SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
LEVITZ FURNITURE, INC.
(Name of Registrant as Specified in Its Charter)
LEVITZ FURNITURE, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on the 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 transactions apply:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date Filed:
<PAGE>
LEVITZ FURNITURE INCORPORATED
6111 BROKEN SOUND PARKWAY, N.W.
BOCA RATON, FLORIDA 33487
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 20, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Levitz
Furniture Incorporated, a Delaware corporation (the "Company"), will be held
at 9:00 a.m. (local time) on Tuesday, August 20, 1996, at The Deerfield Beach
Hilton, 100 Fairway Drive, Deerfield Beach, Florida, for the following
purposes:
1. To elect two Class III Directors of the Company, each to serve for a
term of three years;
2. To ratify the appointment of Arthur Andersen LLP as the Company's
independent accountants for fiscal year 1997;
3. To approve amendments to the Company's Long-Term Incentive Plan to (i)
increase the number of shares reserved for issuance thereunder, and
(ii) limit the number of options or stock appreciation rights that can
be granted to any one participant in any one year.
4. To transact such other business as may properly come before the meeting
and any adjournments or postponements thereof.
Only stockholders of record at the close of business on July 20, 1996 are
entitled to notice of and to vote at the Annual Meeting and at any and all
adjournments or postponements thereof. A list of stockholders entitled to
vote at the meeting will be available for inspection at the Deerfield Beach
Hilton, 100 Fairway Drive, Deerfield Beach, Florida for at least ten days
prior to the meeting, and will also be available for inspection at the
meeting.
By Order of the Board of Directors,
Edward P. Zimmer, SECRETARY
Boca Raton, Florida
July 23, 1996
YOUR VOTE IS IMPORTANT
EACH STOCKHOLDER IS URGED TO COMPLETE, SIGN, DATE AND MAIL PROMPTLY THE
ENCLOSED PROXY TO THE COMPANY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. RETURNING A SIGNED PROXY WILL NOT
PREVENT YOU FROM ATTENDING THE MEETING AND VOTING IN PERSON, IF YOU SO
DESIRE.
<PAGE>
LEVITZ FURNITURE INCORPORATED
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 20, 1996
PROXY STATEMENT
---------------
This Proxy Statement is being furnished to the stockholders of Levitz
Furniture Incorporated, a Delaware corporation (the "Company"), in connection
with the solicitation of proxies by the Board of Directors of the Company for
use at the Annual Meeting of Stockholders of the Company, to be held at 9:00
a.m. (local time) on Tuesday, August 20, 1996, at The Deerfield Beach Hilton,
100 Fairway Drive, Deerfield Beach, Florida, and at any and all adjournments
or postponements thereof. At the Annual Meeting, the stockholders of the
Company are being asked to consider and vote upon (i) the election of two
Class III Directors, each to serve for a term of three years, (ii) a proposal
to ratify the appointment of the Company's independent accountants for fiscal
year 1997 and (iii) a proposal to ratify the amendment of the Company's
Long-Term Incentive Plan to increase the number of shares reserved for
issuance thereunder and to limit the number of options or stock appreciation
rights that can be granted to any one person in any one year.
This Proxy Statement and the enclosed form of proxy are first being mailed
to stockholders of the Company on or about July 23, 1996.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Only holders of record of the Company's common stock, par value $.01 per
share ("Common Stock"), at the close of business on July 20, 1996 (the
"Record Date") are entitled to notice of the Annual Meeting. At the close of
business on the Record Date, there were 29,620,628 shares of Common Stock
outstanding of which 26,046,966 shares were Voting Common Stock and 3,573,662
shares were Non-Voting Common Stock. Only holders of record of the Voting
Common Stock are entitled to vote at the Annual Meeting. The presence, either
in person or by proxy, of the holders of a majority of the shares of Voting
Common Stock outstanding on the Record Date is necessary to constitute a
quorum at the Annual Meeting. All abstentions and broker non-votes will be
counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum at the meeting.
Each stockholder will be entitled to one vote, in person or by proxy, for
each share of Voting Common Stock held in such stockholder's name as of the
Record Date on any matter submitted to a vote of stockholders at the Annual
Meeting. The election of the Class III Directors will require the affirmative
vote of a plurality of the shares of Voting Common Stock represented and
voting in person or by proxy and entitled to vote at the Annual Meeting.
Ratification of the appointment of the Company's independent accountants for
the Company's 1997 fiscal year and the amendments to the Long-Term Incentive
Plan will require the affirmative vote of a majority of the shares of Voting
Common Stock represented in person or by proxy and entitled to vote at the
Annual Meeting. In determining whether a proposal submitted to a vote of
stockholders has received the requisite number of affirmative votes,
abstentions and broker non-votes will be counted and will have the same
effect as a vote against the proposal, except that (i) abstentions and broker
non-votes will not be counted as votes cast in connection with determining
the plurality required to elect a director and will have no effect on the
outcome of that vote and (ii) broker non-votes will not be counted as votes
cast with respect to any proposal as to which the broker does not have
discretionary authority and has not received voting instructions from the
beneficial owners and will have no effect on the outcome of that vote.
Shares of Voting Common Stock represented by properly executed proxies
received in time for voting at the Annual Meeting will, unless such proxy has
previously been revoked, be voted in accordance with the instructions
indicated thereon. In the absence of specific instructions to the
<PAGE>
contrary, the persons named in the accompanying form of proxy intend to vote
all properly executed proxies received by them (i) FOR the election of the
Board of Directors' nominees as Class III Directors, (ii) FOR the
ratification of Arthur Andersen LLP as the Company's independent accountants
for the Company's 1997 fiscal year and (iii) FOR the ratification of the
amendments to the Long-Term Incentive Plan. No business other than as set
forth in the accompanying Notice of Annual Meeting is expected to come before
the Annual Meeting, but should any other matter requiring a vote of
stockholders be properly brought before the Annual Meeting, it is the
intention of the persons named in the enclosed form of proxy to vote such
proxy in accordance with their best judgment on such matters. For information
with respect to advance notice requirements applicable to stockholders who
wish to propose any matter for consideration or nominate any person for
election as a director at an annual meeting, see "Stockholder Proposals for
1997 Annual Meeting".
Execution of the enclosed proxy will not prevent a stockholder from
attending the Annual Meeting and voting in person. Any proxy may be revoked
at any time prior to the exercise thereof by delivering in a timely manner a
written revocation or a new proxy bearing a later date to the Secretary of
the Company, 6111 Broken Sound Parkway, N.W., Boca Raton, Florida 33487, or
by attending the Annual Meeting and voting in person. Attendance at the
Annual Meeting will not, however, in and of itself constitute a revocation of
a proxy.
This solicitation is being made by the Company. The cost of this
solicitation will be borne by the Company. Solicitation will be made by mail,
and may be made personally or by telephone by officers and other employees of
the Company who will not receive additional compensation for solicitation.
The Company has retained Georgeson & Co., Inc. to assist in the distribution
of proxy solicitation materials at a cost of approximately $3,500 plus
handling charges and out-of-pocket expenses.
PROPOSAL 1
ELECTION OF CLASS III DIRECTORS
The Board of Directors of the Company is divided into three classes,
designated Class I, Class II and Class III, serving three-year terms. The
Company's Certificate of Incorporation requires that such classes be as
nearly equal in number of directors as possible. The terms of the two Class
III Directors, Michael Bozic and Henry B. Reiling, expire at the Annual
Meeting.
At the Annual Meeting, two Class III Directors are to be elected to serve
three-year terms ending in 1999 or until their respective successors are
elected and qualified or their earlier death, resignation or removal. Each of
the two nominees presently serves as a Class III Director. Each of the
nominees has consented to serve as a Director if elected at the Annual
Meeting and, to the best knowledge of the Board of Directors, each of such
nominees is and will be able to serve if so elected. In the event that either
of the nominees listed below should be unavailable to stand for election
before the Annual Meeting, the persons named in the accompanying proxy intend
to vote for such other person, if any, as may be designated by the Board of
Directors, in the place of any nominee unable to serve.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
COMPANY'S NOMINEES AS CLASS III DIRECTORS. UNLESS CONTRARY INSTRUCTIONS ARE
GIVEN, THE PROXIES SOLICITED BY MANAGEMENT WILL BE VOTED "FOR" SUCH NOMINEES.
Set forth below is a brief biography of each nominee for election as a
Class III Director and of all other members of the Board of Directors who
will continue in office.
2
<PAGE>
NOMINEES FOR ELECTION AS CLASS III DIRECTORS
TERM EXPIRING IN 1999
Michael Bozic, age 55. Mr. Bozic has been Chief Executive Officer and
Chairman of the Board of Directors of the Company and its wholly-owned
subsidiary, Levitz Furniture Corporation ("Levitz"), since November 1995. Mr.
Bozic was appointed to the Board to fill the vacancy created by the retirement
of Robert M. Elliott. Prior to joining the Company Mr. Bozic was Chairman of the
Board and Chief Executive Officer of Hills Stores, Inc. from 1991 to 1995. He
also held several executive positions with Sears Roebuck & Co., including that
of Chief Executive Officer of the Sears Merchandise Group, in a 28 year career
with Sears. Mr. Bozic serves as a director of Dean Witter Intercapital, Inc.,
Eaglemark Financial Services, Inc. (Harley Davidson Credit) and Wierton Steel
Corporation.
Henry B. Reiling, age 58. Mr. Reiling has been a Director of the Company
since 1990. Mr. Reiling has been a professor at the Harvard Graduate School
of Business Administration since 1976.
INCUMBENT CLASS I DIRECTORS
TERM EXPIRING IN 1997
Robert M. Harrell, age 72. Since 1984 Mr. Harrell has been a commercial
real estate broker in Orlando, Florida. He has been employed by Andrew McCaw
and Associates, Inc. since 1990 and from 1984 to 1989 he was employed by
Cushman and Wakefield of Florida, Inc. Mr. Harrell is a former Executive Vice
President of Merchandising of Montgomery Ward & Company, Incorporated. Mr.
Harrell was appointed to the Board in May 1994.
Bruce C. Leadbetter, age 57. Mr. Leadbetter has been Chief Executive
Officer of Dalfort Aviation, an aviation servicing company since January
1994. Since 1991, he has been Managing Partner of the Security Management
Company and, since 1981, has been the President and a director of the Astraea
Company, a management consulting firm. He has been a director of the Company
since 1985.
INCUMBENT CLASS II DIRECTORS
TERM EXPIRING IN 1998
Richard M. Cashin, age 43. Mr. Cashin has been a director of the Company
since August 1993 and previously served on the board from 1985 to 1990. Mr.
Cashin was appointed President of Citicorp Venture Capital in 1994 and has
been a Vice President of Court Square Capital, Ltd. since 1983. Mr. Cashin is
also a director of Titan Wheel International, Inc.
Kenneth D. Moelis, age 37. Mr. Moelis has served on the Company's Board
since 1986. He has been a Managing Director of the investment banking firm
Donaldson, Lufkin & Jenrette Securities Corporation since 1990.
Wayne W. Wright, age 80. Mr. Wright has been a director of the Company
since 1987. He is a retired Partner and Director of Heidrick and Struggles,
Inc., a management consulting and recruiting firm.
3
<PAGE>
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Company's Board of Directors held six meetings in fiscal 1996. Each
Director attended 75% or more of the total number of Board meetings and
meetings of Board committees on which such Director served except Mr. Cashin,
who attended 44% of such meetings. The Board of Directors has established
standing Audit and Compensation Committees. There is no standing Nominating
Committee. The membership and functions of the committees of the Board of
Directors are as set forth below:
AUDIT COMMITTEE: The principal functions of the Audit Committee include
recommending independent accountants; conferring with the Company's
independent accountants regarding the scope and results of their audit of the
Company; reviewing the fees of the Company's independent accountants and
other terms of their engagement; and reviewing the adequacy of internal
accounting controls and the results of fiscal policies and financial
management of the Company. The Audit Committee held three meetings in fiscal
1996. The current members of the Audit Committee are Mr. Reiling (Chairman),
Mr. Cashin, Mr. Moelis and Mr. Leadbetter.
COMPENSATION COMMITTEE: The principal functions of the Compensation
Committee are to review and make recommendations regarding the compensation
of the executive officers of the Company and to administer the Company's
executive long-term incentive plan. The Compensation Committee held four
meetings in fiscal 1996. The current members of the Compensation Committee
are Mr. Wright (Chairman), Mr. Harrell and Mr. Moelis.
COMPENSATION OF DIRECTORS AND RELATED MATTERS
Directors who are employees of the Company or Levitz do not receive any
compensation for serving on the Board of Directors of either the Company or
Levitz. Directors who are not employees of the Company or Levitz receive
$15,000 in compensation annually. Audit and Compensation Committee members
receive $1,000 for each committee meeting attended and each committee
chairman receives an additional $5,000 per year for serving as chairman. In
fiscal 1996 Messrs. Moelis, Reiling and Wright each received $10,000 for his
service on the Board's Management Succession Committee which was established
to identify and evaluate potential candidates to succeed Robert M. Elliott as
the Company's Chief Executive Officer.
Pursuant to the Company's NonEmployee Directors' Stock Option Plan, each
director who is not an employee of the Company receives an annual grant of an
option to purchase 2,000 shares of the Company's Common Stock. Such directors
may also elect to receive options to purchase shares of the Company's Common
Stock in lieu of their yearly retainer fee. The exercise price of all options
granted pursuant to this plan will be set at the average of the high and low
prices of the Common Stock on the New York Stock Exchange on the date of
grant. The term of each option is ten years from date of grant. Annual grant
options are exercisable as to one-third of the shares subject to the option
on each of the first, second and third anniversary of the grant. Elective
grant options are exercisable six months after the grant.
Mr. Moelis is a Managing Director of Donaldson, Lufkin and Jenrette
Securities Corporation ("DLJ"), which served in June 1994 as financial
consultant to Levitz Furniture Corporation in its acquisition of the John M.
Smyth Company. DLJ was also retained in 1995 by the Company to evaluate the
Company's strategic alternatives and in 1996 to advise Levitz in connection
with the solicitation of a consent and exchange offer concerning Levitz's 12
3/8 % Senior Notes. Mr. Cashin is Vice President of Court Square Capital,
Ltd., which owns 16.1% of the Company's Common Stock. Court Square Capital,
Ltd. also owns the capital stock of Furniture Comfort Corporation which, in
the ordinary course of business, sold $7.6 million of merchandise to Levitz
in Fiscal 1996. Mr. Leadbetter was an executive officer of Emnet, Inc., which
filed for protection under Chapter 11 of the United States Bankruptcy Code in
1992.
4
<PAGE>
EXECUTIVE COMPENSATION
The following summary compensation table sets forth information regarding
the annual and long-term compensation awarded or earned for each of the last
three fiscal years to those persons who were, for the fiscal year ended,
March 31, 1996, the Chief Executive Officer, the four other most highly
compensated executive officers and two former Chief Executive Officers.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------ -----------------------------
NUMBER OF
SECURITIES
RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS STOCK AWARDS OPTIONS COMPENSATION(1)
- --------------------------- ------ ----------- ----------- -------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic 1996 $262,500 $150,000 $1,562,500(3) 500,000 $ --
Chairman of the Board 1995 -- -- -- -- --
and Chief Executive Officer 1994 -- -- -- -- --
of the Company and Levitz(2)
$
George H. Bradley 1996 $225,791 -- -- -- $ 53,335
former Chief Executive 1995 307,744 64,584 -- 15,000 56,610
Officer and President of 1994 293,578 116,064 -- -- 54,814
the Company and Levitz(4)
$
Robert M. Elliott 1996 $158,858 -- -- -- $ 947
former Chairman and Chief 1995 590,044 309,300 -- -- 164,766
Executive Officer of the 1994 584,274 515,800 -- -- 160,978
Company and Levitz(5)
Edward F. Gilligan 1996 $130,781 $200,000 $625,000(7) 200,000 $ --
President--Merchandise/ 1995 -- -- -- -- --
Marketing of the Company 1994 -- -- -- -- --
and Levitz(6)
$ $
Ronald A. Kaplan 1996 $195,570 -- -- 250,000 $107,707
President--Chief Operating 1995 123,540 31,000 -- 10,000 --
Officer of the Company
and Levitz(8) 1994 117,968 20,000 -- -- --
$ $
Patrick J. Nolan 1996 $208,710 -- -- 30,000 $ 64,420
Vice President and Chief 1995 192,207 36,087 -- 15,000 29,869
Financial Officer of the 1994 182,611 64,852 -- -- 28,861
Company and Senior Vice
President--Finance of Levitz
$ $
Edward P. Zimmer 1996 $162,447 -- -- 30,000 $ 49,168
Vice President, Secretary 1995 149,445 36,087 -- 15,000 27,264
and General Counsel of the 1994 142,210 64,852 -- -- 26,705
Company and Levitz
- --------------------
<FN>
(1) In the fiscal year ended March 31, 1993 the Company granted a bonus award
to certain members of its management in recognition of past services and
the termination of an incentive bonus plan. Additional discretionary
amounts relating to that award totalling $386,666 were earned in each of
the fiscal years ended March 31, 1996, 1995 and 1994 and are included in
this column for Messrs. Kaplan, Nolan and Zimmer in the amounts of
$100,000, $56,586 and $44,041, respectively, for the fiscal year ended
March 31, 1996. Also included in this column for the fiscal year ended
March 31, 1996 are matching contributions paid pursuant to Levitz's
Associates' Savings Plan to Messrs. Bradley, Elliott, Kaplan, Nolan and
Zimmer in the amounts of $962, $204, $2,184, $1,918 and $1,928,
respectively, and the dollar value attributable to life insurance
premiums paid to Messrs. Bradley, Kaplan, Nolan and Zimmer in the amounts
of $5,706, $5,523, $5,916, and $3,199, respectively.
5
<PAGE>
(2) Mr. Bozic was named Chairman and Chief Executive Officer effective
November 1, 1995.
(3) Pursuant to the terms of his employment agreement with the Company, Mr.
Bozic is entitled to receive 500,000 shares of restricted stock as of
November 1, 1995. The dollar amount shown is the value of those shares
based on the closing price ($3.125) of the Company's Common Stock on the
New York Stock Exchange on that date. Based on such closing price
($3.625) at March 31, 1996 such shares had a value of $1,812,500. The
restrictions on these shares lapse with respect to 40% of the shares on
November 1, 1996, with respect to 30% of the shares on November 1, 1997
and with respect to 30% of the shares on November 1, 1998. Mr. Bozic has
the right to receive any dividends paid on these shares.
(4) Mr. Bradley retired on November 1, 1995.
(5) Mr. Elliott retired on July 1, 1995.
(6) Mr. Gilligan was named President--Merchandise/Marketing effective
November 28, 1995.
(7) Pursuant to the terms of his employment agreement with the Company, Mr.
Gilligan is entitled to receive 200,000 shares of restricted stock as of
November 28, 1995. The dollar amount shown is the value of those shares
based on the closing price ($3.125) of the Company's Common Stock on the
New York Stock Exchange on that date. Based on such closing price
($3.625) at March 31, 1996 such shares had a value of $725,000. The
restrictions on these shares lapse with respect to 40% of the shares on
November 28, 1996, with respect to 30% of the shares on November 28, 1997
and with respect to 30% of the shares on November 28, 1998. Mr. Gilligan
has the right to receive any dividends paid on these shares.
(8) Mr. Kaplan, formerly a Group Vice President of Levitz, was named
President--Chief Operating Officer of the Company and Levitz effective
July 1, 1995.
</FN>
</TABLE>
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth certain information concerning options
granted during the Fiscal Year ended March 31, 1996 to the executive officers
named in the Summary Compensation Table:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS GRANTED TO
SECURITIES EMPLOYEES IN THE EXERCISE OR
UNDERLYING FISCAL YEAR ENDED BASE PRICE EXPIRATION GRANT DATE
NAME OPTIONS(1) MARCH 31, 1996 ($'S/SHARE) DATE PRESENT VALUE
- ------------------- ------------- ------------------- -------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Michael Bozic ..... 500,000 40.3 3.0625 11/1/05 $915,000(2)
George H. Bradley -- -- -- -- --
Robert M. Elliott -- -- -- -- --
Edward F. Gilligan 200,000 16.1 3.250 11/28/05 404,000(3)
Ronald A. Kaplan . 200,000(4) 16.1 3.0625 11/1/05 366,000(2)
50,000 4.0 6.250 7/26/05 161,000(5)
Patrick J. Nolan . 30,000 2.4 6.250 7/26/05 96,600(5)
Edward P. Zimmer . 30,000 2.4 6.250 7/26/05 96,600(5)
<FN>
(1) All options granted have a ten year term. The options granted to Messrs.
Bozic and Gilligan and the 200,000 grant to Mr. Kaplan become exercisable
as to 40% of the shares underlying the grant after one year and as to 30%
of such shares on each of the second and third anniversary of the grant.
The remaining options become exercisable as to 25% of the shares
underlying the grant after
6
<PAGE>
one year and as to 25% of such shares on each of the second, third and
fourth anniversary of the grant. Pursuant to the terms of the employment
agreements between the Company or Levitz and each of the persons named
above, these options may become immediately exercisable upon the
occurrence of a change in control of the Company.
(2) These grant date present values are determined using the Black-Scholes
model. The material assumptions and adjustments incorporated in the
Black-Scholes model in estimating the value of the options include the
following: (a) an option exercise price as shown above, the fair market
value of the Common Stock on the date of grant, (b) an interest rate of
5.9% that represents the interest rate on a U.S. Treasury security with a
maturity date corresponding to that of the option term, (c) volatility of
70%, calculated using daily stock prices for the one-year period prior to
the grant date, (d) dividends at the rate of $0.00 per share,
representing the expected annualized dividends to be paid with respect to
a share of Common Stock, and (e) reductions of approximately 7% to
reflect the probability of forfeiture due to termination prior to
vesting, and approximately 18% to reflect the probability of a shortened
option term due to termination of employment prior to the option
expiration date.
(3) This grant date present value is determined using the Black-Scholes
model. The material assumptions and adjustments incorporated in the
Black-Scholes model in estimating the value of the options include the
following: (a) an option exercise price as shown above, the fair market
value of the Common Stock on the date of grant, (b) an interest rate of
5.9% that represents the interest rate on a U.S. Treasury Security with a
maturity date corresponding to that of the option term, (c) volatility of
75%, calculated using daily stock prices for the one-year period prior to
the grant date, (d) dividends at the rate of $0.00 per share,
representing the expected annualized dividends to be paid with respect to
a share of Common Stock, and (e) reductions of approximately 7% to
reflect the probability of forfeiture due to termination prior to
vesting, and approximately 18% to reflect the probability of a shortened
option term due to termination of employment prior to the option
expiration date.
(4) This grant was made subject to stockholder approval. See Proposal
3--Amendment of Long-Term Incentive Plan.
(5) These grant date present values are determined using the Black-Scholes
model. The material assumptions and adjustments incorporated in the
Black-Scholes model in estimating the value of the options include the
following: (a) an option exercise price as shown above, the fair market
value of the Common Stock on the date of grant, (b) an interest rate of
6.3% that represents the interest rate on a U.S. Treasury Security with a
maturity date corresponding to that of the option term, (c) volatility of
59%, calculated using daily stock prices for the one-year period prior to
the grant date, (d) dividends at the rate of $0.00 per share,
representing the expected annualized dividends to be paid with respect to
a share of Common Stock, and (e) reductions of approximately 10% to
reflect the probability of forfeiture due to a termination prior to
vesting, and approximately 22% to reflect the probability of a shortened
option term due to termination of employment prior to the option
expiration date.
</FN>
</TABLE>
The ultimate values of the options will depend on the future market price
of the Common Stock, which cannot be forecast with reasonable accuracy. The
actual value, if any, an optionee will realize upon exercise of an option
will depend on the excess of the market value of the Common Stock over the
exercise price on the date the option is exercised.
7
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
None of the officers exercised any options in the fiscal year ended March
31, 1996.
The following table provides information on the number of options held by
the executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
-------------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C>
Michael Bozic -- 500,000 $0 $281,250
George H. Bradley -- -- $0 $ 0
Robert M. Elliott -- -- $0 $ 0
Edward F. Gilligan -- 200,000 $0 $ 75,000
Ronald A. Kaplan -- 260,000 $0 $112,500
Patrick J. Nolan -- 45,000 $0 $ 0
Edward P. Zimmer -- 45,000 $0 $ 0
</TABLE>
LEVITZ RETIREMENT PLANS
Certain officers and key employees and former employees (a total of 31
persons) are participants in the Levitz Furniture Corporation Employees
Retirement Plan (the "Retirement Plan") and the Levitz Furniture Corporation
Supplemental Executive Retirement Plan (the "Supplemental Plan"). After March
31, 1996 no additional benefits will accrue under the Retirement Plan.
Retirement and disability benefits pursuant to the Supplemental Plan are
equal to 4% of the highest five-year average of salary plus bonus for each
year of service to a maximum of 15 years of service. The retirement benefit
of a participant who terminates service prior to age 65 is, except under
certain circumstances, subject to reduction. Benefits are subject to a
dollar-for-dollar reduction for similar benefits paid under the Retirement
Plan, pension plans of other employers and Social Security. Retirement and
disability benefits under the Supplemental Plan are limited to a 1996 maximum
of $437,467 per year, to be increased annually by the average increase in
annual salary for Plan participants. The following table shows annual
benefits payable (before offsets) under the Supplemental Plan to participants
at age 65 in specified years of service and remuneration classes:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE(2)
--------------------------------
REMUNERATION(1) 10 15 OR MORE AT AGE 65
- ---------------- --------- ---------------------
<S> <C> <C>
$200,000 $ 80,000 $120,000
300,000 120,000 180,000
400,000 160,000 240,000
500,000 200,000 300,000
600,000 240,000 360,000
- ---------------
<FN>
(1) For the fiscal year ended March 31, 1996, Remuneration equaled the amount
listed for each executive officer under "Annual Compensation" in the
Summary Compensation Table.
(2) As of March 31, 1996 Messrs. Bozic and Gilligan had less than one year of
service and the remaining listed executive officers had more than 15
years of service under the Supplemental Plan.
</FN>
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has employment agreements with 8 officers, including Messrs.
Bozic, Gilligan, Kaplan, Nolan and Zimmer. Each of the agreements is for an
initial term of three years and is
8
<PAGE>
automatically renewable from year to year unless either party gives certain
notice prior to the anniversary date of the agreement. The agreements provide
that if an officer is terminated by the Company other than for Cause (as
defined in the agreements) or disability or by the officer for Good Reason
(as defined in the agreements), the Company must continue to pay such
officer's base salary through the term of the employment period and would be
required to credit the officer with three years of additional service and age
for purposes of the Company's Supplemental Plan. In the event of such
termination following a Change in Control (as defined in the agreements), the
Company must pay the officer three times (i) his base salary plus (ii) an
amount equal to the average bonus awarded such officer over the last three
years. Each agreement also contains certain non-competition provisions.
Mr. Bozic's employment agreement provides for a yearly salary of $650,000
with a guaranteed yearly bonus of $150,000. The agreement also provides for
the grant of 500,000 shares of restricted stock and the grant of an option to
purchase 500,000 shares of stock, as described above. Mr. Gilligan's
employment agreement provides for a yearly salary of $400,000 with a
guaranteed yearly bonus of $100,000 and a one-time signing bonus of $100,000.
The agreement also provides for the grant of 200,000 shares of restricted
stock and the grant of options to purchase 200,000 shares of stock, as
described above.
In the event of termination at their current salary, the current executive
officers listed in the Summary Compensation Table would receive the following
total compensation pursuant to the above-described employment agreements: Mr.
Bozic--$1,950,000, Mr. Gilligan--$1,200,000, Mr. Kaplan--$750,000, Mr.
Nolan--$636,000 and Mr. Zimmer--$495,000. These amounts assume three-year
payments of current salaries. In the event of (i) a Change in Control of the
Company or Levitz and (ii) termination of that person's employment with the
Company or Levitz within two years of the Change in Control, the executive
officers listed in the Summary Compensation Table would receive the following
total compensation (assuming current salary and bonuses) pursuant to these
employment agreements: Mr. Bozic--$2,100,000, Mr. Gilligan--$1,300,000, Mr.
Kaplan--$801,000, Mr. Nolan--$737,000 and Mr. Zimmer--$596,000.
9
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
TO OUR STOCKHOLDERS
The Compensation Committee (the "Committee") is comprised of three
independent, non-employee directors who have no "interlocking" relationship
as defined by the Securities and Exchange Commission. The Committee's goal is
to develop executive compensation policies that are consistent with, and
linked to, the Company's strategic business objectives and company values.
The Committee continues to assess the effectiveness of, and design and
administer executive compensation programs that support overall corporate
policy. The Committee works with the Vice President--Human Resources on
executive compensation issues, and has available to it an outside executive
compensation consultant, as well as access to independent compensation data.
KEY ELEMENTS OF EXECUTIVE OFFICER COMPENSATION
The key elements of Levitz's executive officer compensation program are
base salary, annual incentives (bonus), and long-term incentives (stock
options). Base salary pays executives for the base job, bonuses reward for
favorable annual performance, and stock options provide a link to
stockholders' interests and an incentive to think long-term.
To determine appropriate compensation levels within each component, the
Committee considers all elements of the executive compensation program. The
Committee administers these programs with a goal of providing "total
compensation" that approximates the competitive 50th percentile of the
market, as defined below. Actual total compensation levels may be above or
below target based on performance levels achieved (e.g., performance under
the annual incentive plan, stock price appreciation).
Competitive market data is provided by an independent compensation
consultant. For competitive pay analyses, the Committee chooses comparator
companies considering such factors as similar sales volume to Levitz, the
same line of business, and/or direct competitors. The Committee believes
these criteria provide reasonable pay comparisons, enabling the Company to
assure executives that they are being paid fairly, while assuring
stockholders that executive pay levels are reasonable.
The companies chosen for compensation comparisons are not the same
companies that comprise the published industry index in the performance
graph. The Committee believes that the most direct competitors for executive
talent are not necessarily the same companies that would be included in a
published industry index for comparing stockholder returns.
BASE SALARIES
The Committee regularly reviews each executive officer's base salary.
Initial base salary criteria includes the executive's job content and level
of responsibility, prior experience, job tenure, internal equity issues, and
external pay practices. Levitz targets salary levels at the 50th percentile.
Base salary increases for executives are influenced by a number of
factors, including continued satisfactory individual performance and
competitive market data. The Committee considers the following factors to be
of equal importance when evaluating continued satisfactory individual
performance: efforts in promoting Company values; continuing educational and
management training; developing relationships with customers, suppliers, and
employees; demonstrating leadership abilities among co-workers; and other
goals.
Overall, based on these factors, Levitz's executive officers received
salary increases in fiscal 1996 at rates commensurate to increases received
at other companies. On average, officer salary levels are at or near the 50th
percentile of the market.
10
<PAGE>
CHIEF EXECUTIVE OFFICER: Mr. Bozic was appointed Chief Executive Officer
effective November 1, 1995. His salary of $650,000 is higher than the 50th
percentile for other chief executive officers. However, the Committee
believes Mr. Bozic's salary range is within the competitive range for other
chief executive officers in the comparator group, when factors such as prior
experience and individual performance are taken into account.
ANNUAL INCENTIVES
The annual incentive plan (the "Plan") promotes Levitz's
pay-for-performance philosophy, in that the Company communicates specific
annual corporate performance goals, and then motivates executive officers to
achieve those goals. The Plan is structured to foster teamwork among the
executive officers and to focus efforts on corporate results that directly
impact stockholders.
Payout opportunities are based on targeted corporate performance as
measured by a combination of return on sales (i.e. income from operations
expressed as a percentage of sales for the year) and specific key objectives
assigned to individual officers. The Plan does allow for some Committee
discretion. It is unlikely that the Committee would exercise discretion,
except in the case of an extraordinary event (outside of management's
control) that affects payout calculations. No award payout was made for
fiscal 1996.
At the beginning of each year, the Company establishes a range of
corporate performance levels and a corresponding range of payout
opportunities. Officers can earn a percentage of base salary based on the
performance level achieved, up to a specified maximum of base salary.
Targeted bonus opportunities and targeted performance levels are set at
market levels. The Company regularly analyzes the historical performance of
other retailers to verify that Levitz's target performance levels are set at
market. The Committee believes these targeted goals are achievable with the
Company's attainment of a significant performance level.
Actual payouts may fall above or below the targeted percentage of base
salary, depending on the level of corporate performance achieved. In years of
below-expected performance, a below-target annual incentive will be paid.
Corporate performance for fiscal 1996 was below the targeted performance.
Chief Executive Officer: For fiscal 1996, Mr. Bozic's annual bonus payment
was $150,000, all of which was based on the contractual arrangement contained
in his employment agreement with the Company.
LONG-TERM INCENTIVES
Long-term incentives may be provided pursuant to an omnibus long-term
incentive plan, authorizing the grant of stock options, stock appreciation
rights, restricted stock, and performance units or shares.
STOCK OPTIONS
During fiscal 1996, the Company made its stock option grants to the
executive officers listed in the Summary Compensation Table. The stock
options were granted at prices equal to the fair market values of the
Company's stock on the grant dates. Accordingly, the options have value to
the executives only if the stock price appreciates from the grant date. The
Committee believes this design will focus executives on the creation of
stockholder value over the long-term, and will encourage equity ownership.
11
<PAGE>
Stock option grant sizes are based on competitive practice, and are
targeted to the 50th percentile of long-term incentive values granted to
executives at other companies. The Committee's objective is to deliver a
competitive award opportunity based on the dollar value of the award granted.
As a result, the number of shares underlying stock option awards is dependent
on stock price and may change from year to year.
The Committee approved an option award of 200,000 shares to Mr. Kaplan
upon his confirmation as President--Chief Operating Officer. This grant is
above the 50th percentile of long-term incentive grants to similarly situated
executives at other companies. However, the Committee believes that such
grant was necessary to retain high quality and experienced management after
the retirement of Mr. Elliott and Mr. Bradley.
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT
Section 162(m) of the Internal Revenue Code generally limits the corporate
deduction for compensation paid to executive officers named in the proxy to
$1 million, unless certain requirements are met. The Company believes that it
is not at risk of losing deductions and currently is not affected by the
limits on deductibility as a result of the transition rules for privately
held companies that go public. In the future, the Committee will use its best
judgment in such cases, taking all factors into account, including the
materiality of any deductions that may be lost. The Company is asking
stockholders to ratify an amendment to the Company's Long-Term Incentive Plan
which will limit to 500,000 the number of options or stock appreciation
rights that can be granted to any one participant in any one year. That
amendment, if ratified, will maintain the deductibility of certain
option-related compensation for executive officers.
NEW EXECUTIVE OFFICERS
In connection with their employment in November 1995, Messrs. Bozic and
Gilligan negotiated compensation packages which are described elsewhere in
the Proxy Statement. Such arrangements were negotiated with the Company at
arm's-length and, in the Company's judgment, are consistent with the overall
compensation goals of the Company. The Company believes that the compensation
packages are fair and reasonable considering the management needs of the
Company and competition in the industry.
CONCLUSION
The Committee will continue to monitor the effectiveness of the Company's
total compensation program to meet overall strategic business objectives and
executive compensation policies.
Wayne W. Wright (Chairman)
Robert M. Harrell
Kenneth D. Moelis
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert M. Harrell, Kenneth D. Moelis and Wayne W. Wright comprise the
Compensation Committee. Mr. Moelis is a Managing Director of Donaldson,
Lufkin and Jenrette Securities Corporation, an investment banking firm which
performs services for the Company. See "Compensation of Directors and Related
Matters."
12
<PAGE>
STOCK PERFORMANCE GRAPH
The following line graph compares the cumulative total stockholder return
on the Company's Common Stock on a semi-annual basis from July 2, 1993, the
date of the Company's initial public offering of the Common Stock, through
March 31, 1996, with the cumulative total return on the Standard & Poor's 500
Stock Index ("S&P 500") and the Standard & Poor's Specialty Retailers Index
("S&P Retail") for the same period. In accordance with the rules of the
Securities and Exchange Commission, the returns are indexed to a value of
$100 at July 2, 1993 and assume that all dividends were reinvested.
COMPARISON OF QUARTERLY CUMULATIVE TOTAL RETURN
LEVITZ FURNITURE INCORPORATED, S & P 500 INDEX
AND S&P RETAIL INDEX
TOTAL SHAREHOLDER RETURNS
[INSERT GRAPH]
<TABLE>
<CAPTION>
QUARTER OR PERIOD ENDED
-------------------------------------------------------------------------------------
07/02/93 09/30/93 03/31/94 09/31/94 03/31/95 09/30/95 03/31/96
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
LFI .......... $100 $129 $110 $ 66 $ 45 $ 45 $ 26
S&P 500 ...... 100 104 102 107 118 139 156
S&P Retail .. 100 99 98 104 100 97 106
</TABLE>
13
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and officers to file with the Securities and Exchange
Commission and the New York Stock Exchange initial reports of ownership and
reports of changes in ownership of the Company's Common Stock. Copies of all
such Section 16(a) reports are required to be furnished to the Company. These
filing requirements also apply to holders of more than ten percent of the
Company's Common Stock. To the Company's knowledge, based solely on a review
of the copies of Section 16(a) reports furnished to the Company during the
fiscal year ended March 31, 1996, all Section 16(a) filing requirements
applicable to the Company's officers and directors were complied with on a
timely basis except that a Form 4, Statement of Changes in Beneficial
Ownership reporting the sale of shares of the Company's Common Stock, with
respect to George H. Bradley, the Company's former Chief Executive Officer,
was filed late.
BENEFICIAL OWNERSHIP OF COMMON STOCK
PRINCIPAL STOCKHOLDERS
As of the July 20, 1996 Record Date, the Common Stock was held of record
by 642 stockholders. The following table sets forth certain information
concerning the beneficial ownership of Common Stock by each stockholder who
is known by the Company to own beneficially in excess of 5% of the
outstanding Common Stock, by each director, by the executive officers named
in the Summary Compensation Table above, and by all directors and executive
officers as a group, as of the Record Date. Except as otherwise indicated,
all persons listed below have (i) sole voting power and investment power with
respect to their shares of Common Stock, except to the extent that authority
is shared by spouses under applicable law, and (ii) record and beneficial
ownership with respect to their shares of Common Stock.
NO. OF
SHARES OF
NAME OF BENEFICIAL OWNER COMMON STOCK(1) PERCENT(1)
- ------------------------ ----------------- ----------
Apollo Investment Fund III; 5,000,000(2) 14.4
Apollo Overseas Partners, III, L.P.
and Apollo (U.K.) Partners, III, L.P.
Two Manhattanville Road
Purchase, New York, 10577
Michael Bozic 10,000(3) *
6111 Broken Sound Parkway, N.W.
Boca Raton, Florida
George H. Bradley 200,000 *
5276 Boca Marina Circle South
Boca Raton, Florida
--
Edward F. Gilligan (4) --
6111 Broken Sound Parkway, N.W.
Boca Raton, Florida
Richard M. Cashin 176,273(5) *
399 Park Avenue, 14th Floor
New York, New York
Court Square Capital, Ltd. ("CSC") 4,764,720(6) 16.1
399 Park Avenue, 10th Floor
New York, New York
14
<PAGE>
NO. OF
SHARES OF
NAME OF BENEFICIAL OWNER COMMON STOCK(1) PERCENT(1)
- ------------------------ --------------- ----------
Robert M. Elliott 994,590 3.4
1400 South Ocean Blvd.
Boca Raton, Florida
Robert M. Harrell 3,418(7) *
9139 Ridge Pine Trail
Orlando, Florida
Ronald A. Kaplan 82,500(8) *
6111 Broken Sound Parkway, N.W.
Boca Raton, Florida
Bruce C. Leadbetter 137,113(9) *
7701 Lemmon Avenue
Dallas, Texas
Kenneth D. Moelis 28,001(10) *
Donaldson, Lufkin & Jenrette
2121 Avenue of the Stars
Los Angeles, California
Patrick J. Nolan 269,019(11) *
6111 Broken Sound Parkway, N.W.
Boca Raton, Florida
Pioneering Management Corporation 2,960,800 10.0
60 State Street
Boston, Massachusetts
Henry B. Reiling 55,678(12) *
Harvard Graduate School of
Business Administration
Morgan 385, Soldiers Field
Boston, Massachusetts
Wayne W. Wright 5,501(13) *
402 West Lonnquist Parkway
Mt. Prospect, Illinois
Edward P. Zimmer 78,974(14) *
6111 Broken Sound Parkway, N.W.
Boca Raton, Florida
All Officers and Directors of the Company
as a group (11 persons) 855,127(15) 2.9
All Officers and Directors of Levitz
as a group (8 persons) 547,682(16) 1.8
- ------------------
* Less than 1.0%
(1) Includes Voting Common Stock and Non-Voting Common Stock. The Non-Voting
Common Stock is identical to the Voting Common Stock in all respects,
except that the Non-Voting Common Stock is non-voting and is convertible
into Voting Common Stock. See "Voting Rights and Description of Proxies."
On July 20, 1996, there were 26,046,966 shares of Voting Common Stock and
3,573,662 shares of Non-Voting Common Stock outstanding, which were held by
637 and 5 holders of record, respectively.
15
<PAGE>
(2) Represents warrants to purchase 5,000,000 shares of Common Stock.
(3) Excludes 500,000 shares of restricted stock which Mr. Bozic is entitled to
receive pursuant to his employment agreement with the Company.
(4) Excludes 200,000 shares of restricted stock which Mr. Gilligan is entitled
to receive pursuant to his employment agreement with the Company.
(5) Includes beneficial ownership of 6,849 shares which may be acquired within
60 days pursuant to stock option grants.
(6) CSC is an indirect wholly-owned subsidiary of Citicorp. Of these shares
3,484,888 are Non-Voting Common Stock.
(7) Includes beneficial ownership of 2,001 shares which may be acquired within
60 days pursuant to stock option grants.
(8) Includes beneficial ownership of 12,500 shares which may be acquired within
60 days pursuant to stock option grants.
(9) Includes beneficial ownership of 6,849 shares which may be acquired within
60 days pursuant to stock option grants. Also includes shares which Mr.
Leadbetter may acquire upon exercise of a currently exercisable option
granted to him by a stockholder of the Company, and 1,000 shares held by
members of Mr. Leadbetter's family. Mr. Leadbetter disclaims beneficial
ownership of such shares held by members of his family.
(10) Includes beneficial ownership of 2,001 shares which may be acquired within
60 days pursuant to stock option grants. Also includes 6,000 shares held by
members of Mr. Moelis's family. Mr. Moelis disclaims beneficial ownership
of such shares.
(11) Includes beneficial ownership of 7,500 shares which may be acquired within
60 days pursuant to stock option grants. Also includes 28,019 shares held
by members of Mr. Nolan's family. Mr. Nolan disclaims beneficial ownership
of such shares held by members of his family.
(12) Includes beneficial ownership of 6,849 shares which may be acquired within
60 days pursuant to stock option grants. Also includes 3,250 shares held in
trust for members of Mr. Reiling's family. Mr. Reiling disclaims beneficial
ownership of such shares held by members of his family.
(13) Includes beneficial ownership of 2,001 shares which may be acquired within
60 days pursuant to stock option grants.
(14) Includes beneficial ownership of 7,500 shares which may be acquired within
60 days pursuant to stock option grants.
(15) Includes beneficial ownership of 54,050 shares which may be acquired within
60 days pursuant to stock option grants and excludes an aggregate of
700,000 shares of restricted stock which Messrs. Bozic and Gilligan are
entitled to receive pursuant to their employment agreements with the
Company and Levitz.
(16) Includes beneficial ownership of 52,500 shares which may be exercised
within 60 days pursuant to stock option grants and excludes an aggregate of
700,000 shares of restricted stock which Messrs. Bozic and Gilligan are
entitled to receive pursuant to their employment agreements with the
Company and Levitz.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject to stockholder ratification, the Board of Directors has
reappointed the firm of Arthur Andersen LLP, as independent auditors to make
an examination of the accounts of the Company for the fiscal year ending
March 31, 1997. Arthur Andersen LLP has served as the independent auditors of
the Company since the beginning of the fiscal year ended March 31, 1991.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" SUCH
RATIFICATION. UNLESS CONTRARY INSTRUCTIONS ARE GIVEN, THE PROXIES SOLICITED
BY MANAGEMENT WILL BE VOTED "FOR" SUCH RATIFICATION. Ratification will
require the affirmative vote of the holders of a majority of the shares of
Voting Common Stock present in person or by proxy and entitled to vote at the
meeting.
16
<PAGE>
One or more representatives of Arthur Andersen LLP are expected to be
present at the Annual Meeting and will have an opportunity to make a
statement if they desire to do so and will be available to respond to
questions.
PROPOSAL 3
APPROVAL OF AMENDMENTS TO LONG-TERM INCENTIVE PLAN
AMENDMENT TO INCREASE NUMBER OF AUTHORIZED SHARES
The Company adopted the long term incentive plan (the "Incentive Plan") in
1993. As of the date of this Proxy Statement all but 51,031 of the 1,481,031
shares of Common Stock previously authorized for issuance under the Incentive
Plan remain available for grants of stock options, stock appreciation rights
and restricted stock and performance units. Of the stock options granted,
none have been exercised, and 63,625 of such unexercised options are vested
and immediately exercisable. In addition, stock options for 290,000 shares of
Common Stock have been granted by the Committee, subject to stockholder
approval, to certain key employees (including officers who are employees) of
the Company and certain of its affiliates.
The Compensation Committee of the Board of Directors adopted, subject to
stockholder approval, an amendment to the Incentive Plan to increase the
number of shares of Common Stock authorized for issuance thereunder from
1,481,031 shares to 2,881,031 shares. The Board of Directors believes that
the proposed amendment to increase the number of shares of Common Stock
authorized under the Incentive Plan is necessary to maintain the
effectiveness of the Incentive Plan in achieving the Company's objectives of
attracting, motivating and retaining officers and employees of the Company,
and increasing the identity of interest of such persons with the Company's
stockholders.
The approval of the amendment to the Incentive Plan to increase the number
of shares of Common Stock authorized for issuance thereunder from 1,481,031
to 2,981,031 shares will require the approval of the holders of a majority of
the outstanding shares of voting Common Stock present in person or
represented by proxy at the Annual Meeting and entitled to vote. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE
AMENDMENT TO THE INCENTIVE PLAN. UNLESS CONTRARY INSTRUCTIONS ARE GIVEN, THE
PROXIES SOLICITED BY MANAGEMENT WILL BE VOTED "FOR" SUCH APPROVAL.
AMENDMENT TO LIMIT THE MAXIMUM NUMBER OF SHARES THAT MAY BE GRANTED TO ANY
INDIVIDUAL
In order that compensation payable upon exercise of options and stock
appreciation rights granted under the Incentive Plan is fully deductible, the
Board of Directors adopted, subject to stockholder approval, an amendment to
the Incentive Plan limiting the maximum number of shares with respect to
which stock options or stock appreciation rights may be granted pursuant to
the Incentive Plan to any participant to 500,000 shares in each fiscal year.
The approval of the amendment to the Incentive Plan to limit the maximum
number of shares of Common Stock with respect to which options or stock
appreciation rights may be granted to any participant pursuant to the
Incentive Plan will require the approval of the holders of a majority of the
outstanding shares of voting Common Stock present in person or represented by
proxy at the Annual Meeting and entitled to vote. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THIS AMENDMENT
TO THE INCENTIVE PLAN. UNLESS CONTRARY INSTRUCTIONS ARE GIVEN, THE PROXIES
SOLICITED BY MANAGEMENT WILL BE VOTED "FOR" SUCH APPROVAL.
DESCRIPTION OF THE INCENTIVE PLAN
The following summary describes the material terms of the Incentive Plan
as it is proposed to be amended and restated. This summary description does
not purport to be complete and is qualified in its
17
<PAGE>
entirety by reference to the complete text of the Incentive Plan which is on
file with the Company's Secretary, 6111 Broken Sound Parkway, N.W., Boca
Raton, Florida 33487. The complete text of the Amendments is attached hereto
as Exhibit A.
On July 19, 1996, the most recent practical date prior to the printing of
this Proxy Statement, the market value of the Common Stock underlying
outstanding stock options, based on the closing price per share of Common
Stock on the New York Stock Exchange, was $5.00.
Pursuant to the Incentive Plan officers and key employees of the Company
are eligible to receive awards of stock options and stock appreciation rights
("SARs"). Options granted under the Incentive Plan may be "incentive stock
options" ("ISOs"), within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") or nonqualified stock options
("NQSOs"). SARs may be granted simultaneously with the grant of an option.
The Incentive Plan is administered by a committee (the "Committee"),
established by the Company's Board of Directors, the composition of which at
all times satisfies the provision of Rule 16b-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Subject to the provisions of
the Incentive Plan, the Committee determines the type of award, when and to
whom awards will be granted, and the number of shares covered by each award.
The Committee also determines the terms, provisions and kind of consideration
payable, if any, with respect to awards. In addition, the Committee has sole
discretionary authority to interpret the Incentive Plan and to adopt rules
and regulations related thereto. In determining the persons to whom awards
will be granted and the number of shares covered by each award, the Committee
takes into account the contribution to the management, growth and/or
profitability of the business of the Company by the respective persons and
such other factors as the Committee deems relevant.
An option may be granted on such terms and conditions as the Committee may
approve, and generally may be exercised for a period of up to 10 years from
the date of grant. Options are granted with an exercise price at least equal
to the "Fair Market Value" (as defined in the Incentive Plan) on the date of
grant. In the case of ISOs, certain limitations will apply with respect to
the aggregate value of option shares which can become exercisable for the
first time during any one calendar year, and certain additional limitations
will apply to "Insiders" (as defined in the Incentive Plan). The Committee
may provide for the payment of the option price in cash, by delivery of other
Common Stock having a Fair Market Value equal to such option price, by a
combination thereof or by any other method in accordance with the terms of
the option agreements. The Incentive Plan contains special rules governing
the time of exercise in the case of death, disability or other termination of
employment and also provides for accleration of the exercisability of options
in the event of a "Change in Control" (as defined in the Incentive Plan).
The Incentive Plan also permits the Committee to grant SARs with respect
to all or any portion of the shares of Common Stock covered by options.
The Incentive Plan permits the Committee to include in any NQSO grant a
provision whereby the Company will pay to the grantee an amount that is equal
to the savings the Company realized through tax deductions related to the
option exercise.
The Incentive Plan permits the Committee to grant SARs in tandem with or
independent of options. SARs which are freestanding are granted at a price no
less than the Fair Market Value (as defined in the Incentive Plan) on the
date of grant. Otherwise, SAR grant prices equal the exercise price of the
related option. SARs have an exercise period of up to 10 years from the date
of grant. SARs granted in tandem with options are exercisable upon the
surrender of the related option and only if the related option is then
exercisable. Freestanding SARs are exercisable upon the terms and conditions
imposed by the Committee. Payment will be made in cash, or shares of common
stock, at the Committee's discretion, in an amount equal to the difference
between the Fair Market Value on the date of exercise over the grant price
for each share with respect to the SAR exercise.
18
<PAGE>
The Incentive Plan also provides for the grant of Restricted Stock and
Performance Units/Shares (as defined in the Incentive Plan) on terms and
conditions and subject to performance goals as determined by the Committee.
The Committee may also attach Limited Stock Application Rights ("LSARs") to
any option or SAR. LSARs have a term equal to that of the related option or
SAR and are exercisable upon a Change In Control (as defined in the Incentive
Plan). Upon exercise of an LSAR the grantee is entitled to a payment, in lieu
of payment pursuant to the related option or SAR, in an amount equal to the
excess of the greater of (i) the highest price per share paid or offered in a
Change in Control transaction or (ii) the highest Fair Market Value per share
during the 60 days preceding the Change in Control over the grant price of
the related SAR or the option price of the related option.
The Company's Board of Directors may at any time and from time to time
suspend, amend, modify or terminate the Incentive Plan; provided however,
that, unless approved by the holders of a majority of the issued and
outstanding securities of the Company entitled to vote, to the extent
required by the Exchange Act, no such change may (i) materially increase the
aggregate number of shares as to which options may be granted under the
Incentive Plan (except for adjustments provided for in the Incentive Plan to
reflect stock dividends or other recapitalizations affecting the number or
kind of outstanding shares), (ii) materially increase the benefits accruing
to optionees, or (iii) materially modify the requirements as to eligibility
for participation in the Incentive Plan. In addition, no such change may
adversely affect any option previously granted, except with the written
consent of the optionee.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
OF AWARDS UNDER THE INCENTIVE PLAN
INCENTIVE STOCK OPTIONS. A holder of an incentve stock option will
generally realize taxable income only upon disposition of shares acquired
upon exercise of the incentive stock option rather than upon the grant or
timely exercise of the option. Tax consequences of an untimely exercise of an
incentive stock option are determined in accordance with the rules applicable
to nonqualified stock options. The amount by which the fair market value of
the Comon Stock on the exercise date of an incentive stock option exceeds the
exercise price generally will increase the option holder's "alternative
minimum taxable income."
NONQUALIFIED STOCK OPTIONS. A holder of a nonqualified stock option
generally will not be subject to tax at the time of the grant of the option.
Rather, upon exercise of a nonqualified stock option, the optionee generally
will include in ordinary income the excess, if any, of the fair market value
of the Common Stock purchased over the exercise price. The Company generally
will be entitled to a deduction at the time and in the amount that the holder
recognizes ordinary income.
STOCK APPRECIATION RIGHTS. The grant of stock appreciation rights has no
federal income tax consequences at the time of grant. Upon the exercise of
stock appreciation rights, the amount received is generally taxable as
ordinary income, and the Company is entitled to a corresponding deduction.
RESTRICTED STOCK. Generally, the grant of restricted stock has no federal
income tax consequences at the time of grant. Rather, at the time the shares
are no longer subject to a substantial risk of forfeiture (as defined in the
code) the holder will recognize ordinary income in an amount equal to the
fair market value of such shares. A holder may, however, elect to be taxed at
the time of the grant. The Company generally will be entitled to a deduction
at the time and in the amount that the holder recognizes ordinary income.
RESTRICTED STOCK UNITS. The grant of Restricted Stock Units has no federal
income tax consequences at the time of grant. Upon the receipt of payment,
the amount received is generally taxable as ordinary income, and the Company
is entitled to a corresponding deduction.
The foregoing constitutes a brief summary of the principal federal income
tax consequences of the transactions based on current federal income tax
laws. This summary is not intended to be exhaustive and does not describe
state, local or foreign tax consequences.
19
<PAGE>
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
In accordance with Rule 14a-8 under the Securities Exchange Act of 1934,
any stockholder proposals intended to be presented at the 1997 Annual Meeting
of Stockholders must be received by the Company no later than March 25, 1997
in order to be considered for inclusion in the Proxy Statement and form of
proxy relating to that meeting.
Section 8 of Article II of the Company's By-Laws provides that, in order
for a stockholder to nominate a person for election to the Board of Directors
at an annual meeting of the Company, such stockholder must be a stockholder
of record on the date the notice described below is given and on the record
date for the annual meeting, and must have given timely prior written notice
to the Secretary of the Company of such stockholder's intention to make such
nomination before the meeting. To be timely, notice must be received by the
Company not less than sixty days nor more than ninety days prior to the date
of the annual meeting. Provided, however, that in the event less than seventy
days notice or prior public disclosure of the date of the meeting is given to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the tenth day following the day on which
such notice of the date of the annual meeting was mailed or such public
disclosure of the date of the annual meeting was made, whichever first
occurs. Such notice must contain certain information about the person whom
the stockholder proposes to nominate and the stockholder giving the notice,
including the name, age, residence and business address, occupation, and
class and number of shares of Common Stock owned beneficially or of record by
the proposed nominee and the name, record address and class and number of
shares of Common Stock beneficially owned by such stockholder as well as a
description of any arrangements between such stockholder and the proposed
nominee pursuant to which the nominations are to be made. In addition, such
notice must contain any other information related to the proposed nominee or
such stockholder that would be required to be disclosed in a proxy statement.
The notice must also contain a representation that such stockholder intends
to appear in person or by proxy at the meeting to nominate the persons named
in such notice. Such notice must be accompanied by a written consent of each
proposed nominee to being named as a nominee and to serve as a director if
elected.
In addition, Section 9 of Article II of the Company's By-Laws provides
that, in order for a stockholder to propose any matter for consideration at
an annual meeting of the Company, such stockholder must be a stockholder of
record on the date the notice described below is given and on the record date
for the annual meeting, and must have given timely prior written notice to
the Secretary of the Company of such stockholder's intention to bring such
business before the meeting. To be timely, notice must be received by the
Company not less than sixty days nor more than ninety days prior to the date
of the annual meeting. Provided, however, that in the event less than seventy
days notice or prior public disclosure of the date of the meeting is given to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the tenth day following the day on which
such notice of the date of the annual meeting was mailed or such public
disclosure of the date of the annual meeting was made, whichever first
occurs. Such notice must contain certain information about such business and
the stockholder who proposes to bring the business before the meeting,
including the name and record address of such stockholder, a brief
description of the business the stockholder proposes to bring before the
meeting, the reasons for conducting such business at the annual meeting, the
class and number of shares of Common Stock beneficially or of record owned by
such stockholder, any material interest of such stockholder in the business
so proposed, a description of all arrangements or understandings between such
stockholder and any other person or persons (including their names) in
connection with the proposal of such business by such stockholder and a
representation that such stockholder intends to appear in person or by proxy
at the annual meeting to bring such business before the meeting.
20
<PAGE>
ADDITIONAL INFORMATION
Copies of the Company's 1996 Annual Report to Stockholders, which includes
audited financial statements, are being mailed to stockholders of the Company
with this Proxy Statement. Additional copies are available without charge on
request. Requests should be addressed to the Secretary, Levitz Furniture
Incorporated, 6111 Broken Sound Parkway, N.W., Boca Raton, Florida 33487.
LEVITZ FURNITURE INCORPORATED
Boca Raton, Florida
July 23, 1996
21
<PAGE>
EXHIBIT A
AMENDMENT TO
LEVITZ FURNITURE INCORPORATED
EXECUTIVE LONG-TERM INCENTIVE PLAN
The Levitz Furniture Incorporated Executive Long-Term Incentive Plan (the
"Plan"), which became effective as of April 1, 1993, is hereby amended as set
forth below, subject to the approval of the Company's stockholders, effective
as of April 1, 1996.
1. Article 4 of the Plan is amended by restating the first sentence of
Section 4.1 thereof to read as follows:
4.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 4.3
herein, the total number of Shares available for grant under the Plan, as
of April 1, 1996, shall be 2,881,031.
2. Article 6 of the Plan is amended by restating the second sentence of
Section 6.1 thereof to read as follows:
The Committee shall have discretion in determining the number of Shares
subject to Options granted to each Participant; PROVIDED, HOWEVER, that,
as of April 1, 1996, the number of Shares with respect to which Options
may be granted pursuant to the Plan to any Participant in any fiscal year
may not exceed 500,000.
3. Article 7 of the Plan is amended by restating the first sentence of
Section 7.1 thereof to read as follows:
7.1 GRANT OF SARS. Subject to the terms and conditions of the Plan, a
SAR may be granted to an Employee at any time and from time to time as
shall be determined by the Committee; PROVIDED, HOWEVER, that, as of April
1, 1996, the number of Shares with respect to which SARs may be granted
pursuant to the Plan to any Participant in any fiscal year may not exceed
500,000.
Except as set forth above, the Plan is hereby ratified and confirmed in
all respects.
A-1
<PAGE>
LEVITZ FURNITURE INCORPORATED
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON AUGUST 20, 1996
KNOW ALL MEN BY THESE PRESENTS, that the undersigned stockholder(s) of
Levitz Furniture Incorporated (the "Company"), do(es) hereby appoint Messrs.
Michael Bozic and Edward P. Zimmer, and each of them, true and lawful proxy
or proxies, with full power of substitution in each, for and in the name of
the undersigned to vote all shares of common stock, $.01 par value, of the
Company outstanding in the name of the undersigned at the Annual Meeting of
Stockholders of the Company to be held at the Deerfield Beach Hilton, 100
Fairway Drive, Deerfield Beach, Florida on August 20, 1996 at 9:00 a.m. local
time, and at any and all adjournments thereof, with all the powers the
undersigned would possess if personally present, hereby revoking all previous
proxies. This Proxy is revocable. The undersigned reserves the right to
attend and vote in person. The undersigned hereby acknowledges receipt of the
Notice of Annual Meeting of Stockholders dated July 23, 1996, the Proxy
Statement accompanying the Notice, and the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1996.
Said proxies are directed to vote as indicated on the following proposals:
1. ELECTION OF CLASS III DIRECTORS:
NOMINEES: MICHAEL BOZIC AND HENRY B. REILING
[ ] FOR all nominees listed above.
[ ] WITHHOLD AUTHORITY to vote for all nominees listed above.
[ ] FOR all nominees listed above except that authority is withheld to
vote for any nominee whose name is written on the line immediately
below:
- -------------------------------------------------------------------------------
2. TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR THE YEAR ENDING MARCH 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. TO APPROVE AMENDMENTS TO THE COMPANY'S LONG-TERM INCENTIVE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED, AND TO BE SIGNED, ON THE OTHER SIDE)
<PAGE>
4. OTHER MATTERS:
To vote with discretionary authority upon any other matters which may
properly come before the meeeting or any adjournment thereof.
Each stockholder should specify by a mark in the appropriate box above how
he wishes his shares voted. Shares will be voted as specified. IF NO
SPECIFICATION IS MADE ABOVE, SHARES WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES LISTED IN ITEM 1 ABOVE, FOR THE APPOINTMENT OF ARTHUR ANDERSEN
LLP AS DESCRIBED IN ITEM 2 ABOVE, AND FOR THE APPROVAL OF AMENDMENTS TO
THE COMPANY'S LONG-TERM INCENTIVE PLAN AS DESCRIBED IN ITEM 3 ABOVE.
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE REPLY ENVELOPE. IN
ADDITION, PLEASE CHECK THE BOX BELOW IF YOU ARE PLANNING TO ATTEND THE ANNUAL
MEETING IN PERSON.
[ ] I AM PLANNING TO ATTEND THE ANNUAL MEETING IN PERSON.
Dated:___________________________, 1996
_______________________________________
_______________________________________
_______________________________________
Signature(s) of Stockholder(s)
Note: Signature(s) should agree with the
name(s) on the stock certificates.
Executors, administrators, trustees,
guardians, etc. should so indicate when
signing.
