SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [xx]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[xx] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
LA-Z-BOY INCORPORATED
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[xx] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the off-
setting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the
date of its filing
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
LA-Z-BOY INCORPORATED
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Monroe, Michigan
La-Z-Boy Incorporated June 27, 1997
Notice is hereby given that the annual meeting of shareholders of
La-Z-Boy Incorporated will be held at the La-Z-Boy Incorporated Auditorium,
1314 North Telegraph Road, Monroe, Michigan, on Monday, July 28, 1997, at
11:00 A.M. Eastern Daylight Time for the following purposes:
1) To elect three (3) directors to three-year terms scheduled for
expiration in 2000;
2) to consider and act upon a proposal to approve the La-Z-Boy
Incorporated 1997 Incentive Stock Option Plan;
3) to consider and act upon a proposal to approve the La-Z-Boy
Incorporated 1997 Restricted Share Plan; and
4) to transact such other business as may properly come before the
meeting or any adjournments thereof.
A copy of the Annual Report, containing the financial statements of the
Company for the year ended April 26, 1997, is enclosed herewith.
Only shareholders of record at the close of business on June 20, 1997
will be entitled to notice of, and to vote at, the meeting.
Shareholders, whether planning to attend in person or not, are urged to
date, sign and return the enclosed proxy in the accompanying envelope, to
which no postage need be affixed if mailed in the United States. Even though
you sign and return the proxy, you may vote your shares in person by revoking
the proxy at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Gene M. Hardy, Secretary
Monroe, Michigan
June 27, 1997
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of La-Z-Boy Incorporated ("the Company")
to be used at the annual meeting of shareholders to be held on Monday, July
28, 1997 and at any adjournments thereof. The meeting will be held at 11 A.M.
EDT at the La-Z-Boy Incorporated Auditorium, 1314 North Telegraph Road,
Monroe, Michigan. The Board of Directors knows of no business which will be
presented to the meeting other than the matters referred to in the
accompanying Notice of Annual Meeting. However, if any other matters are
properly presented to the meeting, it is intended that the persons named in
the enclosed form of proxy will vote upon the same and act in accordance with
their judgment. Shares represented by properly executed proxies in the
enclosed form will be voted at the meeting in the manner specified therein.
If no instructions are specified in the proxy, the shares represented thereby
will be voted FOR the election of the director nominees identified in this
Proxy Statement, FOR approval of the La-Z-Boy Incorporated 1997 Incentive
Stock Option Plan as set forth in Exhibit A to this Proxy Statement and FOR
approval of the La-Z-Boy Incorporated 1997 Restricted Share Plan as set forth
in Exhibit B to this Proxy Statement. A proxy may be revoked at any time
insofar as it has not been exercised by executing and returning a later-dated
proxy or by giving notice to the Company in writing or in the open meeting.
The Company's principal executive office is located at 1284 North Telegraph
Road, Monroe, Michigan 48162.
As of June 20, 1997, there were issued and outstanding 17,972,410
common shares, $1.00 par value, of the Company ("common shares") which is the
only class of Company equity securities outstanding. Each common share is
entitled to one vote on each matter to be presented at the meeting. Only
shareholders of record at the close of business on June 20, 1997 will be
entitled to vote at the meeting.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Under rules adopted by the Securities and Exchange Commission ("SEC"),
a person is deemed to be the beneficial owner of the Company's common shares
if he or she has or shares the right to vote the shares or if he or she 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 or she 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 the Company to
beneficially own more than 5% of the Company's common shares as of June 20,
1997, based in each case on data provided by such person.
T A B L E I
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
------------------- -------------------- --------
<S> <C> <C>
Edwin J. Shoemaker
8 Sylvan Drive
Monroe, Michigan 48162 .................. 1,016,838(1) 5.658%
1
Monroe Bank & Trust
Monroe, Michigan 48161 .................. 4,515,282(2) 25.123%
<FN>
- - - ----------------
(1) All of these shares are held in a revocable trust established by
Mr. Shoemaker who is deemed a beneficial owner of the shares due to his power
to revoke the trust.
(2) The shares reported for Monroe Bank & Trust are held in various
revocable and irrevocable trusts of which Monroe Bank & Trust is the trustee
or a co-trustee. In such capacity, Monroe Bank & Trust has sole or shared
investment and/or voting power and accordingly is deemed a beneficial owner
of all of these shares. The reported shares include the shares reported above
for Mr. Shoemaker, since Monroe Bank & Trust is the trustee of his trust.
</TABLE>
Stock Ownership of Directors and Executive Officers
The following table sets forth information as to the common shares
beneficially owned as of June 20, 1997 by each director and by each current
or fiscal 1997 executive officer of the Company, and by all directors and
current executive officers as a group, based upon data provided by the named
individuals and group members.
T A B L E I I
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name Beneficial Ownership of Class
- - - ----- -------------------- --------
<S> <C> <C>
Edwin J. Shoemaker ................1,016,838 (1) 5.658%
Charles T. Knabusch .................779,472 (2) 4.322%
Lorne G. Stevens .....................13,100 .073%
Frederick H. Jackson ................279,459 (3) 1.553%
Gene M. Hardy .......................181,812 (4) 1.012%
Patrick H. Norton ....................77,652 (5) .431%
H. George Levy ........................2,000 .011%
David K. Hehl .........................7,999 (6) .045%
John F. Weaver ......................159,100 (7) .885%
Rocque E. Lipford .....................3,900 (8) .022%
James W. Johnston ...................322,710 (9) 1.800%
Gerald L. Kiser ......................15,517 (10) .086%
Douglas R. Jordan (11) ................----- ----%
All Directors and Executive Officers as a
group (12 persons) ..............2,439,559 (12) 13.574%
<FN>
- - - -----------------
(1) See footnote 1 to Table I.
(2) Includes 62,574 shares subject to options exercisable currently or
within 60 days of the date of this Proxy Statement. Also includes 74,718
shares owned by Mr. Knabusch's wife individually or as a trustee for their
children, as to which Mr. Knabusch disclaims beneficial ownership. In
addition, includes 140,000 shares over which Mr. Knabusch has shared
investment power as a member of the Investment Committee for the Company's
Employees' Profit Sharing Plan (the "Profit Sharing Plan"), as to which
shares he also disclaims beneficial ownership.
2
(3) Includes 26,795 shares subject to options exercisable currently or
within 60 days of the date of this Proxy Statement. Also includes 800 shares
owned by Mr. Jackson's wife, as to which he disclaims beneficial ownership,
and 140,000 shares over which Mr. Jackson has shared investment power as a
member of the Investment Committee for the Profit Sharing Plan, as to which
he also disclaims beneficial ownership.
(4) Includes 7,575 shares subject to options exercisable currently or
within 60 days of the date of this Proxy Statement. Also includes 11,099
shares owned by Mr. Hardy's wife, as to which he disclaims beneficial
ownership, and 140,000 shares over which Mr. Hardy has shared investment
power as a member of the Investment Committee for the Profit Sharing Plan, as
to which he also disclaims beneficial ownership.
(5) Includes 26,795 shares subject to options exercisable currently or
within 60 days of this Proxy Statement. Also includes 7,405 shares owned by
Mr. Norton's wife, as to which he disclaims beneficial ownership.
(6) Includes 1,947 shares owned by Mr. Hehl's wife, as to which he
disclaims beneficial ownership.
(7) Includes 15,600 shares owned by Mr. Weaver's wife, as to which he
disclaims beneficial ownership, and 140,000 shares over which Mr. Weaver has
shared investment power as a member of the Investment Committee for the
Profit Sharing Plan, as to which he also disclaims beneficial ownership.
(8) Includes 800 shares owned by Mr. Lipford's wife, as to which he
disclaims beneficial ownership.
(9) Includes 53,615 shares owned by Mr. Johnston's wife, as to which he
disclaims beneficial ownership.
(10) Includes 7,982 shares subject to options exercisable currently or
within 60 days of this Proxy Statement.
(11) Mr. Jordan is no longer with the Company. See note (8) to the
Summary Compensation Table, below.
(12) Shares reported above for more than one named individual are
included only once.
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's current executive officers and directors, persons who currently own
more than 10% of the Company's common shares and in some cases, persons who
held such positions or such ownership at any time during the Company's most
recently ended fiscal year, to file reports of ownership and changes in
ownership with the SEC and the New York Stock Exchange and to furnish the
Company with all copies of Section 16(a) forms they file. Based solely on its
review of the copies of such forms received by it, and representations from
certain reporting persons that no Forms 5 were required for those persons,
the Company believes that during the fiscal year ended April 26, 1997, all
filing requirements were complied with in a timely fashion.
PROPOSAL 1: ELECTION OF DIRECTORS
The Company'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. This year, three
directors are to be elected, to serve until the Company's annual meeting of
shareholders in 2000 or until their successors are elected and qualified.
3
Pursuant to applicable Michigan corporate law, assuming the presence of
a quorum, directors will be elected at the meeting from among those persons
duly nominated for such positions by a plurality of votes cast by holders of
the common shares who are present in person, or represented by proxy, and
entitled to vote at the meeting. Thus, for this year, those nominees who
receive the highest through third-highest numbers of votes for their election
as directors will be elected, regardless of the number of votes which for any
reason, including abstention, withholding of authority, or broker non-vote,
are not cast for the election of such nominees.
The Board's nominees for election as directors are the three current
directors whose terms are scheduled to expire at the 1997 annual meeting. In
the absence of other instruction, the persons named in the accompanying form
of proxy intend to vote in favor of these three nominees (or, if any such
nominee should become unable or unwilling to serve, which is not presently
anticipated, for such substitute nominee as is designated by the Board). The
tables which follow provide background information concerning each of the
Board's nominees, each other director of the Company whose term of office
will continue beyond the 1997 annual meeting, and each current executive
officer who is not also a director.
<TABLE>
<CAPTION>
NOMINEES FOR DIRECTOR FOR THREE YEAR TERM EXPIRING JULY, 2000
Director Business Experience
Name Age Since and Other Directorships
- - - ---- --- -------- ------------------------
<S> <C> <C> <C>
Lorne G. Stevens.......69 1972 On April 30, 1988, Mr. Stevens
retired from the Company as Vice
President of Manufacturing, a
position he had held for more
than five years.
Patrick H. Norton......75 1981 Mr. Norton has been Senior Vice
President, Sales and Marketing of
the Company for more than five
years.
Frederick H. Jackson...69 1971 Mr. Jackson has been Vice-
President Finance of the Company
for more than five years.
<CAPTION>
DIRECTORS WITH TERMS EXPIRING IN 1999
Director Business Experience
Name Age Since and Other Directorships
- - - ---- --- -------- ------------------------
<S> <C> <C> <C>
Charles T. Knabusch....57 1970 Mr. Knabusch has been Chairman
of the Board and President of
the Company for more than five
years.
John F. Weaver.........80 1971 Mr. Weaver was elected Vice
Chairman of the Board of Monroe
Bank & Trust in April 1997 and
previously was Executive Vice
President and a Director of
Monroe Bank & Trust for more
than five years.
James W. Johnston(1)...58 1991 Mr. Johnston has been a
self-employed financial and
business consultant and private
investor for more than five
years.
H. George Levy, M.D....47 1997 Dr. Levy has been a Doctor of
Otolaryngology for more than
five years. He was appointed a
Director in January 1997 to
fill the remaining term of
former Director Warren W.
Gruber who had resigned for
personal reasons.
4
<CAPTION>
DIRECTORS WITH TERMS EXPIRING IN 1998
Director Business Experience
Name Age Since and Other Directorships
- - - ---- --- -------- ------------------------
<S> <C> <C> <C>
Edwin J. Shoemaker.....90 1941 Mr. Shoemaker has been the
Company's Vice Chairman of the
Board and Executive Vice President
of Engineering for more than five
years.
Gene M. Hardy..........60 1982 Mr. Hardy has been Secretary and
Treasurer of the Company for more
than five years.
David K. Hehl..........50 1977 Mr. Hehl has been a member in the
public accounting firm of Cooley
Hehl Wohlgamuth & Carlton
P.L.L.C. since January 1995 and
previously was a partner of
Cooley Hehl Wohlgamuth & Carlton
for more than five years.
Rocque E. Lipford......58 1979 Mr. Lipford has been a member 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 then
five years.
<CAPTION>
NON-DIRECTOR EXECUTIVE OFFICERS
Business Experience
Name Age and Other Directorships
- - - ---- --- -----------------------
<S> <C> <C>
Gerald L. Kiser ......50 Mr. Kiser was appointed Executive Vice
President and Chief Operating Officer
of the Company on April 16, 1997. From
May 1996 until that appointment, he
served as the Company's Vice
President-Operations. Before that, he
served as its Vice President of
Engineering and Development for one
year and as Senior Vice President of
Operations of Kincaid Furniture
Company for more than five years.
<FN>
- - - ----------------
(1) Mr. James W. Johnston is the son-in-law of Mr. Edwin J. Shoemaker.
</TABLE>
DIRECTORS' MEETINGS AND CERTAIN STANDING COMMITTEES
Edwin J. Shoemaker and Charles T. Knabusch may be deemed to be persons
who are in control of the Company.
During the Company's fiscal year ending April 26, 1997, the Board of
Directors held nine meetings. Each director attended at least 75% of the
total number of Board meetings and at least 75% of the total number of
committee meetings on which he served that were held during that period. All
directors are in regular touch with the Company's affairs. Directors who are
also employed by the Company or any subsidiary ("employee directors") receive
a fee of $300 for each Board meeting attended. All other directors receive an
annual retainer of $15,000 and a fee of $450 for each Board meeting and each
committee or subcommittee meeting attended.
5
In addition, each director who is not an employee director receives an
initial grant of 30-day options on 1,500 of the Company's common shares upon
first election to the Board and a subsequent grant of 30-day options on 200
common shares at the beginning of each fiscal year while he continues as a
director. Such grants are made pursuant to the Company's Restricted Stock
Plan for Non-Employee Directors which was approved by the shareholders. This
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 any director-grantee 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 the Company's employee members of the Board, all as defined in
the plan.
The standing committees of Board of Directors include an Audit
Committee and a Compensation Committee. The Board also maintains a
subcommittee of the Compensation Committee (the "Compensation Subcommittee")
as a standing committee.
The Audit Committee, which held two meetings during fiscal 1997,
currently consists of Mr. Hehl, Chairman, Dr. Levy and Messrs. Weaver,
Stevens and Lipford, none of whom are employee directors. The functions of
the Audit Committee are to recommend to the Board of Directors the firm of
independent accountants to serve the Company each fiscal year, to review the
scope, fees and results of the audit by independent accountants and to review
the adequacy of the Company's system of internal accounting controls and the
scope and results of internal auditing procedures.
The Compensation Committee, which held seven meetings during the fiscal
year, currently consists of Mr. Weaver, Chairman, Dr. Levy and Messrs. Hehl
and Lipford, none of whom are employee directors. The Compensation
Subcommittee, which was first established in September 1996, met twice during
the fiscal year. Its current members are Mr. Hehl and Dr. Levy, both of whom
also are "Non-Employee Directors" as defined in SEC Rule 16b-3 and "outside
directors" as defined in regulations of the Department of the Treasury
promulgated under Section 162(m) of the Internal Revenue Code (the "Code").
Since its establishment, the Compensation Subcommittee has been responsible
for administering the Company's stock-based employee incentive plan,
including the new plans being proposed for shareholder approval at the annual
meeting. The functions of the Compensation Committee include recommending to
the Board of Directors the cash and other remuneration of the officers of the
Company, recommending to the Board of Directors remuneration of the members
of the Board and its committees and subcommittees, and administration of the
Company's cash incentive compensation plans.
The Board of Directors does not have a nominating committee.
Nominations for director are considered by the entire Board.
EXECUTIVE COMPENSATION
The following table sets forth summary information for the Company's
1997 fiscal year and the preceding two fiscal years with respect to the
compensation paid to or earned by its Chief Executive Officer. It also sets
forth summary compensation information with respect to the four other highest
paid
6
individuals who served as an executive officer during fiscal 1997 and
whose total salary and bonus for that year exceeded $100,000.00. The
individuals named in this table hereafter are referred to as the "named
executives".
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
- - - ------------------------------------------------------------------------ ----------------------------------------
Awards Payouts
--------- ----------
Long-
Incentive Term
Stock Incentive
Other Annual Option Plan All Other
Name and Principal Salary(1) Bonus Compensation Grants(3) Payouts(4) Compensation(5)
Position Year $ $ $ # $ $
------------------ ---- --------- ----- ------------ --------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles T. Knabusch 1997 473,371 429,885 91,656(2) 23,800 148,930 107,962
Chairman of the Board, 1996 437,500 150,082 0 22,255 365,333 88,582
President and Chief 1995 398,656 163,921 0 20,232 343,375 75,142
Executive Officer (6)
Frederick H. Jackson 1997 291,496 153,778 0 10,000 63,600 66,951
Vice President Finance 1996 269,620 75,404 0 9,500 156,195 55,017
and Chief Financial Officer 1995 245,573 82,259 0 8,640 148,625 46,836
Patrick H. Norton 1997 291,496 153,778 0 10,000 63,600 67,219
Senior Vice President 1996 269,620 75,404 0 9,500 156,195 54,947
Sales & Marketing 1995 245,573 82,259 0 8,640 148,625 46,819
Gerald L. Kiser 1997 190,469 90,022 0 5,200 17,490 39,053
Executive Vice President and
Chief Operating Officer
Douglas R. Jordan 1997 180,000 85,284 0 5,200 0 27,000
Former Vice President
Organization Development
& Planning (8)
<FN>
- - - -----------------
(1) Includes, where applicable, amounts electively deferred by a named
executive under the Company'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 Incorporated Board of Directors'
meetings.
(2) Amount reported for fiscal 1997 represents a "gross up" on taxes
payable by Mr. Knabusch on the extraordinary bonus discussed below under
"Joint Report on Executive Compensation --- Short Term Incentive Awards and
Other Bonuses."
(3) Grants in 1997 are subject to approval by shareholders at the
Company's 1997 Annual meeting in conjunction with approval of the 1997
Incentive Stock Option Plan. If not approved, such option grants will be
canceled.
(4) Amounts reported for fiscal 1997, fiscal 1996 and fiscal 1995
represent the aggregate closing market price on date of grant of shares of
common stock awarded to the named executives under the Company's 1993
Performance-Based Stock Plan in light of performance goals achieved for the
three-year performance periods ended April 26, 1997, April 27, 1996 and April
29, 1995 respectively.
(5) Totals in this column are comprised of amounts allocated for the
named executives to the Company's Supplemental Executive Retirement Plan
("SERP") and/or its Employees' Profit Sharing
7
Plan, earnings credited to them under the SERP, and the cash value at date of
contribution of Company matching contributions made for their accounts under
the Matched Retirement Savings Plan in the form of Company common shares. Set
forth below is a breakdown of the totals contained in the table for fiscal
1997:
<S> <C>
Amounts allocated to the Supplemental Earnings credited on supplemental
Executive Retirement Plan and/or the retirement balances under the
Employees' Profit Sharing Plan of the Company's Supplemental Executive
Company were as follows: Retirement Plan were as follows:
<CAPTION>
1997 1997
------ ------
<S> <C> <S> <C>
Charles T. Knabusch ......$70,500 Charles T. Knabusch ......$36,108
Frederick H. Jackson ......43,275 Frederick H. Jackson ......22,250
Patrick H. Norton .........43,275 Patrick H. Norton .........22,153
Gerald L. Kiser ...........30,383 Gerald L. Kiser ............7,283
Douglas R. Jordan .........27,000 Douglas R. Jordan ..............0
<CAPTION>
Contributions under the Company's Matched Retirement Savings Plan were as
follows:
<S> <C>
1997
-----
Charles T. Knabusch ................................. $1,354
Frederick H. Jackson ................................ 1,426
Patrick H. Norton ................................... 1,791
Gerald L. Kiser ..................................... 1,387
Douglas R. Jordan ................................... 0
<FN>
(6) With the prior approval of the Compensation Committee, on December
17, 1997, the Company made an unsecured, interest-free loan of $117,336 to
Mr. Knabusch to cover certain taxes related to his exercise of stock options
earlier in fiscal 1997. The initial principal amount of the loan remained
outstanding at the close of the fiscal year.
(7) As permitted by SEC rules, information concerning Mr. Kiser's
compensation for fiscal years 1996 and 1995 are not presented here, because
he did not become an executive officer of the Company until fiscal 1997.
(8) Mr. Jordan first joined the Company on May 1, 1996 and thereafter
held the position identified above until June 13, 1997, when he resigned from
the Company's employ. Until resigning to join the Company, Mr. Jordan was
President of Management Resource Center Inc., a management and compensation
consulting firm. He also was a 50% owner of that firm for a period of time
after joining the Company. As reported below under "Joint Report on Executive
Compensation," Management Resource Center Inc. was one of the consultants
retained by the Company during fiscal 1997 to assist the Compensation
Committee and the Compensation Subcommittee in their respective deliberations
concerning executive compensation. That firm also rendered certain other
consulting services to the Company during the fiscal year. For all consulting
services rendered during fiscal 1997, Management Resource Center Inc. was
paid $61,326 by the Company.
</TABLE>
8
The following table shows all stock options granted to the named
executives during fiscal year 1997 and the potential realizable value of the
grants assuming stock price appreciation rates of 5% and 10% over the
five-year term of the options. Please note that all of the options reported
here were granted under the new plan being submitted for shareholder approval
as Proposal 2 and will be canceled if that plan is not so approved.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at
Assumed Annual Rates of Stock Price
Individual Grants (1) Appreciation for Option Terms ($)(2)
---------------------------------------------------- --------------------------------------------
5% Per Year 10% Per Year
--------------------- --------------------
% of Total
Options Options Granted Exercise or Price Aggregate Price Aggregate
Granted To Employees Base Price Expiration Per Share Value Per Share Value
Name (#) In Fiscal Year ($/SH) Date ($/SH) ($) ($/SH) ($)
---- ------- -------------- ---------- ---------- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles T. Knabusch ... 23,800 15.17 30.75 9/8/01 8.4904 129,012 18.7603 373,617
Frederick H. Jackson .. 10,000 6.37 30.75 9/8/01 8.4904 84,904 18.7603 187,603
Patrick H. Norton ..... 10,000 6.37 30.75 9/8/01 8.4904 84,904 18.7603 187,603
Gerald L. Kiser ....... 5,200 3.31 30.75 9/8/01 8.4904 44,150 18.7602 97,553
Douglas R. Jordan ..... 5,200 3.31 30.75 (3) -- -- -- --
<FN>
- - - ------------------
(1) See discussion of Proposal 2 for other terms of these options.
(2) The 5% and 10% rates of appreciation used in this table are
required by rules of the SEC and are not intended to forecast possible future
actual appreciation, if any, in the Company's stock prices. It is important
to note that options have potential value for a named executive only if the
Company's stock price advances beyond the exercise price shown in the table
during the effective five-year option period. Information concerning Mr.
Jordan's options are omitted, since all of them have now been canceled. See
Note (3) below.
(3) All of Mr. Jordan's options reported in this table automatically
were canceled upon his resignation from the Company on June 13, 1997.
</TABLE>
The following table provides information as to stock options exercised
by each of the named executives in fiscal year 1997 and the value of the
remaining options held by each such executive officer at the Company's
year-end, April 26, 1997:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Value of Unexercised
Number of Securities Underlying Unexercised In-The-Money Options/SARs
Shares Options/SARs at Fiscal Year-End at Fiscal Year-End(2)
Acquired Value ------------------------------------------- -------------------------
On Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
Name # $(1) # $
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Charles T. Knabusch ..... 36,410 309,485 56,954/56,233 228,926/25,796
Frederick H. Jackson .... 4,300 46,225 24,395/23,845 155,986/56,449
Patrick H. Norton ....... 4,300 46,225 24,395/23,845 155,986/56,449
Gerald L. Kiser ......... 1,200 12,600 7,322/10,268 45,040/21,438
Douglas R. Jordan ....... 0 0 0/5,200 0/7,800
<FN>
- - - ----------------
(1) Based on the closing market price of the Company's common shares on
date of exercise, minus the exercise price. An individual, upon exercise of
an option, does not receive cash equal to the amount
9
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 the Company's common shares at
fiscal 1997 year-end ($32.25) minus the exercise price. Due to Mr. Jordan's
resignation from the Company after fiscal year-end, he no longer holds
options on any of the securities reported and valued for him in this table.
</TABLE>
LONG-TERM INCENTIVE COMPENSATION TARGET AWARDS
Under the Company's 1993 Performance-Based Stock Plan, as currently in
effect (the "Performance Plan"), prior to or early in each fiscal year
employees selected by the Board committee or subcommittee then charged with
administering the Performance Plan (the "Administrative Committee") may be
granted contingent awards ("Target Awards") the potential payments on which
("Performance Awards") are linked to achievement by the end of a three-year
cycle consisting of that and the next two Company fiscal years (a
"Performance Cycle") of performance goals established by the Administrative
Committee when the Target Awards are granted. All Performance Awards under
this plan are structured as options to purchase or outright grants of Company
common shares. For each recipient of a Target Award for a given Performance
Cycle, his maximum Performance Award potential, which is awarded after the
end of the cycle if all of performance goals are achieved, is a grant of
shares equal to four times the base number of shares established by the
Administrative Committee with respect to that Target Award; the minimum
potential Performance Award, for achievement of only one performance goal
during the cycle, is a 30-day option to purchase the base number of shares at
50% of their fair market value at date of grant of the Target Award.
Early in fiscal 1997, the Committee (which then was the Compensation
Committee of the Board) granted Target Awards to certain employees including
named executives for the Performance Cycle ending April 24, 1999 (the "1999
cycle"). As has been the case since the first grant of Target Awards under
the Performance Plan, for the 1999 cycle the Compensation Committee
established four uniform financial goals for all Target Award recipients,
each relating to the operating performance of the Company and its
subsidiaries for that cycle. One of these goals relates to sales growth, the
second to earnings before income taxes, the third to return on total capital
and the fourth to international sales growth.
The table which follows provides information concerning the Target
Awards so granted to the named executives. Please note that these Target
Awards also were reported in the Company's 1996 Proxy Statement as part of a
proposal to amend and restate the prior version of the Performance Plan into
its current form.
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
Number of Performance
Performance Period Until
Shares (1) Maturation Threshold Target Maximum
Name # Or Payout #(2) #(3) #(4)
- - - ---- ----------- ------------ --------- ------ -------
<S> <C> <C> <C> <C> <C>
Charles T. Knabusch......3,000 (5) 3,000 6,000 12,000
Frederick H. Jackson.....1,250 (5) 1,250 2,500 5,000
Patrick H. Norton........1,250 (5) 1,250 2,500 5,000
Gerald L. Kiser.......... 650 (5) 650 1,300 2,600
Douglas R. Jordan........ 650 (5) 650 1,300 2,600
10
<FN>
- - - ------------
(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 150% 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 the Company
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. Target Awards reported for Mr. Jordan in this table have
not been canceled.
(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 the Company 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 the three-year period ending April 24, 1999.
</TABLE>
CERTAIN AGREEMENTS
The Company recognizes that establishing and maintaining a strong
management team are essential to protecting and enhancing the interests of
the Company and its shareholders. In order to assure management stability and
the continuity of key management personnel, the Company has entered into
change in control agreements with certain key employees including, among
others, all current executive officers. The employees eligible for change in
control agreements are those selected by the Compensation Committee. These
agreements, which were unanimously approved by the Board of Directors,
provide that if any of such persons is terminated, other than for cause,
disability, death or retirement, within three years after a change in control
of the Company, that person shall be entitled to receive a lump sum severance
payment equal to three times the sum of (i) his annualized salary and (ii)
11
an amount equal to the average bonus paid to the employee in the previous
three years, as well as certain other payments and benefits, including
continuation of employee welfare benefit payments, and reimbursement of
certain legal fees and expenses incurred by such employee in connection with
enforcing such agreement following a change in control. In consideration of
the foregoing, each of such persons agrees to remain in the employ of the
Company during the pendency of any proposal for a change in control of the
Company. The agreements expire December 31, 1997 and are automatically
renewed for additional one-year periods unless either party gives 90 days'
notice that it does not wish to extend the agreement. In the event of a
change in control, the agreements are automatically extended for 36 months.
PERFORMANCE COMPARISON
The following graph provides an indicator of the return for the
Company's last five fiscal years that would have been realized (assuming
reinvestment of dividends) by an investor who invested $100 on April 25, 1992
in each of (i) the New York Stock Exchange Index, (ii) the group of publicly
traded companies that the Company has used as its peer group in prior years
(the "Old Peer Group"), (iii) another group of publicly traded companies that
the Company intends to use as its peer group going forward (the "New Peer
Group"), and (iv) the Company's common shares. Further information concerning
the composition of the Old Peer Group and the New Peer Group is provided
after the graph.
La-Z-Boy Incorporated
Comparison of Total Return to Shareholders
April 25, 1992 through April 26, 1997
[ PERFORMANCE GRAPH ]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
La-Z-Boy Inc........$100.00 $122.23 $149.19 $123.07 $140.85 $154.65
NYSE Market Index....100.00 110.73 118.77 132.92 171.69 171.69
Peer Group (New).....100.00 129.65 131.43 107.50 134.55 170.52
Peer Group (Old).....100.00 119.42 120.91 109.20 126.63 168.21
</TABLE>
12
Composition of Peer Groups
The Old Peer Group consists of the following seven public companies
operating primarily in the residential segment of the furniture industry and
two larger public companies that formerly operated in that segment as well as
other business segments: RESIDENTIAL -- Bassett Furniture, Bush Industries,
DMI Furniture, Flexsteel Industries, LADD Furniture, Pulaski Furniture, and
Rowe Furniture; OTHERS -- MASCO Corporation and Leggett & Platt. Beginning
with the fiscal year ended April 26, 1997, the Company has elected to change
its peer group by dropping four companies and adding four new companies which
more appropriately reflect the residential segment of the furniture industry
wherein the Company primarily operates. The companies in the New Peer Group
are as follows: Bassett Furniture, Bush Industries, Chromcraft Revington
Inc., Ethan Allen Interiors, Flexsteel Industries, Furniture Brands
International, LADD Furniture, Pulaski Furniture, and Stanley Furniture. In
the graph above, the stock performance of each company in the Old Peer Group
and those of each company in the New Peer Group has been weighted according
to its relative stock market capitalization for purposes of arriving at group
averages.
JOINT REPORT ON EXECUTIVE COMPENSATION
The compensation of the Company's Chief Executive Officer. and the
other named executives, as well as that of other senior executives at the
Company and subsidiaries, for many years has been determined by the
Compensation Committee of the Company's Board of Directors (hereafter
referred to in this section of the Proxy Statement as the "Committee"). Until
September 9, 1996, when the Compensation Subcommittee (hereafter referred to
in this section as the "Subcommittee") was established and charged with
administration of the Company's stock-related employee plans in which
executive officers may participate, the Committee also determined all
executive officer compensation for fiscal 1997, and at present the Committee
continues to discharge this function with respect to all such compensation
decisions not assigned to the Subcommittee.
The report in this section is a joint report by the Subcommittee and
the Committee concerning the policies followed and decisions made with
respect to the compensation of executive officers, particularly those named
in the Summary Compensation Table of this Proxy Statement, for fiscal 1997.
Information concerning decisions made by the Subcommittee is provided by the
Subcommittee only; all other information is provided by the Committee.
Compensation Philosophy
The Company's executive compensation programs are premised on the
conviction that the interest of executives should be closely aligned with
those of the Company's shareholders. The members of the Subcommittee and of
the Committee as a whole believe that to further that objective a substantial
portion of the aggregate potential compensation of executive officers should
be directly and materially linked to the Company's operating performance.
Consequently, a significant portion of each executive's total compensation is
placed at risk and linked to the accomplishment of specific results which
will benefit the shareholders in both the short and long term. Since
achievement of performance objectives over time is a primary determinant of
share price, executive compensation is weighted heavily on the basis of
performance and achievement of these goals. Under this performance
orientation:
* Executives are motivated to improve the overall performance and
profitability of the Company by rewarding them when specific,
measurable results have been achieved.
13
* Accountability is further encouraged by incentive awards on the basis
of executives' performance and contribution against defined short and
long term goals.
* In years when corporate performance has been superior, executives
will be well compensated, which will permit the Company to attract
and retain the talent needed to lead and grow its business;
conversely, in years of below average performance, compensation
declines below competitive benchmarks.
* The compensation strategy will support business goals and direction
and specifically link executive and shareholder interests through
equity-based plans linked to the Company's common shares.
* The Company's compensation policy will maximize growth-driven
financial performance, balancing appropriately the short and long
term goals of the Company.
Compensation Plan Generally
For a number of years, the Committee's practice in carrying out its
duties has been to review the executive compensation programs of furniture
manufacturers and other manufacturing companies of similar size whose
executives have similar responsibilities and operations. Included in this
review process are the companies in the peer group then being used by the
Company for stock performance comparison its proxy materials. A regular
feature of this review process also has been analyses of such compensation
data and recommendations presented by a compensation consultant retained by
the Company to assist the Committee to assure itself that the Company's total
compensation program is properly integrated with both the Company's annual
and longer term objectives and is competitive with the compensation programs
of other companies with which the companies must directly compete for
executive talent.
The Committee again engaged in such a review process with respect to
its fiscal 1997 compensation decisions concerning executive officers. For
that fiscal year, both the Old Peer Group and the New Peer Group identified
under "Performance Comparison" were among the companies whose compensation
practices were considered. Data analysis and recommendations initially were
presented by Management Resource Center Inc. ("MRC"), the compensation
consultant that had provided such services to the Committee in prior years,
and the independent consulting firm of Hewitt Associates LLC ("Hewitt") also
provided data analysis and recommendations with respect to compensation
decisions made late in and shortly after fiscal year end. Since membership on
the Subcommittee is drawn solely from Committee members, the Subcommittee
also had the benefit of this review process during fiscal 1997.
The chief components of the Company's executive compensation program
are salary, annual cash incentive bonuses, and long term incentives utilizing
stock-based awards. After the Subcommittee was established, all decisions
concerning stock-based awards for fiscal 1997 were made by it; all other
decisions concerning the fiscal 1997 compensation of executives were made by
the Committee. In making those decisions, both the Committee and the
Subcommittee considered the components identified above as a whole and sought
to balance the total compensation package between the more stable salary
portion and the "at risk" incentive portions so that a substantial percentage
of the total potential compensation of each executive, and particularly that
of the CEO, would be dependent on the achievement of Company long and short
term strategic goals and increases in value of the Company's common shares.
Information concerning other factors bearing on particular components of
fiscal 1997 executive compensation is provided below. Except as otherwise
indicated in this report, the 1997 salary, bonus, and
14
long-term incentive awards to Mr. Knabusch were determined based on the same
policies and after consideration of the same factors as were applied with
respect to the other executive officers of the Company.
Salary
In considering adjustments to the salaries of executive officers for
1997, the Committee reviewed with MRC the results of various surveys of
salaries being paid to executives at other companies (including, where
available, companies in the Old Peer Group and/or the New Peer Group and
other companies considered potential competitors for the services of Company
executives) and a report prepared by MRC assigning a range of salaries for
each executive, based on the survey data and his position with the Company.
The Committee then considered whether the performance of each executive
considered in the context of Company financial results, any changes in the
scope of any executive's responsibilities, or any other special factors
concerning any executive were such as might call for a departure from the
Committee's general practice in recent years, which has been to establish
executive salaries at approximately 90% of the midpoint of the salary range
for their respective positions as reported for the year by MRC.
Based on the foregoing considerations for fiscal 1997, the Compensation
Committee determined uniformly to follow its prior practice and, accordingly,
adjusted the salary of each executive, including Mr. Knabusch, to
approximately 90% of the midpoint for his position as reflected in MRC's
report to the Committee. The salary amounts so established for Mr. Knabusch
and the other executives named in the Summary Compensation Table preceding
this report are provided in that table.
Short-Term Incentive Awards and Other Bonuses
Annually, the Committee establishes short-term performance criteria for
the management incentive plan. Performance criteria include such areas as
growth in revenue and improved earnings. The specific focus and weighting of
the criteria are based on the Committee's assessment of the key short-term
priorities of the Company. The performance criteria are established at the
start of the fiscal year or as shortly thereafter as possible. The target and
maximum award opportunity for each executive is based on competitive data
provided by the compensation consultant. The award paid is based on actual
results compared to the established performance targets. For fiscal 1997, the
maximum award opportunity available for each executive named in the Summary
Compensation Table was 110% of his salary for the CEO, 90% of salary for Mr.
Jackson and Mr. Norton, and 80% of salary for Mr. Kiser and Mr. Jordan. The
performance criteria for fiscal 1997 were improvement in sales revenue and
pretax income. One-third of the award was based on sales revenue and
two-thirds was based on pretax income. This weighting is the result of the
Board's continuing emphasis on improving earnings. For fiscal 1997, the
Company's consolidated sales revenue increased 6% over fiscal 1996, and the
Company's pretax income for fiscal 1997 increased 12% over fiscal 1996. Based
on the sliding scale of performance goals established prior to the start of
the fiscal year, the Company's financial performance resulted in a cash
incentive bonus award of $306,193 to Mr. Knabusch for the fiscal year and,
for each of the other named executives, a cash incentive bonus award equal to
fiscal 1997 total reported for him under "Bonus" in the Summary Compensation
Table. Those incentive bonuses were determined exclusively based on the
Company's performance for the fiscal year using the system described above.
In addition to the cash incentive bonus awarded to Mr. Knabusch for fiscal
1997, during that year the Committee approved a cash payment to him of
$123,692, which also is reported for him as 1997 bonus in the Summary
Compensation Table. This payment was made in order to reimburse Mr. Knabusch
for certain taxes incurred by him in a prior year
15
as a result of option exercises the Company erroneously had informed him were
not taxable and which would not have occurred had he been provided with the
correct information. In connection with its approval of that payment, the
Committee also approved a so-called "tax gross-up" for the additional taxes
Mr. Knabusch would incur due to the payment, which is reported for him under
"Other Annual Compensation" in the Summary Compensation Table.
Long-Term Incentives
The Company and the Compensation Committee have long recognized the
importance of linking executive compensation and value created for
shareholders. Consequently, stock-based awards are an important component of
executive compensation and one which particularly links executive
compensation to the maximization of shareholder values. For fiscal 1997,
awards under the 1997 Incentive Stock Option Plan being submitted for
shareholder approval at the upcoming meeting (see Proposal 2 below), and
awards under the Company's Performance Plan (which was approved by the
shareholders in its current form at last year's annual meeting) both were
used to further these objectives with respect to executive officers. Awards
under the 1997 Restricted Share Plan being submitted for shareholder approval
at the upcoming meeting (see Proposal 3) also were available for this
purpose. With respect to that plan, however, the Subcommittee decided to
follow the same practice the Committee had followed in administering a
predecessor plan, and consistent with that policy determined not to make any
grants under the 1997 Restricted Share Plan to any executive officer or any
other employee eligible to participate in the Performance Plan.
When considering the grant of options to executive officers under the
1997 Incentive Stock Option Plan, the Subcommittee primarily was concerned
with achieving an appropriate balance between such stock-based awards and
their other compensation components for the year. Toward that end, the
Subcommittee relied on survey data provided by MRC and Hewitt concerning the
practices in this area followed by other companies (including companies in
the Old Peer Group and/or the New Peer Group, as well as other potential
competitors for executives) and their recommendations for achieving
comparable allocation results, which were based on that data and their
respective analyses and estimates of the present and potential future value
of the Company's stock-based awards. The Subcommittee also considered the
compensation opportunity that had been afforded executives early in the
fiscal year through the grant of Target Awards under the Performance Plan for
the Performance Cycle ending in 1999 and the availability of the Performance
Plan for subsequent grants of Target Awards to executives. Based on the
factors described above, the Subcommittee determined to grant non-qualified
stock options on 23,800 shares to the CEO and to grant incentive and/or
non-qualified stock options on an aggregate 33,300 common shares to other
named executives. Further information concerning these options, all of which
are subject to shareholder approval of Proposal 2, is provided below in the
discussion of that proposal.
The Performance Awards under the Performance Plan reported as 1997 long
term incentive plan payouts in the Summary Compensation Table were awarded to
named executives after the close of fiscal 1997 for the three-year
Performance Cycle then ended (the "1997 cycle"). As administrator of that
plan when the Target Awards for that cycle were made, the Compensation
Committee had established performance goals for each of those Target Awards.
As new administrator of the Performance Plan, the Subcommittee determined
after the close of fiscal 1997 that two of those goals had been achieved.
16
Accordingly, pursuant to the terms of the Performance Plan, each recipient of
a Target Award for the 1997 cycle (which includes all named executives other
than Mr. Jordan, who was not an employee at the time those awards were
granted) received a 30-day option grant on common shares equal to twice the
base number of shares reflected in his Target Award for the cycle.
The Compensation Committee
John F. Weaver, Chairman
David K. Hehl *
Rocque E. Lipford
H. George Levy, M.D.*
-------------
*Member of the Subcommittee
17
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As indicated above, the current members of the Compensation Committee
are Mr. Hehl, Dr. Levy, and Messrs. Lipford and Weaver, and the current
members of the Compensation Subcommittee are Mr. Hehl and Dr. Levy. Messrs.
Hehl, Lipford, and Weaver served on the Compensation Committee throughout
fiscal 1997; Mr. Hehl also served on the Compensation Subcommittee from its
establishment in September 1996. Dr. Levy was appointed to both bodies in
January 1997. The only other person who served on either body during fiscal
1997 is former Director Warren W. Gruber, who served on both of them until
his resignation from the Board last January.
John F. Weaver is Vice Chairman of Monroe Bank & Trust. Charles T.
Knabusch, Chairman of the Board, President and CEO of the Company is a member
of the Board of Directors of Monroe Bank & 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 Senior Member, provides legal services to the Company
and has done so for the past 17 years.
PROPOSAL 2: APPROVAL OF 1997 INCENTIVE STOCK OPTION PLAN
Introduction
For many years, the Company has maintained a plan under which long-term
options on its common shares from time to time may be granted to employees.
In fiscal 1996, the plan used for this purpose was the Company's 1986
Incentive Stock Option Plan. By its terms, however, the authority to grant
options under that plan ended on May 5, 1996.
In order to retain the flexibility to continue to incorporate long-term
options in the Company's compensation programs, the Board of Directors on
September 9, 1996 adopted a new plan, designated as the La-Z-Boy Incorporated
1997 Incentive Stock Option Plan (the "1997 Option Plan"), subject to
shareholder approval at the upcoming meeting. On the same day, the
Compensation Subcommittee, as administrator of the plan, granted options
under the 1997 Option Plan to the named executives and certain other
employees, which grants also are subject to shareholder approval of the plan
at the meeting.
The full text of the 1997 Option Plan is provided in Exhibit A to this
Proxy Statement. The discussion which follows summarizes features of the
plan, provides information concerning the options heretofore granted, and
also provides information concerning other matters relevant to the proposal
to approve the plan (and therefore, effectively, those options). The summary
information concerning the 1997 Option Plan provided below should be read in
conjunction with Exhibit A, which shareholders are advised to review in its
entirety in connection with their deliberations upon this proposal.
Summary of Principal Plan Features
Administration. By its terms, the 1997 Option Plan must be administered
by a committee or subcommittee of the Company's Board (the "Option Plan
Committee") all of the members of which at any given time must satisfy all
such criteria as are then necessary in order to facilitate exemption of
compensation paid pursuant to the plan from the tax deduction limits imposed
by Section 162(m) of the Internal Revenue Code and also must be Non-Employee
Directors (as that or a comparable term at the time is used in SEC Rule
16b-3). As indicated above, the Compensation Subcommittee currently acts as
the Option Plan Committee.
18
Eligibility. No one other than an employee of the Company or a
subsidiary (as therein defined) is eligible to be granted options under the
1997 Option Plan, and the only employees eligible for such a grant at any
given time are employees who at time of grant are officers of the Company or
a subsidiary or otherwise are determined by the Option Plan Committee to be
key employees. As of June 12, 1997, in addition to the Company's six
executive officers (including the five who also are Company directors), the
Company has 11 other officers, its subsidiaries have 27 other officers, and
the Company and its subsidiaries have 130 other employees whom management
believes might be deemed by the Option Plan Committee also to be key
employees. Eligibility to be granted a plan option does not confer any right
to receive one, however, since all such grants are at the discretion of the
Option Plan Committee.
Types of Awards. The only awards that may be granted under the 1997
Option Plan are options on the Company's common shares. Both options meeting
the requirements of Section 422 of the Internal Revenue Code and related
regulations ("incentive stock options" or "ISOs"), and options which do not
meet those requirements ("nonqualified stock options" or "NQSOs"), may be
granted. The principal difference between these types of options is their
differing treatment for income tax purposes under the Code, which is further
discussed under "Certain Federal Tax Matters" below.
In connection with the grant of any option, the Option Plan Committee
is required to specify whether the option is intended to be an ISO or NQSO,
and the relevant option agreement is to designate the option accordingly.
However, if for any reason an option intended to be an ISO fails to qualify
as such under the Code, whether at the time of grant or subsequently, the
failure to qualify will not invalidate the option; instead, it will be
treated a nonqualified stock option, regardless of its designation in the
option agreement.
Exercise Prices; Expiration Dates. The per share exercise price of any
option intended to be an ISO that is granted under the 1997 Option Plan to an
Over-10% Owner (as therein defined) must be at least equal to 110% of a
common share's grant date Fair Market Value, and the per share exercise price
of any other option granted under the plan may not be less than such Fair
Market Value. For as long as the Company's common shares continue to trade on
the New York Stock Exchange ("NYSE"), Fair Market Value under the plan is
defined in terms of the NYSE closing sale price of a common share on the date
for which value is being determined or, if no common shares traded on that
date, on the latest preceding date on which such trading occurred. On June
12, 1997, the closing sale price for a common share on the NYSE was $35.00.
The expiration date for any ISO granted to an Over-10% Owner must be
the fifth anniversary of its date of grant. The expiration date for each
other plan option must be a date specified by the Option Plan Committee that
is no earlier then the fifth anniversary nor later then the tenth anniversary
of its grant date.
Transfer Restrictions. During the lifetime of the grantee, an option
granted under the 1997 Option Plan may not be sold, assigned, pledged,
hypothecated, or otherwise transferred in any manner, except that the Option
Plan Committee, in its discretion and subject to such conditions as it may
determine to impose, may permit an inter vivos transfer by gift to an
immediate family member of the grantee or to a charitable organization.
Exercisability, Acceleration, and Effect of Employment Termination.
Generally, an option granted under the 1997 Option Plan becomes exercisable
with respect to 25% of the covered shares on each of the first, second,
third, and fourth anniversaries of its grant date, and any installment once
exercisable
19
continues to be exercisable for the remaining term of the option. However, as
provided in Section 6.5 of the plan, in the event of a sale, exchange, or
other disposition of all or substantially all of the total assets of the
Company or all or substantially all of its outstanding common shares, all
plan options then outstanding immediately would become fully exercisable. In
addition, if the employment of the grantee of an outstanding plan option
should terminate under any of the circumstances specified in Section 7.1 of
the plan, his or her option would become fully exercisable and thereafter
would continue to be exercisable until the first anniversary of the
termination date or, if earlier, the option's expiration date. Termination of
employment under any other circumstances automatically would terminate the
option.
Under the terms of the agreements described above under "Executive
Compensation --- Certain Agreements" (to which all of the Company's executive
officers currently are party), an employee party to such an agreement and who
also is a grantee of an outstanding plan option may become entitled to
certain payments from the Company relating to the option should his or her
employment terminate following a change in control.
Payment for Exercised Options; Tax Withholding. To exercise a plan
option, the optionee must tender full payment of the aggregate exercise price
for the number of shares for which it is being exercised. At the optionee's
election, payment may be made in cash, by transferring to the Company
unencumbered shares then owned by the optionee, by directing the Company to
retain some of the shares for which the option is being exercised, or by any
combination of the foregoing, except that the share retention alternative may
not be used for an ISO. The optionee also may use such share transfer or
retention procedures to satisfy tax withholding obligations related to
exercise of a nonqualified stock option and may use share transfer procedures
(but not share retention procedures) to satisfy any tax withholding
obligations that may arise in connection with a so-called "disqualifying
disposition" of shares acquired by exercise of ISO.
Where transferred or retained shares are used to pay for an option
exercise, and where retained shares are used to satisfy tax withholding
obligations, the shares will be valued at their aggregate Fair Market Value
as of the option's exercise date. Where transferred shares are used to
satisfy tax withholding obligations, the shares will be valued at their
aggregate Fair Market Value at the transfer date. Once given, a direction for
retention of shares for either of these purposes will be irrevocable.
Share Limits. Subject to adjustment for "recapitalization events" as
described in Section 8.1 of the 1997 Option Plan and to adjustment as
hereinafter described, the aggregate maximum number of common shares which
may be issued in settlement of plan options is 2,500,000. To the extent an
option expires or is canceled for any reason prior to its exercise, the
shares not acquired by exercise of the option would again become available
for the plan. The aggregate number of available shares also will be increased
by the number of any shares transferred to the Company in payment for
exercise of an option or to satisfy any related tax withholding obligations
and by the number of any shares withheld by the Company at an optionee's
direction for either of those purposes. In addition to the aggregate share
limits described above, the maximum number of shares that may be covered by
plan options granted to any single employee during any single year may not
exceed 75,000, again subject to adjustment pursuant to Section 8.1. The plan
also does not permit any grant of an ISO after September 8, 2006.
Amendments; Plan Duration. By its terms, the 1997 Option Plan may be
terminated, suspended, or amended at any time by action of the Board of
Directors, but no such action by the Board may adversely affect the rights of
a holder of any then-outstanding plan option without the holder's consent.
Shareholder approval of plan amendments is not required by the plan itself or
by applicable Michigan
20
corporate law. However, shareholder approval of certain amendments currently
would be required by NYSE rules, Section 422 of the Code and related
regulations, or regulations promulgated under Section 162(m) of the Code. The
Board's present intention is to seek shareholder approval of an amendment
whenever such approval is required by any of the foregoing.
The plan is intended to be of indefinite duration, and options may be
granted under it at any time, subject only to the share limits described
above.
Plan Options Currently Outstanding
As previously noted, certain options already have been granted under
the 1997 Option Plan to eligible employees, including the named executives,
subject to shareholder approval of the plan at the annual meeting. The table
under "Executive Compensation" headed "Option Grants in Last Fiscal Year"
provides information with respect to the granted options for each of the
named executives. All of those options continue outstanding at present,
except for the options shown for Mr. Jordan, which have been canceled. The
table below provides comparable information, for each of the groups
identified, concerning the granted options that currently remain outstanding.
Except for reported options that were granted to Mr. Knabusch, all of which
are NQSOs, the reported options were granted as ISOs to the greatest extent
consistent with Code Section 422 and the regulations thereunder.
<TABLE>
<CAPTION>
OUTSTANDING GRANTS UNDER 1997 OPTION PLAN
Potential Realizable Value at
Assumed Annual Rates of Stock Price
Grants by Group Appreciation for Option Terms ($)
----------------------------------- --------------------------------------------
5% Per Year 10% Per Year
-------------------- ---------------------
% of
Outstanding
Options Options Exercise or Price Aggregate Price Aggregate
Granted Granted Base Price Expiration Per Share Value Per Share Value
Group (#) To Group ($/SH) Date ($/SH) ($) ($/SH) ($)
----- ------- ----------- ----------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
All Executive Officers ... 51,930 34.42 30.75 9/8/01 8.4904 440,906 18.7603 974,222
All Directors not
Executive Officers ..... 0 0 N.A. N.A. N.A. N.A. N.A. N.A.
All Employees Not
Executive Officers ..... 98,945 65.58 30.75 9/8/01 8.4904 840,083 18.7603 1,856,238
</TABLE>
Due to the nature of the 1997 Option Plan, the aggregate benefits which
any eligible employee or group of employees ultimately may receive under the
plan if it is approved by the shareholders cannot presently be determined.
Certain Federal Tax Matters
Income Tax Differences Between ISOs and NQSOs. Under Federal income tax
law as currently in effect, the grant of an option under the 1997 Option Plan
would not be a taxable event for the grantee or entitle the Company to any
deduction, regardless of the type of option granted. However, subsequent
Federal income tax consequences would differ, depending on whether the option
is a nonqualified stock option or an incentive stock option.
21
If the option is a NQSO, under current law the grantee would recognize
ordinary compensation income upon exercise of the NQSO, in an amount equal to
the difference between the fair market value of the acquired shares on the
date the option is exercised and the aggregate exercise price paid for the
shares. At the same time, subject to the normal Internal Revenue Code
requirement that compensation be reasonable and the special deduction limits
of Section 162(m) of the Code (which are not expected to present a problem
for plan options for the reason discussed below), the Company would become
entitled to a deduction in the same amount.
In contrast, if the option is an ISO and assuming it is exercised
within the time limits permitted by the Code, under current law the grantee
would not recognize any income, and the Company would not be entitled to any
deduction, when the ISO is exercised. In addition, assuming timely exercise,
if the shares acquired by exercise of the ISO are then held for at least two
years from the grant date of the ISO and one year from its exercise date, the
grantee would receive capital gain or loss treatment (rather than
compensation income treatment) on a subsequent disposition of the shares, and
the Company again would not be entitled to any deduction.
However, if an ISO instead is exercised after the time permitted by the
Code, it would cease to be an ISO, and the tax effects of exercise would be
the same as for a nonqualified stock option. Also, if shares acquired by
exercise of an ISO are disposed of too soon, the grantee would recognize
compensation income, rather than receiving capital gain or loss treatment,
upon the disposition. In either of these cases, subject to the Code
requirements for deductions noted above, the Company would be entitled to a
deduction equal to the compensation income of the grantee.
Section 162(m) Considerations. Subject to certain exclusions (including
an exclusion for certain performance-based compensation), Section 162(m) of
the Internal Revenue Code imposes a $1 million-per-executive cap on the
amount a public company (such as the Company) may deduct as compensation
expense for Federal income tax purposes on account of compensation paid in
any tax year beginning after 1993 to executives named in its Summary
Compensation Table for that year. Compensation related to stock options can
qualify as performance-based compensation for Section 162(m) purposes,
provided certain requirements specified in the regulations under Section
162(m) are satisfied. Based on the current Section 162(m) regulations, the
Board of Directors believes that, if the 1997 Option Plan is approved as
proposed, compensation associated with plan options will qualify as
performance-based compensation and therefore will not be subject to Section
162(m)'s deduction limit.
Required Vote and Related Matters
Shareholder approval of the 1997 Option Plan is not required by
Michigan corporate law. However, because Company officers, including officers
who are employee-directors, have been granted options under the plan and will
be eligible to be granted additional options under the plan, shareholder
approval is required by NYSE rules. Shareholder approval also is required in
order for ISOs to be granted under the plan and in order to satisfy the
currently applicable Section 162(m) regulations. Accordingly, the plan has
been adopted by the Board subject to shareholder approval at the 1997 annual
meeting, and all plan options heretofore granted also have been granted
subject to such approval. If the proposal to approve the plan is not carried
at the meeting, all plan options then outstanding automatically will be
canceled, and no further grants will be made under the plan.
The proposal to approve the 1997 Option Plan will be carried if a
majority of the common shares entitled to vote and actually voted upon the
proposal at the annual meeting are voted "for" the proposal,
22
provided that the total number of shares voted for and voted against the
proposal equals a majority of all common shares entitled to vote. For this
purpose, any shares for which an abstention or broker non-vote is registered
will not be considered to have been voted upon the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF
THE 1997 INCENTIVE STOCK OPTION PLAN.
PROPOSAL 3. APPROVAL OF 1997 RESTRICTED SHARE PLAN
Introduction
The Company also for many years has maintained a plan under which
eligible employees from time to time may be granted 30-day rights to purchase
common shares at a discount price, with the shares so purchased being
subject to transfer restrictions and the Company's right to repurchase them
at the same price for a period of time thereafter. The authority to grant
such purchase rights under that plan also ended on May 5, 1996.
Therefore, in order to retain the flexibility to use such a restricted
share program for employee compensation purposes, the Board of Directors on
September 9, 1996 adopted a similar new plan, designated as the La-Z-Boy
Incorporated 1997 Restricted Share Plan (the "Restricted Share Plan"),
subject to shareholder approval at the annual meeting. In addition, as
administrator of the Restricted Share Plan, the Compensation Subcommittee has
taken action such that, if the plan is so approved, certain employees
thereupon automatically will be granted awards under the plan.
The full text of the Restricted Share Plan is provided in Exhibit B to
this Proxy Statement. The discussion which follows summarizes features of the
plan, provides information concerning the awards which will be granted if the
plan is approved, and also provides information concerning other matters
relevant to the proposal to approve the plan (and therefore, effectively,
those awards). The summary information concerning the Restricted Share Plan
provided below should be read in conjunction with Exhibit B, which
shareholders are advised to review in its entirety in connection with their
deliberations upon this proposal.
Summary of Principal Plan Features
Administration. The Restricted Share Plan must be administered by a
committee or subcommittee of the Board comprised solely of Rule 16b-3
Non-Employee Directors (the "Restricted Plan Committee"). The Compensation
Subcommittee currently acts as the Restricted Plan Committee.
Eligibility. Any employee of the Company or a subsidiary (as therein
defined) who, in the judgment of the Restricted Plan Committee, is a key
employee and expected to contribute materially to the Company's future
success is eligible to be granted a right to purchase restricted shares under
the Restricted Share Plan; non-employees are ineligible. Although executive
officers of the Company and other employees eligible to participate in the
Company's Performance Plan are not excluded from participation by the terms
of the Restricted Share Plan, it currently is not expected that such
employees will receive awards under the latter plan while the former
continues in operation.
23
Plan Purchase Rights. A grant under the Restricted Share Plan will
afford the grantee a right, exercisable for 30 days only and subject to such
additional terms and conditions as the Restricted Plan Committee may
determine to impose, to purchase common shares from the Company for cash at a
per share price equal to 25% of a share's Fair Market Value (defined in the
same manner as for the 1997 Option Plan) on the Determination Date for the
award. Normally, the Determination Date for a plan award would be the same as
the award's date of grant. However, for the awards scheduled to be granted at
the annual meeting, the Determination Date is September 9, 1996, provided the
plan is then so approved. The 30-day exercise period for a plan award
normally would commence on or shortly after the grant date. Whenever any
employee granted a right to purchase shares under the Restricted Share Plan
exercises that right he or she will be required to execute an agreement with
the Company detailing his or her rights and obligations concerning those
shares as specified in the plan.
Transfer Restrictions. All shares purchased by an employee under the
Restricted Plan ("restricted shares") will be subject to transfer
restrictions such that none of them may be sold, assigned, pledged,
hypothecated, or otherwise transferred in any manner without the written
consent of the Company authorized by the Board. In addition, for as long as
the restricted shares remain subject to such transfer restrictions, any
common shares or other securities that the owner of the restricted shares may
receive or be entitled to receive due to ownership of the restricted shares,
whether as a result of a stock split or dividend or other recapitalization of
or by the Company or as a result of a statutory share exchange involving
common shares or a merger or consolidation or sale of assets involving the
Company ("related securities"), also will be subject to the same transfer
restrictions.
The transfer restrictions on restricted shares and related securities
normally would continue for a three-year period commencing on the
Determination Date applicable to the purchase right pursuant to which the
restricted shares were purchased. However, if a purchaser of restricted
shares ceases to be an employee during the applicable restriction period due
to his or her death or disability as specified in Section 7.2(a) of the
Restricted Share Plan, or if any of the "change in control" events described
in the first sentence of Section 7.2(c) of the plan were to occur, then the
transfer restrictions would terminate immediately. The same would be true if
a merger, consolidation, share exchange, or asset sale of the type described
in the second sentence of Section 7.2(c) were to occur, unless the
transaction had received director approval as there prescribed. If at least
two years have elapsed since the relevant Determination Date for restricted
shares and the purchaser then ceases to be an employee under the retirement
circumstances specified in Section 7.2(b) of the plan, the transfer
restrictions also would terminate immediately, unless the purchaser is to
remain a director of the Company or be retained as a paid consultant after
his or her retirement or the Restricted Plan Committee otherwise determines
not to allow the restrictions to lapse because doing so would not be in the
best interests of the Company.
Repurchase Rights. Under the terms of the Restricted Share Plan, if a
purchaser of restricted shares ceases to be an employee during the restricted
period applicable to those shares other than under circumstances causing
termination of the transfer restrictions (or which would have caused the
transfer restrictions to terminate if the purchaser had not remained a
director or paid consultant to the Company), the purchaser will be obligated
to sell the restricted shares and any related securities back to the Company
for cash equal to the aggregate price he or she paid for the restricted
shares. Generally, a purchaser of restricted shares continuing as a director
or a paid consultant also would be so obligated if he or she were to resign
that position before the end of the restricted period.
Tax Withholding. Although restricted shares may only be purchased for
cash, the Restricted Share Plan permits a purchaser to elect to satisfy any
tax withholding obligations arising from the grant
24
or exercise of his or her purchase right or from the lapse of transfer
restrictions on the shares by transferring unencumbered common shares to the
Company. Any shares so transferred will be valued at their aggregate Fair
Market Value at the transfer date.
Share Limits. Subject to adjustment for "recapitalization events" as
described in Section 8.2 of the Restricted Share Plan and to adjustment as
hereinafter described, the aggregate maximum number of common shares which
may be made available for purchase under the plan is 250,000. If a purchase
right granted to an employee expires or otherwise terminates without having
been exercised in full, the shares not acquired again will be available for
the plan, as will any shares purchased but subsequently reacquired by the
Company pursuant to its repurchase right. The aggregate number of available
shares will be increased by the number of any common shares transferred to
the Company in satisfaction of tax withholding obligations arising in
connection with plan awards or the lapse of transfer restrictions on
restricted shares.
Amendments; Plan Duration. By its terms, the Restricted Share Plan may
be terminated, suspended, or amended at any time by action of the Board of
Directors, but no such action taken after an employee has executed an
agreement concerning the restricted shares may adversely affect the
employee's rights or obligations under that agreement or with respect to
restricted shares or related securities subject to that agreement without the
employee's written consent. Shareholder approval of plan amendments is not
required by the plan itself or by applicable Michigan corporate law. However,
shareholder approval of certain amendments currently would be required by
NYSE rules. The Board's present intention is to seek shareholder approval of
an amendment whenever such approval is required by those rules.
The plan is intended to be of indefinite duration, and purchase rights
may be granted under it at any time, subject only to the share limits
described above.
Current Restricted Share Purchase Rights Awards
As previously noted, the Compensation Subcommittee already has
determined that if the Restricted Share Plan is approved as proposed, certain
employees immediately and automatically will be granted rights to purchase
restricted shares under the plan. The table below provides information, for
each of the named executives and for the groups identified, concerning the
numbers of restricted shares each would be entitled to purchase pursuant to
such rights. In accordance with the terms of the plan, if it is approved at
the annual meeting the per share exercise price for the reported shares will
be $7.6875 (25% of the NYSE closing sale price for a common share on
September 9, 1996).
25
<TABLE>
<CAPTION>
RESTRICTED SHARE PURCHASE RIGHTS
SCHEDULED FOR AWARD AT ANNUAL MEETING
Name of Executive Number of Restricted Shares
or Identity of Group to be Subject to Purchase Rights
-------------------- --------------------------------
<S> <C>
Charles T. Knabusch ..................... 0
Frederick H. Jackson .................... 0
Patrick H. Norton ....................... 0
Gerald L. Kiser ......................... 0
Douglas R. Jordan ....................... 0
All Executive Officers .................. 0
All Directors Not Executive Officers .... 0
All Employees Not Executive Officers .... 13,065
</TABLE>
Due to the nature of the Restricted Share Plan, the aggregate benefits
which any eligible employee or group of employees ultimately may receive
under the plan if it is approved by the shareholders cannot presently be
determined.
Certain Federal Tax Matters
Under current Federal income tax law, unless an employee purchasing
restricted shares under the Restricted Share Plan makes a timely election
under Section 83(b) of the Code to be taxed at an earlier time, the employee
would not be required to recognize income in respect of the shares until
lapse of the transfer restrictions, at which time the employee would
recognize compensation income equal to the fair market value of the shares at
the time, less what was paid for them. If the employee makes a timely Section
83(b) election, the employee instead would recognize compensation income
equal to the fair market value of unrestricted shares at the time the right
to purchase them was granted, less the price he or she is required to pay to
purchase the restricted shares. In that case, lapse of the transfer
restrictions thereafter would not be a taxable event for the employee, but if
the transfer restrictions have not lapsed and the employee loses the shares
due to termination of employment and exercise of the Company's repurchase
right, he or she will have no right to recover the taxes previously paid.
Generally, subject only to the normal Code requirements that
compensation be reasonable and the special deduction limits of Section 162(m)
of the Code (discussed in more detail in the preceding discussion of Proposal
2), whenever an employee granted the right to purchase restricted shares
under the Restricted Share Plan recognizes compensation income in respect of
the shares (and only then), the Company would be entitled under current
Federal income tax law to a deduction in the same amount. Restricted shares
cannot be excluded from the Section 162(m) deduction limit under the
regulations currently in effect. However, since it currently is not expected
that any awards under the Restricted Share Plan will be made to the highest
level Company personnel, plan awards also are not expected to present
deductibility issues under Section 162(m) to any significant extent.
Required Vote and Related Matters
Shareholder approval of the Restricted Share Plan is not required by
Michigan corporate law. However, shareholder approval is required by NYSE
rules, and the plan therefore has been adopted subject to such approval at
the annual meeting. If the proposal to approve the Restricted Share Plan is
not carried at the meeting, neither the plan nor the restricted share
purchase rights scheduled for award under the plan at the meeting will become
effective.
26
The proposal to approve the Restricted Share Plan will be carried if a
majority of the common shares entitled to vote and actually voted upon the
proposal at the annual meeting are voted "for" the proposal, provided that
the total number of shares voted for and voted against the proposal equals a
majority of all common shares entitled to vote. For this purpose, any shares
for which an abstention or broker non-vote is registered will not be
considered to have been voted upon the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL
OF THE 1997 RESTRICTED SHARE PLAN.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The Board of Directors, at the recommendation of its Audit Committee,
has reappointed the firm of Price Waterhouse LLP as the Company's independent
accountants. Price Waterhouse has served as independent accountants for the
Company continuously since 1968. It is expected that a representative of
Price Waterhouse will be present at the annual shareholders' meeting with the
opportunity to make a statement if he or she desires and to answer
appropriate questions which may be raised by shareholders at the meeting.
SHAREHOLDER PROPOSALS
Shareholders who intend to present a proposal at the annual meeting to
be held in 1998 must furnish such information to the Company by February 27,
1998 for the proposal to be included in the Company's proxy statement for
that meeting. The Company may omit a proposal and any statement in support
thereof from its proxy statement and form of proxy in accordance with rules
issued by the Securities and Exchange Commission.
OTHER MATTERS
The total expense of sending out notices, proxy forms, and this Proxy
Statement will be paid by the Company. This expense is expected to be limited
to the cost of preparing and mailing this Proxy Statement and accompanying
documents.
Please execute and return the accompanying proxy, so that your shares
may be voted at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Gene M. Hardy, Secretary
Monroe, Michigan
June 27, 1997
A copy of the Company's Form 10-K Annual Report for the fiscal year
ended April 26, 1997 may be obtained by writing the Secretary's Office.
27
Exhibit A
LA-Z-BOY INCORPORATED
1997 INCENTIVE STOCK OPTION PLAN
ARTICLE I
1.1 Purpose. The purpose of the Plan is to advance the interests of the
Company and its shareholders by facilitating the attraction and retention of
competent executive personnel and other key employees of the Company and its
Subsidiaries and by providing incentive to such employees to devote their
utmost effort and skill to the advancement and betterment of the Company by
permitting them to participate in the ownership of the Company, and thereby
share in increases in the value of the Company which they will help to
produce, through the grant from time to time of Incentive Stock Options and
Nonqualified Stock Options.
ARTICLE II
2.1 Certain Definitions. When used in the Plan, the following terms have
the following respective meanings:
(a) "Board" or "Board of Directors" means the Board of Directors of
the Company,
(b) "Code" means the Internal Revenue Code of 1986 as in effect
at a given time, or such successor code as may be in effect at the
time.
(c) "Committee" means the Compensation Committee of the Board of
Directors (or such other Board committee or subcommittee as the Board
hereafter may designate from time to time), all of the members of which
at any given time shall satisfy all such criteria as are then necessary
in order to facilitate exemption of compensation paid pursuant to the
Plan from the tax deduction limits imposed by Section 162(m) and also
shall be Non-Employee Directors (as that term or a comparable term is
then used in Rule 16b-3),
(d) "Company" means La-Z-Boy Incorporated, a Michigan corporation.
(e) "Employee" means an employee (who also may be an officer) of
the Company or a Subsidiary.
(f) "Fair Market Value" means the closing sale price of a Share
on the New York Stock Exchange for the date as of which such value is
being determined or, if no Shares traded on such exchange on that date,
then for the latest preceding date on which the Shares so traded.
(g) "Incentive Stock Option" or "ISO" means an Option that meets
the requirements of Section 422 of the Code (or such successor section
as may be in effect at a given time) and the Treasury Regulations
promulgated thereunder and that is identified as intended to be an ISO
in the written agreement evidencing the Option.
A-1
(h) "Nonqualified Stock Option" or "NQSO" means any Option that is
not an Incentive Stock Option,
(i) "Option" means any option to purchase Shares granted under the
Plan.
(j) "Over-10% Owner" means an owner of over 10% of the total
combined voting power of all classes of the capital stock of the
Company.
(k) "Plan" means the La-Z-Boy Incorporated 1997 Incentive Stock
Option Plan as in effect at a given time.
(l) "Rule 16b-3" means Rule 16b-3 of the Securities and Exchange
Commission as in effect at a given time, or such successor rule or
regulation as may be in effect at the time.
(m) "Shares" means the Company's common shares, $1.00 par value.
(n) "Section 162(m)" means Section 162(m) of the Code (or such
successor section as may be in effect at a given time) and the Treasury
Regulations promulgated thereunder.
(o) "Subsidiary" means a corporation, partnership, or other
business entity in which the Company directly or indirectly has a
significant equity interest under accounting principles generally
accepted in the United States of America.
(p) "Treasury Regulations" means rules and regulations of the U.S.
Department of the Treasury as in effect at a given time.
ARTICLE III
3.1 Aggregate Shares Limits and Reservation of Shares. Subject to the
provisions of this section and those of Section 8.1 of the Plan, the
aggregate maximum number of Shares which may be issued in settlement of
Options is 2,500,000. If any Option or Option portion shall expire,
terminate, or be canceled for any reason prior to its exercise, the Shares
theretofore subject to such Option or Option portion shall again be available
for purposes of the Plan. The aggregate number of available Shares
hereinabove set forth shall be increased by the number of any already owned
Shares transferred to the Company by an Option holder in payment of the
exercise price of an Option or in satisfaction of any related tax withholding
obligations of such optionee and by the number of any Shares withheld by the
Company at the direction of an Option holder in payment of the exercise price
of any NQSO or to satisfy any related tax withholding obligations. There
shall at all times be reserved for issuance pursuant to the Plan from the
authorized but unissued Shares the maximum number of Shares then permitted by
the Plan to be issued in settlement of outstanding Options and Options which
thereafter may be granted.
3.2 Limits on Grants to Individual Employees. Subject to adjustment
pursuant to Section 8.1, the maximum number of Shares that may be covered by
Options granted to any single Employee during any single Company fiscal year
may not exceed 75,000.
ARTICLE IV
4.1 Eligibility. No one other than an Employee shall be eligible to be
granted an Option, and the only Employees eligible to be granted Options at a
given time shall be those who at such time are officers of the Company or a
Subsidiary or who are otherwise determined by the Committee to be key
Employees. Eligibility to be granted an Option confers no right upon any
Employee to receive any such grant.
A-2
4.2 No Effect on Employment Rights. Nothing in the Plan, any other
document describing the Plan, or any agreement or other document evidencing
or describing any Option shall be construed to limit in any manner the right
of the Company or a Subsidiary to terminate any Employee's employment at any
time, without regard to the effect of such termination upon any rights or
expectations of benefit such Employee would or might otherwise have under the
Plan or any Option granted to the Employee, or to give any Employee any right
to remain employed by the Company or a Subsidiary in any particular position
or at any rate of compensation.
ARTICLE V
5.1 Plan Administration. The Plan shall be administered by the
Committee, which, subject to the limitations expressly set forth in the Plan,
shall have the exclusive authority to (a) determine those Employees who are
eligible to be granted Options, (b) select from among such eligible Employees
those to whom Options will be granted, and (c) establish the other terms and
conditions of each Option granted. The Committee also shall have the
authority to interpret the provisions of the Plan and the terms of any
agreements evidencing Options, to prescribe, amend, and rescind rules and
regulations relating to the Plan, and to make all other determinations
necessary or advisable for its administration. The Committee's interpretation
or construction of the Plan or any Option agreement shall be conclusive and
binding upon all interested persons.
ARTICLE VI
6.1 Written Agreements Required. Each Option granted shall be evidenced
by a written agreement between the Company and the grantee in form prescribed
or approved by the Board or the Committee, setting forth the type of Option
intended to be granted, the number of Shares covered by the Option, and the
per Share exercise price and scheduled expiration date of the Option and
setting forth (or, to the extent appropriate, incorporating by reference to
applicable provisions of the Plan) all other terms and conditions of the
Option including, in addition to such terms and conditions as are specified
in the Plan or required by the Plan to be determined by the Committee,
all such other terms and conditions not inconsistent with the Plan as the
Committee may deem appropriate. Each such agreement also shall specify that
in the event of any inconsistency between the terms of the agreement and
those of the Plan the terms of the Plan shall govern.
6.2 Types of Options. Both Incentive Stock Options and Nonqualified
Stock Options may be granted. In connection with the grant of an Option, the
Committee shall specify whether the Option is intended to be an ISO or a
NQSO, and the agreement evidencing the Option shall designate it accordingly.
In connection with the grant of any Option intended to be an ISO, the
Committee may prescribe such terms and conditions other than those specified
in the Plan as the Committee deems desirable to qualify the Option as an
incentive stock option under the Code. If for any reason an Option (or any
portion thereof) intended by the Committee to be an ISO nevertheless does not
so qualify, whether at the time of grant or subsequently, such failure to
qualify shall not invalidate the Option (or such portion), and instead the
disqualified portion (or, if necessary, the entire Option) shall be deemed to
have been granted as a Nonqualified Stock Option irrespective of the manner
in which it is designated in the Option agreement.
A-3
6.3 Exercise Price. Unless a higher price is specified at the time of
grant, the per Share exercise price of each Option shall be the Fair Market
Value of a Share on the grant date, except that the per Share exercise price
of any ISO granted to an Over-10% Owner shall be at least equal to 110% of
such Fair Market Value on the grant date.
6.4 Expiration Date. Subject to earlier termination as provided in
Article VII: (a) any ISO granted to an Over-10% Owner shall expire (to the
extent not earlier exercised) on the fifth anniversary of the date of grant
of the ISO and (b) each other Option shall expire (to the extent not earlier
exercised) on the such date (not earlier than the fifth nor later than the
tenth anniversary of the Option's grant date) as the Committee shall
determine at the time of grant.
6.5 Exercisability. Subject to acceleration of exercisability as
hereafter provided in this section and as provided in Article VII, each
granted Option shall become exercisable in installments with respect to 25%
of the total number of Shares covered by the Option (but in any event only
for whole Shares) on each of first, second, third, and fourth anniversaries
of the Option's date of grant. The right to exercise each installment shall
be cumulative and may be exercised in whole or in part, to the extent such
right has accrued and not been exercised, at any time or from time to time
while the Option remains outstanding. All installments shall become
immediately exercisable in the event of a sale, exchange, or other
disposition of all or substantially all of the total assets of the Company or
all or substantially all of the Company's outstanding Shares.
6.6 Exercise Procedures and Payment. The holder of an exercisable
Option (or Option portion) may exercise it in whole or in part by complying
with such procedures for exercise as are then in effect and tendering payment
in full of the aggregate exercise price for the number of Shares in respect
of which the Option is then being exercised. The aggregate exercise price
payable may be paid by the Option holder in cash, by transferring to the
Company unencumbered Shares then owned by the holder, by directing the
Company to retain some of the Shares for which the Option is being exercised
(provided that the Option is a NQSO), or by a combination of the foregoing.
For these purposes, payment in U.S. currency, or by check, bank draft,
cashier's check, or postal money order payable in such currency shall be
deemed to be payment in cash. Any Shares transferred or retained in payment
of the exercise price shall be valued at their aggregate Fair Market Value as
of the exercise date. Once given to the Company, a direction for the
retention of Shares to pay for exercise of a NQSO shall be irrevocable.
6.7 Tax Withholding. The holder of an Option may be required to pay the
Company, and the Company and any Subsidiary shall have the right to deduct
from any amounts otherwise payable to the holder, the full amount of any and
all taxes required by law to be paid by or withheld from the holder in
respect of exercise of the Option or, in the case of an ISO, in respect of a
subsequent disposition of Shares for which the ISO has been exercised. The
holder may elect to satisfy such payment or withholding obligations in whole
or in part by transferring to the Company unencumbered Shares then owned by
the holder or, if the Option is a NQSO, by directing the Company in writing
to retain some of the Shares for which the Option is being exercised. Any
Shares so transferred shall be valued at their aggregate Fair Market Value on
the transfer date, and any Shares so retained shall be valued at their
aggregate Fair Market Value on the date the Option is exercised. Once given
to the Company, a direction for the retention of Shares to satisfy tax
withholding obligations arising from exercise of a NQSO shall be irrevocable.
6.8 Transfer Restrictions. During the lifetime of the grantee of an
Option, neither the Option nor any rights or privileges thereby conferred may
be sold, assigned, pledged, hypothecated, or otherwise
A-4
transferred in any manner whatsoever, except that the Committee, in its
discretion and subject to such conditions as it may determine to impose, may
permit an intervivos transfer by gift to an immediate family member of the
grantee or to a charitable organization. Upon any attempt to sell, assign,
pledge, hypothecate, or otherwise dispose of an Option in violation of the
foregoing, and upon the levy of attachment or similar process upon an Option,
the Option immediately shall become null and void.
6.9 Rights as a Shareholder. The holder of an Option shall have no
rights as a shareholder with respect to any Shares covered by the Option
until the date of issuance to the holder of a stock certificate evidencing
those Shares for which the Option has been exercised and until the exercise
price for the Shares has been fully paid. No adjustment shall be made for
dividends or other rights relating to such Shares for which the record date
is prior to the date of issuance of the stock certificate.
ARTICLE VII
7.1 Effect of Death or Retirement under Certain Circumstances. If the
grantee of a then-outstanding Option should cease to be an Employee due to
(1) retirement at or after age 65, (ii) retirement at an age not younger than
age 55 and with the Company's consent or pursuant to the disability
retirement provisions of a Company-sponsored pension or profit-sharing plan
applicable to the grantee, or (iii) the grantee's death, the Option thereupon
shall become exercisable for the full amount of Shares for which it has not
theretofore been exercised, regardless of whether all installments of the
Option otherwise would have been exercisable by that time. Thereafter, the
Option shall continue to be exercisable by the grantee (or his or her
administrator or executor or another person who has acquired the right to
exercise the Option by bequest or inheritance or by intervivos gift from the
grantee) until the first anniversary of the grantee's employment termination
or, if earlier, the expiration date of the Option.
7.2 Effect of Other Employment Termination. If the grantee of a
then-outstanding Option should cease to be an Employee under any
circumstances other than those specified in Section 7.1, the Option thereupon
automatically shall terminate.
ARTICLE VIII
8.1 Adjustments for Recapitalization. Whenever a stock split, reverse
stock split, stock-on-stock dividend, or other relevant change in the
capitalization of the Company or a successor thereto (each, a
"recapitalization event") occurs, the Board of Directors shall make such
changes in the type and number of securities which thereafter may be made
subject to Options, the type and number of securities subject to any
then-outstanding Option and/or the exercise price thereof, and the other
terms and conditions of then-outstanding Options, as the Board determines to
be appropriate in order to carry out the purposes of the Plan in light of
such recapitalization event. Any fractional Shares resulting from the
adjustments to outstanding Options contemplated by this section shall be
eliminated from the Option. Any adjustment with respect to an ISO in
connection with a transaction to which Section 424(a) of the Code (or any
successor section then in effect) is applicable shall be made in accordance
therewith unless the Board expressly determines otherwise. No adjustment
shall be made for cash dividends or the issuance to shareholders of rights to
subscribe for additional Shares or other securities of the Company. The grant
of an Option shall not in any way affect or limit the right or power of the
Company to propose or make adjustments, reclassifications, reorganizations,
or changes in its capital or business structure, to merge or consolidate, or
to dissolve, liquidate, sell, or transfer all or any part of its business or
assets.
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8.2 Regulatory Compliance and Listing. Notwithstanding anything in the
Plan to the contrary, the issuance or delivery of any Shares pursuant to the
exercise of an Option may be postponed by the Company for such period as may
be required to enable the Company to comply with any applicable securities
laws or regulations, any applicable listing requirements of any national
securities exchange, or any requirements under any other law or regulation
applicable to the issuance or delivery of such Shares, and the Company shall
not be obligated to issue or deliver any such Shares if the issuance or
delivery thereof shall constitute a violation of any applicable provision of
law or regulation of any governmental authority or national securities
exchange.
8.3 Termination, Suspension, or Amendment. The Plan at any time or from
time to time may be terminated, suspended, or amended in any manner, in whole
or in part, by resolution of the Board of Directors; provided, however, that
no such action by the Board shall adversely affect the rights of the holder
of any then-outstanding Option without such holder's consent.
8.4 Governing Law. The Plan and the terms of each Option shall be
governed and construed in accordance with the laws of the State of Michigan
applicable to contracts made and to be performed within such State.
8.5 Shareholder Approval. The Plan has been adopted by the Board of
Directors as of September 9, 1996, subject to approval by the shareholders of
the Company at its annual meeting of shareholders to be held in calendar year
1997. Any and all Options granted prior to such meeting shall be subject to
shareholder approval of the Plan at such meeting and shall be automatically
canceled and of no effect, and no additional Options thereafter may be
granted, if such approval is not then obtained.
8.6 Duration of the Plan. Provided the Plan is approved by the
Company's shareholders as contemplated in Section 8.5 and subject to
termination by the Board as permitted by Section 8.3, the Plan shall be of
indefinite duration, and Options may be granted at any time so long as the
Share limits specified in Article V are not exceeded. However,
notwithstanding the foregoing, in no event may any ISOs be granted under the
Plan after September 8, 2006.
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Exhibit B
LA-Z-BOY INCORPORATED
1997 RESTRICTED SHARE PLAN
ARTICLE I
1.1 Purpose. The purpose of the Plan is to advance the interests of the
Company and its shareholders by facilitating the attraction and retention of
competent executive personnel and other key employees of the Company and its
Subsidiaries and by providing incentive to such employees to devote their
utmost effort and skill to the advancement and betterment of the Company by
permitting them to purchase shares of the Company's stock at prices below
market value at the time of purchase thereof, subject, however, to certain
restrictions on their transfer.
ARTICLE II
2.1 Certain Definitions. When used in the Plan, the following terms have
the following respective meanings:
(a) "Board" or "Board of Directors" means the Board of Directors of
the Company.
(b) "Committee" means the Compensation Committee of the Board of
Directors (or such other Board committee or subcommittee as the Board
hereafter may designate from time to time), all of the members of which
at any given time shall be Non-Employee Directors (as that term or a
comparable term is then used in Rule 16b-3).
(c) "Company" means La-Z-Boy Incorporated, a Michigan corporation.
(d) "Determination Date" has the meaning set forth in Section 6.1
of the Plan.
(e) "Employee" means an employee (who also may be an officer) of
the Company or a Subsidiary.
(f) "Fair Market Value" means the closing sale price of a Share
on the New York Stock Exchange for the date as of which such value is
being determined or, if no Shares traded on such exchange on that date,
then for the latest preceding date on which any Shares so traded.
(g) "Plan" means the La-Z-Boy Incorporated 1997 Restricted Share
Plan as in effect at a given time.
(h) "Related Securities" means any other Shares or other
securities which an owner of Restricted Shares may receive or be
entitled to receive due to ownership of those Restricted Shares,
whether the same are issued as a result of a Share split or dividend or
other recapitalization of or by the Company or as the result of a
statutory share exchange involving Shares or a merger or consolidation
or sale of assets involving the Company.
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(i) "Restricted Shares" means any Shares purchased by an Employee
pursuant to the Plan.
(j) "Rule 16b-3" means Rule 16b-3 of the Securities and Exchange
Commission as in effect at a given time, or such successor rule or
regulation as may be in effect at the time.
(k) "Shares" means the Company's common shares, $1.00 par value.
(l) "Subsidiary" means a corporation, partnership, or other
business entity in which the Company directly or indirectly has a
significant equity interest under accounting principles generally
accepted in the United States of America.
ARTICLE III
3.1 Aggregate Share Limits and Reservation of Shares. Subject to the
provisions of this section and those of Section 8.2 of the Plan, the
aggregate maximum number of Shares which may be made available for purchase
as Restricted Shares is 250,000. If a right to purchase Restricted Shares
granted to an Employee expires or otherwise terminates without having
been exercised in full, the Shares not acquired by the Employee shall again
become available for purposes of the Plan, as shall any Restricted Shares
purchased by an Employee but subsequently reacquired by the Company pursuant
to Section 7.3 of the Plan. The aggregate number of available Shares
hereinabove set forth shall be increased by the number of any Shares
(including Restricted Shares, if no longer subject to transfer restrictions)
that are transferred to the Company in satisfaction of any tax withholding
obligations arising in connection with the grant or exercise of the right to
purchase Restricted Shares or the lapse of transfer restrictions upon
Restricted Shares. There shall at all times be reserved for issuance pursuant
to the Plan from the authorized but unissued Shares the maximum number of
Shares then permissible for future purchase as Restricted Shares.
ARTICLE IV
4.1 Eligibility. Any Employee who, in the judgment of the Committee, is
a key Employee and expected to contribute materially to the Company's success
in the future shall be eligible to be granted a right to purchase Restricted
Shares and thereby participate in the Plan. No one who is not an Employee,
and no Employee who has not been determined by the Committee to satisfy the
eligibility criteria set forth above, shall be eligible to purchase any
Restricted Shares. Eligibility to participate in the Plan confers no right
upon any Employee to be granted a right to purchase Restricted Shares at any
time, all decisions to grant such rights being solely at the discretion of
the Committee.
4.2 No Effect on Employment Rights. Nothing in the Plan, any other
document describing the Plan or any agreement or other document concerning
Restricted Shares that have been or may be acquired by any Employee under the
Plan shall be construed to limit in any manner the right of the Company or a
Subsidiary to terminate any Employee's employment at any time, without regard
to the effect of such termination upon any rights or expectations of benefit
such Employee would or might otherwise have under the Plan, or to give any
Employee any right to remain employed by the Company or a Subsidiary in any
particular position or at any rate of compensation.
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ARTICLE V
5.1 Plan Administration. The Plan shall be administered by the
Committee, which, subject to the limitations expressly set forth in the Plan,
shall have the exclusive authority to (a) determine those Employees who are
eligible to participate in the Plan, (b) select from among such eligible
Employees those to whom rights to purchase Restricted Shares will be granted,
and (c) determine the numbers of Restricted Shares which may be purchased by
such grantees, the purchase price therefor, and the other terms and
conditions of such grants and of any Restricted Shares purchased pursuant to
such grants. The Committee also shall have the authority to interpret the
provisions of the Plan and the terms of any agreements or other documents
concerning such grants or Restricted Shares so acquired, to prescribe, amend,
and rescind rules and regulations relating to the Plan, and to make all other
determinations necessary or advisable for its administration. The Committee's
interpretation or construction of the Plan or any agreement or other document
concerning Restricted Shares or the grant of a right to purchase Restricted
Shares shall be conclusive and binding upon all interested persons.
ARTICLE VI
6.1 Grants to Purchase Restricted Shares. In connection with
determining to grant an eligible Employee a right to purchase Restricted
Shares, the Committee shall specify the number of Shares which may be
purchased by the Employee and any special terms or conditions concerning the
right or the Restricted Shares that the Committee deems appropriate and that
are not inconsistent with the Plan. Except as provided in Section 8.6, the
date on which the Committee makes such determinations concerning a grant to
an eligible Employee (the "Determination Date") shall be deemed to be the
date of grant of the right. As promptly as possible following the
Determination Date concerning a grant to an eligible Employee, written notice
thereof shall be given by the Company to the Employee. If the date of grant
of the right is later than the applicable Determination Date, the Company
also shall give written notice of the grant date to the grantee on or as
promptly as possible after the grant date.
6.2 Purchase Price and Payment Terms. In each case in which an eligible
Employee is granted a right to purchase Restricted Shares, the per Share
purchase price for the Shares shall be 25% of the Fair Market Value of a
Share on the applicable Determination Date, payable in full in cash within
the 30-day period described in Section 6.3 during which the right is
exercisable. For this purpose, payment in U.S. currency, or by check, bank
draft, cashier's check, or postal money order payable in such currency shall
be deemed to be payment in cash.
6.3 Exercise of Purchase Rights. Each eligible Employee granted a right
to purchase Restricted Shares shall have a 30-day period, commencing on the
date of the latest notice given to the Employee pursuant to Section 6.1,
during which to accept the offer to purchase with respect to any or all of
the Shares offered, by giving written notice of acceptance to the Secretary
of the Company (or such other officer as the Committee may have designated).
If the offer is not accepted during that period, the Employee's purchase
right will cease to be in effect. If the offer is accepted, the Employee
shall pay to the Company the aggregate purchase price for the Restricted
Shares being purchased and execute an agreement with the Company concerning
those Restricted Shares. The Employee shall have no rights as a shareholder
with respect to the Restricted Shares being purchased until the purchase
price is paid, the Restricted Share agreement is executed, and a stock
certificate evidencing the Restricted Shares has been issued in the name of
the Employee.
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6.4 Restricted Share Agreements. Each Restricted Share agreement
required by Section 6.3 shall be in form prescribed or approved by the
Committee, shall set forth all of the terms and conditions concerning the
Restricted Shares specified in Article VII of the Plan, shall provide that in
the event of any inconsistency between the terms of the Plan and those of the
agreement the terms of the Plan shall govern, and may contain all such other
provisions not inconsistent with the Plan as the Committee deems appropriate.
ARTICLE VII
7.1 Transfer Restrictions. Any and all Restricted Shares purchased by a
grantee initially shall be subject to transfer restrictions such that none of
them may be sold, assigned, pledged, hypothecated, or otherwise transferred
in any manner whatsoever without the written consent of the Company which has
been authorized by the Board of Directors. For so long as Restricted Shares
remain subject to such transfer restrictions, any Related Securities also
shall be subject to the same transfer restrictions and repurchase right as
the Restricted Shares to which they relate.
7.2 Duration and Termination of Transfer Restrictions. The transfer
restrictions' imposed upon Restricted Shares purchased pursuant to the Plan
and on Related Securities shall continue for a three-year restriction period
commencing on the Determination Date applicable to such Restricted Shares,
except as follows:
(a) Death, Permanent Disability, or Disability Retirement. If a
purchaser of Restricted Shares ceases to be an Employee during the
applicable restriction period due to (i) the purchaser's death, (ii)
his or her permanent mental or physical disability as determined by the
Committee, or (iii) pursuant to the disability retirement provisions of
a Company-sponsored pension or profit-sharing plan applicable to the
purchaser, all transfer restrictions imposed under the Plan upon the
purchaser's Restricted Shares and any Related Securities thereupon
immediately shall terminate.
(b) Retirement under Certain Circumstances. If a purchaser of
Restricted Shares ceases to be an Employee during the applicable
restriction period due to (i) retirement at or after age 65, or (ii)
retirement at an age not younger than age 55 and with the Company's
consent, all transfer restrictions imposed under the Plan upon the
purchaser's Restricted Shares and any Related Securities also shall
thereupon terminate, provided that at least two years have elapsed
since the Determination Date applicable to such Restricted Shares and
further provided that the Committee, in its sole discretion, may
determine that such restrictions shall not terminate because to allow
such termination would not be in the best interests of the Company. The
Committee shall not allow such restrictions to terminate if the
purchaser, after retirement, remains as a Director of the Company or is
retained as a paid consultant by the Company.
(c) Change of Control. If after the date on which the Plan has
been adopted by the Board: (1) any "person" or "group" (as such terms
are used with respect to Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended), other than pursuant to a transaction
or agreement approved in advance by the Board of Directors, becomes the
"beneficial owner" (as defined in Rule 13d-3 of the Securities and
Exchange Commission) of voting securities representing 25% or more of
the combined voting power of all then outstanding voting securities of
the Company, or obtains the right to acquire such beneficial ownership
(any such person or group an "Acquiring Person"),
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or (ii) during any period of 24 consecutive calendar months, the
individuals who at the beginning of such period constituted the Board
of Directors and any new Directors whose election by the Board or whose
nomination for election by Company shareholders was approved by a vote
of at least two-thirds of the members of the Board who either were
Directors at the beginning of the period or whose election or
nomination as Directors was previously so approved cease for any reason
to constitute at least a majority of the Board members, then all
transfer restrictions imposed by the Plan upon all Restricted Shares
and Related Securities thereupon immediately shall terminate. If at any
time while there is an Acquiring Person, there occurs (1) a merger or
consolidation to which the Company is a party, whether or not the
Company is the surviving or resulting corporation, (2) a reorganization
(including, without limitation, a share exchange) pursuant to which the
Company becomes a subsidiary of another entity, or (3) the sale of all
or substantially all of the assets of the Company, then all transfer
restrictions imposed by the Plan upon all Restricted Shares and Related
Securities also immediately shall terminate, unless such merger,
consolidation, reorganization, or asset sale had been approved by a
majority of the Directors who were members of the Board prior to the
time the Acquiring Person became such.
7.3 Company Repurchase Rights. If a purchaser of Restricted Shares
ceases to be an Employee during the restriction period applicable to such
Restricted Shares for any reason other than (a) death or disability as
specified in Section 7.2(a), (b) retirement causing termination of transfer
restrictions pursuant to Section 7.2(b)or retirement which would have caused
termination of transfer restrictions thereunder had the retiree not continued
as a director or paid consultant, or (c) an event causing termination of
transfer restrictions pursuant to Section 7.2(c), the purchaser thereupon
shall be obligated to sell such Restricted Shares and any Related Securities
back to the Company for an aggregate cash purchase price equal to the price
paid by the purchaser for the Restricted Shares. If a retired former Employee
who has purchased Restricted Shares and who continues after retirement as a
director or paid consultant ceases to serve in either capacity prior to
termination of the Plan's transfer restrictions applicable to such Restricted
Shares for any reason other than one which would have caused termination of
the transfer restrictions pursuant to Section 7.2(a) or 7.2(c) had he or she
then still been an Employee, such retiree thereupon shall be obligated to
sell such Restricted Shares and any Related Securities back to the Company
for an aggregate cash purchase price equal to the price paid by the purchaser
for the Restricted Shares.
7.4 Escrow of Shares. Upon the issuance to a purchaser of a stock
certificate evidencing any Restricted Shares or Related Securities, the
purchaser shall execute the form of assignment on the certificate or a
separate instrument of transfer and deliver the same to a bank or trust
company designated by the Company to act as escrow agent for the Restricted
Shares and any Related Securities, to ensure the prompt repurchase thereof by
the Company under the circumstances contemplated by Section 7.3.
7.5 Restrictive Legends. At the Company's election, certificates
evidencing Restricted Shares and/or those evidencing Related Securities shall
be inscribed with an appropriate legend indicating that transferability of
such securities has been restricted and that such securities are subject to a
repurchase right of the Company in accordance with the applicable Restricted
Share agreement with the Company.
ARTICLE VIII
8.1 Tax Withholding. Each holder of Restricted Shares may be required
to pay the Company, and the Company and any Subsidiary shall have the right
to deduct from any amounts otherwise payable to the holder, the full amount
of any and all taxes required by law to be paid by or withheld from the
holder
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in respect of the grant or exercise of the right to purchase such Restricted
Shares or the lapse of transfer restrictions upon the Restricted Shares. The
holder may elect to satisfy such payment or withholding obligations in whole
or in part by transferring to the Company unencumbered Shares (including any
Restricted Shares no longer subject to transfer restrictions) then owned by
the holder. Any Shares so transferred shall be valued at their aggregate Fair
Market Value on the transfer date.
8.2 Adjustments for Recapitalization. Whenever a stock split, reverse
stock split, stock-on-stock dividend, or other relevant change in the
capitalization of the Company or a successor thereto (each a
"recapitalization event") occurs, the Board of Directors shall make such
changes in the type and number of securities which thereafter may be made
available for purchase as Restricted Shares as the Board determines to be
appropriate in order to carry out the purposes of the Plan in light of such
recapitalization event.
8.3 Regulatory Compliance and Listing. Notwithstanding anything in the
Plan to the contrary, the issuance or delivery of any Restricted Shares
pursuant to the Plan may be postponed by the Company for such period as may
be required to enable the Company to comply with any applicable securities
laws or regulations, any applicable listing requirements of any national
securities exchange, or any requirements under any other law or regulation
applicable to the issuance or delivery of such Shares, and the Company shall
not be obligated to issue or deliver any such Shares if the issuance or
delivery thereof shall constitute a violation of any applicable provision of
law or regulation of any governmental authority or national securities
exchange.
8.4 Termination, Suspension, or Amendment. The Plan at any time or from
time to time may be terminated, suspended, or amended in any manner, in whole
or in part, by resolution of the Board of Directors; provided, however, that
no such action taken after an Employee has executed a Restricted Share
agreement shall adversely affect his or her rights or obligations under that
agreement or with respect to the Restricted Shares and any Related Securities
subject to that agreement, without Hs or her consent.
8.5 Governing Law. The Plan and the terms of each Restricted Share
agreement shall be governed and construed in accordance with the laws of the
State of Michigan applicable to contracts made and to be performed within
such State.
8.6 Shareholder Approval of the Plan; Effect on Prior Committee
Determinations. The Plan has been adopted by the Board of Directors as of
September 9, 1996, subject to approval by the shareholders of the Company at
its annual meeting of shareholders to be held in calendar year 1997. Any and
all rights to purchase Restricted Shares that the Committee determines to
grant prior to such meeting shall be subject to shareholder approval of the
Plan at such meeting, shall be deemed to have been granted only if and when
such approval is obtained, and otherwise shall be of no effect.
8.7 Duration of the Plan. Provided the Plan is approved by the
Company's shareholders as contemplated in Section 8.6 and subject to
termination by the Board as permitted by Section 8.4, the Plan shall be of
indefinite duration, and rights to purchase Restricted Shares may be granted
at any time so long as the Share limits specified in Article V are not
exceeded. However, notwithstanding the foregoing, in no event may any
Restricted Shares be granted under the Plan after September 8, 2006.
B-6
LA-Z-BOY INCORPORATED PROXY
The undersigned hereby appoints C. T. Knabusch, and E. J.
Shoemaker, and both of them Proxies with power of substitution to
attend the Annual Meeting of Shareholders of La-Z-Boy Incorporated
to be held at the La-Z-Boy Incorporated Auditorium, 1314 North
Telegraph Road, Monroe, Michigan, July 28, 1997 at 11:00 o'clock
A.M., Eastern Daylight Time, and any adjournment thereof, and
thereat to vote all shares now or hereafter standing in the name of
the undersigned.
(Continued and TO BE SIGNED on other side)
- - - --------------------------------------------------------
1. ELECTION OF DIRECTORS
Withhold Authority Nominees:
For all nominees to vote for all Frederick H. Jackson
listed to right nominees listed to right Patrick H. Norton
Lorne G. Stevens
[ ] [ ]
(INSTRUCTIONS: To withhold authority to vote for any individual nominees,
write that nominee's name on the line below.)
- - - ---------------------------------------------
2. APPROVE 1997 Incentive Stock Option Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. APPROVE 1997 Restricted Share Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy, when properly executed, will be voted in the manner directed by
the undersigned stockholder. If no direction is made, this proxy will be
voted FOR all director nominees listed and FOR proposals 2 and 3.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Please mark, sign, date and return the proxy card using the enclosed
envelope.
SIGNATURE_______________________________________ DATE__________________
Signature should agree with name(s) on stock
certificate.
SIGNATURE_______________________________________ DATE__________________
Signature if held jointly
NOTE: When shares are held by joint tenants both should sign. When
signing as attorney, as executor, administrator, trustee or
guardian, please give full title as such. If a corporation,
please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in
partnership name by authorized person.
