; Pro Forma Condensed Combined Financial
Information; England/Corsair, Inc.
Item 5. Pro Forma Financial Summary; Pro Forma Condensed Combined Financial
Information Information
Item 6. Material Contacts with the Summary; The Merger and Related Transactions;
Company Being Acquired England/Corsair, Inc.
Item 7. Additional Information *
Required for Reoffering by
Persons and Parties Deemed to
be Underwriters
Item 8. Interests of Named Experts and Legal Matters
Counsel
Item 9. Disclosure of Commission *
Position on Indemnification for
Securities Act Liabilities
B. INFORMATION ABOUT THE
REGISTRANT
Item 10. Information with Respect to *
S-3 Registrants
Item 11. Incorporation of Certain *
Information by Reference
Item 12. Information with Respect to *
S-2 or S-3 Registrants
Item 13. Incorporation of Certain *
Information by Reference
Item 14. Information with Respect to Summary; Pro Forma Condensed Combined Financial
Registrants Other than S-2 or Information; La-Z-Boy Chair Company; La-Z-Boy
S-3 Registrants Chair Company Financial Statements
C. INFORMATION ABOUT THE
COMPANY BEING ACQUIRED
Item 15. Information with Respect to *
S-3 Companies
Item 16. Information with Respect to *
S-2 or S-3 Companies
Item 17. Information with Respect to England/Corsair, Inc.; Management of the Surviving
Companies Other than S-2 or Corporation After the Merger; Pro Forma Condensed Combined
S-3 Companies Financial Information; England/Corsair, Inc. Financial
Statements
D. VOTING AND MANAGEMENT
INFORMATION
Item 18. Information If Proxies, Introduction; Summary; England/Corsair, Inc.; La-Z-Boy
Consents or Authorizations Are Chair Company; The Meeting; The Merger and Related
to Be Solicited Transaction; Management of the Surviving Corporation After
the Merger
Item 19. Information if Proxies, *
Consents or Authorizations Are
Not to be Solicited, or in an
Exchange Offer
<FN>
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* Omitted because inapplicable or answer is in the negative.
</TABLE>
<PAGE>
ENGLAND/CORSAIR, INC.
402 OLD KNOXVILLE HIGHWAY
NEW TAZEWELL, TENNESSEE 37825
April 17, 1995
Dear Shareholder:
You are cordially invited to attend a Special Meeting of
Shareholders of England/Corsair, Inc., a Tennessee corporation ("E/C"),
which will be held at 402 Old Knoxville Highway, New Tazewell, Tennessee at
2:00 p.m., local time, on Thursday, April 27, 1995 (the "Meeting"). The
Meeting will be a joint meeting of holders of E/C's Class A Common Stock,
without par value, and its Class B Common Stock, without par value
(collectively, the "E/C Stock").
At the Meeting, E/C shareholders will be asked to consider and vote
upon a proposal (the "Proposal") to approve: (a) the Amended and Restated
Reorganization Agreement dated as of January 13, 1995 (the "Reorganization
Agreement") among E/C, La-Z-Boy Chair Company, a Michigan corporation
("La-Z-Boy"), and LZB Acquisition, Inc., a newly formed Michigan
corporation and a wholly owned subsidiary of La-Z-Boy ("LZB Acquisition");
(b) the Amended and Restated Plan of Merger dated as of January 13, 1995
among E/C, La-Z-Boy, and LZB Acquisition (the "Plan of Merger"); and (c)
all of the transactions contemplated by the Reorganization Agreement and
the Plan of Merger, including (without limitation) the merger of E/C with
and into LZB Acquisition (the "Merger"). The Proposal is further described
in the accompanying Proxy Statement/Prospectus.
LZB Acquisition will be the surviving corporation of the Merger.
Upon consummation of the Merger: (i) E/C will cease to exist as a separate
corporation, and all of the assets and liabilities of E/C will become
assets and liabilities of LZB Acquisition, which will continue to be a
wholly owned subsidiary of La-Z-Boy; (ii) the holder of each share of E/C
Stock of either class will receive, at such holder's election, either
3.6519467707 shares of La-Z-Boy's Common Stock, $1.00 par value ("La-Z-Boy
Common Stock"), $109.558403121 principal amount of La-Z-Boy's 8% Unsecured
Promissory Notes Due 1999 ("La-Z-Boy Notes"), or $109.558403121 in cash,
all subject to the terms and limitations described in the accompanying
Proxy Statement/Prospectus; and (iii) holders of E/C Stock of either class
will also receive Performance Units, the terms of which are described in
the accompanying Proxy Statement/Prospectus. Please note that the payment
of additional Merger consideration pursuant to the Performance Units is
conditioned upon LZB Acquisition's future performance at levels never
before achieved by E/C; accordingly, the present value of the Performance
Units is unknown, and there can be no assurance that they will not prove to
have little or no value at maturity.
The Plan of Merger contains certain limitations on the
aggregate amount of each type of consideration which may be paid, as well
as procedures for allocating different types of consideration in the event
elections made by E/C shareholders would result in any of said limitations
being exceeded. As a result of these limitations and allocation
procedures, shareholders of E/C may not receive the type of consideration
they elect, and shareholders electing to receive cash or La-Z-Boy Notes may
nevertheless receive shares of La-Z-Boy Common Stock whose market value at
that time may be less than the $30.00 price of La-Z-Boy Common Stock upon
which the exchange ratio was determined. See "The Merger and Related
Transactions - Limitations" and " - Allocation of Cash, Shares and Notes"
in the accompanying Proxy Statement/Prospectus.
Prior to the vote being taken, the Chairman of the Meeting will
announce the amounts of each type of consideration elected by the
shareholders pursuant to the Notices of Election filed with the Secretary.
In the event the elections made by the shareholders result in any of the
above-described limitations being exceeded: (a) the Chairman of the Meeting
will advise those shareholders present in person of the fact that one or
more of such limitations has been exceeded and that as a consequence of the
allocation procedures set forth in the Plan of Merger, if the Merger is
approved, some or all of the shareholders will not receive the type of
consideration they elected; (b) the Chairman of the Meeting will announce
the amount of each type of consideration which will be received by each
shareholder affected by the allocation procedures if the Merger is
approved; and (c) those shareholders who are not present at the Meeting in
person and who are affected by the allocation procedures will be provided
with the same information by telephone or facsimile and given the
opportunity to confirm in writing the proxy previously submitted or revoke
the previously submitted proxy and execute a substitute proxy prior to the
vote being taken. If any shareholder who is not present in person and who
is affected by the allocation procedures fails to respond within a
reasonable time (as determined by the Chairman of the Meeting), the Meeting
will be adjourned for 24 hours or such longer period as the Chairman deems
appropriate. In the event any such shareholder does not respond by the
time the vote is taken at the adjourned Meeting, the proxy as previously
executed will not be voted at the Meeting. Any shareholder who cannot be
contacted by telephone or facsimile and whose proxies will not be voted at
the adjourned meeting will be deemed to have delivered written notice of
intent to demand payment in accordance with Section 202 of the Tennessee
Business Corporation Act and such shareholder will be entitled to
dissenters' rights. The accompanying Proxy Statement/Prospectus sets forth
and describes the dissenters' rights of the E/C shareholders.
The Board of Directors of E/C (the "E/C Board") has determined that
the Proposal is in the best interests of E/C and its shareholders.
ACCORDINGLY, THE E/C BOARD UNANIMOUSLY APPROVED THE PROPOSAL AND RECOMMENDS
THAT YOU VOTE FOR THE PROPOSAL AT THE MEETING.
Conditions to the consummation of the Merger include, among other
things, the approval of E/C's shareholders. Such approval requires the
affirmative vote of the holders of a majority of the total shares of E/C
Stock of both classes (voting together as a single voting group)
outstanding as of the record date for the Meeting.
The accompanying Proxy Statement/Prospectus sets forth the voting
rights of the E/C Stock with respect to these matters and describes the
matters to be acted upon at the Meeting. It also contains important
information concerning E/C, La-Z-Boy, and their respective subsidiaries, a
detailed description of the Proposal, its terms and conditions, and the
transactions contemplated thereby, certain tax matters that should be
considered, management and operation of E/C following consummation of the
Merger, and other matters. Shareholders are urged to review carefully the
accompanying Proxy Statement/Prospectus. Because of the significance of the
proposed transactions to E/C, your participation in the Meeting, in person
or by proxy, is especially important. In any event, you must complete and
submit the enclosed Election Form prior to the commencement of the Meeting.
Baker, Donelson, Bearman & Caldwell and Dennis C. Valkanoff have been
acting as legal counsel on behalf of E/C and BDO Seidman and Otis S. Sawyer
have been providing accounting services to E/C. Individual shareholders are
advised, if they so desire, to seek the advice of independent accounting
and/or legal
counsel.
We hope you will attend the Meeting. Whether or not you are able to
attend the Meeting in person, it is important that your shares be
represented. Accordingly, whether or not you plan to attend the Meeting,
please sign, date, and mail the enclosed proxy promptly in the postage-paid
envelope that has been provided to you for your convenience. If you wish to
vote in accordance with the recommendations of the E/C Board, it is not
necessary to specify your choices; you may merely sign, date, and return
the enclosed proxy.
Thank you, and we look forward to seeing you at the Meeting.
Sincerely,
/s/ Rodney D. England
Rodney D. England
Chairman of the Board, President,
and Chief Executive Officer
England/Corsair, Inc.<PAGE>
ENGLAND/CORSAIR, INC.
402 OLD KNOXVILLE HIGHWAY
NEW TAZEWELL, TENNESSEE 37825
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of
England/Corsair, Inc., a Tennessee corporation ("E/C"), will be held at 402
Old Knoxville Highway, New Tazewell, Tennessee at 2:00 p.m., local time, on
Thursday, April 27, 1995 (the "Meeting"). The Meeting, which will be a
joint meeting of holders of E/C's Class A Common Stock, without par value,
and its Class B Common Stock, without par value (collectively, the "E/C
Stock"), will be held for the following purposes, which are more fully
described in the accompanying Proxy Statement/Prospectus:
1. To consider and vote upon a proposal (the "Proposal") to
approve:
(a) the Amended and Restated Reorganization Agreement dated as
of January 13, 1995 (the "Reorganization Agreement") among E/C,
La-Z-Boy Chair Company, a Michigan corporation ("La-Z-Boy"),
and LZB Acquisition, Inc., a newly formed Michigan corporation
and a wholly owned subsidiary of La-Z-Boy ("LZB Acquisition");
(b) the Amended and Restated Plan of Merger dated as of January
13, 1995 among E/C, La- Z-Boy, and LZB Acquisition (the "Plan
of Merger"); and (c) all of the transactions contemplated by
the Reorganization Agreement and the Plan of Merger, including
(without limitation) the merger of E/C with and into LZB
Acquisition (the "Merger").
The transactions contemplated by the Reorganization Agreement,
the Plan of Merger, and certain related instruments and
agreements executed, or to be executed, in connection with the
Reorganization Agreement and the Plan of Merger are intended to
result in the acquisition of E/C by La-Z-Boy through the
Merger. LZB Acquisition will be the surviving corporation of
the Merger. Upon consummation of the Merger: (i) E/C will cease
to exist as a separate corporation, and all of the assets and
liabilities of E/C will become assets and liabilities of LZB
Acquisition, which will continue to be a wholly owned
subsidiary of La-Z-Boy; (ii) the holder of each share of E/C
Stock of either class will receive, at such holder's election,
either 3.6519467707 shares of La-Z-Boy's Common Stock, $1.00
par value ("La-Z-Boy Common Stock"), $109.558403121 principal
amount of La-Z-Boy's 8% Unsecured Promissory Notes Due 1999
("La-Z-Boy Notes"), or $109.558403121 in cash, all subject to
the terms and limitations described in the accompanying Proxy
Statement/Prospectus; and (iii) holders of E/C Stock of either
class will also receive Performance Units, the terms of which
are described in the accompanying Proxy Statement/Prospectus.
2. To transact such other business as may properly come before
the Meeting or any adjournments or postponements thereof.
The Board of Directors of E/C has fixed the close of business on
April 17, 1995 as the record date for determination of shareholders
entitled to notice of and to vote at the Meeting and any adjournments or
postponements thereof. Only shareholders of record at the close of business
on such date are entitled to notice of and to vote at the Meeting and any
adjournments or postponements thereof. A list of E/C shareholders entitled
to vote at the Meeting will be subject to inspection at the Meeting.
E/C Stock constitutes the only security of E/C whose holders are
entitled to vote at the Meeting. Approval of the Proposal requires the
affirmative vote of the holders of a majority of the total shares of E/C
Stock
of both classes (voting together as a single voting group) outstanding as
of the record date for the Meeting, with each share entitled to one vote.
Pursuant to Chapter 23 of the Tennessee Business Corporation Act,
as amended (the "TBCA"), holders of shares of E/C Common Stock have the
right to dissent and to be paid the fair value of their shares in
connection with, or as a result of, the matters to be acted upon at the
Meeting. SUCH DISSENTERS' RIGHTS WILL BE LOST, HOWEVER, IF THE PROCEDURAL
REQUIREMENTS OF THE TBCA ARE NOT FULLY AND PRECISELY SATISFIED. Such
dissenters' rights are more fully explained in the accompanying Proxy
Statement/Prospectus. A copy of Chapter 23 of the TBCA is included in the
accompanying Proxy Statement/Prospectus.
The Plan of Merger contains certain limitations on the aggregate
amount of each type of consideration which may be paid, as well as
procedures for allocating different types of consideration in the event
elections made by E/C shareholders would result in any of such limitations
being exceeded. As a result of these limitations and allocation
procedures, shareholders of E/C may not receive the type of consideration
they elect, and shareholders electing to receive cash or La-Z-Boy Notes may
nevertheless receive shares of La-Z-Boy Common Stock whose market value at
that time may be less than the negotiated $30.00 price of La-Z-Boy Common
Stock upon which the exchange ratio was determined. See "The Merger and
Related Transactions - Limitations" and
" -- Allocation of Cash, Shares and Notes" in the accompanying Proxy State-
ment/Prospectus.
Prior to the vote being taken, the Chairman of the Meeting will
announce the amounts of each type of consideration elected by the
shareholders pursuant to the Notices of Election filed with the Secretary.
In the event the elections made by the shareholders result in any of the
above-described limitations being exceeded: (a) the Chairman of the Meeting
will advise those shareholders present in person of the fact that one or
more of such limitations has been exceeded and that as a consequence of the
allocation procedures set forth in the Plan of Merger, if the Merger is
approved, some or all of the shareholders will not receive the type of
consideration they elected; (b) the Chairman of the Meeting will announce
the amount of each type of consideration which will be received by each
shareholder affected by the allocation procedures if the Merger is
approved; and (c) those shareholders who are not present at the Meeting in
person and who are affected by the allocation procedures will be provided
with the same information by telephone or facsimile and given the
opportunity to confirm in writing the proxy previously submitted or revoke
the previously submitted proxy and execute a substitute proxy prior to the
vote being taken. If any shareholder who is not present in person and who
is affected by the allocation procedures fails to respond within a
reasonable time (as determined by the Chairman of the Meeting), the Meeting
will be adjourned for 24 hours or such longer period as the Chairman deems
appropriate. In the event any such shareholder does not respond by the
time the vote is taken at the adjourned Meeting, the proxy as previously
executed will not be voted at the Meeting. Any shareholder who cannot be
contacted by telephone or facsimile and whose proxies will not be voted at
the adjourned meeting will be deemed to have delivered written notice of
intent to demand payment in accordance with Section 202 of the Tennessee
Business Corporation Act and such shareholder will be entitled to
dissenters' rights. The accompanying Proxy Statement/Prospectus sets forth
and describes the dissenters' rights of the E/C shareholders.
Your vote is important regardless of the number of shares you own.
Each shareholder, even though he or she now plans to attend the Meeting, is
requested to sign, date, and return the enclosed proxy without delay in the
enclosed postage-paid envelope. You may revoke your proxy at any time prior
to its exercise. Any shareholder of record present at the Meeting or any
adjournments or postponements thereof may revoke his or her proxy and vote
personally on each matter brought before the Meeting.
/s/ Linda E. Duff
Secretary
April 17, 1995
THE BOARD OF DIRECTORS OF E/C RECOMMENDS THAT
YOU VOTE FOR THE ABOVE PROPOSAL.
PLEASE SIGN AND DATE THE ENCLOSED PROXY AND
MAIL IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE.
<PAGE>
LA-Z-BOY CHAIR COMPANY
PROSPECTUS
2,000,000 SHARES OF COMMON STOCK, $1.00 PAR VALUE
$10,000,000 8% UNSECURED PROMISSORY NOTES DUE 1999
297,330 PERFORMANCE UNITS
----------------------------------------
ENGLAND/CORSAIR, INC.
PROXY STATEMENT
----------------------------------------
This Proxy Statement/Prospectus (the "Proxy Statement/Prospectus") is being
furnished to shareholders of England/Corsair, Inc., a Tennessee corporation
("E/C"), in connection with the solicitation of proxies by its Board of
Directors for use at its Special Meeting of Shareholders (including any
adjournments or postponements thereof, the "Meeting") to be held on
April 27, 1995.
This Proxy Statement/Prospectus constitutes a prospectus of La-Z-Boy Chair
Company, a Michigan corporation ("La-Z-Boy"), with respect to the following:
(i) up to 2,000,000 shares of the common stock, $1.00 par value per share, of
La-Z-Boy (the "La-Z-Boy Common Stock") to be issued to shareholders of E/C as
part of the consideration for the "Merger" (as hereinafter defined), including
shares which may be issued in settlement of the Performance Units described
below; (ii) up to $10,000,000 principal amount of La-Z-Boy's 8% Unsecured
Promissory Notes Due 1999 (the "La-Z-Boy Notes") to be issued to shareholders
of E/C as part of the consideration for the Merger; and (iii) 297,330
"Performance Units" to be issued to shareholders of E/C as part of the
consideration for the Merger, each of which constitutes La-Z-Boy's promise to
pay additional consideration in respect of the Merger, in La-Z-Boy Common
Stock as hereinafter described, the amount of which will be contingent
upon the performance of the business now conducted by E/C during the two years
following consummation of the Merger. Upon consummation of the Merger, each
outstanding share of E/C's Class A Common Stock, without par value, and
Class B Common Stock, without par value (collectively, "E/C Stock"), will be
converted into the right to receive, at the holder's election but subject to the
terms and limitations hereinafter set forth, either $109.558403121 in cash,
3.6519467707 shares of La-Z-Boy Common Stock, or $109.558403121 principal amount
of La-Z-Boy Notes and, in addition, into one Performance Unit. SEE "CERTAIN
CONSIDERATIONS RELATING TO THE MERGER" FOR CERTAIN
MATTERS WHICH SHOULD BE CONSIDERED BY E/C SHAREHOLDERS PRIOR TO
VOTING ON THE MERGER AND/OR ELECTING THE TYPE OF CONSIDERATION THEY
WISH TO RECEIVE. The closing price of the La-Z-Boy Common on the New York Stock
Exchange was $27.625 on April 13, 1995.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Proxy Statement/Prospectus and the accompanying forms of proxy are
first being mailed to shareholders of E/C on or about April 17, 1995.
The date of this Proxy Statement/Prospectus is April 17, 1995.
<PAGE>
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE SOLICITATIONS OF PROXIES OR THE OFFERING OF SECURITIES MADE
HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY LA-Z-BOY, LZB ACQUISITION, OR E/C. THIS
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY,
IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. ALL INFORMATION CONTAINED IN
THIS PROXY STATEMENT/PROSPECTUS RELATING TO LA-Z-BOY AND ITS SUBSIDIARIES HAS
BEEN SUPPLIED BY LA-Z-BOY, AND ALL INFORMATION CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS RELATING TO E/C HAS BEEN SUPPLIED BY E/C.
AVAILABLE INFORMATION
La-Z-Boy is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements, and other information filed by La-Z-Boy with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices at 7 World Trade Center, Suite 1300, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material also can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, material filed by La-Z-Boy can be inspected at
the offices of the New York Stock Exchange, Inc. (the "NYSE"), 11 Wall Street,
New York, New York 10005, and of the Pacific Stock Exchange (the "PSE"), 233
South Beaudry Ave., Los Angeles, California 90012.
La-Z-Boy has filed with the Commission a registration Statement on
Form S-4 (registration no. 33-57623, together with any amendments thereto,
the "Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the following: (i) 2,000,000 shares of the
common stock, $1.00 par value per share, of La-Z-Boy (the "La-Z-Boy Common
Stock"); (ii) $10,000,000 principal amount of La-Z-Boy's 8% Unsecured Promissory
Notes Due 1999 (the "La-Z-Boy Notes"); and (iii) 297,330 performance units, the
terms of which are more fully described herein (the "Performance Units"). This
Proxy Statement/Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits thereto. Such additional information may
be inspected and copied as set forth above.
Statements contained in this Proxy Statement/Prospectus as to the contents of
any contract or other document referred to herein are not necessarily complete,
and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference.
end page
<PAGE>
TABLE OF CONTENTS
PAGE
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 2
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Record Date; Shares Entitled to Vote. . . . . . . . . . . . . . . . . 8
The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Dissenters' Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 11
Management of the Surviving Corporation After the Merger . . . . . . 12
Summary Condensed Historical Financial Data of E/C. . . . . . . . . . 12
Summary Condensed Consolidated Historical Financial Data of La-Z-Boy. 14
Summary Unaudited Pro Forma Condensed Combined Financial Data
of La-Z-Boy After Giving Effect to the Merger. . . . . . . . . . . 15
Capitalization of E/C and La-Z-Boy . . . . . . . . . . . . . . . . . 17
Comparative Per Share Data . . . . . . . . . . . . . . . . . . . . . 19
Comparative Stock Prices . . . . . . . . . . . . . . . . . . . . . . 20
CERTAIN CONSIDERATIONS RELATING TO THE MERGER . . . . . . . . . . . . 21
THE COMPANIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
England/Corsair, Inc . . . . . . . . . . . . . . . . . . . . . . . . 22
La-Z-Boy Chair Company . . . . . . . . . . . . . . . . . . . . . . . 22
LZB Acquisition, Inc.. . . . . . . . . . . . . . . . . . . . . . . . 22
THE MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Matters to Be Considered at the Meeting. . . . . . . . . . . . . . . 23
Vote Required. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Voting of Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . 23
Revocability of Proxies. . . . . . . . . . . . . . . . . . . . . . . 23
Record Date; Shares Entitled to Vote; Quorum . . . . . . . . . . . . 24
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . 24
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . 26
THE MERGER AND RELATED TRANSACTIONS. . . . . . . . . . . . . . . . . . 26
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . 26
Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . . 28
Recommendation of the E/C Board. . . . . . . . . . . . . . . . . . . 33
Interests of Certain Persons in the Merger . . . . . . . . . . . . . 34
Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . 34
Operations After the Merger. . . . . . . . . . . . . . . . . . . . . 34
Consideration for Shares . . . . . . . . . . . . . . . . . . . . . . 34
Performance Units. . . . . . . . . . . . . . . . . . . . . . . . . . 35
Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Election Procedures. . . . . . . . . . . . . . . . . . . . . . . . . 36
Allocation of Cash, Shares and Notes . . . . . . . . . . . . . . . . 37
Cash in Lieu of Fractional Shares. . . . . . . . . . . . . . . . . . 38
Payment for Shares . . . . . . . . . . . . . . . . . . . . . . . . . 39
The Reorganization Agreement . . . . . . . . . . . . . . . . . . . . 39
Distributions Prior to Closing . . . . . . . . . . . . . . . . . . . 40
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . . . 40
Termination; Liquidated Damages; Termination Fee . . . . . . . . . . 44
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Amendment; Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . 45
Certain Federal Income Tax Consequences. . . . . . . . . . . . . . . 45
Tax Lock-up Letters. . . . . . . . . . . . . . . . . . . . . . . . . 48
Resale of La-Z-Boy Common Stock; Restrictions on Transfer. . . . . . 48
Stock Listing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
MANAGEMENT OF THE SURVIVING CORPORATION AFTER THE MERGER . . . . . . . 48
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION . . . . . . . . . . 49
ENGLAND/CORSAIR, INC.. . . . . . . . . . . . . . . . . . . . . . . . . 55
Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . 55
Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . . . 57
Business and Properties. . . . . . . . . . . . . . . . . . . . . . . 61
Market Price of Stock and Dividends. . . . . . . . . . . . . . . . . 61
Management and Related Matters . . . . . . . . . . . . . . . . . . . 61
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . 64
Certain Relationships and Related Transactions . . . . . . . . . . . 65
LA-Z-BOY CHAIR COMPANY . . . . . . . . . . . . . . . . . . . . . . . . 66
Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . 66
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . 68
Unaudited Quarterly Financial Information . . . . . . . . . . . . . . 74
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Market Price of La-Z-Boy Common Stock, Dividend
Information, and Related Shareholder Matters. . . . . . . . . . . . 84
Stock Ownership of Certain Beneficial Owners . . . . . . . . . . . . 85
Management and Related Matters . . . . . . . . . . . . . . . . . . . 87
DESCRIPTION OF LA-Z-BOY CAPITAL STOCK. . . . . . . . . . . . . . . . . 93
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
La-Z-Boy Preferred Stock . . . . . . . . . . . . . . . . . . . . . . 94
La-Z-Boy Common Stock. . . . . . . . . . . . . . . . . . . . . . . . 94
Certain Articles Provisions. . . . . . . . . . . . . . . . . . . . . 95
Certain MBCA Provisions. . . . . . . . . . . . . . . . . . . . . . . 96
Certain Potential Anti-Takeover Effects. . . . . . . . . . . . . . . 97
COMPARISON OF SHAREHOLDER RIGHTS AND CHARTER DOCUMENTS . . . . . . . . 98
Capital Structure. . . . . . . . . . . . . . . . . . . . . . . . . . 98
Board of Directors; Removal; Vacancies . . . . . . . . . . . . . . . 98
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . 99
Certain Differences Concerning Shareholder Voting and
Extraordinary Transactions . . . . . . . . . . . . . . . . . . . . 99
Derivative Proceedings . . . . . . . . . . . . . . . . . . . . . . . 100
Director Liability; Indemnification. . . . . . . . . . . . . . . . . 101
Other Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
DESCRIPTION OF THE LA-Z-BOY NOTES. . . . . . . . . . . . . . . . . . . 102
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Interest Rate and Payment. . . . . . . . . . . . . . . . . . . . . . 102
Scheduled Principal Payments . . . . . . . . . . . . . . . . . . . . 102
Optional Prepayment. . . . . . . . . . . . . . . . . . . . . . . . . 102
Ranking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Limited Transferability. . . . . . . . . . . . . . . . . . . . . . . 103
DESCRIPTION OF INDENTURE . . . . . . . . . . . . . . . . . . . . . . . 103
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Certain Covenants of La-Z-Boy. . . . . . . . . . . . . . . . . . . . 103
Redemption Provisions. . . . . . . . . . . . . . . . . . . . . . . . 104
Merger and Consolidation . . . . . . . . . . . . . . . . . . . . . . 104
Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . 104
Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Modification of the Indenture. . . . . . . . . . . . . . . . . . . . 106
The Designated Representative. . . . . . . . . . . . . . . . . . . . 106
DESCRIPTION OF THE PERFORMANCE UNITS . . . . . . . . . . . . . . . . . 106
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
INDEX TO FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . F-1
ENGLAND/CORSAIR, INC. FINANCIAL STATEMENTS . . . . . . . . . . . . . . F-2
LA-Z-BOY CHAIR COMPANY FINANCIAL STATEMENTS. . . . . . . . . . . . . . F-22
ANNEXES
A. Reorganization Agreement
B. Plan of Merger
C. Chapter 23 of TBCA
<PAGE>
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to shareholders of E/C
in connection with the solicitation of proxies by the Board of Directors of E/C
for use at E/C's Special Meeting of Shareholders (including any adjournments or
postponements thereof, the "Meeting") on April 27, 1995.
At the Meeting, the shareholders of E/C will be asked to approve: (i) the
Amended and Restated Reorganization Agreement dated as of January 13, 1995 (the
"Reorganization Agreement") among E/C, La-Z-Boy Chair Company, a Michigan
corporation ("La-Z-Boy"), and LZB Acquisition, Inc., a newly formed Michigan
corporation and a wholly owned subsidiary of La-Z-Boy ("LZB Acquisition");
(ii) the Amended and Restated Plan of Merger dated as of January 13, 1995 (the
"Plan of Merger") among E/C, La-Z-Boy, and LZB Acquisition; and (iii) all of
the transactions contemplated by the Reorganization Agreement and the Plan of
Merger. The transactions contemplated by the Reorganization Agreement and the
Plan of Merger and certain related instruments and agreements executed, or to
be executed, in connection with the Reorganization Agreement and the Plan of
Merger are intended to result in the acquisition of E/C by La-Z-Boy through the
merger of E/C with and into LZB Acquisition (the "Merger"). LZB Acquisition
will be the surviving corporation of the Merger. LZB Acquisition, in its
capacity as the surviving corporation of the Merger, is sometimes referred to in
this Proxy Statement/Prospectus as the "Surviving Corporation."
Upon consummation of the Reorganization, among other things, the following
will occur:
(i) E/C will cease to exist as a separate corporation, and all
of the assets and liabilities of E/C will become assets and liabilities
of LZB Acquisition, which will continue to be a wholly owned subsidiary
of La-Z-Boy;
(ii) holders of E/C Stock of either class will receive, at their
election, either shares of La-Z-Boy Common Stock, La-Z-Boy Notes, cash,
or any combination of the foregoing ("Initial Merger Consideration"),
all in the amounts and subject to the terms and limitations described
in this Proxy Statement/Prospectus; and
(iii) holders of E/C Stock of either class will also receive
Performance Units, the terms of which are described in this Proxy
Statement/Prospectus.
Copies of the Reorganization Agreement (without exhibits or schedules) and
the Plan of Merger are attached as Annexes A and B, respectively, to this Proxy
Statement/Prospectus.
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. As this summary is necessarily incomplete,
reference is made to, and this summary is qualified in its entirety by, the
more detailed information contained or incorporated by reference in this Proxy
Statement/Prospectus and the Annexes hereto. Shareholders are urged to read
this Proxy Statement/Prospectus and the Annexes hereto in their entirety.
Certain capitalized terms which are used but not defined in this summary are
defined elsewhere in this Proxy Statement/Prospectus.
THE COMPANIES
England/Corsair, Inc.
E/C was incorporated under the laws of the State of Tennessee in 1964 and
is headquartered in the State of Tennessee. E/C is engaged primarily in the
manufacture of upholstered furniture. E/C's principal office is located at 402
Old Knoxville Highway, New Tazewell, Tennessee 37825, and its telephone number
is (800) 251-9125. For additional information regarding E/C, see
"England/Corsair, Inc."
La-Z-Boy Chair Company
La-Z-Boy was incorporated under the laws of the State of Michigan in 1941
and is headquartered in the State of Michigan. La-Z-Boy is engaged primarily in
the manufacture of furniture. La-Z-Boy's principal office is located at 1284
North Telegraph Road, Monroe, Michigan 48161, and its telephone number is (313)
242-1444. For additional information regarding La-Z-Boy and its operations, see
"La-Z-Boy Chair Company" and the documents described therein.
LZB Acquisition, Inc.
LZB Acquisition was incorporated under the laws of the State of Michigan
in 1995 and is headquartered in the State of Michigan. LZB Acquisition was
formed for the purpose of serving as the Surviving Corporation of the Merger
and does not engage in any business at this time. Its principal office is
located at 1284 North Telegraph Road, Monroe, Michigan 48161, and its telephone
number is (313) 242-1444.
THE MEETING
A Special Meeting of Shareholders of E/C will be held at 402 Old Knoxville
Highway, New Tazewell, Tennessee at 2:00 p.m., local time, on Thursday,
April 27, 1995 (together with any adjournments or postponements
thereof, the "Meeting"). The Meeting will be a joint meeting of holders of
E/C's Class A Common Stock, without par value ("E/C Class A Stock"), and its
Class B Common Stock, without par value ("E/C Class B Stock"). In this Proxy
Statement/Prospectus, the E/C Class A Stock and the E/C Class B Stock are
sometimes referred to collectively as the "E/C Stock." See "The Meeting."
At the Meeting, E/C shareholders will be asked to consider and vote upon a
proposal (the "Proposal") to approve: (a) the Amended and Restated
Reorganization Agreement dated as of January 13, 1995 (the "Reorganization
Agreement") among E/C, La-Z-Boy, and LZB Acquisition; (b) the Amended and
Restated Plan of Merger dated as of January 13, 1995 among E/C, La-Z-Boy, and
LZB Acquisition (the "Plan of Merger"); and (c) all of the transactions
contemplated by the Reorganization Agreement and the Plan of Merger, including
(without limitation) the merger of E/C with and into LZB Acquisition (the
"Merger"). See "The Meeting -- Matters to Be Considered at the Meeting."
VOTE REQUIRED
Approval of the Proposal requires the affirmative votes of the holders of
a majority of all outstanding shares of E/C Stock of both classes (voting
together as a single voting group), with each such share entitled to one vote.
Approval of the Proposal by the requisite vote of E/C shareholders is a
condition to, and is required for, consummation of the Merger. As of
March 31, 1995 approximately 51.8% of the shares of E/C Stock outstanding and
entitled to vote on the Proposal was held by members of the Board of
Directors, executive officers, and their affiliates. No vote of La-Z-Boy
shareholders is required in connection with the Merger. See "The Meeting --
Vote Required."
RECORD DATE; SHARES ENTITLED TO VOTE
The record date for the Meeting is April 17, 1995. Only E/C
shareholders at the close of business on such date are entitled to notice of,
and to vote at, the Meeting. See "The Meeting -- Record Date; Shares Entitled
to Vote; Quorum."
THE MERGER
In the Merger, E/C will be merged with and into LZB Acquisition, which is
a wholly owned subsidiary of La-Z-Boy and which will be the Surviving
Corporation of the Merger. Upon consummation of the Merger, the Surviving
Corporation will succeed to all the rights and obligations of E/C and will
continue to be a wholly owned subsidiary of La-Z-Boy.
Consideration for Shares
Upon the Merger becoming effective, each share of E/C Stock will be
converted into the right to receive cash, La-Z-Boy Notes, or shares of
La-Z-Boy Common Stock, or a combination thereof, as described below, based
on total merger consideration (excluding the Performance Units) of
$32,575,000 and a negotiated value of $30.00 per share of La-Z-Boy Common
Stock. Each share of E/C Stock owned by shareholders who comply with the
election procedures set forth in the Plan of Merger and described herein
will be converted into, at their option (but subject to the limitations
described below), either: $109.558403121 in cash; $109.558403121
principal amount of La-Z-Boy Notes; or 3.6519467707 shares of La-Z-Boy
Common Stock. Each share of E/C Stock, regardless of, and in addition to,
the election made by the holder thereof, will also be converted into one
Performance Unit.
The Plan of Merger contains certain limitations on the aggregate
amount of each type of consideration which may be paid, as well as
procedures for allocating different types of consideration in the
event elections made by E/C shareholders would result in any of said
limitations being exceeded. Under these limitations and procedures,
at the time the Merger is consummated:
1. The aggregate principal amount of La-Z-Boy Notes which may be issued
is limited to $10,000,000. If E/C shareholders elect to receive
La-Z-Boy Notes in excess of this amount, such elections will be
reduced pro rata, and cash will be allocated instead.
2. More than 50% of the total Merger consideration must consist of
La-Z-Boy Common Stock (based on its fair market value at the
Effective Time). If E/C shareholders elect to receive other
consideration (i.e., cash and La-Z-Boy Notes) which would constitute
50% or more of the total Merger consideration, the cash to be
paid (including cash allocated under step 1 above) will reduced pro
rata, and La-Z-Boy Common Stock will be allocated instead.
As a result of these limitations and allocation procedures, shareholders of
E/C may not receive the type of consideration they elect, and shareholders
electing to receive cash or La-Z-Boy Notes may nevertheless receive shares
of La-Z-boy Common Stock whose market value at that time may be less than the
negotiated $30.00 price of La-Z-Boy Common Stock upon which the exchange ratio
was determined. See "The Merger and Related Transactions -- Limitations" and
"-- Allocation of Cash, Shares and Notes."
Prior to the vote being taken, the Chairman of the Meeting will
announce the amounts of each type of consideration elected by the shareholders
pursuant to the Notices of Election filed with the Secretary. In the event the
elections made by the shareholders result in any of the above-described
limitations being exceeded: (a) the Chairman of the Meeting will advise those
shareholders present in person of the fact that one or more of such limitations
has been exceeded and that as a consequence of the allocation procedures set
forth in the Plan of Merger, if the Merger is approved, some or all of the
shareholders will not receive the type of consideration they elected; (b) the
Chairman of the Meeting will announce the amount of each type of consideration
which will be received by each shareholder affected by the allocation procedures
if the Merger is approved; and (c) those shareholders who are not present at the
Meeting in person and who are affected by the allocation procedures will be
provided with the same information by telephone or facsimile and given the
opportunity to confirm in writing the proxy previously submitted or revoke the
previously submitted proxy and execute a substitute proxy prior to the vote
being taken. If any shareholder who is not present in person and who is
affected by the allocation procedures fails to respond within a reasonable time
(as determined by the Chairman of the Meeting), the Meeting will be adjourned
for 24 hours or such longer period as the Chairman deems appropriate. In the
event any such shareholder does not respond by the time the vote is taken at the
adjourned Meeting, the proxy as previously executed will not be voted at the
Meeting. Any shareholder who cannot be contacted by telephone or facsimile and
whose proxies will not be voted at the adjourned meeting will be deemed to have
delivered written notice of intent to demand payment in accordance with Section
202 of the Tennessee Business Corporation Act and such shareholder will be
entitled to dissenters' rights. See "The Meeting -- Dissenters' Rights."
Performance Units will entitle the holders thereof to receive
additional shares of La-Z-Boy Common Stock based on the Pre-Tax Income
(as defined in and determined in accordance with the Plan of Merger) of E/C
during each of the two successive twelve month periods immediately following
the effective time of the Merger. The payment of additional Merger
consideration pursuant to the Performance Units is conditioned upon the
Surviving Corporation's future performance at levels never before achieved
by E/C; accordingly, the present value of the Performance Units is unknown,
and there can be no assurance that they will not prove to have little or no
value at maturity.
Under the Plan of Merger, the total number of shares of La-Z-Boy Common
Stock which may be issued (including both shares issued at the time of
consummation of the Merger and shares issued in settlement of Performance
Units) is limited to 2,000,000. In addition, the total number of shares
issued in settlement of Performance Units may not exceed the number issued
at the time of consummation of the Merger. If the number of shares
otherwise issuable at any time pursuant to the Performance Units would exceed
either or both of these limitations, the number of shares to be so issued will
be reduced pro rata to the extent necessary to avoid exceeding either
limitation. See "The Merger and Related Transactions --
Performance Units" and "Description of the Performance Units."
Recommendation of the Board of Directors of E/C; Reasons for the Merger
The Board of Directors of E/C (the "E/C Board") has concluded that the
terms of the Merger are fair to E/C shareholders and that consummation of the
Merger is in the best interests of E/C and its shareholders. In reaching these
conclusions, the E/C Board considered the expectation that the transaction will
be a tax-free transaction of E/C and its shareholders to the extent such
shareholders receive shares of La-Z-Boy Common Stock, the accomplishment of
certain goals identified by management of E/C, the review of the business,
operations, earnings and financial conditions of La-Z-Boy, the enhanced
opportunities for growth and the respective contributions the parties would
bring to a combined business, the possibility of the resignation of senior
management and resulting devaluation of E/C, recognition of disputes existing
between management and various shareholders, and the ability of the combined
entity to compete in the relevant markets. See "The Merger and Related
Transactions -- Background of the Merger; Recommendation of the Board of
Directors of E/C; Reasons for the Merger."
THE E/C BOARD RECOMMENDS UNANIMOUSLY THAT SHAREHOLDERS VOTE
FOR ADOPTION AND APPROVAL OF THE REORGANIZATION AGREEMENT, PLAN OF
MERGER, AND THE MERGER.
Effective Time of the Merger
If the Reorganization Agreement, Plan of Merger, and the Merger are
approved by the E/C shareholders at the Meeting, and assuming that all
other conditions have then been satisfied (see "The Merger and Related
Transactions -- Amendments, Conditions, and Termination"), it is expected that
the Merger will become effective at 5:00 p.m., Detroit, Michigan time, on the
day of the Meeting or as promptly as practicable thereafter. The Merger
will become effective on the date and at the time that appropriate certificate
and articles of merger are filed and have become effective with the Secretary
of State of Tennessee and the Michigan Corporation Bureau, respectively (the
"Effective Time"). See "The Merger and Related Transactions -- Effective Time."
Distributions Prior to Closing
As provided in the Reorganization Agreement, neither La-Z-Boy nor E/C may
either declare or pay any dividends on or make any distributions in respect of
their capital shares prior to the Effective Time, except:
(1) La-Z-Boy may declare and pay dividends on the La-Z-Boy Common Stock in
accordance with its prior practice; and
(2) E/C may (i) pay to its shareholders the cash dividend previously
declared in the amount of 60% of its taxable income for the period of July 1,
1994 to December 31, 1994; (ii) declare and pay to its shareholders dividends
in an amount equal to 40% (later increased to 60% with La-Z-Boy's consent) of
its taxable income for the period of January 1, 1995 to the day before the
Effective Time; and (iii) declare and pay to its shareholders dividends in an
amount equal to 50% of the net proceeds receivable by E/C under any policies
owned by E/C on the life of Arnold Dwight England.
Conditions to the Merger; Termination
The obligation of La-Z-Boy and E/C to consummate the Merger is subject to
certain conditions, including the requisite approval by the E/C shareholders,
the continuing truth of the parties' representations and warranties in all
material respects, receipt of certain legal opinions of counsel to E/C and
La-Z-Boy (including, in the case of La-Z-Boy's counsel, an opinion in respect
of certain federal income tax consequences of the Merger), and receipt of an
opinion from BDO Seidman, the independent accountants of E/C, as to E/C's
status as an "S corporation" for federal income tax purposes. See "The Merger
and Related Transactions -- Conditions to the Merger."
In certain circumstances, the Reorganization Agreement and the Plan of
Merger, and the transactions contemplated thereby, may be terminated at any
time prior to the Effective Time, whether before or after approval of the
matters presented in connection with the Merger by the shareholders of E/C. In
book value percertain limited circumstances, a termination fee may be payable
to one of the parties by the other party if the Reorganization Agreement is
terminated. See "The Merger and Related Transactions -- Termination;
Liquidated Damages; Termination Fee."
Certain Federal Income Tax Consequences
For a description of the anticipated federal income tax consequences of
the Merger to E/C shareholders, see "The Merger and Related Transactions --
Certain Federal Income Tax Consequences."
Consummation of the Merger is conditioned upon there being delivered an
opinion of La-Z-Boy's counsel to the effect that (i) the Merger will qualify
as a reorganization within the meaning of Section 368(a)(1)(A) and
368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the "Code"),
and (ii) no gain or loss will be recognized by an E/C shareholder upon receipt
of La-Z-Boy Common Stock solely in exchange for E/C Stock.
Consummation of the Reorganization is conditioned upon there being
executed and delivered "tax lock-up letters" by all of the holders of
E/C Stock who will receive shares of La-Z-Boy Common Stock in the Merger. These
tax lock-up letters essentially prohibit sales or dispositions of the shares of
La-Z-Boy Common Stock subject thereto prior to the second anniversary of the
consummation of the Merger other than pursuant to "permitted transfers." See
"The Merger and Related Transactions -- Tax Lock-Up Letters."
Resale of La-Z-Boy Common Stock; Restrictions on Transfer
The shares of La-Z-Boy Common Stock to be issued in the Merger will be
registered under the Securities Act and will be transferable under the
Securities Act, except for shares issued to any shareholder who may be deemed
to be an "affiliate" of E/C for purposes of Rule 145 under the Securities Act.
Affiliates may not sell shares of La-Z-Boy Common Stock acquired in connection
with the Merger except pursuant to an effective registration statement under
the Securities Act covering such shares or in compliance with Rule 145 or
another applicable exemption from the registration requirements of the
Securities Act. In addition, all shareholders of E/C receiving La-Z-Boy Common
Stock in the Merger will be required to deliver "tax lock-up letters"
restricting the disposition of such shares. See "The Merger and Related
Transactions -- Tax Lock-up Letters."
Non-Transferability of La-Z-Boy Notes and Performance Units
The La-Z-Boy Notes will not be transferrable except upon the death of the
holder thereof. See "Description of the La-Z-Boy Notes -- Limited
Transferability." Performance Units will not be transferable except to the
extent required by applicable law. See "Description of the Performance Units."
Stock Listing
The shares of La-Z-Boy Common Stock to be issued in the Merger will be
approved for listing on the NYSE and the PSE subject to official notice of
issuance and to the approval by the shareholders of E/C of the Merger.
DISSENTERS' RIGHTS
Holders of shares of E/C Stock will have dissenters' rights under Chapter
23 of the Tennessee Business Corporation Act, as amended (the "TBCA"), in
connection with, or as a result of, the matters to be acted upon at the
Meeting. SUCH DISSENTERS' RIGHTS WILL BE LOST, HOWEVER, IF THE PROCEDURAL
REQUIREMENTS OF THE TBCA ARE NOT FULLY AND PRECISELY SATISFIED. See
"The Merger and Related Transactions -- Dissenters' Rights."
A copy of Chapter 23 of the TBCA is attached as Annex C to this Proxy
Statement/Prospectus.
It is a condition to consummation of the Merger that La-Z-Boy's counsel
deliver an opinion as to certain tax matters, and such counsel will not be able
to deliver such opinion if holders of more than 50% of the outstanding shares
of E/C Stock perfect their dissenters' rights. See "The Reorganization
Agreement -- Conditions to the Merger" and "The Merger and Related Transactions
- -- Certain Federal Income Tax Consequences."
MANAGEMENT OF THE SURVIVING CORPORATION AFTER THE MERGER
It is expected that certain of the current officers and directors of
E/C will continue to be employed by the Surviving Corporation after the
Merger. Consequently, those officers and directors possess potentially
conflicting interests with E/C shareholders because of their interest in
both sides of the proposed transaction. It is anticipated that, upon
consummation of the Merger, the Board of Directors of the Surviving
Corporation will consist of four persons, one of whom will be
Mr. Rodney D. England, the current Chairman of the Board, President, and
Chief Executive Officer of E/C, and the remainder of whom will be current
officers of La-Z-Boy. In addition, following consummation of the Merger,
it is expected that (i) Mr. England will become the President and Chief
Executive Officer of the Surviving Corporation, (ii) Mr. Otis S. Sawyer, the
current Vice President Finance of E/C, will become Vice President Finance of
the Surviving Corporation, (iii) Mr. Dennis C. Valkanoff, the current Vice
President Business Development of E/C, will become a Vice President of the
Surviving Corporation, (iv) Mr. James L. Price, the current Vice President
Manufacturing of E/C, will become Vice President Manufacturing of the Surviving
Corporation, and (v) the remaining officers of the Surviving Corporation will
consist of current officers of La-Z-Boy. See "Management of the Surviving
Corporation After the Merger" and "The Merger and Related Transactions --
Operations After the Merger."
<PAGE>
SUMMARY CONDENSED HISTORICAL FINANCIAL DATA OF E/C
The following table sets forth certain condensed historical financial data
of E/C and is based on the financial statements of E/C, including the notes
thereto, which appear elsewhere in this Proxy Statement/Prospectus and should
be read in conjunction therewith. See "England/Corsair, Inc. Financial
Statements." Interim unaudited data for the six months ended December 31,
1994 and 1993 reflect, in the opinion of management of E/C, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such data. Results for the six months ended December 31,
1994 and 1993 are not necessarily indicative of results that may be expected
for any other interim period or for the fiscal year as a whole.
<TABLE>
<CAPTION>
(In thousands except per share data)
(unaudited)
Six Months
Ended December 31, Fiscal Years Ended June 30,
---------------------- -------------------------------------------------------------
Statement of 1994 1993 1994 1993 1992 1991 1990
Operations Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 50,127 $ 50,524 $ 105,781 $ 99,435 $ 86,175 $ 72,729 $ 65,242
Cost of sales 41,183 41,609 87,288 79,905 69,107 60,157 53,947
Gross profit 8,944 8,915 18,493 19,530 17,068 12,572 11,295
Selling, general, and
administrative
expenses(2) 6,094 6,686 14,484 12,632 10,040 8,422 7,707
Operating profit 2,850 2,229 4,009 6,898 7,028 4,150 3,588
Interest expense - net 916 556 1,318 1,073 1,305 1,833 1,421
Miscellaneous income 38 11 10 57 70 187 57
Pre-tax income 1,972 1,684 2,701 5,882 5,793 2,504 2,224
Income taxes(1) 81 67 122 (499) 2,100 930 820
Net income $ 1,891 $ 1,617 $ 2,579 $ 6,381 $ 3,693 $ 1,574 $ 1,404
Pro forma income taxes 727 620 994 2,165
Pro forma net income $ 1,245 $ 1,064 $ 1,707 $ 3,717
Weighted average shares
used in per share
calculations 297 298 297 298 298 322 339
Net income per share -
historical $ 12.39 $ 4.90 $ 4.14
Pro forma net income per
share $ 4.19 $ 3.57 $ 5.75 $ 12.47
Dividends per share(2) $ 3.36 $ 5.92 $ 15.88 $ 8.81 $ 2.00 -0- -0-
<CAPTION>
(unaudited)
As of December 31, As of June 30,
----------------------- --------------------------------------------------------------
Balance Sheet Data: 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Total assets $35,619 $ 34,367 $ 28,416 $ 23,335 $ 24,923 $ 24,724
Long-term debt,
including current
portion $14,670 $ 14,094 $ 7,619 $ 7,057 $ 9,225 $ 9,909
Total liabilities and
equity subject to redemption $35,619 $ 34,367 $ 28,416 $ 23,335 $ 24,923 $ 24,724
<FN>
- ---------------------------
(1) Beginning July 1, 1992, E/C elected to be treated as an "S
corporation" for federal income tax purposes and accordingly was not
subject to federal or certain state income tax at the corporate level.
The 1994 and 1993 fiscal periods contain an illustration of "pro forma
income taxes" which includes an additional estimated provision for income
taxes based on pre-tax income as if E/C had not been an S corporation.
E/C, for the 1993 fiscal year elected to adopt Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes"
(FAS 109), and the pro forma provisions for income taxes for periods
ending 1994 and 1993 have been reported in accordance with FAS 109.
The adoption of FAS 109 did not have a material effect on E/C's results
of operations.
(2) In May 1994 E/C instituted a plan of management succession which involved
paying non-recurring distributions of AAA earnings (previously
undistributed taxable earnings of $2,520 since the S corporation election)
to its shareholders along with a one time bonus of $600 to the retiring
Chairman of the Board Dwight England. Subsequent to this distribution
selected shareholders loaned funds totaling $1,288 back to E/C in the
form of subordinated debt. To finance the succession plan and refinance
its existing debt E/C negotiated a new loan agreement which provides a
credit facility of $7,500 including a $3,750 term loan at 6.95% with the
remainder as a revolving credit bearing interest at the prime rate less
1/2%. In anticipation of the Chairman of the Board's retirement and to
prepare E/C for future expansion, new executive level positions were added
in the areas of manufacturing, marketing, and finance.
</TABLE>
<PAGE>
SUMMARY CONDENSED CONSOLIDATED HISTORICAL FINANCIAL DATA OF
LA-Z-BOY
The following table sets forth certain condensed consolidated historical
financial data of La-Z-Boy and is based on the financial statements of
La-Z-Boy, including the respective notes thereto, which are included in
this Proxy Statement/Prospectus and should be read in conjunction therewith.
See "La-Z-Boy Chair Company Financial Statements." Interim unaudited data
for the nine months ended January 28, 1995 and January 22, 1994 reflect, in
the opinion of management of La-Z-Boy, all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of such data.
Results for the nine months ended January 28, 1995 and January 22, 1994 are
not necessarily indicative of results that may be expected for any other
interim period or for the fiscal year as a whole.
<TABLE>
<CAPTION>
(In thousands except per share data)
(unaudited)
Nine Months Ended Fiscal Years Ended in April,
-------------------- -----------------------------------------------------
Statement of Jan. 28, Jan. 22, 1994 1993 1992 1991 1990
Operations Data: 1995 1994 (53 weeks) (52 weeks) (52 weeks) (52 weeks) (52 weeks)
<S> <C> <C> <C> <C> <C> <C> <C>
Sales $615,787 $563,788 $804,898 $684,122 $619,471 $608,032 $592,273
Cost of sales 458,237 416,978 593,890 506,435 453,055 449,502 430,383
Gross profit 157,550 146,810 211,008 177,687 166,416 158,530 161,890
Selling, general,
and administrative
expenses 116,187 109,109 151,756 131,894 123,927 116,278 112,652
Operating profit 41,363 37,701 59,252 45,793 42,489 42,252 49,238
Interest expense 2,455 2,178 2,822 3,260 5,305 6,374 7,239
Other income 1,705 1,800 1,725 2,766 2,721 2,492 3,536
Pre-tax income 40,613 37,323 58,155 45,299 39,905 38,370 45,535
Income taxes 17,044 14,946 23,438 18,015 14,805 15,009 17,282
Income before
accounting
change 23,569 22,377 34,717 27,284 25,100 23,361 28,253
Accounting change(1) -- 3,352 3,352 -- -- -- --
Net income $ 23,569 $ 25,729 $ 38,069 $ 27,284 $ 25,100 $ 23,361 $ 28,253
Average shares 18,083 18,257 18,268 18,172 18,064 17,941 17,868
Net income per
share before
accounting change $ 1.30 $ 1.23 $ 1.90 $ 1.50 $ 1.39 $ 1.30 $ 1.58
Accounting change(1) -- 0.18 0.18 -- -- -- --
Net income per share $ 1.30 $ 1.41 $ 2.08 $ 1.50 $ 1.39 $ 1.30 $ 1.58
Dividends per share $ 0.51 $ 0.47 $ 0.64 $ 0.60 $ 0.58 $ 0.56 $ 0.54
Ratio of earnings
to fixed
charges 13.2 16.4 11.7 7.4 6.2 6.6
<CAPTION>
(unaudited)
As of January 28, As of Fiscal Year-End in April,
------------------ ------------------------------------------------------
Balance Sheet Data: 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Total assets $441,424 $430,253 $401,064 $376,722 $363,085 $361,856
Long-term debt, including
current portion $ 58,120 $ 55,370 $ 55,912 $ 60,726 $ 70,867 $78,036
Total liabilities $147,003 $139,342 $137,678 $130,363 $133,868 $147,271
Shareholders' equity $294,421 $290,911 $263,386 $246,359 $229,217 $214,585
<FN>
- ----------------
(1) Effective April 25, 1993, La-Z-Boy adopted the provisions of Financial
Accounting Standards Board Statement No. 109.
</TABLE>
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA OF
LA-Z-BOY AFTER GIVING EFFECT TO THE MERGER
The following table sets forth certain unaudited pro forma condensed
combined financial data for La-Z-Boy after giving effect to the Merger as if
it had occurred as of the beginning of the fiscal year ended April 30, 1994
for the statement of operations data and as of January 28, 1995 for the
balance sheet data. The Merger will be accounted for as a purchase, and,
accordingly, E/C assets acquired and liabilities assumed will be recorded
at their estimated fair values, based upon net realizable values or other
analysis, with appropriate recognition given to the effect of current interest
rates and income taxes. Because the pro forma fair values used herein are
preliminary and subject to further refinement, the purchase accounting
adjustments shown herein are preliminary and subject to change however, the
final allocation is not expected to materially differ from the pro forma
presentation. This information should be read in conjunction with the
historical financial statements of E/C and La-Z-Boy, including the respective
notes thereto, which appear in this Proxy Statement/Prospectus, and in
conjunction with the other pro forma financial information, including the
notes thereto, appearing elsewhere in this Proxy Statement/Prospectus.
See "England/Corsair, Inc. Financial Statements," "La-Z-Boy Chair Company
Financial Statements," and "Pro Forma Condensed Combined Financial
Information." The pro forma financial data are not necessarily indicative
of the results that actually would have occurred had the Merger been
consummated on the dates indicated or that may be obtained in the future.
<TABLE>
<CAPTION>
(unaudited)
(In thousands except per share data)
Nine Months
Ended Fiscal Year
Jan. 28, Ended
1995 April 30, 1994
(39 Weeks) (53 weeks)
Statement of
Operations Data:
<S> <C> <C>
Sales $692,604 $910,679
Cost of sales 521,375 681,178
Gross profit 171,229 229,501
Selling, general, and
administrative
expenses 127,178 166,960
Operating profit 44,051 62,541
Interest expense 4,207 4,730
Other income 1,551 1,576
Pre-tax income 41,395 59,387
Income taxes 17,510 24,141
Income before
accounting change $ 23,885 $ 35,246
Average shares 18,735 18,920
Income before
accounting change
per share $ 1.27 $ 1.86
<CAPTION>
(unaudited)
As of
January 28,
1995
Balance Sheet Data:
<S> <C>
Total assets $491,297
Long-term debt,
including current
portion $ 79,305
Total liabilities $177,331
Shareholders' equity $313,966
</TABLE>
<PAGE>
CAPITALIZATION OF E/C AND LA-Z-BOY
The following table sets forth the capitalization (i) of E/C and La-Z-Boy
on an historical basis and (ii) of La-Z-Boy on a pro forma basis as adjusted to
give effect to the Merger. The information set forth below should be read in
conjunction with the historical financial statements of E/C and La-Z-Boy,
including the respective notes thereto, which appear in this Proxy
Statement/Prospectus, and in conjunction with the other pro forma financial
information, including the notes thereto, appearing elsewhere in this Proxy
Statement/Prospectus. See "England/Corsair, Inc. Financial Statements,"
"La-Z-Boy Chair Company Financial Statements," and "Pro Forma Condensed
Combined Financial Information."
<TABLE>
<CAPTION>
(Dollars in thousands)
------------------------------------------------------------
Unaudited Unaudited
La-Z-Boy E/C Unaudited Unaudited
Jan 28, Dec. 31, Adjust- Pro Forma
1995 1994 ments Combined
----------- ------------- ---------- ------------
Long-term debt:
<S> <C> <C> <C> <C>
Credit lines $ 15,000 $ 6,710 $ 21,710
Subordinated debt to
shareholders 1,161 1,161
Capital lease obligations 6,725 6,725
Other long term notes 74 74
Private placement 11,250 11,250
Industrial revenue bonds 31,870 31,870
8% Unsecured Promissory Notes
Due 1999 $ 6,515 (a) 6,515
Total debt 58,120 14,670 6,515 79,305
Less: current portion 1,875 2,325 4,200
Total long term debt 56,245 12,345 6,515 75,105
Equity subject to redemption 12,666 (12,666) (b) 0
Shareholders' equity:
Common stock 17,969 0 652 (a) 18,621
Capital in excess of par value 10,464 0 18,893 (a) 29,357
Retained earnings 267,014 0 0 267,014
Currency translation
adjustments (1,026) 0 0 (1,026)
Total shareholders' equity 294,421 0 19,545 313,966
Total capitalization $ 350,666 $ 25,011 $ 13,394 $ 389,071
</TABLE>
The pro forma capitalization has been prepared to reflect the acquisition
of E/C by La-Z-Boy for an estimated aggregate price of $32,575 and a value
of $30 per share of La-Z-Boy Common Stock. The $30 value per share is the value
stated in the Plan of Merger and was used to determine the ratio of exchange.
At April 13, 1995 the closing price for La-Z-Boy Common Stock was $27.625. The
Plan of Merger requires that more than 50% of the initial consideration be paid
in La-Z-Boy Common Stock with the remainder paid in cash and/or La-Z-Boy Notes.
Furthermore, additional payments in La-Z-Boy Common Stock may be required if
the Surviving Corporation exceeds predetermined Pre-Tax Income as defined and
determined in accordance with the Plan of Merger, for the two successive twelve
month periods following the Merger. It should be noted that E/C has not
attained these performance levels at any time in its history. These possible
additional payments have not been included in the pro forma capitalization
table. For purposes of this pro forma, it is assumed that 60% of the payment
will be made in La-Z-Boy Common Stock, 20% is cash, and 20% is La-Z-Boy Notes.
Pro forma adjustments reflect:
(a) La-Z-Boy Notes in the amount of $6,515 and 651,500 shares of
La-Z-Boy Common Stock issued and valued at $30 per share.
(b) To eliminate E/C equity subject to redemption.
The pro forma balance sheet reflects dividends totaling approximately
$856 declared by E/C but not paid as of December 31, 1994.
In February 1995, E/C received life insurance proceeds totaling $850 on
key man policies covering the former chairman of the board, Dwight England,
who died in January, 1995. On February 23, 1995 E/C distributed 50% of these
proceeds or $1.43 per share to its shareholders in accordance with the
provisions of the Reorganization Agreement. See "The Merger and Related
Transactions -- Distributions Prior to Closing." Dividends will be distributed
for the period January 1, 1995, through the Effective Time of the merger based
on 60% of the taxable income earned during this period. Such dividends have
not been reflected in the pro forma capitalization table.
If the payment was based on the maximum La-Z-Boy Notes of $10,000 or 31%, 51%
La-Z-Boy Common Stock and 18% cash, total capitalization would be $389,631. If
the payout was based on 92% La-Z-Boy Common Stock, 8% cash and no La-Z-Boy
Notes, total capitalization would be $393,011.
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain selected financial data on an
historical, pro forma combined and pro forma combined equivalent per share basis
giving effect to the Merger as if it had occurred at the beginning of the
earliest period shown. The information presented herein should be read in
conjunction with the other financial information, including the notes thereto,
included in this Proxy Statement/Prospectus. Pro forma and pro forma equivalent
share information is unaudited.
<TABLE>
<CAPTION>
(Unaudited)
Nine Months Ended Year Ended
Jan 28, (La-Z-Boy), 1995 or April 30 (La-Z-Boy) or
December 31 (E/C), 1994 (3) June 30 (E/C), 1994
Income per share
before accounting change:
<S> <C> <C>
La-Z-Boy $ 1.30 $ 1.90
E/C 4.12 5.75
La-Z-Boy pro forma(1) 1.27 1.86
E/C pro forma 4.64 6.79
equivalent(2)
Dividends per share:
La-Z-Boy $ 0.51 $ 0.64
E/C 13.31 15.88
La-Z-Boy pro forma(1) 0.51 0.64
E/C pro forma 1.86 2.34
equivalent(2)
Book Value per share:
La-Z-Boy $16.38 $15.91
E/C 42.60 39.60
La-Z-Boy pro forma(1) 16.86 16.39
E/C pro forma 61.57 59.86
equivalent(2)
<FN>
(1) La-Z-Boy pro forma per share data has been calculated assuming 60% of
the consideration for the Merger is paid in La-Z-Boy Common Stock, 20% in
La-Z-Boy Notes, and 20% in cash. La-Z-Boy determines the dividends to to
be paid on a per share basis. In the opinion of management, the dividends
declared for the periods presented above would not have changed for the
additional shares issued to E/C stockholders. Other assumptions used in
computing the La-Z-Boy pro forma amounts are described in "Pro Forma
Combined Financial Information."
(2) E/C pro forma equivalent per share data has been computed by multiplying
the corresponding pro forma amounts for La-Z-Boy by the number of shares
(3.6519467707) of La-Z-Boy Common Stock into which each share of E/C Stock
will (as to those shares of E/C Stock which the holder elects to have
converted to La-Z-Boy Common Stock) be converted.
(3) E/C's fiscal year ends on June 30; therefore, its operating results for
the nine months ended December 31, 1994 include the fourth quarter of its
fiscal year ended June 30, 1994. During the fourth quarter of fiscal 1994,
E/C recorded a charge of $600 to selling, general and administrative
expenses in connection with a one-time bonus paid to its former chief
executive officer.
E/C paid dividends of $9.95 per share in the fourth quarter of 1994.
If the payment was based on 51% La-Z-Boy Common Stock, 31% La-Z-Boy
Notes, and 18% cash, La-Z-Boy nine months ended pro forma income per share
before accounting change would be $1.28 and the E/C equivalent would be
$4.67. La-Z-Boy pro forma book value per share would be $16.79 and the
E/C equivalent would be $61.32. If the payment was based on 92% La-Z-Boy
Common Stock and 8% cash, La-Z-boy nine months ended pro forma book value
per share would be $17.11 and the E/C equivalent would be $62.48.
La-Z-Boy pro forma income per share before accounting change and the E/C
pro forma equivalent would not change.
</TABLE>
<PAGE>
COMPARATIVE STOCK PRICES
The following table shows the closing price of La-Z-Boy Common Stock on the
NYSE on January 12, 1995 (the date preceding the day of public announcement of
the proposed Merger), the market value of the E/C stock based on the most recent
independent valuation of the E/C Stock available to E/C prior to that date and
the equivalent per share value of E/C Stock based on the exchange ratio for
La-Z-Boy Common Stock under the Plan of Merger. The market value shown for the
E/C Stock is based on an appraisal performed by an independent appraiser in May
1994 (approximately eight months prior to announcement of the proposed Merger)
and therefore does not reflect any developments between that date and the date
of the announcement. E/C shareholders should also bear in mind that the
appraisal was performed for the purpose of determining the value of E/C in
connection with the purchase of Arnold Dwight England's shares by members of his
family and not in connection with any proposed sale of E/C to an unrelated
party. See "The Merger and Related Transactions -- Reasons for the Merger" for
additional information concerning the appraisal. The closing price of the
La-Z-Boy Common Stock on the NYSE was $27.625 on April 13, 1995. For other
historical price information on La-Z-Boy Common Stock, see"La-Z-Boy Chair
Company -- Market Price of La-Z-Boy Common Stock, Dividend Information, and
Related Shareholder Matters."
E/C Stock --
Equivalent Per
Share Value Based
E/C Stock -- on Exchange Ratio La-Z-Boy Common
Market Value for La-Z-Boy Stock -- Market
Per Share Common Stock Value Per Share
$94.48(1) $114.58(2) $31.375
(1) The June 1994 appraisal referred to above determined that the aggregate
value of all of the E/C/ Stock would have been $28,092.432 (or $94.48 per
share of E/C Stock if the E/C Stock had been freely marketable. However,
the appraiser discounted the per share values for lack of marketability and
further discounted the per share value of the E/C Class B Stock due to its
lack of voting rights, resulting in appraised values of $61.40 per
share for the E/C Class Stock and $60.20 per share for the E/C Class B
Stock.
(2) The equivalent per share value was obtained by multiplying the closing
price of the La-Z-Boy Common Stock on the NYSE on January 12, 1995
($31-3/8) by the exchange ratio provided for in the Plan of Merger
(3.6519467707 shares of La-Z-Boy Common Stock for each share of E/C
exchanged for La-Z-Boy Common Stock). The value shown does not
reflect any discount for the restrictions on resale which will be
applicable to La-Z-Boy Common Stock received by E/C shareholders
pursuant to the Merger. See "Certain Considerations Relating to
the Merger -- Restrictions on Resale."
CERTAIN CONSIDERATIONS RELATING TO THE MERGER
Fixed Exchange Ratio
The exchange ratio applicable to those E/C shareholders who elect to
receive (or to whom there are allocated) shares of La-Z-Boy Common Stock as
consideration for the Merger is fixed and is not subject to adjustment for
fluctuations in the market price of La-Z-Boy Common Stock. The exchange ratio
was negotiated between La-Z-Boy and E/C based on an assumed value of $30.00
per share of La-Z-Boy Common Stock. To the extent the market value of
La-Z-Boy declines, the value to be received by such E/C shareholders will be
diminished, and to the extent such market value increases, the value to be
received by such E/C shareholders will be enhanced. The closing price of the
La-Z-Boy Common Stock on the NYSE was $27.625 on April 13, 1995.
Restrictions on Resale
E/C shareholders who may be deemed to be "affiliates" of E/C for purposes
of Rule 145 under the Securities Act may not sell shares of La-Z-Boy Common
Stock acquired in connection with the Merger except pursuant to an effective
registration statement under the Securities Act covering such shares or in
compliance with Rule 145 or another applicable exemption from the registration
requirements of the Securities Act. In addition, all shareholders of E/C
receiving La-Z-Boy Common Stock in the Merger will be required to deliver "tax
lock-up letters" prohibiting the sale or disposition of such shares (with
certain limited exceptions) for two years after consummation of the Merger.
See "The Merger and Related Transactions - Tax Lock-up Letters."
The La-Z-Boy Notes will not be transferable except upon the death of the
holder thereof. See "Description of the La-Z-Boy Notes - Limited
Transferability." Performance Units will not be transferable except to the
extent required by applicable law. See "Description of the Performance Units."
Unknown Value of Performance Units
The payment of additional Merger consideration pursuant to the Performance
Units is conditioned upon the Surviving Corporation's future performance at
levels never before achieved by E/C; accordingly, the present value of the
Performance Units is unknown, and there can be no assurance that they will not
prove to have little or no value at maturity. The terms of the Performance
Units were negotiated by La-Z-Boy and E/C with the objective of conditioning
any payment thereunder on the future performance of the Surviving Corporation,
measured in a manner which would approximate the manner in which E/C's future
performance would have been measured had the Merger not occurred. However,
the Merger may affect E/C's business and performance in ways not anticipated
during such negotiations and may therefore affect the ultimate value of the
Performance Units. See "The Merger and Related Transactions - Performance
Units" and "Description of the Performance Units." In addition, the Plan of
Merger establishes certain limits on the number of shares of La-Z-Boy Common
Stock which may be issued in settlement of the Performance Units. See "The
Merger and Related Transactions -- Limitations" and " -- Allocation of Cash,
Shares and Notes."
Certain Federal Income Tax Consequences
The tax opinion of Miller, Canfield, Paddock and Stone, P.L.C. described
elsewhere in this Proxy Statement/Prospectus relates only to the treatment of
the Merger as a reorganization for federal income tax purposes and to certain
of the principal consequences of such tax treatment. However, such opinion
does not cover all of the issues which may arise, and the law is unsettled
with respect to some of the issues which are covered. See "The Merger and
Related Transactions - Certain Federal Income Tax Consequences." Neither
E/C nor La-Z-Boy knows the tax consequences that will apply in specific cases,
and each E/C shareholder is therefore strongly urged to consult with his or
her own tax adviser prior to voting on the Merger and prior to making any
election with respect to Merger consideration.
Absence of Call Protection for La-Z-Boy Notes
The La-Z-Boy Notes will bear interest at a fixed rate but (unlike some
other fixed-rate debt securities) will be subject to prepayment, in whole or in
part, without penalty or premium, at any time at La-Z-Boy's option.
Accordingly, La-Z-Boy will have the option to prepay principal (without
paying compensation to holders of the La-Z-Boy Notes) if interest rates
decline, or to extend payment over the full stated term ,if interest rates
increase. See "Description of the La-Z-Boy Notes."
Liquidated Damages Provisions
The Reorganization Agreement provides that if the Merger is not
consummated due to certain specified occurrences (including the failure of
E/C's shareholders to approve the Merger by the required vote), E/C will be
liable to La-Z-Boy in the amount of $500,000 as liquidated damages, and that if
the Merger is not consummated due to certain other specified occurrences, La-Z-
Boy will be liable to E/C in the same amount. See "The Merger and Related
Transactions -- Termination; Liquidated Damages; Termination Fee."
Differences in Shareholder Rights
As a result of differences between applicable Tennessee and Michigan laws
and differences between the charter documents of E/C and La-Z-Boy, the rights
of a shareholder of La-Z-Boy differ in certain respects from those of a
shareholder of E/C. See "Description of La-Z-Boy Capital Stock" and
"Comparison of Shareholder Rights and Charter Documents."
THE COMPANIES
ENGLAND/CORSAIR, INC.
E/C was incorporated under the laws of the State of Tennessee in 1964 and
is headquartered in the State of Tennessee. E/C is engaged primarily in the
manufacture of upholstered furniture. E/C's principal office is located at 402
Old Knoxville Highway, New Tazewell, Tennessee 37825, and its telephone number
is (800) 251-9125.
LA-Z-BOY CHAIR COMPANY
La-Z-Boy was incorporated under the laws of the State of Michigan in 1941
and is headquartered in the State of Michigan. La-Z-Boy is engaged primarily in
the manufacture of furniture. La-Z-Boy's principal office is located at 1284
North Telegraph Road, Monroe, Michigan 48161, and its telephone number is (313)
242-1444.
LZB ACQUISITION, INC.
LZB Acquisition was incorporated under the laws of the State of Michigan
in 1995 and is headquartered in the State of Michigan. LZB Acquisition was
formed for the purpose of serving as the Surviving Corporation of the Merger
and does not engage in any business at this time. Its principal office is
located at 1284 North Telegraph Road, Monroe, Michigan 48161, and its telephone
number is (313) 242-1444.
THE MEETING
MATTERS TO BE CONSIDERED AT THE MEETING
At the Meeting, E/C shareholders will be asked to consider and vote upon
the Proposal, which is to approve: (a) the Reorganization Agreement; (b) the
Plan of Merger; and (c) all of the transactions contemplated by the
Reorganization Agreement and the Plan of Merger, including (without limitation)
the Merger. E/C shareholders will also consider and vote upon such other
matters, if any, as may properly be brought before the Meeting.
THE BOARD OF DIRECTORS OF E/C UNANIMOUSLY APPROVED THE REORGANIZATION
AGREEMENT, THE PLAN OF MERGER AND ALL OF THE TRANSACTIONS CONTEMPLATED
THEREBY AND RECOMMENDS THAT E/C SHAREHOLDERS VOTE FOR THE APPROVAL OF THE
PROPOSAL.
VOTE REQUIRED
Approval of the Proposal requires the affirmative votes of the holders of
a majority of all outstanding shares of E/C Stock of both classes (voting
together as a single voting group), with each such share entitled to one vote.
As of March 31, 1995, approximately 51.8% of the shares of E/C Stock outstanding
and entitled to vote on the Proposal was held by E/C directors, executive
officers, and their affiliates. Approval of the Proposal by the requisite vote
of E/C shareholders is a condition to, and is required for, consummation of the
Merger. No vote of La-Z-Boy shareholders is required in connection with the
Merger.
VOTING OF PROXIES
Proxies. Shares of E/C Stock represented by properly executed proxies
received at or prior to the Meeting and not thereafter effectively revoked will
be voted at the Meeting in the manner specified by the holders of such shares.
Properly executed proxies which do not contain voting instructions will be
voted FOR the Proposal.
Broker Nonvotes and Abstentions. As of the record date, none of the E/C
Stock was held in the name of any broker so no proxies are expected to be
withheld due to broker nonvotes. Solely for purposes of determining whether the
Proposal has received the shareholder votes required for approval, each
abstention is functionally equivalent to a vote "against" the Proposal.
Other Matters. If any other matters are properly presented at the Meeting
for consideration, including, among other things, consideration of a motion to
adjourn the Meeting to another time and/or place (including, without
limitation, for the purpose of soliciting additional proxies), the persons
named in the form of proxy enclosed herewith and acting thereunder will have
discretion to vote on such matters in accordance with their best judgment. E/C
directors have no knowledge of any matters to be presented at the Meeting
other than the matters referred to and described in this Proxy
Statement/Prospectus.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed form of proxy does not preclude a
shareholder from voting in person or otherwise revoking a proxy. Attendance at
the Meeting will not in and of itself constitute revocation of a proxy. A
shareholder may revoke a proxy at any time prior to its exercise by filing with
the Secretary of E/C a duly executed revocation or a proxy bearing a later date
or by voting in person at the Meeting.
The Plan of Merger contains certain limitations on the aggregate
amount of each type of consideration which may be paid, as well as
procedures for allocating different types of consideration in the event
elections made by E/C shareholders would result in any of such
limitations being exceeded. As a result of these limitations and
allocation procedures, shareholders of E/C may not receive the type of
consideration they elect, and shareholders electing to receive cash or
La-Z-Boy Notes may nevertheless receive shares of La-Z-Boy Common Stock
whose market value at that time may be less than the negotiated $30.00
price of La-Z-Boy Common Stock upon which the exchange ratio was
determined. See "The Merger and Related Transactions -- Limitations" and
"-- Allocation of Cash, Shares and Notes."
Prior to the vote being taken, the Chairman of the Meeting will
announce the amounts of each type of consideration elected by the
shareholders pursuant to the Notices of Election filed with the Secretary.
In the event the elections made by the shareholders result in any of the
above-described limitations being exceeded: (a) the Chairman of the
Meeting will advise those shareholders present in person of the fact that
one or more of such limitations has been exceeded and that as a
consequence of the allocation procedures set forth in the Plan of Merger,
if the Merger is approved, some or all of the shareholders will not
receive the type of consideration they elected; (b) the Chairman of the
Meeting will announce the amount of each type of consideration which will
be received by each shareholder affected by the allocation procedures if
the Merger is approved; and (c) those shareholders who are not present at
the Meeting in person and who are affected by the allocation procedures
will be provided with the same information by telephone or facsimile and
given the opportunity to confirm in writing the proxy previously submitted
or revoke the previously submitted proxy and execute a substitute proxy
prior to the vote being taken. If any shareholder who is not present in
person and who is affected by the allocation procedures fails to respond
within a reasonable time (as determined by the Chairman of the Meeting),
the Meeting will be adjourned for 24 hours or such longer period as the
Chairman deems appropriate. In the event any such shareholder does not
respond by the time the vote is taken at the adjourned Meeting, the proxy
as previously executed will not be voted at the Meeting. Any shareholder who
cannot be contacted by telephone or facsimile and whose proxies will not be
voted at the adjourned meeting will be deemed to have delivered written notice
of intent to demand payment in accordance with Section 202 of the Tennessee
Business Corporation Act and such shareholder will be entitled to dissenters'
rights. See "The Meeting -- Dissenters' Rights."
RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM
The record date for the Meeting is April 17, 1995. Only E/C
shareholders at the close of business on such date are entitled to notice of,
and to vote at, the Meeting. At March 31, 1995, there were issued and
outstanding 297,330 shares of E/C Stock. Shares representing a majority of the
aggregate number of outstanding shares of E/C Stock entitled to vote must be
represented in person or by proxy at the Meeting in order for a quorum to be
present at the Meeting. See "-- Voting of Proxies."
DISSENTERS' RIGHTS
Holders of the E/C Class A Stock and holders of the E/C Class B Stock
have a right pursuant to Section 102 (a)(1)(A) of Chapter 23 of the TBCA
("Section 102") to assert dissenters' rights. In addition, holders of E/C
Class A Stock and holders of E/C Class B Stock have a right pursuant to
Section 301(a) of Chapter 23 of the TBCA ("Section 301") to judicial
appraisal of his or her shares. A copy of Chapter 23 of the TBCA is attached
hereto as Annex C. A dissenting shareholder is entitled to obtain payment
from the Surviving Corporation of the "fair value" (as defined) of his or
her shares. "Fair value" is defined to mean the value of the shares
immediately before the effectuation of the corporate action to which the
dissenter objects, excluding any appreciation or depreciation in anticipation
of the corporate action. If the Surviving Corporation and a dissenting
shareholder are unable to determine the fair value of the shares, the fair
value of shares will be determined by judicial appraisal pursuant to the
terms of Section 301.
To assert dissenter's rights, a holder of E/C Stock (a) must deliver to
E/C, prior to the shareholder vote on the Proposal, written notice of his or
her intent to demand payment for their shares if the proposed Merger is
effectuated and (b) must not vote their shares in favor of the Proposal.
Holders of E/C Stock who satisfy these requirements are referred to herein as
"dissenting shareholders." The Surviving Corporation will send a dissenter's
notice to all dissenting shareholders no later than 10 days after the proposed
corporate action is authorized by a vote of the shareholders. The dissenter's
notice must state where the payment demand must be sent and where and when
certificates for certificated shares must be deposited. The notice must also
inform holders of uncertificated shares to what extent transfer of the shares
will be restricted after the payment demand is received, and must specify a
date not less than one month, nor more than two months after the date of the
delivery of the dissenter's notice on which the demand for payment must be
received by the Surviving Corporation. The dissenter's notice must be
accompanied by a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the principal terms of the
proposed corporate action and requires that the dissenting shareholder verify
whether or not he acquired beneficial ownership of the shares before that date.
A shareholder who does not demand payment or deposit his or her share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his or her shares under Chapter 23 of the TBCA.
As soon as the Merger is effectuated, or upon receipt of a payment demand,
which ever is later, the Surviving Corporation must pay each dissenting
shareholder that has satisfied all requirements to assert dissenter's rights,
the amount the corporation estimates to be the fair value of his or her shares,
plus accrued interest. The payment must be accompanied by (a) the Surviving
Corporation's balance sheet as of the end of a fiscal year ending not more than
16 months before the date of payment, an income statement for that year, a
statement of changes in shareholders' equity for that year, and the latest
available interim financial statements, if any; (b) a statement of the
corporation's estimate of the fair value of the shares; (c) an explanation of
how the interest was calculated; (d) a statement of the dissenter's right to
demand payment; and (e) a copy of Chapter 23 of the TBCA, if not previously
provided. A corporation may elect to withhold payment from a dissenter unless
he was the beneficial owner of the shares before the date set forth in the
dissenters' notice as the date of the first announcement to news media or to
shareholders of the principal terms of the proposed corporate action.
If the Surviving Corporation does not effectuate the proposed action that
gave rise to the dissenter's rights within two months after the date set for
demanding payment and delivering stock certificates, the Surviving Corporation
must return the stock certificates and release the transfer restriction imposed
on uncertificated shares.
A dissenter may notify the Surviving Corporation in writing of his or her
own estimate of the fair value of the shares and amount of interest due, and
demand payment of his or her estimate (less any payment made to the dissenting
shareholder for those shares), or reject the Surviving Corporation's offer and
demand payment of the fair value of the shares and interest due if (a) the
dissenting shareholder believes the amount offered or paid by the Surviving
Corporation is less than the fair value of his or her shares or that the
interest due is incorrectly calculated, (b) the proposed action has not been
effectuated within two months after the date set for demanding payment or (c)
the Surviving Corporation, having failed to effectuate the proposed action,
does not return delivered stock certificates or release transfer restrictions
imposed on uncertificated shares within two months after the date set for
demanding payment. A dissenter must notify the Surviving Corporation of his or
her demand in writing within one month after the Surviving Corporation made or
offered payment for his or her shares.
If a demand for payment remains unsettled, the Surviving Corporation must
commence a proceeding within two months after receiving the payment demand and
petition the court to determine the fair value of the shares and accrued
interest. If the Surviving Corporation fails to do so, it must pay each
dissenter whose demand remains unsettled the amount demanded. Each dissenter
made a party to the proceeding is entitled to judgment for the amount, if any,
by which the court finds the fair value of the shares, plus accrued interest,
exceeds the amount paid by the Surviving Corporation or the fair value, plus
accrued interest, of his or her after-acquired shares for which the Surviving
Corporation elected to withhold payment. Court costs and attorneys' fees will
be assessed against the Surviving Corporation, unless the court finds it
equitable to assess some of such fees against the dissenting shareholder.
SOLICITATION OF PROXIES
The Surviving Corporation will bear the cost of the solicitation of
proxies from E/C's shareholders if the Merger is consummated. It is estimated
that the costs of soliciting proxies, including the cost of printing and
mailing this Proxy Statement/Prospectus, will be approximately $5,500. In
addition to solicitation by mail, proxies may be solicited by telephone,
telegram, facsimile transmission, or in person. Proxies will be solicited on
behalf of E/C by directors, officers, and regular employees of E/C (none of
whom will receive any additional compensation for such services, but who may be
reimbursed for reasonable out-of-pocket expenses incurred in connection with
such solicitation).
THE MERGER AND RELATED TRANSACTIONS
THE MERGER
The following information concerning the Merger, insofar as it relates to
matters contained in the Reorganization Agreement, is qualified in its entirety
by reference to the Reorganization Agreement, a copy of which is attached to
this Proxy Statement/Prospectus as Appendix A. All shareholders are urged to
read the Reorganization Agreement in its entirety.
BACKGROUND OF THE MERGER
In the fall of 1993 the principal shareholder and Chairman of the E/C
Board, Arnold Dwight England, was in declining health and confined to a
wheelchair. During the fall and winter of 1993, E/C considered an initial
public offering. The purpose of the proposed offering was to allow Arnold
Dwight England to retire by providing E/C funds to redeem his stock, to
eliminate short term financing and to allow those of the E/C shareholders
who desired to do so to sell some of their stock to accumulate wealth outside
of E/C. E/C has 22 shareholders, all but one of whom are family members or
trusts of children of family members and all but one of whom works for E/C.
In November 1993, after all year end adjustments had been computed and
first quarter results of 1994 were known it became clear to E/C that the pro-
jected stock offering price was not going to be obtained, due to decreased
earnings. Because of this pricing issue, the shareholders elected not to
proceed with the initial public offering.
Having elected to withdraw from the initial public offering, E/C considered
two alternatives to accomplish the goals of the retirement of Arnold Dwight
England, refinancing the short term debt and the accumulation of wealth outside
of E/C by the shareholders. Those alternatives were: (1) to determine whether
there was any interest of other companies in purchasing or merging with E/C or
(2) to seek conventional funding.
Management and the shareholders of E/C initially desired to maintain
control of E/C. Accordingly, E/C sought to refinance its debt, including bor-
rowing additional monies to fund the retirement of Arnold Dwight England and to
allow additional payments to shareholders to accomplish their goal of accumula-
tion of wealth outside of E/C.
This refinancing was obtained in early 1994, with a long term/short term
financing plan with a commercial bank. As part of the program, additional
financing was obtained to fund a severance agreement for Arnold Dwight England
of $600,000 and a distribution to all E/C shareholders of $2,520,516.
Approximately $1,288,000 of the distribution was loaned back to E/C. During
early 1994, Mr. England had surgery which resulted in a complete change in his
health. He was no longer confined to a wheelchair and he and his wife were
able to travel. He remained a valued consultant to E/C and watched over the
various family dealings.
In April 1994, at an E/C Board meeting, a serious split in the management
of E/C and the family occurred. Rodney England, son of Arnold Dwight England,
had been acting as President and Chief Executive Officer. At that meeting
Chris England, a director and a brother, nominated Linda Duff, a sister to be
Chairperson of the E/C Board. The meeting was adjourned without a vote being
taken.
Subsequently, E/C shareholders elected Rodney England Chairman of the E/C
Board and enacted new bylaws which provide for outside (non-family) members
serving on the E/C Board. Linda Duff and Chris England were removed as
directors and replaced by James Price, Vice President-Manufacturing,
Otis Sawyer, Vice President-Finance and Walter Winding (a non-employee
director). However, Ms. Duff and Chris England remained as E/C employees.
Arnold Dwight England remained a member of the E/C Board. Five of Arnold
Dwight England's six children are employed by E/C.
Concurrently with the changes described above, Arnold Dwight England, for
the purpose of estate planning, entered into agreements to sell his E/C Stock
to his six children. This resulted in splitting his majority interest into
different blocks. The disagreement of family members continued. These six
adult children, either directly or indirectly, own 80.8% of the E/C Stock.
H. Wayne England (Arnold Dwight England's brother) and his family control
19.2%. One non-family member owns a fractional percentage of stock.
Arnold Dwight England, returned from an extended vacation and recognized
the operational problems and difficulty in reaching management decisions. In
the fall of 1994, it became apparent to the E/C shareholders that the best
interest of all E/C shareholders was a sale of E/C.
Inquiries of a purchase and/or sale in the furniture industry are made
frequently. Confidentiality agreements were submitted to and signed by two
companies in June and September 1994. One company was involved in another
acquisition and did not pursue an interest in E/C. The discussions ended
without the execution of either a letter of intent or formal agreement.
The second company, a foreign based corporation, sent its principal United
States officers to meet with representatives of E/C in the fall of 1994.
Although this company expressed an interest, it became evident that as a private
company it could not deliver publicly traded stock to the E/C shareholders and
that a nontaxable transaction could not be structured so as to be satisfactory
to all parties. The discussion with the second company ended without the
execution of either a letter of intent or formal agreement.
In October 1994, E/C and La-Z-Boy met to determine if the parties had a
mutual interest in either a purchase/sale or a merger. At that October meet-
ing, representatives of La-Z-Boy present were Charles Knabusch, Chairman and
President of La-Z-Boy, Frederick Jackson, Vice President-Finance,
Patrick Norton, Senior Vice President-Sales and Marketing and Charles Nocella,
Vice President-Manufacturing. Representatives of E/C were Rodney England,
Chairman and President, Richard England, Vice President-Administration,
James Price, Vice President-Manufacturing, H. Wayne England, Senior Vice
President-Sales, Otis Sawyer, Vice President-Finance, Dennis Valkanoff,
General Counsel, and Arnold Dwight England, E/C Board member. The merger
with La-Z-Boy offered to the E/C shareholders the potential of a "tax free
reorganization," for those who desired to defer any tax obligations. The
option of choosing cash or receiving promissory notes offered to the
individual shareholders the maximum alternatives to fit each
shareholder's individual needs.
Subsequently in November 1994, a second meeting was held in Monroe,
Michigan, with Messrs. Rodney England, Sawyer, and Valkanoff, attending for
E/C. Representatives of La-Z-Boy were Frederick Jackson, Gene Hardy, Jim
Korsnack and James Klarr, financial and legal personnel for La-Z-Boy. The
purpose of the meeting was to discuss further details of a possible
transaction.
Discussion included the potential fit of the two companies, the family
problems affecting E/C operations, La-Z-Boy's interest in the E/C's
transportation system and the operation of La-Z-Boy subsidiaries. At that
meeting the parties agreed to a structure which would include cash, notes and
stock.
On December 6, 1994, E/C's Board met in a special meeting and Rodney England
presented the details of the negotiations. At that meeting the E/C Board,
with the motion made by Arnold Dwight England, moved unanimously to approve
the proposed combination with La-Z-Boy. The 22 E/C shareholders met on
December 10, 1994 and agreed to continue the negotiation of a definitive
agreement with La-Z-Boy. The Reorganization Agreement was subsequently
executed on January 13, 1995, less than one month after the meetings of
the E/C Board and shareholders, and 9 days after the death of
Arnold Dwight England.
REASONS FOR THE MERGER
Management determined that selling parts of E/C was not in E/C's best
interest, in part due to the nature of the E/C assets. Management
determined that a partial sale would not maximize shareholder value. No
other bids except those described above were solicited. No other bids were
received. E/C did not engage an investment advisor in its discussions with
potential acquirors.
The E/C Board believes there are several reasons for the transaction:
(a) the E/C Board's belief that the transaction would accomplish the
following goals:
(i) provide liquidity to those E/C shareholders who desired
such;
(ii) eliminate the capital drain to E/C which occurred each
time a shareholder decided to retire or leave E/C;
(iii) provide a strong financial partner with the capability
of assisting E/C to grow in a highly competitive industry. The
Merger provides potential savings for both companies in areas
of transportation, purchasing and finance. In addition, the
E/C Board believes the Merger will enable the combined entity
to improve its market penetration;
(iv) allow E/C shareholders to determine the timing of
federal tax consequences realized by the sale of their E/C
Stock. Since there is no limitation with regard to the number
of shares of La-Z-Boy Common Stock an E/C shareholder can elect
to receive upon consumption of the merger, he or she has the
ability to defer all federal taxes.
(v) eliminate the internal conflict among E/C shareholders who
are in senior management positions over the direction and
organization of E/C. The E/C shareholders have communicated to
the E/C Board their concern regarding the amount of capital
which has been invested in E/C as well as the debt financing
used to expand E/C's sales and distribution systems.
(b) the E/C Board's review of the business, operations, earnings
and financial condition of La-Z-Boy on both a historical and
prospective basis;
(c) while not attempting to quantify the potential synergies, the
E/C Board believes that the Merger will provide contributions
of the respective parties to a combined business which will
enhance opportunities for operating efficiencies and
opportunities for growth, including as follows:
(i) transportation: E/C's distribution system requires that
it invest heavily in transportation equipment. Because E/C
delivers on a very exacting schedule it must maintain a truck
fleet capable of servicing its peak demand. During normal
seasonal lows, E/C sells its excess trucking capacity on the
spot market. Currently, E/C maintains a large tele-marketing
department to help fill its trucks with general freight during
its low season and back hauls following furniture delivery.
E/C's Board believes that La-Z-Boy, with its many factories,
will help consume most of its seasonal excess capacity with
less manpower expended in trying to arrange freight loads.
E/C's transportation system should allow La-Z-Boy to
significantly reduce its packaging cost and freight damage;
(ii) financing: E/C's Board believes that the Merger will
provide E/C with more competitive prices on purchased raw
material. The E/C Board also understands that La-Z-Boy
currently cuts its own seat cushion foam. This option is
currently under review by E/C due to significant foam price
increases experienced in 1995. La-Z-Boy owns and operates a
centralized fabric distribution center. The E/C Board
understands that this allows La-Z-Boy to maintain a lower
fabric inventory than would be possible if fabric were stored
at each of its manufacturing facilities. The E/C Board
believes it may be able to integrate with this distribution
facility some time in the future thereby reducing its cost of
funds tied up in raw fabric inventory (currently $3 million);
(iii) production: The E/C Board believes its experiences in
manufacturing low cost upholstered furniture may help La-Z-Boy
modify its production process thereby lowering its
manufacturing costs;
(iv) distribution: La-Z-Boy owns a large number of
proprietary retail stores. E/C should be able to provide La-Z-
Boy's retail stores with product at price points below that at
which La-Z-Boy is currently capable of manufacturing at
profitable margins;
(d) the E/C Board's belief that the combined entity would have the
ability to compete more effectively in the relevant markets due
to the reasons described in (c) above;
(e) the E/C Board's belief that the failure to accomplish a
satisfactory business combination would result in the
resignations of senior management and the resulting devaluation
of E/C.
The E/C Board did not assign any specific or relative weight to the
fore-going factors in its considerations.
Both the E/C Board and its nine individual shareholders have
discussed and realize that the La-Z-Boy stock was $30 at the time of the
negotiations and that as a publicly-traded stock, the La-Z-Boy stock price
might fluctuate either up or down. Based on those discussions, management
of E/C believes that the transaction is attractive to the shareholders
because of its tax-free nature and because of the flexibility it gives each
E/C shareholder for tax and financial planning purposes and not because of
the market price of La-Z-Boy common stock. Management of E/C believes that
the shareholders have a longer-term view of the transaction and have
objectives other than an immediate liquidation of the exchanged stock.
E/C has nine adult shareholders who are also trustees for trusts
which hold all the remaining shares of E/C Stock. All but one adult
shareholder works for E/C. Three of the E/C shareholders are members of
the E/C Board. During the negotiations the E/C Board has communicated
frequently with the E/C shareholders. Based on these communications which
occurred both before and after the Reorganization Agreement was signed, it
is the E/C Board's belief that E/C shareholders want to proceed with the
Merger even though the current market price for La-Z-Boy stock is below the
initial estimate of $30 per share.
The E/C Board, with the input of the E/C shareholders elected not to
engage an independent third party to render a fairness opinion for the
purposes of this transaction for several reasons. First, the E/C Board and
shareholders had the May 1994 valuation of E/C conducted by Mercer Capital
Management, Inc. ("Mercer"), an independent appraiser for the purposes of
determining the value of E/C when the family members purchased the interest
of Arnold Dwight England. The appraised total valuation was approximately
$28 million on a marketable minority interest basis as if the stock were
freely tradeable and was subsequently discounted for lack of marketability.
The $28 million valuation is less than the $32.5 million offered by La-Z-
Boy. The Mercer appraisal was not an appraisal of E/C as a whole. Mercer
did not contemplate a controlling interest valuation but instead obtained
its minority interest value conclusion by direct reference to values of
freely tradeable minority interest in publicly traded comparable companies.
The Mercer appraisal is described below. The E/C Board also was concerned
with the cost of a third party fairness opinion in light of the fact that
it had recently incurred various expenses related to the proposed initial
public offering and management succession and felt that additional review
by a third party was unnecessary.
The E/C Board believes the transaction is fair to, and in the best
interest of, the E/C shareholders for the following reasons:
(a) based on its access to preliminary non-binding elections of the
E/C shareholders, the E/C Board's belief that the combination
of consideration was attractive to E/C shareholders;
(b) The E/C Board reviewed the La-Z-Boy offering price of $109.56
in relation to its average earnings before interest and taxes
("EBIT"). For the year ended June 30, 1994, the La-Z-Boy offer
is 8.1 times E/C's EBIT. It was the E/C Board's belief, when
considering all other factors, that an offering price per share
in the range of 5 to 7 times EBIT would be a fair multiple.
The E/C Board considered the initial price as fair
consideration for the stock and the further payment pursuant to
the Performance Units, if obtained, as a premium to be paid by
La-Z-Boy for E/C. See "Performance Units."
May 1994 Appraisal
The following is a summary of the May 1994 appraisal of E/C. The E/C
Board considered the appraisal as only one piece of information available
in its consideration of the Merger, especially since the appraisal was
conducted for a purpose unrelated to the Merger. The E/C Board believed
the appraisal reflected the minimum consideration it would consider in a
transaction. A copy of the appraisal is available for inspection and
copying at the principal offices of E/C during its regular business hours
by any E/C shareholder or a copy of the appraisal will be transmitted by
E/C to any interested E/C shareholder upon written request at the expense
of the requesting E/C shareholder. Such written request should be directed
to Dennis Valkanoff, England/Corsair, 402 Old Knoxville Highway, New
Tazewell, Tennessee 37825, telephone (800) 251-9125.
In May 1994, Mercer Capital Management, Inc. ("Mercer") was retained
by A. Dwight England to determine the "fair market value" (as defined in
the Code, related regulations and interpretations) of 81,430 shares of E/C
Stock. The shares represented approximately 27% of the issued and
outstanding shares. The appraisal was determined on a minority interest
basis as of May 1994 and was for the purpose of assisting Mr. England's
estate planning. The appraisal found the total value of E/C to be
approximately $28 million on a minority basis, which did not contemplate a
possible premium for control (or $94.17 per share). The appraisal was
determined on a marketable minority interest basis as if the stock were
freely tradeable and was subsequently discounted for lack of marketability.
Mercer did not contemplate a controlling interest valuation but instead
obtained its minority interest value conclusion by direct reference to
values of freely tradeable minority interests in publicly-traded comparable
companies. Therefore, no discrete minority discount was applied. Mercer
applied to the $28 million a 35% discount for lack of marketability of the
E/C Stock and concluded that the fair market value of the E/C Stock being
appraised was $61.40 per Class A voting share and $60.20 per Class B non-
voting share.
Mercer examined the economic outlook of the national and
local/regional economy, the furniture industry outlook and the future
outlook of E/C. It examined historical financial statements of E/C for the
fiscal years ended June 30, 1989 through June 30, 1993 (audited) and the
twelve months ended December 31, 1993 (unaudited). Mercer compared E/C's
financial averages with industry financial averages available from non-
public company sources published in the 1993 Annual Statement, by Robert
Morris Associates. Additionally, Mercer used comparative information from
financial statements of four publicly-traded manufacturers of upholstered
furniture.
Mercer prepared a cash flow analysis, reviewed management's outlook
for the coming year, prepared estimates of ongoing earning power and
reviewed dividend history, capacity and prospects. Other valuation
considerations included the classifications of the stock, the distribution
of ownership of the E/C Stock, the agreements and restrictions related to
the E/C Stock, the lack of transactions in the E/C Stock and environmental
issues.
Mercer selected valuation methods including the transactions method,
the net asset value method, the guideline company (public minority) method
and the discounted future benefits method. The transactions method was
disregarded since there had been no recent transactions in the E/C Stock.
The net asset value method requires adjustment of a company's asset and
liabilities to their actual or estimated fair market value or economic
values. Net asset value is defined as the difference between the adjusted
valuation of all assets and liabilities. The Mercer estimate of the net
asset value was approximately $14 million which was the same as the E/C
unadjusted book value as of December 31, 1993. Mercer identified no
relevant adjustments to reported assets or liabilities.
The guideline company (public minority) method compares the subject
company to publicly traded companies in the same or similar business. The
four companies used in this method by Mercer included Bassett Furniture
Industries, Inc., Flexsteel Industries, Inc., La-Z-Boy Chair Company, and
Leggett & Platt, Inc. Mercer employed a capitalization of earnings method
using a price/earnings ratio and a capitalization of EBITD (defined below)
using the guideline companies as measures of appropriate multiples.
The average price/earnings ratio of the four guideline companies was
16.99x which was used as the base capitalization factor in the derivation
of earnings value. Mercer discounted the price/earnings ratio for E/C
based on certain fundamental differences between it and the four guidelines
companies. These differences included size, financial leverage, access to
capital markets and key executive dependencies. The discount applied was
40% and yielded for E/C an adjusted price/earnings multiple of 10.19x. The
earning power of E/C was estimated to be approximately $2.5 million
providing a capitalized earnings value of approximately $36 million.
Total capitalization of earnings before interest, taxes and
depreciation ("EBITD") for the four guideline companies was an average of
9.08x. Applying a discount to E/C for the fundamental differences between
it and the guidelines companies resulted in an adjusted capitalization
factor of 5.45x. Mercer found E/C's total capitalization using the
guideline company method of approximately $43 million (based on EBITD). A
reduction for interest-bearing debt results in a value of equity of
approximately $30.5 million.
The discounted future benefits method requires an explicit forecast
of future benefits over a reasonably foreseeable future period, an
appropriate discount rate and an estimate of long-term growth beyond the
forecast period. Mercer reviewed management projections. Discounting the
cash flows and the implied terminal value provided an estimate of the
present value of total invested capital of approximately $38.5 million less
interest-bearing debt of $12.6 million resulting in the value of equity
estimate of approximately $26 million.
Mercer assigned weights to the values indicated by the various
valuation methods. The weights reflected Mercer's opinion of the relative
importance or reliability of the methods when determining fair market
value. Equal 45% weights were assigned to the capitalization of earnings
and EBITD capitalization methods to reflect the importance of earnings as a
source of expected returns to minority shareholders. The remaining 10%
weight was assigned to the discounted future benefits method to give some
weight to the explicit prospects for the business as forecasted by
management. No weight was given to the transaction and net asset value
methods.
Mercer then applied a discount of 35% for the lack of marketability
of the E/C Stock which was near the mean discount suggested by various
studies reviewed by Mercer.
The conclusion of total value was derived by taking the initial
indication of value ($28 million) and subtracting the appropriate
marketability discount (35%). The result is approximately $18 million
which represented the fair market value of E/C on a nonmarketable, minority
interest basis.
The Class B Non-Voting Shares were discounted 2% to Class A pricing
based on Mercer's belief that otherwise equivalent non-voting shares tend
to trade at modest discounts to prices of the same company's voting class.
Mercer is one of the larger independent business valuation firms in
the nation. It handles hundreds of valuation assignments yearly for
clients throughout the United States. Valuation opinions have been
rendered for a wide variety of purposes and have been used to facilitate
many public and private transactions. Representative clients include legal
and accounting professionals, individuals, closely-held companies
representing over 200 different industry categories, banks, thrifts, public
companies and governmental agencies.
For rendering the appraisal, Mercer received $12,500, plus reasonable
out-of-pocket expenses. Mercer has never been previously engaged by E/C or
La-Z-Boy. Neither Mercer nor its principals own an interest in the
securities of E/C or La-Z-Boy.
FURTHER CONSIDERATIONS OF THE E/C BOARD
The E/C shareholders will have the option to choose cash, stock and/or
promissory notes. For those receiving stock, and more than 50% of the purchase
price must be taken in stock, the transaction will become a "tax free
reorganization." If in the election, cash and promissory notes are selected
each individual shareholder will need to have the impact on his/her own tax
situation reviewed by their own advisor. See "Consideration for Shares," and
"Limitations" set forth below.
The E/C Board considered the transaction to have the following advantages:
(a) E/C's sales and marketing position would be enhanced given that
the Surviving Corporation would become a La-Z-Boy subsidiary;
(b) La-Z-Boy's dedicated dealer base would provide new distribution
points for the Surviving Corporation;
(c) The combination of the companies would allow greater purchasing
power, allowing greater volume rebates;
(d) The financial resources of La-Z-Boy could be available to assist
the Surviving Corporation during any economic downturns, offering
economic stability for E/C's employees; and
(e) The financial resources of La-Z-Boy would support the trucking
purchase obligations of the Surviving Corporation and the
ability of the Surviving Corporation to transport some of
La-Z-Boy products.
The E/C Board considered the transaction to have the following
disadvantages:
(a) The loss of a family owned business; and
(b) The loss of potential equity growth in later years.
All E/C shareholders are entitled to receive Performance Units. Should
E/C obtain the profitability levels of $6,000,000 in the year following the
closing, and/or $7,000,000 in the following year, additional payments will be
made to the shareholders. It should be noted that E/C has not obtained
these performance levels at any time in E/C's past. The receipt of payment
under the Performance Units should not be a significant factor in whether
or not you vote for the Merger. Rather, if obtained, the Performance
Units should be viewed as a premium to be paid by La-Z-Boy for E/C. See
"Performance Units."
RECOMMENDATION OF THE E/C BOARD
For the reasons described above the E/C Board unanimously approved the
Reorganization Agreement and the transactions contemplated thereby.
THE E/C BOARD RECOMMENDS UNANIMOUSLY THAT SHAREHOLDERS VOTE FOR
ADOPTION AND APPROVAL OF THE REORGANIZATION AGREEMENT, PLAN OF MERGER,
AND THE MERGER.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Except for Walter Winding, the sole outside director, members of the E/C
Board are all employees of E/C. Richard England, Rodney England, and
H. Wayne England are also shareholders as well as employees of E/C. Should the
transaction be effected, these three are expected to continue as employees
of the Surviving Corporation. Rodney D. England is expected to be President
and Chief Executive Officer of the Surviving Corporation. Directors of E/C,
James L. Price and Otis S. Sawyer who are currently the Vice President -
Manufacturing and Vice President - Finance, respectively, of E/C, are expected
to continue in similar capacities with the Surviving Corporation. See
"Management of the Surviving Corporation After the Merger" and "The Merger
and Related Transactions-Operations After the Merger."
EFFECTIVE TIME OF THE MERGER
If the Reorganization Agreement, Plan of Merger, and the Merger are
approved by the E/C shareholders at the Meeting, and assuming that all
other conditions have then been satisfied (see "Amendments, Conditions, and
Termination"), it is expected that the Merger will become effective at 5:00
p.m., Detroit, Michigan time, on the day of the Meeting or as promptly
as practicable thereafter. The Merger will become effective on the date and at
the time that appropriate certificate and articles of merger are filed and have
become effective with the Secretary of State of Tennessee and the Michigan
Corporation Bureau, respectively (the "Effective Time").
In the event that the Merger has not been consummated by April 15, 1995
(later extended by mutual agreement to April 28, 1995), the Reorganization
Agreement provides that either La-Z-Boy or E/C may terminate the Reorganization
Agreement and abandon the Merger, notwithstanding the approval previously given
by the shareholders of E/C. See "Amendments, Conditions, and Termination."
OPERATIONS AFTER THE MERGER
LZB Acquisition will be the Surviving Corporation of the Merger, and, in
connection with consummation of the Merger, LZB Acquisition will change its
name to "England/Corsair, Inc." The Board of Directors and officers of the
Surviving Corporation will be as follows:
Charles T. Knabusch -- Director and Chairman
Rodney D. England -- Director, President, and Chief Executive Officer
Frederick H. Jackson -- Director and Vice President
Gene M. Hardy -- Director, Secretary, and Treasurer
Patrick H. Norton -- Vice President
Otis S. Sawyer -- Vice President Finance
Dennis C. Valkanoff -- Vice President
James L. Price -- Vice President Manufacturing
James P. Klarr -- Assistant Secretary and Tax Counsel
CONSIDERATION FOR SHARES
Upon the Merger becoming effective, each share of E/C Stock will be
converted into the right to receive cash, La-Z-Boy Notes or shares of La-Z-Boy
Common Stock, or a combination thereof, as described below, based on total
merger consideration (excluding the Performance Units) of $32,575,000 and a
negotiated value of $30.00 per share of La-Z-Boy Common Stock. Each share of
E/C Stock owned by shareholders who comply with the election procedures set
forth in the Plan of Merger and described below will be converted into, at
their option (but subject to the limitations set forth in the Plan of Merger
and described under the captions "Limitation" and "Allocation of Cash, Shares
and Notes"), either: $109.558403121 in cash; $109.558403121 principal amount of
La-Z-Boy Notes; or 3.6519467707 shares of La-Z-Boy Common Stock. Each share of
E/C Stock, regardless of, and in addition to, the election made by the holder
thereof, will also be converted into one Performance Unit, as described below.
Each share of E/C Stock owned by a shareholder who does not duly and
timely comply with the election procedures will be converted into
$109.558403121 in cash per share, subject to the limitations described below
under the captions "Limitation" and "Allocation of Cash, Shares and Notes,"
plus one Performance Unit.
PERFORMANCE UNITS
Performance Units will entitle the holders thereof to receive
additional shares of La-Z-Boy Common Stock based on the Pre-Tax Income
(as defined in and determined in accordance with the Plan of Merger) of E/C
during each of the two successive twelve month periods immediately following
the Effective Time. The first such twelve month period is referred to herein
and in the Plan of Merger as the "1996 Performance Period" and the amount, if
any, payable with respect to each of the Performance Units for the 1996
Performance Period as the "1996 Performance Unit Amount," and the second such
twelve month period is referred to herein and in the Plan of Merger as the
"1997 Performance Period" and the amount, if any, payable with respect to each
of the Performance Units for the 1997 Performance Period as the "1997
Performance Unit Amount."
The 1996 Performance Unit Amount will be determined by, first, multiplying
the Pre-Tax Income of E/C above $6,000,000 for the 1996 Performance Period by
1.75 and, second, dividing the resulting number by the number of shares of E/C
Stock outstanding as of the Effective Time. The 1997 Performance Unit Amount
will be determined in the same manner but based on the Pre-Tax Income of E/C
for the 1997 Performance Period above $7,000,000. The total value of shares
of La-Z-Boy Common Stock issued pursuant to the Performance Units cannot
exceed $20,000,000.
Performance Units will be settled in additional shares of La-Z-Boy
Common Stock, the number of which will be determined by dividing the aggregate
1996 Performance Unit Amount and the aggregate 1997 Performance Unit Amount by
the closing price of La-Z-Boy Common Stock on the NYSE on the last day of the
1996 Performance Period and the 1997 Performance Period, as the case may be.
The payment of additional Merger consideration pursuant to the Performance
Units is conditioned upon the Surviving Corporation's future performance at
levels never before achieved by E/C; accordingly, the present value of the
Performance Units is unknown, and there can be no assurance that they will not
prove to have little or no value at maturity.
LIMITATIONS
The Plan of Merger provides that in the event (i) the aggregate number
of shares of La-Z-Boy Common Stock which would be issuable to those E/C
shareholders who elected to receive shares of La-Z-Boy Common Stock in the
Merger exceeds the Total Share Limitation or the Performance Unit Share
Limitation (both as defined below), or (ii) the aggregate amount of cash
and La-Z-Boy Notes which would otherwise be paid to E/C shareholders who
either elected to receive cash or whose shares were converted into cash
because of the failure to comply with the election procedures specified
in the Plan of Merger, exceeds the Total Non-Share Limitation (as defined
below), or (iii) the aggregate principal amount of La-Z-Boy Notes which
would be issuable to E/C shareholders who have elected to receive
La-Z-Boy Notes exceeds $10,000,000 (the "Note Limitation"), then the
elections made by, or allocations to, one or more of the E/C shareholders
will be changed from cash to shares of La-Z-Boy Common Stock, La-Z-Boy
Notes to cash or La-Z-Boy Common Stock to cash, as the case may be, in
accordance with the procedures set forth in the Plan of Merger and described
below under the caption "Allocation of Cash, Shares and Notes."
As a result of these limitations and the allocation procedures,
shareholders of E/C may not receive the type of consideration they elect. In
addition, as a result of such limitations, shareholders of E/C electing to
receive cash or La-Z-Boy Notes in the Merger may nevertheless receive shares
of La-Z-Boy Common Stock whose market value at the Effective Time may be less
than the negotiated $30.00 price of La-Z-Boy Common Stock upon which the
exchange ratio was determined.
The term "Total Non-Share Limitation" means the amount of consideration
other than La-Z-Boy Common Stock which, if paid in connection with the Merger,
would result in such consideration constituting 50% or more of the aggregate
consideration paid by La-Z-Boy to acquire shares of E/C Stock in connection
with the Merger, whether pursuant to the Plan of Merger, by operation of law or
in lieu of fractional shares, based in all cases on the fair market value of
the La-Z-Boy Common Stock at the Effective Time. The term "Total Share
Limitation" means that number of shares of La-Z-Boy Common Stock which, if
issued in connection with the Merger, would result in La-Z-Boy issuing more
than 2,000,000 shares of La-Z-Boy Common Stock, whether issued at time of
consummation of the Merger or in settlement of Performance Units. The term
"Performance Unit Share Limitation" means that number of shares of La-Z-Boy
Common Stock which is equal to the number of shares issued at the time of
consummation of the Merger. Due to the Performance Unit Share Limitation
(which was included in the terms of the Merger in order to satisfy one of the
requirements for a reorganization under federal income tax laws and
regulations), the aggregate number of shares which can be issued in payment
of the Performance Units cannot exceed the aggregate number issued at the time
of consummation of the Merger to E/C shareholders who elect to receive (or
are allocated) shares of La-Z-Boy Common Stock as initial Merger considera-
tion. Accordingly, the greater the number of shares issued at the time of
consummation of the Merger (up to 1,000,000 shares - one-half of the Total
Share Limitation), the greater the number which will be available for
issuance in settlement of Performance Units.
ELECTION PROCEDURES
If the Plan of Merger and the Merger are approved by E/C shareholders at
the Meeting, and assuming that all other conditions have been satisfied
(see "Amendments, Conditions, and Termination"), it is expected that the Merger
will become effective on the date of the Meeting or as promptly as
practicable thereafter. A Letter of Transmittal and Election Form (a "Form of
Election") is being delivered to each E/C shareholder of record on the Record
Date ("Electing Shareholders") together with this Proxy Statement/Prospectus. A
Form of Election can only be filed with respect to all shares of E/C Stock held
by an Electing Shareholder. An election will only be proper if La-Z-Boy shall
have received a Form of Election properly completed and signed prior to the
commencement of the Meeting and the Form of Election is accompanied by the
certificate(s) representing the shares of E/C Stock to which the Form of
Election relates. Any shareholder who fails to file a Form of Election prior
to the commencement of the Meeting will be deemed to have elected to receive
cash in the Merger.
A Form of Election may be revoked by an Electing Shareholder only by
written notice received by La-Z-Boy prior to the commencement of the Meeting.
In the event that the Merger is not consummated for any reason, any
certificate(s) for shares representing E/C Stock which have been deposited
with La-Z-Boy in connection with the election procedures will be promptly
returned.
La-Z-Boy will determine the validity and timeliness of Forms of Election
submitted by E/C shareholders and whether revocations, if any, have been
properly made.
ALLOCATION OF CASH, SHARES AND NOTES
In the event that the elections made by E/C shareholders will result in
the Total Share Limitation, the Total Non-Share Limitation, the Note
Limitation, or the Performance Unit Share Limitation being exceeded, the
Plan of Merger provides that the elections made by one or more of
the E/C shareholders will be changed from cash to shares of La-Z-Boy Common
Stock, from La-Z-Boy Notes to cash or from shares of La-Z-Boy Common Stock to
cash in the order provided, and pursuant to the allocation procedures
described, below. In certain circumstances such limitations could reduce the
total consideration payable in settlement of the Performance Units.
In connection with the initial consideration payable at the time of
consummation of the Merger:
First, if the total principal amount of La-Z-Boy Notes otherwise
issuable would exceed the Note Limitation, the principal amount of
La-Z-Boy Notes to be issued will be reduced pro rata, and cash will be
allocated instead.
Second, if the sum of the principal amount of La-Z-Boy Notes is-
suable and the cash otherwise payable (including cash allocated due to
the Note Limitation having been exceeded) would exceed the Total Non-
Share Limitation, the cash to be paid will be reduced pro rata (and
without distinguishing between E/C shareholders who elected cash and
those to whom cash was allocated due to the Note Limitation having been
exceeded), and La-Z-Boy Common Stock will be allocated instead.
The following example is presented for the purpose of illustrating how the
allocation procedures would apply to a hypothetical fact situation;
Example:
Assumed Facts: Of the 297,330 shares of E/C Stock outstanding, the
holders of 100,000 shares elect to receive La-Z-Boy Notes ($10,955,840.31
total principal amount of La-Z-Boy Notes), the holders of 60,000 shares
elect to receive cash ($6,573,504.19 total cash), and the holders of the
remaining 137,330 shares elect to receive La-Z-Boy Common Stock
(501,522 total shares of La-Z-Boy Common Stock). Assuming the fair
market value of the La-Z-Boy Common Stock at the Effective Time is
$29.00 per share,the aggregate value of the 501,522 shares of La-Z-
Boy Common Stock would be $14,544,138.00. In this example, the total
of the initial Merger consideration would be $32,073,482.50
($10,955,840.31 + $6,573,504.19 + $14,544,138.00).
Application of Allocation Procedures:
First: Under the Note Limitation, no more than 91,275 shares of E/C
Stock ($10,000,000 / $109.558403121 per share) may be exchanged for
La-Z-Boy Notes. Therefore, the principal amount of La-Z-Boy Notes
issuable would be reduced from the $10,955,840.31 elected to $9,999,943.24
(91,275 x $109.558403121), and the difference of $955,897.07 would instead
be payable in cash (subject to further adjustment as described below). The
change in elections would be allocated among all the shares of E/C Stock
which the holders had elected to exchange for La-Z-Boy Notes, pro rata in
accordance with the principal amount of La-Z-Boy Notes elected.
Second: After the allocation described above, $14,544,138.00 (or
approximately 45.3%) of the total initial Merger consideration would be
payable in La-Z-Boy Common Stock, $9,999,943.24 (or approximately 31.2%)
would be payable in La-Z-Boy Notes, and $7,529,401.26 (or approximately
23.5%), consisting of the $6,573,504.19 originally elected and the
$955,897.07 allocated to E/C shareholders who elected La-Z-Boy Notes,
would be payable in cash. However, under the Total Non-Share Limita-
tion, more than 50% of the total Merger consideration must consist of
La-Z-Boy Common Stock. Therefore, the total number of shares of E/C
Stock to be exchanged for shares of La-Z-Boy Common Stock at the time
the Merger is consummated would be increased from the 137,330 shares
which the holders initially elected to exchange for La-Z-Boy Common
Stock to 151,424 shares (the smallest number of shares of E/C Com-
mon Stock which could be exchanged for La-Z-Boy Common Stock without
violating the Total Non-Share Limitation; these 151,424 shares of E/C
Common Stock would be exchanged for 552,992 shares of La-Z-Boy Common
Stock worth (assuming a $29.00 per share market value) a total of
$16,036,768.00, or slightly more than 50% of the total initial
consideration). The additional 14,094 shares of E/C Stock to be
exchanged pursuant to this step would be allocated pro rata among all
shares of E/C Stock otherwise exchangeable for cash (including both
those shares which the holders originally elected to exchange for cash
and those which were allocated cash due to the Note Limitation,
without distinction between the two groups).
In connection with each of the two scheduled payments of consideration in
satisfaction of Performance Units (each a "Performance Unit Payment"):
If the sum of the number of shares of La-Z-Boy Common Stock
previously issued and the number otherwise issuable in connection with
such Performance Unit Payment would exceed the Total Share Limitation,
or if the number of shares issuable in connection with such Performance
Unit Payment (plus, in the case of the second Performance Unit Payment,
the number issued in connection with the first Performance Unit Payment)
would exceed the Performance Unit Share Limitation or both, the amount
of such Performance Unit Payment will be reduced pro rata, to the extent
necessary to avoid violating the Total Share Limitation or the Performance
Unit Share Limitation.
La-Z-Boy will determine whether or not elections have been properly made
or revoked. If La-Z-Boy determines that any election was not properly or timely
made or was revoked and not replaced, the shares of E/C Stock subject to such
election will be treated as shares to be converted into cash (subject to the
limitations described above).
As a result of these allocation procedures, shareholders of E/C may not
receive the type of consideration they elect, and shareholders who fail to make
any election may nevertheless not receive cash.
CASH IN LIEU OF FRACTIONAL SHARES
Each holder of a certificate or certificates representing E/C Stock who
would otherwise have been entitled to receive a fraction of a share of La-Z-Boy
Common Stock (after taking into account all E/C Stock represented by such
certificate(s) then delivered by such holder) upon consummation of the Merger
will receive, in lieu thereof, an amount of cash determined by multiplying
such fraction by $30.00. Each holder of Performance Units who would otherwise
have been entitled to receive a fraction of a share of La-Z-Boy Common Stock
(after taking into account all Performance Units held by such holder) in
respect of any 1996 Performance Unit Amount and/or 1997 Performance Unit
Amount will receive, in lieu thereof, cash in an amount determined by
multiplying such fraction by the closing price of La-Z-Boy Common Stock on
the NYSE on the last day of the 1996 Performance Period or the 1997
Performance Period, as the case may be.
PAYMENT FOR SHARES
La-Z-Boy will make available cash, La-Z-Boy Notes and shares of La-Z-Boy
Common Stock sufficient in amounts to make the payments to be made to E/C
shareholders in the Merger promptly following the Effective Time. The Forms of
Election accompanying this Proxy Statement/Prospectus are to be used in
surrendering certificates representing outstanding shares of E/C Stock.
Shareholders are urged to carefully review the instructions which form a part
of the Forms of Election. Promptly after the Effective Time, and upon receipt
by La-Z-Boy of such certificates, together with a duly executed letter of
transmittal, there will be issued to the persons entitled thereto (i) a check
in the amount to which such persons are entitled, after giving effect to any
tax withholdings to the extent required by applicable law; (ii) a certificate
evidencing the number of shares of La-Z-Boy Common Stock to which such persons
are entitled; and/or (iii) a La-Z-Boy Note in the principal amount to which
such persons are entitled. No interest will be paid or will accrue on the cash
amounts payable upon the surrender of any certificate representing E/C Stock.
If payment is to be made to a person other than the registered holder of the
share certificate surrendered, it is a condition of such payment or delivery
that the certificate so surrendered is properly endorsed or otherwise in proper
form for transfer and that the person requesting such payment or delivery shall
pay any transfer or other taxes required by reason of the payment or delivery
to a person other than the registered holder of the certificate surrendered or
establish to the satisfaction of the Surviving Corporation of the Merger or
La-Z-Boy that such tax has been paid or is not applicable. Nine months
following the Effective Time, E/C shareholders who have not submitted their
certificates for exchange will be entitled to look only to La-Z-Boy with
respect to the consideration due upon surrender of their certificates.
Neither La-Z-Boy, LZB Acquisition nor E/C will be liable to any holder of
certificates formerly representing shares of E/C Stock for any amount paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
No transfer of shares of E/C Stock will be made on the stock transfer
books of the Surviving Corporation of the Merger at or after the Effective Time.
THE REORGANIZATION AGREEMENT
The terms of the Reorganization Agreement and Plan of Merger are the
result of the arm's-length negotiations between representatives of E/C and
La-Z-Boy. In the Reorganization Agreement, E/C and La-Z-Boy have made numerous
representations and warranties to one another with respect to, among other
things, their organization and good standing, authorized and issued capital
stock, corporate authority, required filings and financial statements. In
addition, E/C has made certain other representations and warranties to La-Z-Boy
concerning its employee benefit plans and arrangements, labor matters, pending
and threatened litigation, certain tax matters, environmental matters, title to
properties, the absence of material adverse changes, the information concerning
E/C contained in this Proxy Statement/Prospectus, its compliance with applic-
able laws, certain agreements to which it is a party, its subsidiaries,
broker's or finder's fees, undisclosed liabilities, the absence of illegal
payments, its bank accounts, its intellectual property, the conduct of its
business since the end of its last fiscal year, its real and personal
property (both owned and leased), its accounts receivable and inventory and
insurance arrangements.
The representations and warranties and covenants and agreements of E/C
contained in or made pursuant to the Reorganization Agreement will survive the
Merger, but the E/C shareholders will not have any personal liability or
responsibility for any breach or non-performance thereof, whether occurring
prior or subsequent to consummation of the Merger. However, the amount, if any,
the E/C shareholders are to receive in respect of Performance Units will depend
upon the level of Pre-Tax Income achieved by E/C during the two years following
the Merger, and the Computation Standards for Pre-Tax Income attached as
Exhibit A to the Plan of Merger specifically provide that payments, reserves
or accruals resulting from any breach or non-performance of any warranty or
covenant of E/C contained in the Reorganization Agreement, or any liabilities
of E/C existing at the Effective Time and not reflected in the financial
statements or disclosure schedules delivered by E/C to La-Z-Boy as provided
in the Reorganization Agreement, will be treated as deductions in computing
Pre-Tax Income.
ACCORDINGLY, BREACHES OF THE REPRESENTATIONS AND COVENANTS OF E/C
CONTAINED IN THE REORGANIZATION AGREEMENT COULD REDUCE THE AMOUNT OF
LA-Z-BOY COMMON STOCK RECEIVED BY THE E/C SHAREHOLDERS IN RESPECT OF
THE PERFORMANCE UNITS, THEREBY REDUCING THE TOTAL CONSIDERATION TO
BE RECEIVED BY THE E/C SHAREHOLDERS IN RESPECT OF THE MERGER.
E/C has agreed, pending consummation of the Merger, to give La-Z-Boy or
its representatives full access to all its premises, books, records, and
financial and operating data, and that it will continue to operate its business
in the ordinary course, except as otherwise consented to by La-Z-Boy. E/C has
also agreed that neither it nor any of its subsidiaries nor any of their
respective officers or directors will initiate or solicit any other acquisition
proposals for E/C or participate in any negotiations concerning any such
proposals.
DISTRIBUTIONS PRIOR TO CLOSING
As provided in the Reorganization Agreement, neither La-Z-Boy nor E/C may
either declare or pay any dividends on or make any distributions in respect of
their capital shares prior to the Effective Time, except:
(1) La-Z-Boy may declare and pay dividends on the La-Z-Boy Common Stock in
accordance with its prior practice; and
(2) E/C may (i) pay to its shareholders the cash dividend previously
declared in the amount of 60% of its taxable income for the period of July 1,
1994 to December 31, 1994; (ii) declare and pay to its shareholders dividends
in an amount equal to 40% (later increased to 60% with La-Z-Boy's consent) of
its taxable income for the period of January 1, 1995 to the day before the
Effective Time; and (iii) declare and pay to its shareholders dividends in
an amount equal to 50% of the net proceeds receivable by E/C under any
policies owned by E/C on the life of Arnold Dwight England.
CONDITIONS TO THE MERGER
The obligation of La-Z-Boy and E/C to consummate the Merger is
subject to the following conditions:
(i) the Reorganization Agreement and Plan of Merger shall
have been approved and adopted by the requisite vote of the E/C
shareholders;
(ii) the shares of La-Z-Boy Common Stock issuable in the
Merger shall have been authorized for listing on the NYSE and PSE
upon official notice of issuance;
(iii) other than the filing of the LZB Acquisition Certificate
of Merger with the Corporation and Securities Bureau of the Michigan
Department of Commerce and the filing of the E/C Articles of Merger
with the Secretary of State of the State of Tennessee, all
authorizations, consents, orders or approvals of, or declarations or
filings with, and all expirations of waiting periods imposed by, any
governmental entity (collectively, the "Consents") which are
prescribed by law as necessary for the consummation of the Merger
and the other transactions contemplated by the Reorganization
Agreement, other than immaterial Consents the failure to obtain
which would have no material adverse effect on the consummation of
the Merger or the other transactions contemplated by the
Reorganization Agreement, or on the corporation surviving the
Merger, shall have been filed, occurred or been obtained (all such
authorizations, consents, orders, approvals, declarations or filings
and the lapse of all such waiting periods being referred to as the
"Requisite Regulatory Approvals"), as the case may be and all such
Requisite Regulatory Approvals shall be in full force and effect;
(iv) the Registration Statement, of which this Proxy
Statement/Prospectus forms a part, shall have become effective under
the Securities Act and no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceedings
for that purpose shall have been initiated or threatened;
(v) the sale of the La-Z-Boy Common Stock shall have been
qualified or registered with the appropriate "Blue Sky" authorities
of all states in which qualification or registration is required and
such qualifications or registrations shall not have been suspended
or revoked;
(vi) no order, injunction or decree issued by any court or
agency of competent jurisdiction or other legal restraint or
prohibition (an "Injunction") preventing the consummation of the
Merger or any of the transactions contemplated by the Reorganization
Agreement shall be in effect, nor shall any proceeding by any
governmental entity seeking any such Injunction be pending, nor
shall any lawsuit or governmental proceeding be pending or
threatened against La-Z-Boy, LZB Acquisition or E/C or any of their
respective directors, seeking substantial damages in connection with
the transactions contemplated by the Reorganization Agreement;
(vii) no statute, rule, regulation, order, injunction or
decree shall have been enacted, entered, promulgated or enforced by
any governmental entity which prohibits, restricts or makes illegal
consummation of the Merger;
(viii) there shall not be any action taken, or any law, rule,
regulation, order, judgment or decree proposed, promulgated, enacted,
entered, enforced or deemed applicable to the Merger or any of the
transactions contemplated by the Reorganization Agreement, by any
governmental entity or by any court or other tribunal, including the
entry of a preliminary injunction, which, (A) in connection with the
grant of a Requisite Regulatory Approval, imposed any condition or
restriction upon La-Z-Boy, LZB Acquisition or E/C which would so
materially adversely impact the economic or business benefits of the
transactions contemplated by the Reorganization Agreement as to
render inadvisable, in the reasonable judgment of the La-Z-Boy Board,
the LZB Acquisition Board or the E/C Board, the consummation of the
Merger (a "Materially Burdensome Condition"); or (B) in the
reasonable opinion of any party, (1) makes the Reorganization
Agreement, the Plan of Merger, the Merger, or any of the other
transactions contemplated by the Reorganization Agreement, illegal,
(2) results in a material delay in the ability of La-Z-Boy, LZB
Acquisition or E/C to consummate the Merger or any of the other
transactions contemplated by the Reorganization Agreement, (3)
requires the divestiture by La-Z-Boy, LZB Acquisition or E/C of a
material portion of the business of E/C, taken as a whole, or
La-Z-Boy, taken as a whole, or (4) otherwise prohibits or restricts
or delays in a material respect consummation of the Merger or any of
the other transactions contemplated by the Reorganization Agreement
or impairs in a material respect the contemplated benefits to
La-Z-Boy, LZB Acquisition or E/C of the Reorganization Agreement,
the Merger or any of the other transactions contemplated by the
Reorganization Agreement; and
(ix) the E/C shareholders designated in a schedule to the
Reorganization Agreement as affiliates of E/C shall have executed
and delivered to La-Z-Boy an agreement under Rule 145 under the
Securities Act requiring that transfers of La-Z-Boy Common Stock
after the Merger comply with the requirements of Rule 145 and other
applicable provisions of the Securities Act.
The obligation of La-Z-Boy and LZB Acquisition (sometimes referred
to collectively as the "LZB Companies") to effect the Merger is
subject to the satisfaction by E/C or waiver by the LZB Companies
of the following additional conditions:
(i) the representations and warranties of E/C in the
Reorganization Agreement must be true and correct in all material
respects as of the date of the Reorganization Agreement and (except
to the extent such representations and warranties speak as of an
earlier date) as of the Effective Time as though made on and as of
such time, except as otherwise contemplated by the Reorganization
Agreement;
(ii) E/C shall have performed in all material respects all
obligations required to be performed by it under the Reorganization
Agreement at or prior to the Effective Time;
(iii) E/C shall have obtained the consent or approval of each
person (other than those of certain governmental entities) whose
consent or approval shall be required in order to permit the
succession by the corporation surviving the Merger pursuant to the
Plan of Merger to any obligation, right or interest of E/C under any
loan or credit agreement, note, mortgage, indenture, lease, license
or other agreement or instrument;
(iv) the LZB Companies shall have received the opinion of
Miller, Canfield, Paddock and Stone, P.L.C., dated the effective
date of the Registration Statement and the Effective Time, to the
effect that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a)
of the Code;
(v) the LZB Companies shall have received from Baker,
Donelson, Bearman & Caldwell, counsel to E/C, (A) an appropriate
letter regarding the Registration Statement, this Proxy
Statement/Prospectus and certain related matters, and (B) an opinion
as to such matters as are customary for transactions of the type
contemplated by the Reorganization Agreement, all in form and
substance reasonably acceptable to the LZB Companies;
(vi) the total debt of E/C shall not exceed $30,000,000 at the
Effective Time;
(vii) the LZB Companies shall have received the tax lock-up
letters described under "Certain Federal Income Tax Consequences"
from all E/C shareholders who have elected to receive La-Z-Boy
Common Stock in the Merger and from those E/C shareholders
designated in a schedule delivered to the LZB Companies pursuant
to the Reorganization Agreement;
(viii) BDO Seidman shall have delivered to the LZB Companies its
opinion with respect to E/C's status as an electing small business
corporation under the Code, in form and content acceptable to the
LZB Companies;
(ix) each of the officers and directors of E/C shall have
delivered to the LZB Companies documents, in form and substance
reasonably satisfactory to the LZB Companies, pursuant to which
such officers and directors forever waive and release any and all
claims they might otherwise have (whether under the charter or
bylaws of E/C, the articles of incorporation or bylaws of either of
the LZB Companies, by contract, or otherwise) for indemnification or
for the payment of advancing of expenses relating in any way to any
disputes which may arise between such officer or director and either
the Reorganization Agreement or the transactions contemplated
hereby; and
(x) each holder of E/C Class A Stock shall have executed and
delivered to E/C (with copies to the LZB Companies) documents, in
form and substance satisfactory to La-Z-Boy in its reasonable
judgment, acknowledging that any and all employment contracts
between such person and E/C have been terminated and releasing E/C
and LZB Acquisition from any further liability thereunder, including
(but not limited to) any liability with respect to such termination.
The obligation of E/C to effect the Merger is subject to the
satisfaction by the LZB Companies or the waiver by E/C of the
following additional conditions:
(i) the representations and warranties of the LZB Companies
set forth in the Reorganization Agreement shall be true and correct
in all material respects as of the date of the Reorganization
Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Effective Time
as though made on and as of such time, except as otherwise
contemplated by the Reorganization Agreement;
(ii) the LZB Companies shall have performed in all material
respects all obligations required to be performed by them under the
Reorganization Agreement at or prior to the Effective Time;
(iii) the LZB Companies shall have obtained the consent or
approval of each person (other than those of certain governmental
entities) whose consent or approval shall be required in connection
with the transactions contemplated by the Reorganization Agreement
under any loan or credit agreement, note, mortgage, indenture,
lease, license or other agreement or instrument to which any of the
LZB Companies is a party or is otherwise bound;
(iv) E/C shall have received the opinion of Miller, Canfield,
Paddock and Stone, P.L.C., dated the effective date of the
Registration Statement and the Effective Time, to the effect that
the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code;
(v) E/C shall have received from Miller, Canfield, Paddock
and Stone, P.L.C., (A) an appropriate letter regarding the
Registration Statement, this Proxy Statement/Prospectus and certain
related matters, (B) an opinion, dated the Effective Time, as to such
matters as are customary for transactions of the type contemplated
by the Reorganization Agreement, all in form and substance reasonably
acceptable to E/C; and
(vi) E/C shall have received the tax lock-up letters described
under "Certain Federal Income Tax Consequences."
TERMINATION; LIQUIDATED DAMAGES; TERMINATION FEE
The Reorganization Agreement and the Plan of Merger, and the transactions
contemplated thereby, may be terminated at any time prior to the Effective
Time, whether before or after approval of the matters presented in connection
with the Merger by the shareholders of E/C:
(i) by mutual consent of E/C and the LZB Companies if the Board of
Directors of each so determines by a vote or a majority of the members of
the entire Board;
(ii) by E/C or either of the LZB Companies upon written notice to
the others if (A) any Requisite Regulatory Approval shall have been denied
or any Materially Burdensome Condition shall have been imposed, or (B)
any governmental entity of competent jurisdiction shall have issued a
final nonappealable order enjoining or otherwise prohibiting the
consummation of the transactions contemplated by the Reorganization;
(iii) by E/C or either of the LZB Companies upon written notice to
the others if the Merger shall not have been consummated on or before
April 15, 1995 (later extended by mutual agreement to April 28, 1995),
provided that a party may not terminate under this provision if such party
is in breach in any material respect of the Reorganization Agreement;
(iv) by E/C or either of the LZB Companies upon written notice to
the others if any approval of the shareholders of E/C required for the
consummation of the Merger shall not have been obtained by reason of the
failure to obtain the required vote at the Meeting;
(v) by E/C or the LZB Companies upon written notice to the others
if there shall have been a material breach of any of the representations
or warranties or covenants and agreements set forth in the Reorganization
Agreement on the part of E/C (in the case of the LZB Companies) or either
of the LZB Companies (in the case of E/C);
(vi) by either of the LZB Companies upon written notice to E/C if,
after recommending in this Proxy Statement/Prospectus that shareholders
approve the Reorganization Agreement and the Plan of Merger, the E/C
Board shall withdraw, modify, or amend such recommendation in
any respect materially adverse to the LZB Companies; or
(vii) by either of the LZB Companies upon written notice to E/C if
E/C shall have authorized, recommended, proposed, or announced an
intention to authorize, recommend, or propose, or entered into an
agreement with any person (other than any of the LZB Companies) to effect,
a "Takeover Proposal" (as defined in the Reorganization Agreement) or
shall fail to publicly oppose a tender offer or exchange offer by another
person based on a Takeover Proposal.
In the event of termination of the Reorganization Agreement by E/C or the
LZB Companies, the Reorganization Agreement will become void and have no effect
except (i) with respect to certain specified provisions of the Reorganization
Agreement relating to confidentiality, expenses, the effect of termination,
employees, liquidated damages, termination fees, third party beneficiaries and
governing law, and (ii) subject to the payment of specified liquidated damages,
no party shall be relieved or released from any liabilities or damages arising
out of the breach by such party of any provision of the Reorganization
Agreement or the Plan of Merger.
In the event that (i) at any time prior to termination of the
Reorganization Agreement E/C authorizes, recommends, publicly proposes or
publicly announces an intention to authorize, recommend or propose, or enters
into an agreement with any person (other than any of the LZB Companies) to
effect a Takeover Proposal or shall fail to publicly oppose a tender offer or
exchange offer by another person based on a Takeover Proposal, or (ii) any
approval of the shareholders of E/C required for consummation of the Merger
shall not have been obtained by reason of the failure to obtain the required
vote of shareholders, or (iii) E/C fails to hold the Meeting, or (iv)
the E/C Board shall have withdrawn, modified or amended its recommendation that
E/C shareholders approve and adopt the Reorganization Agreement and the Plan of
Merger in any respect materially adverse to the LZB Companies; or (v) the LZB
Companies, or either of them, shall terminate the Reorganization Agreement due
to a material breach of any of the covenants and agreements set forth therein
on the part of E/C, E/C shall, within 10 days after notice of the occurrence
thereof by La-Z-Boy, pay to La-Z-Boy the sum of $500,000 as liquidated damages.
In the event that E/C shall terminate the Reorganization Agreement due
to the material breach of any of the covenants and agreements set forth therein
on the part of the LZB Companies, or either of them, La-Z-Boy shall, within 10
days after notice of the occurrence thereof by E/C, pay to E/C the sum of
$500,000 as liquidated damages.
EXPENSES
If the Merger is consummated, all costs and expenses incurred in
connection with this Agreement will be paid by the Surviving Corporation, and
if the Merger is not consummated, all such costs and expenses will be paid
by the party incurring the same.
AMENDMENT; WAIVER
The Reorganization Agreement may be amended by the parties thereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the shareholders of E/C, provided, that after any such approval, no
amendment shall be made which by law requires further approval by such
shareholders, without such further approval. The Reorganization Agreement may
not be amended except in writing.
At any time prior to the Effective Time, the parties to the Reorganization
Agreement, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
thereto, (ii) waive any inaccuracies in the representations and warranties
contained therein or in any document delivered pursuant thereto, and (iii)
waive compliance with any of the agreements or conditions contained therein.
Any agreement on the part of a party to the Reorganization Agreement to any
such extension or waiver must be in a written instrument.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary describes the material federal income tax
consequences of the Merger. This summary is based on the opinion to be
delivered at the Effective Time by Miller, Canfield, Paddock and Stone, P.L.C.,
which opinion will be based on certain assumptions, matters of reliance and on
representations made by La-Z-Boy and E/C, and will be subject to certain
exceptions and limitations set forth in such opinion. A copy of the form of such
opinion has been filed as an Exhibit to the Registration Statement of which this
Proxy Statement/Prospectus is a part. Delivery of the opinion in substantially
the form so filed is a condition precedent to the consummation of the Merger.
This summary does not discuss, and the opinion will not cover, the tax
consequences that may be relevant to certain shareholders of E/C entitled to
special treatment under the Internal Revenue Code of 1986, as amended (the
"Code"). This summary also does not discuss, and the opinion will not cover,
the tax consequences to E/C shareholders who acquired their shares pursuant to
the exercise of employee stock options, warrants or otherwise as compensation.
In addition, the opinion will assume the E/C shareholders hold their shares as
capital assets and will not address state, local or foreign tax consequences
of the Merger.
The opinion will state that, in the opinion of Miller, Canfield, Paddock
and Stone, P.L.C.:
(i) The Merger will be treated as a reorganization within the
meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code, and
La-Z-Boy, LZB Acquisition and E/C will each be a party to the
reorganization within the meaning of Section 368(b) of the Code.
(ii) No gain or loss will be recognized by La-Z-Boy, LZB
Acquisition, or E/C as a consequence of the Merger.
(iii) With respect to E/C shareholders who receive solely La-Z-
Boy Common Stock (other than La-Z-Boy Common Stock received through
a Performance Unit) in exchange for their E/C Stock, no gain or
loss will be recognized at the Effective Time except for cash
received in lieu of fractional share interests in La-Z-Boy Common
Stock.
(iv) With respect to E/C shareholders who receive La-Z-Boy
Common Stock (other than La-Z-Boy Common Stock received through a
Performance Unit), and a La-Z-Boy Note and/or cash in exchange for
their E/C stock, income, gain or loss which is realized at the
Effective Time under the applicable rules of the Code will be
recognized in accordance with the rules of Code Section 356 not in
excess of the sum of cash received in lieu of fractional shares and
other cash and the issue price (as such term is defined in the Code
and the applicable Treasury Regulations) of the La-Z-Boy Notes
received in the Merger. If the installment method is applicable to
the receipt of a La-Z-Boy Note in the Merger, the E/C shareholder's
recognized gain attributable to the receipt of the La-Z-Boy Note in
the Merger may be deferred under the installment method. In this
regard, no opinion will be expressed on the applicability of the
installment method to the receipt of a La-Z-Boy Note nor on the
specific tax consequences of the receipt of payments of principal
and interest under a La-Z-Boy Note.
(v) With respect to E/C shareholders who receive solely cash
and/or a La-Z-Boy Note and Performance Unit(s) in exchange for
their E/C stock, income, gain or loss which is realized at the
Effective Time under the applicable rules of the Code will be
recognized in accordance with the rules of the Code not in excess
of the sum of cash received and the issue price (as such term is
defined in the Code and the applicable Treasury Regulations) of the
La-Z-Boy Notes received in the Merger. If the installment method
is applicable to the receipt of a La-Z-Boy Note in the Merger, the
E/C shareholder's recognized gain attributable to the receipt of
the La-Z-Boy Note in the Merger may be deferred under the
installment method. In this regard, no opinion will be expressed
on the applicability of the installment method to the receipt of a
La-Z-Boy Note nor on the specific tax consequences of the receipt
of payments of principal and interest under a La-Z-Boy Note.
(vi) E/C shareholders who dissent from the Merger and receive
solely cash in exchange for their E/C stock should be treated as
having received a distribution in redemption of their E/C Stock and
should be taxed under the rules of Code Section 302. No opinion
will be expressed as to the tax consequences of the application of
Code Section 302 to a dissenting E/C shareholder.
(vii) The holding period of the La-Z-Boy Common Stock received
tax free either upon the initial Merger exchange or through a
Performance Unit will include the period during which the E/C Stock
exchanged therefor was held, provided that such E/C Stock was held
as a capital asset at the Effective time.
(viii) Based upon Internal Revenue Service ("IRS") regulations
and rulings, the federal income tax basis of an E/C shareholder's
E/C Stock which is properly allocable under Section 358 of the Code
to La-Z-Boy Common Stock received tax free either upon the initial
Merger exchange or through a Performance Unit should be initially
allocated to the maximum number of shares of La-Z-Boy Common Stock
that may be received in the Merger, including shares receivable
through the Performance Units, but excluding any shares (or a
portion thereof) that may be treated as received in payment of the
Imputed Interest Amount, as such term is defined below. Upon final
determination of the actual number of La-Z-Boy Common Stock shares
issued, adjustments to basis should be made if less than the
maximum number of shares are actually issued.
With respect to La-Z-Boy Common Stock received by E/C
shareholders under the Performance Units, and in express reliance
of the representation made to such firm supporting the
determination that under the facts and circumstances such shares
have been issued for a valid business purpose associated with the
original Merger, the opinion will provide that, in the opinion of
Miller, Canfield, Paddock and Stone, P.L.C.:
(ix) The receipt of a Performance Unit at the Effective Time
will not give rise to current federal income tax.
(x) No gain or loss will be recognized by an E/C shareholder
upon the receipt of La-Z-Boy Common Stock under the Performance
Units except for the portion of La-Z-Boy Common Stock treated as
interest income (the "Imputed Interest Amount") under the Code.
(xi) In the absence of specific direction from the IRS, it is
reasonable to believe that the Imputed Interest Amount should equal
the excess of (a) the fair market value as of the day of receipt of
the La-Z-Boy Common Stock received under a Performance Unit, over
(b) such fair market value discounted back to the Effective Time
using the discount rate prescribed by the Code and the Proposed
Treasury Regulations.
The parties do not intend to submit a ruling request regarding the
transaction to the National Office of the IRS. The above-described
opinion will NOT be binding upon the IRS.
It should be noted that actions taken by E/C shareholders after
consummation of the Merger in connection with the disposition of
shares of La-Z-Boy Common Stock received in the Merger could cause the
Merger to fail to satisfy the "continuity of interest" requirement
under the Code and thus cause the tax consequences described above to
be different. The shareholders of E/C will be required to execute tax
lock-up letters designed to prevent such disqualifying dispositions.
See "Tax Lock-up Letters" below.
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. THE DISCUSSION DOES NOT ADDRESS THE STATE, LOCAL OR
FOREIGN TAX ASPECTS OF THE MERGER. THE DISCUSSION IS BASED ON
CURRENTLY EXISTING PROVISIONS OF THE CODE, EXISTING AND PROPOSED
TREASURY REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND
COURT DECISIONS. IN ADDITION, THE FOREGOING DISCUSSION IS ONLY A
SUMMARY OF CERTAIN OF THE APPLICABLE LAWS AND REGULATIONS AND DOES NOT
ADDRESS ALL ISSUES WHICH MAY ARISE. ALL OF THE THE FOREGOING IS
SUBJECT TO CHANGE, AND ANY SUCH CHANGES COULD AFFECT THE CONTINUING
VALIDITY OF THIS DISCUSSION. EACH E/C SHAREHOLDER SHOULD CONSULT SUCH
SHAREHOLDER'S OWN TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER TO SUCH SHAREHOLDER, INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN FEDERAL LAWS OR OTHER TAX LAWS.
TAX LOCK-UP LETTERS
Consummation of the Reorganization is conditioned upon there
being executed and delivered certain "tax lock-up letters" by all of
the holders of E/C Stock who will receive shares of La-Z-Boy Common
Stock in the Merger. These tax lock-up letters essentially prohibit
sales or dispositions of the shares of La-Z-Boy Common Stock subject
thereto prior to the second anniversary of the consummation of the
Merger other than pursuant to "Permitted Transfers." For purposes of
the foregoing, a "Permitted Transfer" is (i) a disposition by will or
under the laws of descent and distribution; (ii) an offering, sale or
other disposition by any shareholder which is not a natural person to
any corporation in which the direct or indirect parent of such
shareholder owns, directly or indirectly, 100% of the outstanding
capital stock of such corporation; (iii) a transfer by operation of
law; or (iv) a disposition to any person who receives shares of
La-Z-Boy Common Stock in the Merger.
RESALE OF LA-Z-BOY COMMON STOCK; RESTRICTIONS ON TRANSFER
The shares of La-Z-Boy Common Stock to be issued in the Merger
will be registered under the Securities Act and will be transferable
under the Securities Act, except for shares issued to any shareholder
who may be deemed to be an "affiliate" of E/C for purposes of Rule 145
under the Securities Act. Affiliates may not sell shares of La-Z-Boy
Common Stock acquired in connection with the Merger except pursuant to
an effective registration statement under the Securities Act covering
such shares or in compliance with Rule 145 or another applicable
exemption from the registration requirements of the Securities Act.
In addition, shareholders of E/C executing and delivering "tax
lock-up letters" will be subject to the restrictions on disposition
set forth therein. See "Tax Lock-up Letters."
STOCK LISTING
The shares of La-Z-Boy Common Stock to be issued in the Merger
will be approved for listing on the NYSE and the PSE subject to
official notice of issuance and to the approval by the shareholders of
E/C of the Merger.
MANAGEMENT OF THE SURVIVING CORPORATION AFTER THE MERGER
It is expected that certain of the current officers and directors
of E/C will continue to be employed by the Surviving Corporation after
the Merger. Consequently, those officers and directors possess
potentially conflicting interests with E/C shareholders because of
their interest in both sides of the proposed transaction. It is
anticipated that, upon consummation of the Merger, the Board of
Directors of the Surviving Corporation will consist of four persons,
one of whom will be Mr. Rodney D. England, the current Chairman of the
Board, President, and Chief Executive Officer of E/C, and the
remainder of whom will be current officers of La-Z-Boy. In addition,
following consummation of the Merger, it is expected that (i) Mr.
England will become the President and Chief Executive Officer of the
Surviving Corporation, (ii) Mr. Otis S. Sawyer, the current Vice
President Finance of E/C, will become Vice President Finance of the
Surviving Corporation, (iii) Mr. Dennis C. Valkanoff, the current Vice
President Business Development of E/C, will become a Vice President of
the Surviving Corporation, (iv) Mr. James L. Price, the current Vice
President Manufacturing of E/C, will become Vice President
Manufacturing of the Surviving Corporation, and (v) the remaining
officers of the Surviving Corporation will consist of current officers
of La-Z-Boy.
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial
statements are presented to illustrate the financial statement effect
of the Merger, as described previously in this Proxy
Statement/Prospectus, and should be read in conjunction with the
historical financial statements of E/C and La-Z-Boy contained
elsewhere herein. The pro forma condensed combined financial
statements have been prepared assuming that the Merger will be
accounted for as a purchase and, accordingly, the cost of E/C assets
acquired and liabilities assumed will be allocated at their estimated
fair values, based upon appraisals, net realizable values, or other
analysis, with appropriate recognition given to the effect of current
interest rates and income taxes. The excess of the net assets acquired
over the purchase price will be recorded as goodwill. The pro forma
fair values used herein are preliminary and subject to further
refinement, however, the final allocation is not expected to
materially differ from the pro forma presentation.
<R/>
The accompanying unaudited pro forma condensed combined balance
sheet adjusts the historical balance sheets of La-Z-Boy and E/C at
January 28, 1995 and December 31, 1994, respectively, as if the Merger
had occurred as of that period end.
The accompanying unaudited pro forma condensed combined
statements of operations adjust the historical statements of
operations of La-Z-Boy and E/C for their respective fiscal years ended
April 30, 1994 and June 30, 1994 and for the nine month periods ended
January 28, 1995 and December 31, 1994, respectively, as if the Merger
had become effective at the beginning of each of the respective
periods presented.
The pro forma condensed combined financial statements may not be
indicative of the combined results of operations or combined financial
position that actually would have been achieved if the Merger had been
in effect as of the date and for the periods indicated or which may be
obtained in the future.
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
REFLECTING LA-Z-BOY AFTER GIVING EFFECT TO THE MERGER
(Dollars in thousands)
Unaudited
Unaudited Unaudited Pro Forma
La-Z-Boy E/C -----------------------
1/28/95 12/31/94 Adjustments(1) Balance
<S> <C> <C> <C> <C>
Current Assets
Cash and equivalents $ 41,552 $ 285 $(6,515)(b) $ 35,322
Receivables 166,506 3,721 170,227
Inventories 75,634 9,031 84,665
Deferred income taxes 17,820 17,820
Other current assets 5,084 335 5,419
Total current assets 306,596 13,372 (6,515) 313,453
Property, plant, and equipment 97,552 21,679 119,231
Goodwill 20,085 20,769 (b) 40,854
Other long-term assets 17,191 568 17,759
Total assets $441,424 $35,619 $14,254 $491,297
Current Liabilities
Current portion of long-term
debt $ 1,875 $ 2,325 $ 4,200
Accounts payable 29,761 4,929 34,690
Other current liabilities 44,528 3,214 47,742
Total current liabilities 76,164 10,468 86,632
Long-term debt 56,245 12,345 $ 6,515 (b) 75,105
Deferred income taxes 6,424 140 860 (a) 7,424
Other long-term liabilities 8,170 0 8,170
Equity subject to redemption 12,666 (12,666) (b) 0
Shareholder's equity 294,421 0 19,545 (b) 313,966
Total liabilities, equity
subject to redemption and
shareholders' equity $441,424 $35,619 $14,254 $491,297
<FN>
- -----------------
(1) The pro forma condensed combined balance sheet has been prepared to
reflect the acquisition of E/C by La-Z-Boy for an estimated aggregate price
of $32,575 and a negotiated value of $30 per share of La-Z-Boy Common Stock. The
$30 value per share is the value stated in the Plan of Merger and was used to
determine the ratio of exchange. At April 13, 1995, the closing price for
La-Z-Boy Common Stock was $27.625. The Plan of Merger requires that more than
50% of the initial consideration be paid in La-Z-Boy Common Stock with the
remainder paid in cash and/or La-Z-Boy Notes. Furthermore, additional payments
in La-Z-Boy Common Stock may be required if the Surviving Corporation exceeds
predetermined Pre-Tax Income, as defined and determined in accordance with the
Plan of Merger in the two successive twelve month periods following the Merger.
It should be noted that E/C has not attained these performance levels at any time
in its history. These possible additional payments have not been reflected in
the pro forma condensed combined balance sheet. Should such additional payments
be required, La-Z-Boy will record additional goodwill which will be amortized
over the remaining life of the original goodwill. For purposes of these pro forma
adjustments, it is assumed that 60% of the initial consideration will be made in
La-Z-Boy Common Stock, 20% in cash, and 20% in La-Z-Boy notes. Pro forma
adjustments are made to reflect:
(a) The estimated deferred income tax liability arising upon termination
of E/C's S-corporation tax status.
(b) Consideration given in the form of cash payment of $6,515, La-Z-Boy
Notes of $6,515 at 8% for four years, and 651,500 shares of La-Z-Boy
Common Stock issued and valued at $30 per share, with the excess of
acquisition cost ($32,575) over the estimated fair market value of
net assets acquired ($11,806) resulting in $20,769 of goodwill. The
estimated Fair Market Value of net assets acquired is equal to the E/C
equity subject to redemption less the estimated deferred income tax
liability from (a) above.
The pro forma balance sheet reflects dividends totaling approximately $856
declared by E/C but not paid as of December 31, 1994.
In February 1995, E/C received life insurance proceeds totaling $850 on key
man policies covering the former chairman of the board, Dwight England, who died
in January, 1995. On February 23, 1995 E/C distributed 50% of these proceeds or
$1.43 per share to its shareholders in accordance with the provisions of the
Reorganization Agreement. See "The Merger and Related Transactions --
Distributions Prior to Closing." Dividends will be distributed for the period
January 1, 1995, through the Effective Time of the merger based on 60% of the
taxable income earned during this period. Such dividends have not been reflected
in this pro forma table.
If the payment was based on the maximum La-Z-Boy Notes of $10,000 or 31%,
51% La-Z-Boy Stock and 18% cash, Total assets and Total liabilities, equity
subject to redemption and shareholders' equity would be $491,857. If the payment
was based on 92% La-Z-Boy Stock, 8% cash and no La-Z-Boy Notes, Total assets and
Total liabilities, equity subject to redemption and shareholders' equity would be
$495,237.
</TABLE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT
OF OPERATIONS REFLECTING LA-Z-BOY
AFTER GIVING EFFECT TO THE MERGER
(in thousands, except per share data)
La-Z-Boy (Unaudited)
Year Ended E/C Pro Forma
(53 weeks) Year Ended ------------------------
4/30/94 6/30/94 Adjustments(1) Balance
<S> <C> <C> <C> <C>
Sales $ 804,898 $ 105,781 $ 910,679
Cost of sales 593,890 87,288 681,178
Gross profit 211,008 18,493 229,501
Selling, general, and
administrative expense(3) 151,756 14,484 $ 720 (b) 166,960
Operating profit 59,252 4,009 (720) 62,541
Interest expense 2,822 1,387 521 (a) 4,730
Other income 1,725 79 (228)(c) 1,576
Pre-tax income 58,155 2,701 (1,469) 59,387
872 (d)
Income taxes 23,438 122 (291)(e) 24,141
Income before accounting change $ 34,717 $ 2,579 $(2,050) $ 35,246
Pro forma taxes 994
Pro forma net income $ 1,707
Average shares and equivalent
shares outstanding 18,268 652(2) 18,920
Income per share before
accounting change $ 1.90 $ 1.86
<FN>
- ----------------
(1) The pro forma condensed combined statement of operations has been
adjusted by the following to reflect the Merger as if it were effective at the
beginning of the period:
(a) Additional annual interest expense of $521 attributed to assumed
issuance of La-Z-Boy Notes of $6,515 at 8%.
(b) Amortization of estimated goodwill on a straight line basis over 30
years.
(c) Reduction in interest income of $228 attributed to assumed payment of
$6,515 in cash at 3.5%, the average interest rate for investments
during the period.
(d) Reflects additional income taxes on historical earnings of E/C as if
E/C was not an S corporation during the period. For purposes of this
calculation a combined federal and state rate of 36.8% was used. The
federal tax portion was derived by subtracting the actual state taxes
incurred from the estimated combined taxes.
(e) Reduction of income taxes related to the additional expenses and a
decrease in interest income, excluding non-deductible amortization,
at an effective rate of 38.9%. As a tax free reorganization, the
goodwill and resulting amortization are not recognized or deductible
for tax purposes.
(2) Assumes 651,500 shares of La-Z-Boy Common Stock are issued to E/C
shareholders, as described in note 1 to the pro forma condensed combined
balance sheet.
(3) During the fourth quarter of fiscal 1994 E/C recorded a charge of $600
in connection with a one-time bonus paid to its former chief executive officer.
If the payment was based on the maximum La-Z-Boy Notes of $10,000 or 31%,
51% La-Z-Boy Stock and 18% cash, the income per share before accounting
change would be $1.86. If the payment was based on 92% La-Z-Boy Stock,
8% cash and no La-Z-Boy Notes, the income per share before accounting
change would be $1.85.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
REFLECTING LA-Z-BOY AFTER GIVING EFFECT TO THE MERGER
(In thousands, except per share data)
(Unaudited) (Unaudited)
La-Z-Boy E/C (Unaudited)
39 Weeks 9 Months Pro Forma
Ended Ended ------------------------
1/28/95 12/31/94(1) Adjustments(2) Balance
<S> <C> <C> <C> <C>
Sales $ 615,787 $ 76,817 $ 692,604
Cost of sales 458,237 63,138 521,375
Gross profit 157,550 13,679 171,229
Selling, general, and
administrative expenses 116,187 10,472 $ 519 (b) 127,178
Operating profit 41,363 3,207 (519) 44,051
Interest expense 2,455 1,361 $ 391(a) 4,207
Other income 1,705 90 (244)(c) 1,551
Pre-tax income 40,613 1,936 (1,154) 41,395
631(d)
Income taxes 17,044 82 (247)(e) 17,510
Net income $ 23,569 $ 1,854 $(1,538) $ 23,885
Pro forma income taxes 713
Pro forma net income $ 1,223
Average shares and equivalent
shares outstanding 18,083 652 (3) 18,735
Income from continuing operations
per share $ 1.30 $ 1.27
<FN>
- ------------------
(1) E/C's fiscal year ends on June 30; therefore, its operating results
for the nine months ended December 31, 1994 include the fourth quarter of its
fiscal year ended June 30, 1994. During the fourth quarter of fiscal 1994, E/C
recorded a charge of $600 to selling, general and administrative expenses in
connection with a one-time bonus paid to its former chief executive officer.
(2) The pro forma income statement has been adjusted by the following to
reflect the Merger as if effective at the beginning of the period:
(a) Additional interest expense of $391 attributed to assumed issuance
of La-Z-Boy Notes of $6,515 at 8%.
(b) Amortization of estimated goodwill on a straight line basis over 30
years.
(c) Reduction in interest income of $244 attributed to assumed payment of
$6,515 in cash at 5%, the average interest rate for investments during
the period.
(d) Reflects additional income taxes on historical earnings of E/C as if
E/C was not an S corporation during the period. For purposes of this
calculation a combined federal and state tax rate of 36.8% was used.
The federal tax portion was derived by subtracting the actual state
taxes incurred from the estimated combined taxes.
(e) Reduction of income taxes related to the additional expenses and a
decrease in interest income, excluding non-deductible amortization, at
an effective rate of 38.9%. As a tax free reorganization, the goodwill
and resulting amortization are not recognized or deductible for tax
purposes.
(3) Assumes 651,500 shares of La-Z-Boy Common Stock are issued to E/C
shareholders, as described in note 1 to the pro forma condensed combined
balance sheet.
If the payment was based on the maximum La-Z-Boy Notes of $10,000 or 31%,
51% La-Z-Boy Stock and 18% cash, the income per share before accounting
change would be $1.28. If the payment was based on 92% La-Z-Boy Stock,
8% cash and no La-Z-Boy Notes, the income per share before accounting
change would be $1.27.
</TABLE>
<PAGE>
ENGLAND/CORSAIR, INC.
SELECTED FINANCIAL DATA
The following table sets forth certain condensed historical financial data
of E/C and is based on the financial statements of E/C, including the notes
thereto, which appear elsewhere in this Proxy Statement/Prospectus and should
be read in conjunction therewith. See "England/Corsair, Inc. Financial
Statements." Interim unaudited data for the six months ended December 31,
1994 and 1993 reflect, in the opinion of management of E/C, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such data. Results for the six months ended December 31,
1994 and 1993 are not necessarily indicative of results that may be expected
for any other interim period or for the fiscal year as a whole.
<TABLE>
<CAPTION>
(In thousands except per share data)
(unaudited)
Six Months
Ended December 31, Fiscal Years Ended June 30,
---------------------- -------------------------------------------------------------
Statement of 1994 1993 1994 1993 1992 1991 1990
Operations Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 50,127 $ 50,524 $ 105,781 $ 99,435 $ 86,175 $ 72,729 $ 65,242
Cost of sales 41,183 41,609 87,288 79,905 69,107 60,157 53,947
Gross profit 8,944 8,915 18,493 19,530 17,068 12,572 11,295
Selling, general, and
administrative
expenses(3) 6,094 6,686 14,484 12,632 10,040 8,422 7,707
Operating profit 2,850 2,229 4,009 6,898 7,028 4,150 3,588
Interest expense - net 916 556 1,318 1,073 1,305 1,833 1,421
Miscellaneous income 38 11 10 57 70 187 57
Pre-tax income 1,972 1,684 2,701 5,882 5,793 2,504 2,224
Income taxes(1) 81 67 122 (499) 2,100 930 820
Net income $ 1,891 $ 1,617 $ 2,579 $ 6,381 $ 3,693 $ 1,574 $ 1,404
Pro forma income taxes(1) 727 620 994 2,165
Pro forma net income $ 1,245 $ 1,064 $ 1,707 $ 3,717
Weighted average shares
used in per share
calculations 297 298 297 298 298 322 339
Net income per share -
historical $ 12.39 $ 4.90 $ 4.14
Pro forma net income per
share $ 4.19 $ 3.57 $ 5.75 $ 12.47
Dividends per share(2) $ 3.36 $ 5.92 $ 15.88 $ 8.81 $ 2.00 -0- -0-
<CAPTION>
(unaudited)
As of December 31, As of June 30,
----------------------- --------------------------------------------------------------
Balance Sheet Data: 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Total assets $35,619 $ 34,367 $ 28,416 $ 23,335 $ 24,923 $ 24,724
Long-term debt,
including current
portion $14,670 $ 14,094 $ 7,619 $ 7,057 $ 9,225 $ 9,909
Total liabilities and equity
subject to redemption $35,619 $ 34,367 $ 28,416 $ 23,335 $ 24,923 $ 24,724
<FN>
- ---------------------------
(1) Beginning July 1, 1992, E/C elected to be treated as an "S
corporation" for Federal income tax purposes and accordingly was not
subject to Federal or certain state income tax at the corporate level.
The 1994 and 1993 fiscal periods contain an illustration of "pro forma
income taxes" which includes an additional estimated provision for income
taxes based on pre-tax income as if E/C had not been an S corporation.
E/C, for the 1993 fiscal year elected to adopt Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes"
(FAS 109), and the pro forma provisions for income taxes for periods
ending 1994 and 1993 have been reported in accordance with FAS 109.
The adoption of FAS 109 did not have a material effect on E/C's results
of operations.
(2) In May 1994 E/C instituted a plan of management succession which involved
paying non-recurring distributions of AAA earnings (previously
undistributed taxable earnings of $2,520 since the S corporation election)
to its shareholders along with a one time bonus of $600 to the retiring
Chairman of the Board Dwight England. Subsequent to this distribution
selected shareholders loaned funds totaling $1,288 back to E/C in the
form of subordinated debt. To finance the succession plan and refinance
its existing debt E/C negotiated a new loan agreement which provides a
credit facility of $7,500 including a $3,750 term loan at 6.95% with the
remainder as a revolving credit bearing interest at the prime rate less
1/2%. In anticipation of the Chairman of the Board's retirement and to
prepare E/C for future expansion, new executive level positions were added
in the areas of manufacturing, marketing, and finance.
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results Of Operations
Year Ended June 30, 1994 Versus Year Ended June 30, 1993
E/C experienced a compounded growth rate in net sales of 15% from the
period 1990 through 1993. During this same time period gross profits as a
percent of net sales averaged 18.7%, and income before taxes averaged 5.0%.
However, sales for the fiscal year ended June 30, 1994 grew at only 6.4% and
income before taxes was 2.6% of sales, as shown in the table below.
<TABLE>
<CAPTION>
(Dollars in Thousands)
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Net sales $105,781 $ 99,435 $ 86,175 $ 72,729 $ 65,242
Gross profits $ 18,493 $ 19,530 $ 17,068 $ 12,572 $ 11,295
As a % to sales 17.5% 19.6% 19.8% 17.3% 17.3%
Income before
taxes $ 2,701 $ 5,882 $ 5,793 $ 2,504 $ 2,224
As a % to sales 2.6% 5.9% 6.7% 3.4% 3.4%
</TABLE>
Management believes that the decline in the rate of sales growth can be
attributed to a decision to limit the number of new products introduced into
the market in the spring of 1993. Management's decision was based on a desire
to minimize any disruption to a new manufacturing process implemented in the
third quarter of the fiscal year ended June 30, 1993, which was undertaken in
an effort to reduce direct labor and training expenses. Management anticipated
that this manufacturing re-engineering would initially cause a reduction in
productivity and an increase in employee turnover until fully implemented.
During 1994, management noted that productivity has increased and exceeded the
levels being attained prior to the re-engineering. It is management's belief
that the new production system, which is based on group incentive pay, will
provide a higher quality product at a lower overall cost to manufacture.
Cost of goods sold for the fiscal year ended June 30, 1994 was 82.5% of
sales compared to 80.4% for the fiscal year ended June 30, 1993. The increase in
cost of goods sold of 2.1% for the year ended June 30, 1994 is the result of
increases in material costs, direct labor and manufacturing overhead.
Specifically, material costs increased by .81% of sales or 38.6% of the total
increase in cost of goods sold. Direct labor and payroll taxes rose by .49%
of sales or 23.14% of the total increase in cost of sales. Manufacturing
overhead as a percent of sales rose primarily due to an increase in machinery
and equipment repairs of .19%, an increase in depreciation expense of .11% and
an increase in indirect labor of .32%. Taken together repairs, depreciation
expense and indirect labor account for 29.7% of the total increase in cost of
goods sold. Management attributes the majority of the increase in material
cost and direct labor to the lack of new product introduction in 1993. When
a new product is introduced it is designed to sell at a certain retail price
point. This makes it difficult to pass on cost of living adjustments and raw
material price increases to the consumer. As a product ages cost increases
cause the products profit margins to decline unless the product is re-engineered
to take cost out or replaced with a new style. E/C routinely reviews profit
margins by style to determine which styles should be dropped and replaced.
At the 1994 fall furniture market, E/C made significant introductions of new
products, which began shipping in January 1995.
Margins were further depressed in fiscal 1994 by freight concessions
designed to stimulate west coast sales. In February 1994, management began the
process of phasing out these freight concessions, which has not yet been
completed.
Selling and administrative expenses as a percent of net sales were 13.7%
for the fiscal year ended June 30, 1994 compared to 12.7% for the fiscal year
ended June 30, 1993. Over half of the increase in selling and administrative
costs can be attributed to a one time $600,000 bonus paid to the former chief
executive officer.
Also, in anticipation of the former chief executive officer's retirement,
and to prepare E/C for future expansion, additional salaries and relocation
costs were incurred in adding new executive level positions in manufacturing,
marketing, and finance.
Non-recurring legal and accounting fees relating to the preparation for a
public offering (which was abandoned) further increased fiscal 1994
administrative costs. Additional legal fees were incurred in the drafting of a
plan for management succession, which required the re-drafting of corporate
bylaws. For the year ending June 30, 1994 professional fees for legal and
accounting work performed in connection with the IPO and plan of management
succession increased by approximately $250,000, or .22% of sales.
Interest expense for the fiscal year ended June 30, 1994 increased to
1.3% of sales from 1.2%. In anticipation of the chief executive officer's
retirement, E/C borrowed the funds necessary to restructure its existing debt
and distribute substantially all undistributed S corporation earnings to the
shareholders. The increase in interest expense resulted from additional debt
incurred to finance the distributions and the increase in long term leases used
to finance additional transportation equipment purchases.
Six Months Ended December 31, 1994 versus December 31, 1993
Sales declined $397,000 for the six months ended December 31, 1994 when
compared to the six months ended December 31, 1993. Management attributes part
of the decline in sales revenue to its decision to limit new product to
introductions in the fiscal year ended June 30, 1993. Other conditions
depressing sales include the devaluation of the Canadian dollar, which
depressed Canadian exports. For the six months ended December 31, 1994
Canadian sales were down by $1,919,993 compared to the six months ended
December 31, 1993. All E/C's Canadian sales are quoted and paid in U.S. dollars
thus E/C does not incur any foreign exchange risk. However, the decline in
the Canadian dollar has caused the Canadian selling price of E/C's products to
rise dramatically.
<TABLE>
<CAPTION>
(Dollars in Thousands)
December 31, 1994 December 31, 1993
<S> <C> <C>
Net sales $50,127 $50,524
Gross profit $ 8,944 $ 8,915
As a % of Sales 17.8% 17.6%
Income before
taxes $ 1,972 $ 1,684
As a % of Sales 3.9% 3.3%
</TABLE>
Gross profit as a percent of sales rose .2% in the six months ended
December 31, 1994 when compared to the six months ending December 31, 1993.
Selling, general and administrative expenses were 12.2% of net sales for the
six months ended December 31, 1994 compared to 13.2% for the six months ended
December 31, 1993. The decline in selling, general and administrative
expenses as a percent of sales was the result of reductions in office staffing,
advertising allowances, showroom expenses and commissions.
Interest expense increased from $556,000 to $916,000 due to additional
leases on transportation equipment and additional borrowing used to finance the
management succession plan.
Year Ended June 30, 1993 Versus June 30, 1992
Sales for the fiscal year ended June 30, 1993 grew at 15.4% over the
fiscal year ended June 30, 1992 in line with continued market penetration.
Gross margins remained in line with the prior year. Income before taxes was
5.9% of sales, down 0.8% from the fiscal year ended June 30, 1992.
Selling, general and administrative expenses increased to 12.7% of sales
for the fiscal year ended June 30, 1993 compared to 11.7% for the fiscal year
ending June 1992. The majority of the increase was due to increases in
advertising expense, professional fees, warranty expenses, and 401(k) plan
expenses.
E/C instituted a 401(k) retirement plan for the first time in the fiscal
year ended June 1993. Professional fees increased due to consulting associated
with E/C's decision to elect S corporation status for Federal tax reporting.
An increase in warranty expense resulted from quality problems experienced
as a result of the manufacturing re-engineering instituted in the third quarter
of 1993. Management believes that quality control procedures have been more
effective since that initial period.
Liquidity And Capital Resources
Year Ended June 30, 1994 Versus June 30, 1993
Cash increased by $109,000 during the year ended June 30, 1994. The
increase in E/C's cash position was only as a result of cash proceeds provided
by debt financing. During 1994, E/C generated $5,419,000 in cash from opera-
tions as compared with $8,124,000 during 1993. Net income of $2,579,000,
depreciation and amortization totaling $2,574,000, and increases in accounts
payable and accrued liabilities of $1,577,000 provided operating cash total-
ing $6,730,000, which was partially offset by an increase in accounts
receivable of $1,596,000.
For the fiscal year ended June 30, 1993 E/C generated $6,381,000 in
operating cash flow from net income along with $3,172,000 in cash flow
resulting from an increase in accounts payable and depreciation of
$1,908,000. An increase in inventory caused a reduction of operating cash
flow totaling $1,529,000.
For the fiscal year ended June 30, 1994 E/C raised additional capital by
issuing long-term debt in the amount of $3,375,000 net of repayments.
In 1994, a primary use of investing cash flows was $3,272,000 used to
purchase plant and equipment (including a new 120,000 square foot
manufacturing facility) compared to $2,965,000 in 1993. In both 1993 and
1994, transportation equipment additions were financed with long term capital
leases. For the fiscal year ended June 30, 1994 dividends totaling $4,722,000
were paid to shareholders as part of the plan for management succession.
Dividend distributions for 1993 totaled $3,234,000. In 1994, certain
shareholders also loaned approximately $1,288,000 to E/C in the
form of subordinated debt.
To accomplish the 1994 plan of succession and to restructure its existing
debt, E/C negotiated a new loan agreement which provides a credit facility of
$7,500,000, including a $3,750,000 term loan at 6.95% with the remainder as a
revolving credit bearing interest at the prime lending rate less 1/2%. The bank
loan agreement requires no principal payments for a period of three years at
which time the entire facility becomes a term note payable over four years with
a ten year amortization and a balloon payment at the end of the seventh year.
Six Months Ended December 31, 1994 versus December 31, 1993
Cash increased by $67,000 for the six months ending December 31, 1994.
During this six months E/C generated $2,223,000 in cash from operations as
compared to $2,934,000 for the six months ending December 31, 1993. In the six
months ended December 31, 1994 net income of $1,891,000, depreciation and
amortization totaling $1,699,000 and a decline in inventories of $520,000
provided cash totaling $4,110,000 which was partially offset by an increase in
accounts receivable of $759,000 and a decline in accounts payable of $1,071,000.
For the six months ended December 31, 1993 net income of $1,617,000,
depreciation and amortization totaling $1,245,000, and a decline in accounts
receivable of $373,000 along with an increase in accounts payable of $208,000
provided cash from operations totaling $3,443,000, which was partially offset
by an increase in inventories of $260,000 and an increase in prepaid expenses
of $249,000.
For the six months ended December 31, 1994, $1,014,000 was used to purchase
machinery and equipment compared to $641,000 for the six months ended
December 31, 1993.
Dividends distributed for the six months ending December 31, 1994 were
$143,000 as compared to $1,763,000 for December 31, 1993.
As of December 31, 1994 E/C had $6,710,000 outstanding against the loan
agreement. A portion of the $2,960,000 proceeds received during the six months
ended December 31, 1994 were used to retire debt with another bank and other
lenders whose loans had been collateralized by real property owned by E/C.
Year Ended June 30, 1993 Versus June 30, 1992
Cash increased by $12,000 for the fiscal year ended June 30, 1993. For the
year ended June 30, 1993 E/C generated $8,124,000 in cash from operations
compared to $4,679,000 for the year ended June 30, 1992. In 1993 net income of
$6,381,000, depreciation and amortization of $1,908,000, and increases in
payables and accrued expenses totaling $3,172,000 less the reduction in
deferred income taxes of $784,000 provided cash totaling $10,677,000. The
primary use of operating cash flows in 1993 was to fund an increase in
inventories of $1,529,000 and to reduce income taxes payable by $934,000.
In 1992, net income of $3,693,000, depreciation and amortization of
$1,802,000, and a decrease in inventories totaling $1,093,000 provided cash
totaling $6,588,000. The primary use of operating cash flows in 1992 was to
reduce payables and accrued expenses totaling $2,290,000.
For the year ended June 30, 1993, cash in the amount of $2,965,000 was used
to purchase plant and equipment, compared to capital expenditures totaling
$983,000 in 1992. Transportation equipment was financed with long-term capital
leases in both 1993 and 1992. In 1993, dividends totaling $3,234,000 were paid
to shareholders.
Management believes that cash provided by operating activities, the bank
loan agreement, and the availability of favorable transportation equipment
leases will be sufficient to fund anticipated growth and to meet E/C's
capital requirements through the fiscal 1997.
BUSINESS AND PROPERTIES
E/C is a manufacturer of upholstered furniture which is targeted at
moderate price points and sold under the England/Corsair brand name. E/C's
products include motion and stationary upholstered furniture consisting of
sofas, love seats, sleepers, matching chairs, recliners and accent chairs
and occasional tables. E/C offers imported occasional table products
manufactured from oak, maple and pine veneers which are designed to be
coordinated with the upholstered products.
Based on reported sales, E/C is in the top 40 largest U.S. residential
furniture manufacturers according to Furniture Today (May 9, 1994). E/C's
current product offerings include 45 separate style collections, each of
which is comprised of pieces available in various combinations of colors,
fabrics and styles, including colonial, traditional, contemporary, country
and transitional styles.
E/C's products are sold through independent sales representatives
primarily to independent furniture retailers and specialty retailers, as well
as to certain regional and national chains. E/C maintains approximately 2,000
active accounts located in all 50 states, most of which are independent
furniture retailers.
E/C produces its products to order at its six manufacturing facilities
located in New Tazewell, Tennessee. E/C's present facilities comprise
approximately 685,000 square feet of manufacturing space.
MARKET PRICE OF STOCK AND DIVIDENDS
E/C has been a privately held corporation since its formation, and no
trading market for E/C Stock exists. E/C declared cash dividends of $0.48 and
$2.88 per share in the first and second quarters of the current fiscal year,
respectively, $2.18, $3.75, $0.00, and $9.95, respectively, in the first
through fourth quarters of the fiscal year ended June 30, 1994, and $0.00,
$6.25, $0.00, and $2.56, respectively, in the first through fourth quarters
of the fiscal year ended June 30, 1993.
MANAGEMENT AND RELATED MATTERS
Directors and Executive Officers
<TABLE>
<CAPTION>
YRS. OF
DIRECTOR CO.
NAME AGE SINCE SERVICE BUSINESS EXPERIENCE
<S> <C> <C> <C> <C>
Rodney D. England 43 1987 26 He has been employed with
President, CEO and E/C continuously since 1966,
Chairman of the Board except for military service
from 1970-1972.
H. Wayne England 60 1969 25 He has direct responsibility
Executive Vice President, for the outside sales force
Sales and Marketing and assists in merchandising
and marketing.
Richard D. England 37 1989 22 He has held several positions
Vice President from Plant Manager to Vice
Administration President of Manufacturing to
Vice President of
Administration.
James L. Price 50 1994 1 He has been in the
Vice President of furniture industry for 25
Manufacturing years. He served as Vice
President of Manufacturing
for Goode Manufacturing
from 1992 to 1993, General
Manager of Schnadig
Corporation from 1991 to
1992, and Vice President
Manufacturing of T.P.I. from
1989 to 1991, all of which
are engaged in the furniture
business.
Otis S. Sawyer 37 1994 1 He was Controller of
Vice President Finance Council Craftsmen, Inc.
(casegoods) from 1988 to
1993. He holds an MBA
degree and is a certified
public accountant.
Walter Winding 54 1994 1 He has been an independent
consultant since 1994.
He was a Partner and
Director of H.M. Graphics
since 1993. He was
President and CEO of
Schweiger Industries
(furniture) from 1983 to
1993.
</TABLE>
Executive Compensation
The following table provides information for each of E/C's last three
completed fiscal years concerning the compensation of its Chief Executive
Officer and of each other executive officer who served as such during the
fiscal year ended June 30, 1994 and whose total salary and bonus for such year
exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
================================================================================
Annual Compensation
--------------------------------------
(a) (b) (c) (d) (e) (f)
Name and Principal Other Annual All Other
Position Year Salary($) Bonus($) Compensation($)
Compensation($)
- ---------------------------------------------------------------------------------
- ---
<S> <C> <C> <C> <C> <C>
Rodney D. England 1994 142,196 8,695 1,181 2,498
CEO/President 1993 96,937 16,628 1,665 2,398
1992 77,820 30,431 1,485 925
H. Wayne England 1994 120,406 8,516 5,891 5,921
Vice President 1993 107,640 21,249 5,157 6,717
Marketing 1992 101,430 37,848 3,005 3,690
================================================================================
<FN>
(e) Other Annual Compensation
Rodney England
Year Item Amount
1994 Personal Miles with Company Car 694
Split Dollar Insurance 262
Tax Preparation Fee Paid by E/C 225
1,181
1993 Personal Miles with Company Car 654
Split Dollar Insurance 204
Group Life Insurance 632
Tax Preparation Fee Paid by E/C 175
1,665
1992 Personal Miles with Company Car 663
Split Dollar Insurance 110
Group Life Insurance 608
Tax Preparation Fee Paid by E/C 104
1,485
H. Wayne England
Year Item Amount
1994 Personal Mile with Company Car 3,539
Split Dollar Insurance 1,516
Group Life Insurance 599
Tax Preparation Fee Paid by E/C 237
5,891
1993 Personal Miles with Company Car 2,809
Split Dollar Insurance 1,516
Group Life Insurance 720
Tax Preparation Fee Paid by E/C 112
5,157
1992 Personal Miles with Company Car 1,835
Split Dollar Insurance 562
Group Life Insurance 608
3,005
(f) All Other Compensation
Rodney England
Year Item Amount
1994 401K Company Match 1,573
Split Dollar Life Premiums 925
2,498
1993 401K Company Match 1,473
Split Dollar Life Premiums 925
2,398
1992 Split Dollar Life Premiums 925
H. Wayne England
Year Item Amount
1994 401K Company Match 2,231
Split Dollar Life Premiums 3,690
5,921
1993 401K Company Match 3,027
Split Dollar Life Premiums 3,690
6,717
1992 Split Dollar Life Premiums 3,690
</TABLE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information provided by the persons
indicated with respect to the beneficial ownership (as defined under applicable
rules of the Commission) of shares of E/C Stock as of March 31, 1995 by
(i) each person known by E/C to be the owner of more than 5% of the outstanding
shares of E/C Stock, (ii) each director of E/C and executive officer named in
the Summary Compensation Table, and (iii) all directors and executive officers
of E/C as a group:
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME AND ADDRESS(1) NUMBER OF SHARES BENEFICIAL
OWNERSHIP(2)
<S> <C> <C>
Rodney D. England(2)(3) 52,284 17.6%
H. Wayne England(2) 41,657 14.0%
Richard D. England(2)(4) 60,125 20.2%
Christopher C. England(2)(5) 55,511 18.7%
James O. England(2) 33,934 11.4%
Linda E. Duff(2)(6) 41,295 13.9%
James L. Price 0 0.0%
Otis S. Sawyer 0 0.0%
Walter Winding 0 0.0%
All directors and executive officers
as a group (seven persons) 154,066 51.8%
<FN>
- ----------------
(1) Unless otherwise noted, E/C believes that all persons named in the above
table have (i) sole voting and investment power with respect to all shares
of E/C Stock owned by them, except to the extent that authority is shared
by spouses under applicable law, and (ii) record and beneficial ownership
of such shares. Each such person has an address at 402 Old Knoxville
Highway, New Tazewell, Tennessee 37825.
(2) Rodney, Richard, Christopher, and James England and Linda Duff are
children of the late Arnold Dwight England, the founder of E/C. H. Wayne
England was Arnold England's brother and is the uncle of the above named
shareholders.
(3) Includes (i) 46,576 shares (15.7% of E/C Stock) held by Mr. Rodney England
individually and (ii) 5,708 shares (1.9%) held as trustee with sole voting
and investment power.
(4) Includes (i) 33,934 shares (11.4% of E/C Stock) held by Mr. Richard
England individually, (ii) 9,228 shares (3.1%) held as trustee with sole
voting and investment power, and (iii) 16,963 shares (5.7%) held as
co-trustee with shared voting and investment power.
(5) Includes (i) 31,795 shares (10.7% of E/C Stock) held by Mr. Christopher
England individually, (ii) 8,562 shares (2.9%) held as trustee with sole
voting and investment power, and (iii) 15,154 shares (5.1%) held as
co-trustee with shared voting and investment power.
(6) Includes (i) 30,924 shares (10.4% of the E/C Stock) held by Ms. Duff
individually, (ii) 8,562 shares (2.9%) held as trustee with sole voting
and investment power, and (iii) 1,809 shares (less than 1%) held as
co-trustee with shared voting and investment power.
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 1, 1994 in connection with the reorganization of E/C, certain
shareholders of E/C loaned E/C approximately $1,288,000. The following persons
individually loaned E/C the amounts set forth opposite their names:
Rodney D. England $ 285,290
Richard D. England 178,106
James O. England 178,106
Christopher C. England 159,973
Linda E. Duff 152,589
The Lisa Epperson Trust 80,392
----------
$1,034,456
==========
In addition, various related trusts, for which the individuals named
above serve as trustees or co-trustees, loaned an aggregate amount of
approximately $253,784. The loans are evidenced by unsecured promissory notes
dated June 1, 1994. These notes bear interest at an annual rate of 7% and
mature in 1999. The proceeds of the notes were used for working capital. At
December 31, 1994 the outstanding balance of these notes was $1,159,415.
LA-Z-BOY CHAIR COMPANY
SELECTED FINANCIAL DATA
The following table sets forth certain condensed historical
financial data of La-Z-Boy and is based on the financial statements of
La-Z-Boy, including the notes thereto, which appear elsewhere in this
Proxy Statement/Prospectus and should be read in conjunction
therewith. See "La-Z-Boy Chair Company Financial Statements."
Interim unaudited data for the nine months ended January, 1995 and
1994 reflect, in the opinion of management of La-Z-Boy, all
adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of such data. Results for the nine
months ended January, 1995 and 1994 are not necessarily indicative of
results that may be expected for any other interim period or for the
fiscal year as a whole.
<PAGE>
<TABLE>
Consolidated Six-Year Summary of Selected Financial Data Unaudited
(Dollar amounts in thousands, except per share data) 9 Months Ended
- ------------------------------------------------------------------------------ ---------------------------
Year Ended in April 1994 1993 1992 1991 1990 1989 Jan 28, 1995 Jan 22, 1994
(53 wks) (52 wks) (52 wks) (52 wks) (52 wks) (52 wks) (39 wks) (39 wks)
- ------------------------------------------------------------------------------ ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales.............. $804,898 $684,122 $619,471 $608,032 $592,273 $553,187 $615,787 $563,788
Cost of sales...... 593,890 506,435 453,055 449,502 430,383 397,776 458,237 416,978
--------- --------- --------- --------- --------- --------- -------- ---------
Gross profit..... 211,008 177,687 166,416 158,530 161,890 155,411 157,550 146,810
Sell, gen & admin.. 151,756 131,894 123,927 116,278 112,652 107,978 116,187 109,109
--------- --------- --------- --------- --------- --------- -------- ---------
Oper profit...... 59,252 45,793 42,489 42,252 49,238 47,433 41,363 37,701
Interest expense... 2,822 3,260 5,305 6,374 7,239 7,567 2,455 2,178
Interest income.... 1,076 1,474 1,093 1,215 1,597 1,864 1,002 747
Other income....... 649 1,292 1,628 1,277 1,939 2,244 703 1,053
--------- --------- --------- --------- --------- --------- -------- --------
Total other inc.. 1,725 2,766 2,721 2,492 3,536 4,108 1,705 1,800
--------- --------- --------- --------- --------- --------- -------- --------
Income before tax.. 58,155 45,299 39,905 38,370 45,535 43,974 40,613 37,373
Income tax expense. 23,438 18,015 14,805 15,009 17,282 16,508 17,044 14,946
--------- --------- --------- --------- --------- --------- -------- --------
Net income....... $34,717* $27,284 $25,100 $23,361 $28,253 $27,466 $ 23,569 $ 22,377*
========= ========= ========= ========= ========= ========= ======== ========
Weighted avg shares
outstg ('000s)... 18,268 18,172 18,064 17,941 17,868 17,886 18,083 18,257
Per com shr outstg
Net income....... $1.90* $1.50 $1.39 $1.30 $1.58 $1.54 $ 1.30 $1.23*
Cash div paid.... $0.64 $0.60 $0.58 $0.56 $0.54 $0.46 $0.51 $0.47
BV on YE shr outst. $15.91 $14.48 $13.58 $12.75 $11.98 $10.91 $16.38 $15.28
Rtn avg shrhdr eqt. 12.5%* 10.7% 10.6% 10.5% 13.8% 14.7% --- ---
Gr prft % of sales. 26.2% 26.0% 26.9% 26.1% 27.3% 28.1% 25.6% 26.0%
Op prft % of sales. 7.4% 6.7% 6.9% 6.9% 8.3% 8.6% 6.7% 6.7%
Op prft, excl. acq.
amort., int. inc.
& other inc. % of
BOY capital...... 19.4% 16.2% 15.4% 15.6% 19.6% 19.3% --- ----
Net inc % of sales. 4.3%* 4.0% 4.1% 3.8% 4.8% 5.0% 3.8% 4.0%*
Income tax expense
% pretax income.. 40.3% 39.8% 37.1% 39.1% 38.0% 37.5% 42.0% 40.0%
- ------------------------------------------------------------------------------- ----------------------
Deprec & amortiz... $14,014 $14,061 $14,840 $14,039 $13,735 $13,607 $11,151 $10,254
Capital expendtrs.. $17,485 $12,248 $12,187 $21,428 $22,418 $9,334 $15,179 $13,283
Prty,plt,eqpt,net.. $94,277 $90,407 $93,440 $95,508 $89,141 $79,845 $97,552 $93,889
- ------------------------------------------------------------------------------- ----------------------
Working capital.... $224,122 $202,398 $184,431 $172,989 $170,292 $158,947 $230,432 $213,032
Current ratio...... 4.1 to 1 3.8 to 1 3.7 to 1 3.7 to 1 3.4 to 1 3.1 to 1 4.0 to 1 4.1 to 1
Total assets....... $430,253 $401,064 $376,722 $363,085 $361,856 $349,007 $441,424 $415,010
- ------------------------------------------------------------------------------- -----------------------
Consolidated Six-Year Summary of Selected Financial Data (Unaudited)
(Dollar amounts in thousands, except per share data) 9 Months Ended
- ------------------------------------------------------------------------------ --------------------------
Year Ended in April 1994 1993 1992 1991 1990 1989 Jan 28, 1995 Jan 22, 1994
(53 wks) (52 wks) (52 wks) (52 wks) (52 wks) (52 wks) (39 wks) (39 wks)
- ------------------------------------------------------------------------------ --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-term debt..... $52,495 $55,370 $55,912 $62,187 $69,066 $70,641 $56,245 $52,495
Debt............... $55,370 $55,912 $60,726 $70,867 $78,036 $80,244 $58,120 $55,370
Shareholders' eqty. $290,911 $263,386 $246,359 $229,217 $214,585 $194,293 $294,421 $279,924
Ending capital..... $346,281 $319,298 $307,085 $300,084 $292,621 $274,537 $352,541 $335,294
Ratio debt to eqty. 19.0% 21.2% 24.6% 30.9% 36.4% 41.3% 19.7% 19.8%
Ratio debt to capl. 17.4% 18.5% 20.9% 24.8% 28.7% 31.0% 16.7% 17.4%
- ------------------------------------------------------------------------------ ----------------------
Shareholders....... 12,615 9,032 8,081 7,208 6,827 4,843 13,223 ---
Employees.......... 9,370 8,724 8,153 7,828 8,046 7,743 9,675 9,399
- ------------------------------------------------------------------------------ ----------------------
*Excludes the income effect of adopting SFAS 109 in May 1993 of $3,352 or
$.18 per share.
Note: Acquisition amortization of $1,056 for 1994, $1,039 for 1990-1993 and
$1,041 for 1989 has been reclassified from other income to selling, general and
administrative.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Full Fiscal Years
Analysis of Operations Year Ended April 30, 1994 (1994 compared with 1993)
U.S. furniture industry sales increased roughly 6-8% in La-Z-Boy's fiscal 1994
over 1993. La-Z-Boy's sales increase of 18% over 1993 continued to exceed the
increase experienced by the industry as a whole. Approximately 2% of this
increase was due to 1994 including 53 weeks while 1993 contained 52 weeks.
Management believes the sales volume increase was largely due to improvements
in the economy. Other factors contributing to the sales increase to a lesser
degree include the opening of more La-Z-Boy Furniture Galleries stores and
capital expenditures the last few years at Hammary and Kincaid helping to
improve product quality, delivery and availability. Selling price increases
were generally in the 2-4% range. Major product lines that experienced rates
of unit growth above La-Z-Boy's average were the modulars, lower end recliners,
sofas, reclining sofas, highend recliners and bedroom (wood).
No divisions or companies were acquired or disposed of during the last
six years. Therefore, all sales growth has been internally generated.
During 1994, the La-Z-Boy Contract Furniture Group was formed through the
merger of the former La-Z-Boy Contract and RoseJohnson divisions.
The number of independently owned La-Z-Boy Furniture Galleries stores
continued to grow in 1994. Most of these stores were major upgrades or new
locations for earlier generation La-Z-Boy Showcase Shoppes. These stores
are part of the reason La-Z-Boy sales growth has exceeded the industry average.
In addition, the number of smaller in-store galleries continued to grow for all
divisions.
The gross margin (gross profit dollars as a percent of sales) of 26.2% in
1994 was up from the 26.0% gross margin in 1993. The lack of some one-time
costs that affected 1993 relating to start up and training for new styles and
changes to manufacturing techniques accounted for an improvement of
approximately .8 points. To a lesser degree, the gross margin improved due to
the 18% sales increase covering a larger portion of fixed costs. These reasons
for improvement more than offset the combined .7 point unfavorable effects of
increased sales of product lines with lower-than-average gross margins along
with increased costs associated with increasing production volume quickly to
keep up with sales. To a lesser degree, increased health-care cost also
unfavorably affected the gross margin.
Other income declined in 1994 due to a reduction in interest income,
changes in pension-related assumptions and Canadian currency exchange losses.
Income tax expense as a percent of pretax income increased to 40.3% in
1994 from 39.8% in 1993. The effect of the 1% increase in the federal tax rate
to 35% was partially offset by changes in profitability among divisions.
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes", which changed the method of accounting for income taxes, was adopted
by La-Z-Boy's effective April 25, 1993. This change in accounting principle
increased net income and the net deferred tax asset by $3.4 million or
$.18 per share.
Analysis of Operations Year Ended April 24, 1993 (1993 compared with 1992)
La-Z-Boy's 1993 sales increase of 10% over 1992 once again exceeded
the growth in the U.S. residential furniture industry as a whole. Selling price
increases during 1993 were generally in the 1-3% range. Major product lines
that experienced rates of unit sales growth above La-Z-Boy's average were the
reclining sofa, high end recliner, lower end recliners, bedroom (wood) and
occasional (wood) product lines.
During 1993, 18 independently owned La-Z-Boy Furniture Galleries
stores opened, bringing the total number of stores to 63. The rate of
new store openings and their sales volumes met management's
expectations. Most of these openings were major upgrades or new
locations for earlier generation La-Z-Boy Showcase Shoppes.
Gross margin of 26.0% in 1993 was down from the 26.9% gross margin
in 1992 even though unit volume increased. This decline in gross margin
was primarily in the Residential division which generates roughly 70% of
consolidated sales.
The Residential division gross margin declined for two main reasons. The
primary reason was that unexpectedly high labor and overhead costs were
incurred at most plants. These costs were primarily caused by the introduction
of new styles and efforts to improve plant methods while at the same time,
reduce inventories, improve the flexibility to handle a greater number of
different styles, and ship dealer orders more complete and quicker than in the
past. In addition, an anticipated unfavorable product line mix effect occurred
from selling more product lines with lower-than-average gross margins.
S,G & A expense for 1993 of 19.3% of sales was lower than the 1992
percentage of 20.0% primarily due to the relatively large sales increase
and a decline in bad debt expense.
Interest expense declined $2.0 million in 1993 from 1992 due to a
combination of lower debt principal amounts and lower interest rates.
The increase in other income was primarily due to increased interest
income realized from higher cash balances throughout the year more than
offsetting lower interest rates.
Income tax expense as a percent of pretax income increased to 39.8%
in 1993 from 37.1% in 1992. In 1992, there was a one-time tax benefit
from the merger of a previously acquired division.
Interim Periods
Due to the cyclical nature of La-Z-Boy's business, comparison of operations
between the most recently completed quarter and the immediate preceding quarter
would not be meaningful and could be misleading to the reader of these financial
statements.
La-Z-Boy's 1995 fiscal third quarter that ended January 28, 1995 set a third
quarter record with sales up 9%. Net income per share was 9% lower than last
year's third quarter.
The third quarter and nine months ended sales both increased 9%.
La-Z-Boy believes the increases were primarily the result of the
general economic recovery and were roughly equal to growth
in the U.S. Furniture industry. Price increases were generally in
the 1-3% range and the remainder of the increases were primarily due
to volume increases. The decline in the Canadian exchange rate from
last year in the third quarter and nine months ended reduced the sales
increase by .3 points.
Sales do not include any acquired companies, so the third quarter
and nine months improvements of 9% were all internally generated.
Excluding exchange rate fluctuations, sales increased in each period
at all five operating divisions with particular strength at Hammary.
For the nine month period ended gross profit as a percent of
sales (margins) dropped from 26.0% last year to 25.6%. The
majority of the decrease in nine month margins occurred in the
third quarter. Gross profit as a percent of sales (margins)
dropped from 26.4% in last year's third quarter to 25.2%
primarily due to cost increases. The third quarter's
health-care costs were about 25% higher than last year. Adverse
selection and provider cost shifting are thought to have caused
the 25% jump. Fourth quarter health-care costs are expected
to be roughly equal to last year's quarter on a per week basis.
(Last year's fourth quarter had high health-care costs).
Costs of leather, fabric, cartoning and premium (not frame stock)
woods were measurably up and are not expected to decline.
Cartoning is expected to further increase in cost in the fourth
quarter of fiscal 1995. Factory wage costs were up but were
within expectations.
To a lesser extent, 1995's third quarter margins were unfavorably impacted
approximately .1 points by incentives and costs associated with the
introduction of new contract products as well as an unfavorable Canadian/U.S.
dollar exchange rate. The contract items are not expected to impact the
fourth quarter as much as the third quarter. Canadian exchange
rate gross margin impacts are expected to continue unless the Canadian
dollar strengthens.
The costs and anticipated higher sales associated with La-Z-Boy's new TV
advertising campaign will affect La-Z-Boy's financial results in the fourth
quarter and beyond. The national campaign is part of a long-term
effort believed to be necessary to further expand La-Z-Boy's marketshare
by repositioning La-Z-Boy as a complete furniture resource.
The third quarter and nine months ended S, G & A expenses increased 7% and 6%
respectively from the prior year largely due to the increase in sales. S, G &
A expenses have been slightly less than what was expected before the year
started. This was primarily in the selling expenses area. With the new TV
advertising program, fourth quarter S, G & A expenses are expected to exceed
both last year and expectation before the year started.
The increase in interest expense for the quarter and nine months ended was
primarily due to higher interest rates.
Other income for the third quarter was down from the prior year primarily due
to Canadian exchange impacts. This was partially offset by increased interest
income due to increased investments and higher interest rates. The Canadian
dollar impacts are due to revaluations of trade and other cash-type
intercompany balances at the end of each quarter and only change or cause P&L
impacts if the Canadian/U.S. dollar exchange rate changes from the end of one
quarter to the end of the next consecutive quarter. That is, unfavorable P&L
impacts will not occur in the fourth quarter if the rate stays the same or
strengthens (from Canada's perspective).
Income taxes as a percent of pretax profit was higher than last year for both
the quarter and nine months ended primarily due to unfavorable tax situations
at La-Z-Boy's Canadian operating division. The higher tax rates are likely to
continue in the fourth quarter.
The estimated income taxes liability was $2.3 million less at the end of
January, 1995 compared to January, 1994. The January, 1994 balance was
overstated and corrected in the fourth quarter last year with the offsetting
adjustment to deferred taxes. Since last year, La-Z-Boy has also settled
several audits and tax disputes which resulted in a significant reduction in
the estimated income taxes liability.
The deferred income taxes asset was higher at the end of January, 1995
compared to January, 1994 due to the increase in expenses which were deducted
for book purposes but cannot currently be deducted for tax purposes like
accrued bad debts expenses.
As mentioned above, a major new TV advertising program began
in February. This program is intended to increase sales over the
longer term. Effects on sales in the shorter term (the next few quarters) are
difficult to predict but sales increases and other related favorable management
actions may not be enough to cover the net additional costs of the TV program.
Raw materials were up 9% vs. last year. About half of the increase was in
fabric and leather; and although it was higher than desired, plans are in place
for a reduction by the end of April, 1995. Lumber was planned to increase as
part of seasonal purchasing and should be declining soon.
Finished goods declined 10%, roughly as planned. On hand balances should be
leveling off although efforts are still underway to reduce balances longer
term.
The 89% decrease in the balance sheet currency translation adjustment from
1/22/94 to 1/28/95 was due to the decline in the Canadian exchange rate from
.7627 to .7069 (Canadian dollar to U.S. dollar ratio). This reduced the
present valuation of investments in the Canadian division.
Liquidity and Capital Resources
Cash flows from operations amounted to $28 million in 1994, $35
million in 1993 and $36 million in 1992 and have usually been adequate
for day-to-day expenditures, dividends to shareholders and capital
expenditures.
The 1994 cash flow from operations declined $6.5 million from 1993.
Other assets and liabilities changed from a source of cash in 1993 to
a use of cash in 1994 primarily due to the payment of income taxes. Also,
inventories increased $6.7 million.
Capital expenditures were $17.5 million in 1994 compared to $12.2 million
for both 1993 and 1992. Some capacity expansions occurred in 1994 while the
prior two years did not require expansions. Capacity utilization of about 70%
at the end of 1994 was up from about 65% at the end of 1993. Capital
expenditures are forecast to be approximately $17 million in 1995 compared to
$17.5 million in 1994. The 1995 forecast, which excludes the E/C acquisition,
includes the construction of a new upholstery factory in Arkansas. The 396,000
square foot plant was constructed to replace an existing older 200,000 square
foot plant. Long-term financing of the $7.5 million cost was through the use of
industrial revenue bonds.
Cash flows relating to debt caused both inflows and outflows of cash.
No new debt was raised in the last three years. During 1992, a $15.0 million
bridge loan was refinanced through a private placement and two industrial
revenue bonds totaling $9.7 million were refinanced at a lower interest rate.
Retirements of debt totaled between $1 million and $15 million for each of the
last three years and are primarily related to paying down the $53 million debt
incurred in 1987 to acquire an operating division. While the cash flow
statement shows that $39.3 million of debt was retired in 1992, $24.7 million
relates to refinancing as described above.
As of April 30, 1994, La-Z-Boy had unused lines of credit and
commitments of $60 million under several credit arrangements. In April 1991,
La-Z-Boy entered into a $50 million unsecured revolving credit line (Credit
Agreement) to extend through August 31, 1998, requiring interest payments only
through August 31, 1994 and periodic payments of principal and interest through
1998. La-Z-Boy has renewed the Credit Agreement to require interest only
payments through August 1999 and to require principal payment in August 1999.
The credit Agreement also includes covenants that, among other things, require
La-Z-Boy to maintain certain financial statement ratios. La-Z-Boy has complied
with all of the requirements.
The financial strength of La-Z-Boy is reflected in two commonly used
ratios -the current ratio (current assets divided by current liabilities) and
the debt-to-capital ratio (total debt divided by beginning of the year
shareholders' equity plus total debt). The current ratio at the end of 1994
and 1993 was 4.1:1 and 3.8:1, respectively. The debt to capital ratio was
17.4% at the end of 1994 and 18.5% at the end of 1993.
La-Z-Boy provides for all current and future potential liabilities as
required including those relating to postretirement benefits.
La-Z-Boy is subject to contingencies pursuant to environmental laws
and regulations. La-Z-Boy accrues for certain environmental remediation
activities related to past operations, including Superfund clean-up and
Resource Conservation and Recovery Act compliance activities, for which
commitments have been made and reasonable cost estimates are possible. La-Z-Boy
has been identified as a Potentially Responsible Party ("PRP") at two clean-up
sites: Organic Chemical and Seaboard Chemical Company. At each site, La-Z-Boy
has been identified as a de minimis contributor and volumetric assessments
indicate that La-Z-Boy's contributions to each site have been less than .1% of
the total. Each site has either completed or has begun the Phase I cleanup and
the total cleanup costs expected to be incurred at each site have been
estimated. La-Z-Boy is also participating with a number of other companies in
the voluntary RCRA closure of the Caldwell Systems site. La-Z-Boy's volumetric
assessment at this site is in the 1% range. The steering
committee responsible for negotiating the cleanup plan with the EPA has
recently reinitiated its negotiations in anticipation of initial cleanup
activities. Estimates of the cleanup costs at the Caldwell site are
also available. The number of PRP's and voluntary participants at the
three sites range from 182 to in excess of 1,750. Based on a review of
the number, composition and financial stability of the PRP's and voluntary
participants at each site, along with cleanup cost estimates available,
management does not believe that any significant risk exists that La-Z-Boy
will be required to incur total costs in excess of $100,000 at any of the
sites. At April 30, 1994, a total of $300,000 has been accrued
with respect to these three sites. La-Z-Boy is also conducting
voluntary compliance audits at La-Z-Boy owned facilities.
La-Z-Boy's strong financial position is reflected in the debt to capital
percentage of 16% and a current ratio of 4.0 to 1 at the end of the third
quarter, January 28, 1995. At the end of the preceding year's third quarter,
the debt to capital percentage was 17% and the current ratio was 3.8 to 1.
As of January 28, 1995, there was $62 million of unused lines of credit
available under several credit arrangements.
In October 1987, the La-Z-Boy Board of Directors authorized a one-million
share stock repurchase program. In February 1993, the La-Z-Boy Board
authorized the repurchase of another one million shares. As of January 1995
approximately 28% of the 2 million shares of La-Z-Boy Common Stock authorized
for purchase on the open market were still available for purchase by La-Z-Boy.
Outlook
La-Z-Boy's 1995 fiscal year to end April 29, 1995 will include 52 weeks
compared to fiscal year 1994, which included 53 weeks. This is approximately
a 2% reduction in the length of the year which will affect sales and other
financial comparisons from year to year.
Sales in fiscal year 1995 are expected to exceed the 1994 results but
due to the stronger than expected year in 1994, the double digit sales
increase experienced in 1994 is not expected to repeat.
One of La-Z-Boy's financial objectives is to achieve sales increases of 10%
per year or increases at least greater than that of the furniture industry.
Some furniture industry forecasts for calendar year 1995 over 1994 are in the
2-3% range. For the first nine months of fiscal 1995, La-Z-Boy sales increased
9% over the comparable period in fiscal 1994.
La-Z-Boy's major residential efforts and opportunities for sales growth
greater than industry averages are focused outside the recliner market segment,
e.g., stationary upholstery (single and multi-seat), reclining sofas and
modulars, wood occasional and wall units and wood bedroom and dining room.
The newly formed La-Z-Boy Contract Furniture Group sales growth rate in the
next few years is expected to exceed the average of the other divisions.
Today, this division is not generating a profit and profits are not expected
to improve in 1995 due to research and development expenditures of
approximately $1.3 million, reorganization costs and start-up costs associated
with the recent merger of the two formerly separate contract divisions.
Eventually, profit margins comparable to La-Z-Boy's average rates are
believed to be able to be achieved. Profitability at this level would help
La-Z-Boy reach the financial goals described below even though this division
is not large enough to dramatically affect the consolidated results.
Given no recession, no major competitive environment changes, no major strategic
changes and other similar assumptions, profitability is expected to improve in
1996 and the division is expected to begin generating an operating profit
between 1997 and 1998. The research and development expenditures are
necessary as the products of the two former divisions had not been refreshed
recently and also to redesign the products in an integrated way. In addition,
the lines are to expand into a broader range of products. R & D costs are
expected to remain around this level through 1996 but are expected to become a
smaller percentage of sales as volume increases. The reorganization and start
up costs of the division are estimated to be between $.5 and $2 million.
A second financial goal is to improve operating profit as a percent of sales
in 1995 compared to 1994. For 1994, the operating profit margin was 7.4% of
sales. For the first nine months of 1995, the operating profit margin was
equal to the first nine months of the prior year.
A third goal is to achieve operating profit, excluding acquisition
amortization, interest income and other income (return), as a percent of
beginning of the year capital of 20%. For 1994, return on capital was 19.4%.
La-Z-Boy has an opportunity to improve its margins through increases in
<PAGE>
efficiency, improvements in the utilization of equipment and facilities and
increases in sales volumes, even though product line growth may be in lines
with lower gross margins.
UNAUDITED QUARTERLY FINANCIAL INFORMATION
<TABLE>
(Amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
Quarter Ended July 30 October 29 January 28 9 Months 1995
(13 weeks) (13 weeks) (13 weeks) (39 weeks)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales............ $174,387 $230,586 $210,814 $615,787
Cost of sales.... 133,654 166,816 157,767 458,237
-------- -------- -------- ---------
Gross profit... 40,733 63,770 53,047 157,550
Selling, general
& admin........ 33,032 43,539 39,616 116,187
-------- -------- -------- ---------
Opertg profit.. 7,701 20,231 13,431 41,363
Interest expense. 662 752 1,041 2,455
Total other inc.. 546 861 298 1,705
-------- -------- -------- ---------
Inc before tax. 7,585 20,340 12,688 40,613
Income tax exp... 3,315 8,262 5,467 17,044
-------- -------- -------- ---------
Net income... $4,270 $12,078 $7,221 $23,569
======== ======== ======== =========
Net income
per share.. $0.23 $0.67 $0.40 $1.30
======== ======== ======== =========
- -------------------------------------------------------------------------------
Quarter Ended July 24 October 23 January 22 April 30 Year 1994
(13 weeks) (13 weeks) (13 weeks) (14 weeks) (53 weeks)
- -------------------------------------------------------------------------------
Sales............ $162,096 $209,044 $192,648 $241,110 $804,898
Cost of sales.... 123,047 152,160 141,771 176,912 593,890
-------- -------- -------- --------- ---------
Gross profit... 39,049 56,884 50,877 64,198 211,008
Selling, general
& admin........ 32,509 39,464 37,136 42,647 151,756
-------- -------- -------- --------- ---------
Opertg profit.. 6,540 17,420 13,741 21,551 59,252
Interest expense. 720 776 682 644 2,822
Total other inc.. 717 671 412 (75) 1,725
-------- -------- -------- --------- ---------
Inc before tax. 6,537 17,315 13,471 20,832 58,155
Income tax exp... 2,563 6,900 5,483 8,492 23,438
-------- -------- -------- --------- ---------
Net income... $3,974* $10,415 $7,988 $12,340 $34,717*
======== ======== ======== ========= =========
Net income
per share.. $0.22* $0.57 $0.44 $0.67 $1.90*
======== ======== ======== ========= =========
- -------------------------------------------------------------------------------
Quarter Ended July 25 October 24 January 23 April 24 Year 1993
(13 weeks) (13 weeks) (13 weeks) (13 weeks) (52 weeks)
- -------------------------------------------------------------------------------
Sales............ $140,003 $175,877 $169,810 $198,432 $684,122
Cost of sales.... 106,543 130,924 125,677 143,291 506,435
-------- -------- -------- -------- --------
Gross profit... 33,460 44,953 44,133 55,141 177,687
Selling, general
& admin........ 28,738 34,129 33,469 35,558 131,894
-------- -------- -------- -------- --------
Opertg profit.. 4,722 10,824 10,664 19,583 45,793
Interest expense. 867 841 765 787 3,260
Total other inc.. 778 691 605 692 2,766
-------- -------- -------- -------- --------
Inc before tax. 4,633 10,674 10,504 19,488 45,299
Income tax exp... 1,850 4,167 4,113 7,885 18,015
-------- -------- -------- -------- --------
Net income... $2,783 $6,507 $6,391 $11,603 $27,284
======== ======== ======== ======== ========
Net income
per share.. $0.15 $0.36 $0.35 $0.64 $1.50
======== ======== ======== ======== ========
*Excludes the income effect of adopting SFAS 109 in May 1993 of $3,352 or
$.18 per share.
Note: Acquisition amortization of $260 for the first and second quarters and
fourth quarters of 1993 and 1995, $259 for the third quarters and $277 for the
fourth quarter of 1994 has been reclassified from other income to selling,
general and administrative.
BUSINESS
La-Z-Boy was incorporated under the laws of the State of Michigan in 1941
and is headquartered in the State of Michigan. La-Z-Boy is engaged primarily in
the manufacture of furniture. La-Z-Boy's principal office is located at 1284
North Telegraph Road, Monroe, Michigan 48161, and its telephone number is (313)
242-1444.
PRINCIPAL PRODUCTS
La-Z-Boy operates in the furniture industry and as such does
not have differing segments. "Residential" dealers are those who resell
to individuals for their home use. "Contract" seating and casegood
products are sold to commercial dealers.
- -------------------------------------------------------------------------
Sales by Type 1994 1993 1992
- -------------------------------------------------------------------------
Residential (Home)
Upholstery............................... 76% 74% 75%
Wood & Other............................. 18% 19% 17%
---- ---- ----
94% 93% 92%
Contract (Office).......................... 6% 7% 8%
---- ---- ----
100% 100% 100%
==== ==== ====
- -------------------------------------------------------------------------
Sales by Country 1994 1993 1992
- -------------------------------------------------------------------------
United States.............................. 94% 95% 95%
Canada and Foreign......................... 6% 5% 5%
---- ---- ----
100% 100% 100%
==== ==== ====
La-Z-Boy is organized into five operating divisions. Residential (67 years in
business) accounts for the majority of the upholstery category. Kincaid (48
years) is part of the wood category. Hammary (50 years) is primarily in the wood
category. La-Z-Boy Canada (65 years) is part of the upholstery category.
La-Z-Boy Contract Furniture Group (22 years), which was formed in 1994 from La-
Z-Boy's former Contract and RoseJohnson divisions, is all of the Contract line.
STATUS OF NEW PRODUCTS OR SEGMENTS
There were not any major new products or segments during the 1994
fiscal year.
RAW MATERIALS
The principal raw materials used by La-Z-Boy in the
manufacture of its products are hardwoods for solid wood dining room
and bedroom furniture, casegoods, occasional tables and for the frame
components of seating units; plywood and chipwood for internal parts;
veneers for dining room furniture, wall units, and occasional tables;
water-based and liquid finishes (stains, sealants, lacquers) for
external wood; steel for the mechanisms; leather, cotton, wool,
synthetic and vinyl fabrics for covers; and polyester batting and
non-chlorofluorocarbonated polyurethane foam for cushioning. Steel and
wood products are generally purchased from a number of sources, usually
in the vicinity of the particular plant, and product-covering fabrics
and polyurethane are purchased from a substantial number of sources on
a centralized basis. La-Z-Boy fabricates the majority of the
parts in its products, largely because quality parts made to its exact
specifications are not obtainable at reasonable cost from outside
sources.
Raw materials costs historically have been about 35 percent of net
sales in the upholstery operations and a somewhat higher percentage in
the casegoods operations. Purchased fabric (which includes leather) is
the largest single raw material cost representing about 40 percent of total
upholstery product material costs. Polyurethane (poly) foam for cushions
and padding and lumber are the next two largest types of upholstery raw
material costs. Both fabric and poly are highly sensitive to changes in
the price of oil. Price increases for raw materials excluding lumber have
kept pace with the inflation rate in recent years and are expected to
continue to do so. Lumber prices have increased during the past year by
about 10 to 20 percent, depending on the species of lumber.
Lumber, like most commodities, historically has had sharp changes in
prices over the short term and long term. La-Z-Boy is usually not as
affected by these changes as much as other furniture manufacturers due to
the large percentage of upholstered goods manufactured that do not require
as much lumber as casegoods. Also, wood substitutes, (e.g. steel, plastic)
can be used to some degree in upholstered products.
PATENTS, LICENSES AND FRANCHISES OR CONCESSIONS
La-Z-Boy has a number of patents on its reclining chair and
rocking chair mechanisms which it believes were important to the early
success of La-Z-Boy and to its present competitive position. It
believes, however, that since it is so firmly established in the
industry, the loss of any single or small group of patents would not
now materially or adversely affect La-Z-Boy's business. La-Z-Boy has
no material licenses, franchises or concessions.
SEASONAL BUSINESS
La-Z-Boy generally experiences its lowest level of sales
during the first quarter. When possible, the scheduling of production
is designed to maintain generally uniform manufacturing activity
throughout the year, except for mid summer plant shutdowns to coincide
with slower sales.
PRACTICES REGARDING WORKING CAPITAL ITEMS
La-Z-Boy does not carry significant amounts of upholstered
finished goods inventory to meet rapid delivery requirements of
customers or to assure itself of a continuous allotment of goods from
suppliers. Normal customer terms provide for one payment due within 45
days with a 1 percent discount within 30 days (one installment, 1
percent discount 30 net 45).
Most casegoods finished goods inventories are built to provide for
quicker delivery requirements of customers without installment credit
terms therefore, resulting in higher levels of finished product on hand
at any period in time than the upholstered products. Kincaid and
Hammary divisions primarily sell casegood products. Casegoods are also
sold through the Contract Division.
CUSTOMERS
La-Z-Boy distributes to over 12,000 locations. La-Z-Boy
does not have any customer whose sales amount to 10 percent
or more of La-Z-Boy's consolidated sales. La-Z-Boy
approximate dealer mix consists of 39 percent proprietary, 15 percent
to major dealers (Montgomery Ward and other department stores) and
46 percent to general dealers. Proprietary stores consist of stores
dedicated to the sale of La-Z-Boy products and in-store dedicated
galleries. The dedicated stores include La-Z-Boy Furniture Galleries
stores and Showcase Shoppes. In-store dedicated galleries have been
established for each of La-Z-Boy's divisions.
ORDERS AND BACKLOG
For fiscal year 1994 the majority of La-Z-Boy's Residential Division
orders were for dealer stock, with approximately 35 percent of orders being
requested directly by customers. Furthermore, about 20 percent of units
produced at all divisions were built for La-Z-Boy's inventory. The remainder
were "built-to-order" for dealers.
As of March 4, 1995, backlogs were approximately $89 million compared
to approximately $95 million on February 26, 1994. This represents less than
six weeks of sales. On average, orders are shipped in approximately five
weeks. Any measure of backlog at a point in time may not be indicative of
future sales performance. La-Z-Boy does not rely on backlogs to
predict future sales since the sales cycle is only five weeks and backlog
can change a lot from week to week. In recent weeks the incoming order rate has
slowed.
The cancellation policy for La-Z-Boy, in general, is that an
order cannot be cancelled after it has been put into production. Orders from
prebuilt stock though, may be cancelled up to the time of shipment.
RENEGOTIATION CONTRACTS
La-Z-Boy does not have any material portion of business
which may be subject to renegotiation of profits or termination of
contracts or subcontracts at the election of the Government.
COMPETITIVE CONDITIONS
La-Z-Boy believes that it ranks third in the U.S. in dollar
volume of sales within the Residential furniture industry, which
includes manufacturers of bedroom, dining room and living room
furniture. Based on the most accurate statistics available, La-Z-Boy
believes that it is the largest manufacturer of upholstered products
and solid wood bedroom/dining room products in the United States.
La-Z-Boy competes primarily by emphasis on quality of its
products, dealer support and a lifetime warranty on the reclining and
legrest mechanisms.
La-Z-Boy has approximately fifteen major competitors in the
reclining or motion chair field and a substantially larger number of
competitors in the upholstery business as a whole and in the Casegoods
and Contract businesses.
La-Z-Boy's best U.S. market share information (in dollars,
not units) indicates that it has about 30 to 35 percent of the single seat
recliner market, above 8 percent of the residential upholstery market,
and less than 2 percent of the residential casegoods market. These
market shares have been increasing slightly over the last three years
in most lines.
RESEARCH & DEVELOPMENT
La-Z-Boy spent $6.4 million in fiscal 1994 for new product
development, existing product improvement, quality control,
improvement of current manufacturing operations and research into the
use of new materials in the construction of its products. La-Z-Boy
spent $6.2 million in fiscal 1993 on such activities and
$5.5 million on such activities in fiscal 1992. La-Z-Boy
customers do not engage in research with respect to La-Z-Boy
products.
COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
La-Z-Boy has been identified as a Potentially Responsible Party
("PRP") at two clean-up sites: Organic Chemical and Seaboard Chemical
Company. At each site, La-Z-Boy has been identified as a de minimis
contributor and volumetric assessments indicate that La-Z-Boy's
contributions to each site have been less than .1% of the total. Each
site has either completed or has begun the Phase I cleanup and the total
cleanup costs expected to be incurred at each site have been estimated.
La-Z-Boy is also participating with a number of other companies in the
voluntary RCRA closure of the Caldwell Systems site. La-Z-Boy's
volumetric assessment at this site is in the 1% range. The steering
committee responsible for negotiating the cleanup plan with the EPA has
recently reinitiated its negotiations in anticipation of initial cleanup
activities. Estimates of the cleanup costs at the Caldwell site are
also available. The number of PRP's and voluntary participants at the
three sites range from 182 to in excess of 1,750. Based on a review of
the number, composition and financial stability of the PRP's and voluntary
participants at each site, along with cleanup cost estimates available,
management does not believe that any significant risk exists that La-Z-Boy
will be required to incur total costs in excess of $100,000 at any of the
sites. At April 30, 1994, a total of $300,000 has been accrued with respect
to these three sites.
La-Z-Boy's current environmental compliance concerns are focused
on new regulations for Storm Water Pollution Prevention and the 1990
Clean Air Act Amendments. La-Z-Boy has participated in a group storm
water permit program sponsored by its trade association (American
Furniture Manufacturers Association - AFMA); has contracted with a
consulting firm to provide assistance to its plants with the
development of Storm Water Pollution Prevention Plans; and has
contracted with another firm to conduct detailed air emission
inventories and assist in the preparation of timely and complete
operating permits for Clean Air Act compliance. La-Z-Boy feels that
compliance with these issues is important for maintaining its ongoing
operations and competitive position. La-Z-Boy does not anticipate
that this compliance effort will have a significant effect on capital
expenditures, earnings or competitive position.
EMPLOYEES
La-Z-Boy and its subsidiaries employed 9,675 persons as of
January 28, 1995.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
AND EXPORT SALES.
La-Z-Boy does not make any material amount of sales of
upholstered furniture to foreign customers. La-Z-Boy sells
upholstered furniture to Canadian customers through its Canadian
subsidiary, La-Z-Boy Canada Limited.
La-Z-Boy also derives an insignificant amount of royalty
revenues from the sale and licensing of its trademarks, tradenames and
patents to certain foreign manufacturers.
Export sales are increasing, but no specific sales objectives have
been set at this time.
PROPERTIES
In the United States, La-Z-Boy operates twenty-three
manufacturing plants (most with warehousing space), has an automated
fabric processing center and divisional and corporate offices. La-Z-Boy
has one manufacturing plant in Canada. Some locations listed below have
more than one plant.
The location of these plants, the approximate floor space,
principal operations conducted and the approximate number of employees
at such locations as of March 4, 1995, are as follows:
<PAGE>
Floor Space Number of
Location (square feet) Operations Conducted Details Employees
-------- ------------- --------------------- ------- ---------
Monroe, 233,900 Corporate offices (1) 476
Michigan
Newton, 628,175 Manufacture, assembly, (2) 1,136
Mississippi leather cutting and
warehousing of upholstery
Redlands, 189,125 Upholstering, assembly (3) 267
California and warehousing of
upholstery
Florence, 414,920 Manufacture, assembly (4) 449
South Carolina and warehousing of
upholstery
Florence, 48,400 Fabric processing (5) 17
South Carolina center
Neosho, 560,640 Manufacture, assembly (6) 1,105
Missouri and warehousing of
upholstery
Dayton, 909,320 Manufacture, assembly (7) 1,808
Tennessee and warehousing of
upholstery
Siloam Springs, 400,000 Manufacture and (8) 296
Arkansas assembly of upholstery
<PAGE>
Floor Space Number of
Location (square feet) Operations Conducted Details Employees
------------ ------------ ---------------------- --------- ---------
Tremonton, 672,770 Manufacture, assembly (9) 839
Utah and warehousing of
upholstery
Leland, 311,990 Manufacture, assembly and (10) 413
Mississippi warehousing of Contract
casegoods and upholstery
Waterloo, 257,340 Manufacture, assembly, (11) 412
Ontario and warehousing of
upholstery
Lincolnton, 373,830 Manufacture and (12) 393
North Carolina assembly of upholstery
Grand Rapids, 440,000 Manufacture and assembly (13) 117
Michigan of Contract office
furniture/systems
Lenoir area 554,770 Manufacture, assembly and (14) 467
(Hammary), warehousing of primarily
North Carolina Casegoods and some
upholstered products
Hudson area 1,045,050 Manufacture, assembly, (15) 1,175
(Kincaid), and warehousing of
North Carolina Casegoods
--------- -----
7,040,230 9,370
(1) On December 1, 1974, La-Z-Boy purchased from Floral City
Furniture Company a 15,700 square foot showroom adjacent to
La-Z-Boy's Home Office and a plant on Telegraph Road in
Monroe, Michigan. This facility was constructed in 1935 and
expanded in 1970 to a total square footage of 215,200. It was
brought to its present size by an addition of 18,700 square
feet in 1990.
(2) Originally built in 1961 with 274,200 square feet of space and
includes: 190,000 square foot addition started during 1986,
4,000 square feet added in 1990, 19,100 square feet
constructed in 1991 and 13,510 square feet added in 1992. In
1992, an 82,500 square foot woodworking facility was
constructed. During 1993, the manufacturing and warehouse
buildings were expanded a total of 43,200 square feet. In
1994, a chiller building and a conveyor pit were constructed.
(3) The original building of 158,670 square feet was constructed
in 1967. A 21,200 square foot warehouse addition was completed
in 1987 and a 9,255 square foot warehouse addition was completed
in 1992.
(4) 244,085 and 67,680 square feet represent additions constructed
in 1969 and 1973. In 1994, a 7,020 square foot batting storage
building was completed. The balance represents a building
constructed prior to 1930 and purchased in 1966.
(5) The original building of 24,900 square feet was completed in
1975. La-Z-Boy completed construction of a 23,500
square foot addition to the Fabric Processing Center in 1980.
(6) This facility includes a 130,000 square foot addition completed in
1979, two dry kilns constructed in 1985 at a total square
footage of 4,300, a 72,000 square foot manufacturing addition
completed in 1987 and in addition made in 1990 of 25,000 square
feet. During 1993 a 37,500 square foot metal stamping room was
added. The balance of 291,840 represents the original building
which was constructed in 1969.
(7) The original building of 320,420 square feet was constructed
in 1973. Additions include: a 48,800 square foot warehouse
addition completed in 1982, 195,000 square feet started during
1986, 68,700 square feet added in 1990, a major upholstery
plant of 274,600 square feet added in 1991, and an 1,800
square foot storage building completed in 1992.
(8) The building was constructed in 1995.
(9) The original building of 220,400 square feet was constructed in
1979. Additions include a 60,000 square foot warehouse addition
completed in 1982, a 121,960 square foot addition completed in
1984, 62,500 square feet of expansion during 1989 and an
upholstery plant addition of 207,910 square feet in 1991.
(10) In 1985, La-Z-Boy acquired the net assets of Dillingham
Manufacturing Company, Inc., which included a 153,500 square
foot manufacturing plant located in Leland, Mississippi. This
building was originally constructed in 1959 and 1970. There
was a 153,035 square foot expansion done during 1990. In 1992,
a 7,300 square foot office addition was completed on the site
of the previous office and in 1993, a 1,450 square foot
maintenance shop was added.
(11) As of February 28, 1979, La-Z-Boy acquired the net
assets of Deluxe Upholstering Limited from the Molson
Companies Limited, which included a 124,300 square foot
manufacturing plant located in Waterloo, Ontario, Canada. In
1985, La-Z-Boy relocated its manufacturing plant in
Waterloo, to an existing facility of 209,820 square feet
within the same city and expanded it to its present size in
1989.
(12) In 1986, the net assets of Burris Industries were acquired,
which included a 373,830 square foot manufacturing plant
located in Lincolnton, North Carolina. The building parts were
constructed in 1963, 1965, 1969 and 1974.
(13) In 1986, the net assets of RoseJohnson Incorporated were
acquired, which included a three building total of 440,000
square feet located in Grand Rapids, Michigan. Two of the
buildings were constructed in the early 1900's. Of the two
buildings, one building contains 185,000 total square feet, while
the other building contains 145,000 square feet. The third
building, consisting of 110,000 square feet, was completed in 1960.
(14) In 1986, the operating assets of Hammary Furniture Company
were acquired, which included three manufacturing facilities:
one built in 1946 consisting of 136,500 square feet located in
Lenoir, North Carolina; another constructed in 1968 with
341,580 square feet, including a warehouse of 141,000 built in
1990, located in Granite Falls, North Carolina; and a third
facility in Sawmills, North Carolina, built in 1963 consisting
of 75,000 square feet. During 1993, a 4,000 square foot dry
lumber storage building was built to replace a 2,310 square
foot building that was torn down.
(15) In 1988, the net assets of Kincaid Furniture Company were
acquired, which included 730,000 square feet in six
manufacturing locations within North Carolina. A 237,500
square foot warehouse addition was completed in 1991 and a
5,000 square foot boiler building was added in 1993. During
1994, the completion of the following additions expanded
Kincaid by 72,550 square feet: a cafeteria, a rough mill
building, a dry shed building, and a finishing room.
The Monroe, Michigan; Redlands, California; Dayton, Tennessee; Waterloo,
Ontario, Canada; Lincolnton, North Carolina; Grand Rapids, Michigan;
Lenoir, North Carolina; Hudson, North Carolina and Newton, Mississippi
woodworking facility plants are owned in fee by La-Z-Boy. The Florence,
South Carolina; Neosho, Missouri; Newton, Mississippi; Siloam Springs,
Arkansas and Tremonton, Utah plants as well as the automated Fabric
Processing Center were financed by the issuance of industrial revenue bonds
and are occupied under long-term leases with government authorities. The
Leland, Mississippi plant is under a long term lease between the Board of
Supervisors of Washington County, Mississippi (lessor) and La-Z-Boy Chair
Company (lessee). These leases are capitalized on La-Z-Boy books. La-Z-Boy
believes that its plants are well maintained, in good operating condition
and will be adequate to meet its present and near future business
requirements. The average age of La-Z-Boy's properties is 25 years.
LEGAL PROCEEDINGS
For information relating to certain legal proceedings, see Note 9
of the Notes to Consolidated Financial Statements under "La-Z-Boy Chair Company
Financial Statements."
<PAGE>
MARKET PRICE OF LA-Z-BOY COMMON STOCK, DIVIDEND INFORMATION, AND RELATED
SHAREHOLDER MATTERS
Dividend and Market Information
---------------------------------------------------
1995 Divi- Market Price
Quarter dends -----------------------------
Ended Paid High Low Close
----------------------------------------------------
July 30 $0.17 $33 3/4 $25 3/8 $26 1/2
Oct. 29 0.17 30 26 1/2 29 3/4
Jan. 28 0.17 32 5/8 27 7/8 30 5/8
---------------------------------------------------
1994 Divi- Market Price
Quarter dends -----------------------------
Ended Paid High Low Close
----------------------------------------------------
July 24 $0.15 $31 7/8 $25 1/2 $29 3/4
Oct. 23 0.15 31 7/8 29 1/4 31 3/8
Jan. 22 0.17 39 3/4 31 1/2 39 3/4
Apr. 30 $0.17 $40 $30 1/2 $33 1/2
-----
$0.64
=====
----------------------------------------------------
1993 Divi- Market Price
Quarter dends -------------------------------
Ended Paid High Low Close
-----------------------------------------------------
July 25 $0.15 $24 5/8 $21 $23 3/8
Oct. 24 0.15 24 3/8 18 20 3/8
Jan. 23 0.15 27 1/8 20 5/8 26 3/8
Apr. 24 $0.15 $29 3/4 $26 3/8 $28
-----
$0.60
=====
- -------------------------------------------------------------------------------
Dividend Market Price P/E Ratio
Dividends Dividend Payout ----------------------- ---------
Year Paid Yield Ratio High Low Close Earnings High Low
- -------------------------------------------------------------------------------
1994 $0.64 1.9% 33.7%* $40 25 1/2 33 1/2 $1.90* 21* 13*
1993 0.60 2.1% 40.0% 29 3/4 18 28 l.50 20 12
1992 0.58 2.5% 41.7% 28 3/4 19 1/2 23 1/2 1.39 21 14
1991 0.56 2.6% 43.1% 21 1/2 12 1/4 21 1/4 1.30 17 9
1990 0.54 2.8% 34.2% 23 16 3/4 19 5/8 1.58 15 11
1989 0.46 2.4% 29.9% 19 7/8 14 19 1/8 1.54 13 9
*Excludes the income effect of adopting SFAS 109 in May 1993 of $3,352 or
$.18 per share.
Shares of the La-Z-Boy Common Stock are traded on the NYSE and the PSE
(symbol LZB). Market price data presented above are NYSE prices. See
"Summary -- Comparative Stock Prices" for a recent closing price of the
La-Z-Boy Common Stock on the NYSE.
As if January 28, 1995, there were approximately 13,223 holders
of record of the La-Z-Boy Common Stock.
No officer, director, or beneficial owner of 5% or more of the outstanding
La-Z-Boy Common Stock is a shareholder of E/C, and consummation of the Merger
will therefore have no effect on the number of shares of La-Z-Boy Common Stock
held by such persons. If 51%, 60%, or 92% of the initial Merger consideration
consists of La-Z-Boy Common Stock, the percentage ownership of each such person
would be reduced to approximately 97.0%, 96.5%, or 94.7%, respectively, of its
present level.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Under rules adopted by the Securities and Exchange Commission, a
person is deemed to be the beneficial owner of La-Z-Boy's common shares
if he has or shares the right to vote the shares or if he has or
shares the investment power over such shares. There may be, therefore,
more than one beneficial owner with respect to any share or group of
shares. A person may also be deemed to be the beneficial owner if he is
the settlor of a trust with a right to revoke the trust and regain the
shares or has the power to acquire shares by means of outstanding options
or rights to convert other securities into common shares.
The following information is furnished in compliance with these
rules with respect to security ownership of each person known to La-Z-Boy
to beneficially own more than 5% of La-Z-Boy's common shares as
of February 28, 1995, based in each case on data provided by such person.
<PAGE>
T A B L E I
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
------------------- -------------------- --------
Edwin J. Shoemaker
8 Sylvan Drive
Monroe, Michigan 48161.............. 1,015,528(1) 5.667%
Monroe Bank & Trust
Monroe, Michigan 48161.............. 5,022,285(2) 28.026%
Mitchell Hutchins Institutional Investor
New York, NY 10019................. 1,340,600(3) 7.481%
(1) Mr. Shoemaker beneficially owns and is the donor of a revocable trust
which holds 1,015,178 shares.
(2) Monroe Bank & Trust is the trustee of a number of revocable and
irrevocable trusts under which it, under certain conditions, has sole or
shared voting power over the above-mentioned shares. It may in certain
instances have sole or shared investment power with respect to such
shares. The shares referred to above include the shares identified in
footnote (1) above as being beneficially owned by Mr. Shoemaker, since
Monroe Bank & Trust is the trustee of his trust.
(3) Based on information contained in the named shareholders' Schedule 13G
dated February 13, 1995, filed pursuant to the Securities and Exchange Act
of 1934 and based on information delivered to La-Z-Boy by the named
shareholder in February 1995. The Schedule states that the shares were
acquired for investment.
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as to the common shares
beneficially owned as of February 28, 1995 by each director and each executive
officer of La-Z-Boy, based in each case on data provided by such person.
T A B L E I I
Amount and Nature of Percent
Name Beneficial Ownership of Class
---- -------------------- --------
Edwin J. Shoemaker.................... 1,015,328 (1) 5.667%
Charles T. Knabusch................... 717,507 (2) 3.988%
Lorne G. Stevens...................... 29,002 (3) .162%
Frederick H. Jackson.................. 246,763 (4) 1.376%
Gene M. Hardy......................... 176,706 (5) .986%
Patrick H. Norton..................... 55,515 (6) .310%
Warren W. Gruber...................... 3,000 (7) .017%
David K. Hehl......................... 7,430 (8) .041%
John F. Weaver........................ 158,500 (9) .884%
Rocque E. Lipford..................... 3,300 (10) .018%
James W. Johnston..................... 321,450 (11) 1.794%
Charles W. Nocella.................... 23,739 (12) .132%
All Directors and Executive Officers
As A Group (12 persons)............. 2,338,440 12.974%
(1) See footnote 1 to Table I.
(2) Mr. Knabusch owns 202,455 shares of record and beneficially. He has
options to purchase 70,832 shares which are exercisable within 60 days of
February 28, 1995. His wife owns 74,720 shares individually and as a trustee
for their children. He is also one of the members of the advisory
committee of an irrevocable trust holding 229,500 shares and as such has
shared voting and investment powers with respect to such shares. In
addition, he has shared investment power as a member of the Investment
Committee under La-Z-Boy's Employees' Profit Sharing Plan which holds
140,000 shares. He may be deemed to own all of such shares beneficially.
(3) Mr. Stevens owns 12,500 shares of record and beneficially and his wife
owns 16,502 shares of record and beneficially.
(4) Mr. Jackson owns 91,607 shares of record and beneficially and his wife
owns 800 shares of record and beneficially. He has options to purchase
12,350 shares which are exercisable within 60 days of February 28, 1995. In
addition, he has shared investment power as a member of the Investment
Committee under La-Z-Boy's Employees' Profit Sharing Plan which holds
140,000 shares. He is deemed to own all of such shares beneficially.
(5) Mr. Hardy owns 19,755 shares of record and beneficially and he has
options to purchase 4,252 shares which are exercisable within 60 days of
February 28, 1995. His wife owns 12,443 shares of record and beneficially. In
addition, he has shared investment power as a member of the Investment Committee
under La-Z-Boy's Employees' Profit Sharing Plan which holds 140,000 shares.
He is deemed to own all of such shares beneficially.
(6) Mr. Norton owns 36,725 shares of record and beneficially and his wife
owns 5,975 shares. He has options to purchase 12,350 shares which are
exercisable within 60 days of February 28, 1995.
(7) Mr. Gruber owns 2,900 shares of record and beneficially. His wife owns
100 shares of record and beneficially.
(8) Mr. Hehl owns 4,901 shares of record and beneficially. His wife owns
652 shares individually and their three sons own 1,877 shares of record
and beneficially.
(9) Mr. Weaver owns 2,900 shares of record and beneficially and his wife
owns 15,600 shares. In addition, he has shared investment power as a
member of the Investment Committee under La-Z-Boy's Employees' Profit
Sharing Plan which holds 140,000 shares. He is deemed to own all of such
shares beneficially.
(10) Mr. Lipford owns 2,500 shares of record and beneficially. His wife
owns 800 shares of record and beneficially.
(11) Mr. Johnston owns 268,465 shares of record and beneficially and his
wife owns 52,985 shares of record and beneficially.
(12) Mr. Nocella owns 8,120 shares of record and beneficially and his wife
owns 11,685 shares. He has options to purchase 3,650 shares which are
exercisable within 60 days of February 28, 1995.
MANAGEMENT AND RELATED MATTERS
DIRECTORS AND EXECUTIVE OFFICERS
La-Z-Boy's Board of Directors is divided into three classes, one
consisting of three directors and two consisting of four directors.
Directors serve for three-year, staggered terms, such that the terms of
office of directors comprising one of the classes expires each year.
The table which follows provides background information concerning each of
the directors of La-Z-Boy currently in office and concerning each executive
officer of La-Z-Boy who is not also a director.
DIRECTORS
Director Business Experience
Name Age Since and Other Directorships
---- --- -------- -----------------------
Frederick H. Jackson........ 66 1971 Mr. Jackson has been Vice
President Finance for more than
five years.
Lorne G. Stevens............ 66 1972 On April 30, 1988, Mr. Stevens
retired from La-Z-Boy as Vice
President of Manufacturing, a
position he held for more than
five years.
Patrick H. Norton........... 72 1981 Mr. Norton has been Senior Vice
President, Sales and Marketing
for more than five years.
Edwin J. Shoemaker.......... 87 1941 Mr. Shoemaker has been Vice
Chairman of the Board and Executive
Vice President of Engineering for
more than five years.
Charles T. Knabusch......... 54 1970 Mr. Knabusch has been Chairman of
the Board and President of the
Company for more than five years.
John F. Weaver.............. 77 1971 Mr. Weaver has been Executive
Vice President and a Director of
the Monroe Bank & Trust for more
than five years.
David K. Hehl............... 47 1977 Mr. Hehl has been a partner in the
public accounting firm of Cooley,
Hehl, Wohlgamuth & Carlton for
more than five years.
Rocque E. Lipford........... 55 1979 Mr. Lipford has been a principal in
the law firm of Miller, Canfield,
Paddock and Stone, P.L.C., since
January 1994 and previously was a
partner of Miller, Canfield,
Paddock and Stone for more than
five years.
Warren W. Gruber............ 73 1981 Mr. Gruber has been President and
Chief Operating Officer and a
Director of Gruber Valu-World for
more than five years.
Gene M. Hardy............... 57 1982 Mr. Hardy has been Secretary and
Treasurer of La-Z-Boy for more
than five years.
James W. Johnston........... 55 1991 Mr. Johnston has been a self-
employed financial and business
consultant for more than five
years. He was appointed a
Director in January 1991.
NON-DIRECTOR EXECUTIVE OFFICERS
Charles W. Nocella 62 Vice President of Manufacturing for more than
five years.
Employee directors receive a fee of $250 for each meeting of the Board of
Directors attended. Non-employee directors receive an annual retainer of
$12,000 and a fee of $400 for each Board meeting and for each committee
meeting attended.
In addition, each non-employee director receives an initial grant of
30-day options on 1,500 common shares of Restricted Stock upon election to
the Board and a subsequent annual grant at the beginning of each fiscal
year of 30-day options on 200 common shares of Restricted Stock. Such
grants are made pursuant to the La-Z-Boy Chair Company Restricted Stock
Plan for Non-Employee Directors approved by the shareholders effective
September 1, 1989. The Plan contemplates a present sale of the optioned
shares at 25% of market value, but provides restrictions on the transfer
or other disposition of the shares by the non-employee director during the
restricted time, which expires upon the earliest to occur of the following
events: death or disability, retirement from the Board, change of control,
or termination of the participant's service as a director with the consent
of a majority of La-Z-Boy's employee members of the Board, all as
defined in the Plan.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to or earned by
the Chief Executive Officer and each of La-Z-Boy's four other most
highly compensated executive officers (the "named executives") during the
last three fiscal years.
<PAGE>
SUMMARY COMPENSATION TABLE
<CAPTION>
</TABLE>
<TABLE> Long-Term
Annual Compensation Compensation Awards
- ------------------------------------------------------------------- --------------------------------
Awards Payouts
--------------------- ---------
Incentive Long-
Restricted Stock Term
Other Annual Stock Option Incentive All
Other
Name and Principal Salary(1) Bonus(2) Compensation Awards(3) Grants Plan
Compensation(4)
Position Year $ $ $ $ # Payouts $
------------------ ---- --------- -------- ------------ ---------- --------- ---------
- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles T. Knabusch 1994 386,625 264,046 0 0 22,500 0 70,913
Chairman of the Board 1993 377,550 198,056 0 0 24,400 0 67,206
President and Chief 1992 353,200 133,765 0 0 36,410 0 56,961
Executive Officer.........
Edwin J. Shoemaker 1994 127,345 62,373 0 0 0 0 17,347
Vice Chairman and 1993 124,350 45,030 0 0 0 0 16,229
Executive Vice President 1992 118,850 31,012 0 0 0 0 18,892
of Engineering............
Frederick H. Jackson 1994 238,250 132,503 0 0 9,600 0 44,147
Vice President Finance 1993 232,550 97,180 0 0 10,500 0 41,055
and Chief Financial 1992 217,800 65,661 0 117,000 4,300 0 36,744
Officer...................
Patrick H. Norton 1994 238,250 132,503 0 0 9,600 0 44,504
Senior Vice President 1993 232,550 97,180 0 0 10,500 0 41,921
Sales & Marketing......... 1992 217,800 65,661 0 117,000 4,300 0 37,465
Charles W. Nocella 1994 149,650 84,111 0 0 4,600 0 28,566
Vice President of 1993 146,050 61,688 0 0 5,000 0 26,645
Manufacturing............. 1992 135,050 41,229 0 21,750 2,900 0 23,198
(1) Includes, where applicable, amounts electively deferred by a named
executive under La-Z-Boy's Matched Retirement Savings Plan, which is a
so-called "401(k)" plan, and directors' fees paid to the named executives,
where applicable, for attendance at La-Z-Boy Chair Company Board of
Directors' meetings.
(2) Allocated to named executives for the applicable fiscal year under
La-Z-Boy's Executive Incentive Compensation Plan.
<PAGE>
(3) At the close of La-Z-Boy's 1994 fiscal year, the named executives
held the following numbers of shares of restricted stock, which had the
following aggregate values on such date (based on the closing market price
for unrestricted shares of La-Z-Boy's Common Stock): Mr. Knabusch, -0-
shares worth $-0-; Mr. Shoemaker, $-0- shares worth $-0-; Mr. Jackson,
7,800 shares worth $261,300; Mr. Norton, 7,800 shares worth $261,300; and
Mr. Nocella, 1,450 shares worth $48,575.
The value of restricted stock listed in the Summary Compensation Table
represents the fair market value of La-Z-Boy's stock at the grant date
less the 25% required payment for the stock by the executive. While all
shares of restricted stock require three years of post-grant service to
vest in the ordinary course, such shares may vest in less than three years
in certain circumstances, such as upon a change of control of La-Z-Boy
or the holder's death, permanent mental or physical disability or normal
retirement. Normal dividends are paid on the restricted stock and are not
subject to forfeiture.
(4) The amounts in this column include amounts allocated for the named
executives to the Supplemental Executive Retirement Plan (SERP), earnings
credited under the SERP, and La-Z-Boy matching contributions in the form of
La-Z-Boy Common Stock to the Matched Retirement Savings Plan. Set forth below
is a breakdown of the totals contained in the Table for fiscal 1994:
Amounts allocated to the Supplemental Executive Retirement Plan of
La-Z-Boy were as follows:
1994
----
Charles T. Knabusch................. $57,656
Edwin J. Shoemaker.................. 13,733
Frederick H. Jackson................ 35,362
Patrick H. Norton................... 35,362
Charles W. Nocella.................. 22,447
Earnings credited on supplemental retirement balances under La-Z-Boy's
Supplemental Executive Retirement Plan were as follows:
1994
----
Charles T. Knabusch................. $11,941
Edwin J. Shoemaker.................. 3,614
Frederick H. Jackson................ 7,387
Patrick H. Norton................... 7,325
Charles W. Nocella.................. 4,609
Contributions under La-Z-Boy's Matched Retirement Savings Plan were as
follows:
1994
----
Charles T. Knabusch................. $1,316
Edwin J. Shoemaker.................. -0-
Frederick H. Jackson................ 1,398
Patrick H. Norton................... 1,817
Charles W. Nocella.................. 1,510
</TABLE>
<PAGE>
<TABLE>
The following table shows all stock options granted to each of the
named executive officers of La-Z-Boy during fiscal year 1994 and the
potential realizable value of the grants assuming stock price appreciation
rates of 5% and 10% over the five-year term of the options.
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock Price
Individual Grants (1) Appreciation for Option Terms ($)(2)
-------------------------------------------- ------------------------------------------
5% Per Year 10% Per Year
% of Total -------------------- --------------------
Options
Granted To
Options Employees Exercise or Price Aggregate Price Aggregate
Granted In Fiscal Base Price Expiration Per Share Value Per Share Value
Name (#) Year ($/SH) Date ($/SH) ($) ($/SH) ($)
---- ------- ---------- ----------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles T. Knabusch..... 22,500 18.27 32.5875 09/01/98 41.5908 935,793 52.4825 1,180,856
Edwin J. Shoemaker...... -0- -0- -0- N/A -0- -0- -0- -0-
Frederick H. Jackson.... 9,600 7.80 29.6250 09/01/98 37.8098 362,974 47.7114 458,029
Patrick H. Norton....... 9,600 7.80 29.6250 09/01/98 37.8098 362,974 47.7114 458,029
Charles W. Nocella...... 4,600 3.74 29.6250 09/01/98 37.8098 173,925 47.7114 219,472
All Optionees........... 123,130 100.00 30.1664 09/01/98 38.5000 4,740,505 48.5833 5,982,062
(1) All of the above options were granted September 2, 1993 pursuant to
the terms of La-Z-Boy's 1986 Incentive Stock Option Plan as approved by
the shareholders of La-Z-Boy in 1986 and in effect as of the date of
the grant. One-fourth of the shares purchasable under each option normally
becomes exercisable beginning in the second, third, fourth and fifth years
after the date of the grant. However, under the terms of the agreements
described under "Certain Agreements" below, then-outstanding options would
be accelerated upon the occurrence of a change in control. Options once
exercisable generally remain exercisable until the expiration of the fifth
year after the date of grant. In the event of the optionee's death or
retirement, the right to exercise the option will exist for a period of
one year following the date of such event for the full amount of shares
remaining unexercised. The optionee's right to exercise an option
immediately terminates in the event the optionee's employment terminates
for any reason other than death or retirement. The per share exercise
price at which the options were granted was 100% of the fair market value
of La-Z-Boy's Common Stock on the date the options were granted, except
that in the case of options granted to Mr. Knabusch, such price was 110%
of fair market value on the grant date.
(2) The 5% and 10% rates of appreciation are required to be disclosed by
the Securities and Exchange Commission ("SEC") and are not intended to
forecast possible future actual appreciation, if any, in La-Z-Boy's
stock prices. It is important to note that options have potential value
for the named executive only if La-Z-Boy's stock price advances beyond
the exercise price shown in the table during the effective five-year
option period.
</TABLE>
<PAGE>
<TABLE>
The following table provides information as to stock options
exercised by each of the named executive officers in fiscal year 1994 and
the value of the remaining options held by each such executive officer at
La-Z-Boy's year-end, April 30, 1994:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
Value of Unexercised
Number of Unexercised In-The-Money Options
Options at Fiscal Year-End At Fiscal Year-End(2)
-------------------------- --------------------------
Shares
Acquired Value
On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Name # $(1) # # $ $
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles T. Knabusch..... 10,100 117,786 67,579 65,431 833,881 520,532
Edwin J. Shoemaker...... -0- -0- -0- -0- -0- -0-
Frederick H. Jackson.... 4,500 65,250 13,700 21,100 196,791 187,334
Patrick H. Norton....... -0- -0- 13,700 21,100 196,791 187,334
Charles W. Nocella...... 2,700 45,975 1,975 10,700 24,475 98,900
(1) Based on the closing market price of La-Z-Boy's Common Stock on the
date of exercise, minus the exercise price. An individual, upon exercise
of an option, does not receive cash equal to the amount contained in the
Value Realized column of this table. No cash is realized until the shares
received upon exercise of an option are sold.
(2) Based on the closing market price of La-Z-Boy's Common Stock on
April 30, 1994 ($33.50), minus the exercise price.
</TABLE>
LONG-TERM INCENTIVE COMPENSATION UNDER THE
LA-Z-BOY CHAIR COMPANY 1993 PERFORMANCE-BASED STOCK PLAN
At the 1993 Annual Meeting, shareholders approved a long-term
incentive compensation plan designated as the La-Z-Boy Chair Company 1993
Performance-Based Stock Plan ("Performance Plan"). The purpose of the
Performance Plan is to provide La-Z-Boy and its subsidiaries with an
additional means to (a) attract and retain competent new personnel and
other key employees, (b) insure retention of the services of existing
executive personnel and key employees, and (c) provide incentive to all
such personnel to devote their utmost effort and skills to the long-term
advancement and betterment of La-Z-Boy and its shareholders. The
Performance Plan seeks to accomplish that purpose through the grant to
selected employees of contingent awards ("Target Awards") the potential
pay-outs on which ("Performance Awards") are linked to achievement by the
end of a cycle of three Company fiscal years (a "Performance Cycle") of
Company performance goals specified toward the beginning of the
Performance Cycle, and by structuring all Performance Awards which may be
earned as options to purchase or outright grants of Company Common Stock.
After the 1993 Annual Meeting, the Compensation Committee granted
Target Awards to certain employees for the Performance Cycle ending at the
close of La-Z-Boy's 1996 fiscal year. In addition, shortly before the
end of fiscal 1994, the Compensation Committee granted additional Target
Awards for the Performance Cycle ending at the close of fiscal 1997. In
each case, the Committee determined to establish four uniform financial
goals for these Target Awards, each relating to operating performance of
La-Z-Boy and its consolidated subsidiaries for the pertinent
Performance Cycle: (1) sales growth at a rate greater than that of the
industry, (2) an increase in earnings before income tax at a rate equal to
or greater than sales growth, (3) operating profit margin growth at a rate
equal to or greater than sales growth, and (4) return on total capital at
a specified rate.
<TABLE>
The table which follows provides information concerning the Target
Awards granted during fiscal 1994 to executive officers named in the
Summary Compensation Table:
Long Term Incentive Plan -- Awards in Last Fiscal Year
<CAPTION>
Estimated Future Payouts
-----------------------------------
Number of Performance
Performance Period Until
Shares(1) Maturation Threshold(2) Target(3) Maximum(4)
Name # Or Payout # # #
---- ----------- ------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Charles T. Knabusch... 3,122 (5) 3,122 6,245 12,490
2,810 (6) 2,810 5,620 11,240
Edwin J. Shoemaker.... -0- (5) -0- -0- -0-
-0- (6) -0- -0- -0-
Frederick H. Jackson.. 1,335 (5) 1,335 2,670 5,340
1,200 (6) 1,200 2,400 4,800
Patrick H. Norton..... 1,335 (5) 1,335 2,670 5,340
1,200 (6) 1,200 2,400 4,800
Charles W. Nocella.... 637 (5) 637 1,275 2,550
575 (6) 575 1,150 2,300
(1) Numbers reported are the base numbers of shares subject to Target
Awards granted.
(2) Numbers reported are the numbers of shares which would become subject
to 30-day option if only one performance goal is achieved. The per share
exercise price for any such option would be 50% of the "Fair Market Value"
(as defined in the Performance Plan) of a common share at date of grant of
the Target Awards.
(3) Numbers reported are the numbers of shares which would become subject
to 30-day option if two performance goals are achieved. The per share
exercise price for each such option would be 25% of Fair Market Value of a
common share on date of grant of the Target Awards. For achievement of
three performance goals, an outright grant of the same number of shares
would be made. Under the terms of the Performance Plan, if a Target Award
grantee's employment terminates due to death, or if termination is due to
disability (as therein defined) or retirement with the consent of
La-Z-Boy and the terminated employee subsequently dies before the end of
the Performance Cycle, his or her estate administrator may elect to
receive a Performance Award prior to the end of the cycle. If the election
is made, the estate would receive either a 30-day option on the number of
shares shown in this column, as if two Performance Goals had been met, or
an outright grant of that number of shares, depending upon whether
employment termination occurred during the first or second half of the
Performance Cycle. Termination of the grantee's employment due to death,
disability, or consensual retirement otherwise has no effect on any
outstanding Target Awards of the grantee, but termination for any other
reason automatically cancels such awards.
(4) Numbers reported are the numbers of shares which would be awarded, in
the form of an outright grant, if all performance goals are achieved.
Under the terms of the Performance Plan, the holder of a Target Award also
will be deemed automatically to have earned and been granted the same
Performance Award if a person or group becomes an Acquiring Person (as
defined in the Performance Plan) or certain changes in the composition of
the Board of Directors occurs while the Target Award is outstanding. The
same effect upon then-outstanding Target Awards also will result if, while
there is an Acquiring Person, any of certain other significant
transactions involving La-Z-Boy should occur, unless the transaction
has been approved by a majority of Directors who were Board members before
the Acquiring Person became such.
(5) The performance period (Performance Cycle) until maturation or payout
is three fiscal years ending April 28, 1996.
(6) The performance period is three fiscal years ending April 27, 1997.
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following non-employee directors constitute the Compensation
Committee of La-Z-Boy's Board of Directors and served in that capacity
for the entire 1994 fiscal year: Warren W. Gruber, David K. Hehl,
Rocque E. Lipford and John F. Weaver. No other persons served on the
Compensation Committee during that fiscal year.
John F. Weaver is an Executive Vice President of Monroe Bank and
Trust. Charles T. Knabusch, Chairman of the Board, President and CEO of
La-Z-Boy is a member of the Board of Directors of Monroe Bank and Trust
and serves as a member of the Personnel Committee of the Bank.
The law firm of Miller, Canfield, Paddock and Stone, P.L.C., of which
Rocque E. Lipford is a principal, provided legal services to La-Z-Boy, during
fiscal 1994 as Miller, Canfield, Paddock and Stone, has done for the past 14
years.
DESCRIPTION OF LA-Z-BOY CAPITAL STOCK
The following description of the capital stock of La-Z-Boy does not
purport to be complete and is subject to and qualified in its entirety by
reference to the full texts of La-Z-Boy's Articles of Incorporation, as amended
(the "La-Z-Boy Articles"), and its By-Laws (the "La-Z-Boy Bylaws" and together
with the La-Z-Boy Articles, the "La-Z-Boy Charter Documents"), which are
exhibits to the Registration Statement of which this Proxy Statement/Prospectus
is a part and are incorporated herein by reference. The summaries provided
herein of certain provisions of the Michigan Business Corporation Act, as
amended (the "MBCA"), also do not purport to be comprehensive and are qualified
in their entirety by reference to the full text of such statutory provisions.
See also "Comparison of Shareholder Rights and Charter Documents" below.
GENERAL
La-Z-Boy's total authorized capital stock consists of: (a) 40,000,000
shares of La-Z-Boy Common Stock, of which approximately 17,969,000 shares were
issued and outstanding as of January 28, 1995 and approximately 3,855,000
shares are reserved for future issuance (including in the Merger), and (b)
5,000,000 shares of Preferred Stock (the "La-Z-Boy Preferred Stock"), none of
which shares have been issued or are currently reserved for future issuance.
Except as otherwise required by the La-Z-Boy Articles or the MBCA, authorized
but unissued shares of either class may be issued at the discretion of the
La-Z-Boy Board without need for any further action by the shareholders of
La-Z-Boy.
LA-Z-BOY PREFERRED STOCK
As permitted by the MBCA, the La-Z-Boy Articles authorize the La-Z-Boy
Board at any time, and from time to time, to divide the La-Z-Boy Preferred
Stock into one or more series, having such voting powers, full, limited, or
none, such designations, preferences, privileges, powers, and relative,
participating, optional, or other special rights, and such qualifications,
limitations, and restrictions thereon as shall be stated and expressed in the
resolutions of the La-Z-Boy Board providing for the issuance thereof. With
respect to any series designated by the La-Z-Boy Board, it also is authorized
to, among other things, specify the number of shares comprising such series,
the dividend rate or rates on the shares of such series and the preference or
relation which such dividends shall bear to any other class or series of
La-Z-Boy stock, and the redemption rights, if any, any purchase, retirement, or
sinking fund, any conversion rights, and any special voting rights relating to
such series.
Shares of any series of La-Z-Boy Preferred Stock hereafter designated and
issued and which subsequently are redeemed or otherwise acquired by La-Z-Boy
would return to the status of authorized and unissued shares of La-Z-Boy
Preferred Stock, without designation as to series, and thereafter may be
reissued by the La-Z-Boy Board.
It is possible for La-Z-Boy Preferred Stock (or additional shares of
La-Z-Boy Common Stock) to be issued for the purpose of making an acquisition by
an unwanted suitor of a controlling interest in La-Z-Boy more difficult,
time-consuming, or costly or to otherwise discourage an attempt to acquire
control of La-Z-Boy. Under such circumstances, the availability of authorized
and unissued shares of La-Z-Boy Preferred Stock and La-Z-Boy Common Stock may
make it more difficult for shareholders to obtain a premium for their shares.
Such authorized and unissued shares could be used to create voting or other
impediments or to frustrate a person seeking to obtain control of La-Z-Boy by
means of a merger, tender offer, proxy contest, or other means. Such shares
could be privately placed with purchasers who might cooperate with the La-Z-Boy
Board in opposing such an attempt by a third party to gain control of La-Z-Boy.
The issuance of new shares of La-Z-Boy Preferred Stock or La-Z-Boy Common Stock
also could be used to dilute ownership of a person or entity seeking to obtain
control of La-Z-Boy. Although La-Z-Boy does not currently contemplate taking
such action, shares of La-Z-Boy Common Stock or one or more series of La-Z-Boy
Preferred Stock could be issued for the purposes and effects described above
and the La-Z-Boy Board reserves its rights (consistent with its fiduciary
responsibilities) to issue such stock for such purposes.
LA-Z-BOY COMMON STOCK
Subject to the rights and preferences, if any, of any then outstanding
shares of La-Z-Boy Preferred Stock, the holders of La-Z-Boy Common Stock are
entitled to receive such dividends as may from time to time be lawfully
declared by the La-Z-Boy Board. With respect to every issue submitted to them
as La-Z-Boy shareholders at a meeting of shareholders or otherwise (including,
without limitation, the election of directors), such holders are entitled to
one vote per share of La-Z-Boy Common Stock. In the event of liquidation they
are entitled, after payment in full of the liquidation preference, if any, on
any then outstanding shares of La-Z-Boy Preferred Stock, to share ratably in
all assets of La-Z-Boy available for distribution to holders of shares of
La-Z-Boy Common Stock. Holders of shares of La-Z-Boy Common Stock do not have
preemptive rights to subscribe for additional shares which La-Z-Boy may propose
to issue and are not entitled to cumulate votes in the election of
La-Z-Boy directors. All shares of La-Z-Boy Common Stock now issued and
outstanding are, and all such shares to be issued in the Merger will be, fully
paid and nonassessable.
The registrar and transfer agent for the La-Z-Boy Common Stock is American
Stock Transfer & Trust Company.
CERTAIN ARTICLES PROVISIONS
Under Article VIII of the La-Z-Boy Articles, La-Z-Boy may not consummate a
"Business Combination" involving any corporation, person, or other entity that
is a 10%-or-more "beneficial owner" (as therein broadly defined) of shares of
La-Z-Boy stock entitled to vote in the election of La-Z-Boy directors (a
"Related Entity"), without the approval of the Business Combination by the
affirmative vote of the holders of at least 67% of the outstanding shares
entitled to vote in the election of La-Z-Boy directors, unless: (a) certain
"fair price" and related conditions specified in paragraph (2)(a) of Article
VIII are satisfied; (b) a memorandum of understanding concerning the Business
Combination was approved by a majority of the La-Z-Boy directors before the
Related Entity became such; (c) after the Related Entity became such, the
Business Combination has been approved by a majority of "Continuing Directors;"
or (d) the Business Combination relates to or is with a corporation a majority
of the outstanding shares of each class of equity of which is owned by La-Z-Boy
and following consummation of the Business Combination La-Z-Boy shareholders
(other than the Related Entity) will retain their proportionate voting and
equity interests in La-Z-Boy or the resulting combined entity.
For purposes of Article VIII, a "Business Combination" includes any merger
or consolidation of La-Z-Boy with or into a Related Entity; sale, exchange, or
lease of all or any substantial part of the assets of La-Z-Boy to a Related
Entity; or issuance or transfer by La-Z-Boy of voting securities of La-Z-Boy or
rights to acquire such voting securities if issued or exchanged with a Related
Entity for any sort of consideration. As defined in that article, any La-Z-Boy
director who was a member of the La-Z-Boy Board on the date Article VIII was
adopted by the La-Z-Boy shareholders and any other La-Z-Boy director who has
been elected by the La-Z-Boy shareholders prior to the time that the Related
Entity involved in the proposed Business Combination became a Related Entity,
or who, if so elected following the time the Related Entity became such, was
elected upon the recommendation of a majority of the then Continuing Directors
in office to succeed a Continuing Director.
Article X of the La-Z-Boy Articles provides that Article VIII (and Article
X itself) may not be amended or repealed except by the affirmative vote of at
least 67% of all shares of La-Z-Boy stock entitled to vote with respect
thereto, unless such amendment or repeal is approved and recommended to the
La-Z-Boy shareholders by a majority of those members of the La-Z-Boy Board who
would then qualify as Continuing Directors. Article X also requires the
affirmative vote of at least 67% of all La-Z-Boy shares entitled to vote in the
election of directors for any amendment of the La-Z-Boy Bylaws by La-Z-Boy
shareholders.
CERTAIN MBCA PROVISIONS
Chapter 7A of the MBCA provides that a "business combination" (as therein
defined) between a covered Michigan corporation or any of its subsidiaries and
an "interested shareholder" (generally, a 10%-or-more beneficial owner of
voting shares) or any affiliate thereof may not be consummated for at least
five years after the interested shareholder became such (or at any time
thereafter unless certain price and other conditions are also satisfied)
without approval (a) by 90% of the votes of each class of stock entitled to be
cast by the corporation's shareholders, and (b) by 2/3 of the votes of each
class entitled to be cast, excluding shares beneficially owned by the
interested shareholder, its affiliates and associates. Chapter 7A "business
combinations" include, among other transactions, mergers, significant asset
transfers, certain disproportionate issuances of shares to an interested
shareholder, certain reclassifications and recapitalizations disproportionately
favorable to such a shareholder, and the adoption of a plan of liquidation or
dissolution in which such a shareholder would receive anything other than cash,
but do not include purchases of shares from other shareholders in the open
market, a tender offer, or otherwise.
Currently, Chapter 7A does not apply to La-Z-Boy. However, although the
La-Z-Boy Board has no present plans or intentions to take such an action, the
chapter permits the La-Z-Boy Board at any time, by resolution and without a
shareholder vote, to cause La-Z-Boy to become subject, with respect to
specifically identified or unidentified interested shareholders, to the
supermajority vote requirements of the chapter.
Chapter 7B of the MBCA divests of their normal voting rights any shares of
a covered Michigan corporation that are acquired in a "control share
acquisition" (as defined in that chapter) unless, before or after the
acquisition, the shareholders of the corporation approve those rights. Two
votes are required for approval: (a) a majority of votes cast by all holders of
shares entitled to vote (voting by class in certain circumstances), and (b) a
majority of all such votes cast, excluding "interested shares" (i.e., in
general, shares controlled for voting purposes by the person that has made or
proposes to make the control share acquisition, any member of a group with that
person concerning the acquisition, or any officer or employee-director of the
corporation). Subject to certain exceptions (including acquisitions by gift or
inheritance, in satisfaction of a good faith security interest, or pursuant to
a merger agreement to which the corporation is a party), a "control share
acquisition" is an acquisition of outstanding voting shares of the corporation
or the right to direct the vote of such shares which, when added to shares
previously owned or controlled for voting purposes by any person, would entitle
the person, alone or as part of a group, to exercise or direct the exercise of
voting power in the election of the corporation's directors within any of the
following ranges of voting power: over 1/5 but less than 1/3, over 1/3 but less
than a majority, or a majority.
In addition to applying to certain other Michigan corporations, Chapter 7B
applies to any Michigan corporation which, like La-Z-Boy: (a) has its principal
place of business in Michigan, (b) has 100 or more shareholders of record,
excluding certain types of holders specified in the chapter ("excluded
holders"), and (c) without giving effect to any excluded holders, has over 10%
of its shares held of record by, or over 10% of its record shareholders who
are, Michigan residents. Chapter 7B permits a covered corporation to opt out of
coverage by means of an amendment to its articles of incorporation or bylaws
(including by a bylaw amendment adopted by directors), but La-Z-Boy has not
elected to be excluded from coverage. If such an election were made in the
future, it would be effective only with respect to a control share acquisition
occurring after the amendment making such election and before any subsequent
repeal of such amendment.
Under Chapter 7B, unless otherwise provided in the articles of
incorporation or bylaws of a covered corporation before a control share
acquisition has occurred, in the event that the corporation's shareholders
approve full voting rights for the shares acquired in such an acquisition and
the acquiring person has acquired a majority of all voting power of the
corporation, the corporation's shareholders (other than the acquiring person)
would have dissenters' rights to receive the "fair value" of their shares from
the corporation. In addition, if authorized in the covered corporation's
articles of incorporation or bylaws before a control share acquisition has
occurred, shares acquired in a control share acquisition are redeemable for
their fair value at the option of the corporation during certain periods
specified in the chapter. For each of these purposes, "fair value" is defined
in the chapter as a value not less than the highest per share price paid by the
acquiring person in the control share acquisition. Currently, neither of the
La-Z-Boy Charter Documents includes any provisions which would eliminate
dissenters' rights, or would permit redemption of an acquiring person's shares,
under the circumstances described above.
Section 368 of the MBCA prohibits a corporation that has shares registered
on a national securities exchange, such as La-Z-Boy, from privately purchasing
any of such listed shares at a per share price in excess of the average market
price per share for the 30 business days prior to the date of purchase from any
person holding more than 3% of its shares, if such person has owned the listed
shares for less than two years, unless the purchase has been authorized in
advance by the holders of the corporation's shares entitled to vote thereon,
meets the requirements of a provision in the corporation's articles of
incorporation permitting such a purchase, or is otherwise authorized by the
MBCA. The La-Z-Boy Articles do not contain any provision relevant to Section
368. If the redemption provisions of Chapter 7B discussed above were to be made
applicable to La-Z-Boy, as could occur through an amendment of the La-Z-Boy
Bylaws by the La-Z-Boy Board, the shareholder vote requirement of Section 368
would not apply to any redemption pursuant to Chapter 7B. However, the La-Z-Boy
Board has no present plans or intentions to adopt any such bylaw amendment.
CERTAIN POTENTIAL ANTI-TAKEOVER EFFECTS
The supermajority vote requirements of Articles VIII and X of the La-Z-Boy
Articles and the provisions of MBCA Chapter 7A (which, while not currently
applicable to La-Z-Boy, can be made applicable at any time by resolution of the
La-Z-Boy Board) do not prevent the acquisition of a significant or even
controlling voting interest in La-Z-Boy through the purchase of shares in the
open market, a tender offer, or otherwise. However, if the prospective
acquiror's acquisition terms are unacceptable to the La-Z-Boy Board, such
provisions can present substantial impediments to actions, such as a follow-up
merger, that a party obtaining such a voting interest may wish or need to take
in order to accomplish its acquisition goals. In addition, MBCA Chapter 7B
presents substantial direct impediments to the acquisition of a significant or
controlling interest in La-Z-Boy on terms unacceptable to the La-Z-Boy Board.
Such provisions of the La-Z-Boy Articles and the MBCA, therefore, may prevent,
hamper, or discourage persons unwilling or unable to negotiate acceptable
acquisition terms with the La-Z-Boy Board from undertaking or succeeding in an
"unfriendly" takeover attempt. The broad authority of the La-Z-Boy Board
concerning the terms of any series of La-Z-Boy Preferred Stock and its general
authority to issue shares of such series, additional shares of La-Z-Boy Common
Stock, and rights (including so-called "poison pill" rights) to acquire shares
of either class of capital stock, as well as the classified structure of the
La-Z-Boy Board discussed in the next section of this Proxy
Statement/Prospectus, also may have such anti-takeover effects.
COMPARISON OF SHAREHOLDER RIGHTS AND CHARTER DOCUMENTS
In the event the proposed Merger is consummated and E/C merges into LZB
Acquisition, shareholders of E/C whose shares of E/C Stock are converted into
shares of La-Z-Boy Common Stock will become shareholders of La-Z-Boy. Upon the
consummation of the Merger, the rights of La-Z-Boy shareholders will be
governed by the provisions of the La-Z-Boy Charter Documents and the MBCA.
Currently, the rights of E/C shareholders are governed by E/C's Restated
Charter (the "E/C Charter"), its Amended and Restated Bylaws (the "E/C Bylaws"
and, together with the E/C Charter, the "E/C Charter Documents"), the
Tennessee Business Corporation Act ("TBCA"), and, where applicable, certain
other Tennessee statutes.
There are differences between the La-Z-Boy Charter Documents and the E/C
Charter Documents. Moreover, although the MBCA and the TBCA are similar in many
respects, there are differences between the Michigan and Tennessee statutes
which may affect shareholders' rights.
Certain differences between the rights of holders of La-Z-Boy Common Stock
and the rights of holders of E/C Stock are summarized below. The following
discussion is not meant to be relied upon as an exhaustive list or detailed
description of such differences and is not intended to constitute a detailed
comparison or description of the provisions of the La-Z-Boy Charter Documents,
the E/C Charter Documents, the MBCA, the TBCA, or any other Tennessee statutes.
The following discussion is qualified in its entirety by reference to the
La-Z-Boy Charter Documents, the E/C Charter Documents, and the laws of the
State of Michigan and of the State of Tennessee, and holders of E/C Stock are
referred to the complete texts of such documents and laws. Additional
information concerning the La-Z-Boy Common Stock also is provided above under
"Description of La-Z-Boy Capital Stock."
CAPITAL STRUCTURE
Unlike La-Z-Boy, which has only one authorized class of common stock,
there are two classes of E/C Stock: the E/C Class A Stock, and the E/C Class B
Stock. The voting rights of holders of the E/C Class A Stock are comparable to
those of holders of La-Z-Boy Common Stock discussed above. Shares of E/C Class
B Stock have no voting rights with respect to election of E/C directors and
have no other voting rights, except in certain special cases set forth in the
E/C Charter or the TBCA.
Under certain circumstances specified in the E/C Charter, all outstanding
shares of E/C Class B Stock automatically would convert into shares of E/C
Class A Stock, and the E/C Charter also provides for automatic conversion of
shares of one class into shares of the other depending on whether the shares
are held by persons who then hold certain specified positions with E/C. No
comparable conversion provisions apply to shares of La-Z-Boy Common Stock.
As further discussed above, La-Z-Boy also has an authorized class of
Preferred Stock, whereas the only authorized classes of capital stock of E/C
are the E/C Class A Stock and the E/C Class B Stock.
BOARD OF DIRECTORS; REMOVAL; VACANCIES
The La-Z-Boy Bylaws provide for a board of directors divided into two
classes of four directors each and one class of three directors. As
contemplated by the La-Z-Boy Bylaws, La-Z-Boy directors are elected by class
for three-year, staggered terms. The E/C Bylaws provide for nine directors to
constitute the entire board, five of which directors are required to be the
following five officers of E/C: Chief Executive Officer, Executive Vice
President, Vice President Administration, Vice President Manufacturing, Vice
President Finance. Under the TBCA, all directors of a corporation are to be
elected annually, unless the corporation's charter provides for a longer term.
The E/C Charter does not contain any such provisions.
As permitted by the TBCA, the E/C Charter Documents provide that any E/C
director may be removed for cause by vote of a majority of the entire E/C
Board. The MBCA does not authorize the removal of directors by directors. Any
E/C director also may be removed at any time, with or without cause, by the
holders of E/C shares entitled to vote thereon; the same is true with respect
to removal of any La-Z-Boy director by the shareholders of La-Z-Boy.
The La-Z-Boy Bylaws delegate to incumbent directors the power to fill any
vacancies on the La-Z-Boy Board, however occurring, by the affirmative vote of
two-thirds of the remaining directors though less than a quorum. Any person so
appointed to fill a vacancy would hold office for the unexpired portion of the
term of the director whose place was filled. The E/C Bylaws do not permit any
E/C Board action to fill any vacancy on the E/C Board caused by a vote of E/C
shareholders, but any other vacancy may be filled by the E/C Board until the
next annual meeting of E/C shareholders. Where E/C Board action to fill a
vacancy is permitted, the affirmative vote of a simple majority of directors
remaining on the E/C Board is all that is required.
DISSENTERS' RIGHTS
Under the MBCA, shareholders that otherwise would be entitled to exercise
dissenters' rights with respect to an articles or charter amendment, a merger,
disposition of assets, or other extraordinary transaction do not have any
dissenters' rights if (a) the stock affected is either listed on a national
securities exchange or held of record by at least 2,000 shareholders or (b) the
holders of such stock are to receive cash or shares (or any combination
thereof) and such shares, if any, are either listed on a national securities
exchange or held of record by more than 2,000 shareholders. Under the TBCA,
shareholders that otherwise would be entitled to exercise dissenters' rights do
not have such rights if the stock affected is listed on a national securities
exchange or is a national market system security, but the type of consideration
to be received for such stock does not affect the availability of dissenters'
rights. The E/C Stock is neither listed on a national securities exchange nor a
national market system security. Except as noted in the next subsection of this
Proxy Statement/Prospectus or in the discussion of Chapter 7B of the MBCA under
"Description of La-Z-Boy Capital Stock," the matters with respect to which
shareholders of a Michigan corporation such as La-Z-Boy and shareholders of a
Tennessee corporation such as E/C may have dissenters' rights are generally
comparable. The procedural provisions of the MBCA and applicable Tennessee law
relating to dissenters' rights also do not differ significantly.
CERTAIN DIFFERENCES CONCERNING SHAREHOLDER VOTING AND
EXTRAORDINARY TRANSACTIONS
Both under MBCA, and under the TBCA and other Tennessee statutes, the
amendment of a corporation's articles of incorporation or charter, and, in
circumstances in which a shareholder vote is required for approval of a merger,
disposition of assets, or other extraordinary corporate transaction, such a
transaction, requires the affirmative vote of a majority of the outstanding
stock entitled to vote, and a majority of the outstanding stock of any class,
series, or similar category entitled to vote separately, subject, in each case,
to such "supermajority" voting requirements as may be provided for in the
corporation's articles of incorporation or charter and to such special
supermajority or other unusual voting requirements as are imposed by statute.
As more fully discussed under "Description of La-Z-Boy Capital Stock,"
Article VIII of the La-Z-Boy Articles under some circumstances requires a
supermajority shareholder vote for approval of certain Business Combinations
(as therein defined), and, although Chapter 7A of the MBCA does not currently
apply to La-Z-Boy, to the extent (if ever) that the La-Z-Boy Board may at some
time in the future determine to make the chapter applicable, Chapter 7A also
would impose supermajority voting requirements for certain business
combinations (as therein defined). Absent such requirements, some Article VIII
Business Combinations and Chapter 7A business combinations would require
majority shareholder approval and no shareholder approval would be required for
others. As also further discussed above, any amendment of Article VIII of the
La-Z-Boy Articles not recommended by Continuing Directors (as therein defined)
and any shareholder amendment of the La-Z-Boy Bylaws also requires a
supermajority vote.
The E/C Charter does not contain any supermajority shareholder voting
requirements. In addition, although the Tennessee Business Combination Act
contains provisions generally similar to Chapter 7A of the MBCA, that statute
does not apply to a non-public corporation (like E/C) absent an express
election to be covered in the corporation's charter, and the E/C Charter does
not contain such an election.
In addition, as also discussed under "Description of La-Z-Boy Capital
Stock," Chapter 7B would divest voting shares of La-Z-Boy acquired in a control
share acquisition (as therein defined) of their normal voting rights unless and
until approved by the shareholder votes specified in the chapter, and Section
368 of the MBCA in some cases would require shareholder approval for an
above-market purchase by La-Z-Boy of shares of La-Z-Boy Common Stock. The
Tennessee Control Share Acquisition Act contains provisions comparable to those
of Chapter 7B of the MBCA, and the TBCA contains provisions comparable to those
of Section 368 of the MBCA, but such Tennessee statutory provisions do not
apply to a closely-held, non-public corporation like E/C.
The MBCA contains a provision, for which there is no counterpart under
Tennessee law, that affords voting rights (as well as dissenters' rights) to
shareholders of an acquiring corporation concerning a merger with or an
acquisition of shares or assets of another entity where the consideration for
the merger or acquisition is to be shares of the acquiring corporation's common
stock (or convertibles) and the merger or acquisition would have a specified
substantial dilative effect. Except in that respect and as otherwise indicated
above, the MBCA and the La-Z-Boy Charter Documents, and the applicable
Tennessee statutes and the E/C Charter Documents, respectively, provide similar
shareholder voting rights with respect to mergers, asset dispositions, and
other extraordinary transactions, as well as concerning amendments to the
respective Charter Documents of La-Z-Boy and E/C.
DERIVATIVE PROCEEDINGS
The MBCA provides that a shareholder of a corporation may commence and
maintain a derivative proceeding (i.e., a lawsuit brought in the right of the
corporation to recover damages or other relief for the benefit of the
corporation) only if the shareholder was a shareholder of the corporation at
the time of the act or omission complained of (or is a successor by operation
of law to one who was a shareholder at that time); the shareholder fairly and
adequately represents the interests of the corporation in enforcing the
corporation's right; the shareholder continues to be a shareholder until the
time of judgment, unless the failure to continue to be a shareholder is the
result of corporate action in which he did not acquiesce and the derivative
proceeding was commenced prior to the termination of his status as a
shareholder; and, prior to commencing the proceeding, the shareholder has made
a written demand upon the corporation to take suitable action and certain other
conditions concerning such demand have been satisfied. The TBCA also permits a
corporate shareholder to commence a derivative proceeding if the shareholder
was a shareholder of the corporation when the transaction complained of
occurred (or a successor to one who was), but does not expressly require the
shareholder to continue being a shareholder after that time or expressly impose
any other conditions comparable to those in the MBCA for commencement or
maintenance of such a proceeding.
DIRECTOR LIABILITY; INDEMNIFICATION
The MBCA authorizes a corporation to provide in its articles of
incorporation that a director will not be personally liable to the corporation
or its shareholders for monetary damages for breach of fiduciary duty as a
director, subject to certain exclusions. The TBCA authorizes a corporation to
provide for a similar limitation on directors' liability in its charter. The
La-Z-Boy Articles and the E/C Charter each contain such a liability limiting
provision. Under both the MBCA and the TBCA, such a provision does not
eliminate or limit a director's liability for breach of the duty of loyalty,
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, the unlawful payment of dividends or distributions,
or for any transaction from which the director derived an improper personal
benefit.
Both the MBCA and the TBCA require a corporation to indemnify its
directors, officers, employees, and agents under certain circumstances (in the
case of the TBCA, subject to any charter provisions to the contrary) and permit
broader indemnification of such persons under other circumstances relating to
derivative or other proceedings brought against such a person by virtue of such
person having served in such a capacity with or at the request of the
corporation. Both statutes also permit the advancement of expenses relating to
such proceedings under certain conditions.
Both the La-Z-Boy Charter Documents and the E/C Charter Documents require
indemnification of directors and officers to the fullest extent permitted by
applicable law. The La-Z-Boy Charter Documents also provide for mandatory
advancement of expenses of such an indemnitee under certain circumstances,
whereas advancement of expenses is not mandatory in any case with respect to
E/C indemnities.
OTHER MATTERS
The La-Z-Boy Bylaws require that La-Z-Boy call a special meeting of
the shareholders whenever requested by shareholders owning, in the
aggregate, at least 75% of the entire capital stock of the corporation
entitled to vote at such special meeting. While the TBCA requires that a
special meeting of shareholders be held upon the demand of the holders of
at least 10% of all the votes entitled to be cast on any issue proposed to
be considered at the meeting (and the E/C Bylaws also so provide), the MBCA
does not have such a requirement. It does provide, however, that upon the
application of at least 10% of all the shares entitled to vote at a meeting
and for good cause shown, a court may order a special meeting of
shareholders to be called and held, for the transaction of such business as
the court may designate.
Any of the La-Z-Boy Bylaws (other than a provision in Article VIII(a)
of the La-Z-Boy Bylaws that corresponds to the provision in the La-Z-Boy
Articles requiring a supermajority vote for shareholder action to amend or
repeal the La-Z-Boy Bylaws) may be amended or repealed, and new bylaws may
be adopted, by the affirmative vote of a majority of the La-Z-Boy Board.
The E/C Bylaws authorize their amendment or alteration, and the adoption of
new bylaws, by majority vote of all of the voting stock of E/C issued and
outstanding. In the absence of any contrary provisions in the E/C Charter
Documents, the TBCA also authorizes the E/C Board to amend the E/C Bylaws,
acting by a majority of a quorum.
Tennessee has a statute, designated as the Tennessee Investor
Protection Act ("TIPA"), regulating certain tender offers (defined therein
as "takeover offers") for equity securities of an "offeree company"
(defined in TIPA to include, any Tennessee corporation involved in a
takeover offer for its equity securities and which has substantial assets
located in Tennessee). Among other exclusions from its definition of
"takeover offer," any offer made on substantially equal terms to the
holders of any class of equity of an offeree company is excluded, if the
number of holders does not exceed 50 at the time of the offer. Also
excluded is an offer made on substantially equal terms to all shareholders
of an offeree company and recommended by that company's board of directors,
if the terms of the offer, including any inducements to officers or
directors not available to all shareholders, have been disclosed to the
shareholders. Where applicable, TIPA requires the filing of a registration
statement by the offeror with the Tennessee Commissioner of Insurance and
Commerce (the "Tennessee Commissioner") and delivery to the Tennessee
Commissioner by both offeror and offeree company of all solicitation
materials used in connection with the takeover offer. It also prohibits
"fraudulent, deceptive, or manipulative acts or practices" by either side
in connection with the offer.
There is no Michigan statute comparable to TIPA and, although TIPA by
its terms purports to govern takeover offers for certain corporations not
organized under the laws of Tennessee, the U.S. Court of Appeals for the
Sixth Circuit has held TIPA to be unconstitutional as so applied. The
Sixth Circuit Court of Appeals also has held provisions of The Tennessee
Control Share Acquisition Act which purports to extend the scope of the
Tennessee counterparts of MBCA Chapters 7A and 7B to certain non-Tennessee
corporations unconstitutional as so applied.
DESCRIPTION OF THE LA-Z-BOY NOTES
GENERAL
The La-Z-Boy Notes, known as the "La-Z-Boy Chair Company 8% Unsecured
Promissory Notes Due 1999," are unsecured obligations of La-Z-Boy to be issued
under the Indenture. The aggregate principal amount of the Notes outstanding at
any time under the Indenture is limited to $10,000,000. The Notes will be
substantially in the form set forth in the Indenture. See "Description of the
Indenture" for a summary of the provisions of the Indenture.
INTEREST RATE AND PAYMENT
The La-Z-Boy Notes will provide for 8% simple interest per annum on the
unpaid principal balance, payable annually.
SCHEDULED PRINCIPAL PAYMENTS
The principal of the La-Z-Boy Notes will be payable in four equal annual
installments.
OPTIONAL PREPAYMENT
The La-Z-Boy Notes will be subject to prepayment, in whole or in part,
without penalty or premium, at the option of La-Z-Boy, at any time after
issuance. The prepayment price will be an amount equal to the sum of the
outstanding principal balance plus all accrued and unpaid interest thereon.
RANKING
The La-Z-Boy Notes will be unsecured indebtedness of La-Z-Boy. With
respect to any assets of La-Z-Boy deposited, in trust, for the equal and pro
rata benefit of the holders of the La-Z-Boy Notes, such holders will have a
lien of first priority against such assets. With respect to those assets of
La-Z-Boy assigned to other creditors of La-Z-Boy as collateral for credit
extended to La-Z-Boy by such other creditors, the rights of the holders of the
La-Z-Boy Notes will be subordinate to the rights of such creditors. With
respect to the remaining assets of La-Z-Boy, the rights of the holders of the
La-Z-Boy Notes will rank equally with those of other general creditors of
La-Z-Boy. As of January 28, 1995, La-Z-Boy's outstanding debt totaled
approximately $147,003,000, of which approximately $43,120,000 was secured
by liens on certain assets.
LIMITED TRANSFERABILITY
There is currently no trading market for the La-Z-Boy Notes and it is
unlikely that any such market will develop. La-Z-Boy does not intend to take
any steps to facilitate the development of a trading market for the La-Z-Boy
Notes. The La-Z-Boy Notes will be transferable only upon the death of the
holder.
DESCRIPTION OF INDENTURE
The following is a summary of the material provisions of the Indenture.
The following summary does not purport to be complete and is subject to, and
qualified in its entirety by, all the provisions of the Indenture. Where
reference is made to particular provisions of the Indenture, such provision,
including definitions of certain terms, are incorporated herein by reference.
It is anticipated that the Indenture will be executed and become effective at
the Effective Time. A copy of the form of the Indenture may be obtained by
writing La-Z-Boy at 1284 North Telegraph Road, Monroe, Michigan 48161.
GENERAL
The Indenture provides that the principal of and the interest on the
La-Z-Boy Notes will be payable at an office of La-Z-Boy maintained for such
purpose in the City of Monroe, State of Michigan; provided, however, that at
the option of La-Z-Boy, the principal of and interest on the La-Z-Boy Notes may
be paid by check mailed to the registered holders of the La-Z-Boy Notes
(Section 301). The Notes are to be issued as registered Notes in any
denomination as La-Z-Boy may determine. (Section 302). The La-Z-Boy Notes may
be transferred only upon the death of the Holder pursuant to the applicable
laws of descent, such permitted transfer will be without service charge other
than any tax or other governmental charge imposed in connection therewith,
subject to the limitations provided in the Indenture. (Section 304).
The Indenture limits the aggregate principal amount of the La-Z-Boy Notes
that may be outstanding at any time to $10,000,000 (Section 301). The Indenture
also provides that the La-Z-Boy Notes will mature on the fourth anniversary of
the Effective Time and bear 8% simple interest, and will have such other terms
and provisions, as provided in the Indenture.
The Indenture provides that the La-Z-Boy Notes are solely obligations of
La-Z-Boy and that no personal liability whatever, under any circumstances or
conditions, shall attach to or be incurred by the incorporators, shareholders,
officers or directors of La-Z-Boy because of the incurring of the indebtedness
authorized by the Indenture, or by reason of any of the obligations, covenants
or agreements, express or implied, in the Indenture or in any of the La-Z-Boy
Notes (Article Twelve).
CERTAIN COVENANTS OF LA-Z-BOY
The Indenture requires La-Z-Boy to (i) duly and punctually pay the
principal of and interest on the La-Z-Boy Notes and comply with all other
terms, agreements and conditions contained therein, or made in the Indenture
for the benefit of the La-Z-Boy Notes; (ii) maintain an office where the
La-Z-Boy Notes may be presented, surrendered for payment, transferred or
exchanged and where notices upon La-Z-Boy may be served; (iii) under certain
conditions segregate and hold in trust for the benefit of the persons entitled
thereto a sum sufficient to pay the principal or interest becoming due on the
La-Z-Boy Notes; (iv) deliver to the Designated Representative, within 120 days
after the end of each fiscal year a written statement to the effect that
La-Z-Boy has fulfilled all its obligations under the Indenture throughout such
year; and (v) preserve its corporate existence (Sections 1001, 1002, 1003 and
1005).
La-Z-Boy is required to maintain a list indicating the names and addresses
of the holders of the La-Z-Boy Notes, the aggregate amount of the La-Z-Boy
Notes outstanding and the amount of each La-Z-Boy Note outstanding. If, and so
long as La-Z-Boy acts as its own Paying Agent, the list maintained by La-Z-Boy
must indicate (i) whether there has been any default in the payment of any sums
due and payable under any of the La-Z-Boy Notes outstanding (a "Payment
Default"); (ii) if there has been such a Payment Default, the date of such
Payment Default; (iii) if there has been such a Payment Default, whether such
Payment Default has been cured; and (iv) if such a Payment Default has been
cured, the date of such cure (Section 701).
REDEMPTION PROVISIONS
The La-Z-Boy Notes will be redeemable, at any time, in whole or in part,
at the option of La-Z-Boy, at one hundred percent (100%) of their principal
amount together with accrued interest to the redemption date (Article Eleven).
MERGER AND CONSOLIDATION
The Indenture will permit, without the consent of Holders of the La-Z-Boy
Notes, the consolidation or merger of La-Z-Boy with or into any other
corporation, if (i) La-Z-Boy is the continuing corporation or if the successor
corporation is incorporated under the laws of the United States, any State
thereof or the District of Columbia and expressly assumes the obligations of
La-Z-Boy under the Indenture; and (ii) immediately after giving effect to such
transactions, no Event of Default shall have happened and be continuing
(Section 801).
EVENTS OF DEFAULT
Each of the following events is defined as an Event of Default under the
Indenture with respect to the La-Z-Boy Notes: (i) default in the payment of any
principal and interest on the La-Z-Boy Notes, when due, continued for 30
days (a "Payment Default"); (ii) failure to observe or perform any other
covenant contained in the Indenture for the benefit of the La-Z-Boy Note
Holders continued for 60 days after written notice from the Designated
Representative or the Holders of at least fifty percent (50%) in principal
amount of the outstanding La-Z-Boy Notes; or (iii) certain events of
bankruptcy, insolvency or reorganization (Section 101).
The Indenture provides that if an Event of Default, other than a Payment
Default, shall have occurred and be continuing, the Designated Representative
and the Holders of not less than fifty percent (50%) in principal amount of the
La-Z-Boy Notes outstanding may declare the principal and the interest accrued
thereon, if any, to be due and payable immediately. Upon certain conditions
such declarations may be annulled and past defaults (except for Payment
Defaults or defaults in compliance with certain covenants) may be waived by the
Holders of a majority in principal amount of the La-Z-Boy Notes outstanding
(Sections 501 and 513).
The Indenture provides that if a Payment Default shall have occurred and
be continuing any Holder may notify La-Z-Boy in writing of the occurrence of an
Event of Default with respect to such Holder's La-Z-Boy Note(s) only and may
declare the principal and the interest accrued thereon, if any, to be due and
payable immediately.
Under the Indenture La-Z-Boy must give to the Designated Representative
and the Holders of the La-Z-Boy Notes notice of all uncured defaults, other
than a Payment Default, known to it with respect to the La-Z-Boy Notes
within 90 days after such a default occurs (the term "default" includes the
events specified above without notice of grace periods) (Section 602).
No Holder of any Note may institute any action under the Indenture unless
(i) such Holder gives La-Z-Boy written notice of a continuing Payment Default;
(ii) the Holders of not less than fifty percent (50%) in the aggregate
principal amount of the La-Z-Boy Notes outstanding requests the Designated
Representative to institute proceedings in respect of an Event of Default;
(iii) such Holder or Holders offer the Designated Representative such
reasonable indemnity as the Designated Representative may require; (iv) the
Designated Representative fails to institute an action for 60 days thereafter;
and (v) no inconsistent direction is given to the Designated Representative
during such 60-day period by the Holders of a majority in aggregate principal
amount of the La-Z-Boy Notes outstanding (Section 506).
The Holders of a majority in aggregate principal amount of the La-Z-Boy
Notes outstanding have the right, subject to certain exceptions, to waive an
Event of Default, direct the time, method and place of conducting any
proceeding for any remedy available to the Designated Representative, or
exercising any power conferred on the Designated Representative with respect
to the La-Z-Boy Notes (Section 511).
The Indenture provides that, in case an Event of Default (other than a
Payment Default) shall occur and be continuing, the Designated Representative,
in exercising its rights and powers under the Indenture, will be required to
use the degree of care of a prudent man in the conduct of his own affairs
(Section 601). The Indenture further provides that the Designated
Representative shall not be required to expend or risk his own funds or
otherwise incur any financial liability in the performance of any of his duties
under the Indenture unless it has reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
reasonably assured to it (Section 601).
La-Z-Boy must furnish to the Designated Representative within 120 days
after the end of each fiscal year a statement signed by certain officers of
La-Z-Boy to the effect that a review of the activities of La-Z-Boy during such
year and of its performance under the Indenture and the terms of the La-Z-Boy
Notes has been made, and to the best of the knowledge of the signatories based
on such review, La-Z-Boy is not in default in the performance and observance of
the terms of the Indenture, or, if La-Z-Boy is in default, specifying such
default (Section 1004).
DEFEASANCE
Under the terms of the Indenture, La-Z-Boy, at its option, (i) will be
"Discharged" (defined herein as in the Indenture) from any and all obligations
in respect of the La-Z-Boy Notes (except in each case for certain obligations
to register the transfer of La-Z-Boy Notes, replace stolen, lost or mutilated
La-Z-Boy Notes, or hold moneys for payment in trust) or (ii) need not comply
with certain restrictive covenants of the Indenture (including those described
above under "Certain Covenants of La-Z-Boy"), if La-Z-Boy deposits in trust for
the benefit of the Holders, money or U.S. Government Obligations which passes
through the payment of interest thereon and principal thereof which will
provide for the payment of the principal of and interest on the La-Z-Boy Notes
on the dates such payments are due in accordance with the terms of the La-Z-Boy
Notes.
MODIFICATION OF THE INDENTURE
Under limited circumstances, the Indenture may be modified by La-Z-Boy and
the Designated Representative without the consent of the Holders of any
La-Z-Boy Notes. In addition, with certain exceptions, the Indenture or the
rights of the Holders of the La-Z-Boy Notes may be modified by La-Z-Boy and the
Designated Representative with the consent of the Holders of a majority in
aggregate principal amount of the La-Z-Boy Notes affected by such modification
then outstanding, but no such modification may be made which would (i) change
the maturity of any payment of principal of, or any premium on, or any
installment of interest on, any La-Z-Boy Note, or reduce the principal amount
thereof or the interest thereon, or change the method of computing the amount
of principal thereof or interest thereon on any date or change any place of
payment where, or the coin or currency in which, any La-Z-Boy Note or
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the maturity thereof;
(ii) reduce the percentage in principal amount of the outstanding La-Z-Boy
Notes, the consent of whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required for any waiver
of compliance with certain provisions of the Indenture or certain
defaults thereunder and their consequences, provided for in the Indenture;
or (iii) modify any of the provisions of certain Sections of the
Indenture including the provisions summarized in this paragraph, except to
increase any such percentage or to provide that certain other provisions of the
Indenture cannot be modified or waived without the consent of the Holder of
each outstanding La-Z-Boy Note affected thereby (Section 902).
THE DESIGNATED REPRESENTATIVE
Mr. Rodney D. England, having offices at 402 Old Knoxville Highway, New
Tazewell, Tennessee 37825, will act as Designated Representative under the
Indenture.
DESCRIPTION OF THE PERFORMANCE UNITS
The Performance Units will constitute general unsecured obligations of
La-Z-Boy to issue additional shares of La-Z-Boy Common Stock to former E/C
shareholders in respect of the Merger. For a description of the terms of the
Performance Units, see "The Merger and Related Transactions -- Performance
Units." The Performance Units will be non-transferable and will not be listed
on any exchange; there is therefore no expectation that any trading market
will be established for the Performance Units. The payment of additional Merger
consideration pursuant to the Performance Units is conditioned upon the
Surviving Corporation's future performance at levels never before achieved by
E/C; accordingly, the present value of the Performance Units is unknown, and
there can be no assurance that they will not prove to have little or no
value at maturity.
LEGAL MATTERS
The legality of the La-Z-Boy Common Stock, the La-Z-Boy Notes, and the
Performance Units will be passed upon for La-Z-Boy by its counsel, Miller,
Canfield, Paddock and Stone, P.L.C., 150 West Jefferson, Suite 2500, Detroit,
Michigan 48226. Miller, Canfield, Paddock and Stone, P.L.C. has also issued
the tax opinion described above under "The Merger and Related Transactions
- - Certain Federal Income Tax Consequences." Rocque E. Lipford, the sole
shareholder of Rocque E. Lipford, P.C., which is a principal of Miller,
Canfield, Paddock and Stone, P.L.C., is a director of La-Z-Boy.
Certain legal matters will be passed upon for E/C by its counsel, Baker,
Donelson, Bearman & Caldwell, 2200 Riverview Tower, Knoxville, Tennessee 37902.
EXPERTS
The financial statements of E/C included in this Proxy
Statement/Prospectus and in the Registration Statement have been audited by BDO
Seidman, independent certified public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of that firm as experts in auditing and accounting in giving said
reports.
The financial statements of La-Z-Boy Chair Company as of April 30, 1994
and April 24, 1993 and for each of the three years in the period ended April 30,
1994 included in this Proxy Statement/Prospectus have been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
A representative of BDO Seidman is expected to be present at the Meeting.
This representative will have an opportunity to make statements if he or she so
desires and will be available to respond to appropriate questions.
F-1
INDEX TO FINANCIAL STATEMENTS
ENGLAND/CORSAIR, INC.
FINANCIAL STATEMENTS Page
Report of Independent Certified Public Accountants.................... F-2
Balance Sheets as of June 30, 1994 and 1993........................... F-3
Statements of Income for Each of the Three Years in the Period
Ended June 30, 1994.................................................. F-5
Statements of Equity Subject to Redemption for Each of the Three Years
in the Period Ended June 30, 1994.................................... F-6
Statements of Cash Flows for Each of the Three Years in the Period
Ended June 30, 1994.................................................. F-7
Summary of Accounting Policies........................................ F-9
Notes to Financial Statements......................................... F-11
Balance Sheets as of December 31, 1994 and June 30, 1994 (Uaudited)... F-18
Statements of Income for the Six Months Ended December 31, 1994 and
December 31, 1993 (Unaudited)........................................ F-19
Statements of Cash Flows for the Six Months Ended December 31, 1994
and December 31, 1993 (Unaudited).................................... F-20
Notes to Financial Statements (Unaudited)............................. F-21
LA-Z-BOY CHAIR COMPANY
FINANCIAL STATEMENTS
Report of Independent Accountants.................................... F-22
Consolidated Statements of Income for Each of the Three
Fiscal Years in the Period Ended April 30, 1994 .................... F-23
Consolidated Balance Sheets as of April 30, 1994 and
April 24, 1993 ..................................................... F-24
Consolidated Statements of Cash Flows for Each of the
Three Fiscal Years in the Period Ended April 30, 1994............... F-25
Consolidated Statement of Changes in Shareholders' Equity for Each
of the Three Fiscal Years in the Period Ended April 30, 1994 ...... F-26
Notes to Consolidated Financial Statements .......................... F-27
Consolidated Summaries of Operations for the Three and Nine Months
Ended January 28, 1995 and January 22, 1994 Unaudited............... F-28
Consolidated Balance Sheets as of January 28, 1995
and January 22, 1994.Unaudited...................................... F-29
Consolidated Statements of Cash Flows for the Three and Nine Months
Ended January 28, 1995 and January 22, 1994 Unaudited............... F-30
Notes to Condensed Consolidated Financial Statements Unaudited....... F-31
<PAGE>
F-2
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
England/Corsair, Inc.
Tazewell, Tennessee
We have audited the accompanying balance sheets of England/Corsair, Inc.
as of June 30, 1994 and 1993, and the related statements of income, equity
subject to redemption and cash flows for each of the three years in the period
ended June 30, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of England/Corsair, Inc. at
June 30, 1994 and 1993, and the results of its operations and its cash flows
for each of the three years in the period ended June 30, 1994, in conformity
with generally accepted accounting principles.
High Point, North Carolina BDO SEIDMAN
August 12, 1994
<PAGE>
F-3
ENGLAND/CORSAIR, INC.
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, 1994 1993
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current
Cash $ 218 $ 109
Receivables:
Trade, less allowance of $68 for possible losses 833 397
Factors (Note 1) 2,129 986
Inventories (Note 2) 9,551 10,004
Other, including prepaid expenses 326 129
TOTAL CURRENT ASSETS 13,057 11,625
PROPERTY AND EQUIPMENT, less accumulated
depreciation and amortization (Notes 3, 5 and 6) 20,795 16,325
OTHER, including cash surrender value of insurance
(face amount $3,050) on officers' lives, less
loans of $40 515 466
$34,367 $ 28,416
</TABLE>
<PAGE>
<TABLE>
F-4
ENGLAND/CORSAIR, INC.
BALANCE SHEETS (CONCLUDED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<CAPTION>
June 30, 1994 1993
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND EQUITY SUBJECT TO REDEMPTION
CURRENT LIABILITIES
Accounts payable - trade $ 6,397 $ 5,294
Accruals:
Compensation 1,577 1,158
Employee benefits (Note 6) 241 202
Income taxes 58 66
Interest 86 70
Current maturities of long-term debt (Note 5) 860 780
Current maturities of capital lease obligations (Note 6) 1,826 1,190
TOTAL CURRENT LIABILITIES 11,045 8,760
LONG-TERM DEBT, less current maturities (Note 5) 6,885 3,590
CAPITAL LEASE OBLIGATIONS, less current maturities (Note 6) 4,523 2,059
DEFERRED INCOME TAXES (Note 7) 140 90
EQUITY SUBJECT TO REDEMPTION (Notes 6 and 9)
Common stock (Notes 6 and 9):
Class A, without par value - shares authorized, 500,000;
issued 262,252 262 --
Class B, without par value - shares authorized, 500,000;
issued 72,678 73 --
Common stock, $1 par - shares authorized, 0 in 1994 and
500,000 in 1993; issued 334,930 in 1993 -- 335
Retained earnings 12,882 15,025
Treasury stock, at cost, 37,600 shares of Class A
Common stock (1,443) (1,443)
TOTAL EQUITY SUBJECT TO REDEMPTION 11,774 13,917
TOTAL LIABILITIES AND EQUITY SUBJECT TO REDEMPTION 34,367 28,416
Commitments (Note 6)
$34,367 $28,416
<FN>
See accompanying summary of accounting policies and notes to financial
statements.
</TABLE>
<PAGE>
<TABLE>
F-5
ENGLAND/CORSAIR, INC.
STATEMENTS OF INCOME
(IN THOUSANDS)
<CAPTION>
Year ended June 30, 1994 1993 1992
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $105,781 $ 99,435 $ 86,175
COST OF SALES 87,288 79,905 69,107
GROSS PROFIT ON SALES 18,493 19,530 17,068
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (Note 10) 14,484 12,632 10,040
OPERATING INCOME 4,009 6,898 7,028
OTHER INCOME (EXPENSE)
Interest expense (1,387) (1,139) (1,359)
Interest income 69 66 54
Miscellaneous - net 10 57 70
TOTAL OTHER INCOME (EXPENSE) (1,308) (1,016) (1,235)
INCOME BEFORE TAXES ON INCOME 2,701 5,882 5,793
TAXES ON INCOME (BENEFIT) (Note 7) 122 (499) 2,100
NET INCOME $ 2,579 $ 6,381 $ 3,693
NET INCOME PER SHARE -
HISTORICAL $ 12.37
PRO FORMA AMOUNTS (Note 9)
INCOME BEFORE TAXES $ 2,701 $ 5,882
INCOME TAXES AT 36.8% 994 2,165
NET INCOME $ 1,707 $ 3,717
PRO FORMA INCOME PER SHARE $ 5.75 $ 12.47
<FN>
See accompanying summary of accounting policies and notes to financial
statements.
</TABLE>
<PAGE>
F-6
ENGLAND/CORSAIR, INC.
STATEMENTS OF EQUITY SUBJECT TO REDEMPTION
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
Common Stock Treasury Stock
------------------ ------------------ Retained
Shares Amount Shares Amount earnings
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, July 1, 1991 307,800 $308 36,500 $ 1,361 $ 8,212
ADD - net income for the year - - - - 3,693
DEDUCT:
S Corporation distributions - - - - (597)
10% stock dividend 27,130 27 - - (27)
BALANCE, June 30, 1992 334,930 335 36,500 1,361 11,281
ADD - net income for the year - - - - 6,381
DEDUCT:
S Corporation distributions - - - - (2,637)
Purchase of treasury stock - - 1,100 82 -
BALANCE, June 30, 1993 334,930 335 37,600 1,443 15,025
ADD - net income for the year - - - - 2,579
DEDUCT - S Corporation distributions - - - - (4,722)
BALANCE, June 30, 1994 334,930 $335 37,600 $ 1,443 $ 12,882
<FN>
See accompanying summary of accounting policies and notes to financial
statements.
</TABLE>
<PAGE>
F-7
ENGLAND/CORSAIR, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year ended June 30, 1994 1993 1992
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $ 104,185 $ 108,455 $ 93,995
Cash paid to suppliers and employees (97,395) (98,137) (86,662)
Interest paid (1,370) (1,098) (1,377)
Interest received 69 66 54
Income taxes paid, net of refunds received (80) (1,219) (1,424)
Other receipts 10 57 93
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,419 8,124 4,679
CASH FLOWS FROM INVESTING ACTIVITIES
Distributions to stockholders (4,722) (3,234) -
Capital expenditures (3,272) (2,965) (983)
Increase in cash surrender value of insurance (19) (11) (25)
Purchase of treasury stock - (82) -
NET CASH USED IN INVESTING ACTIVITIES (8,013) (6,292) (1,008)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 5,170 - (1,500)
Principal payments on long-term debt (1,795) (790) (1,159)
Principal payments under capital lease obligations (672) (1,030) (1,009)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 2,703 (1,820) (3,668)
NET INCREASE IN CASH 109 12 3
CASH, at beginning of year 109 97 94
CASH, at end of year $ 218 $ 109 $ 97
<FN>
See accompanying summary of accounting policies and notes to financial
statements.
</TABLE>
<PAGE>
F-8
ENGLAND/CORSAIR, INC.
STATEMENTS OF CASH FLOWS (CONCLUDED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year ended June 30, 1994 1993 1992
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Net income $ 2,579 $6,381 $ 3,693
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,574 1,908 1,802
Deferred income taxes 50 (784) (116)
Provision for losses on accounts receivable 17 64 33
Loss on disposition of assets - - 22
Change in assets and liabilities:
Decrease (increase) in accounts receivable (1,596) 94 (325)
Decrease (increase) in inventories 453 (1,529) 1,093
Decrease (increase) in prepaid expenses and
other assets (227) (248) (25)
Increase (decrease) in payables and accrued
expenses 1,577 3,172 (2,290)
Increase (decrease) in income taxes payable (8) (934) 792
Total adjustments 2,840 1,743 986
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 5,419 $8,124 $ 4,679
<FN>
See accompanying summary of accounting policies and notes to financial
statements.
</TABLE>
<PAGE>
F-9
ENGLAND/CORSAIR, INC.
SUMMARY OF ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS The Company was incorporated in Tennessee
in 1964 and is engaged primarily in the
design, manufacture and sale of upholstered
residential furniture. In addition, the
Company imports and sells occasional tables.
SALES RECOGNITION AND
CREDIT RISK Sales are made to the retail furniture
industry primarily in the United States and
Canada. Sales are recognized when delivered
and accepted by the customer. The Company
uses factoring arrangements to minimize the
risk on accounts receivable. The Company has
no concentrated sales or credit risk with any
individual customer.
INVENTORIES Inventories are valued at the lower of cost
(first-in, first-out) or market. Routine
maintenance, operating and office supplies
are not inventoried.
PROPERTY, EQUIPMENT AND
DEPRECIATION Property and equipment are stated at cost.
Depreciation is computed using straight-line
and accelerated methods for financial
reporting purposes over the following
estimated useful lives:
Years
Buildings and land
improvements 5 - 30
Machinery and equipment 5 - 10
Furniture, fixtures and office
equipment 3 - 10
Transportation equipment 3 - 7
Other vehicles 3 - 7
For income tax reporting purposes,
depreciation is computed under the same
methods used for financial reporting purposes
except for additions after June 30, 1986 for
which the straight-line method is used for
financial reporting purposes and accelerated
methods are used for income tax reporting
purposes.
PRO FORMA DATA Pro forma adjustments are presented to
reflect a provision for income taxes based
upon pro forma income before taxes as if the
Company had not been an S Corporation for
the years ended June 30, 1994 and 1993.
See accompanying notes to financial statements.
<PAGE>
F-10
ENGLAND/CORSAIR, INC.
SUMMARY OF ACCOUNTING POLICIES
(CONCLUDED)
TAXES ON INCOME In July 1992, the Company elected S
Corporation status for federal income tax
purposes (see Note 7).
For the year ended June 30, 1993, the Company
elected early adoption of the method for
accounting for income taxes pursuant to the
Statement of Financial Accounting Standards
No. 109 "Accounting for Income Taxes" (SFAS
109). SFAS 109, effective for fiscal years
beginning after December 15, 1992, requires,
among other things, a liability approach to
calculating deferred income taxes. This
change had no material effect on earnings for
the year ended June 30, 1993.
Deferred income taxes are provided on the
difference in earnings determined for tax and
financial reporting purposes. Since July 1,
1992 deferred taxes are provided for certain
state income taxes only, as these states do
not recognize the S Corporation election.
EMPLOYEE BENEFITS The Company does not provide post-employment
or retirement benefits to its employees.
Accordingly, the provisions of the Financial
Accounting Standards Board's Statements of
Financial Accounting Standards No. 106
"Employers' Accounting for Post-retirement
Benefits other than Pensions" and No. 112
"Employers' Accounting for Postemployment
Benefits" do not have an effect on the
financial condition or results of operations
of the Company.
STATEMENTS OF CASH FLOWS For purposes of the statements of cash flows,
the Company considers investments purchased
with a maturity of three months or less to be
cash equivalents. There were no cash
equivalents at June 30, 1994 or 1993.
FREIGHT REVENUES AND COSTS Freight revenues are classified as an offset
against freight costs which are classified as
a cost of sales.
See accompanying notes to financial statements.
<PAGE>
F-11
ENGLAND/CORSAIR, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
1. ACCOUNTS RECEIVABLE
AND FACTORING
AGREEMENT The Company factors most of its customer
accounts receivable with two factors. Of the
receivable invoices factored, most are
factored without recourse. Under the terms of
the agreement, the Company may receive
advances prior to the due dates of the
factored invoices. Such advances, available
from ninety to one hundred percent of the
factored receivables, bear interest at the
prime rate.
2. INVENTORIES Inventories are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C>
Finished products, including tables $ 2,784 $ 3,713
Work-in-process 516 631
Raw materials 6,251 5,660
Total inventories $ 9,551 $10,004
</TABLE>
3. PROPERTY AND
EQUIPMENT Major classes of property and equipment
consist of the following:
<TABLE>
<CAPTION>
1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C>
Land $ 987 $ 987
Buildings and improvements 12,021 10,330
Machinery and equipment (Note 5) 4,558 4,341
Furniture, fixtures and office equipment 2,436 1,746
Transportation equipment (Note 5) 10,268 6,452
Other vehicles 1,465 1,255
Totals 31,735 25,111
Less accumulated depreciation
and amortization (10,940) (8,786)
Net property and equipment $20,795 $ 16,325
</TABLE>
4. NOTES PAYABLE In July 1994, the Company entered into an
agreement with a bank which provides for a
line of credit up to a maximum of $3,750
with interest at the lesser of the prime rate
less .5 percent or the LIBOR rate plus 1.2
percent.
<PAGE>
F-12
ENGLAND/CORSAIR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
4. NOTES PAYABLE
(CONCLUDED) Any amounts outstanding under this line of credit
at September 1, 1997 will convert to a term loan
with monthly payments beginning in September 1997
with the remaining balance to be paid in August
2001. The payments will be based upon an
amortization period of ten years.
In addition to the line of credit, the agreement
also provides for borrowings of an additional
$3,750. Under a bridge loan provided by the
bank, $3,750 was outstanding at June 30, 1994
(see note 5).
5. LONG-TERM DEBT Long-term debt consists of:
<TABLE>
<CAPTION>
1994 1993
- -----------------------------------------------------------------
<S> <C> <C>
Note to bank payable $43 per
month, including interest at
6.95%, beginning September
1997, with the remaining
balance of approximately
$2,600 due August 2001,
collateralized by property
and equipment (see Note 4) $3,750 $ --
Notes to shareholders payable $64
per quarter, plus interest at 7%
beginning August 1994 through
May 1999 (subordinated) 1,288 --
Note to bank payable $47 per
quarter, plus interest at the
prime rate plus 1% through
November 1995 with the remaining
balance due November 1995,
collateralized by property 265 1,443
Note to bank payable $50 per
quarter, plus interest at the
prime rate plus .75%, through
August 1995 with the remaining
balance due November 1995,
collateralized by property 1,145 1,345
</TABLE>
<PAGE>
F-13
ENGLAND/CORSAIR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
5. LONG-TERM DEBT
(CONCLUDED)
<TABLE>
<S> <C> <C>
Industrial revenue bond
payable $13 per quarter,
plus interest at 90% of the
prime rate through
September 2008 with a
final payment due October
2008, collateralized by
property 725 775
Note payable $4 per month,
including interest at 10%
through February 2002,
collateralized by property
and guaranteed by a
stockholder 276 299
Other, collateralized by property
and transportation equipment 296 508
Totals 7,745 4,370
Less current maturities 860 780
Total long-term debt $6,885 $3,590
</TABLE>
At June 30, 1994, the approximate aggregate
amounts of long-term debt maturing in each of the
next five years are as follows: 1995 - $860;
1996 - $1,370; 1997 - $355; 1998 - $570;
and 1999 - $640. Certain of the above
loan agreements contain covenants with
respect to working capital, total indebtedness,
capital expenditures, stockholders' equity,
earnings and dividends. At June 30, 1994, the
Company was in compliance with the provisions
of the agreements.
6. COMMITMENTS Leases
The Company leases showroom facilities, a
manufacturing facility, a research facility,
equipment and delivery equipment under operating
leases that expire over the next five years.
In most cases, management expects that in the
normal course of business, leases will be renewed
or replaced with other leases. Rent expense was
approximately $520, $685 and $490 for
years ended June 30, 1994, 1993 and 1992,
respectively. In addition, the Company leases
equipment (primarily trucks used as
transportation equipment) under capital leases
expiring at various dates through May, 1998.
<PAGE>
F-14
ENGLAND/CORSAIR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
6. COMMITMENTS
(CONTINUED) Following is an analysis of leased property
under capital leases by major classes:
<TABLE>
<CAPTION>
Asset balances at June 30, 1994 1993
- --------------------------------------------------------------
<S> <C> <C>
Transportation equipment $9,590 $6,191
Machinery and equipment 306 306
9,896 6,497
Less accumulated amortization 4,415 3,477
Net leased property under
capital leases $5,481 $3,020
</TABLE>
As of June 30, 1994, future net minimum lease
payments under capital leases and future
minimum rental payments required under
operating leases that have initial or
remaining noncancelable terms in excess of
one year are as follows:
<TABLE>
<CAPTION>
Capital Operating
leases leases
- ----------------------------------------------------------------
<S> <C> <C>
1995 $2,170 $ 150
1996 1,785 20
1997 1,430 20
1998 1,190 10
1999 389 --
Thereafter 176 --
Total minimum lease payments 7,140 $ 200
Less amount representing interest,
calculated at the Company's
incremental borrowing rate (791)
Present value of net minimum
lease payments $6,349
</TABLE>
<PAGE>
F-15
ENGLAND/CORSAIR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
6. COMMITMENTS
(CONCLUDED) EMPLOYEE BENEFITS
The Company maintains a self-insurance
program for that portion of health care costs
not covered by insurance. The Company is
liable for claims up to $60 per
participant annually, and aggregate claims up
to $2,170 annually. Self-insurance costs
are accrued based upon the aggregate of the
liability for reported claims and an
estimated liability for claims incurred but
not reported.
WORKMEN'S COMPENSATION
In July 1992, the Company began a
self-insurance plan for workmen's
compensation coverage. The Company is liable
for claims up to $250 per employee and
aggregate claims up to $1,100 annually.
Self insurance costs are accrued based upon
the aggregate of the expected liability for
claims filed which have not been paid. The
plan requires the Company to maintain
$1,000 of letters of credit as security
to cover potential claims.
STOCKHOLDERS' AGREEMENTS
The Company has agreements with its
stockholders whereby the Company agrees to
purchase all shares of a stockholder upon
death at an amount established by the Board
of Directors (currently $61 per share). The
amount may be paid in cash or with notes to
be repaid over a period not to exceed 60
months with interest at 5%. As a result of
the potential redemptions, what would
otherwise be classified as stockholders'
equity is presented as equity subject to
redemption in the accompanying balance sheets.
RETIREMENT PLAN
In August 1992, the Company adopted a
tax-qualified employee benefit plan which
meets the criteria of Section 401(k) of the
Internal Revenue Code. Under the Plan,
participants may elect to defer from 1% to
25% of their compensation into the Plan up to
specified limits per year ($9 during
1994). The Company contributes an additional
amount equal to 25% of the employee
contributions, limited to $1 per
employee. Participants become fully vested in
contributions made by the Company on a
graduated scale defined in the Plan document.
Company contributions were approximately
$147 and $149 in the years ended June 30,
1994 and 1993, respectively.
<PAGE>
F-16
ENGLAND/CORSAIR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
7. TAXES ON INCOME (BENEFIT) Provisions for federal and state income
taxes in the statements of income are made
up of the following components:
<TABLE>
<CAPTION>
Year ended June 30, 1994 1993 1992
- ----------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ - $ - $1,925
State 72 285 245
72 285 2,170
Deferred taxes (benefit):
Federal - (764) (60)
State 50 (20) (10)
50 (784) (70)
Total taxes on income
(benefit) $122 $(499) $2,100
</TABLE>
The absence of a provision for federal
income taxes for the years ended June 30,
1994 and 1993 is due to the election by the
Company, and consent by its stockholders to
include their respective shares of taxable
income of the Company in individual federal
tax returns (S Corporation election). As
a result of the election, federal deferred
taxes were eliminated and included in income
for the year ended June 30, 1993.
The following summary reconciles income
taxes at the maximum federal statutory rate
with the effective rate.
<TABLE>
<CAPTION>
1994 1993 1992
% % %
<S> <C> <C> <C>
Provision for Federal income taxes
at the statutory rate - - 34.0
Increase (decrease) due to:
State income taxes 4.5 4.5 2.8
Federal income taxes eliminated
due to S corporation election - (13.0) -
Other - - (.5)
Taxes on income (benefit) 4.5 (8.5) 36.3
</TABLE>
<PAGE>
F-17
ENGLAND/CORSAIR, INC.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
(IN THOUSANDS)
7. TAXES ON INCOME (BENEFIT)
(CONCLUDED) The components of the deferred income taxes
at June 30, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
- ----------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Inventories $ 3 $ 9
Allowance for doubtful accounts 3 3
Accrued expenses 31 8
Total deferred tax assets 37 20
Deferred tax liability - depreciation 177 110
Total net deferred tax liability $140 $ 90
<FN>
8. SUPPLEMENTAL CASH
FLOW INFORMATION Capital lease obligations of approximately
$3,772 and $2,382 were incurred when
the Company entered into leases for delivery
vehicles and equipment in the years ended
June 30, 1994 and 1993, respectively. The
Company did not enter into capital lease
obligations during the year ended June 30,
1992.
9. COMMON STOCK During the year ended June 30, 1994, the
Company entered into a plan whereby its
existing common stock was exchanged for
newly created Class A common stock and
Class B common stock. The Class A common
stock is voting stock which can only be held
by individuals actively involved in the
management of the Company. The Class B
common stock is non-voting stock. The
relative rights, preferences and limitations
of the shares are otherwise the same. As a
result, there are no shares of the old common
stock outstanding.
10. Other In the year ended June 30, 1994, the Company
recorded a charge of $600 in connection with a
a one time bonus paid to its former chairman of the
board. Such charge is included in selling
general and administrative expenses in the
accompanying statements of income.
<PAGE>
F-18
ENGLAND/CORSAIR, INC.
BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARES)
</TABLE>
<TABLE>
<CAPTION> (UNAUDITED)
December 31, June 30,
1994 1994
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 285 $ 218
Accounts Receivable less allowance for losses
of $68 1,535 833
Accounts Receivable from factors 2,186 2,129
Inventories (Note 3) 9,031 9,551
Prepaid Expense 335 326
Total Current Assets 13,372 13,057
Net Property and Equipment 21,679 20,795
Other Assets 568 515
$ 35,619 $ 34,367
LIABILITIES AND EQUITY SUBJECT TO REDEMPTION
Current Liabilities:
Accounts Payable $ 4,929 $ 6,397
Current Portion of Long Term Debt 2,325 2,686
Accrued Liabilities (Note 7) 3,214 1,962
Total current liabilities 10,468 11,045
Long Term Debt
Long Term Notes Payable 6,784 6,457
Long Term Notes Payable to Shareholders 1,161 1,288
Obligations under long term capital leases 6,725 6,349
Less Current Portion (2,325) (2,686)
Long Term Debt 12,345 11,408
Deferred Taxes 140 140
Total Long Term Liabilities 12,485 11,548
Equity Subject to Redemption (Notes 4 and 5)
Common stock (Notes 6 and 9):
Class A, without par value - shares authorized,
500,000; issued 262,252 262 .262
Class B, without par value - shares authorized,
500,000; issued 72,678 73 .73
Retained Earnings 13,774 12,882
Less Treasury Stock at cost, 37,600 shares
of Class A common stock (1,443) (1,443)
Total Equity Subject to Redemption 12,666 11,774
Total Liabilities and Equity Subject to Redemption $ 35,619 $ 34,367
Commitments (Note 4)
<FN>
See accompanying notes to unaudited financial statements.
</TABLE>
F-19
ENGLAND/CORSAIR, INC.
INCOME STATEMENTS (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Six Months Ended
December 31, December 31,
1994 1993
-------- ---------
<S> <C> <C>
Net Sales $ 50,127 $ 50,524
Cost of Sales 41,183 41,609
Gross Profit 8,944 8,915
Selling, general and administrative
expenses 6,094 6,686
Operating Profit 2,850 2,229
Interest Expense (948) (590)
Interest Income 32 34
Miscellaneous Income 38 11
Income before taxes 1,972 1,684
Income Taxes 81 67
Net Income $ 1,891 $ 1,617
Pro forma income taxes $ 727 $ 620
Pro forma net income $ 1,245 $ 1,064
Average Shares 297 298
Pro forma net income
Per Share $ 4.19 $ 3.57
Dividends Per Share $ 3.36 $ 5.92
<FN>
See accompanying notes to unaudited financial statements.
</TABLE>
<PAGE>
F-20
ENGLAND/CORSAIR, INC.
STATEMENT OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
December 31, December 31,
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 49,368 $50,897
Cash paid to suppliers and employees (46,265) (47,410)
Interest paid (944) (596)
Interest received 32 34
Income taxes paid (6) (2)
Other receipts 38 11
Net cash provided by operating activities 2,223 2,934
Cash flows from investing activities:
Distributions to stockholders (143) (1,763)
Capital expenditures (1,014) (641)
Increase in cash surrender value of insurance (5) (54)
Net cash used in investing activities (1,162) (2,458)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 2,960 806
Principal payments on long term debt (2,760) (677)
Principal payments under capital lease obligations (1,194) (691)
Net cash used in financing activities (994) (562)
Net increase in cash 67 (86)
Cash, beginning of year 218 109
Cash, end of year $ 285 $ 23
Reconciliation of net income to net cash provided by
operating activities
Net income $1,891 $ 1,617
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,699 1,245
Change in assets and liabilities:
Decrease (increase) in accounts receivable (759) 373
Decrease (increase) in inventories 520 (260)
Decrease (increase) in prepaid expenses and
other assets (57) (249)
Increase (decrease) in payables and accrued
expenses (1,071) 208
Total adjustments 332 1,317
Net cash provided by operating activities $2,223 $2,934
See accompanying notes to unaudited financial statements.
</TABLE>
<PAGE>
F-21
ENGLAND/CORSAIR, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Note 1 - In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position as of
December 31, 1994 and the results of operations and cash flows
for the six months ended December 31, 1994 and December 31, 1993.
Note 2 - The results of operations for the six months ended December 31, 1994
are not necessarily indicative of the results to be expected for the full year.
Note 3 - Inventories are summarized as follows:
<TABLE>
<CAPTION>
(in Thousands)
December 31, 1994 June 30, 1994
<S> <C> <C>
Finished products, including tables $ 3,026 $2,784
Work-in-process 419 516
Raw materials 5,586 6,251
Total Inventories $9,031 $9,551
</TABLE>
Note 4 - The Company has agreements with its stockholders whereby the Company
agrees to purchase all shares of a stockholder upon death at an amount estab-
lished by the Board of Directors (currently $61 per share). The amount may
be paid in cash or with notes to be repaid over a period not to exceed 60
months with interest at 5%. As a result of the potential redemptions, what
would otherwise be classified as stockholders' equity is presented as equity
subject to redemption in the accompanying balance sheets.
Note 5 - On January 13, 1995, the Company, La-Z-Boy Chair Company ("La-Z-Boy")
and LZB Acquisition, Inc. ("LZB"), a wholly-owned subsidiary of La-Z-Boy,
executed an agreement which provides for the acquisition of the Company by
LZB pursuant to the terms of the Amended and Restated Reorganization
Agreement, on the effective date, holders of La-Z-Boy's stock will receive,
at their election, either shares of La-Z-Boy's common stock, La-Z-Boy's 8%
Unsecured Promissory Notes due 1999 and/or cash. Holders of La-Z-Boy's
stock will also receive Performance Units which will provide for additional
considerations in respect of the Merger if certain defined performance goals
are achieved by the Company subsequent to the Merger.
Note 6 - During the six months ended December 31, 1994 and 1993, capital lease
obligations of approximately $1,570,000 and $3,009,000 respectively, were
incurred when E/C entered into leases for delivery vehicles.
Note 7 - The pro-forma balance sheet reflects dividends totaling approximately
$856 declared but not paid as of December 31, 1994. In February E/C received
life insurance proceeds totaling $850 on key man policies covering the former
chairman of the board, Dwight England, who died in January, 1995. On
February 23, 1995 E/C distributed 50% of these proceeds or $1.43 per share to
its shareholders in accordance with the provisions of the Reorganization
Agreement. See "The Merger and Related Transactions - Distributions Prior to
Closing." Dividends will be distributed for the period January through the
effective date of the merger based on 60% of the taxable income earned during
this period.
<PAGE>
F-22
Report of Independent Accountants
To the Board of Directors and Shareholders
of La-Z-Boy Chair Company:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of cash flows and of changes in shareholders'
equity, present fairly, in all material respects, the financial position of La-
Z-Boy Chair Company and its subsidiaries at April 30, 1994 and April 24, 1993,
and the results of their operations and their cash flows for each of the three
years in the period ended April 30, 1994, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.As discussed in Note 8 to the
Consolidated Financial Statements, on April 25, 1993, the Company changed its
method of accounting for income taxes.
Price Waterhouse LLP
Toledo, Ohio
June 2, 1994
<PAGE>
F-23
Consolidated Statement of Income
(Amounts in thousands, except per share data)
- -----------------------------------------------------------------------------
Year Ended April 30, April 24, April 25,
1994 1993 1992
(53 weeks) (52 weeks) (52 weeks)
- -----------------------------------------------------------------------------
Sales................................ $804,898 $684,122 $619,471
Cost of sales........................ 593,890 506,435 453,055
--------- --------- ---------
Gross profit....................... 211,008 177,687 166,416
Selling, general and administrative.. 151,756 131,894 123,927
--------- --------- ---------
Operating profit................... 59,252 45,793 42,489
Interest expense..................... 2,822 3,260 5,305
Interest income...................... 1,076 1,474 1,093
Other income......................... 649 1,292 1,628
--------- --------- ---------
Total other income................. 1,725 2,766 2,721
Income before income tax expense..... 58,155 45,299 39,905
Income tax expense
Federal - current.................. 19,719 16,726 17,595
- deferred................. (445) (1,965) (5,417)
State - current.................. 4,283 3,254 2,627
- deferred................. (119) - -
--------- --------- ---------
Total tax expense................ 23,438 18,015 14,805
--------- --------- ---------
Net income before accounting change.. 34,717 27,284 25,100
Accounting change.................... 3,352 - -
--------- --------- ---------
Net income....................... $38,069 $27,284 $25,100
========= ========= =========
Weighted average shares.............. 18,268 18,172 18,064
========= ========= =========
Net income per share before
accounting change.................. $1.90 $1.50 $1.39
Accounting change.................... .18 - -
--------- --------- ---------
Net income per share............. $2.08 $1.50 $1.39
========= ========= =========
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
Acquisition amortization of $1,056 in 1994 and $1,039 in 1993 and 1992 has
been reclassified from other income to selling, general and administrative.
<PAGE>
F-24
Consolidated Balance Sheet
(Amounts in thousands, except par value)
- ----------------------------------------------------------------------------
As of April 30, April 24,
1994 1993
- ----------------------------------------------------------------------------
Assets
- ------
Current Assets
Cash and equivalents.............................. $ 25,926 $ 28,808
Receivables, less allowances of $13,537 in 1994
and $10,500 in 1993............................. 183,115 169,950
Inventories
Raw materials................................... 31,867 27,555
Work-in-progress................................ 29,325 30,598
Finished goods.................................. 26,676 20,135
--------- ---------
FIFO inventories.............................. 87,868 78,288
Excess of FIFO over LIFO...................... (20,632) (17,801)
--------- ---------
Total inventories........................... 67,236 60,487
Deferred income taxes............................. 15,160 9,152
Other current assets.............................. 4,148 5,065
--------- ---------
Total Current Assets............................ 295,585 273,462
Property, plant and equipment, net.................. 94,277 90,407
Goodwill, less accumulated amortization of
$5,574 in 1994 and $4,668 in 1993................. 20,752 21,658
Other long-term assets, less allowances of
$1,257 in 1994 and $1,170 in 1993................. 19,639 15,537
--------- ---------
Total Assets.................................. $430,253 $401,064
========= =========
<PAGE>
F-24
Consolidated Balance Sheet
(Amounts in thousands, except par value)
- ----------------------------------------------------------------------------
As of April 30, April 24,
1994 1993
- ----------------------------------------------------------------------------
Liabilities and Shareholders' Equity
- ------------------------------------
Current Liabilities
Current portion of long-term debt................. $ 2,875 $ 542
Accounts payable.................................. 21,552 20,010
Payroll/benefits.................................. 29,453 28,411
Estimated income taxes............................ 3,882 9,011
Other current liabilities......................... 13,701 13,090
--------- ---------
Total Current Liabilities....................... 71,463 71,064
Long-term debt...................................... 52,495 55,370
Deferred income taxes............................... 6,949 4,857
Other long-term liabilities......................... 8,435 6,387
Shareholders' Equity
Preferred Shares - 5,000 authorized; 0 issued..... - -
Common shares, $1 par value - 40,000 authorized;
18,287 issued in 1994 and 18,195 in 1993........ 18,287 18,195
Capital in excess of par value.................... 10,147 8,494
Retained earnings................................. 263,348 236,842
Currency translation adjustments.................. (871) (145)
--------- ---------
Total Shareholders' Equity...................... 290,911 263,386
--------- ---------
Total Liabilities and Shareholders' Equity.... $430,253 $401,064
========= =========
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements. Certain April 24, 1993 balance sheet items have
been reclassed for comparability to April 30, 1994.
<PAGE>
F-25
Consolidated Statement of Cash Flows
(Amounts in thousands) Increase (Decrease) in Cash and Equivalents
- -----------------------------------------------------------------------------
Year Ended April 30, April 24, April 25,
1994* 1993 1992
(53 weeks) (52 weeks) (52 weeks)
- -----------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net income.............................. $ 38,069 $ 27,284 $ 25,100
Adjustments to reconcile net income to net
cash provided by operating activities:
Accounting change................... (3,352) - -
Depreciation and amortization....... 14,014 14,061 14,840
Change in receivables............... (13,165) (14,475) (7,039)
Change in inventories............... (6,749) (2,679) 2,599
Change in other assets and liab..... (168) 12,368 6,301
Change in deferred taxes............ (564) (1,965) (5,417)
--------- --------- ---------
Total adjustments................. (9,984) 7,310 11,284
--------- --------- ---------
Cash Provided by Operating
Activities...................... 28,085 34,594 36,384
Cash Flows from Investing Activities:
Proceeds from disposals of assets....... 177 2,100 508
Capital expenditures.................... (17,485) (12,248) (12,187)
Change in pref. stocks held as invest... - - 1,583
Change in other investments............. (2,981) (2,624) -
--------- --------- ---------
Cash Used for Investing Activities (20,289) (12,772) (10,096)
Cash Flows from Financing Activities:
Short-term debt......................... 727 1,767 4,444
Long-term debt.......................... - - 24,700
Change in unexpended IRB funds.......... - - 414
Retirements of debt..................... (1,269) (6,581) (39,285)
Sale of stock under stock option plans.. 1,850 1,372 1,973
Stock for 40l(k) employee plans......... 2,952 2,503 1,533
Purchase of La-Z-Boy stock.............. (2,928) (2,676) (388)
Payment of cash dividends............... (11,692) (10,902) (10,474)
--------- --------- ---------
Cash Used for Financing Activities (10,360) (14,517) (17,083)
Effect of exchange rate changes on cash... (318) (234) (428)
--------- -------- ---------
Net change in cash and equivalents........ (2,882) 7,071 8,777
Cash and equiv. at beginning of the year.. 28,808 21,737 12,960
--------- --------- ---------
Cash and equiv. at end of the year........ $25,926 $28,808 $21,737
========= ========= =========
Cash paid during the year - Income taxes.. $29,116 $16,789 $20,128
- Interest...... $2,675 $3,108 $5,105
For purposes of the Statement of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to
be cash equivalents.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
*Certain April 24, 1993 balance sheet items have been reclassed for
comparability to April 30, 1994.
<PAGE>
F-26
Consolidated Statement of Changes in Shareholders' Equity
(Amounts in thousands)
- ------------------------------------------------------------------------------
Capital Currency
in Trans-
Excess lation
Common of Par Retained Adjust-
Shares Value Earnings ments Total
- ------------------------------------------------------------------------------
Balance at April 27, 1991.. $17,979 $ 6,293 $203,934 $1,011 $229,217
Purchase of La-Z-Boy stock... (16) (372) (388)
Currency translation......... (602) (602)
Exercise of stock options.... 107 427 1,439 1,973
Exercise of 40l(k) stock..... 65 585 883 1,533
Dividends paid............... (10,474) (10,474)
Net income................... 25,100 25,100
-------- ------- --------- ------- ---------
Balance at April 25, 1992.. 18,135 7,305 220,510 409 246,359
Purchase of La-Z-Boy stock... (117) (2,559) (2,676)
Currency translation......... (554) (554)
Exercise of stock options.... 74 245 1,053 1,372
Exercise of 40l(k) stock..... 103 944 1,456 2,503
Dividends paid............... (10,902) (10,902)
Net income................... 27,284 27,284
-------- ------- --------- ------- ---------
Balance at April 24, 1993.. 18,195 8,494 236,842 (145) 263,386
Purchase of La-Z-Boy stock... (91) (2,837) (2,928)
Currency translation......... (726) (726)
Exercise of stock options.... 90 307 1,453 1,850
Exercise of 40l(k) stock..... 93 1,346 1,513 2,952
Dividends paid............... (11,692) (11,692)
Net income................... 38,069 38,069
-------- ------- --------- ------- ---------
Balance at April 30, 1994.. $18,287 $10,147 $263,348 ($871) $290,911
======== ======= ========= ======= =========
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<PAGE>
F-27
Notes to Consolidated Financial Statements
Note 1: Accounting Policies
The Company operates in the furniture industry. The following is a summary of
significant accounting policies followed in the preparation of these financial
statements.
Principles of Consolidation
The consolidated financial statements include the accounts of La-Z-Boy Chair
Company and its wholly owned subsidiaries. All significant intercompany
transactions have been eliminated.
Revenue Recognition
Revenue is recognized upon shipment of product.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined on
the last-in, first-out (LIFO) basis.
Property, Plant and Equipment
Items capitalized, including significant betterments to existing facilities,
are recorded at cost. Depreciation is computed using primarily accelerated
methods over the estimated useful lives of the assets.
Goodwill
The excess of the cost of operating companies acquired over the value of their
net assets is amortized on a straight-line basis over 30 years from the date
of acquisition.
Income Taxes
Income tax expense is provided on all revenue and expense items included in
the consolidated statement of income, regardless of the period such items are
recognized for income tax purposes. In fiscal 1994 the Company changed its
method of accounting for income taxes (see Note 8).
Note 2: Cash and Equivalents
(Amounts in thousands)
- -----------------------------------------------------------------
April 30, April 24,
1994 1993
- -----------------------------------------------------------------
Cash in bank........................... $ 5,926 $ 5,808
Certificates of deposit................ 20,000 15,000
Commercial paper....................... - 8,000
------- -------
Total cash and equivalents........... $25,926 $28,808
======= =======
The Company invests in certificates of deposit with a bank whose board of
directors includes three members of the Company's board of directors. At the
end of 1994 and 1993, $10 million and $15 million, respectively, was invested
in this bank's certificates.
Note 3: Property, Plant and Equipment
(Amounts in thousands)
- ------------------------------------------------------------------
April 30, April 24,
1994 1993
- ------------------------------------------------------------------
Land and land improvements............ $ 7,117 $ 6,604
Buildings and building fixtures....... 92,720 88,669
Machinery and equipment............... 82,971 73,281
Information systems................... 9,859 10,523
Other................................. 11,789 12,092
-------- --------
204,456 191,169
Less: accumulated depreciation....... 110,179 100,762
-------- --------
Property, plant and equipment, net.. $ 94,277 $ 90,407
======== ========
<PAGE>
Note 4: Debt
(Dollar amounts in thousands)
- -------------------------------------------------------------------------
Interest April 30, April 24,
rates Maturities 1994 1993
- -------------------------------------------------------------------------
Credit lines.............. 4.1% 1995-98 $15,000 $15,000
Private placement......... 8.8% 1995-02 15,000 15,000
Industrial 2.7%-
revenue bonds........... 3.3% 1995-12 25,370 25,912
------- -------
Total debt................................... $55,370 $55,912
Less: current portion........................ 2,875 542
------- -------
Long-term debt............................... $52,495 $55,370
======= =======
Weighted average interest 4.8% 4.8%
Fair value of long-term debt $56,003 $56,597
In April 1991 the Company entered into a $50 million unsecured revolving
credit line (Credit Agreement) to extend through August 31, 1998, requiring
interest payments only through August 31, 1994 and periodic payments of
principal and interest through 1998. The Company is in the process of
renewing the Credit Agreement to require interest only payments through
August 1999 and to require principal payment in August 1999. The Credit
Agreement also includes covenants that, among other things, require the
Company to maintain certain financial statement ratios. The Company has
complied with all of the requirements.
Proceeds from industrial revenue bonds were used to finance the construction
of manufacturing facilities. These arrangements require the Company to insure
and maintain the facilities and make annual payments that include interest.
The bonds are secured by the facilities constructed from the bond proceeds.
Maturities on debt obligations for the five years subsequent to April 30,
1994 are $3 million, $2 million, $3 million, $2 million and $3 million,
respectively. As of April 30, 1994, the Company had remaining unused lines
of credit and commitments of $60 million under several credit arrangements.
Note 5: Stock Option Plans
The Company's shareholders adopted an employee stock option plan that provides
grants to certain employees to purchase common shares of the Company at not
less than their fair market value at the date of grant. Options are for five
years and become exercisable at 25% per year beginning one year from date of
grant. The Company is authorized to grant options for up to 1,600,000 common
shares.
- --------------------------------------------------------------------
Number of Per share
shares option price
- --------------------------------------------------------------------
Outstanding at April 25, 1992.... 415,942 $14.13 - $22.13
Granted........................ 133,750 $21.75
Exercised...................... (59,099) $14.13 - $22.13
Expired or cancelled........... (27,019)
- --------------------------------------------------------------------
Outstanding at April 24, 1993.... 463,574 $14.13 - $22.13
Granted........................ 120,110 $29.63
Exercised...................... (78,584) $14.13 - $22.13
Expired or cancelled........... (15,126)
- --------------------------------------------------------------------
Outstanding at April 30, 1994.... 489,974 $14.13 - $29.63
- --------------------------------------------------------------------
Exercisable at April 30, 1994.... 193,915
Shares available for grants at
April 30, 1994................. 877,725
- --------------------------------------------------------------------
The Company's shareholders have adopted Restricted Share Plans under which the
Compensation and Stock Option Committee of the Board of Directors was
authorized to offer for sale up to an aggregate of 650,000 common shares to
certain employees and non-employee directors at 25% of the fair market value
of the shares. The plans require that all shares be held in an escrow account
for a period of three years in the case of an employee, or until the
participant's service as a director ceases in the case of a director. In the
event of an employee's termination during the escrow period, the shares must
be sold back to the Company at the employee's cost.
Shares aggregating 11,800 and 14,450 were granted and issued during the fiscal
years 1994 and 1993, respectively, under the Restricted Share Plans. Shares
remaining for future grants under the above plans amounted to 442,075 at
April 30, 1994.
The Company's shareholders have also adopted a Performance-Based Restricted
Stock Plan. This plan authorizes the Compensation and Stock Option Committee
of the Board of Directors to award up to an aggregate of 400,000 shares to key
employees. Grants of shares are based entirely on achievement of goals over
a three-year performance period. Any award made under the plan will be at
the sole discretion of the Committee after judging all relevant factors. At
April 30, 1994, performance awards were outstanding pursuant to which up to
47,000 shares and 43,520 shares may be issued in fiscal years 1996 and 1997,
respectively, depending on the extent to which certain specified performance
objectives are met. The costs of performance awards are expensed over the
performance period.
Note 6: Retirement
The Company has contributory and non-contributory retirement plans covering
substantially all factory employees.
Eligible salaried employees are covered under a trusteed profit sharing
retirement plan. Cash contributions to a trust are made annually based on
profits.
The Company has established a non-qualified deferred compensation plan for
highly compensated employees called a SERP (Supplemental Executive Retirement
Plan).
The Company offers a voluntary 401(k) retirement plan to eligible employees
within all U.S. operating divisions. Currently over 70% of eligible employees
are participating in the plan. Employee contributions are matched with
La-Z-Boy stock at $0.50 on the dollar up to a maximum company contribution of
1% of pay.
The actuarially determined net periodic pension cost and retirement costs are
computed as follows (for the years ended):
(Amounts in thousands)
- ------------------------------------------------------------------------------
April 30, April 24, April 25,
1994 1993 1992
(53 weeks) (52 weeks) (52 weeks)
- ------------------------------------------------------------------------------
Service cost........................... $1,526 $1,426 $ 839
Interest cost.......................... 1,683 1,455 1,303
Actual return on plan assets........... (719) (2,197) (2,428)
Net amortization and deferral.......... (1,575) (234) 233
------- ------- -------
Net periodic pension cost............ 915 450 (53)
Profit sharing......................... 4,659 4,341 3,557
SERP................................... 795 691 559
40l(k)................................. 1,145 1,002 835
Other.................................. 442 478 726
------- ------- -------
Total retirement costs............... $7,956 $6,962 $5,624
======= ======= =======
The funded status of the pension plans was as follows:
(Amounts in thousands)
- ------------------------------------------------------------------------------
April 30, April 24,
1994 1993
- ------------------------------------------------------------------------------
Actuarial present value of accumulated benefit
obligation........................................ ($23,887) ($19,608)
Plan assets at fair value........................... 28,531 27,134
--------- ---------
Excess of plan assets over projected benefit
obligation...................................... 4,644 7,526
Prior year service cost not yet recognized in net
periodic pension cost............................. 1,117 1,215
Unrecognized net loss............................... 5,274 1,895
Unrecognized initial asset.......................... (3,995) (4,326)
--------- ---------
Prepaid pension asset............................. $7,040 $6,310
========= =========
The expected long-term rate of return on plan assets was 8.5% for 1994 and 9.0%
for 1993 and 1992. The discount rate used in determining the actuarial present
value of accumulated benefit obligations was 7.5% for 1994, 8.0% for 1993 and
8.5% for 1992. Vested benefits included in the accumulated benefit obligation
were $21 million and $17 million at April 30, 1994 and April 24, 1993,
respectively. Plan assets are invested in a diversified portfolio that
consists primarily of debt and equity securities.
The Company's pension plan funding policy has been to contribute annually the
maximum amount that can be deducted for federal income tax purposes.
Note 7: Health Care
The Company offers eligible employees an opportunity to participate in group
health plans. Participating employees make required premium payments through
pretax payroll deductions.
Health-care expenses were as follows (for the years ended):
(Amounts in thousands)
- ----------------------------------------------------------------------------
April 30, April 24, April 25,
1994 1993 1992
(53 weeks) (52 weeks) (52 weeks)
- ----------------------------------------------------------------------------
Gross health care................. $29,061 $23,962 $22,298
Participant payments.............. (4,442) (2,356) (1,323)
-------- -------- --------
Net health care................. $24,619 $21,606 $20,975
======== ======== ========
The 1994 gross health-care expenses increased 21% over 1993 which was a much
higher rate of increase than 1993's 7% increase over 1992, even after
adjusting for employment increases.
Participant payments increased markedly due to premium payments for most
employees becoming effective January 1993 making 1994 the first full payment
year. Participant payments covered 15% of health-care expenses in 1994.
Net health-care costs in 1994 increased 14% over 1993 compared to a 3% increase
in 1993 over 1992 even though much higher participant payments occurred.
The Company makes annual provisions for any current and future retirement
health-care costs which may not be covered by retirees' collected premiums.
Note 8: Income Taxes
Effective April 25, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes," which applies a
balance sheet approach to income tax accounting. In accordance with the new
standard, the balance sheet reflects the anticipated tax impact of future
taxable income or deductions implicit in the balance sheet in the form of
temporary differences. These temporary differences reflect the difference
between the basis in assets and liabilities as measured in the financial
statements and as measured by tax laws using enacted tax rates. On April 25,
1993, the Company recorded a tax credit of $3 million or $0.18 per share,
which represents the net increase in the net deferred tax asset as of that
date. Such amount has been reflected in the consolidated statement of
income as an accounting change. Prior years' financial statements have not
been restated.
The primary components of the Company's deferred tax assets and liabilities as
of April 30, 1994 and April 25, 1993 (date of adoption) are as follows:
(Amounts in thousands)
- ---------------------------------------------------------------------------
April 30, April 25,
1994 1993
- ---------------------------------------------------------------------------
Current
Deferred income tax assets (liabilities):
Bad debt................................... $ 5,993 $ 4,628
Warranty................................... 2,703 2,496
Workers' compensation...................... 1,211 1,118
Inventory.................................. 916 1,186
State income tax........................... (40) 1,569
Other...................................... 4,881 2,794
-------- --------
Net current deferred tax assets.......... 15,664 13,791
Noncurrent
Deferred income tax assets (liabilities):
Property, plant and equipment.............. (4,372) (4,108)
Pension.................................... (2,899) (2,638)
Other...................................... 322 408
------- -------
Net noncurrent deferred tax liabilities.. (6,949) (6,338)
Valuation allowance.......................... (504) (342)
------- -------
Net deferred tax asset..................... $8,211 $7,111
======= =======
The differences between the provision for income taxes and income taxes
computed using the U.S. federal statutory rate are as follows (for the years
ended):
(% of pretax income)
- ------------------------------------------------------------------------------
April 30, April 24, April 25,
1994 1993 1992
- ------------------------------------------------------------------------------
Statutory tax rate......................... 35.0 34.0 34.0
Increase (reduction) in taxes resulting in:
State income taxes net of federal benefit.. 4.8 4.7 4.3
Tax credits................................ (0.2) (0.3) (1.0)
Acquisition amortization................... 0.7 0.9 0.9
Merger of previously acquired operation.... - - (0.7)
Miscellaneous items........................ 0.0 0.5 (0.4)
----- ----- -----
Effective tax rate......................... 40.3 39.8 37.1
===== ===== =====
Note 9: Contingencies
The Company has been named as defendant in various lawsuits arising in the
normal course of business. It is not possible at the present time to estimate
the ultimate outcome of these actions; however, management and the Company's
legal counsel believe that the resultant liability, if any, will not be
material based on the Company's previous experience with lawsuits of these
types.
La-Z-Boy has been identified as a Potentially Responsible Party
("PRP") at two clean-up sites: Organic Chemical and Seaboard Chemical
Company. At each site, the Company has been identified as a de minimis
contributor and volumetric assessments indicate that the Company's
contributions to each site have been less than .1% of the total. Each
site has either completed or has begun the Phase I cleanup and the total
cleanup costs expected to be incurred at each site have been estimated.
The Company is also participating with a number of other companies in the
voluntary RCRA closure of the Caldwell Systems site. The Company's
volumetric assessment at this site is in the 1% range. The steering
committee responsible for negotiating the cleanup plan with the EPA has
recently reinitiated its negotiations in anticipation of initial cleanup
activities. Estimates of the cleanup costs at the Caldwell site are
also available. The number of PRP's and voluntary participants at the
three sites range from 182 to in excess of 1,750. Based on a review of
the number, composition and financial stability of the PRP's and voluntary
participants at each site, along with cleanup cost estimates available,
management does not believe that any significant risk exists that the
Company will be required to incur total costs in excess of $100,000 at
any of the sites. At April 30, 1994, a total of $300,000 has been accrued
with respect to these three sites.
<PAGE>
F-28
La-Z-Boy Chair Company
CONSOLIDATED SUMMARY OF OPERATIONS
(Amounts in thousands, except per share data)
THIRD QUARTER ENDED (UNAUDITED)
----------------------------------------------
Amounts
------------------ Percent of Sales
Jan. 28, Jan. 22, % Over ----------------
1995 1994 (Under) 1995 1994
-------- -------- ------- ------- -------
Sales $210,814 $192,648 9% 100.0% 100.0%
Cost of sales 157,767 141,771 11% 74.8% 73.6%
-------- -------- ------- ------- -------
Gross profit 53,047 50,877 4% 25.2% 26.4%
S, G & A 39,616 37,136 7% 18.8% 19.3%
-------- -------- ------- ------- -------
Operating profit 13,431 13,741 -2% 6.4% 7.1%
Interest expense 1,041 682 53% 0.5% 0.4%
Other income 298 412 -28% 0.1% 0.3%
-------- -------- ------- ------- -------
Pretax income 12,688 13,471 -6% 6.0% 7.0%
Income taxes 5,467 5,483 -0% 43.1%** 40.7%**
-------- -------- ------- ------- -------
Net income $7,221 $7,988 -10% 3.4% 4.1%
======== ======== ======= ======= =======
Average shares 17,968 18,302 -2%
Earnings per share $0.40 $0.44 -9%
Dividends per share $0.17 $0.17 0%
** As a percent of pretax income, not sales.
Note: Acquisition amortization of $259 for both periods has
been reclassified from other income to S, G & A.
<PAGE>
La-Z-Boy Chair Company
CONSOLIDATED SUMMARY OF OPERATIONS
(Amounts in thousands, except per share data)
NINE MONTHS ENDED (UNAUDITED)
----------------------------------------------
Amounts
------------------ Percent of Sales
Jan. 28, Jan. 22, % Over ----------------
1995 1994 (Under) 1995 1994
-------- -------- ------- ------- -------
Sales $615,787 $563,788 9% 100.0% 100.0%
Cost of sales 458,237 416,978 10% 74.4% 74.0%
-------- -------- ------- ------- -------
Gross profit 157,550 146,810 7% 25.6% 26.0%
S,G & A 116,187 109,109 6% 18.9% 19.3%
-------- -------- ------- ------- -------
Operating profit 41,363 37,701 10% 6.7% 6.7%
Interest expense 2,455 2,178 13% 0.4% 0.4%
Other income 1,705 1,800 -5% 0.3% 0.3%
-------- -------- ------- ------- -------
Pretax income 40,613 37,323 9% 6.6% 6.6%
Income taxes 17,044 14,946 14% 42.0%** 40.0%**
-------- -------- ------- ------- -------
Income before acctg. change 23,569 22,377 5% 3.8% 4.0%
Accounting change - 3,352 N/A - 0.6%
-------- -------- ------- ------- -------
Net income $23,569 $25,729 -8% 3.8% 4.6%
======== ======== ======= ======= =======
Average shares 18,083 18,257 -1%
Earnings per share:
- -------------------
Income before acctg. change $1.30 $1.23 6%
Accounting change - 0.18 N/A
-------- -------- -------
Net income $1.30 $1.41 -8%
======== ======== =======
Dividends per share $0.51 $0.47 9%
** As a percent of pretax income, not sales.
Note: Acquisition amortization of $779 for both periods has
been reclassified from other income to S, G & A.
<PAGE>
F-29
La-Z-Boy Chair Company
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
Unaudited Increase
------------------ (Decrease) Audited
Jan. 28, Jan. 22, ---------------- April 30,
1995 1994 Dollars Percent 1994
-------- -------- ------- ------- ---------
Current Assets
Cash & equivalents $41,552 $32,402 $9,150 28% $25,926
Receivables 166,506 153,003 13,503 9% 183,115
Inventories
Raw materials 36,362 33,259 3,103 9% 31,867
Work-in-process 33,574 32,063 1,511 5% 29,325
Finished goods 26,732 29,698 (2,966) -10% 26,676
-------- -------- ------- ------- --------
FIFO inventories 96,668 95,020 1,648 2% 87,868
Excess of FIFO over LIFO (21,034) (18,170) (2,864) -16% (20,632)
-------- -------- ------- ------- ---------
Total inventories 75,634 76,850 (1,216) -2% 67,236
Deferred income taxes 17,820 13,720 4,100 30% 15,160
Other current assets 5,084 5,614 (530) -9% 4,148
-------- -------- ------- ------- ---------
Total Current Assets 306,596 281,589 25,007 9% 295,585
Property, plant & equipment 97,552 93,889 3,663 4% 94,277
Goodwill 20,085 20,991 (906) -4% 20,752
Other long-term assets 17,191 18,541 (1,350) -7% 19,639
-------- -------- ------- ------- ---------
Total Assets $441,424 $415,010 $26,414 6% $430,253
======== ======== ======= ======= =========
Certain prior year balance sheet items have been reclassed for comparability
to the current year.
<PAGE>
La-Z-Boy Chair Company
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
Unaudited Increase
------------------ (Decrease) Audited
Jan. 28, Jan. 22, ---------------- April 30,
1995 1994 Dollars Percent 1994
-------- -------- ------- ------- ---------
Current Liabilities
Current portion of L/T debt $1,875 $2,875 ($1,000) -35% 2,875
Accounts payable 29,761 22,740 7,021 31% 21,552
Payroll/benefits 26,750 23,283 3,467 15% 29,453
Estimated income taxes 803 3,148 (2,345) -74% 3,882
Other current liabilities 16,975 16,511 464 3% 13,701
-------- -------- ------- ------- ---------
Total Current Liabilities 76,164 68,557 7,607 11% 71,463
Long-term debt 56,245 52,495 3,750 7% 52,495
Deferred income taxes 6,424 6,455 (31) -0% 6,949
Other long-term liabilities 8,170 7,579 591 8% 8,435
Shareholders' Equity
17,968,660 shares, $1.00 par 17,969 18,320 (351) -2% 18,287
Capital in excess of par 10,464 9,596 868 9% 10,147
Retained earnings 267,014 252,550 14,464 6% 263,348
Currency translation (1,026) (542) (484) -89% (871)
-------- -------- ------- ------- ---------
Total Shareholders' Equity 294,421 279,924 14,497 5% 290,911
-------- -------- ------- ------- ---------
Total Liabilities and
Shareholders' Equity $441,424 $415,010 $26,414 6% $430,253
======== ======== ======= ======= =========
Certain prior year balance sheet items have been reclassed for comparability
to the current year.
<PAGE>
F-30
LA-Z-BOY CHAIR COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Unaudited, dollar amounts in thousands)
Three Months Ended Nine Months Ended
------------------- -------------------
Jan. 28, Jan. 22, Jan. 28, Jan. 22,
1995 1994 1995 1994
--------- --------- --------- ---------
Cash Flows from Operating Activities
Net income $7,221 $7,988 $23,569 $25,729
Adjustments to reconcile net income
to net cash provided by operating
activities
Accounting change 0 0 0 (3,352)
Depreciation and amortization 3,829 3,580 11,151 10,254
Change in receivables 26,498 28,387 16,609 16,947
Change in inventories 173 (1,460) (8,398) (16,364)
Change in other assets and liab. (183) (7,523) 2,858 (7,122)
Change in deferred taxes (2,310) 3 (3,185) 382
--------- --------- --------- ---------
Total adjustments 28,007 22,987 19,035 745
--------- --------- --------- ---------
Cash Provided by Operating
Activities 35,228 30,975 42,604 26,474
Cash Flows from Investing Activities
Proceeds from disposals of assets 104 79 1,338 146
Capital expenditures (4,691) (4,069) (15,179) (13,283)
Change in other investments 1,607 (234) 1,073 (3,311)
--------- --------- --------- ---------
Cash Used for Investing Activities (2,980) (4,224) (12,768) (16,448)
Cash Flows from Financing Activities
Short-term debt 0 0 261 441
Long-term debt 0 0 7,500 0
Change in unexpended IRB funds 680 0 (59) 0
Retirements of debt 0 (530) (5,011) (983)
Sale of stock under stock option plans 194 456 1,551 1,683
Stock for 401(k) employee plans 349 707 1,179 2,073
Purchase of La-Z-Boy stock (994) (261) (10,345) (857)
Payment of cash dividends (3,056) (3,109) (9,232) (8,576)
--------- --------- --------- ---------
Cash Used for Financing Activities (2,827) (2,737) (14,156) (6,219)
Effect of exch. rate changes on cash (168) 23 (54) (213)
--------- --------- --------- ---------
Net change in cash and equivalents 29,253 24,037 15,626 3,594
Cash and equiv. at beginning of period 12,299 8,365 25,926 28,808
--------- --------- --------- ---------
Cash and equiv. at end of period $41,552 $32,402 $41,552 $32,402
========= ========= ========= =========
Cash paid during period - Income taxes $10,923 $6,542 $22,776 $20,269
- Interest $944 $522 $2,362 $1,945
For purposes of the Statement of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to
be cash equivalents.
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
Certain prior year balance sheet items have been reclassed for comparability
to the current year.
<PAGE>
F-31
LA-Z-BOY CHAIR COMPANY AND OPERATING DIVISIONS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
---------------------
The financial information is prepared in conformity with generally
accepted accounting principles and such principles are applied on a basis
consistent with those reflected in the 1994 Annual Report filed with the
Securities and Exchange Commission. The financial information included
herein, other than the consolidated condensed balance sheet as of April
30, 1994, has been prepared by management without audit by independent
certified public accountants who do not express an opinion thereon. The
consolidated condensed balance sheet as of January 28, 1995 has been
derived from, but does not include all the disclosures contained in, the
audited consolidated financial statements for the year ended April 30,
1994. The information furnished includes all adjustments and accruals
consisting only of normal recurring accrual adjustments which are, in the
opinion of management, necessary for a fair presentation of results for
the interim period.
2. Interim Results
---------------
The foregoing interim results are not necessarily indicative of the
results of operations for the full fiscal year ending April 29, 1995.
3. Commitments and Contingencies
-----------------------------
There has been no significant change from the prior fiscal year end
audited financial statements.
<PAGE>
ANNEX A
AMENDED AND RESTATED
REORGANIZATION AGREEMENT
dated as of January 13, 1995
among
La-Z-Boy Chair Company
LZB Acquisition, Inc.
and
England/Corsair, Inc.
<PAGE>
TABLE OF CONTENTS
Page
PREMISES................................................................... 1
1. DEFINITIONS AND RULES OF CONSTRUCTION................................ 2
1.1. Definitions.................................................. 2
"Acquisition Event".......................................... 2
"Agreement".................................................. 2
"Alpha" .................................................... 2
"CERCLA" .................................................... 2
"Closing".................................................... 2
"Closing Date"............................................... 2
"Code" .................................................... 2
"Debt" .................................................... 2
"E/C" .................................................... 3
"E/C Agreement".............................................. 3
"E/C Balance Sheet Date"..................................... 3
"E/C Benefit Plans".......................................... 3
"E/C Class A Stock".......................................... 4
"E/C Class B Stock".......................................... 4
"E/C Disclosure Schedule".................................... 4
"E/C Financial Statements"................................... 4
"E/C Formerly Owned Property"................................ 4
"E/C Intellectual Property".................................. 4
"E/C Leased Personal Property"............................... 4
"E/C Permits"................................................ 4
"E/C Property"............................................... 5
"E/C Real Estate"............................................ 5
"E/C Real Estate Documents".................................. 5
"E/C Stock".................................................. 5
"E/C Shareholder Meeting".................................... 5
"Effective Time"............................................. 5
"Encumbrance"................................................ 5
"Environmental Laws"......................................... 5
"ERISA" .................................................... 6
"Exchange Act"............................................... 6
"Exchanges".................................................. 6
"GAAP" .................................................... 6
"Governmental Entity"........................................ 6
"Guaranties"................................................. 6
"Hart-Scott-Rodino Act"...................................... 6
"Hart-Scott-Rodino Filings".................................. 6
"Hazardous Substance(s)"..................................... 7
"ICC" .................................................... 7
"Indenture".................................................. 7
"IRS" .................................................... 7
"LZB" .................................................... 7
"LZB Acquisition"............................................ 7
"LZB Common Stock"........................................... 7
"LZB Company"................................................ 7
"LZB Disclosure Schedule".................................... 7
"LZB Notes".................................................. 7
"LZB Preferred Stock"........................................ 7
"LZB SEC Documents".......................................... 7
"Material"................................................... 8
"Material adverse effect".................................... 8
"Materially Burdensome Condition"............................ 8
"MBCA" .................................................... 8
"Merger" .................................................... 8
"Merger Consideration"....................................... 9
"Michigan Certificate of Merger"............................. 9
"Michigan Corporation Bureau"................................ 9
"Merger Securities".......................................... 9
"PBGC" .................................................... 9
"Performance Units".......................................... 9
"Person" .................................................... 9
"Plan of Merger"............................................. 9
"Proxy Statement/Prospectus"................................. 9
"RCRA" .................................................... 9
"Registration Statement"..................................... 9
"Requisite Regulatory Approvals"............................. 10
"Returns".................................................... 10
"SEC" .................................................... 10
"Securities Act"............................................. 10
"Subsidiary"................................................. 10
"Surviving Corporation"...................................... 10
"Takeover Proposal".......................................... 10
"Taxes" .................................................... 10
"TBCA" .................................................... 11
"Tennessee Articles of Merger"............................... 11
"Violation".................................................. 11
"Voting Debt"................................................ 11
1.2. Plurals...................................................... 11
1.3. Gender....................................................... 11
2. THE MERGER AND RELATED TRANSACTIONS.................................. 11
2.1. Plan of Merger............................................... 11
2.2. E/C Shareholder Meeting...................................... 12
2.3. LZB Acquisition Shareholder Action........................... 12
2.4. Articles and Certificate of Merger; Effective
Time......................................................... 12
3. THE CLOSING.......................................................... 12
3.1. Closing Date................................................. 12
3.2. Sales and Transfer Taxes..................................... 13
3.3. Further Assurances........................................... 13
4. REPRESENTATIONS AND WARRANTIES....................................... 13
4.1. Representations and Warranties of E/C........................ 13
4.1.1. Organization, Standing, and Power................... 13
4.1.2. Capital Structure................................... 13
4.1.3. Authority........................................... 14
4.1.4. E/C Financial Statements............................ 15
4.1.5. Registration Statement.............................. 16
4.1.6. Compliance with Applicable Laws..................... 16
4.1.7. Litigation.......................................... 17
4.1.8. Taxes............................................... 17
4.1.9. Certain Agreements.................................. 19
4.1.10. Employee Benefit Plans.............................. 19
4.1.11. Subsidiaries........................................ 21
4.1.12. Absence of Certain Changes or Events................ 22
4.1.13. Antitakeover Provisions............................. 22
4.1.14. Environmental Matters............................... 22
4.1.15. Approvals........................................... 24
4.1.16. Brokers and Finders................................. 24
4.1.17. Labor Matters....................................... 24
4.1.18. Undisclosed Liabilities............................. 25
4.1.19. Illegal Payments.................................... 26
4.1.20. Bank Accounts....................................... 26
4.1.21. Insurance Matters................................... 26
4.1.22. Intellectual Property............................... 27
4.1.23. Conduct of Business................................. 27
4.1.24. Title to Assets..................................... 29
4.1.25. Real Property....................................... 30
4.1.26. Leased Personal Property............................ 31
4.1.27. E/C Tangible Personal Property...................... 32
4.1.28. Accounts Receivable................................. 32
4.1.29. Inventory........................................... 32
4.2. Representations and Warranties of the LZB
Companies.................................................... 32
4.2.1. Organization, Standing, and Power................... 32
4.2.2. Capital Structure................................... 33
4.2.3. Authority........................................... 33
4.2.4. The Merger Securities............................... 35
4.2.4. LZB SEC Documents................................... 35
4.2.5. Registration Statement.............................. 36
4.2.6. Approvals........................................... 36
4.2.7. Brokers and Finders................................. 36
4.2.8. No Material Adverse Change.......................... 36
5. COVENANTS............................................................ 37
5.1. Covenants of E/C............................................. 37
5.1.1. Ordinary Course..................................... 37
5.1.2. Dividends and Distributions......................... 37
5.1.3. Charter and Bylaw Amendments........................ 37
5.1.4. Other Actions....................................... 37
5.1.5. Advice of Changes; Government Filings............... 38
5.1.6. Accounting Methods.................................. 38
5.1.7. S Corporation Status................................ 38
5.1.8. Affiliate Transactions.............................. 38
5.1.9. Other Actions....................................... 38
5.1.10. No Solicitations.................................... 38
5.1.11. Acquisitions........................................ 39
5.1.12. Dispositions........................................ 39
5.1.13. Debt................................................ 39
5.1.14. Benefit Plans....................................... 39
5.1.15. Discharge of Claims; Capital
Expenditures........................................ 40
5.1.16. Access to Information............................... 40
5.2. Covenants of LZB Companies................................... 40
5.2.1. Dividends and Distributions......................... 40
5.2.2. Charter and Bylaw Amendments........................ 40
5.2.3. Other Actions....................................... 40
5.2.4. Advice of Changes; Government Filings............... 41
5.2.5. Other Actions....................................... 41
6. ADDITIONAL AGREEMENTS................................................ 41
6.1. Regulatory Matters........................................... 41
6.1.1. Registration Statement.............................. 41
6.1.2. Hart-Scott-Rodino Filings........................... 41
6.1.3. General............................................. 41
6.2. Opinions of Counsel.......................................... 42
6.3. Legal Conditions to Mergers.................................. 43
6.4. Affiliates................................................... 43
6.5. Expenses..................................................... 43
6.6. Additional Agreements; Best Efforts.......................... 44
6.7. Plan of Merger............................................... 44
6.8. Letter of E/C's Accountants.................................. 44
6.9. Letter of LZB's Accountants.................................. 44
6.10. E/C Disclosure Schedule...................................... 45
7. CONDITIONS PRECEDENT................................................. 45
7.1. Conditions to Each Party's Obligation To Effect
the Merger................................................... 45
7.1.1. Shareholder Approval................................ 45
7.1.2. Listing on Exchanges................................ 45
7.1.3. Requisite Regulatory Approvals...................... 45
7.1.4. Registration Statement.............................. 45
7.1.5. Blue Sky Matters.................................... 45
7.1.6. No Restrictions or Restraints;
Illegality.......................................... 45
7.1.7. No Materially Burdensome Condition.................. 46
7.1.8. Governmental Action................................. 46
7.1.9. Affiliates' Agreements.............................. 46
7.1.10. LZB Notes and Indenture............................. 46
7.2. Conditions to Obligations of the LZB Companies............... 46
7.2.1. Representations and Warranties...................... 46
7.2.2. Performance of Obligations of E/C................... 47
7.2.3. Consents Under Agreements........................... 47
7.2.4. Tax Opinions........................................ 47
7.2.5. Legal Opinions...................................... 47
7.2.6. Debt................................................ 47
7.2.7. Accountants' Letters................................ 47
7.2.8. Tax Lock-Up Letters................................. 47
7.2.9. S Corporation Opinion............................... 48
7.2.10. Waivers of Indemnification Rights................... 48
7.2.11. Termination of Employment Agreements................ 48
7.3. Conditions to Obligations of E/C............................. 48
7.3.1. Representations and Warranties...................... 48
7.3.2. Performance of Obligations of E/C................... 48
7.3.3. Consents Under Agreements........................... 49
7.3.4. Tax Opinions........................................ 49
7.3.5. Legal Opinions...................................... 49
7.3.6. Accountants' Letters................................ 49
7.3.7. Tax Lock-Up Letters................................. 49
8. TERMINATION AND AMENDMENT............................................ 49
8.1. Termination.................................................. 49
8.2. Effect of Termination........................................ 51
8.3. Amendment.................................................... 51
8.4. Extension; Waiver............................................ 51
8.5. Liquidated Damages; Termination Fee.......................... 52
9. GENERAL PROVISIONS................................................... 52
9.1. Survival of Agreements....................................... 52
9.2. Notices...................................................... 52
9.3. Interpretation............................................... 53
9.4. Counterparts................................................. 53
9.5. Entire Agreement; No Third Party Beneficiaries;
Rights of Ownership.......................................... 54
9.6. Governing Law................................................ 54
9.7. Enforcement of Agreement..................................... 54
9.8. Severability................................................. 54
9.9. Publicity.................................................... 54
9.10. Assignment................................................... 54
EXHIBITS
1. Plan of Merger
2. Outline of Terms of LZB Notes
<PAGE>
AMENDED AND RESTATED
REORGANIZATION AGREEMENT
THIS AMENDED AND RESTATED REORGANIZATION AGREEMENT (this
"Agreement") is entered into as of January 13, 1995, by and among
La-Z-Boy Chair Company, a Michigan corporation ("LZB"); LZB
Acquisition, Inc., a Michigan corporation ("LZB Acquisition"); and
England/Corsair, Inc., a Tennessee corporation ("E/C").
PREMISES:
A. The parties have executed and delivered a Reorganization
Agreement dated as of January 13, 1995 (the "Original Agreement")
and a Plan of Merger dated as of January 13, 1995 (the "Original
Plan").
B. The parties desire to amend and restate the Original
Agreement and the Original Plan in their entirety as set forth in
this Agreement and the Amended and Restated Plan of Merger attached
hereto as Exhibit 1 and made a part hereof (the "Plan of Merger").
C. This Agreement, together with the Plan of Merger, sets
forth the terms and conditions of the reorganization of the E/C and
the LZB Companies through the Merger, in which E/C will be merged
with and into LZB Acquisition, LZB Acquisition (the surviving
corporation of the Merger) will continue to be a wholly owned
subsidiary of LZB, holders of E/C Stock will exchange their shares
of E/C Stock for Merger Consideration pursuant to conversion
formulas and procedures set forth in the Plan of Merger.
D. The Plan of Merger is being executed and delivered by the
parties thereto contemporaneously with the execution and delivery
of this Agreement.
E. The respective Boards of Directors of E/C, LZB, and LZB
Acquisition have determined that it is in the best interests of
E/C, LZB, and LZB Acquisition and their respective shareholders for
E/C to be merged with and into LZB Acquisition upon the terms and
subject to the conditions set forth in this Agreement and the Plan
of Merger and in accordance with the TBCA and the MBCA.
F. The respective Boards of Directors of E/C, LZB, and LZB
Acquisition have adopted resolutions approving this Agreement, the
Plan of Merger, and the Merger, and the Board of Directors of E/C
has resolved to recommend approval of this Agreement, the Plan of
Merger, and the Merger to its shareholders.
G. For federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization under the provisions of
Section 368 of the Code.
<PAGE>
H. E/C and the LZB Companies desire to make certain
representations, warranties, and agreements in connection with the
transactions contemplated herein and also to prescribe various
conditions to the consummation of such transactions.
NOW, THEREFORE, in consideration of the premises and the
respective representations, warranties, covenants, and agreements
set forth herein, and intending to be legally bound hereby, the
parties agree as follows:
1. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1. Definitions. As used in this Agreement, the following
terms have the following meanings:
"Acquisition Event" means that E/C shall have
authorized, recommended, proposed, or announced an
intention to authorize, recommend, or propose, or entered
into an agreement with any person (other than either of
the LZB Companies) to effect a Takeover Proposal or shall
have failed to publicly oppose a tender offer or exchange
offer by another person based on a Takeover Proposal.
"Agreement" means this Agreement, as the same may
from time to time be amended or supplemented.
"Alpha" means Alpha Aviation, Inc., a Tennessee
corporation.
"CERCLA" means the Comprehensive Environmental
Response Compensation and Liability Act, 42 U.S.C.
sections 9601 et seq.
"Closing" means the consummation of the transactions
which this Agreement provides are to occur on the Closing
Date.
"Closing Date" is defined in Section 3.1.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Debt" means the following to the extent any item is
not duplicative of another item: (a) all items of
borrowing which in accordance with GAAP would be included
in determining total liabilities as shown on the
liability side of a balance sheet as of the date at which
Debt is to be determined; (b) all Guaranties, letters of
credit, and endorsements (other than of notes, bills, and
checks presented to banks for collection or deposit in
the ordinary course of business); and (c) all items of
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<PAGE>
borrowing secured by any Encumbrance existing on any
property owned by the person whose Debt is to be
determined, whether or not the borrowings secured thereby
shall have been incurred or assumed by such person.
"E/C" means England/Corsair, Inc., a Tennessee
corporation.
"E/C Agreement" means any of the following, whether
oral or written, to which E/C or any Subsidiary is a
party: (a) any consulting agreement not terminable on 60
days or less notice; (b) any union, guild, or collective
bargaining agreement; (c) any agreement with any officer
or other key employee of E/C or any Subsidiary the
benefits of which are contingent, or the terms of which
are materially altered, upon the occurrence of a
transaction involving E/C of the nature contemplated by
this Agreement; (d) any agreement with respect to any
officer of E/C or any Subsidiary providing any term of
employment or compensation guarantee; (e) any agreement
or plan, including any stock option plan, stock
appreciation rights plan, restricted stock plan, or stock
purchase plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will
be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value
of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this
Agreement; (f) any noncompetition or similar agreement
which restricts the conduct of any business by E/C or any
Subsidiary; (g) any loan or line of credit agreement,
note, or other credit facility of E/C or any Subsidiary
or any guarantees by E/C or any Subsidiary of the
indebtedness of any other person; (h) any agreement
providing for the payment or receipt by E/C or any
Subsidiary of $100,000 or more in any twelve-month
period; or (i) any agreement between E/C and any
Subsidiary.
"E/C Balance Sheet Date" means November 25, 1994.
"E/C Benefit Plans" means all plans, contracts,
programs, and arrangements for the benefit of the
employees of E/C or any of its Subsidiaries, including
(but not limited to) employment agreements, collective
bargaining agreements, pensions, profit sharing
arrangements, bonuses, deferred compensation, retirement,
stock option, severance, hospitalization, insurance,
salary continuation, vacation, day care, scholarship, and
other employee benefit plans, programs, or arrangements
now maintained by E/C or any Subsidiary or under which
-3-
<PAGE>
E/C or any Subsidiary has any obligations in respect of
any current or former employee.
"E/C Class A Stock" means the Class A Common Stock,
without par value, of E/C.
"E/C Class B Stock" means the Class B Common Stock,
without par value, of E/C.
"E/C Disclosure Schedule" means the disclosure
schedule to be delivered to the LZB Companies by E/C
pursuant to Section 6.10.
"E/C Financial Statements" means: (a) the balance
sheet as of June 30, 1994, the related statements of
income, retained earnings, and changes in cash flows of
E/C for the year ended June 30, 1994, the notes thereto
and the audit report prepared in connection therewith by
its independent certified public accountants; and (b) the
balance sheet as of November 25, 1994, the related
statements of income, retained earnings, and changes in
cash flows of E/C for the period from July 1, 1994 to
November 25, 1994, and the notes thereto.
"E/C Formerly Owned Property" means all E/C Property
owned or leased by E/C or any Subsidiary at any time in
the past but not owned or leased as of the Effective
Time.
"E/C Intellectual Property" means all intellectual
property of E/C or any Subsidiary including, without
limitation, all copyrights, patents, invention
disclosures, trade secrets, trademarks, trade names, and
service marks, whether registered or common law, and all
applications therefor that are pending or in the process
of preparation in the United States and in foreign
countries, that are directly or indirectly owned,
licensed, used, required for use, or controlled in whole
or in part by E/C or any Subsidiary.
"E/C Leased Personal Property" means all personal
property that is currently being leased by E/C or any
Subsidiary.
"E/C Permits" means all permits, licenses,
variances, exemptions, orders, and approvals of all
Governmental Entities which are necessary for the
operation of the business of E/C or any Subsidiary or the
use, operation, or ownership of any of the E/C Real
Estate.
-4-
<PAGE>
"E/C Property" means any parcel of real estate now
or heretofore owned by E/C or any Subsidiary or in which
E/C or any Subsidiary has or had any interest, including
any lessee's interest or any interest held as security
for an obligation, and all E/C Formerly Owned Property.
"E/C Real Estate" means all real property that is
owned, leased, or subleased by E/C or any of its
Subsidiaries or as to which any of them has any interest
of any kind including, without limitation, all office,
manufacturing, and warehouse facilities and ground
leases.
"E/C Real Estate Documents" means all deeds, leases,
subleases, and other agreements and instruments relating
to any of the E/C Real Estate.
"E/C Stock" means either or both of the E/C Class A
Stock and the E/C Class B Stock.
"E/C Shareholder Meeting" means a meeting of E/C's
shareholders to be held for the purpose of voting upon
the approval of this Agreement, the Plan of Merger, and
the Merger.
"Effective Time" is defined in Section 2.4.
"Encumbrance" means any pledge, lien, security
interest, encumbrance, mortgage, claim, proxy, voting
trust, voting agreement, obligation, option, equity
interest, demand, lease, sublease, tenancy, license,
easement, or rights of occupancy or use by another person
or any other interest whatsoever.
"Environmental Laws" means: (a) the Toxic Substance
Control Act, 15 U.S.C. sections 2601 et seq.; (b) the National
Historic Preservation Act, 16 U.S.C. sections 470 et seq.;
(c) the Coastal Zone Management Zone Act of 1972, 16
U.S.C. sections 1451 et seq.; (d) the Rivers and Harbors Act of
1899, 33 U.S.C. sections 401 et seq.; (e) the Clean Water Act,
33 U.S.C. sections 1251 et seq.; (f) the Flood Disaster
Protection Act, 42 U.S.C. sections 4001 et seq.; (g) the
National Environmental Policy Act, 42 U.S.C. sections 4321 et
seq.; (h) RCRA; (i) the Clean Air Act, 42 U.S.C. sections 7401
et seq.; (j) CERCLA; (k) the Hazardous Materials
Transportation Act, 49 U.S.C. sections 1801 et seq.; (l) the
Safe Drinking Water Act, 42 U.S.C. sections 300f et seq.;
(m) the Emergency Planning and Community Right-to-Know
Act, 42 U.S.C. sections 11001 et seq.; (n) the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
sections 136 et seq.; (o) the Occupational Safety and Hygiene
-5-
<PAGE>
Act, 29 U.S.C. sections 685 et seq.; and (p) all other federal,
state, county, municipal, local, foreign, and other
statutes, laws, regulations, and ordinances which relate
to or deal with protection of human health or the
environment; all as may be from time to time amended.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Exchanges" means the New York Stock Exchange and
the Pacific Stock Exchange.
"GAAP" means generally accepted accounting
principles consistently applied.
"Governmental Entity" means any court, commission,
administrative agency, or other governmental authority or
instrumentality, whether federal, state, or local, and
whether domestic or foreign.
"Guaranties" means all obligations (other than
endorsements in the ordinary course of business of
negotiable instruments for deposit or collection) of a
person guaranteeing any Debt of any other person in any
manner, whether directly or indirectly, including,
without limitation, all obligations incurred through an
agreement, contingent, or otherwise, by such Person:
(a) to purchase such Debt or obligation or any property
or assets constituting security therefor; (b) to advance
or supply funds (i) for the purchase or payment of such
Debt or obligation, (ii) to maintain working capital or
other balance sheet conditions or otherwise to advance or
make available funds for the purchase or payment of such
Debt or obligation; (c) to lease property or to purchase
securities or other property or services primarily for
the purpose of assuring the owner of such Debt or
obligation; or (d) otherwise to assure the owner of the
Debt or obligation against loss in respect thereof.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, being Section 7A of
the Clayton Act, as amended.
"Hart-Scott-Rodino Filings" means the filing by E/C
and LZB of appropriate premerger notification forms with
respect to the Merger with the Federal Trade Commission
on the Justice Department pursuant to the Hart-Scott-
Rodino Act.
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<PAGE>
"Hazardous Substance(s)" means: (a) any flammable or
combustible substance, explosive, and/or radioactive
material, hazardous waste, toxic substance, pollutant,
contaminant, and/or any related materials or substance
identified in and/or regulated by any of the
Environmental Laws; and (b) asbestos, polychlorinated
biphenyls, urea formaldehyde, chemicals and/or chemical
wastes, explosives, known carcinogens, petroleum products
and by-products (including fractions thereof), and radon.
"ICC" means the Interstate Commerce Commission.
"Indenture" means the Indenture pursuant to which
the LZB Notes will be issued, which shall be in form and
substance satisfactory to E/C and LZB.
"IRS" means the United States Internal Revenue
Service.
"LZB" means La-Z-Boy Chair Company, a Michigan
corporation.
"LZB Acquisition" means LZB Acquisition, Inc., a
Michigan corporation and a wholly owned subsidiary of
LZB.
"LZB Common Stock" means the Common Stock, $1.00 par
value, of LZB.
"LZB Company" means either LZB or LZB Acquisition.
"LZB Disclosure Schedule" means the disclosure
schedule delivered to E/C by the LZB Companies prior to
the execution of this Agreement.
"LZB Notes" means 8% Unsecured Promissory Notes Due
1999 of LZB issued pursuant to the Indenture, which shall
be in form and substance satisfactory to E/C and LZB and
which shall be consistent with the outline of the terms
thereof set forth in Exhibit 2.
"LZB Preferred Stock" means the Preferred Stock of
LZB.
"LZB SEC Documents" means the following documents
heretofore filed with or furnished to the SEC by LZB
(including, in each case, all documents incorporated by
reference therein): (a) Annual Report on Form 10-K for
the fiscal year ended April 30, 1994; (b) Quarterly
Reports on Form 10-Q for the fiscal quarters ended July
30, 1994 and October 29, 1994; (c) Current Report on Form
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<PAGE>
8-K dated June 2, 1994; (d) Annual Report to Shareholders
for the fiscal year ended April 30, 1994; and (e)
definitive Proxy Statement for the annual meeting of
shareholders held on July 25, 1994.
"Material" (whether or not capitalized), when used
with any reference to any event, change, or effect with
respect to a specified person, means an event, change, or
effect which is material in relation to the condition
(financial or otherwise), assets, liabilities,
businesses, results of operations, or prospects of such
person (and its Subsidiaries, if any) taken as a whole.
In addition to the foregoing, when used with reference to
E/C, an event, change, or effect is "material" if any
resulting cost or loss of profits to E/C or the Surviving
Corporation exceeds or may exceed $25,000 (prior to
giving effect to any Tax consequences thereof).
"Material adverse effect" (whether or not
capitalized), when used with respect to a specified
person, means a material adverse effect on either (a) the
business, assets, liabilities, results of operations,
condition (financial or otherwise), or prospects of such
person (and its Subsidiaries, if any) taken as a whole,
or (b) the ability of any of such person to perform its
obligations hereunder or to consummate the transactions
contemplated hereby. In addition to the foregoing, when
used with reference to E/C, "material adverse effect"
means any cost or loss of profits to E/C or the Surviving
Corporation in an amount exceeding $100,000 (prior to
giving effect to any Tax consequences thereof).
"Materially Burdensome Condition" means any action
taken, or any statute, rule, regulation, or order
enacted, entered, enforced, or deemed applicable to the
Merger or any of the transactions contemplated hereby, by
any Governmental Entity which, in connection with the
grant of a Requisite Regulatory Approval, imposes any
condition or restriction upon E/C, either of the LZB
Companies, or the Surviving Corporation which would so
materially adversely impact the economic or business
benefits of the transactions contemplated by this
Agreement as to render inadvisable, in the reasonable
judgment of the Board of Directors of E/C or either LZB
Company, the consummation of the Merger.
"MBCA" means the Business Corporation Act of the
State of Michigan, as amended.
"Merger" means the merger of E/C with and into LZB
Acquisition pursuant to the Plan of Merger and this
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Agreement.
"Merger Consideration" means any one or more of the
following: (a) LZB Common Stock; (b) LZB Notes; (c) cash;
and (d) Performance Units.
"Michigan Certificate of Merger" means a certificate
of merger with respect to the Merger, to be filed with
the Michigan Corporation Bureau in accordance with the
MBCA.
"Michigan Corporation Bureau" means the Corporation
and Securities Bureau of the Michigan Department of
Commerce.
"Merger Securities" means: (a) the LZB Common Stock
to be issued as part of the Merger Consideration; (b) LZB
Notes to be issued as part of the Merger Consideration;
(c) the Performance Units; and (d) the LZB Common Stock
to be issued in payment of the Performance Units.
"PBGC" means the Pension Benefit Guaranty
Corporation.
"Performance Units" is defined in the Plan of
Merger.
"Person" (whether or not capitalized) means any
entity, whether a natural person, trustee, corporation,
partnership, limited liability company, joint stock
company, trust, unincorporated organization, business
association or firm, joint venture, government or agency,
instrumentality, or public subdivision thereof, court, or
otherwise.
"Plan of Merger" means the Amended and Restated Plan
of Merger dated as of January 13, 1995 between E/C and
LZB Acquisition, in the form of Exhibit 1.
"Proxy Statement/Prospectus" means the proxy
statement/prospectus constituting part of the
Registration Statement.
"RCRA" means the Resource Conservation and Recovery
Act of 1976, 42 U.S.C. sections 6901 et seq.
"Registration Statement" means a Registration
Statement on Form S-4 to be filed with the SEC pursuant
to the Securities Act by LZB in connection with its
issuance of the Merger Securities.
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"Requisite Regulatory Approvals" means all
authorizations, consents, orders, or approvals of, all
declarations or filings with, and the expiration or early
termination of all waiting periods by, any Governmental
Entity which are prescribed by law as necessary for the
consummation of the Merger and the other transactions
contemplated hereby (including, but not limited to,
expiration or early termination of the applicable waiting
period under the Hart-Scott-Rodino Act and all required
filings with and actions by the ICC), other than the
filing of the Tennessee Articles of Merger and the
Michigan Certificate of Merger.
"Returns" means all returns, declarations, reports,
statements, and other documents required to be filed in
respect of Taxes.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933,
as amended.
"Subsidiary" means, when used in respect of any
person, any corporation or other organization, whether
incorporated or unincorporated, of which such person
directly or indirectly owns or controls securities or
other interests having by their terms ordinary voting
power to elect 50 percent or more of the board of
directors or others performing similar functions with
respect to such corporation or other organization, or any
organization in which such person is a general partner.
"Surviving Corporation" means LZB Acquisition as the
surviving corporation of the Merger.
"Takeover Proposal" means any tender or exchange
offer, proposal for a merger, consolidation, or other
business combination involving E/C, or any proposal or
offer to acquire in any manner 10 percent or more of any
class of E/C's capital stock or 10 percent or more of
E/C's assets, other than the transactions contemplated by
this Agreement.
"Taxes" means all federal, state, local, foreign,
and other net income, gross income, gross receipts,
sales, use, ad valorem, value added, transfer, franchise,
profits, license, lease, service, service use,
withholding, payroll, employment, unemployment and
payroll related, excise, severance, stamp, occupation,
premium, property, or windfall profits taxes, customs,
duties, or other taxes, fees, assessments, or charges of
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any kind whatever, together with any interest and any
penalties, additions to tax, or additional amounts with
respect thereto.
"TBCA" means the Tennessee Business Corporation Act,
as amended.
"Tennessee Articles of Merger" means articles of
merger with respect to the Merger, to be filed with the
Tennessee Secretary of State in accordance with the TBCA.
"Violation" means, with respect to any document, any
event or condition which conflicts with, gives rise to or
results in any violation of or default (with or without
notice or lapse of time, or both) under, or gives rise to
a right of termination, cancellation, or acceleration of
any obligation or the loss of a material benefit under,
or the creation of an Encumbrance on assets pursuant to,
any provision of such document.
"Voting Debt" means bonds, debentures, notes, or
other indebtedness the holders of which have the right to
vote (or convertible into or exercisable for securities
having the right to vote) with the shareholders of the
issuer thereof on any matter.
1.2. Plurals. Any defined term used in this Agreement in the
plural form shall be deemed to include all members of the relevant
class.
1.3. Gender. Any masculine, feminine, or neuter word or term
used in this Agreement shall be deemed also to include the other
genders.
2. THE MERGER AND RELATED TRANSACTIONS.
2.1. Plan of Merger. The Plan of Merger sets forth: (a) the
name of each corporation planning to merge, the name of the
Surviving Corporation, and the name of each corporation whose
securities will be issued in connection with the Merger; (b) as to
each of E/C and LZB Acquisition, the designation and number of
outstanding shares of each class, specifying the classes entitled
to vote, and the manner (if any) in which the number of shares is
subject to change before the Effective Time; (c) the terms and
conditions of the Merger; (d) the manner and basis of converting
the outstanding shares of E/C Stock into Merger Consideration;
(e) a statement that no amendment to or restatement of the articles
of incorporation of the Surviving Corporation will be effected by
the Merger; and (f) certain other details and provisions applicable
to the Merger. LZB Acquisition shall be the Surviving Corporation.
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The Plan of Merger is intended to constitute the "plan of merger"
contemplated by Section 48-21-102 of the TBCA and the "plan of
merger" contemplated by Section 701 of the MBCA.
2.2. E/C Shareholder Meeting. E/C shall take all steps
necessary to duly call, give notice of, convene, and hold the E/C
Shareholder Meeting as soon as is reasonable after the date on
which the Registration Statement becomes effective, and E/C will,
through its Board of Directors, recommend to its shareholders
approval of this Agreement, the Plan of Merger, and the Merger
(unless, in the written opinion of E/C's independent counsel, such
recommendation is not consistent with the fiduciary duties of E/C's
Board of Directors).
2.3. LZB Acquisition Shareholder Action. Prior to the
Effective Time, LZB, as the sole shareholder of LZB Acquisition,
shall take all action proper or convenient for the consummation of
the Merger by LZB Acquisition.
2.4. Articles and Certificate of Merger; Effective Time.
Subject to the provisions of this Agreement, as soon as practicable
on the Closing Date: (a) the Tennessee Articles of Merger shall be
duly prepared, executed, and acknowledged by the Surviving
Corporation and thereafter delivered for filing to the Secretary of
State of the State of Tennessee, as provided in the TBCA; and
(b) the Michigan Certificate of Merger shall be duly prepared,
executed, and acknowledged by the Surviving Corporation and
thereafter delivered for filing to the Michigan Corporation Bureau,
as provided in the MBCA. "Effective Time" means the later of:
(i) the time at which the Merger becomes effective under the laws
of the State of Tennessee; or (ii) the time at which the Merger
becomes effective under the laws of the State of Michigan. It is
contemplated that E/C, LZB, and LZB Acquisition will agree in
writing to provide in the Tennessee Articles of Merger and the
Michigan Certificate of Merger for identical effective times under
the laws of both states.
3. THE CLOSING.
3.1. Closing Date. Subject to the terms and conditions
hereof, the Closing will take place at 10:00 a.m., Detroit,
Michigan time, on the third business day following the satisfaction
(or waiver, subject to applicable law) of the last to be satisfied
(or waived) of the conditions set forth in Sections 7.1, 7.2.3, and
7.3.3 or such other time and date as the parties agree to in
writing (the "Closing Date") at the offices of Miller, Canfield,
Paddock and Stone, P.L.C., Detroit, Michigan. All transactions
occurring and all documents executed and/or delivered at the
Closing shall be deemed to occur simultaneously, and no transaction
shall be deemed to have occurred and no document shall be deemed to
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have been executed or delivered unless all transactions shall have
occurred and all such documents shall have been executed and
delivered.
3.2. Sales and Transfer Taxes. All applicable sales,
transfer, stamp, documentary, and other similar taxes and
governmental fees, if any, which may be due or payable as a result
of the Merger shall be borne and paid by the Surviving Corporation
if the Merger is consummated and otherwise shall be borne and paid
by the party incurring the same.
3.3. Further Assurances. From time to time subsequent to the
Closing Date, E/C and LZB Acquisition shall at the request of LZB
execute and deliver such additional documents, instruments,
certifications, papers, and other assurances as may be requested by
LZB as necessary, appropriate, convenient, useful, or desirable to
effectively carry out the intent of this Agreement and/or the Plan
of Merger.
4. REPRESENTATIONS AND WARRANTIES.
4.1. Representations and Warranties of E/C. E/C represents
and warrants to the LZB Companies as follows:
4.1.1. Organization, Standing, and Power. E/C is a
corporation duly incorporated, validly existing, and in good
standing under the laws of its jurisdiction of incorporation,
has all requisite power and authority (corporate and other) to
own, lease, and operate its properties and to carry on its
business as now being conducted, and is duly qualified and in
good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its
properties makes such qualification necessary other than in
such jurisdictions where the failure to so qualify would not
have a material adverse effect on E/C. Section 4.1.1 of the
E/C Disclosure Schedule will correctly set forth the
jurisdictions in which E/C is qualified to do business. True
and complete copies of the charter and bylaws of E/C as
currently in effect have been delivered to LZB.
4.1.2. Capital Structure.
(a) The authorized capital stock of E/C consists solely
of 500,000 shares of E/C Class A Stock and 500,000 shares of
E/C Class B Stock. As of the date of this Agreement, 224,652
shares of E/C Class A Stock are issued and outstanding, and
72,678 shares of E/C Class B Stock are issued and outstanding.
All outstanding shares of E/C Stock have been duly authorized
and validly issued and are fully paid and nonassessable and
not subject to any preemptive rights. 37,600 shares of E/C
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Class A Stock and no shares of E/C Class B Stock are held by
E/C as treasury shares. No shares of any class of E/C's
capital stock are reserved for issuance for any purpose.
(b) E/C owns 50 percent of the issued and outstanding
shares of capital stock of Alpha. All such shares of capital
stock of Alpha have been duly authorized and validly issued,
are fully paid and nonassessable, and are owned by E/C free
and clear of any Encumbrance except as will be set forth in
Section 4.1.2(b) of the E/C Disclosure Schedule. Section
4.1.2(b) of the E/C Disclosure Schedule will set forth the
name, address, telephone number, and number of shares held
with respect to each other shareholder of Alpha.
(c) E/C has no outstanding Voting Debt.
(d) Except for this Agreement and the Plan of Merger,
E/C has no outstanding options, warrants, calls, rights,
commitments, or agreements of any character to which it is a
party or is bound obligating it to issue, deliver, or sell, or
to cause to be issued, delivered, or sold, additional shares
of capital stock, any Voting Debt, or any other security with
voting rights in E/C or obligating E/C to grant, extend, or
enter into any such option, warrant, call, right, commitment,
or agreement. On and immediately following the Effective
Time, there will be no option, warrant, call, right, or
agreement obligating E/C to issue, deliver, or sell, or to
cause to be issued, delivered, or sold, any shares of capital
stock, any Voting Debt, or any other security with voting
rights in E/C or obligating E/C to grant, extend, or enter
into any such option, warrant, call, right, or agreement.
There are no outstanding contractual obligations of E/C to
repurchase, redeem, or otherwise acquire any shares of its
capital stock. E/C is not required to, and no shareholder of
E/C has any right to require E/C to, redeem, repurchase, or
otherwise acquire or to offer to redeem, repurchase, or
otherwise acquire any shares of its capital stock in
connection with or as a result of the Merger or the other
transactions contemplated in this Agreement.
4.1.3. Authority.
(a) E/C has all requisite corporate power and authority
to enter into this Agreement and the Plan of Merger and,
subject to approval of this Agreement and the Plan of Merger
by the shareholders of E/C, to consummate the transactions
contemplated hereby and thereby. The execution and delivery
of this Agreement and the Plan of Merger and the consummation
of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part
of E/C, subject to the approval of this Agreement and the Plan
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of Merger by the shareholders of E/C. No approval or adoption
of the shareholders of E/C is required to consummate the
Merger and the other transactions contemplated hereby other
than specifically set forth in Section 7.1.1. This Agreement
and the Plan of Merger have been duly executed and delivered
by E/C and constitute legal, valid, and binding obligations of
E/C, enforceable against E/C in accordance with their terms,
except as enforceability may be limited by general principles
of equity, whether considered at law or in equity, and
bankruptcy, insolvency, and similar laws affecting creditors'
rights and remedies generally.
(b) The execution and delivery of this Agreement and the
Plan of Merger and the consummation of the transactions
contemplated hereby and thereby will not be, give rise to, or
result in any Violation of the charter or bylaws of E/C or
(subject to obtaining or making the consents, approvals,
orders, authorizations, registrations, declarations, and
filings referred to in paragraph (c) below, and except as will
be set forth in Section 4.1.3(b) of the E/C Disclosure
Schedule) be, give rise to, or result in any Violation of, or
require the consent of any other person that is a party to,
any loan or credit agreement, note, mortgage, indenture,
lease, sublease, E/C Benefit Plan, or other agreement,
obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance,
rule, or regulation applicable to E/C or its properties or
assets.
(c) No consent, approval, order, or authorization of, or
registration, declaration, or filing with, any Governmental
Entity is required by or with respect to E/C in connection
with the execution and delivery of this Agreement or the Plan
of Merger by E/C or the consummation by E/C of the
transactions contemplated hereby or thereby, except for:
(i) the filing of the Tennessee Articles of Merger with the
Secretary of State of the State of Tennessee; (ii) the filing
of the Certificate of Merger with the Michigan Corporation
Bureau; (iii) the filing of appropriate documents with the
relevant authorities of other states in which E/C is qualified
to do business; (iv) E/C's Hart-Scott-Rodino Filing and
expiration or early termination of the waiting period under
the Hart-Scott-Rodino Act; (v) the filings with and actions by
the ICC which will be described in Section 4.1.3(c) of the E/C
Disclosure Schedule; and (vi) such other matters, if any, as
will be set forth in Section 4.1.3(c) of the E/C Disclosure
Schedule.
4.1.4. E/C Financial Statements. E/C has delivered to
the LZB Companies true and complete copies of the E/C
Financial Statements. The E/C Financial Statements have been
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prepared in accordance with GAAP and fairly present the
financial position of E/C as at the dates thereof and the
results of its operations and cash flows or changes in
financial position for the periods then ended.
4.1.5. Registration Statement. None of the
information supplied or to be supplied by E/C for inclusion in
(a) the Registration Statement will, at the time the
Registration Statement becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, or
(b) the Proxy Statement/Prospectus or any amendment or
supplement thereto will, at the date of mailing to
shareholders and at the time of the E/C Shareholder Meeting,
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
The Proxy Statement/Prospectus (except for such portions
thereof that relate only to the LZB Companies) will comply in
all material respects with the laws of the State of Tennessee
and with any applicable provisions of the Exchange Act and the
rules and regulations thereunder, and the Registration
Statement (except for portions thereof that relate only to the
LZB Companies) will comply in all material respects with the
provisions of the Securities Act and the rules and regulations
thereunder.
4.1.6. Compliance with Applicable Laws. E/C holds all
E/C Permits, except for E/C Permits the lack of which does not
and will not, individually or in the aggregate, have a
material adverse effect on E/C. A list of the material E/C
Permits held by E/C will be set forth in Section 4.1.6 of the
E/C Disclosure Schedule, and each of the E/C Permits so listed
is in full force and effect. E/C is in compliance in all
material respects with the terms of the E/C Permits and all
applicable laws and regulations, except for possible
violations which, individually or in the aggregate, do not and
will not have a material adverse effect on E/C. The
businesses of E/C and its Subsidiaries are not being
conducted, and have not been conducted during the past five
years, in violation of any law, ordinance, regulation, order,
writ, rule, or decree of any Governmental Entity except for
possible violations which, individually or in the aggregate,
do not and will not have a material adverse effect on E/C. No
investigation by any Governmental Entity with respect to E/C
or any Subsidiary is pending or, to the best knowledge of E/C,
threatened. None of the E/C Companies is required, or has
ever been required, to be registered under the Investment
Company Act of 1940, as amended.
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4.1.7. Litigation. Except as will be set forth in
Section 4.1.7 of the E/C Disclosure Schedule, there is no
claim, suit, action, arbitration, or governmental proceeding
or investigation pending or, to the best knowledge of E/C,
threatened against or affecting E/C or any Subsidiary which,
if adversely determined, would, individually or in the
aggregate, have a material adverse effect on E/C, nor is there
any reasonable basis for any such claim, suit, action,
arbitration, or governmental proceeding or investigation.
Except as will be set forth in Section 4.1.7 of the E/C
Disclosure Schedule, there is no judgment, decree, injunction,
rule, or order of any Governmental Entity or arbitrator
outstanding against E/C or any Subsidiary. Section 4.1.7 of
the E/C Disclosure Schedule will list all consents, orders,
decrees, and other compliance agreements with any Governmental
Entity under which E/C or any Subsidiary is operating or by
which any of their assets are bound and, to the best knowledge
of E/C, all investigations commenced by any Governmental
Entity against E/C or any Subsidiary during the past five
years.
4.1.8. Taxes.
(a) There have been properly completed in all material
respects and filed on a timely basis, and in correct form in
all material respects, all Returns required to be filed by E/C
or any Subsidiary. All taxes owing by E/C or any Subsidiary
for all periods ended on or prior to the date of the latest of
the E/C Financial Statements have either been paid or
adequately accrued in accordance with GAAP in such E/C
Financial Statements.
(b) Except as will be described in Section 4.1.8 of the
E/C Disclosure Schedule, within the last five years: (i) there
has not been any review or audit by any taxing authority of
any Taxes of E/C or any Subsidiary; (ii) neither E/C nor any
Subsidiary has received notice of any pending or threatened
audit by the IRS or any other Governmental Entity related to
any Returns or Tax liability of E/C or any Subsidiary for any
period; and (iii) no claim for assessment or collection of
Taxes has been asserted against E/C or any Subsidiary.
Neither E/C nor any Subsidiary has any unpaid deficiency
assessed by the IRS or any other Governmental Entity with
respect to any of Returns of E/C or any Subsidiary, nor is
there reason to believe that any deficiency will be assessed.
There are no actions, suits, proceedings, investigations, or
claims now pending or, to the best knowledge of E/C,
threatened against E/C or any Subsidiary in respect of Taxes,
nor are there any matters under discussion with any
Governmental Entity relating to Taxes.
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(c) No agreements have been made or are currently being
negotiated by or on behalf of E/C or any Subsidiary for any
waiver or for the extension of any statute of limitations
governing the time of assessment or collection of any Taxes,
and no closing agreements or compromises are currently pending
or have been entered into by E/C or any Subsidiary.
(d) E/C and each Subsidiary has withheld in connection
with the amount paid to any officer, director, employee,
independent contractor, creditor, shareholder, or other third
party the amount of all Taxes and other amounts required to be
withheld therefrom by applicable law and has paid the same to
the proper Governmental Entities or other receiving officers
within the time required under applicable law.
(e) There are no liens for Taxes (other than for current
Taxes not yet due and payable) on any of the assets of E/C or
any Subsidiary.
(f) None of the assets of E/C or any Subsidiary is
property that is required to be treated as being owned by any
other person pursuant to the so-called "safe harbor lease"
provisions of former Section 168(f)(8) of the Code.
(g) None of the assets of E/C or any Subsidiary directly
or indirectly secures any debt the interest on which is tax-
exempt under Section 103(a) of the Code.
(h) Neither E/C nor any Subsidiary: (i) has filed a
consent under Section 341(f) of the Code; (ii) has made any
payments or is obligated to make any payments, or is a party
to any compensatory agreement with respect to the performance
of services that under certain circumstances could obligate it
to make any payments, that may not be deductible under Section
280G of the Code; (iii) is a new loss corporation within the
meaning of Section 382(k)(3) of the Code; (iv) is or has been
a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code; (v) (A) has been a
member of an affiliated group of corporations that filed a
consolidated return with respect to the federal corporate
income tax for any taxable year in lieu of separate returns
(other than a group the common parent of which was E/C),
(B) has been a member of an affiliated group of corporations
that was considered by authorities in any jurisdiction to
conduct a unitary business the combined income of which was
subject to Tax in such jurisdiction, or (C) to the best
knowledge of the E/C Companies, has any liability for the
Taxes of any person under Section 1.1502-6 of the Treasury
Regulations (or any similar provision of state, local, or
foreign law) as a transferee or successor, by contract, or
otherwise; (vi) is a party to any safe harbor lease within the
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meaning of Section 168(f)(8) of the Internal Revenue Code of
1954 (as in effect prior to enactment of the Tax Equity and
Fiscal Responsibility Act of 1982); (vii) owns any asset that
is tax-exempt use property within the meaning of Section
168(h) of the Code; (viii) has agreed, or is required, to make
any adjustment under Section 481(a) of the Code by reason of
a change in accounting method; or (ix) has ever computed its
taxable income for federal income tax purposes using the cash
receipts and disbursements method of accounting.
(i) Section 4.1.8(i) of the E/C Disclosure Schedule will
set forth the following information with respect to E/C and
each Subsidiary as of the most recent practicable date (which
date is specified therein): (i) the tax basis of any stock
owned by such company in any Subsidiary of E/C (or the amount
of such company's excess loss account with respect to such
stock); (ii) the amount of any net operating loss, capital
loss, unused investment or other credit, or excess charitable
contribution; and (iii) the amount of any gain or loss on
deferred intercompany transactions that has been deferred by
such company under Section 1.1502-13 of the Treasury
Regulations and the character and source of such gain or loss.
(j) There is no tax-sharing agreement or similar
agreement with respect to or involving E/C or any Subsidiary.
(k) No new elections with respect to Taxes or any
changes in current elections with respect to Taxes affecting
E/C or any Subsidiary will be made after the date of this
Agreement without the prior written consent of LZB.
4.1.9. Certain Agreements. Except for this Agreement
and the Plan of Merger, all E/C Agreements will be listed in
Section 4.1.9 of the E/C Disclosure Schedule. There are no
defaults or events which with the passage of time or the
giving of notice would constitute defaults under any of the
E/C Agreements on the part of any person that is a party to
any of the E/C Agreements. Section 4.1.9 of the E/C
Disclosure Schedule will contain a true and complete
description of all transactions with management and others,
business relationships, indebtedness of management, and
transactions with promoters that would be required to be
disclosed pursuant to Item 404 of Regulation S-K promulgated
by the SEC for the current and last two fiscal years of E/C.
4.1.10. Employee Benefit Plans.
(a) Section 4.1.10 of the E/C Disclosure Schedule will
contain a true and complete list of all E/C Benefit Plans.
True and complete copies of all current and prior documents,
including all amendments, with respect to each E/C Benefit
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Plan and related trust or other funding vehicle to be listed
in Section 4.1(j)(i) of the E/C Disclosure Schedule will be
provided to the LZB Companies with the E/C Disclosure
Schedule. With respect to each "employee benefit plan,"
within the meaning of Section 3(3) of the ERISA, all of which
will be listed in Section 4.1.10 of the E/C Disclosure
Schedule, E/C will provide the LZB Companies (at the same time
it provides the E/C Disclosure Schedule) with true and
complete copies of (i) the three most recent annual actuarial
valuation reports, if any, (ii) the five most recently filed
Form 5500s or 5500-Cs and Schedules A and B thereto, (iii) all
IRS rulings, if any, (iv) the most recent IRS determination
letter, if any, and (v) each form 5310 and any related
documents filed with the IRS or with the PBGC with respect to
any E/C Benefit Plan during the most recent six full plan
years.
(b) With respect to any and all of the E/C Benefit
Plans: (i) none of the E/C Benefit Plans is an "employee
pension benefit plan," as defined in Section 3(2) of ERISA;
(ii) E/C and its Subsidiaries have performed all obligations
required to be performed by them under the E/C Benefit Plans
and are not in default under or in violation of, and have no
knowledge of any other person's default under or violation of,
any E/C Benefit Plan; (iii) each such plan is in compliance
with the requirements prescribed by any and all statutes,
orders, or governmental rules or regulations applicable to
such plan, including but not limited to ERISA and the Code;
(iv) neither E/C, any Subsidiary, nor any other "disqualified
Person" or "party in interest," within the meanings of Section
4975 of the Code or Section 3(14) of ERISA, respectively, has
engaged in any "prohibited transaction," as such term is
defined in Section 4975 of the Code or Section 406 of ERISA,
which could, following the Effective Time, subject any plan
(or its related trust), E/C, any Subsidiary of E/C, either of
the LZB Companies, or any officer, director, or employee of
any of such entities, to any tax or penalty imposed under the
Code or ERISA; (v) there are no actions, suits, or claims
pending (other than routine claims for benefits) or threatened
against any E/C Benefit Plan or against the assets of any E/C
Benefit Plan; (vi) no E/C Benefit Plan is subject to Part 3 of
Subtitle B of Title I of ERISA or Section 412 of the Code;
(vii) each "plan official," within the meaning of Section 412
of ERISA, of each Plan is bonded to the extent required by
said Section 412; (viii) no proceeding has been initiated to
terminate any E/C Benefit Plan, and no "reportable event,"
within the meanings of Section 4043(b) or 4063(a) of ERISA,
has occurred with respect to any E/C Benefit Plan (other than
those which may result from the transactions contemplated
hereby); (ix) E/C and its Subsidiaries have complied in all
material respects with the reporting and disclosure
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requirements of ERISA, and all filings and reports as to each
E/C Benefit Plan required to have been made on or before the
Effective Time to the IRS, the PBGC, or the Department of
Labor have been or will be made on or before the Effective
Time; (x) all insurance premiums incurred or accrued up to and
including the Effective Time to the PBGC have been timely paid
by the E/C Companies; and (xi) there are no leased employees
that must be taken into account under any E/C Benefit Plan
pursuant to Code Section 414(n)(3).
(c) No E/C Benefit Plan is subject to Title IV of ERISA.
(d) With respect to each E/C Benefit Plan that is a
defined contribution plan within the meaning of Section 3(34)
of ERISA, to the extent required by the terms of such E/C
Benefit Plan, E/C and its Subsidiaries have paid all
contributions on behalf of prior plan years and any salary
deferrals and employer contributions, including matching
contributions, that have accrued for the current plan year.
(e) Neither E/C nor any Subsidiary maintains or
participates in, or has ever maintained or participated in, a
plan which is a "multiemployer plan" within the meaning of
Section 3(37) of ERISA.
(f) Except as will be specifically set forth in Section
4.1.10(f) of the E/C Disclosure Schedule, with respect to each
E/C Benefit Plan that is an "employer welfare benefit plan"
within the meaning of Section 3(1) of ERISA: (i) each such E/C
Benefit Plan which is intended to meet the requirements for
tax-favored treatment under Subchapter B of Chapter 1 of the
Code meets such requirements; (ii) there is no disqualified
benefit (as such term is defined in Section 4976(b) of the
Code) which would subject E/C, any of its Subsidiaries, or
either of the LZB Companies to a tax under Section 4976(a) of
the Code; (iii) each such E/C Benefit Plan that is a "group
health plan" as such term is defined in Section 5000(b)(i) of
the Code satisfies and has satisfied the applicable
requirements of Sections 601 through 608 of ERISA, Section
162(k) of the Code (through December 31, 1988), and Section
4980B of Code (commencing on January 1, 1989); and (iv) each
such E/C Benefit Plan that covers former employees of E/C or
any Subsidiary may be amended or terminated by E/C or such
Subsidiary on or at any time after the Effective Time, and all
of the liabilities to such former employees (and future former
employees) under such E/C Benefit Plan have been reflected in
the E/C Financial Statement in a manner satisfying the
requirements of FAS 106.
4.1.11. Subsidiaries. E/C has no Subsidiaries other
than Alpha.
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4.1.12. Absence of Certain Changes or Events. Except
as will be disclosed in Section 4.1.12 of the E/C Disclosure
Schedule, since the E/C Balance Sheet Date neither E/C nor any
Subsidiary has incurred any material liability except in the
ordinary course of its business consistent with its past
practices, nor has there been any change, or any event
involving a prospective change, in the business, assets,
liabilities, condition (financial or otherwise), results of
operations, or prospects of E/C or any Subsidiary which has
had, or is reasonably likely to have, a material adverse
effect on E/C.
4.1.13. Antitakeover Provisions. None of the
provisions of the Tennessee Investor Protection Act, the
Tennessee Business Combination Act, or the Tennessee Control
Share Acquisition Act apply or will apply to the transactions
contemplated by this Agreement.
4.1.14. Environmental Matters.
(a) A true and correct list of all E/C Property and all
E/C Formerly Owned Property, including the address and the
county in which such property is located, will be set forth in
Section 4.1.14(a) of the E/C Disclosure Schedule.
(b) Except as will be described in Section 4.1.14(b) of
the E/C Disclosure Schedule, E/C and each of its Subsidiaries
is now and has at all times been in compliance with all
Environmental Laws except for any violations which,
individually or in the aggregate, would not have a material
adverse effect on E/C. Except as will be described in Section
4.1.14(b) of the E/C Disclosure Schedule, no Hazardous
Substances have been stored, treated, released, emitted, or
disposed of, or otherwise deposited, on or in the E/C Property
in violation of any Environmental Law except any of the
foregoing as would not, individually or in the aggregate, have
a material adverse effect on E/C. A true and correct list of
all Hazardous Substances now or heretofore used or generated
by E/C or any Subsidiary will be set forth in Section
4.1.14(b) of the E/C Disclosure Schedule. All Hazardous
Substances to be disclosed in Section 4.1.14(b) of the E/C
Disclosure Schedule have been used, generated, stored,
treated, released, emitted, and disposed of, or otherwise
deposited, on or in the E/C Property in compliance with all
Environmental Laws except for any violations which,
individually or in the aggregate, would not have a material
adverse effect on E/C.
(c) Except as will be described in Section 4.1.14(c) of
the E/C Disclosure Schedule, no activity has been undertaken
on any E/C Property that would cause or contribute to:
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(i) such E/C Property becoming a treatment, storage, or
disposal facility within the meaning of RCRA or any similar
state law or local ordinance; (ii) a release or threatened
release of any Hazardous Substances; or (iii) the discharge of
pollutants or effluents into any water source or system or
into the air, or the dredging or filling of any waters, that
would require a permit under the Federal Water Pollution
Control Act, 33 U.S.C. sections 1251 et seq., the Clean Air Act, as
amended, 42 U.S.C. sections 7401 et seq., or any similar foreign or
state law or local ordinance.
(d) Except as will be described in Section 4.1.14(d) of
the E/C Disclosure Schedule, there are no substances or
conditions in or on any of the E/C Property or any operations
conducted in or on any of the E/C Property that may support a
claim or cause of action or imposition of any liability under
any Environmental Law against E/C or any Subsidiary, except
for any claim, cause of action, or liability which would not,
individually or in the aggregate, have a material adverse
effect on E/C.
(e) Except as will be described in Section 4.1.14(e) of
the E/C Disclosure Schedule, there are not and never have been
any underground storage tanks located in or under any E/C
Property.
(f) E/C and its Subsidiaries have obtained all permits
required by all applicable Environmental Laws, and all such
permits are in full force and effect, except for any such
permits the lack of which would not, individually or in the
aggregate, have a material adverse effect on E/C. Except as
will be described in Section 4.1.14(f) of the E/C Disclosure
Schedule, E/C and its Subsidiaries are and have at all times
been in compliance with all such permits, except for any
violations which, individually or in the aggregate, would not
have a material adverse effect on E/C.
(g) Except as will be described in Section 4.1.14(g) of
the E/C Disclosure Schedule, neither E/C, any of its
Subsidiaries, nor any of their respective directors, officers,
employees, or agents have generated or transported any
Hazardous Substances at any time which have been transported
to or disposed of in any landfill, waste processing facility,
or other facility, which transportation or disposal could
create liability to any unit of government or any third
person, except for any such liability which, individually or
in the aggregate, would not have a material adverse effect on
E/C. Neither E/C nor any Subsidiary has received any request
for response action, administrative or other order (or request
therefor), judgment, complaint, claim, investigation, request
for information, or other request for relief in any form
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relating to any facility where Hazardous Substances generated
or transported by E/C or any Subsidiary have been disposed of,
placed, or located. No later than the time it delivers the
E/C Disclosure Schedule, E/C will provide the LZB Companies
with true and complete copies of, or access to, all manifests
and records maintained by E/C or any Subsidiary relating to
such transporters, landfills, and other facilities.
(h) Except as will be described in Section 4.1.14(h) of
the E/C Disclosure Schedule, there are no pending or, to the
best knowledge of E/C, threatened claims, investigations,
administrative proceedings, litigation, regulatory hearings,
or requests or demands for remedial or response actions or for
compensation with respect to any E/C Property, alleging
noncompliance with or violation of any Environmental Law, or
seeking relief under any Environmental Law, nor, to the best
knowledge of E/C, is there any reasonable basis therefor.
(i) Except as will be described in Section 4.1.14(i) of
the E/C Disclosure Schedule, none of the E/C Property is or
ever has been listed on the United States Environmental
Protection Agency's National Priorities List of Hazardous
Waste Sites or any other list, schedule, log, inventory, or
record of hazardous waste sites maintained by any federal,
state, or local agency.
(j) E/C has disclosed and delivered to the LZB Companies
all environmental reports and investigations which E/C or any
Subsidiary has obtained or ordered with respect to any E/C
Property during the past ten years.
4.1.15. Approvals. E/C knows of no reason why all
Requisite Regulatory Approvals should not be obtained without
the imposition of any Materially Burdensome Condition.
4.1.16. Brokers and Finders. Neither E/C nor any of
its directors, officers, or employees has employed any broker
or finder or incurred any liability for any financial advisory
fees, brokerage fees, commissions, or similar payments in
connection with the transactions contemplated by this
Agreement.
4.1.17. Labor Matters.
(a) Neither E/C nor any of its Subsidiaries is or ever
has been a party to any collective bargaining agreement or
labor union contract. Except as will be listed in Section
4.1.17(a) of the E/C Disclosure Schedule, no grievance
procedure, arbitration proceeding or other labor controversy
is pending against any E/C or any Subsidiary that would result
in a material liability. E/C and its Subsidiaries have
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complied in all material respects with all laws relating to
the employment of labor, including, without limitation, any
provisions thereof relating to wages, hours, equal employment,
safety, collective bargaining, and the payment of social
security and similar Taxes, and neither E/C nor any Subsidiary
is liable for any arrears of wages or any Taxes or penalties
for failure to comply with any of the foregoing. Except as
will be disclosed in Section 4.1.17(a) of the E/C Disclosure
Schedule, there is no unfair labor practice or similar
complaint against E/C or any Subsidiary pending before the
National Labor Relations Board or any similar authority or any
strike, dispute, slowdown, work stoppage, or lockout pending
or threatened against E/C or any Subsidiary or any compliant
pending before the Equal Employment Opportunity Commission or
any comparable federal, state, or local fair employment
practices agency and none has existed during the past five
years.
(b) Section 4.1.17(b) of the E/C Disclosure Schedule
will contain a true and complete list of the following with
respect to E/C and each Subsidiary: the names, positions, and
compensation of each director, each officer, and each employee
who received during 1994, or who is expected to receive during
1995, $100,000 or more, together with a statement of the
annual salary payable to such person, summaries of bonus
arrangements, and descriptions of agreements for commissions
or additional compensation and other like benefits, if any,
paid or payable to each such person. Except as will be listed
in Section 4.1.17(b) of the E/C Disclosure Schedule, all
employees of E/C and its Subsidiaries are employees-at-will,
may be terminated at any time for any lawful reason or for no
reason, and have no entitlement to employment by virtue of any
oral or written contract, employer policy, or otherwise.
(c) There are no retired employees of E/C or any
Subsidiary who are receiving or are entitled to receive any
payments or any health or other benefits from E/C or any
Subsidiary.
4.1.18. Undisclosed Liabilities. Neither E/C nor any
Subsidiary has any liabilities or obligations, accrued,
contingent, or otherwise, that are material to E/C that do not
satisfy one of the following: (a) such liabilities or
obligations have been reflected or disclosed in the E/C
Financial Statements; (b) such liabilities or obligations have
been incurred since the E/C Balance Sheet Date in the ordinary
course of business; or (c) such liabilities or obligations
will be disclosed in Section 4.1.18 of the E/C Disclosure
Schedule. E/C knows of no basis for the assertion against it
or against any Subsidiary of any liability, obligation, or
claim (including, without limitation, that of any Governmental
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Entity) that is likely to result in or have a material adverse
effect on E/C that is not fairly reflected in the E/C
Financial Statements.
4.1.19. Illegal Payments. Neither E/C, any of its
Subsidiaries, nor any of their directors, officers, agents, or
employees, or any other person acting on behalf of any of them
has, directly or indirectly: (a) used any corporate funds of
E/C or any Subsidiary for unlawful contributions, gifts,
entertainment, or other unlawful expenses relating to
political activity; (b) made any unlawful payments on behalf
of E/C or any Subsidiary to foreign or domestic government
officials or employees or to foreign or domestic political
parties or campaigns from corporate funds; (c) violated any
provision of the Foreign Corrupt Practices Act of 1977, as
amended; (d) knowingly made any false or fictitious entry on
the books or records of E/C or any Subsidiary; or (e) made any
bribe, rebate, payoff, influence payment, kickback, or other
unlawful payment on behalf of E/C or any Subsidiary.
4.1.20. Bank Accounts. Section 4.1.20 of the E/C
Disclosure Schedule will contain a true and complete list of
the names and locations of all banks or other financial
institutions which are depositories of funds of any of E/C or
any Subsidiary, the names of all persons authorized to draw or
sign checks or drafts upon such accounts, the numbers of such
accounts, and the names and locations of any institutions in
which E/C or any Subsidiary has safe deposit boxes and the
names of the individuals having access thereto. Neither E/C
nor any Subsidiary has any outstanding powers of attorney.
4.1.21. Insurance Matters. All policies of insurance
covering any of E/C's or any Subsidiary's real and personal
property or providing for business interruption, personal or
product liability coverage, and other insurance will be
described in Section 4.1.21 of the E/C Disclosure Schedule
(specifying the insurer, the policy number, type of insurance,
and any pending claims thereunder). Such insurance is in
amounts deemed by E/C to be sufficient with respect to its and
its Subsidiaries' assets, properties, business, operations,
products, and services as the same are presently owned or
conducted. All such policies are in full force and effect,
and the premiums have been paid when due. Except as will be
described in Section 4.1.21 of the E/C Disclosure Schedule,
other than claims made under the policies in the ordinary
course and which are not material in amount, there are no
claims, actions, suits, or proceedings arising out of or based
upon any of such policies of insurance, and, to the best
knowledge of E/C, no reasonable basis for any such claim,
action, suit, or proceeding exists. Neither E/C nor any
Subsidiary is in default with respect to any provisions
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contained in any such insurance policies, and none of them has
failed to give any notice or to present any material claim
under any such insurance policy in due and timely fashion.
4.1.22. Intellectual Property. Section 4.1.22 of the
E/C Disclosure Schedule will list all E/C Intellectual
Property and material licenses and other agreements allowing
E/C or any Subsidiary to use the intellectual property of
third parties in the United States or foreign countries.
Except as will be set forth in Section 4.1.22 of the E/C
Disclosure Schedule, E/C or one of its Subsidiaries is the
sole and exclusive owner of each item of E/C Intellectual
Property free and clear of all Encumbrances, and no
governmental registration of any of the E/C Intellectual
Property has lapsed, expired, or been abandoned, opposed,
canceled, or the subject of a re-examination request. There
are no claims or any reasonable basis for challenging the
scope, validity, or enforceability of any of the copyrights,
patents, trademarks, trade names, or service marks which are
a part of the E/C Intellectual Property. None of the E/C
Intellectual Property infringes the intellectual property of
any other person, and no activity of any other person
infringes upon any of the E/C Intellectual Property. E/C and
each of its Subsidiaries has been and is now conducting its
business in a manner which has not been and is not now in
violation of any intellectual property rights of any other
person and so as not to require a license or other proprietary
right to so operate its business other than as will be
described in Section 4.1.22 of the E/C Disclosure Schedule.
The manufacturing and engineering drawings, process sheets,
specifications, bills of material, trade secrets, "know-how,"
and other like data of E/C and its Subsidiaries are in such
form and of such quality that they can, following the
Effective Time, be used in the process of designing,
producing, manufacturing, assembling, and selling the products
and providing the services heretofore provided by them so that
such products and services meet applicable specifications and
conform with the quality standards heretofore met or required
to be met by them.
4.1.23. Conduct of Business. Except as will be
otherwise disclosed in Section 4.1.23 of the E/C Disclosure
Schedule, since the E/C Balance Sheet Date, neither E/C nor
any Subsidiary has:
(a) Issued any capital stock or other securities
convertible into or exchangeable or exercisable for capital
stock or having voting rights or declared or paid any dividend
or made any other payment from capital or surplus or other
distribution of any nature, or directly or indirectly
redeemed, purchased, or otherwise acquired or recapitalized or
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reclassified any of its capital stock or liquidated in whole
or in part.
(b) Merged or consolidated with any other person.
(c) Altered or amended its charter or bylaws.
(d) Entered into, materially amended, or terminated any
material agreement, license or permit, except in the ordinary
course of business consistent with past practices.
(e) Experienced any labor disturbance.
(f) Incurred or become subject to any obligation or
liability (absolute, accrued, contingent or otherwise),
except: (i) obligations incurred in the ordinary course of
business consistent with past practice, which did not involve
borrowing money, and which have not caused and will not cause
a material adverse effect on E/C; and (ii) obligations in
connection with the performance of this Agreement.
(g) Discharged or satisfied any Encumbrance or paid or
satisfied any obligation or liability (absolute, accrued,
contingent, or otherwise) other than: (i) liabilities shown or
reflected in the E/C Financial Statements; or (ii) liabilities
incurred since the E/C Balance Sheet Date in the ordinary
course of business consistent with past practice which were
not material in amount.
(h) Mortgaged, pledged, or subjected to any Encumbrance
any of its assets, properties, or business.
(i) Sold or transferred or agreed to sell or transfer
any material asset, property, or business, canceled or agreed
to cancel any material debt or claim, or waived any right,
except in any such event in the ordinary course of business
consistent with past practice.
(j) Disposed of or permitted to lapse any E/C
Intellectual Property.
(k) Granted any increase in the rates of pay of
employees or any increases in salary or compensation payable
or to become payable to any officer, employee, consultant, or
agent, or changed or increased the compensation payable to any
officer, director, or employee, or (by means of any bonus or
pension plan, contract, or other commitment) increased the
compensation of any officer, director, employee, consultant,
or agent, or hired any new officer, employee, consultant, or
agent.
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(l) Since January 1, 1994, made or authorized any
capital expenditures for additions to plant or equipment
accounts in excess of $500,000 in the aggregate.
(m) Experienced any material damage, destruction, or
loss (whether or not covered by insurance) affecting its
properties, assets, or business.
(n) Instituted or settled any litigation, action, or
proceeding before any court or other Governmental Entity
relating to it or its property involving a controversy in
excess of $10,000.
(o) Made any change in any method of accounting or any
accounting practice or suffered any deterioration in
accounting controls.
(p) Varied, canceled, or allowed to expire any insurance
coverage, other than renewals in the ordinary course of
business consistent with past practice.
(q) Entered into any other material transaction other
than in the ordinary course of business consistent with past
practice.
(r) Agreed or committed to do any of the foregoing.
4.1.24. Title to Assets.
(a) E/C and its Subsidiaries are the sole and absolute
owners of all of the assets (real and personal, tangible and
intangible) reflected in the latest E/C Financial Statements
as owned by them, other than assets which are leased under
leases capitalized in accordance with GAAP and assets which
have been disposed of since the date of such financial
statements, and have good and marketable title to all such
assets free and clear of any and all Encumbrances, except for
the Encumbrances, if any, which will be listed in Section
4.1.24(a) of the E/C Disclosure Schedule. E/C and its
Subsidiaries have valid leasehold interests in all assets
(real and personal, tangible and intangible) leased by them.
(b) No person has any written or oral agreement, option,
understanding, or commitment, or any right or privilege
capable of becoming an agreement, for the purchase from E/C or
any Subsidiary of any of the assets owned or leased by any of
them other than pursuant to purchase orders for inventory
accepted in the ordinary course of business consistent with
past practice.
(c) Section 4.1.24(c) of the E/C Disclosure Schedule
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will list or describe all consigned property and other
property which is owned by or an interest in which is claimed
by any other person (whether a customer, supplier, or other
person) for which E/C or any Subsidiary is responsible (and
true and complete copies of all agreements relating thereto
will be delivered to the LZB Companies with the E/C Disclosure
Schedule). All such property is used or held for use in the
conduct of the business of E/C or a Subsidiary and is in such
condition that upon return to its owner, they will not be
liable to such owner.
4.1.25. Real Property.
(a) Section 4.1.25(a) of the E/C Disclosure Schedule
will contain a true and complete list of: (i) all E/C Real
Estate; and (ii) all E/C Real Estate Documents (true and
complete copies of all of which will delivered to the LZB
Companies with the E/C Disclosure Schedule). All buildings
and other improvements on the E/C Real Estate are located
within the boundaries of each particular parcel of E/C Real
Estate and do not encroach upon such boundaries, except to the
extent such encroachment would not have a material adverse
effect on E/C. No building or other improvement situated on
any adjacent real estate is encroaching upon any of the
boundaries of the E/C Real Estate, except to the extent such
encroachment would not have a material adverse effect on E/C.
(b) Except as will be described in Section 4.1.25(b) of
the E/C Disclosure Schedule, the use of the E/C Real Estate by
E/C and its Subsidiaries and the conduct therein of their
respective businesses have not violated, and are not expected
to violate, any federal, state, or local law, ordinance, rule,
or regulation. The E/C Real Estate has an adequate water
supply and sewage and waste disposal, or facilities therefor,
and adequate utility connections and capacity as are
sufficient for the operation of existing business of E/C and
its Subsidiaries.
(c) The E/C Real Estate, including, without limitation,
the buildings and improvements located thereon, and the
ownership, operations, and maintenance thereof as now owned,
operated, and maintained, do not: (i) violate any ordinances,
statutes, regulations, covenants, or deed restrictions,
including, without limitation, those relating to zoning,
building use, air or water pollution, waste disposal,
sanitation, and noise control; or (ii) violate any provision
of federal, state, or local law. Consummation of the
transactions contemplated herein will not cause the zoning for
any of the E/C Real Estate to become non-complying by virtue
of elimination of a grandfather clause or for any other
reason.
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(d) The buildings and other improvements on the E/C Real
Estate, including, without limitation, the plumbing, heating,
air-conditioning, electrical, mechanical, water, water
pumping, and sewage systems, are in working order and not in
violation of any applicable governmental rule or regulation or
any other legal requirements, including, without limitation,
health and fire codes and other similar regulations.
(e) There exists no pending or, to the best knowledge of
E/C, threatened condemnation or similar proceeding with
respect to, or which could affect, the E/C Real Estate in any
respect.
(f) Except as will be described in Section 4.1.25(f) of
the E/C Disclosure Schedule, neither E/C nor any Subsidiary
has contracted for the furnishing of labor or materials to the
E/C Real Estate which will not be paid in full prior to the
Effective Time.
(g) Each of the E/C Real Estate Documents is in full
force and effect, and there are no existing defaults or events
of default thereunder, real or claimed, or events which with
notice or lapse of time or both would constitute defaults
thereunder by E/C or any Subsidiary or, to the best knowledge
of E/C, any other person.
(h) The E/C Real Estate has sufficient and adequate
vehicular and pedestrian access rights to and from public
streets and rights-of-way contiguous to the E/C Real Estate,
and adequate parking for each property comprising the E/C Real
Estate is available and in compliance with all applicable
zoning ordinances and laws.
(i) The buildings on the E/C Real Estate are fully
constructed and are free from structural defects.
4.1.26. Leased Personal Property. Section 4.1.26 of
the E/C Disclosure Schedule will describe all E/C Leased
Personal Property. True and complete copies of all leases to
which E/C or any Subsidiary is a party relating to the E/C
Leased Personal Property will be delivered to the LZB
Companies with the E/C Disclosure Schedule. All E/C Leased
Personal Property is in such condition that upon the return of
such E/C Leased Personal Property in its present condition to
its owner, neither E/C nor any Subsidiary will be liable to
such owner. All E/C Leased Personal Property is situated at
the E/C Real Estate and is used by E/C or a Subsidiary in the
operation of its business. Each of the leases relating to the
E/C Leased Personal Property is in full force and effect, and
there are no existing defaults or events of default, real or
claimed, or events which with notice or lapse of time or both
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would constitute defaults by E/C or any Subsidiary or, to the
best knowledge of E/C, any other person.
4.1.27. E/C Tangible Personal Property. Except as will
be described in Section 4.1.27 of the E/C Disclosure Schedule,
all of the machinery, equipment, vehicles, and other tangible
personal property that is used or useful in or necessary for
the conduct of the businesses E/C and its Subsidiaries, except
items with an aggregate book value of less than $50,000, is in
working condition and repair and is capable of and has the
capacity to produce products in the amount and of the quality
required by any purchase order accepted by E/C or any
Subsidiary and outstanding at the Effective Time.
4.1.28. Accounts Receivable. All accounts and notes
receivable reflected on the latest balance sheet included in
the E/C Financial Statements, or arising since the E/C Balance
Sheet Date (net of related reserves or, if reserves have not
been established, net of an amount which if so established
would be consistent with the established reserve policies of
E/C), have been collected, or are and will be good and
collectible, in each case at the aggregate recorded amounts
thereof without right of recourse, defense, deduction, return
of goods, counterclaim, or set off on the part of the obligor
and, if not collected, can reasonably be anticipated to be
paid within 90 days of the date incurred.
4.1.29. Inventory. Except as will be disclosed in
Section 4.1.29 of the E/C Disclosure Schedule, the inventory
of raw materials and work in process of E/C and its
Subsidiaries is usable in all material respects, and all
inventory of finished goods is good and marketable on a normal
basis in the existing product lines of E/C and its
Subsidiaries. Such inventories do not represent more than a
twelve-month supply measured by the volume of sales or use for
the most recent complete fiscal year covered by the E/C
Financial Statements.
4.2. Representations and Warranties of the LZB Companies. The
LZB Companies, jointly and severally, represent and warrant to E/C
as follows:
4.2.1. Organization, Standing, and Power. Each of the
LZB Companies is a corporation duly incorporated, validly
existing, and in good standing under the laws of its
jurisdiction of incorporation. True and complete copies of
the articles of incorporation and bylaws of each of the LZB
Companies as currently in effect have been delivered to E/C
with the LZB Disclosure Schedule.
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4.2.2. Capital Structure.
(a) The authorized capital stock of LZB consists solely
of 40,000,000 shares of LZB Common Stock and 5,000,000 shares
of LZB Preferred Stock. As of December 31, 1994, 17,961,476
shares of LZB Common Stock were issued and outstanding, and no
shares of LZB Preferred Stock were issued and outstanding.
All outstanding shares of LZB Common Stock have been duly
authorized and validly issued and are fully paid and
nonassessable and not subject to any preemptive rights. No
shares of any class of LZB's capital stock are held by LZB as
treasury shares.
(b) The authorized capital stock of LZB Acquisition
consists solely of 1,000 shares of common stock. As of the
date of this Agreement, one share of LZB Acquisition's common
stock is issued and outstanding, which is owned by LZB. All
outstanding shares of LZB Acquisition's common stock have been
duly authorized and validly issued and are fully paid and
nonassessable and not subject to any preemptive rights. No
shares of any class of LZB Acquisition's capital stock are
held by LZB Acquisition as treasury shares.
(c) Neither of the LZB Companies has outstanding any
Voting Debt.
(d) Except for this Agreement and the Plan of Merger,
and except as disclosed in the LZB SEC Documents or in Section
4.2.2(d) of the LZB Disclosure Schedule, LZB has no
outstanding options, warrants, calls, rights, commitments, or
agreements of any character to which it is a party or is bound
obligating it to issue, deliver, or sell, or to cause to be
issued, delivered, or sold, additional shares of capital
stock, any Voting Debt, or any other security with voting
rights in LZB or obligating LZB to grant, extend, or enter
into any such option, warrant, call, right, commitment, or
agreement. There are no outstanding contractual obligations
of LZB to repurchase, redeem, or otherwise acquire any shares
of its capital stock. LZB is not required to, and no
shareholder of LZB has any right to require LZB to, redeem,
repurchase, or otherwise acquire or to offer to redeem,
repurchase, or otherwise acquire any shares of its capital
stock in connection with or as a result of the Merger or the
other transactions contemplated in this Agreement.
4.2.3. Authority.
(a) The LZB Companies have all requisite corporate power
and authority to enter into this Agreement and the Plan of
Merger and, subject to approval of this Agreement and the Plan
of Merger by the shareholders of E/C, to consummate the
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transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the Plan of Merger and the
consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate
action on the part of the LZB Companies. No approval or
adoption by the shareholders of LZB is required to consummate
the Merger and the other transactions contemplated hereby.
This Agreement and the Plan of Merger have been duly executed
and delivered by the LZB Companies and constitute legal,
valid, and binding obligations of the LZB Companies,
enforceable against the LZB Companies in accordance with their
terms, except as enforceability may be limited by general
principles of equity, whether considered at law or in equity,
and bankruptcy, insolvency, and similar laws affecting
creditors' rights and remedies generally.
(b) The execution and delivery of this Agreement and the
Plan of Merger and the consummation of the transactions
contemplated hereby and thereby will not be, give rise to, or
result in any Violation of the articles of incorporation or
bylaws of either of the LZB Companies or (subject to obtaining
or making the consents, approvals, orders, authorizations,
registrations, declarations, and filings referred to in
paragraph (c) below, and except as set forth in Section
4.2.3(b) of the LZB Disclosure Schedule) be, give rise to, or
result in any Violation of, or require the consent of any
other person that is a party to, any loan or credit agreement,
note, mortgage, indenture, lease, sublease, or other
agreement, obligation, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law,
ordinance, rule, or regulation applicable to either of the LZB
Companies or its properties or assets.
(c) No consent, approval, order, or authorization of, or
registration, declaration, or filing with, any Governmental
Entity is required by or with respect to either of the LZB
Companies in connection with the execution and delivery of
this Agreement or the Plan of Merger by the LZB Companies or
the consummation by the LZB Companies of the transactions
contemplated hereby or thereby, except for: (i) the filing of
the Tennessee Articles of Merger with the Secretary of State
of the State of Tennessee; (ii) the filing of the Certificate
of Merger with the Michigan Corporation Bureau; (iii) the
filing of appropriate documents with the relevant authorities
of other states in which E/C is qualified to do business;
(iv) LZB's Hart-Scott-Rodino Filing and expiration or early
termination of the waiting period under the Hart-Scott-Rodino
Act; (v) the filing of the Registration Statement and any
appropriate amendments thereto with the SEC and the
effectiveness thereof under the Securities Act; (vi) any
filings or other actions required to register the Merger
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Securities under the securities laws of any state or to obtain
exemptions from the requirement for such registration; and
(vii) the listing of the LZB Common Stock to be issued as part
of the Merger Consideration upon notice of issuance with the
Exchanges.
4.2.4. The Merger Securities.
(a) The LZB Common Stock to be issued as part of the
Merger Consideration and the additional LZB Common Stock which
may become issuable under the terms of the Performance Units
has been duly authorized and, when issued in accordance with
the Plan of Merger, will be validly issued, fully paid, and
nonassessable.
(b) When the Indenture has been duly authorized,
executed, and delivered by LZB, the Indenture will constitute
the legal, valid, and binding obligation of LZB, enforceable
against LZB in accordance with its terms, except as
enforceability may be limited by general principles of equity,
whether considered at law or in equity, and bankruptcy,
insolvency, and similar laws affecting creditors' rights and
remedies generally.
(c) When the Notes have been duly authorized, executed,
and delivered in accordance with the Plan of Merger and the
Indenture, the Notes will constitute the legal, valid, and
binding obligations of LZB, enforceable against LZB in
accordance with their terms, except as enforceability may be
limited by general principles of equity, whether considered at
law or in equity, and bankruptcy, insolvency, and similar laws
affecting creditors' rights and remedies generally.
4.2.4. LZB SEC Documents. LZB has provided to E/C
with the LZB Disclosure Schedule true and complete copies of
each of the LZB SEC Documents (including those exhibits copies
of which were requested by E/C, but excluding the other
exhibits thereto). As of their respective dates, the LZB SEC
Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations
of the SEC thereunder applicable to such LZB SEC Documents,
and none of the E/C SEC Documents contained any untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of
LZB included in the LZB SEC Documents comply in all material
respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP, except as
may be indicated in the notes thereto or, in the case of
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unaudited statements, as permitted by Form 10-Q of the SEC,
and fairly present (subject, in the case of the unaudited
statements, to recurring audit adjustments normal in nature
and amount) the consolidated financial position of LZB as at
the dates thereof and the consolidated results of its
operations and cash flows or changes in financial position for
the periods then ended.
4.2.5. Registration Statement. None of the
information supplied or to be supplied by either of the LZB
Companies for inclusion or incorporation by reference in
(a) the Registration Statement will, at the time the
Registration Statement becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, or
(b) the Proxy Statement/Prospectus or any amendment or
supplement thereto will, at the date of mailing to
shareholders and at the time of the E/C Shareholder Meeting,
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
The Proxy Statement/Prospectus (except for such portions
thereof that relate only to E/C or its Subsidiaries) will
comply in all material respects with any applicable provisions
of the Exchange Act and the rules and regulations thereunder,
and the Registration Statement (except for portions thereof
that relate only to E/C or its Subsidiaries) will comply in
all material respects with the provisions of the Securities
Act and the rules and regulations thereunder.
4.2.6. Approvals. The LZB Companies know of no reason
why all Requisite Regulatory Approvals should not be obtained
without the imposition of any Materially Burdensome Condition.
4.2.7. Brokers and Finders. Neither of the LZB
Companies nor any of their directors, officers, or employees
has employed any broker or finder or incurred any liability
for any financial advisory fees, brokerage fees, commissions,
or similar payments in connection with the transactions
contemplated by this Agreement.
4.2.8. No Material Adverse Change. Except as
disclosed in Section 4.2.8 of the LZB Disclosure Schedule,
there has been no material adverse change in the condition
(financial or otherwise), business, or prospects of LZB since
the date of the latest balance sheet included in the LZB SEC
Documents.
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5. COVENANTS.
5.1. Covenants of E/C. During the period from the date of
this Agreement and continuing until the Closing Date, E/C agrees
that, except as expressly contemplated or permitted by this
Agreement or to the extent that LZB shall otherwise consent in
writing:
5.1.1. Ordinary Course. E/C and each Subsidiary shall
carry on its respective business in, and only in, the usual,
regular, and ordinary course in substantially the same manner
as heretofore conducted and use all reasonable efforts to
preserve intact its present business organizations, maintain
its rights and franchises, and preserve its relationships with
customers, suppliers, and others having business dealings with
it to the end that its goodwill and ongoing business shall not
be impaired, and will not enter into any transaction not in
the ordinary course of business.
5.1.2. Dividends and Distributions. Neither E/C nor
any Subsidiary shall, or shall propose to: (a) declare or pay
any dividends on or make other distributions in respect of any
of its capital stock except for (i) payment by E/C to its
shareholders of the dividend previously declared in an amount
equal to 60 percent of its taxable income for the period of
July 1, 1994 to December 31, 1994, (ii) declaration and
payment by E/C of dividends to its shareholders in an amount
equal to 40 percent of its taxable income for the period of
January 1, 1995 to the day before the Effective Time (or, if
earlier, the date on which E/C ceases to be a small business
corporation (as defined in Section 1361(a) of the Code)), as
estimated by it in good faith), and (iii) declaration and
payment by E/C of dividends to its shareholders in an amount
equal to 50 percent of the proceeds (net of any loans and
other deductions or offsets) receivable by E/C under insurance
policies owned by E/C on the life of Arnold Dwight England;
(b) split, combine, or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other
securities in respect of, in lieu of, or in substitution for
shares of its capital stock; or (c) repurchase, redeem, or
otherwise acquire, or permit any Subsidiary to purchase or
otherwise acquire, any shares of its capital stock or any
securities convertible into or exercisable for any shares of
its capital stock.
5.1.3. Charter and Bylaw Amendments. Neither E/C nor
any Subsidiary shall amend its charter or bylaws.
5.1.4. Other Actions. Neither E/C nor any Subsidiary
shall take any action that is intended to result in any of its
representations and warranties set forth in this Agreement
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being or becoming untrue in any material respect, or in any of
the conditions to the Merger set forth in Section 7 not being
satisfied or in a violation of any provision of this Agreement
or which would adversely affect the ability of E/C to obtain
any of the Requisite Regulatory Approvals without imposition
of a Materially Burdensome Condition except, in every case, as
may be required by applicable law.
5.1.5. Advice of Changes; Government Filings. E/C
shall promptly advise the LZB Companies orally and in writing
of any change or event having, or which, insofar as can
reasonably be foreseen, could have, a material adverse effect
on E/C or which would cause or constitute a material breach of
any of the representations, warranties, or covenants of E/C
contained herein, or which, insofar as can be reasonably
foreseen, would result in a condition set forth in Section 7
not being satisfied as of the Closing Date.
5.1.6. Accounting Methods. E/C shall not change its
methods of accounting in effect at the E/C Balance Sheet Date,
except as required by changes in generally accepted accounting
principles as concurred in by such party's independent
auditors, or change its fiscal year.
5.1.7. S Corporation Status. E/C shall use its best
efforts to maintain its status as an S Corporation for federal
income tax purposes.
5.1.8. Affiliate Transactions. Neither E/C nor any
Subsidiary shall engage in any new transaction with any of its
"affiliates" (as defined in Rule 145 under the Securities
Act).
5.1.9. Other Actions. Neither E/C nor any Subsidiary
will issue, deliver, or sell, or authorize or propose the
issuance, delivery, or sale of, any shares of its capital
stock of any class, any Voting Debt, or any securities
convertible into or exercisable for, or any rights, warrants,
or options to acquire any such shares or Voting Debt, or other
securities with voting rights or enter into any agreement with
respect to any of the foregoing.
5.1.10. No Solicitations. E/C will not, and will not
authorize or permit any of its officers, directors, or
employees or any investment banker, financial advisor,
attorney, accountant, or other representative or agent
retained by it to, solicit or encourage the making of any
Takeover Proposal or (unless, in the written opinion of E/C's
independent counsel, such action is required by the fiduciary
duties of the Board of Directors of E/C) agree to or endorse
any Takeover Proposal, or participate in any negotiations, or
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provide third parties with any information relating to any
such proposal. E/C will promptly advise LZB orally and in
writing of any such proposals.
5.1.11. Acquisitions. Neither E/C nor any Subsidiary
will acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or in any other manner,
any business or any corporation, partnership, association, or
other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material,
individually or in the aggregate, to E/C.
5.1.12. Dispositions. Other than sales of inventory in
the ordinary course of business consistent with prior
practice, neither E/C nor any Subsidiary will sell, lease,
encumber, or otherwise dispose of, or agree to sell, lease,
encumber, or otherwise dispose of, any material portion of its
assets.
5.1.13. Debt. Other than in the ordinary course of
business consistent with past practice, neither E/C nor any
Subsidiary will incur any Debt, assume, guarantee, endorse or
otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other
entity, or make any loan or advance other than in the ordinary
course of business consistent with past practice; provided,
however, that in no event shall E/C incur Debt which would
result in it having total Debt as of the Closing Date in
excess of $24,000,000.
5.1.14. Benefit Plans. Neither E/C nor any Subsidiary
will, without the prior written consent of LZB: (a) enter
into, adopt, amend, or terminate any E/C Benefit Plan or any
other employee benefit plan or any agreement, arrangement,
plan, or policy between such party and one or more of its
directors or officers; (b) increase in any manner the
compensation or fringe benefits of any director, officer, or
employee or pay any benefit not required by any plan or
arrangement as in effect as of the date hereof (including,
without limitation, the granting of stock options, stock
appreciation rights, restricted stock, restricted stock units,
or performance units or shares) or enter into any contract,
agreement, commitment, or arrangement to do any of the
foregoing; or (c) enter into or renew any contract, agreement,
commitment, or arrangement providing for the payment to any
director, officer, or employee of such party of compensation
or benefits contingent, or the terms of which are materially
altered, upon the occurrence of any of the transactions
contemplated by this Agreement.
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5.1.15. Discharge of Claims; Capital Expenditures.
Neither E/C nor any Subsidiary will: (a) pay, discharge, or
satisfy any claim, liability, or obligation of any nature
other than in the ordinary course of business consistent with
past practice; or (b) make any capital expenditures or
commitments other than those which have been approved by LZB.
5.1.16. Access to Information. Upon reasonable notice
and subject to applicable laws relating to the exchange of
information, E/C shall each afford to the officers, employees,
accountants, counsel, and other representatives of LZB access,
during normal business hours during the period prior to the
Closing Date, to all its properties, books, contracts,
commitments and records and, during such period, E/C shall
make available to LZB all other information concerning its
business, properties, and personnel as LZB may reasonably
request. No investigation by or on behalf of a LZB Company
shall affect the representations and warranties of E/C set
forth herein.
5.2. Covenants of LZB Companies. During the period from the
date of this Agreement and continuing until the Closing Date, the
LZB Companies agree that, except as expressly contemplated or
permitted by this Agreement or to the extent that E/C shall
otherwise consent in writing:
5.2.1. Dividends and Distributions. LZB shall not,
and shall not propose to: (a) declare or pay any dividends on
or make other distributions in respect of the LZB Common Stock
other than cash dividends in amounts determined in accordance
with prior practice; or (b) split, combine, or reclassify the
LZB Common Stock or issue or authorize or propose the issuance
of any other securities in respect of, in lieu of, or in
substitution for shares of the LZB Common Stock.
5.2.2. Charter and Bylaw Amendments. Neither of the
LZB Companies shall amend its articles of incorporation or
bylaws so as to adversely affect the rights of holders of LZB
Common Stock.
5.2.3. Other Actions. Neither of the LZB Companies
shall take any action that is intended to result in any of its
representations and warranties set forth in this Agreement
being or becoming untrue in any material respect, or in any of
the conditions to the Merger set forth in Section 7 not being
satisfied or in a violation of any provision of this Agreement
or which would adversely affect the ability of the LZB
Companies to obtain any of the Requisite Regulatory Approvals
without imposition of a Materially Burdensome Condition
except, in every case, as may be required by applicable law.
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5.2.4. Advice of Changes; Government Filings. LZB
shall promptly advise E/C orally and in writing of any change
or event having, or which, insofar as can reasonably be
foreseen, could have, a material adverse effect on LZB or
which would cause or constitute a material breach of any of
the representations, warranties, or covenants of the LZB
Companies contained herein, or which, insofar as can be
reasonably foreseen, would result in a condition set forth in
Section 7 not being satisfied as of the Closing Date.
5.2.5. Other Actions. LZB will not issue any shares
of LZB Common Stock for less than fair value except pursuant
to employee stock option plans described in the LZB SEC
Documents or in Section 5.2.5 of the LZB Disclosure Schedule.
6. ADDITIONAL AGREEMENTS.
6.1. Regulatory Matters.
6.1.1. Registration Statement. E/C and LZB shall
promptly prepare and file with the SEC the Registration
Statement, in which the Proxy Statement/Prospectus will be
included. Each of LZB and E/C shall use all reasonable
efforts to have the Registration Statement declared effective
under the Securities Act as promptly as practicable after such
filing and after receipt of the tax lock-up letters referred
to in Section 7.2.8, and E/C shall thereafter mail the Proxy
Statement to its shareholders. E/C and the LZB Companies
shall also use their respective best efforts to obtain all
necessary state securities law or "blue sky" permits and
approvals required to carry out the transactions contemplated
by this Agreement, and E/C and the LZB Companies, as
applicable, shall furnish all information concerning LZB, E/C,
and the holders of E/C Stock as may be reasonably requested in
connection with any such action.
6.1.2. Hart-Scott-Rodino Filings. E/C and LZB shall
each promptly prepare and file their respective Hart-Scott-
Rodino Filings and shall use their best efforts to cause the
applicable waiting period under the Hart-Scott-Rodino Act to
expire or be terminated.
6.1.3. General.
(a) The parties hereto shall cooperate with each other
and use their best efforts to promptly prepare and file all
necessary documentation, to effect all necessary applications,
notices, petitions, filings, and other documents, to obtain as
promptly as practicable all necessary permits, consents,
approvals, and authorizations of all other persons and
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Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement. E/C and LZB
shall have the right to review in advance, and to the extent
practicable each will consult the other on, in each case
subject to applicable laws relating to the exchange of
information, all the information relating to E/C or the LZB
Companies, which appears in any filing made with, or written
materials submitted to, any third party or any Governmental
Entity in connection with the transactions contemplated by
this Agreement. In exercising the foregoing right, each of
the parties hereto shall act reasonably and as promptly as
practicable. The parties hereto agree that they will consult
with each other with respect to the obtaining of all permits,
consents, approvals, and authorizations of all third parties
and Governmental Entities necessary or advisable to consummate
the transactions contemplated by this Agreement, and each
party will keep the other apprised of the status of matters
relating to completion of the transactions contemplated
herein.
(b) E/C and each of the LZB Companies shall, upon
request, use their best efforts to furnish each other with all
information concerning themselves, their directors, officers,
and shareholders, all financial information or other
information, including accountant comfort letters relating
thereto, certificates, and consents, and such other matters as
may be reasonably necessary or advisable in connection with
the Registration Statement, the Hart-Scott-Rodino Filings, or
any other statement, filing, notice, or application made by or
on behalf of any of E/C or either of the LZB Companies to any
Governmental Entity or any other person in connection with the
Merger and the other transactions contemplated by this
Agreement and the Plan of Merger.
(c) E/C and each of the LZB Companies shall promptly
furnish each other with copies of written communications
received by any of them or any of their respective affiliates
or associates (as such terms are defined in Rule 12b-2 under
the Exchange Act as in effect on the date hereof) from, or
delivered by any of the foregoing to, any Governmental Entity
in respect of the transactions contemplated hereby.
6.2. Opinions of Counsel. Each party shall use its best efforts to cause
to be delivered to the other opinions of its independent counsel, dated the
effective date of the Registration Statement and the date of the E/C
Shareholder Meeting, to the effect that the Registration Statement and the
Proxy Statement/Prospectus and any amendment and supplements thereto (except
for information with respect to the other parties and except for the financial
statements and notes thereto and other financial, statistical, and accounting
data included in, incorporated by
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reference in, or which should have been included in or incorporated by
reference in the Registration Statement or the Proxy Statement/Prospectus, as
to all of which they need express no opinion) comply as to form in all material
respects with the applicable requirements of the Securities Act and rules and
regulations of the SEC promulgated thereunder. Each party shall also use its
best efforts to cause to be delivered to the other letters of its counsel dated
the same dates as the opinions described above to the effect that nothing has
come to such counsel's attention that has caused such counsel to believe that
the Registration Statement or the Proxy Statement/Prospectus, at the time the
Registration Statement became effective, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were, made not misleading (except for information with respect
to the other parties and except for financial statements and notes thereto and
other financial, statistical, and accounting data included in, incorporated by
reference in, or which should have been included in or incorporated by
reference in the Registration Statement or the Proxy Statement/Prospectus, as
to all of which they need make no statement).
6.3. Legal Conditions to Mergers. Each of E/C and the LZB
Companies shall use their best efforts: (a) to take, or cause to be
taken, all actions necessary to comply promptly with all legal
requirements which may be imposed on such party with respect to the
Merger and, subject to the conditions set forth in Section 7, to
consummate the transactions contemplated by this Agreement and the
Plan of Merger; and (b) to obtain (and to cooperate with the other
party to obtain) any consent, authorization, order, or approval of,
or any exemption by, any Governmental Entity and any other public
or private person which is required to be obtained or made by such
party in connection with the Merger and the transactions
contemplated by this Agreement and the Plan of Merger. Each of the
parties will promptly cooperate with and furnish information to the
other in connection with any such condition or restriction suffered
by, or requirement imposed upon, any of them in connection with the
foregoing.
6.4. Affiliates. E/C shall use its best efforts to cause each
director, officer, and other person who is an "affiliate" (for
purposes of Rule 145 under the Securities Act) of E/C to deliver to
LZB, on or prior to the Closing Date, a written agreement, in form
and substance satisfactory to LZB in its reasonable judgment, to
comply with the applicable provisions of Rule 145 in connection
with any resales of Merger Securities. Section 6.4 of the E/C
Disclosure Schedule will contain a list of the persons considered
by E/C to be an affiliate for such purpose.
6.5. Expenses. If the Merger is consummated, all costs and
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expenses incurred in connection with this Agreement shall be paid
by the Surviving Corporation, and if the Merger is not consummated,
all such costs and expenses shall be paid by the party incurring
the same. Nothing in this Section 6.5 is intended to limit in any
manner the damages or liabilities that a party may seek to recover
arising out of a breach of this Agreement or the Plan of Merger by
another party.
6.6. Additional Agreements; Best Efforts. Subject to the
terms and conditions of this Agreement, each of the parties hereto
agrees to use its best efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary,
proper, or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this
Agreement, including, without limitation, cooperating fully with
the other parties hereto, providing the other parties hereto with
any appropriate information, and making all necessary filings in
connection with the Requisite Regulatory Approvals. In case at any
time after the Closing Date any further action is necessary or
desirable to carry out the purposes of this Agreement or the Plan
of Merger or to vest the Surviving Corporation with full title to
all properties, assets, rights, approvals, immunities, and
franchises of any of the constituent corporations of the Merger,
the proper officers and directors of each party to this Agreement
shall take all such necessary action.
6.7. Plan of Merger. Immediately after the execution of this
Agreement, the parties thereto shall execute and deliver the Plan
of Merger.
6.8. Letter of E/C's Accountants. E/C shall use its best
efforts to cause to be delivered to E/C and the LZB Companies
letters of BDO Seidman, independent auditors for E/C, dated (a) the
date on which the Registration Statement shall become effective,
and (b) the business day prior to the Effective Time, and addressed
to E/C and the LZB Companies, in form and substance reasonably
satisfactory to E/C the LZB Companies, and customary in scope and
substance for letters delivered by independent public accountants
in connection with registration statements similar to the
Registration Statement.
6.9. Letter of LZB's Accountants. LZB shall use its best
efforts to cause to be delivered to E/C and the LZB Companies
letters of Price Waterhouse, independent auditors for LZB, dated
(a) the date on which the Registration Statement shall become
effective, and (b) the business day prior to the Effective Time,
and addressed to E/C and the LZB Companies, in form and substance
reasonably satisfactory to E/C the LZB Companies, and customary in
scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to
the Registration Statement.
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6.10. E/C Disclosure Schedule. No later than January 24,
1995, E/C shall deliver the E/C Disclosure Schedule (together with
all documents required to be delivered therewith) to the LZB
Companies.
7. CONDITIONS PRECEDENT.
7.1. Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the
Merger shall be subject to the satisfaction prior to the Effective
Time of the following conditions:
7.1.1. Shareholder Approval. This Agreement, the Plan
of Merger, and the Merger shall have been duly approved by the
requisite vote of each "voting group" (as defined in the TBCA)
entitled to vote thereon.
7.1.2. Listing on Exchanges. The shares of LZB Common
Stock issuable as part of the Merger Consideration shall have
been listed on upon official notice of issuance on the
Exchanges.
7.1.3. Requisite Regulatory Approvals. The waiting
period under the Hart-Scott-Rodino Act shall have expired or
been terminated, and all other Requisite Regulatory Approvals
shall have been accomplished or obtained and shall be in full
force and effect.
7.1.4. Registration Statement. The Registration
Statement shall have become effective under the Securities
Act, no stop order suspending the effectiveness of the
Registration Statement shall have been issued, and no
proceedings for that purpose shall have been initiated or
threatened by the SEC or the securities administrators of any
jurisdiction, nor shall any of such authorities have
instituted or threatened to institute any proceedings with
respect to a stop order.
7.1.5. Blue Sky Matters. The Merger Securities shall
have been qualified or registered with the appropriate "blue
sky" authorities of all states in which qualification or
registration is required, and such qualifications or
registrations shall not have been suspended or revoked.
7.1.6. No Restrictions or Restraints; Illegality. No
order, injunction, or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger or any of the
transactions contemplated hereby shall be in effect, nor shall
any proceeding by any Governmental Entity seeking any of the
foregoing be pending, nor shall any lawsuit or governmental
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proceeding be pending or threatened against any of E/C, either
of the LZB Companies, or any of their respective directors
seeking substantial damages in connection with the
transactions contemplated in this Agreement. No statute,
rule, regulation, order, injunction, or decree shall have been
enacted, entered, promulgated, or enforced by any Governmental
Entity which prohibits, restricts or makes illegal
consummation of the Merger.
7.1.7. No Materially Burdensome Condition. No
Materially Burdensome Condition shall have been imposed or be
applicable to the transactions contemplated by this Agreement.
7.1.8. Governmental Action. There shall not have been
any action taken, or any law, rule, regulation, order,
judgment, or decree proposed, promulgated, enacted, entered,
enforced, or deemed applicable to the transactions
contemplated by this Agreement by any Governmental Entity or
by any court or other tribunal, including the entry of a
preliminary or permanent injunction, which, in the reasonable
opinion of such party: (a) makes this Agreement, the Plan of
Merger, or the Merger, or any of the other transactions
contemplated by this Agreement, illegal; (b) results in a
material delay in the ability of E/C or the LZB Companies to
consummate the Merger or any of the other transactions
contemplated by this Agreement; (c) requires the divestiture
by E/C or the LZB Companies of a material portion of the
business of E/C, taken as a whole, or the LZB Companies, taken
as a whole; or (d) otherwise prohibits or restricts or delays
in a material respect consummation of the Merger or any of the
other transactions contemplated by this Agreement or impairs
in a material respect the contemplated benefits to E/C or the
LZB Companies of this Agreement, the Merger, or any of the
other transactions contemplated by this Agreement.
7.1.9. Affiliates' Agreements. The affiliates'
agreements described in Section 6.4 shall have been executed
and delivered by the persons described in Section 6.4.
7.1.10. LZB Notes and Indenture. The parties shall
have agreed to the definitive forms of the LZB Notes and the
Indenture, and the Indenture shall have been executed and
delivered by the parties thereto.
7.2. Conditions to Obligations of the LZB Companies. The
obligation of the LZB Companies to effect the Merger is also
subject to the satisfaction or waiver by the LZB Companies prior to
the Effective Time of the following conditions:
7.2.1. Representations and Warranties. The
representations and warranties of E/C set forth in this
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Agreement shall be true and correct in all material respects
as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier
date) as of the Effective Time as though made on and as of
such time, except as otherwise contemplated by this Agreement,
and the LZB Companies shall have received a certificate signed
on behalf of E/C by its Chief Executive Officer and Chief
Financial Officer to such effect.
7.2.2. Performance of Obligations of E/C. E/C shall
have performed in all material respects all obligations
required to be performed by it under this Agreement at or
prior to the Effective Time, and the LZB Companies shall have
received a certificate signed on behalf of E/C by its Chief
Executive Officer and Chief Financial Officer to such effect.
7.2.3. Consents Under Agreements. E/C shall have
obtained the consent or approval of each person (other than
the Governmental Entities referred to in Section 7.1.3) whose
consent or approval shall be required in order to permit the
succession by the Surviving Corporation pursuant to the Merger
to any obligation, right, or interest of E/C under any loan or
credit agreement, note, mortgage, indenture, lease, license,
or other agreement or instrument.
7.2.4. Tax Opinions. The LZB Companies shall have
received the opinion of Miller, Canfield, Paddock and Stone,
P.L.C., dated the effective date of the Registration Statement
and the Effective Time, to the effect that the Merger will be
treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code.
7.2.5. Legal Opinions. The LZB Companies shall have
received: (a) the opinions and letters referred to in Section
6.2; and (b) the opinion of Baker, Donelson, Bearman &
Caldwell, counsel to E/C, dated the Effective Time, as to such
matters as are customary for transactions of this type and in
form and substance reasonably acceptable to the LZB Companies.
7.2.6. Debt. The total Debt of E/C shall not exceed
$30,000,000 on the Effective Time, and the LZB Companies shall
have received a certificate dated the Effective Time, signed
on behalf of E/C by its respective Chief Financial Officer, to
such effect.
7.2.7. Accountants' Letters. The LZB Companies shall
have received the letters referred to in Sections 6.8 and 6.9.
7.2.8. Tax Lock-Up Letters. The LZB Companies shall
have received tax lock-up letters, in form and substance
satisfactory to LZB in its reasonable judgment: (a) from all
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E/C shareholders who are to receive LZB Common Stock as Merger
Consideration; and (b) from those E/C shareholders to be
designated in Section 7.2.8 of the E/C Disclosure Schedule.
7.2.9. S Corporation Opinion. BDO Seidman shall have
delivered to the LZB Companies its opinion, dated the
Effective Time, with respect to the status of E/C prior to
such time as an electing small business corporation under the
Code, in form and substance reasonably acceptable to LZB.
7.2.10. Waivers of Indemnification Rights. Each of the
officers and directors of E/C shall have delivered to the LZB
Companies documents, in form and substance reasonably
satisfactory to the LZB Companies, pursuant to which such
officers and directors forever waive and release any and all
claims they might otherwise have (whether under the charter or
bylaws of E/C, the articles of incorporation or bylaws of
either LZB Company, by contract, or otherwise) for
indemnification or for the payment or advancing of expenses
relating in any way to any disputes which may arise between
such officer or director and either LZB Company relating to
this Agreement or the transactions contemplated hereby.
7.2.11. Termination of Employment Agreements. Each
holder of E/C Class A Stock shall have executed and delivered
to E/C (with copies to the LZB Companies) documents, in form
and substance satisfactory to LZB in its reasonable judgment,
acknowledging that any and all employment contracts between
such person and E/C have been terminated and releasing E/C and
the Surviving Corporation from any further liability
thereunder, including (but not limited to) any liability with
respect to such termination.
7.3. Conditions to Obligations of E/C. The obligation of E/C
to effect the Merger is also subject to the satisfaction or waiver
by E/C prior to the Effective Time of the following conditions:
7.3.1. Representations and Warranties. The
representations and warranties of the LZB Companies set forth
in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an
earlier date) as of the Effective Time as though made on and
as of such time, except as otherwise contemplated by this
Agreement, and E/C shall have received a certificate signed on
behalf of LZB by its Chief Executive Officer and Chief
Financial Officer to such effect.
7.3.2. Performance of Obligations of E/C. The LZB
Companies shall have performed in all material respects all
obligations required to be performed by them under this
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Agreement at or prior to the Effective Time, and E/C shall
have received a certificate signed on behalf of LZB by its
Chief Executive Officer and Chief Financial Officer to such
effect.
7.3.3. Consents Under Agreements. The LZB Companies
shall have obtained the consent or approval of each person
(other than the Governmental Entities referred to in Section
7.1.3) whose consent or approval shall be required in order to
permit the succession by the Surviving Corporation pursuant to
the Merger to any obligation, right, or interest of LZB
Acquisition under any loan or credit agreement, note,
mortgage, indenture, lease, license, or other agreement or
instrument.
7.3.4. Tax Opinions. E/C shall have received the
opinion of Miller, Canfield, Paddock and Stone, P.L.C., dated
the effective date of the Registration Statement and the
Effective Time, to the effect that the Merger will be treated
for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code.
7.3.5. Legal Opinions. E/C shall have received:
(a) the opinions and letters referred to in Section 6.2; and
(b) the opinion of Miller, Canfield, Paddock and Stone,
P.L.C., counsel to the LZB Companies, dated the Effective
Time, as to such matters as are customary for transactions of
this type and in form and substance reasonably acceptable to
E/C.
7.3.6. Accountants' Letters. E/C shall have received
the letters referred to in Sections 6.8 and 6.9.
7.3.7. Tax Lock-Up Letters. E/C shall have received
the tax lock-up letters referred to in Section 7.2.8.
8. TERMINATION AND AMENDMENT.
8.1. Termination. This Agreement and the Plan of Merger may
be terminated at any time prior to the Effective Time, whether
before or after approval of the matters presented in connection
with the Merger by the shareholders of E/C:
(a) by mutual consent of E/C and the LZB Companies in a
written instrument, if the Board of Directors of each so
determines by a vote of a majority of the members of its
entire Board;
(b) by E/C or either of the LZB Companies upon written
notice to the others if (i) any Requisite Regulatory Approval
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shall have been denied or any Materially Burdensome Condition
shall have been imposed or (ii) any Governmental Entity of
competent jurisdiction shall have issued a final nonappealable
order enjoining or otherwise prohibiting the consummation of
the transactions contemplated by this Agreement;
(c) by E/C or either of the LZB Companies upon written
notice to the others if the Merger shall not have been
consummated on or before April 15, 1995, provided that a party
may not terminate under this Section 8.1(c) if such party is
in breach in any material respect of this Agreement;
(d) by E/C or either of the LZB Companies upon written
notice to the others if any approval of the shareholders of
E/C required for the consummation of the Merger shall not have
been obtained by reason of the failure to obtain the required
vote at the E/C Shareholder Meeting, provided that any such
notice of termination must be given not later than 45 days
after the conclusion of the E/C Shareholder Meeting or within
such longer period as may be agreed upon by the parties;
(e) by E/C or the LZB Companies upon written notice to
the others if there shall have been a material breach of any
of the representations or warranties set forth in this
Agreement on the part of E/C (in the case of the LZB
Companies) or either of the LZB Companies (in the case of
E/C), as if any such breach were being made as of the date of
determination, and which breach by its nature cannot be cured
prior to the earlier of the then scheduled Closing Date or 60
days following receipt by the breaching party of written
notice of the breach from any other party hereto;
(f) by E/C or the LZB Companies upon written notice to
the others if there shall have been a material breach of any
of the covenants or agreements set forth in this Agreement on
the part of E/C (in the case of the LZB Companies) or either
of the LZB Companies (in the case of E/C), which breach shall
not have been cured prior to the earlier of the then scheduled
Closing Date 15 business days following receipt by the
breaching party of written notice of such breach from any
other party hereto;
(g) by either of the LZB Companies upon written notice
to E/C if the Board of Directors of E/C does not, or shall
indicate to either of the LZB Companies that it is unwilling
or unable to, recommend in the Proxy Statement/Prospectus that
its shareholders approve this Agreement and the Plan of
Merger, or if after recommending in the Proxy Statement/Prospectus
that shareholders approve this Agreement and the Plan
of Merger, the Board of Directors of E/C shall have withdrawn,
modified, or amended such recommendation in any respect
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materially adverse to the LZB Companies, provided that any
such notice of termination must be given not later than 45
days after the date LZB shall have been advised by E/C in
writing that it is unable or unwilling to so recommend in the
Proxy Statement/Prospectus or that it has withdrawn, modified,
or amended such recommendation, or such later date as may be
agreed upon by E/C and the LZB Companies;
(h) by either of the LZB Companies upon written notice
to E/C if E/C shall have authorized, recommended, proposed, or
announced an intention to authorize, recommend, or propose, or
entered into an agreement with any person (other than any of
the LZB Companies) to effect, a Takeover Proposal or shall
fail to publicly oppose a tender offer or exchange offer by
another person based on a Takeover Proposal;
(i) by either of the LZB Companies upon written notice
to E/C if E/C fails to deliver the E/C Disclosure Schedule
within the time specified in Section 6.10; and
(j) by either of the LZB Companies, in its sole
discretion, upon written notice to E/C given any time within
ten business days after receiving the E/C Disclosure Schedule.
8.2. Effect of Termination. In the event of termination of
this Agreement by E/C or either of the LZB Companies as provided in
Section 8.1, this Agreement shall forthwith become void and have no
effect except (a) with respect to Sections 6.5, 8.2, 8.5, 9.5, and
9.6 and (b) except as otherwise provided in Section 8.5, no party
shall be relieved or released from any liabilities or damages
arising out of the breach by such party of any provision of this
Agreement or the Plan of Merger.
8.3. Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters
presented in connection with the Merger by the shareholders of E/C;
provided, however, that after any such approval, no amendment shall
be made which by law requires further approval by such
shareholders, without such further approval. This Agreement may
not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
8.4. Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their
respective Board of Directors, may, to the extent legally allowed:
(a) extend the time for the performance of any of the obligations
or other acts of the other parties hereto; (b) waive any
inaccuracies in the representations and warranties contained herein
or in any document delivered pursuant hereto; and (c) waive
compliance with any of the agreements or conditions contained
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herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
8.5. Liquidated Damages; Termination Fee.
(a) Notwithstanding anything to the contrary contained herein,
in the event that any of the following events or circumstances
shall occur, E/C shall, within ten days after notice of the
occurrence thereof by LZB, pay to LZB the sum of $500,000, which
the parties agree and stipulate as reasonable and full liquidated
damages and reasonable compensation for the involvement of the LZB
Companies in the transactions contemplated in this Agreement, is
not a penalty or forfeiture, and will not affect the provisions of
Section 8.2(a):
(i) at any time prior to termination of this Agreement
an Acquisition Event shall occur; or
(ii) E/C shall terminate this Agreement pursuant to
Section 8.1(d), LZB or LZB Acquisition shall
terminate this Agreement pursuant to Sections
8.1(d), (f), (g), or (h), or E/C shall fail to
call and hold the E/C Shareholder Meeting as
required by Section 2.2.
(b) Notwithstanding anything to the contrary contained herein,
in the event that E/C shall terminate this Agreement pursuant to
Section 8.1(f), LZB shall, within ten days after notice of the
occurrence thereof by E/C, pay to E/C the sum of $500,000, which
the parties agree and stipulate as reasonable and full liquidated
damages and reasonable compensation for the involvement of E/C in
the transactions contemplated in this Agreement, is not a penalty
or forfeiture, and will not affect the provisions of Section
8.2(a).
(c) Upon the making and receipt of payment under either
subsection (a) or subsection (b) of this Section 8.5, neither E/C
nor either of the LZB Companies shall have any further obligation
of any kind under this Agreement, except in each case under Section
8.2(a).
9. GENERAL PROVISIONS.
9.1. Survival of Agreements. All of the representations,
warranties, covenants, and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the
Effective Time and consummation of the Merger.
9.2. Notices. All notices and other communications hereunder
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shall be in writing and shall be deemed given if delivered
personally, telecopied (with confirmation), or mailed by registered
or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall
be specified by like notice):
(a) if to E/C, to:
England/Corsair, Inc.
402 Old Knoxville Highway
New Tazewell, Tennessee 37825
Attention: Chief Executive Officer
Fax: (614) 626-5211, Ext. 560
and
(b) if to either of the LZB Companies, to:
La-Z-Boy Chair Company
1284 North Telegraph Road
Monroe, Michigan 48161
Attention: Chief Executive Officer
Fax: (313) 457-2005
with a copy to:
Miller, Canfield, Paddock and Stone, P.L.C.
Suite 2500
150 West Jefferson Avenue
Detroit, Michigan 48226
Attention: David D. Joswick, Esq.
Fax: (313) 496-8451
9.3. Interpretation. When a reference is made in this
Agreement to Sections, Exhibits, or Schedules, such reference shall
be to a Section of or Exhibit or Schedule to this Agreement unless
otherwise indicated. The table of contents and headings contained
in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include," "includes," or "including," are used
in this Agreement, they shall be deemed to be followed by the words
"without limitation." The phrases "the date of this Agreement,"
"the date hereof," and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to the date set forth
in the first paragraph of this Agreement.
9.4. Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been
signed by each of the parties and delivered to the other parties,
it being understood that all parties need not sign the same
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counterpart. An executed counterpart received by telecopy shall
have the same effect as an originally executed counterpart.
9.5. Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement, the Exhibits hereto, and the Plan of
Merger: (a) constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof; and (b) are not
intended to confer upon any person other than the parties hereto
any rights or remedies hereunder or thereunder except, if and only
if the Merger is consummated, for the right of the shareholders of
E/C to receive the Merger Consideration. For the purposes hereof,
"party" shall mean E/C, LZB, and LZB Acquisition and shall not
include any other person whatsoever, whether a shareholder,
employee, officer, director, or otherwise.
9.6. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Michigan,
without regard to any applicable conflicts of law.
9.7. Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with
its specific terms or was otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or
in equity.
9.8. Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement or affecting the
validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall
be interpreted to be only so broad as is enforceable.
9.9. Publicity. Except as otherwise required by law or the
rules of the Exchanges, so long as this Agreement is in effect,
none of E/C or the LZB Companies shall issue or cause the
publication of any press release or other public announcement with
respect to the transactions contemplated by this Agreement without
the consent of the other party, which consent shall not be
unreasonably withheld, conditioned, or delayed.
9.10. Assignment. Neither this Agreement nor any of the
rights, interests, or obligations hereunder shall be assigned by
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any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties.
Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by the parties
and their respective successors and assigns.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their respective officers thereunto duly
authorized as of the date first above written.
ENGLAND/CORSAIR, INC.
By /s/ RODNEY ENGLAND
Rodney England
President
Attest:
/s/ DENNIS C. VALKANOFF
Dennis C. Valkanoff
Vice President
LA-Z-BOY CHAIR COMPANY
By /s/ F. H. JACKSON
F. H. Jackson
Vice President Finance
Attest:
/s/ JAMES P. KLARR
James P. Klarr
Assistant Secretary
and Tax Counsel
LZB ACQUISITION, INC.
By /s/ GENE M. HARDY
Gene M. Hardy
Secretary and Treasurer
Attest:
/s/ JAMES P. KLARR
James P. Klarr
Assistant Secretary
and Tax Counsel
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Exhibit 2 to Reorganization Agreement
SUMMARY OF TERMS OF LZB NOTES
Title: La-Z-Boy Chair Company 8% Unsecured
Promissory Notes Due 1999
Maximum aggregate principal
amount: $10,000,000
Form: Registered
Denominations: Any
Principal payments: Four equal installments payable on
first through fourth anniversaries
of Effective Time
Final maturity: Fourth anniversary of Effective Time
Interest: 8% simple, payable annually on
anniversaries of Effective Time
Prepayments: Permitted -- no premium
Security: None
<PAGE>
ANNEX B
Exhibit 1 to Amended and Restated Reorganization Agreement
AMENDED AND RESTATED PLAN OF MERGER
THIS AMENDED AND RESTATED PLAN OF MERGER (the "Plan of Merger") is
entered into as of January 13, 1995 by and among La-Z-Boy Chair Company, a
Michigan corporation ("LZB"), LZB Acquisition, Inc., a Michigan corporation and
a wholly owned subsidiary of LZB ("LZB Acquisition"), and England/Corsair,
Inc., a Tennessee corporation ("E/C").
Premises:
A. The parties have executed and delivered a Plan of Merger dated as
of January 13, 1995 (the "Original Plan of Merger") and a Reorganization
Agreement dated as of January 13, 1995 (the "Original Agreement").
B. The parties hereto have amended and restated the Original Agreement
in its entirety by entering into an Amended and Restated Reorganization
Agreement of even date herewith (the "Reorganization Agreement").
C. The parties desire to amend and restate the Original Plan
of Merger in its entirety as set forth in this Plan of Merger.
D. The Reorganization Agreement provides for the merger (the "Merger")
of E/C with and into LZB Acquisition with the result that the separate
existence of E/C will cease, LZB Acquisition will continue to be a wholly owned
subsidiary of LZB, and E/C shareholders will exchange their shares of common
stock of E/C for shares of LZB common stock, LZB notes, or cash (or a
combination of the foregoing) and for Performance Units (as hereinafter
defined).
E. The parties hereto are entering into this Plan of Merger
to set forth the terms and conditions of the Merger.
F. E/C has authorized capital stock consisting solely of: (1) 500,000
shares of Class A Common Stock, without par value ("E/C Class A Stock") of
which 224,652 shares are issued and outstanding as of the date of this Plan of
Merger and entitled to vote; and (2) 500,000 shares of Class B Common Stock,
without par value ("E/C Class B Stock") of which 72,678 shares are issued and
outstanding as of the date of this Plan of Merger and entitled to vote. Holders
of the E/C Class A Stock and the E/C Class B Stock are entitled to vote on the
Merger; the affirmative votes of the holders of a majority of the total number
of shares of E/C Class A Stock and E/C Class B stock issued and outstanding,
voting together as a single voting group, are required to approve the Merger.
The E/C Class A Stock and the E/C Class B Stock are referred to herein
collectively as the "E/C Stock."
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G. The number of shares of E/C Class A Stock and the number
of shares of E/C Class B Stock are not subject to change before the
effective date of the Merger.
H. LZB Acquisition has an authorized capital stock consisting solely
of 1,000 shares of Common Stock ("LZB Acquisition Stock"), of which one share
is issued and outstanding as of the date of this Plan of Merger and entitled to
vote and which is owned by LZB.
I. The number of shares of LZB Acquisition Stock is not subject to
change before the effective date of the Merger.
J. The respective Boards of Directors of LZB, LZB Acquisition, and E/C
have determined that it is in the best interests of LZB, LZB Acquisition, and
E/C and their respective shareholders for E/C to be merged with and into LZB
Acquisition upon the terms and subject to the conditions set forth in this Plan
of Merger and in accordance with the Business Corporation Act of the State of
Michigan (the "MBCA") and the Tennessee Business Corporation Act (the "TBCA").
K. The respective Boards of Directors of LZB, LZB Acquisition, and E/C
have adopted resolutions approving this Plan of Merger and the Merger; LZB, as
the sole shareholder of LZB Acquisition, has approved this Plan of Merger and
the Merger; and the Board of Directors of E/C has resolved to recommend
approval of this Plan of Merger and the Merger to its shareholders.
L. E/C has agreed in the Reorganization Agreement to duly call and
hold a special meeting of its shareholders to vote upon the approval of this
Plan of Merger and the Merger (the "Meeting").
NOW, THEREFORE, in consideration of the premises and the respective
covenants and agreements set forth herein and in the Reorganization Agreement,
and intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 EFFECTIVE TIME OF THE MERGER. Subject to the provisions
of this Plan of Merger and the Reorganization Agreement: (a) a
certificate of merger (the "Michigan Certificate of Merger") shall
be duly prepared and executed by E/C and LZB Acquisition and
thereafter delivered for filing to the Corporation and Securities
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Bureau of the Michigan Department of Commerce (the "Michigan Corporation
Bureau"), as provided in the MBCA, as soon as practicable on or after the
Closing Date (as defined in the Reorganization Agreement); and (b) articles of
merger (the "Tennessee Articles of Merger") shall be duly prepared and executed
by E/C and LZB Acquisition and thereafter delivered for filing to the Tennessee
Secretary of State, as provided in the TBCA, as soon as practicable on or after
the Closing Date. The Merger shall become effective: (i) under Michigan law,
upon the filing of the Michigan Certificate of Merger with the Michigan
Corporation Bureau or at such time thereafter as LZB, LZB Acquisition, and E/C
may agree in writing to provide in the Michigan Certificate of Merger; and (ii)
under Tennessee law, upon the filing of the Tennessee Articles of Merger with
the Tennessee Secretary of State or at such time thereafter as LZB, LZB
Acquisition, and E/C may agree in writing to provide in the Tennessee Articles
of Merger. As used in this Plan of Merger, "Effective Time" means the later
said times.
1.2 EFFECTS OF THE MERGER.
(a) At the Effective Time,
(i) the separate existence of E/C shall cease, and it shall
be merged with and into LZB Acquisition, which shall be the Surviving
Corporation (as defined in Section 1.2(b) below) of the Merger;
(ii) the Articles of Incorporation of LZB Acquisition, as in
effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until duly amended in accordance
with the provisions thereof and the MBCA; and
(iii) the Bylaws of LZB Acquisition, as in effect immediately prior
to the Effective Time, shall be the Bylaws of the Surviving Corporation until
amended in accordance with the provisions thereof and the MBCA.
(b) As used in this Plan of Merger, the term "Surviving
Corporation" shall mean LZB Acquisition.
(c) At and after the Effective Time, the Merger will have the
effects set forth in Section 724(1) of the MBCA and Section 48-21-108 of the
TBCA.
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ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
2.1 EFFECT ON CAPITAL STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of the
holder of any shares of the E/C Stock or the holder of any shares
of the LZB Acquisition Stock:
(a) CANCELLATION OF E/C TREASURY STOCK. All shares of E/C
Stock that are owned by E/C as treasury stock shall be canceled and retired and
shall cease to exist, and no consideration shall be delivered in exchange
therefor.
(b) CONVERSION OF E/C STOCK.
(i) Each issued and outstanding share of E/C Stock (other
than shares to be canceled and retired in accordance with Section 2.1(a) and
shares held by any holder who shall have perfected such holder's dissenter's
rights under the TBCA, if any, which shall be treated in accordance with the
applicable provisions of the TBCA) shall be converted into the right to receive
the consideration described below:
(x) Each share of E/C Stock held by a shareholder who duly
and timely files a form of election in accordance with the procedures
attached hereto and made a part hereof as Exhibit B (the "Procedures")
shall be converted into, and evidence: (1) the right to receive from
LZB Acquisition, at such shareholder's option, but subject to the
Limitations (as hereinafter defined) and the Procedures, either (A)
$109.558403121 in cash, (B) $109.558403121 principal amount of LZB's
8% Unsecured Promissory Notes Due 1999 ("LZB Notes"), or (C)
3.6519467707 shares of the duly authorized, validly issued, fully
paid, and nonassessable Common Stock, $1.00 par value, of LZB ("LZB
Common Stock"); and (2) one Performance Unit (as hereinafter defined).
Any fractional shares of LZB Common Stock resulting from the
computation in clause (C) above shall not be issued and shall be
settled in cash at $30.00 per whole share of LZB Common Stock.
Each share of E/C Stock held by a shareholder who
fails, for whatever reason, to duly and timely file a form of election
in accordance with the Procedures shall be converted into, and
evidence: (1) the right to receive from LZB Acquisition, but subject
to the Limitations and the Procedures, $109.558403121 in cash; and (2)
one Performance Unit.
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LZB Common Stock, LZB Notes, and cash (including
cash in lieu of fractional shares) issuable pursuant to this Section
2.1(b)(i)(x) are collectively referred to herein as the "Initial
Merger Consideration."
(y) (1) As used in this Plan of Merger, the term "Performance
Unit" means the right to receive from LZB, at the times, in the form,
and on the terms hereinafter set forth, consideration in the 1996
Performance Unit Amount and consideration in the 1997 Performance Unit
Amount (both as hereinafter defined). By executing this Plan of
Merger, LZB hereby agrees to provide such consideration to each holder
of a Performance Unit, at the times, in the form, and on the terms
hereinafter set forth.
(2) As used in this Plan of Merger, the term "Pre-
Tax Income" means the pre-tax income of the Surviving Corporation
determined in accordance with the standards described in Exhibit A
attached hereto and incorporated herein by reference (the "Computation
Standards").
(3) As used in this Plan of Merger, the term "1996
Performance Unit Amount" means the amount derived by performing the
following calculations:
Step 1: Subtract $6,000,000.00 from the Pre-Tax
Income of the Surviving Corporation for the period (the "1996
Performance Period") from (but excluding) the last day of the
accounting month of LZB in which the Effective Time occurs to (and
including) the last day of the corresponding accounting month in 1996.
(If the result is less than zero, the result of this step shall be
deemed to be zero.)
Step 2: Multiply the result of Step 1 by 1.75.
Step 3: Determine the lesser of (A) $20,000,000 or
(B) the result of Step 2 (the "Total 1996 Payment Amount").
Step 4: Divide the Total 1996 Payment Amount by the
number of shares of E/C stock issued and outstanding at the Effective
Time to obtain the 1996 Performance Unit Amount.
(4) As used in this Plan of Merger, the term "1997
Performance Unit Amount" means the amount derived by performing the
following calculations:
Step 1: Subtract $7,000,000.00 from the Pre-Tax
Income of the Surviving Corporation for the period (the "1997
Performance Period") from (but excluding) the last day of the 1996
Performance Period to (and including) the last day of the
corresponding accounting month in 1997. (If the result is
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less than zero, the result of this step shall be deemed to be
zero.)
Step 2: Multiply the result of Step 1 by 1.75.
Step 3: Determine the lesser of (A) $20,000,000
minus the Total 1996 Payment Amount or (B) the result of Step 2 (the
"Total 1997 Payment Amount").
Step 4: Divide the Total 1997 Payment Amount by the
number of shares of E/C stock issued and outstanding at the Effective
Time to obtain the 1997 Performance Unit Amount.
(5) Subject to the Limitations, each Performance
Unit will be settled by the issuance, to the holder of such
Performance Unit, of shares of LZB Common Stock in accordance with
subparagraphs (A) and (B) below:
(A) On or before the forty-fifth day after the later
of the end of the 1996 Performance Period or the date on which
any disputes concerning the 1996 Performance Unit Amount shall have
been resolved in accordance with the Computation Standards (the "1996
Settlement Date"), the holder of each Performance Unit shall be
entitled to receive a number of shares of LZB Common Stock calculated
as follows:
Step 1: Determine the closing price of LZB Common
Stock on the New York Stock Exchange on the last day of the 1996
Performance Period (or, if LZB Common Stock is not traded on that
date, on the last preceding date on which LZB Common Stock was
traded). Such price is referred to herein as the "1996 LZB Common
Stock Price."
Step 2: Divide the 1996 Performance Unit Amount by
the 1996 LZB Common Stock Price.
The result obtained from Step 2, rounded to the nearest
one one-thousandth of a share, shall be the number of shares of LZB
Common Stock which a holder of one Performance Unit shall be entitled
to receive on or before the 1996 Settlement Date in respect of such
Performance Unit. The number of shares of LZB Common Stock so
issuable to each holder of Performance Units shall be aggregated, and
if such aggregate number includes any fractional share, such
fractional share shall not be issued and shall be settled in cash
at the 1996 LZB Common Stock Price.
(B) On or before the forty-fifth day after the later of
the end of the 1997 Performance Period or the date on which any
disputes concerning the 1997 Performance Unit Amount shall have been
resolved in accordance with the Computation Standards (the "1997
Settlement Date"), the holder of each Performance Unit shall be
entitled to receive a number of shares of LZB Common Stock calculated
as follows:
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Step 1: Determine the closing price of LZB Common
Stock on the New York Stock Exchange on the last day of the 1997
Performance Period (or, if LZB Common Stock is not traded on that
date, on the last preceding date on which LZB Common Stock was
traded). Such price is referred to herein as the "1997 LZB Common
Stock Price."
Step 2: Divide the 1997 Performance Unit Amount by
the 1997 LZB Common Stock Price.
The result obtained from Step 2, rounded to the nearest
one one-thousandth of a share, shall be the number of shares of LZB
Common Stock which a holder of one Performance Unit shall be entitled
to receive on or before the 1997 Settlement Date in respect of such
Performance Unit. The number of shares of LZB Common Stock so
issuable to each holder of Performance Units shall be aggregated,
and if such aggregate number includes any fractional share, such
fractional share shall not be issued and shall be settled in cash
at the 1997 LZB Common Stock Price.
(6) Performance Units will be settled, by the issuance of
LZB Common Stock as set forth above, without interest.
(7) Neither the Surviving Corporation nor LZB will
maintain any system for recording transfers of Performance Units. To
the fullest extent permitted by law, Performance Units shall be
non-transferrable, and LZB Common Stock will be issued in settlement
of Performance Units only to the persons to whom the Initial Merger
Consideration was issued with respect to the corresponding shares
of E/C Stock.
(z) As used in this Plan of Merger, the term "Limitations"
means the Note Limitation, the Total Share Limitation, the Total
Non-Share Limitation, and the Performance Unit Share Limitation. As
used herein, the term "Note Limitation" means $10,000,000 aggregate
principal amount of LZB Notes. As used herein, the term "Total Share
Limitation" means that number of shares of LZB Common Stock which, if
issued in connection with the Merger, would result in LZB's issuance
of more than 2,000,000 shares of LZB Common Stock (including both
shares issued as part of the Initial Merger Consideration and shares
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issued in settlement of Performance Units), whether pursuant
to this Plan of Merger or by operation of law. As used herein,
the term "Total Non-Share Limitation" means that amount of
consideration other than shares of LZB Common Stock (including
both cash and LZB Notes) which, if paid in connection with
the Merger, would result in consideration other than LZB Common Stock
constituting 50 percent or more of the aggregate consideration paid by
LZB and LZB Acquisition to acquire E/C Stock in connection with the
Merger, whether pursuant to this Plan of Merger, by operation of law,
from the perfection of appraisal rights by dissenting E/C shareholders
("Dissenting Shareholders"), or in lieu of fractional shares. If the
amount payable to Dissenting Shareholders is not known at the time the
computation of the Non-Share Limitation is made, then LZB shall make a
good faith estimate of the maximum amount which may be payable by the
Surviving Corporation to Dissenting Shareholders, and such estimate
shall be included in the computation of the Non-Share Limitation. All
calculations of the Total Non-Share Limitation shall be based on the
fair market value of the LZB Common Stock at the Effective Time. As
used herein, the term "Performance Unit Share Limitation" means the
number of shares of LZB Common Stock which is equal to the aggregate
number of shares of LZB Common Stock issued as Initial Merger
Consideration.
Notwithstanding the elections to receive cash, LZB Notes, or
LZB Common Stock made by the holders of E/C Stock in accordance with
Section 2.1(b)(i)(x) above: (1) in the event the aggregate principal
amount of LZB Notes which would be issuable to those shareholders
electing to receive LZB Notes exceeds the Note Limitation, then the
elections made by, or allocations to, one or more shareholders shall
be changed from LZB Notes to cash in accordance with the Procedures;
(2) in the event the aggregate amount which would be payable to those
shareholders electing to receive consideration other than LZB Common
Stock exceeds the Total Non-Share Limitation, or the aggregate number
of shares of LZB Common Stock which would be issuable to those
shareholders electing to receive LZB Common Stock shares issuable
in settlement of Performance Units, exceeds the Total Share
Limitation, then the elections made by, or allocations to, one
or more shareholders shall be changed from cash and/or LZB Notes to
LZB Common Stock, or from LZB Common Stock to cash, as the case may
be, in accordance with the Procedures; and (3) in the event that the
aggregate number of shares of LZB Common Stock which would be issuable
in satisfaction of the Performance Units exceeds the Performance Unit
Share Limitation or the Total Share Limitation, then the 1996
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Performance Unit Amount and/or the 1997 Performance Unit
Amount, as the case may be, will be reduced in accordance with the
Procedures. The Limitations shall be applied in the following
order: (A) first, the Note Limitation; (B) second, the Total
Non-Share Limitation; (C) third, the Total Share Limitation;
and (D) last, the Performance Unit Share Limitation. If, but
only if, it proves impossible to pay the full 1996 Performance
Unit Amount and/or the full 1997 Performance Unit Amount without
exceeding either the Total Share Limitation and/or the Performance
Unit Share Limitation, then the 1996 Performance Unit Amount and/or
the 1997 Performance Unit Amount, as the case may be, shall be
reduced to the largest amount which can be paid without exceeding
any of the Limitations.
(ii) All such shares of E/C Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each certificate (each, a "Certificate") previously representing any
such shares shall thereafter represent only the rights described in this
Section 2.1(b). Certificates previously representing shares of E/C Common Stock
shall be exchanged for certificates representing whole shares of LZB Common
Stock, LZB Notes, and/or cash in consideration therefor upon the surrender of
such Certificates in accordance with Section 2.2 without any interest thereon.
(c) NO CONVERSION OF LZB ACQUISITION STOCK. Each of the issued
and outstanding shares of LZB Acquisition Stock shall be and remain as one
issued and outstanding share of the Common Stock of the Surviving Corporation.
2.2 EXCHANGE OF CERTIFICATES. (a) EXCHANGE FUND. As of the Effective
Time, LZB shall have or make available, for exchange in accordance with this
Article II, (i) certificates representing the shares of LZB Common Stock, (ii)
LZB Notes, and (iii) cash (including any cash in lieu of fractional shares)
(such cash, certificates for shares of LZB Common Stock, and LZB Notes,
together with any dividends, interest, or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund") to be issued as the
Initial Merger Consideration pursuant to Section 2.1(b)(i)(x) and paid pursuant
to Section 2.2 in exchange for outstanding shares of E/C Stock.
(b) EXCHANGE PROCEDURES. Promptly after the Effective Time,
LZB shall mail to each holder of record of a Certificate or Certificates (i) a
letter of transmittal which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of
the Certificates to LZB and shall be in such form and have such other
provisions as LZB and E/C may reasonably specify, and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for the
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applicable Initial Merger Consideration. Upon surrender of a Certificate for
cancellation to LZB together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange
therefor (x) a certificate representing that number of whole shares of LZB
Common Stock, (y) a Note in the principal amount, and (z) a check representing
the amount of cash (including any cash in lieu of fractional shares) and unpaid
dividends and distributions, if any, which such holder has the right to receive
in respect of the Certificate surrendered pursuant to the provisions of this
Article II, and the Certificate so surrendered shall forthwith be canceled. No
interest will be paid or accrued on the cash or unpaid dividends and
distributions, if any, payable to holders of Certificates. Except as otherwise
provided in the next sentence, no transfer taxes shall be payable by any holder
of a Certificate in respect of the issuance of certificates representing the
LZB Common Stock or LZB Notes pursuant to this Plan of Merger. In the event of
a transfer of ownership of E/C Stock which is not registered in the transfer
records of E/C, certificates representing the proper number of shares of LZB
Common Stock and/or the proper principal amount of LZB Notes, together with a
check for the proper amount of cash, if any, may be issued to such a transferee
if the Certificate representing such E/C Common Stock is presented to LZB,
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES;
VOTING.
Whenever a dividend or other distribution is declared by LZB on the LZB Common
Stock, the record date for which is at or after the Effective Time, the
declaration shall include dividends or other distributions on all whole shares
of LZB Common Stock issuable pursuant to this Plan of Merger, provided that no
dividends or other distributions declared or made with respect to the LZB
Common Stock with a record date that is six months or more after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to any shares of LZB Common Stock represented thereby until the holder of such
Certificate shall surrender such Certificate in accordance with this Article
II. Subject to the effect of applicable laws, following surrender of any such
Certificate, there shall be paid to the holder of the certificates representing
whole shares of LZB Common Stock issued in exchange therefor, without interest,
(i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore payable
with respect to such whole shares of LZB Common Stock and not paid, and (ii) at
the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to surrender and a
payment date subsequent to surrender payable with respect to such whole shares
of LZB Common Stock. Holders of unsurrendered Certificates shall be entitled to
vote
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after the Effective Time at any meeting of LZB shareholders the number of whole
shares of LZB Common Stock represented by such Certificates, regardless of
whether such holders have exchanged their Certificates. Subject to the effect
of applicable laws, following surrender of any Certificate representing the
right to receive LZB Notes, there shall be paid to the holder of the LZB Notes
issued in exchange therefor, without additional interest, (i) at the time of
such surrender, the amount of each interest payment with a record date after
the Effective Time theretofore payable with respect to such LZB Notes and not
paid, and (ii) at the appropriate payment date, the amount of each interest
payment with a record date after the Effective Time but prior to surrender and
a payment date subsequent to surrender payable with respect to such LZB Notes.
(d) TRANSFERS. After the Effective Time, there shall be no
transfers on the stock transfer books of E/C of the shares of E/C Stock which
were outstanding immediately prior the Effective Time. If after the Effective
Time, certificates are presented to the Surviving Corporation, they shall be
canceled and exchanged for the Initial Merger Consideration deliverable in
respect thereof pursuant to this Plan of Merger in accordance with the
procedures set forth in this Article II. Certificates surrendered for exchange
by any person constituting an "affiliate" of E/C for purposes of Rule 145(c)
under the Securities Act of 1933, as amended (the "Securities Act"), shall not
be exchanged until LZB has received a written agreement from such person as
provided in Section 6.4 of the Reorganization Agreement.
(e) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund (including the proceeds of any investments thereof) that remains unclaimed
by the shareholders of E/C for nine months after the Effective Time shall be
paid to LZB. Any shareholders of E/C who have not theretofore complied with
this Article II shall thereafter look only to LZB for payment of their Initial
Merger Consideration (and unpaid dividends and distributions on the LZB Common
Stock and unpaid interest on the LZB Notes) deliverable in respect of each
share of E/C Stock such shareholder holds as determined pursuant to this Plan
of Merger, in each case, without any interest thereon. Notwithstanding the
foregoing, neither of LZB nor any other person shall be liable to any former
holder of shares of E/C Stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(g) LOST CERTIFICATE(S). In the event any Certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Certificate to be lost, stolen or destroyed
and, if required by LZB, the posting by such person of a bond in such amount as
LZB may direct as indemnity against any claim that may be made against it with
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respect to such Certificate, LZB shall issue in exchange for such lost, stolen
or destroyed Certificate the Initial Merger Consideration deliverable in
respect thereof pursuant to this Plan of Merger.
ARTICLE III
TERMINATION AND ABANDONMENT
3.1 TERMINATION. This Plan of Merger may be terminated and the Merger
abandoned at any time prior to the Effective Time, whether before or after
approval of this Plan of Merger, the Reorganization Agreement and the Merger by
the shareholders of E/C, as provided in Section 8.1 of the Reorganization
Agreement.
3.2 EFFECT OF TERMINATION. In the event of termination of this Plan of
Merger as provided in Section 3.1, this Plan of Merger shall forthwith become
void and have no effect except with respect to this Section 3.2 and Sections
4.2 and 4.3 and (ii) no party shall be relieved or released from any
liabilities or damages arising out of the breach by such party of any provision
of this Plan of Merger.
3.3 AMENDMENT. This Plan of Merger may be amended by the parties
hereto by action taken or authorized by their respective Boards of Directors at
any time before or after approval of this Plan of Merger, the Reorganization
Agreement, and the Merger by the shareholders of E/C; provided, however, that
after such approval, no amendment shall be made which by law requires further
approval by such shareholders, without such further approval. This Plan of
Merger may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
3.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in a written instrument signed on behalf of such
party.
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ARTICLE IV
MISCELLANEOUS
4.1 COUNTERPARTS. This Plan of Merger may be executed in counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart. An executed counterpart received by telecopy shall
have the same effect as an originally executed counterpart.
4.2 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHTS OF
OWNERSHIP. This Plan of Merger and the Reorganization Agreement (a) constitute
the entire agreement and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and (b) is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder except, if and only if the
Merger is consummated, for the right of holders of E/C Stock to receive the
Initial Merger Consideration and Performance Units as provided herein. For the
purposes hereof, the parties shall mean LZB, LZB Acquisition, and E/C and shall
not include other person whatsoever, whether a shareholder, employee, officer,
director, or otherwise.
4.3 GOVERNING LAW. This Plan of Merger shall be governed and construed
in accordance with the laws of the State of Michigan, without regard to any
applicable conflicts of law.
4.4 ROUNDING. The dollar amounts of all cash payable and all LZB Notes
issuable hereunder shall be rounded to the nearest whole cent.
4.5 ENFORCEMENT OF PLAN OF MERGER. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Plan of Merger were not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Plan of Merger and
to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
4.6 SEVERABILITY. Any term or provision of this Plan of Merger which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Plan of Merger or affecting the validity or enforceability of any of the terms
or provisions of this Plan of Merger in any other
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jurisdiction. If any provision of this Plan of Merger is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
4.7 ASSIGNMENT. Neither this Plan of Merger nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Plan of
Merger will be binding upon, inure to the benefit of and be enforceable by the
parties and their respective successors and assigns.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger
to be signed by their respective officers thereunto duly authorized as of the
date first above written.
LA-Z-BOY CHAIR COMPANY
By /s/ F. H. JACKSON
F. H. Jackson
Vice President Finance
Attest:
/s/ JAMES P. KLARR
James P. Klarr
Assistant Secretary
and Tax Counsel
LZB ACQUISITION, INC.
By /s/ GENE M. HARDY
Gene M. Hardy
Secretary and Treasurer
Attest:
/s/ JAMES P. KLARR
James P. Klarr
Assistant Secretary
and Tax Counsel
ENGLAND/CORSAIR, INC.
By /s/ RODNEY ENGLAND
Rodney England
President
Attest:
/s/ DENNIS C. VALKANOFF
Dennis C. Valkanoff
Vice President
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Exhibit A to Plan of Merger
COMPUTATION STANDARDS FOR PRE-TAX INCOME
For purposes of this Plan of Merger, the "Pre-Tax Income" of the
Surviving Corporation for a specified period shall be equal to the sum of (a)
the Surviving Corporation's net income for such period and (b) the Surviving
Corporation's federal income tax expense for such period, both as determined in
accordance with generally accepted accounting principles ("GAAP") as
consistently applied, as applied by E/C immediately prior to the Effective
Time; provided, however, that the rules and standards set forth in the
following numbered paragraphs shall be applied to such computation
notwithstanding whether such rules and standards comply or are in accordance
with GAAP as of the Effective Time.
1. Pro forma adjustments will be made so as to make Pre-Tax Income
equal, as nearly as possible, to the net income prior to federal income tax
expense which E/C would have had for the periods in question had the Merger not
occurred, subject, however, to paragraph 5 below. To this end, and subject to
paragraph 5, pro forma adjustments will be made eliminating the benefits and
the costs of the Merger to the Surviving Corporation. By way of example (but
not of limitation), some of the pro forma adjustments which may be made, if
applicable, are as follows:
(a) If the Surviving Corporation employs different
accountants than were employed by E/C and the fees of such accountants
are higher or lower than the fees most recently charged by E/C's
accountants, Pre-Tax Income will be computed using the fees most
recently charged by E/C's accountants.
(b) If, due to insurance maintained by LZB, the Surviving
Corporation has lower insurance expense than it would have had had the
Merger not occurred, Pre-Tax Income will be computed using the
insurance expense E/C would have incurred if the Merger had not
occurred.
2. Pre-Tax Income will be computed for the business conducted by E/C
at the Effective Time considered as a discrete business unit. If any portion of
such business is transferred to a different entity, such portion will be
considered a part of the Surviving Entity for purposes of this computation.
3. Any applicable state tax expense will not be added back under
clause (b) of the introductory paragraph of these Standards.
4. Before the Surviving Corporation undertakes any new line of
business (including any line of business transferred to the
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Surviving Corporation by LZB or another subsidiary), and before the Surviving
Corporation and LZB or any other subsidiary engage in any inter-company
business, the impact of such business on the computation of Pre-Tax Income
shall be agreed upon pursuant to paragraph 6 below.
5. Any payments, reserves taken, or accruals resulting from or
relating to any breach by E/C of any covenant contained in the Reorganization
Agreement, the inaccuracy of any warranty of E/C contained in the
Reorganization Agreement, or any liabilities of E/C existing at the Effective
Time (including any contingent and/or unliquidated liabilities) and not
reflected in its financial statements or the disclosure schedule delivered by
E/C pursuant to the Reorganization Agreement shall be treated as expenses for
purposes of computing Pre-Tax Income.
6. In the event of any dispute concerning such computations, the chief
executive officer of the Surviving Corporation (if such person was an E/C
shareholder at the Effective Time, and otherwise another former E/C shareholder
designated by the holders of a majority of the E/C shares at the Effective
Time) and the chief financial officer of LZB will endeavor in good faith to
resolve the same. If such persons are unable to resolve such dispute, they will
select a neutral firm of independent certified public accountants and submit
the dispute to such firm, and the decision of such firm will be final and
binding on all parties.
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Exhibit B to Plan of Merger
ELECTION PROCEDURES
1. When E/C mails the Proxy Statement/Prospectus (as defined in the
Reorganization Agreement) to its shareholders, it shall at the same time mail
to each shareholder an election form in the form attached hereto as Attachment
1 or in such other form as E/C and LZB may agree upon (an "Election Form"). An
Election Form can only be filed with respect to all shares of E/C Stock held by
a shareholder, and any such election shall have been properly made only if LZB
shall have received an Election Form properly completed and signed in
accordance with the instructions prior to the commencement of the Meeting (the
"Election Deadline"), accompanied by certificates for the shares of E/C Stock
to which such Election Form relates. Any holder of E/C Stock who fails to file
an Election Form with LZB in the manner and prior to the Election Deadline
shall be deemed to have elected to receive cash as provided in the Plan of
Merger.
2. Any Election Form may be revoked by an E/C shareholder only by
written notice received by LZB prior to the Election Deadline.
3. Each Election Form shall be conditioned upon acceptance in
accordance with the following provisions:
(a) In connection with the payment of Initial Merger Consideration:
(1) In the event the aggregate principal amount of LZB Notes
which would be issuable as a result of due and proper Election Forms
filed with LZB would exceed the Note Limitation, then LZB shall reduce
the aggregate number of shares of E/C Stock with respect to which the
Initial Merger Consideration is to consist of LZB Notes from the
number previously determined (by specification in the Election Forms)
to the largest number as to which it is possible for the Initial
Merger Consideration to consist of LZB Notes without exceeding the
Note Limitation. Such reduction shall be applied pro rata (as nearly
as possible) among all shares of E/C Stock as to which the holders
thereof elected to receive LZB Notes. With respect to each share of
E/C Stock affected by such reduction, cash shall be allocated as
Initial Merger Consideration (instead of LZB Notes) in the same amount
as if the holder of such share of E/C Stock had elected to receive
cash with respect thereto.
(2) In the event the sum of the aggregate principal amount of
LZB Notes which would be issuable and the aggregate amount of cash
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which would be payable as a result of due and proper Election
Forms filed with LZB would exceed the Total Non-Share Limitation
(computed without regard to additional consideration which may
become payable under the Performance Units), then LZB shall reduce
the aggregate number of shares of E/C Stock with respect to which the
Initial Merger Consideration is to consist of cash from the number
previously determined (by specification in the Election Forms, by
failures to file due and proper Election Forms, and by any allocations
under Section 3(a)(1) of these election procedures) to the largest
number as to which it is possible for the Initial Merger Consideration
to consist of cash without exceeding the Total Non-Share Limitation.
Such reduction shall be applied pro rata (as nearly as possible) among
all shares of E/C Stock as to which the Initial Merger Consideration
otherwise (by specification in the Election Forms, by failures to file
due and proper Election Forms, and by any allocations under Section
3(a)(1) of these election procedures) would have consisted of cash.
With respect to each share of E/C Stock affected by such reduction,
LZB Common Stock shall be allocated as Initial Merger Consideration
(instead of cash) in the same amount as if the holder of such share of
E/C Stock had elected to receive LZB Common Stock with respect
thereto.
(b) In connection with each of the two scheduled payments of
consideration in satisfaction of Performance Units (each a "Performance Unit
Payment"):
In the event the sum of the aggregate number of shares of
LZB Common Stock which would be issuable in connection with such
Performance Unit Payment, the aggregate number of shares of LZB Common
Stock issued as Initial Merger Consideration, and (in the case of the
second Performance Unit Payment) the aggregate number of shares of LZB
Common Stock issued in connection with the first Performance Unit
Payment would exceed the Total Share Limitation, the Performance Unit
Share Limitation, or both, then the aggregate amount of such
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Performance Unit Payment shall be reduced (and the 1996
Performance Unit Amount or the 1997 Performance Unit Amount,
as the case may be, shall also be deemed to have been
proportionately reduced) to the largest amount which may be paid
without exceeding the Total Share Limitation and without exceeding
the Performance Unit Share Limitation. Such reduction shall
be applied pro rata (as nearly as possible) among all Performance
Units, and no other consideration shall be allocated to the
Performance Units in respect of any such reduction.
4. LZB shall have discretion to determine whether or not elections
have been properly made or revoked and when elections and revocations were
received by it. If LZB determines that any election was not properly or timely
made or that any election has been revoked and not replaced with another valid
Election Form, the shares subject to such election shall be treated by LZB as
shares for which no election was made. LZB may make such changes in the
procedures set forth herein for the implementation of the elections provided
for as shall be necessary to fully effect such elections.
5. If the Merger is not consummated for any reason, any certificate or
certificates for shares of E/C Stock which have been deposited with LZB in
connection with these election procedures shall be promptly returned to the
person submitting the same to LZB.
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Attachment 1 to Election Procedures
ELECTION FORM
If the merger (the "Merger") of England/Corsair, Inc. ("E/C"), a
Tennessee corporation, with and into LZB Acquisition, Inc. ("LZB Acquisition"),
a Michigan corporation and a wholly owned subsidiary of La-Z-Boy Chair Company
("LZB"), a Michigan corporation, pursuant to the Amended and Restated
Reorganization Agreement and the Amended and Restated Plan of Merger (the "Plan
of Merger"), both dated as of January 13, 1995, by and among said parties,
becomes effective, then the undersigned shareholder of E/C hereby elects the
form(s) of Initial Merger Consideration set forth below with respect to the
number(s) of shares set forth below, respectively, of E/C's Stock (of
either class) owned by the undersigned shareholder:
No. of Shares of
Form of Initial Merger Consideration E/C Stock
------------------------------------ -----------------
La-Z-Boy Chair Company Common
Stock, $1.00 par value ________ shares
La-Z-Boy Chair Company 8% Unsecured
Promissory Notes Due 1999 ________ shares
(Four annual principal and interest
payments)
Cash ________ shares
===============
Total shares of E/C Stock
(of either class) owned by the
undersigned shareholder ________ shares
Any Election Form previously executed by the undersigned is hereby
revoked. The undersigned understands that the elections set forth herein
cannot be revoked after the commencement of the meeting of E/C shareholders at
which approval of the Merger is to be considered.
Dated: ___________, 1995 ____________________________________
Signature
____________________________________
Signature if held jointly
[Please sign exactly as name appears on stock certificate. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title as such.]
(At least 50% of the total E/C Stock must be elected to be converted to
La-Z-Boy Chair Company Common Stock).
<PAGE>
ANNEX C
CHAPTER 23 OF THE
TENNESSEE BUSINESS CORPORATION ACT
48-23-101. DEFINITIONS. (1) "Beneficial shareholder" means the person
who is a beneficial owner of shares held by a nominee as the record
shareholder;
(2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer;
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 48-23-102 and who exercises that right when and
in the manner required by section 48-23-201- -48-23-209;
(4) "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporation action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action;
(5) "Interest" means interest from the effective date of the corporate
action that gave rise to the shareholder's right to dissent until the date of
payment, at the average auction rate paid on United States treasury bills with
a maturity of six (6) months (or the closest maturity thereto) as of the
auction date for such treasury bills closest to such effective date;
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation; and
(7) "Shareholder" means the record shareholder or the beneficial
shareholder. [Acts 1986, ch. 887, section 13.01.]
48-23-102. RIGHT TO DISSENT. (a) A shareholder is entitled to dissent
from, and obtain payment of the fair value of his shares in the event of, any
of the following corporation actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If shareholder approval is required for the merger by section
48-21-103 or the charter and the shareholder is entitled to vote on the
merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under section 48-21-104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the shareholder
is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all
of the net proceeds of the sale will be distributed to the shareholders within
one (1) year after the date of sale;
(4) An amendment of the charter that materially and adversely affects
rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights; or
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share, if the fractional share is to be acquired for cash
under section 48-16-104; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the charter, bylaws, or a resolution of the board of directors provides
that voting or nonvoting shareholders are entitled to dissent and obtain
payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this chapter may not challenge the corporation action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
(c) Notwithstanding the provisions of subsection (a), no shareholder
may dissent as to any shares of a security which, as of the date of the
effectuation of the transaction which would otherwise give rise to dissenters'
rights, is listed on an exchange registered under section 6 of the Securities
Exchange Act of 1934, as amended, or is a "national market system security," as
defined in rules promulgated pursuant to the Securities Exchange Act of 1934,
as amended. [Acts 1986, ch. 887, section 13.02.]
48-23-103. DISSENT BY NOMINEES AND BENEFICIAL OWNERS. (a) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one (1) person and notifies the corporation in
writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this subsection are
determined as if the shares as to which he dissents and his other shares were
registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
of any one (1) or more classes held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of the same class of which he
is the beneficial shareholder or over which he has power to direct the vote.
[Acts 1986, ch. 887, section 13.03.]
48-23-201. Notice of dissenters' rights. (a) If proposed corporate
action creating dissenters' rights under section 48-23-102 is submitted to a
vote at a shareholders' meeting, the meeting notice must state that
shareholders are or may be entitled to assert dissenters' rights under this
chapter and accompanied by a copy of this chapter.
(b) If corporate action creating dissenters' rights under section
48-23-102 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in section
48-23-203.
(c) A corporation's failure to give notice pursuant to this section
will not invalidate the corporate action. [Acts 1986, ch. 887, section 13.20.]
48-23-202. NOTICE OF INTENT TO DEMAND PAYMENT. (a) If proposed
corporate action creating dissenters' rights under section 48-23-102 is
submitted to a vote at a shareholders' meeting, a shareholder who wishes to
assert dissenters' rights:
(1) Must deliver to the corporation, before the vote is taken, written
notice of his intent to demand payment for his shares if the proposed action is
effectuated; and
(2) Must not vote his shares in favor of the proposed action. No such
written notice of intent to demand payment is required of any shareholder to
whom the corporation failed to provide the notice required by section
48-23-201.
(b) A shareholder who does not satisfy the requirements of subsection
(a) is not entitled to payment for his shares under this chapter. [Acts 1986,
ch, 887, section 13.21.]
48-23-203. DISSENTERS' NOTICE. (a) If proposed corporate action
creating dissenters' rights under section 48-23-102 is authorized at a
shareholders' meeting, the corporation shall deliver a written dissenters'
notice to all shareholders who satisfied the requirements of section 48-23-202.
(b) The dissenters' notice must be sent no later than ten (10) days
after the corporate action was authorized by the shareholders or effectuated,
whichever is the first to occur, and must;
(1) State where the payment demand must be sent and where and when
certificates for certified shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the principal terms of
the proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he acquired beneficial ownership of
the shares before that date;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than one (1) nor more than two (2) months
after the date the subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this chapter if the corporation has not
previously sent a copy of this chapter to the shareholder pursuant to section
48-23-201. [Acts 1986, ch. 88887, section 13.22.]
48-23-204. DUTY TO DEMAND PAYMENT. (a) A shareholder sent a dissenters'
notice described in section 48-23-203 must demand payment, certify whether he
acquired beneficial ownership of the shares before the date required to be set
forth in the dissenters' notice pursuant to section 48-23-203(b)(3), and
deposit his certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share
certificates under subsection (a) retains all other rights of a shareholder
until these rights are canceled or modified by the effectuation of the proposed
corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this chapter.
(d) A demand for payment filed by a shareholder may not be withdrawn
unless the corporation with which it was filed, or the surviving corporation,
consents thereto. [Acts 1986, ch. 887, section 13.23.]
48-23-205. SHARE RESTRICTIONS. (a) The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment is
received until the proposed corporate action is effectuated or the restrictions
released under section 48-23-207.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the effectuation of the proposed corporate
action. [Acts 1986, ch. 887, section 13.24.]
48.23-206. PAYMENT. (a) Except as provided in section 48-23-208, as
soon as the proposed corporate action is effectuated, or upon receipt of a
payment demand, whichever is later, the corporation shall pay each dissenter
who complied with section 48-23-204 the amount the corporation estimates to be
the fair value of his shares, plus accrued interest.
(b) The payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any:
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under
section 48-23-209; and
(5) A copy of this chapter if the corporation has not previously sent a
copy of this chapter to the shareholder pursuant to section 48-23-201 or
section 48-23-203. [Acts 1986, ch. 887, section 13.25]
48.23-207. FAILURE TO TAKE ACTION. (a) If the corporation does not
effectuate the proposed action that gave rise to the dissenters' rights within
two (2) months after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates and
release the transfer restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation effectuates the proposed action, it must send a
new dissenters' notice under section 48-23-203 and repeat the payment demand
procedure. [Acts 1986, ch. 887, section 13.26.]
48-23-208. AFTER-ACQUIRED SHARES. (a) A corporation may elect to
withhold payment required by section 48-23-206 from a dissenter unless he was
the beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders
of the principal terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after effectuating the proposed corporate action, it shall
estimate the fair value of the shares, plus accrued interest, and shall pay
this amount to each dissenter who agrees to accept it in full satisfaction of
his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest
was calculated, and a statement of the dissenter's right to demand payment
under section 48-23-209. [Acts 1986, ch. 887, section 13.27.]
48-23-209. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR
OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate of
the fair market value of his shares and amount of interest due, and demand
payment of his estimate (less any payment under section 48-23-206), or reject
the corporation's offer under section 48-23-208 and demand payment of the fair
value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under section 48-23-206
or offered under section 48-23-208 is less than the fair value of his shares or
that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under section 48-23-206
within two (2) months after the date set for demanding payment; or
(3) The corporation, having failed to effectuate the proposed action,
does not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within two (2) months after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing under subsection
(a) within one (1) month after the corporation made or offered payment for his
shares. [Acts 1986, ch. 887, section 13.28.]
48-23-301. COURT ACTION. (a) If a demand for payment under section
48-23-209 remains unsettled, the corporation shall commence a proceeding within
two (2) months after receiving the payment demand and petition the court to
determine the fair value of the shares and accrued interest. If the corporation
does not commence the proceeding within the two-month period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in a court of record
having equity jurisdiction in the county where the corporation's principal
office or, if none in this state, its registered office) is located. If the
corporation is a foreign corporation without a registered office in this state,
it shall commence the proceeding in the county in this state where the
registered office of the domestic corporation merged with or whose shares were
acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not residents
of this state) whose demands remain unsettled, parties to the proceeding as in
an action against their shares and all parties must be served with a copy of
the petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint one (1) or
more persons as appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described in the order
appointing them, or in any amendment to it. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to
judgment:
(1) For the amount, if any, by which the court finds the fair value of
his shares, plus accrued interest, exceeds the amount paid by the corporation;
or
(2) For the fair value, plus accrued interest, of his after-acquired
shares for which the corporation elected to withhold payment under section
48-23-208. [Acts 1986, ch. 887, section 13.30.]
48-23-302. COURT COSTS AND COUNSEL FEES. (a) The court in an appraisal
proceeding commenced under section 48-23-301 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under section 48-23-209.
(b) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of section 48-23-201--48-23-209; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that
the fees for those services should not be assessed against the corporation,
the court may award to the counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefitted. [Act 1986,
ch. 887, section 13.31.]
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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Michigan Business Corporation Act, as amended (the "MBCA"), provides
that a Michigan corporation, such as the registrant, may indemnify any person
who was or is a party or is threatened to be made a party to a threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative and whether formal or informal (a
"Proceeding"), other than a Proceeding by or in the right of the corporation,
by reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust, or other enterprise
(including any employee benefit plan) against expenses (including attorney
fees) and judgments, penalties, fines and amounts paid in settlement actually
and reasonably incurred by him or her in connection with the Proceeding, if the
person acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the corporation or its shareholders,
and with respect to a criminal action or proceeding, if the person had no
reasonable cause to believe his or her conduct was unlawful. The MBCA also
provides that a Michigan corporation may indemnify any person who is or was a
party or is threatened to be made a party to any Proceeding by or in the right
of the corporation by reason of that fact that he or she is or was a director,
officer, employee or agent of the corporation (or, is or was serving at the
request of the corporation, in one of the other capacities described above)
against expenses (including attorney's fees) and amounts paid in settlement
actually and reasonably incurred by the person in connection with the
Proceeding, if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation or its shareholders, except that no indemnification may be made for
a claim, issue, or matter in which the person has been found liable to the
corporation except for any indemnification against expenses that may be ordered
by the court.
Under the MBCA, any indemnification described above, unless ordered by a
court, may be made only as authorized in the specific case upon a determination
(made in one of the ways described in Section 564a(1) of the MBCA) that
indemnification of the pertinent party is proper because he or she has met the
applicable standard of conduct and upon an evaluation of the reasonableness of
expenses and amounts paid in settlement. Section 564b of the MBCA permits a
corporation to pay or reimburse the reasonable expenses incurred by a director,
officer, employee or agent in advance of final disposition of a Proceeding,
only if the person furnishes the corporation with a written affirmation of his
or her good faith belief that he or she has met the applicable standard of
conduct for indemnification and a written undertaking to repay the advance if
it ultimately is determined that he or she did not meet the standard and only
if a determination is made (in one of the ways described in Section 564a(1))
that the facts then known to those making the determination would not preclude
indemnification under the MBCA. Section 565 of the MBCA further provides that
the above-described provisions concerning indemnification and advancement of
expenses are not exclusive of other rights to which a person seeking
indemnification or advancement of expenses may be entitled under a
corporation's articles of incorporation, its bylaws or a contractual
arrangement.
Section 2 of Article IX of the registrant's Articles of Incorporation, as
amended, provides for mandatory indemnification of directors and officers and
permits indemnification of other parties, as follows:
"Section 2. Indemnification. The corporation shall indemnify any of
its directors and officers and may indemnify any of its employees and
agents (in each case including such person's
II-1
heirs, executors, administrators and legal representatives) who are
made or threatened to be made a party to an action, suit or proceeding
(whether civil, criminal, administrative or investigative) by reason of
the fact that such person is or was a director, officer, employee or
agent of the corporation or serves or served at the request of the
corporation as a director, officer, partner, trustee, employee or agent
of another foreign or domestic corporation, partnership, joint venture,
trust or other enterprise, whether for profit or not, to the fullest
extent authorized or permitted under the [Michigan Business Corporation]
Act or other applicable law, as the same presently exist or may hereafter
be amended, but in the case of any such amendment, only to the extent
that such amendment permits the corporation to provide broader
indemnification rights than authorized or permitted before such
amendment. Without limiting the generality of the foregoing, the
following provisions, except to the extent they limit the indemnity which
may be provided pursuant to the foregoing, shall apply:
2.1 -- Indemnification of Directors and Officers: Claims by
Third Parties. The corporation shall to the fullest extent
authorized or permitted by the Act or other applicable law, as the
same presently exist or may hereafter be amended, but, in the case
of any such amendment, only to the extent such amendment permits
the corporation to provide broader indemnification rights than
before such amendment, indemnify a director or officer (the
"Indemnitee") who was or is a party or is threatened to be made a
party to a threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal, other than an action
by or in the right of the corporation, by reason of the fact that
he or she is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation
as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint
venture, trust, or other enterprise, whether for profit or not,
against expenses, including attorneys' fees, judgments, penalties,
fines, and amounts paid in settlement actually and reasonably
incurred by him or her in connection with the action, suit or
proceeding, if the Indemnitee acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best
interests of the corporation or its shareholders, and with respect
to a criminal action or proceeding, if the Indemnitee had no
reasonable cause to believe his or her conduct was unlawful. The
termination of an action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, does not, of itself, create a presumption that the
Indemnitee did not act in good faith and in a manner which he or
she reasonably believed to be in or not opposed to the best
interests of the corporation or its shareholders, and, with respect
to a criminal action or proceeding, has reasonable cause to believe
that his or her conduct was unlawful.
2.2 -- Indemnification of Directors and Officers: Claims
Brought By or In the Right of the Corporation. The corporation
shall, to the fullest extent authorized or permitted by the Act or
other applicable law, as the same presently exist or may hereafter
be amended, but, in the case of any such amendment, only to the
extent such amendment permits the corporation to provide broader
indemnification right than before such amendment, indemnify a
director or officer (the "Indemnitee") who was or is a party to or
is threatened to be made a party to a threatened, pending, or
completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he or
she is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation
as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint
venture, trust, or other enterprise, whether for profit or not,
against expenses, including actual and
II-2
<PAGE>
reasonable attorneys' fees, and amounts paid in settlement
incurred by the Indemnitee in connection with the action or suit,
if the Indemnitee 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 or its shareholders. However,
indemnification shall not be made under this subsection 2.2 for a
claim, issue, or matter in which the Indemnitee has been found
liable to the corporation unless and only to the extent that the
court in which the action or suit was brought has determined upon
application that, despite the adjudication of liability but in view
of all circumstances of the case, the Indemnitee is fairly and
reasonably entitled to indemnification for the expenses which the
court considers proper.
2.3 -- Actions Brought by the Indemnitee. Notwithstanding the
provisions of subsections 2.1 and 2.2, the corporation shall not be
required to indemnify an Indemnitee in connection with an action,
suit, proceeding or claim (or part thereof) brought or made by such
Indemnitee, unless such action, suit, proceeding or claim (or part
thereof): (i) was authorized by the Board of Directors of the
corporation; or (ii) was brought or made to enforce this Section 2
and the Indemnitee has been successful in such action, suit,
proceeding or claim (or part thereof).
2.4 -- Approval of Indemnification. An indemnification under
subsections 2.1 or 2.2 hereof, unless ordered by a court, shall be
made by the corporation only as authorized in the specific case
upon a determination that indemnification of the Indemnitee is
proper in the circumstances because such Indemnitee has met the
applicable standard of conduct set forth in subsections 2.1 or 2.2
as the case may be. This determination shall be made in any of the
following ways:
(a) By a majority vote of a quorum of the Board
consisting of directors who were not parties to the action,
suit, or proceeding.
(b) If the quorum described in subdivision (a) is not
obtainable, then by a majority vote of a committee of
directors who are not parties to the action. The committee
shall consist of not less than three (3) disinterested
directors.
(c) By independent legal counsel in a written opinion.
(d) By the shareholders.
2.5 -- Advancement of Expenses. Expenses incurred in
defending a civil or criminal action, suit, or proceeding described
in subsections 2.1 or 2.2 above shall be paid by the corporation in
advance of the final disposition of the action, suit, or proceeding
upon receipt of an undertaking by or on behalf of the Indemnitee to
repay the expenses if it is ultimately determined that the
Indemnitee is not entitled to be indemnified by the corporation.
The undertaking shall be by unlimited general obligation of the
person on whose behalf advances are made but need not be secured.
2.6 -- Partial Indemnification. If an Indemnitee is entitled
to indemnification under subsections 2.1 or 2.2 for a portion of
expenses including attorneys' fees, judgments, penalties, fines,
and amounts paid in settlement, but not for the total amount
thereof, the corporation shall indemnify the Indemnitee for the
portion of the expenses, judgments, penalties, fines, or amounts
paid in settlement for which the Indemnitee is entitled to be
indemnified.
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<PAGE>
2.7 -- Indemnification of Employees and Agents. Any person
who is not covered by the foregoing provisions of this Section 2
and who is or was an employee or agent of the corporation, or is or
was serving at the request of the corporation as a director,
officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other
enterprise, whether for profit or not, may be indemnified to the
fullest extent authorized or permitted by the Act or other
applicable law, as the same exist or may hereafter be amended, but,
in the case of any such amendment, only to the extent such
amendment permits the corporation to provide broader
indemnification rights than before such amendment, but in any event
only to the extent authorized at any time or from time to time by
the Board of Directors.
2.8 -- Other Rights of Indemnification. The indemnification
or advancement of expenses provided under subsections 2.1 through
2.7 is not exclusive of other rights to which a person seeking
indemnification or advancement of expenses may be entitled under
the Articles of Incorporation or Bylaws, or an agreement. However,
the total amount of expenses advanced or indemnified from all
sources combined shall not exceed the amount of actual expenses
incurred by the person seeking indemnification or advancement of
expenses. The indemnification provided for in subsections 2.1
through 2.7 continues as to a person who ceases to be a director,
officer, employee, or agent and shall inure to the benefit of the
heirs, executors, and administrators of the person.
2.9 -- Definitions. "Other enterprise" shall include employee
benefit plans: "fines" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and "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, the director, officer,
employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith
and in a manner he or she reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan
shall be considered to have acted in a manner "not opposed to the
best interests of the corporation or its shareholders" as referred
to in subsections 2.1 and 2.2
2.10 -- Liability Insurance. The corporation shall have the
power to purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation
as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust, or other
enterprise, whether for profit or not, against any liability
asserted against and incurred by such person in any such capacity
or arising out of such person's status as such, regardless of
whether or not the corporation would have the power to indemnify
such person against such liability under the pertinent provisions
of the Act.
2.11 -- Enforcement. If a claim under this Section 2 is not
paid in full by the corporation within thirty days after a written
claim has been received by the corporation, the claimant may at any
time thereafter bring suit against the corporation to recover the
unpaid amount of the claim, and, if successful in whole or in part,
the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has
been tendered to the corporation) that the claimant has not met the
standards of conduct which makes it permissible under the Act for
the
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<PAGE>
corporation to indemnify the claimant for the amount claimed,
but the burden of providing such defense shall be on the
corporation. Neither the failure of the corporation (including the
Board of Directors, a committee thereof, independent legal counsel,
or its shareholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is
proper in the circumstances because such claimant has met the
applicable standard of conduct set forth in the Act nor an actual
determination by the corporation (including its Board of Directors,
a committee thereof, independent legal counsel or its shareholders)
that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
2.12 -- Contract with the Corporation. The right to
indemnification conferred in this Section 2 shall be deemed to be a
contract right between the corporation and each director or officer
who serves in any such capacity at any time while this Section 2 is
in effect and any repeal or modification of this Section 2 shall
not affect any rights or obligations then existing with respect to
any state of facts then or theretofore existing or any action,
suit, proceeding theretofore or thereafter brought or threatened
based in whole or in part upon any such state of facts.
2.13 -- Application to a Resulting or Surviving Corporation
or Constituent Corporation. The definition for "corporation" found
in Section 569 of the Act, as the same exists or may hereafter be
amended is, and shall be, specifically excluded from application to
this Section 2. The indemnification and other obligations set forth
in this Section 2 of the corporation shall be binding upon any
resulting or surviving corporation after any merger or
consolidation with the corporation. Notwithstanding anything to the
contrary contained herein or in Section 569 of the Act, no person
shall be entitled to the indemnification and other rights set forth
in this Section 2 for acting as a director or officer of another
corporation prior to such other corporation entering into a merger
or consolidation with the corporation.
2.14 -- Severability. Each and every paragraph, sentence,
term and provision of this Section 2 shall be considered severable
in that, in the event that a court finds any paragraph, sentence,
term or provision to be invalid or unenforceable, the validity and
enforceability, operation, or effect of the remaining paragraphs,
sentences, terms or provisions shall not be affected, and this
Section 2 shall be construed in all respects as if such invalid or
unenforceable matter had been omitted."
Section 209(c) of the MBCA provides that the articles of incorporation of
a Michigan business corporation may contain a provision providing that a
director of the corporation is not personally liable to the corporation or its
shareholders for monetary damages for a breach of the director's fiduciary
duty, except that such a provision may not eliminate or limit the liability of
a director for (i) any 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 knowing violation of law; (iii) a
violation of Section 551(1) of the MBCA (relating to unauthorized dividends or
distributions to shareholders and unauthorized loans); or (iv) any transaction
from which the director derived an improper personal benefit. At the 1987
Annual Meeting of registrant's shareholders, the shareholders approved an
amendment to registrant's Articles of Incorporation to include such a
provision, as well as the above-quoted provisions of Section 2, Article IX.
The registrant also has entered into indemnification agreements with its
directors and officers under which the Company is required to maintain
directors' and officers' liability insurance for their benefit or a substitute
for such insurance to the extent reasonably available, or to indemnify them to
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<PAGE>
the full extent of the insurance coverage which otherwise would be provided to
them. These agreements contemplate indemnification broader than that expressly
provided for in the MBCA, in that they contemplate, when certain conditions are
met, indemnification against judgments and fines (as well as settlement costs)
incurred in proceedings brought by or in the right of the Company.
Insurance is maintained on a regular basis (and not specifically in
connection with this offering) against liabilities arising on the part of
directors and officers out of their performance in such capacities or arising
on the part of the registrant out of the foregoing indemnification provisions,
subject to certain exclusions and to the policy limits.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. The following exhibits are filed as part of the registration
statement on Form S-4:
Item 601
Regulation S-K
Exhibit Reference
Number Exhibit Description
(1) Not applicable
(2) Amended and Restated Reorganization Agreement,
dated as of January 13, 1995, among La-Z-Boy Chair
Company, LZB Acquisition Inc. and England/Corsair,
Inc.
A conformed copy of this agreement (with exhibits) is
included as Annex A to the Proxy Statement/Prospectus
which is part of this Registration Statement.
(3)(i)(a)/(4)(a) Articles of Incorporation of registrant, as amended
through August 4, 1987 (filed as an exhibit to
registrant's Form S-8 Registration Statement
(Commission File No. 33-31502) and incorporated
herein by reference).
(3)(i)(b)/(4)(b) Amendment to Articles of Incorporation of registrant,
effective April 24, 1991 (filed as an exhibit to
registrant's Annual Report on Form 10-K for its
fiscal year ended April 25, 1992 (Commission File No.
1-9656) and incorporated herein by reference).
(3)(ii)/(4)(c) Bylaws of registrant, as currently in effect (filed
as an exhibit to registrant's Annual Report on Form
10-K for its fiscal year ended April 25, 1992
(Commission File No. 1-9656 and incorporated herein
by reference).
(4)(d) Form of certificate for Common Stock $1.00 par
value (filed as an exhibit to registrant's Form S-8
Registration Statement (Commission File No. 33-
50318) and incorporated herein by reference).
II-6
<PAGE>
Item 601
Regulation S-K
Exhibit Reference
Number Exhibit Description
(4)(e)* Form of Indenture between La-Z-Boy Chair Company and
Rodney D. England as Designated Representative.
(4)(f) Description of the Performance Units as set forth in
the Amended and Restated Plan of Merger included as
Annex B to the Proxy Statement/Prospectus which
is part of this Registration Statement.
(5) Opinion and consent of Miller, Canfield, Paddock and
Stone, P.L.C.
(6) Not applicable.
(7) Not applicable.
(8) Opinion and consent of Miller, Canfield, Paddock and
Stone, P.L.C.
(9) Not applicable.
(10)(a) La-Z-Boy Chair Company 1993 Performance-Based
Stock plan (filed as Exhibit A to registrant's proxy
statement dated June 25, 1993 (Commission File No.
1-9656) and incorporated herein by reference).
(10)(b) La-Z-Boy Chair Company Restricted Stock Plan for
Non-Employee Directors (filed as Exhibit B to
registrant's proxy statement dated July 6, 1989
(Commission File No. 1-9656 and incorporated herein
by reference).
(10)(c) La-Z-Boy Chair Company Executive Incentive
Compensation Plan Description (filed as
an exhibit to registrant's Current Report on
Form 8-K dated February 6, 1995 (Commission File
No. 1-9656 and incorporated herein by reference).
10(d) La-Z-Boy Chair Company Supplemental Executive
Retirement Plan dated May 1, 1991 (filed as
an exhibit to registrant's Current Report
on Form 8-K dated February 6, 1995 (Commission File
No. 1-9656 and incorporated herein by reference).
(10)(e)(i) La-Z-Boy Chair Company 1986 Restricted Share Plan
(filed as an exhibit to registrant's proxy statement
dated June 26, 1986 (Commission File No. 1-9656 and
incorporated herein by reference).
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<PAGE>
Item 601
Regulation S-K
Exhibit Reference
Number Exhibit Description
(10)(e)(ii) La-Z-Boy Chair Company Amended and Restated
1989 Restricted Share Plan (filed as Exhibit A to
registrant's proxy statement dated July 6, 1989
(Commission File No. 1-9656 and incorporated herein
by reference).
(10)(f) La-Z-Boy Chair Company 1986 Incentive Stock
Option Plan (filed as Exhibit B to registrant's proxy
statement dated June 26, 1986 (Commission File No.
1-9656) and incorporated herein by reference).
(10)(g) Form of Change in Control Agreement, accompanied by
list of employees party thereto (filed as an
exhibit to registrant's Current Report on Form
8-K dated February 6, 1995 (Commission File No.
1-9656) and incorporated herein by reference).
(10)(h) Form of Indemnification Agreement and list of
Registrant's directors who are parties thereto
(filed as an exhibit to Form 8, Amendment
No. 1 dated November 3, 1989 (Commission
File No. 1-9656 and incorporated herein by
reference).
(10)(i) Agreement and Plan of Merger with Kincaid Furniture
Company, Incorporated (filed as Exhibit (c) to
registrant's Schedule 14D-1 dated December 18, 1987
(Commission File No. S-36021) and incorporated herein
by reference).
(10)(j) Revolving Credit and Term Loan Agreement dated as
of April 22, 1988 (filed as an exhibit to
registrant's Form 8, Amendment No. 1 dated November
3, 1989 (Commission File No. 1-9656 and incorporated
herein by reference).
(10)(k) Fixed Rate Term Loan Agreement dated as of April
22, 1988 (filed as an exhibit to registrant's Form 8,
Amendment No. 1 dated November 3, 1989 (Commission
File No. 1-9656 and incorporated herein by
reference).
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<PAGE>
Item 601
Regulation S-K
Exhibit Reference
Number Exhibit Description
(10)(l) La-Z-Boy Chair Company 1979 Key Employee Stock
Option Plan (filed as an exhibit to Form S-8
Registration Statement effective February 15, 1980
(Commission File No. 2-66510) and incorporated herein
by reference).
(11) No statement is required to be filed with respect to
either La-Z-Boy Chair Company or England/Corsair,
Inc. because the computations can be clearly
determined from the materials contained in the
registration statement.
(12)* Computation of Ratio of Earnings to Fixed Charges.
(13) Not applicable.
(14) Not applicable.
(15) Not applicable.
(21)* List of subsidiaries of La-Z-Boy Chair Company.
(23)(a) Consents of Miller, Canfield, Paddock and Stone,
P.L.C. (included in Exhibits (5) and (8)).
(23)(b) Consent of Price Waterhouse LLP.
(23)(c) Consent of BDO Seidman, independent certified
public accountants.
(23)(d) Consent of Mercer Capital Management, Inc.
(24)* Powers of Attorney (contained in signature pages of
the initial filing of the registration statement).
(25) Not applicable.
(26) Not applicable.
(27) Not applicable. This registration statement does
not include financial statements for any fiscal
year or interim period for which financial
statements have not previously been filed.
(28) Not applicable.
________________________________
* Previously filed
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<PAGE>
Item 601
Regulation S-K
Exhibit Reference
Number Exhibit Description
(99) (A) Form of England/Corsair, Inc. Revocable Proxy
(Solicited on Behalf of the Board of Directors of
England/Corsair, Inc. For a Special Meeting
of shareholders to be held
on April 27, 1995)
===============================================================================
(b) Financial Statement Schedules. The following financial statement
schedules are filed as a part of the registration statement on Form S-4.
Schedule
Number Schedule Description
V Property, Plant and Equipment
VI Accumulated Depreciation, Depletior and Amoritization of
Property, Plant and Equipment
VIII Valuation and Qualifying Accounts
X Supplementary Income Statment Information
(c) Information Pursuant to Item 4(b). Not Applicable.
ITEM 22. UNDERTAKINGS.
La-Z-Boy hereby makes the undertakings that follow:
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
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<PAGE>
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described in Item 20 or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of the registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
The undersigned registrant undertakes that every prospectus (i) that is
filed pursuant to the paragraph immediately preceding this paragraph, or (ii)
that purports to meet the requirements of Section 10(a)(3) of the Securities
Act of 1933 and is used in connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and that, for purposes
of determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
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<PAGE>
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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<PAGE>
LA-Z-BOY CHAIR COMPANY AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
(Dollars in thousands)
Foreign
Balance Currency Other
at Additions Trans- Adjust- Balance
Beginning & Reclass- Retire- lation ments at end of
Classification of Period ifications ments Adjustments (1) Period
- -------------- --------- ---------- ------- ----------- ------ --------
Year ended April 30, 1994
Land and land
improvements $6,604 $543 $0 ($30) $0 $7,117
Buildings and
building
fixtures 88,669 4,551 (40) (460) 0 92,720
Machinery and
equipment 73,281 10,209 (237) (282) 0 82,971
Information
systems 10,523 1,736 (2,376) (24) 0 9,859
Other 12,092 446 (686) (63) 0 11,789
-------- ------- -------- ------ ------ --------
Total $191,169 $17,485 ($3,339) ($859) $0 $204,456
======== ======= ======== ====== ====== ========
Year ended April 24, 1993
Land and land
improvements $6,184 $562 ($120) ($22) $0 $6,604
Buildings and
building
fixtures 89,082 2,668 (2,749) (332) 0 88,669
Machinery and
equipment 67,519 7,149 (1,189) (198) 0 73,281
Information
systems 10,212 530 (202) (17) 0 10,523
Other 12,792 1,339 (1,992) (47) 0 12,092
-------- ------- -------- ------ ----- --------
Total $185,789 $12,248 ($6,252) ($616) $0 $191,169
======== ======= ======== ====== ===== ========
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<PAGE>
LA-Z-BOY CHAIR COMPANY AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
(Dollars in thousands)
(continued)
Foreign
Balance Currency Other
at Additions Trans- Adjust- Balance
Beginning & Reclass- Retire- lation ments at end of
Classification of Period ifications ments Adjustments (1) Period
- -------------- --------- ---------- ------- ----------- ------ --------
Year ended April 25, 1992
Land and land
improvements $5,724 $267 ($1) ($11) $205 $6,184
Buildings and
building
fixtures 84,318 2,760 (86) (163) 2,253 89,082
Machinery and
equipment 61,525 6,279 (1,073) (97) 885 67,519
Information
systems 10,393 1,202 (1,360) (23) 0 10,212
Other 11,928 1,679 (1,103) (8) 286 12,792
-------- ------- -------- ------ ------ --------
Total $173,888 $12,187 ($3,623) ($302) $3,629 $185,789
======== ======= ======== ====== ====== ========
NOTE: Land improvements, buildings and building fixtures, machinery and
equipment, information systems and other are depreciated using
primarily accelerated methods over the estimated useful lives of
the assets as follows:
Years
Land improvements 20
Buildings and building fixture 15 to 30
Machinery and equipment 10
Information systems 5
Other 3 to 10
(1): The other adjustments column reflects a non-cash write-up of
assets previously written down in fiscal year 1988. These assets
are physically still in use, therefore $3,639 in installed cost
and $3,361 in accumulated depreciation was added back. The net
book value write-up of $278 was recognized as a credit to
depreciation expense and a debit to accumulated depreciation in
fiscal year 1992 and is not shown in this 10-K but is included in
the cash flow statement.
II-14<PAGE>
LA-Z-BOY CHAIR COMPANY AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
(Dollars in thousands)
Foreign
Balance Currency Other
at Additions Trans- Adjust- Balance
Beginning & Reclass- Retire- lation ments at end of
Classification of Period ifications ments Adjustments (1) Period
- -------------- --------- ---------- ------- ----------- ------ ---------
Year ended April 30, 1994
Land and
improvements $1,570 $209 $0 ($5) $0 $1,774
Buildings and
building
fixtures 35,919 3,903 (4) (146) 0 39,672
Machinery and
equipment 45,295 6,819 (180) (220) 0 51,714
Information
systems 8,986 1,034 (2,323) (22) 0 7,675
Other 8,992 1,065 (655) (58) 0 9,344
-------- ------- -------- ------ ----- --------
Total $100,762 $13,030 ($3,162) ($451) $0 $110,179
======== ======= ======== ====== ===== ========
Year ended April 24, 1993
Land and
improvements $1,495 $191 ($113) ($3) $0 $1,570
Buildings and
building
fixtures 32,917 3,950 (854) (94) 0 35,919
Machinery and
equipment 40,036 6,452 (1,046) (147) 0 45,295
Information
systems 8,065 1,134 (198) (15) 0 8,986
Other 9,836 1,134 (1,941) (37) 0 8,992
------- ------- -------- ------ ----- --------
Total $92,349 $12,861 ($4,152) ($296) $0 $100,762
======= ======= ======== ====== ===== ========
II-15
<PAGE>
LA-Z-BOY CHAIR COMPANY AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
(Dollars in thousands)
(Continued)
Balance Foreign Other
at Additions Trans- Adjust- Balance
Beginning & Reclass- Retire- lation ments at end of
Classification of Period ifications ments Adjustments (1) Period
- -------------- --------- ---------- ------- ----------- ------ -------
Year ended April 25, 1992
Land and land
improvements $1,251 $184 ($1) ($1) $62 $1,495
Buildings and
building
fixtures 26,959 3,918 (48) (40) 2,128 32,917
Machinery and
equipment 33,924 6,235 (935) (65) 877 40,036
Information
systems 7,170 1,971 (1,056) (20) 0 8,065
Other 9,076 1,543 (1,075) (2) 294 9,836
------- ------- -------- ------ ------ --------
Total $78,380 $13,851 ($3,115) ($128) $3,361 $92,349
======= ======= ======== ====== ====== ========
(1) The other adjustments column reflects a non-cash write-up of assets
previously written down in fiscal year 1988. These assets are
physically still in use, therefore $3,639 in installed cost and
$3,361 in accumulated depreciation was added back. The net book
value write-up of $278 was recognized as a credit to depreciation
expense and a debit to accumulated depreciation in fiscal year 1992
and is not shown in this 10-K but is included in the cash flow
statement.
II-16<PAGE>
LA-Z-BOY CHAIR COMPANY
FINANCIAL STATEMENT SCHEDULE
LA-Z-BOY CHAIR COMPANY AND SUBSIDIARIES SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Trade accounts
Additions receivable
Balance at charged to "written off" Balance at
beginning costs and net of end of
Description of period expenses recoveries period
<S> <C> <C> <C> <C>
Year ended April 30, 1994:
Allowance for doubtful
accounts and long-term notes $11,670 $7,578 $ 4,454 $14,794
Accrued warranties $ 6,250 $ 400 $ 6,650
Year ended April 24, 1993:
Allowance for doubtful
accounts and long-term notes $ 7,217 $7,891 $ 3,438 $11,670
Accrued warranties $ 5,950 $ 300 $ 6,250
Year ended April 25, 1992:
Allowance for doubtful
accounts receivable $11,351 $9,271 $13,397 $ 7,217
Accrued warranties $ 5,650 $ 300 $ 5,950
</TABLE>
II-17
<PAGE>
LA-Z-BOY CHAIR COMPANY AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
(Dollars in thousands)
Charged to Costs
and Expenses
----------------
Year ended April 30, 1994
Maintenance and repairs $18,990
Advertising costs $19,558
Year ended April 24, 1993
Maintenance and repairs $16,360
Advertising costs $19,558
Year ended April 25, 1992
Maintenance and repairs $13,203
Advertising costs $19,041
II-18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this amendment no. 2 to the registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Monroe, State of Michigan, on the 17th day of
April 1995.
LA-Z-BOY CHAIR COMPANY
a Michigan corporation
By /s/ Gene M. Hardy
Name: Gene M. Hardy
Title: Secretary and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
amendment no. 2 to the registration statement has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
* Chairman and President April 17, 1995
Charles T. Knabusch and Chief Executive Officer
* Vice President Finance April 17, 1995
F. H. Jackson (principal financial
officer) and Director
/s/ Gene M. Hardy Secretary and Treasurer April 17, 1995
Gene M. Hardy (principal accounting officer)
and Director
* Director April 17, 1995
Warren W. Gruber
</TABLE>
II-19
<PAGE>
<TABLE>
<S> <C> <C>
* Director April 17, 1995
David K. Hehl
_____________________ Director
James W. Johnston
* Director April 17, 1995
Rocque E. Lipford
* Director April 17, 1995
Patrick H. Norton
____________________ Vice Chairman,
Edwin J. Shoemaker Executive Vice President
of Engineering and Director
* Director April 17, 1995
Lorne G. Stevens
* Director April 17, 1995
John F. Weaver
___________________________
* By:/s/ Gene M. Hardy
______________________
Gene M. Hardy
Attorney in Fact
</TABLE>
II-20
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
(5) Opinion and consent of Miller, Canfield, Paddock
and Stone, P.L.C.
(8) Opinion and consent of Miller, Canfield, Paddock
and Stone, P.L.C.
(23)(b) Consent of Price Waterhouse LLP.
(23)(c) Consent of BDO Seidman, independent certified
public accountants.
(23) (d) Consent of Mercer Capital Management, Inc.
(99) (A) Form of England/Corsair, Inc. Revocable Proxy
(Solicited on Behalf of the Board of Directors
of England/Corsair, Inc. For a Special Meeting
of shareholders to be held on April 27, 1995)
II-21
<PAGE>
Exhibit (5)
[Letterhead of Miller, Canfield, Paddock and Stone, P.L.C.]
April 17, 1995
La-Z-Boy Chair Company
1284 North Telegraph Road
Monroe, Michigan 48161
Gentlemen:
This opinion relates to the registration statement on Form S-4,
filed February 7, 1995 as amended by amendment no. 1 thereto filed March
20, 1995 and amendment no. 2 thereto being filed today (as so amended the
"Registration Statement") by La-Z-Boy Chair Company, a Michigan corporation
("La-Z-Boy"), with the Securities and Exchange Commission for the purpose
of registering under the Securities Act of 1933, as amended (the "Act"),
2,000,000 shares of common stock, $1.00 par value ("Common Stock"),
$10,000,000 principal amount of 8% Unsecured Promissory Notes due 1999
("Notes"), and 297,330 Performance Units ("Performance Units"). The Common
Stock, the Notes, and the Performance Units are to be issued pursuant to an
Amended and Restated Plan of Merger dated as of January 13, 1995 (the "Plan
of Merger") among England/Corsair, Inc., a Tennessee corporation ("E/C"),
La-Z-Boy, and LZB Acquisition, Inc., a Michigan corporation and a wholly
owned subsidiary of La-Z-Boy ("LZB Acquisition"). A portion of the Common
Stock (the "Initial Stock"), the Notes and the Performance Units are to be
issued upon the conversion of the outstanding common stock of E/C (the
"E/C Stock") at
the time of consummation of the merger (the "Merger") of E/C with and into
LZB
Acquisition. Additional Common Stock (the "Performance Unit Stock") may be
issued in settlement of the Performance Units on the terms and at the times
provided in the Plan of Merger. As your counsel, we have examined such
certificates, instruments, and documents and reviewed such questions of law
as we have considered necessary or appropriate for the purposes of this
opinion, and, on the basis of such examination and review, we advise you
that, in our opinion:
1. The Common Stock, the Notes, and the Performance Units have been
validly authorized.
2. When the Registration Statement has become effective and the
Initial Stock, the Notes, and the Performance Units have been issued upon
conversion of the E/C Stock in connection with the consummation of the
Merger in accordance with the terms of the Plan of Merger:
(a) The Initial Stock will be legally issued, fully paid, and
nonassessable; and
(b) The Notes and the Performance Units will be binding
obligations of La-Z-Boy.
3. When the Registration Statement has become effective, if and when
Performance Unit Stock is issued in settlement of the Performance Units in
accordance with the terms of the Plan of Merger, the Performance Unit Stock
will be legally issued, fully paid, and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" and in the Prospectus/Proxy Statement forming a part of the
Registration Statement. In giving this consent, we do not thereby admit
that we are within the category of persons whose consent is required under
Section 7 of the Act or the rules and regulations of the Securities and
Exchange Commission.
Very truly yours,
Miller, Canfield, Paddock and Stone, P.L.C.
Exhibit (8)
Draft 4/6/95
[MILLER, CANFIELD, PADDOCK AND STONE, P.L.C. LETTERHEAD]
[Form of Miller, Canfield, Paddock and Stone
Tax Opinion to Be Delivered at the Closing
Only If Certain Conditions Are Satisfied,
Certain Representations Are Received
and Each of the Requirements of
Rev. Proc. 84-42 is Satisfied]
________________, 1995
La-Z-Boy Chair Company England/Corsair, Inc.
1284 North Telegraph Road 402 OldKnoxvilleHighway
Monroe, Michigan 48161-3390 New Tazewell, Tennessee 37825
LZB Acquisition Corp.
1284 North Telegraph Road
Monroe, Michigan 48161-3390
Gentlemen:
We have acted as counsel to La-Z-Boy Chair Company, a Michigan
corporation ("La-Z-Boy"), in connection with the contemplated merger of
England/Corsair, Inc., a Tennessee corporation ("E/C"), with and into LZB
Acquisition Corp., a newly-formed Michigan corporation and a wholly-owned
subsidiary of La-Z-Boy ("LZB Acquisition"), pursuant to an Amended and
Restated Reorganization Agreement (the "Reorganization Agreement") and a
related Amended and Restated Plan of Merger (referred to herein as the
"Plan of Merger" and, collectively with the Reorganization Agreement, the
"Merger Agreement"), both dated as of January 13, 1995, among La-Z-Boy, LZB
Acquisition and E/C.
Our opinion is provided solely with respect to certain federal income
tax consequences of the merger (the "Merger") of E/C with and into LZB
Acquisition. This opinion is being delivered at your request and pursuant
to Sections 7.2.4 and 7.3.4 of the Reorganization Agreement. All
capitalized terms used herein, unless otherwise specified, have the
meanings assigned to them in the Merger Agreement.
Factual Assumptions, Representations and Limitations
In rendering our opinion, we have examined and relied upon, and our
opinion is conditioned upon the accuracy and completeness of, the facts,
information, covenants and representations contained in originals or
copies, certified or otherwise identified to our satisfaction, of the
Merger Agreement, the Registration Statement on Form S-4 under the
Securities Act of 1933, as amended, Registration No. 33-57623, as amended
(the "Registration Statement"), filed by La-Z-Boy with respect to the La-Z-
Boy securities to be issued in connection with the Merger and such other
documents as we have deemed necessary or appropriate as a basis for the
opinion set forth below. We also have assumed that the Merger will be
consummated in accordance with the Merger Agreement and that the Merger
will qualify as a merger under applicable state law.
In addition, we have relied upon, and this opinion is expressly
conditioned on the accuracy of the representations contained in the
attached Representation Certificates from E/C, La-Z-Boy and LZB Acquisition
as being true in all material respects as of the date hereof. These
Representation Certificates are attached hereto as Exhibits A and B,
respectively.
Discussion
In order to qualify as a tax-free reorganization, a transaction must
satisfy certain statutory requirements set forth in the Internal Revenue
Code of 1986, as amended (the "Code"), and several judicially-created
requirements which have been developed through court rulings and Internal
Revenue Service ("IRS") interpretations. Based upon our review of the
representations and the documentation concerning the proposed Merger, we
believe that these statutory and judicial requirements will be satisfied.
It is well established that in order for the Merger to be treated as a
tax-free reorganization under Code Section 368, the "continuity of
shareholder interest" requirement must be satisfied. The purpose of this
requirement is to ensure that the shareholders of the acquired corporation
(E/C) maintain a substantial part of their historic equity investment in
the acquired corporation following the reorganization through holding of
the acquiring corporation's stock. In general, to satisfy the IRS ruling
guidelines applicable to the continuity of shareholder interest
requirement, the E/C shareholders, as a group:
(i) must exchange at least 50% of their E/C Stock solely for
La-Z-Boy Common Stock in the reorganization;
(ii) must have the unrestricted right to maintain ownership of
the La-Z-Boy Common Stock for some period following the
reorganization; and
(iii) either must (a) in fact retain ownership of the La-Z-Boy
Common Stock for some minimum period following the Merger or (b)
demonstrate any early disposition was not pursuant to a plan or
arrangement in place at the time of the Merger.
In addition to the other consideration received at the Effective Time,
shareholders of E/C will be issued a Performance Unit for each share of E/C
Stock surrendered. A Performance Unit entitles an E/C shareholder who
exchanges shares of E/C Stock in the Merger to the contingent right to
receive solely additional shares of La-Z-Boy Common Stock based on the
financial performance of the Surviving Corporation during the two-year
period following the Effective Time.
Generally the IRS will treat contingent stock consideration as not
adversely affecting the tax-free qualification of a merger if the
requirements set forth in Rev. Proc. 84-42, 1984-1 C.B. 521, are satisfied.
These requirements are as follows:
(1) The contingent stock arrangement will settle within five years
after the date of the merger;
(2) There is a valid business purpose for the contingent
consideration arrangement (e.g., the resolution of a dispute
pertaining to the value of the acquired company at the time of
the merger);
(3) The maximum number of shares which may be issued under the
contingent stock arrangement must be expressly stated in the
merger agreement;
(4) At least 50 percent of the maximum number of shares of stock that
may be issued is issued in the initial distribution;
(5) The event that triggers the right to receive additional stock
under the contingent consideration arrangement cannot be within
the control of the acquired corporation's shareholders and cannot
be based on the determination of a reorganization-related federal
income tax liability;
(6) The formula for calculating the amount of stock to be issued or
delivered must be objective and readily ascertainable;
(7) The right to receive additional stock cannot be assignable
(except by operation of law), cannot be evidenced by negotiable
certificates, and must not be readily marketable;
(8) The contingent stock arrangement can be satisfied only with
additional stock; and
(9) The stock issuance cannot be triggered by the payment of
additional tax or a reduction in tax paid as a result of an IRS
audit of the shareholders or corporations involved in the
transaction or related persons.
For purposes of this opinion we are relying on the representation made
to us that the proposed provision for contingent consideration in
connection with the Merger in the form of the Performance Units will
satisfy all of the above guidelines of Rev. Proc. 84-42. Although the
Merger is treated as a tax free reorganization, under current regulations
of the IRS, La-Z-Boy Common Stock issued in settlement of the Performance
Units and regarded by the IRS as issued in connection with the Merger will
be subject to tax treatment as a deferred exchange which will give rise to
imputed taxable interest. The application of the precise rules under which
interest is imputed in this transaction is unclear.
Opinion
Based upon the foregoing, we are of the opinion that under current
law:
(i) the Merger will be treated as a reorganization within the
meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code, and La-
Z-Boy, LZB Acquisition and E/C will each be a party to the
reorganization within the meaning of Section 368(b) of the Code;
(ii) no gain or loss will be recognized by La-Z-Boy, LZB
Acquisition, or E/C as a consequence of the Merger;
(iii) with respect to E/C shareholders who receive solely
La-Z-Boy Common Stock (other than La-Z-Boy Common Stock received
through a Performance Unit) in exchange for their E/C stock, no gain
or loss will be recognized at the Effective Time except for cash
received in lieu of fractional share interests in La-Z-Boy Common
Stock;
(iv) with respect to E/C shareholders who receive La-Z-Boy
Common Stock (other than La-Z-Boy Common Stock received through a
Performance Unit), and a La-Z-Boy Note and/or cash in exchange for
their E/C stock, income, gain or loss which is realized at the
Effective Time under the applicable rules of the Code will be
recognized in accordance with the rules of Code Section 356 not in
excess of the sum of cash received in lieu of fractional shares and
other cash and the issue price (as such term is defined in the Code
and the applicable Treasury Regulations) of the La-Z-Boy Notes
received in the Merger. If the installment method is applicable to
the receipt of a La-Z-Boy Note in the Merger, the E/C shareholder's
recognized gain attributable to the receipt of the La-Z-Boy Note in
the Merger may be deferred under the installment method. In this
regard, we express no opinion on the applicability of the
installment method to the receipt of a La-Z-Boy Note nor on the
specific tax consequences of the receipt of payments of principal
and interest under a La-Z-Boy Note;
(v) with respect to E/C shareholders who receive solely cash
and/or a La-Z-Boy Note and Performance Unit(s) in exchange for their
E/C stock, income, gain or loss which is realized at the Effective
Time under the applicable rules of the Code will be recognized in
accordance with the rules of the Code not in excess of the sum of cash
received and the issue price (as such term is defined in the Code and
the applicable Treasury Regulations) of the La-Z-Boy Notes received in
the Merger. If the installment method is applicable to the receipt of
a La-Z-Boy Note in the Merger, the E/C shareholder's recognized gain
attributable to the receipt of the La-Z-Boy Note in the Merger may be
deferred under the installment method. In this regard, we express no
opinion on the applicability of the installment method to the receipt
of a La-Z-Boy Note nor on the specific tax consequences of the receipt
of payments of principal and interest under a La-Z-Boy Note;
(vi) E/C shareholders who dissent from the Merger and receive
solely cash in exchange for their E/C stock should be treated as
having received a distribution in redemption of their E/C stock and
should be taxed under the rules of Code Section 302. We express no
opinion as to the tax consequences of the application of Code Section
302 to a dissenting E/C shareholder;
(vii) the holding period of the La-Z-Boy Common Stock
received tax free either upon the initial Merger exchange or through a
Performance Unit will include the period during which the E/C stock
exchanged therefor was held, provided that such E/C stock was held as
a capital asset at the Effective time;
(viii) based upon IRS regulations and rulings, the federal
income tax basis of an E/C shareholder's stock which is properly
allocable under Section 358 of the Code to La-Z-Boy Common Stock
received tax free either upon the initial Merger exchange or through a
Performance Unit should be initially allocated to the maximum number
of shares of La-Z-Boy Common Stock that may be received in the Merger,
including shares receivable through the Performance Units, but
excluding any shares (or a portion thereof) that may be treated as
received in payment of the Imputed Interest Amount, as such term is
defined below. Upon final determination of the actual number of La-Z-
Boy Common Stock shares issued, adjustments to basis should be made if
less than the maximum number of shares are actually issued.
With respect to La-Z-Boy Common Stock received by E/C shareholders
under the Performance Units, and in express reliance of the representation
made to us supporting the determination that under the facts and
circumstances such shares have been issued for a valid business purpose
associated with the original Merger, we are of the opinion that:
(ix) the receipt of a Performance Unit at the Effective Time
will not give rise to current federal income tax;
(x) no gain or loss will be recognized by an E/C shareholder
upon the receipt of La-Z-Boy Common Stock under the Performance Units
except for the portion of La-Z-Boy Common Stock treated as interest
income (the "Imputed Interest Amount") under the Code;
(xi) in the absence of specific direction from the
I.R.S, it is reasonable to believe that the Imputed Interest Amount
should equal the excess of (a) the fair market value as of the day
of receipt of the La-Z-Boy Common Stock received under a Performance
Unit, over (b) such fair market value discounted back to the
Effective Time using the discount rate prescribed by the Code and
the Proposed Treasury Regulations.
The parties do not intend to submit a ruling request regarding the
transaction to the National Office of the IRS. The foregoing opinion is
NOT binding upon the IRS.
In rendering our opinion, we have considered the applicable provisions
of the Code, Treasury Regulations and Proposed Treasury Regulations
promulgated thereunder, pertinent judicial authorities, interpretive
rulings of the IRS and such other authorities as we have considered
relevant. It should be noted that statutes, regulations, judicial
decisions and administrative interpretations are subject to change at any
time and, in some circumstances, with retroactive effect. A material
change in the authorities upon which our opinion is based could affect our
conclusions. However, we assume no obligation to revise or supplement this
opinion if any subsequent change were to occur.
Except as set forth above, we express no opinion as to the tax
consequences, whether federal, state, local or foreign, of the Merger, or
of any transactions related thereto. This opinion is solely for your
benefit and is not to be used, circulated, quoted or otherwise referred to
for any purpose without our express written permission. This opinion may
not be relied upon by anyone other than the addressees.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references made to us under the headings
"The Merger and Related Transactions - Certain Federal Income Tax
Consequences" and "Legal Matters" in the Proxy Statement/Prospectus of La-
Z-Boy which forms a part of the Registration Statement. In giving such
consent we do not hereby admit that we are within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules or regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
Miller, Canfield, Paddock and Stone, P.L.C.
<PAGE>
Exhibit A Draft 4/5/95
REPRESENTATION CERTIFICATE
OF
ENGLAND/CORSAIR, INC.
England/Corsair, Inc., a Tennessee corporation ("E/C"), makes the
following representations to Miller, Canfield, Paddock and Stone, P.L.C.
for use by Miller, Canfield, Paddock and Stone, P.L.C. in rendering its
opinion relative to certain of the federal income tax consequences of the
merger (the "Merger") of E/C with and into LZB Acquisition, Inc., a
Michigan corporation ("LZB Acquisition"), in which the E/C shareholders
will receive certain consideration, including shares of common stock of La-
Z-Boy Chair Company, a Michigan corporation ("La-Z-Boy"), in exchange for
their E/C shares. E/C acknowledges and agrees that each of the following
representations constitutes a material representation to be relied upon by
Miller, Canfield, Paddock and Stone, P.L.C. in rendering its opinion, and
any material inaccuracy in any of the following representations may render
the conclusions stated in the opinion of Miller, Canfield, Paddock and
Stone, P.L.C. incorrect.
1. The fair market value of the La-Z-Boy stock and other
consideration received by each E/C shareholder will be approximately equal
to the fair market value of the E/C stock surrendered in the Merger.
2. There is no plan or intention by the shareholders of E/C to sell,
exchange or otherwise dispose of a number of shares of La-Z-Boy stock
received in the Merger that would reduce the E/C shareholders' ownership of
La-Z-Boy stock to a number of shares having a value, as of the date of the
Merger, of less than 50 percent of the value of all of the formerly
outstanding stock of E/C as of the same date. For purposes of this
representation, shares of E/C stock exchanged for cash or other property,
surrendered by dissenters or exchanged for cash in lieu of fractional
shares of La-Z-Boy stock will be treated as outstanding E/C stock on the
date of the Merger. Moreover, shares of E/C stock and shares of La-Z-Boy
stock held by E/C shareholders and otherwise sold, redeemed or disposed of
prior or subsequent to the Merger will be considered in making this
representation.
3. LZB Acquisition will acquire at least 90 percent of the fair
market value of the net assets and at least 70 percent of the fair market
value of the gross assets held by E/C immediately prior to the Merger. For
purposes of this representation, amounts paid by E/C to dissenters, amounts
paid by E/C to shareholders who receive cash or other property, E/C assets
used to pay its reorganization expenses, and all redemptions and
distributions (except for regular, normal dividends) made by E/C
immediately preceding the transfer will be included as assets of E/C held
immediately prior to the Merger.
4. The liabilities of E/C assumed by LZB Acquisition and the
liabilities to which the transferred assets of E/C are subject, if any,
were incurred by E/C in the ordinary course of its business.
5. E/C (or the surviving corporation of the Merger) and the
shareholders of E/C will pay their respective expenses, if any, incurred in
connection with the Merger.
6. There is no intercorporate indebtedness existing between La-Z-Boy
and E/C or between LZB Acquisition and E/C that was issued, acquired or
will be settled at a discount.
7. E/C is not an investment company as defined in
section 368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.
8. E/C is not under the jurisdiction of a court in a title 11 or
similar case within the meaning of section 368(a)(3)(A) of the Internal
Revenue Code.
9. The fair market value of the assets of E/C transferred to LZB
Acquisition will equal or exceed the sum of the liabilities assumed by LZB
Acquisition, plus the amount of liabilities, if any, to which the
transferred assets are subject.
10. At least 50 percent of the fair market value, determined as of
the effective time of the Merger, of all of the consideration received by
E/C shareholders at the effective time of the Merger will be La-Z-Boy
common stock.
11. The contingent consideration in connection with the Merger in the
form of Performance Units will satisfy all of the guidelines of Rev. Proc.
84-42, 1984-1 C.B. 521, are satisfied.
12. The La-Z-Boy Notes will provide for 8% simple interest per annum
on the unpaid principal balance, payable annually, and by their express
terms will be non-transferable and non-assignable.
13. The parties have been unable to agree on the transaction value of
the E/C shares and therefore have provided for the issuance of contingent
shares through a Performnance Unit.
ENGLAND/CORSAIR, INC.
By: ________________________________
Title: ___________________________
Date: ___________________________
<PAGE>
Exhibit B Draft 4/5/95
REPRESENTATION CERTIFICATE
OF
LA-Z-BOY CHAIR COMPANY
AND
LZB ACQUISITION CORP.
La-Z-Boy Chair Company, a Michigan corporation ("La-Z-Boy"), and LZB
Acquisition, Inc., a Michigan corporation ("LZB Acquisition"), make the
following representation to Miller, Canfield, Paddock and Stone, P.L.C. for
use by Miller, Canfield, Paddock and Stone, P.L.C. in rendering its opinion
relative to certain of the federal income tax consequences of the merger
(the "Merger") of England/Corsair, Inc., a Tennessee corporation ("E/C"),
with and into LZB Acquisition, in which the E/C shareholders will receive
certain consideration, including shares of La-Z-Boy common stock, in
exchange for their E/C shares. La-Z-Boy and LZB Acquisition acknowledge
and agree that each of the following representations constitutes a material
representation to be relied upon by Miller, Canfield, Paddock and Stone,
P.L.C. in rendering its opinion, and any material inaccuracy in any of the
following representations may render the conclusions stated in the opinion
of Miller, Canfield, Paddock and Stone, P.L.C. incorrect.
1. The fair market value of the La-Z-Boy stock and other
consideration received by each E/C shareholder will be approximately equal
to the fair market value of the E/C stock surrendered in the Merger.
2. LZB Acquisition will acquire at least 90 percent of the fair
market value of the net assets and at least 70 percent of the fair market
value of the gross assets held by E/C immediately prior to the Merger. For
purposes of this representation, amounts paid by E/C to dissenters, amounts
paid by E/C to shareholders who receive cash or other property, E/C assets
used to pay its reorganization expenses, and all redemptions and
distributions (except for regular, normal dividends) made by E/C
immediately preceding the transfer will be included as assets of E/C held
immediately prior to the Merger.
3. Prior to the Merger, La-Z-Boy will be in control of LZB
Acquisition within the meaning of section 368(c) of the Internal Revenue
Code.
4. Following the Merger, LZB Acquisition will not issue additional
shares of its stock that would result in La-Z-Boy losing control of LZB
Acquisition within the meaning of section 368(c) of the Internal Revenue
Code.
5. La-Z-Boy has no plan or intention to reacquire any of its stock
issued in the Merger.
6. La-Z-Boy has no plan or intention to liquidate LZB Acquisition;
to merge LZB Acquisition with and into another corporation; to sell or
otherwise dispose of the stock of LZB Acquisition; or to cause LZB
Acquisition to sell or otherwise dispose of any of the assets of E/C
acquired in the Merger, except for dispositions made in the ordinary course
of business or transfers described in section 368(a)(2)(C) of the Internal
Revenue Code.
7. Following the Merger, LZB Acquisition will continue the historic
business of E/C or use a significant portion of the E/C's business assets
in a business.
8. La-Z-Boy and LZB Acquisition will pay their respective expenses,
if any, incurred in connection with the Merger, and LZB Acquisition will
not pay any of the expenses of E/C (except to the extent it pays such
expenses in its capacity as the surviving corporation of the Merger) or of
the shareholders of E/C incurred in connection with the Merger.
9. There is no intercorporate indebtedness existing between La-Z-Boy
and E/C or between LZB Acquisition and E/C that was issued, acquired or
will be settled at a discount.
10. The undersigned are not investment companies as defined in
section 368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.
11. No stock of LZB Acquisition will be issued in the Merger.
12. The fair-market value of the assets of E/C transferred to LZB
Acquisition will equal or exceed the sum of the liabilities assumed by LZB
Acquisition, plus the amount of liabilities, if any, to which the
transferred assets are subject.
13. At least 50 percent of the fair market value, determined as of
the effective time of the Merger, of all of the consideration received by
E/C shareholders at the effective time of the Merger will be La-Z-Boy
common stock.
14. The contingent consideration in connection with the Merger in the
form of Performance Units will satisfy all of the guidelines of Rev. Proc.
84-42, 1984-1 C.B. 521, are satisfied.
15. The La-Z-Boy Notes will provide for 8% simple interest per annum
on the unpaid principal balance, payable annually, and by their express
terms will be non-transferable and non-assignable.
16. The parties have been unable to agree on the transaction value of
the E/C shares and therefore have provided for the issuance of contingent
shares through a Performnance Unit.
LA-Z-BOY CHAIR COMPANY
By: _____________________________
Title: ________________________
Date: ________________________
LZB ACQUISITION CORP.
By: _____________________________
Title: ________________________
Date: ________________________
Exhibit (23)(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of
this Registration Statement on Form S-4 of our report dated June 2, 1994
relating to the financial statements of La-Z-Boy Chair Company, which
appears in such Prospectus. We also consent to the application of such
report to the Financial Statement Schedules for the three years ended April
30, 1994 listed under Item 21(b) of this Registration Statement when such
schedules are read in conjunction with the financial statements referred to
in our report. The audits referred to in such report also included these
schedules. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Toledo, Ohio
April 12, 1995
Exhibit (23)(c)
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
England/Corsair, Inc.
Tazewell, Tennessee
We hereby consent to the use in the Prospectus constituting a part of
this
Registration Statement of our report dated August 12, 1994, relating to the
financial statements of England/Corsair, Inc., which is contained in that
Prospectus.
We also consent to the reference to us under the caption "Experts" in
the
Prospectus.
High Point, North Carolina
April 12, 1995 BDO
Seidman
Exhibit (23)(d)
CONSENT OF MERCER CAPITAL MANAGEMENT, INC.
April 3, 1995
We hereby consent to the inclusion in this registration statement on
Form S-4 of our draft report dated June 14, 1994 and to all references to
our firm in the registration statement.
Sincerely yours,
MERCER CAPITAL MANAGEMENT,
INC.
T. Alexander Ivy, CPA, AM
Vice President
Exhibit 99(A)
ENGLAND/CORSAIR, INC.
REVOCABLE PROXY
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ENGLAND/CORSAIR, INC. FOR A SPECIAL MEETING
OF SHAREHOLDERS TO BE HELD ON APRIL 27, 1995)
The undersigned hereby appoints ______________ and ______________, and
either of them with full powers of substitution, as attorneys and proxies
for the undersigned, to represent and vote shares of Common Stock of
England/Corsair, Inc. ("E/C") standing in my name on the books and records
of E/C at the close of business on April 17, 1995 which the undersigned is
entitled to cast at the Special Meeting of Shareholders to be held at 402
Old Knoxville Highway, New Tazewell, Tennessee, on April 27, 1995 at 2:00
p.m., local time, and at any adjournments as follows:
Approval of: (a) the Amended and Restated Reorganization Agreement dated
as of January 13, 1995 (the "Reorganization Agreement") among E/C, La-Z-Boy
Chair Company, a Michigan corporation ("La-Z-Boy"), and LZB Acquisition,
Inc., a newly formed Michigan corporation and a wholly owned subsidiary of
La-Z-Boy ("LZB Acquisition"); (b) the Amended and Restated Plan of Merger
dated as of January 13, 1995 among E/C, La-Z-Boy, and LZB Acquisition (the
"Plan of Merger"); and (c) all of the transactions contemplated by the
Reorganization Agreement and the Plan of Merger, including (without
limitation) the merger of E/C with and into LZB Acquisition (the "Merger").
The transaction contemplated by the Reorganization Agreement, the Plan of
Merger, and certain related instruments and agreements executed, or to be
executed, in connection with the Reorganization Agreement and the Plan of
Merger are intended to result in the acquisition of E/C by La-Z-Boy through
the Merger. LZB Acquisition will be the surviving corporation of the
Merger. Upon consummation of the Merger: (i) E/C will cease to exist as a
separate corporation, and all of the assets and liabilities of E/C will
become assets and liabilities of LZB Acquisition which will continue to be
a wholly owned subsidiary of La-Z-Boy; (ii) the holder of each share of E/C
Stock of either class will receive, at such holder's election, either
3.6519467707 shares of La-Z-Boy's Common Stock, $1.00 par value ("La-Z-Boy
Common Stock"), $109.558403121 principal amount of La-Z-Boy's 8% Unsecured
Promissory Notes Due 1999 ("La-Z-Boy Notes"), or $109.558403121 in cash,
all subject to the terms and limitations described in the Proxy Statement/
Prospectus dated April 17, 1995 and (iii) holders of E/C Stock of either
class will also receive Performance Units, the terms of which are described
in the Proxy Statement/Prospectus
For Against Abstain
NOTE: The Board of Directors is not aware of any other business that may
come before the meeting.
THIS PROXY WILL BE VOTED FOR OF THE PROPOSITION STATED IF NO CHOICE IS MADE
HEREON
Prior to the vote being taken, the Chairman of the Meeting will
announce the amounts of each type of consideration elected by the
shareholders pursuant to the Notices of Election filed with the Secretary.
In the event the elections made by the shareholders result in the Total
Share Limitation, the Total Non-Share Limitation, the Note Limitation or
the Performance Unit Share Limitation (all as defined in the Plan of
Merger) being exceeded: (a) the Chairman of the Meeting will advise those
shareholders present in person of the fact that one or more of such
Limitations has been exceeded and that as a consequence of the allocation
procedures set forth in the Plan of Merger, if the Merger is approved, some
or all of the shareholders will not receive the type of consideration they
elected; (b) the Chairman of the Meeting will announce the amount of each
type of consideration which will be received by each shareholder affected
by the allocation procedures if the Merger is approved; and (c) those
shareholders who are not present at the Meeting in person and who are
affected by the allocation procedures will be provided with the same
information by telephone or facsimile and given the opportunity to confirm
in writing the proxy previously submitted or revoke the previously
submitted proxy and execute a substitute proxy prior to the vote being
taken. If any shareholder who is not present in person and who is affected
by the allocation procedures fails to respond within a reasonable time (as
determined by the Chairman of the Meeting), the Meeting will be adjourned
for 24 hours or such longer period as the Chairman deems appropriate. In
the event any such shareholder does not respond by the time the vote is
taken at the adjourned Meeting, the proxy as previously executed will not
be voted at the Meeting.
Any holder of E/C Common Stock who has delivered a proxy may revoke it any
time before it is voted by attending the Meeting and voting in person at
the Meeting or by giving notice of revocation in writing or submitting a
signed proxy bearing either the same date but delivered at a later time or
a later date to E/C, at the address listed above, Attention: Secretary,
provided such notice or proxy is actually received by E/C before the vote
of shareholders. Should the undersigned be present and elect to vote at
the Meeting or at any adjournment thereof and, after notification to the
Secretary of E/C at the Meeting of the shareholder's decision to terminate
this Proxy, then the power of said attorneys and proxies shall be deemed
terminated and of no further force and effect.
The undersigned acknowledges receipt of a Notice of Special Meeting
called for the 27th day of April, 1995; and the Proxy Statement/Prospectus
dated the 17th day of April, 1995 prior to the execution of this Proxy.
Print Name of Shareholder
Date:
Signature of Shareholder
Print Name of Shareholder
Date:
Signature of Shareholder
(Please sign exactly as your name appears on the envelope in which this
Proxy was delivered. When signing as attorney, executor, administrator,
trustee or guardian, please give your full title. If more than one
trustee, all should sign. If shares are held jointly, each holder should
sign.)
