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 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:
LA-Z-BOY INCORPORATED
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Monroe, Michigan
La-Z-Boy Incorporated: June 26, 1998
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 27, 1998 at 11:00 o'clock a.m.
Eastern Daylight Time for the following purposes:
(1) To elect three (3) directors to three year terms scheduled for
expiration in 2001;
(2) to consider and act upon a proposal to amend the Company's Articles of
Incorporation to increase the number of authorized shares of the Company's
Common Stock from 40,000,000 to 150,000,000;
(3) to transact such other business as may properly come before the meeting
or any adjournments thereof.
A copy of the Company's fiscal 1998 Annual Report, containing the financial
statements of the Company for the year ended April 25, 1998, is enclosed
herewith.
Only shareholders of record at the close of business on June 19, 1998 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 26, 1998
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 27, 1998
and at any adjournments thereof. The meeting will be held at 11:00 a.m., Eastern
Daylight Time, 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 and FOR
approval of the amendment to the Company's Articles of Incorporation to increase
the number of authorized common shares. 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 19, 1998, there were issued and outstanding 17,804,571 shares of
the Company's Common Stock, ("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 19, 1998 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 a beneficial owner of 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 under
outstanding options or has rights to convert other securities into common
shares.
The following information is furnished in compliance with these rules with
respect to each person known to the Company to beneficially own more than 5% of
the Company's common shares as of June 19, 1998, based on data provided by such
person.
TABLE I
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
Edwin J. Shoemaker Trust
c/o Monroe Bank & Trust, Trustee
Monroe, Michigan 48161.................. 1,006,619 5.654%
Monroe Bank & Trust,
Monroe, Michigan 48161.................. 4,506,752(1) 25.312%
- ----------
(1) Shares reported include the shares reported above for the Shoemaker Trust,
as well as shares held in various other trusts of which Monroe Bank & Trust is
the trustee or a co-trustee or in the estate of Charles T. Knabusch, or other
estates, for which Monroe Bank & Trust is the personal representative. In such
capacities, Monroe Bank & Trust has sole or shared investment and/or voting
power over these shares and accordingly is deemed a beneficial owner of all of
them.
Stock Ownership of Directors and Executive Officers
The following table provides information concerning the common shares
beneficially owned as of June 19, 1998 by each director and each current or
fiscal 1998 executive officer of the Company (other than former directors and
executive officers who have died), based in each case on data provided by the
named individual, and by all directors and current executive officers as a
group. Unless otherwise indicated by footnote, each named individual has sole
voting and investment power over the shares shown for him.
TABLE II (1)
Amount and Nature of Percent
Name Beneficial Ownership Of Class
Gerald L. Kiser .............................. 20,529 (2) .115%
Patrick H. Norton ............................ 83,742 (3) .470%
Frederick H. Jackson ......................... 291,823 (4) 1.637%
Lorne G. Stevens ............................. 13,300 .075%
Gene M. Hardy ................................ 179,593 (5) 1.008%
H. George Levy................................ 2,200 .012%
David K. Hehl ................................ 8,124 (6) .046%
John F. Weaver ............................... 159,300 (7) .895%
Rocque E. Lipford ............................ 4,100 (8) .023%
James W. Johnston ............................ 323,395 (9) 1.816%
All directors and current executive officers
as a group (10 persons)....................... 806,106 (10) 4.528%
- ----------
(1) Two fiscal 1998 directors and executive officers, Charles T. Knabusch
and Edwin J. Shoemaker, died during the year. Shares formerly beneficially owned
by Mr. Knabusch are now held in his estate, of which Monroe Bank & Trust is
personal representative. These shares, as well as the shares held in the
Shoemaker Trust, are reported in the preceding table. None of them are reported
in this table.
(2) Includes 9,149 shares subject to options exercisable currently or
within 60 days of this Proxy Statement.
(3) Includes 25,980 shares subject to options exercisable currently or
within 60 days of this Proxy Statement. Also includes 3,525 shares owned by Mr.
Norton's wife, as to which he disclaims beneficial ownership.
(4) Includes 25,980 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.
(5) Includes 7,312 shares subject to options exercisable currently or
within 60 days of the date of this Proxy Statement. Also includes 16,385 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.
(6) Includes 1,872 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 53,845 shares owned by Mr. Johnston's wife, as to which he
disclaims beneficial ownership.
(10) Shares reported above for more than one named individual are included
only once.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, certain categories of over 10% owners 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 ("NYSE") and to furnish the Company with all copies of
Section 16(a) forms that they file. Based solely on its review of the copies of
such forms received by it, or written representations from certain reporting
persons that no Forms 5 were required, the Company believes that during the
fiscal year ended April 25, 1998, 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, two
consisting of three directors and one 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 2001 or until their successors are elected and qualified.
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, the 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 those nominees.
The Board's nominees for election as directors are the three current
directors whose terms are scheduled to expire at the 1998 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 table that
follows provides background information concerning each of the Board's nominees
and each other director of the Company whose term of office will continue beyond
the 1998 annual meeting.
NOMINEES FOR DIRECTOR FOR THREE YEAR TERM EXPIRING IN JULY, 2001
Director Business Experience
Name Age Since and Other Directorships
Gene M. Hardy 61 1982 Mr. Hardy has been Secretary and Treasurer
of the Company for more than five years.
David K. Hehl 51 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 59 1979 Mr. Lipford has been a senior 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 than
five years. Mr. Lipford is a director of
Monroe Bank & Trust.
DIRECTORS WITH TERMS EXPIRING IN 1999
Director Business Experience
Name Age Since and Other Directorships
John F. Weaver 81 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 59 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. 48 1997 Dr. Levy has been a Doctor of Otolaryngology
for more than five years.
Director Business Experience
Name Age Since and Other Directorships
Gerald L. Kiser 51 1997 Mr. Kiser became Executive Vice President
and Chief Operating Officer of the Company
in April 1997. He was promoted to President
and Chief Operating Officer and appointed to
fill the vacancy on the Board created by Mr.
Knabusch's death in October 1997.
Previously, he served as the Company's Vice
President-Operations (May 1996-April 1997),
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.
DIRECTORS WITH TERMS EXPIRING IN 2000
Director Business Experience
Name Age Since and Other Directorships
Lorne G. Stevens 70 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 76 1981 In October, 1997, Mr. Norton was appointed
to succeed Mr. Knabusch as Chairman of the
Board. Previously, he served as Senior Vice
President, Sales and Marketing of the
Company for more than five years.
Mr. Norton is a director of Culp, Inc.
Frederick H. Jackson 70 1971 Mr. Jackson was appointed Executive Vice
President Finance of the Company in October
1997, after holding the position of Vice
President Finance for more than five years.
DIRECTORS' MEETINGS AND CERTAIN STANDING COMMITTEES
During the Company's 1998 fiscal year, the Board of Directors held 12
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 for each committee meeting or
subcommittee meeting attended, including telephonic meetings.
In addition,pursuant to the Company's Restricted Stock Plan for
Non-Employee Directors, 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 becoming a director 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.
The plan contemplates a present sale of the optioned shares at 25% of market
value, but provides restrictions on the transfer or other disposition of the
shares by the non-employee director during the restricted time, which expires
upon the earliest to occur of the following events: death or disability,
retirement from the Board, change of control, or termination of the
participant's service as a director with the consent of a majority of the
Company's employee members of the Board, all as defined in the plan.
The standing committees of the Board of Directors include an Audit
Committee, a Compensation Committee, and a governance committee known as the
Committee on the Board. The Board also maintains a subcommittee of the
Compensation Committee (the "Compensation Subcommittee") as a standing
committee.
The Audit Committee, which held 2 meetings during fiscal 1998, 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 4 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 are also
"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 plans. The functions
of the Compensation Committee include recommending to the Board of Directors the
cash and other remuneration of the officers of the Company, except for
remuneration under plans administered by the Compensation Subcommittee
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 Committee on the Board, which was established December 8, 1997, held
one meeting during the fiscal year. Its current members are Dr. Levy, Chairman,
and Messrs. Johnston and Lipford, all non-employee directors. One of its
functions is to identify, evaluate and recommend candidates to the Board of
Directors for the Board's slate of nominees for shareholder election as
directors or for appointment to fill vacancies on the Board. It also considers
and makes recommendations to the Board on other matters relating to the Board's
practices, policies, and procedures, as well as concerning the desirable size,
structure, and composition of the Board and its committees. The deliberations of
the committee include assessing whether the professional experience and
expertise of the individual directors or proposed directors, in light of the
overall mix of experience, expertise and independence among the directors, will
enable the Board to assist the Company in developing long term strategic and
financial goals and in monitoring the Company's progress toward achieving such
goals. The committee also considers director succession planning, in light of
expected future needs of the Board and the Company, and the application of
policies pertaining to tenure on the Board.
When formulating a proposed slate of director nominees for election at an
annual meeting of shareholders, in addition to considering prospective
candidates identified by the committee's own members or referred to it by other
Board members, management, or outside sources, the Committee on the Board will
consider candidates recommended by shareholders. A shareholder desiring to
recommend a candidate for consideration by the committee should send the
recommendation to the Secretary of the Company at least 90 days prior to the
first anniversary of the prior year's annual meeting. The recommendation should
include or be accompanied by a description of the candidate's qualifications for
Board service, the candidate's consent to be considered as a nominee and to
serve on the Board if nominated and elected, and addresses and telephone numbers
for contacting the candidate and the proposing shareholder for additional
information. For information concerning the requirements for a shareholder's own
nomination of director candidates, see "Shareholder Proposals and Director
Nominations."
EXECUTIVE COMPENSATION
The following table sets forth summary information for the Company's 1998
fiscal year and the preceding two fiscal years with respect to the compensation
paid to or earned by Charles T. Knabusch, who served as the Company's Chairman,
President and Chief Executive Officer until his death on October 14, 1997. It
also sets forth summary compensation information with respect to the four other
highest paid individuals who served as executive officers during fiscal 1998 and
whose total salary and bonus for that year exceeded $100,000. The individuals
named in this table hereafter are referred to as the "named executives".
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(1) Compensation(2)
Grants Payouts(3) Compensation(4)
Position Year $ $ $
# $ $
------------------ ---- --------- -------- --------------- ---
- ------ ---------- --------------
Charles T. Knabusch (5) 1998 237,564 130,736
- -0- 1,102,087 79,230
Former Chairman of the 1997 473,371 429,885 91,656(6)
23,800 148,930 107,962
Board, President and Chief 1996 437,500 150,082
22,255 365,333 88,582
Executive Officer
Gerald L. Kiser (7) 1998 294,524 133,139(8) (9)
9,600 54,133 66,751(10)
President (since October 1997 190,469 90,022
5,200 17,490 39,053
1997; previously Executive
Vice President) and Chief
Operating Officer
Patrick H. Norton 1998 292,499 131,318
9,600 121,569 71,189
Chairman of the Board (since 1997 291,496 153,778
10,000 63,600 67,219
October 1997; previously, 1996 269,620 75,404
9,500 156,195 54,947
Senior Vice President
Sales & Marketing)
Frederick H. Jackson 1998 292,453 131,318
9,600 121,569 71,246
Executive Vice President 1997 291,496 153,778
10,000 63,600 66,951
Finance and Chief Financial 1996 269,620 75,404
9,500 156,195 55,017
Officer
Gene M. Hardy 1998 156,300 54,060(8) (9)
3,250 33,259 45,358(10)
Secretary and Treasurer 1997 141,486 57,543
2,930 17,490 36,424
1996 136,118 29,289
2,620 42,998 27,688
- ----------
(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) As permitted by SEC rules, does not include the Company's cost of
providing perquisites or other personal benefits to named executives, which in
each case and for each fiscal year did not exceed the lesser of $50,000 or 10%
of the named executives total salary and bonus for the year.
(3) All amounts reported in this column relate to performance awards under
the Company's Performance Plan, which is more fully discussed below under
"Long-Term Incentive Compensation Target Awards." As explained under that
section of this Proxy Statement, all performance awards under the Performance
Plan are made as grants of common shares or of discounted 30-day options to
purchase such shares; the dollar amounts reported in this table have been
determined by multiplying the number of shares or options granted by the NYSE
closing price for a common share on the pertinent grant date, reduced, where
applicable, by the option exercise price. As noted in the table in the
above-referenced section, performance awards normally are not made until after
the three-year performance period to which they relate, but if the recipient of
a target award under the plan for a given performance cycle should die, his
estate administrator is permitted to elect an earlier-settled performance award.
During fiscal 1998, Monroe Bank & Trust made such an election for the benefit
of the estate of Charles T. Knabusch. The fiscal 1998 amount reported in this
table for Mr. Knabusch therefore reflects awards to his estate for the fiscal
1999 and fiscal 2000 cycles, as well as for the cycle that ended at the close of
fiscal 1998.
(4) Totals in this column include amounts allocated for named executives to
the Company's Supplemental Executive Retirement Plan ("SERP") and/or its
Employees' Profit Sharing Plan, earnings credited to them under the SERP, and
the cash value at date of contribution of Company matching contributions that
were made for their accounts under the Matched Retirement Savings Plan in the
form of Company common shares. Set forth below is a breakdown of these amounts
for fiscal 1998. For information concerning other 1998 amounts included in this
column for certain executives, see note (10).
Amounts allocated to the Supplemental Earnings credited on supplemental
Executive Retirement Plan, and/or retirement balances under the
the Employees' Profit Sharing Plan: Company's Supplemental Executive
Retirement Plan:
1998 1998
Charles T. Knabusch $35,250 Charles T. Knabusch $43,980
Gerald L. Kiser -0- Gerald L. Kiser 7,938
Patrick H. Norton 43,275 Patrick H. Norton 26,558
Frederick H. Jackson 43,275 Frederick H. Jackson 26,389
Gene M. Hardy -0- Gene M. Hardy 10,957
Contributions under the Company's Matched
Retirement Savings Plan were as follows:
1998
Charles T. Knabusch $ -0-
Gerald L. Kiser 1,788
Patrick H. Norton 1,355
Frederick H. Jackson 1,582
Gene M. Hardy 1,401
(5) As reported in last year's proxy statement, in December 1997, with the
approval of the Compensation Committee, the Company made an interest-free,
unsecured loan to Mr. Knabusch to cover certain taxes related to his exercise of
stock options earlier in fiscal 1998. At his death, this indebtedness became an
obligation of his estate. Later in fiscal 1998, the Company also made an
interest-free, unsecured loan to his estate to cover certain taxes related to
exercise by the estate of options that were outstanding when Mr. Knabusch died.
The aggregate initial principal balance of these loans remained outstanding at
the end of the fiscal year and continues to be outstanding at present.
(6) Represents a "gross up" on taxes payable by Mr. Knabusch on an
extraordinary bonus that he was awarded during fiscal 1997.
(7) As permitted by SEC rules, information concerning Mr. Kiser's
compensation for fiscal year 1996 is not presented here, because he did not
become an executive officer of the Company until fiscal 1997.
(8) Does not include a bonus paid to the executive due to his participation
during the year in the Company's Personal Executive Life Insurance Program ("the
Insurance Program") , which bonus is included for him under "All Other
Compensation" and further discussed in note (10).
(9) Does not include an amount akin to a partial tax "grossup" that was
included in the bonus the executive received due to his participation in the
Insurance Program, which amount is included for him under "All other
Compensation" and further discussed in note (10)
(10) The fiscal 1998 totals reported for Messrs. Kiser and Hardy also
include certain amounts related to their participation in the Insurance Program
during the year. Under this program, a participating employee receives
supplemental life insurance intended to provide benefits to the employee after
his retirement and/or to his spouse or other beneficiary upon his death. An
employee participating in the Insurance Program is not eligible to receive
further Company contributions for his account under the Employee Profit Sharing
Plan or the SERP (which contributions are not currently taxable to the employee)
but does receive an annual bonus (which is currently taxable) in an amount equal
to the amount of premiums payable by him during the year on his Insurance
Program insurance policy plus an additional 32% of that premium amount, which
has the effect of a partial "gross up" to the employee for the taxes payable on
the bonus. The Insurance Program-related bonuses (including tax gross ups) for
Messrs. Kiser and Hardy were $30,204 and $33,000, respectively. Under certain
limited circumstances, in some or all of the tax gross up portions of the
Insurance Program-related bonuses paid to a participating employee would be
repayable to the Company out of policy proceeds, the Company considers such
repayment in most cases to be a remote possibility at best.
In addition to the bonus payments described above, in most cases (including
Mr. Kiser's case but not including Mr. Hardy's case), during the early years of
a Insurance Program participant's policy, a portion of the premiums on the
policy are paid by the Company. The full amount of these Company-paid premiums
is repayable to the Company--generally upon the later of seven years after
purchase of the policy or retirement, but also upon his death or other
termination of employment if that were to occur earlier. For purposes of this
table, $26,821 has been included in this column for Mr. Kiser as the estimated
value to him of the premiums paid by the Company during fiscal 1998. That amount
has been calculated as if the payments were advanced to Mr. Kiser on an
interest-free basis from the time they were paid until May 2004 (the seventh
anniversary of the policy issuance date). Depending on the time at which Mr.
Kiser actually leaves the Company's employ, the actual value he ultimately
receives from these premium payments may be significantly less or significantly
more than that amount.
The following table shows all stock options granted to named executives
during fiscal year 1998 and the potential realizable value of the grants
assuming stock price appreciation rates of 5% and 10% over the five-year term of
the options.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at
Assumed Annual Rates of Stock Price
Individual Grants (1)
Appreciation for Option Terms ($)(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) ($)
---- ------- -------------- ---------- -------
- - ---------- ------- ---------- -----
Charles T. Knabusch -0-
Gerald L. Kiser 9,600 7.38 39.6875 11/10/02
10.96 105,216 24.23 232,608
Patrick H. Norton 9,600 7.38 39.6875 11/10/02
10.96 105,216 24.23 232,608
Frederick H. Jackson 9,600 7.38 39.6875 11/10/02
10.96 105,216 24.23 232,608
Gene M. Hardy 3,250 2.50 39.6875 11/10/02
10.96 35,620 24.23 78,748
(1) All of the above options were granted during fiscal 1998 under the
Company's 1997 Incentive Stock Option Plan. Normally, one-fourth of the shares
purchasable under each option becomes exercisable beginning on the first,
second, third, and fourth anniversaries of the date of the grant and options,
once exercisable, remain exercisable until after the fifth anniversary of the
date of grant. However, under the terms of the plan, in the event of an
optionee's death or his retirement at or after age 65 (or earlier with the
Company's consent), all of his or her then outstanding options become
immediately exercisable and continue to be exercisable for one year thereafter.
In addition, pursuant to the agreements described under "Certain Agreements,"
all then outstanding options granted to any of the named executives also would
become exercisable upon a change in control. Termination of an optionee's
employment under any circumstances other than those described above causes all
of his then outstanding options to terminate immediately.
(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.
The following table provides information as to stock options exercised by
named executives in fiscal year 1998 and the value of the remaining options held
by each such executive officer at the Company's year-end, April 25, 1998:
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) #
$
---- ----------- -------- ----------------
- ------------- -------------------------
Charles T. Knabusch 113,187 2,235,185
0/0 0/0
Gerald L . Kiser 3,000 53,063
7,969/16,221 191,625/285,991
Patrick H. Norton 10,500 188,344
23,330/24,010 567,045/469,715
Frederick H. Jackson 10,500 188,344
23,330/24,010 567,045/469,715
Gene M. Hardy 3,000 41,250
6,587/7,353 159,981/140,793
- ----------
(1) Based on the closing market price of the Company's common shares on the
date of exercise, minus the exercise price. An individual, upon exercise of an
option, does not receive cash equal to the amount contained in the Value
Realized column of this table. No cash is realized until the shares received
upon exercise of an option are sold.
(2) Based on the closing market price of the Company's common shares at
fiscal 1998 year-end ($53.50), minus the exercise price.
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" which since 1997 has been
the Compensation Subcommittee and prior to that time was the Compensation
Committee) may be granted contingent awards ("Target Awards") the potential
payouts 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 1998, the Administrative Committee granted Target Awards to
certain employees including named executives for the Performance Cycle ending
April 29, 2000 (the "2000 cycle"). As has been the case since the first grant of
Target Awards under the Performance Plan, for the 2000 cycle the Administrative
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 operating profit margin,
and the fourth to return on total capital.
The table which follows provides information concerning Target Awards so
granted to named executives.
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)
- ---- ----------- ------------ --------- ------- -------
Charles T. Knabusch 2,750 (5) (5) 5,500 (5)
Gerald L. Kiser 1,150 (6) 1,150 2,300 4,600
Patrick H. Norton 1,150 (6) 1,150 2,300 4,600
Frederick H. Jackson 1,150 (6) 1,150 2,300 4,600
Gene M. Hardy 408 (6) 408 815 1,630
- --------------
(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.
(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) for Mr. Knabusch's award was
the three-year period ending April 29, 2000. However, after his death last
October, the administrator of his estate made the election described in the
preceding note. Accordingly, since he died during the first half of the
Performance Cycle, his estate received, and subsequently exercised a 30-day
option to purchase the number of shares reported for him in the "Target" column
at a per share exercise price of 25% ($8.28125) of Fair Market Value of a share
on the date of grant of his Target Award.
(6) The Performance Cycle until maturation or payout is the three-year
period ending April 29, 2000.
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) 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, 1998 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 24, 1993 in each of (i) the
New York Stock Exchange Index, (ii) a Peer Group of publicly traded furniture
industry companies, and (iii) the Company's common shares. Further information
concerning the composition of the Peer Group is provided after the graph.
Comparison of Total Return to Shareholders
[PERFORMANCE GRAPH]
1993 1994 1995 1996 1997 1998
------ ------ ------ ------ ------ ------
La-Z-Boy Inc $100.00 $122.06 $100.69 $115.23 $126.52 $214.62
Peer Group 100.00 97.15 80.22 97.32 124.59 242.83
Broad Market 100.00 107.26 120.04 155.06 186.83 262.94
Composition of Peer Group Index
The Peer Group consists of nine public companies operating primarily in the
residential segment of the furniture industry and 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 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 executives named in the Summary Compensation Table
of this Proxy Statement; as well as that of other senior executives at the
Company and subsidiaries, is 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") and the Compensation Subcommittee (hereafter
referred to in this section as the "Subcommittee"). The Subcommittee is charged
with administration of the Company's stock-related employee plans in which
executive officers may participate; the Committee determines all executive
officer compensation 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, including the named executives, for
fiscal 1998. 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 stockholders. 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.
*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 in 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 the Company's annual and longer term objectives and is
competitive with the compensation programs of other companies with which the
Company must directly compete for executive talent.
The Committee again engaged in such a review process with respect to its
fiscal 1998 compensation decisions concerning executive officers. For that
fiscal year the Peer Group companies identified under "Performance Comparison"
were among the companies whose compensation practices were considered. Data
analyses and recommendations were presented by Management Resource Center, Inc.
("MRC"), the compensation consultant to the Committee. Since membership on the
Subcommittee is drawn solely from Committee members, the Subcommittee also had
the benefit of this review process during fiscal 1998.
The chief components of the Company's executive compensation program are
salary, annual cash incentive bonuses, and long-term incentives utilizing
stock-based awards. All decisions concerning stock-based awards for 1998 were
made by the Subcommittee; all other decisions concerning the fiscal 1998
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, 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
1998 executive compensation is provided below. Except as otherwise indicated in
this report, the 1998 salary, bonus, and long-term incentive awards to Messrs.
Knabusch, Kiser and Norton 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 fiscal
1998 toward the start of the year, 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 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 1998 the Compensation
Committee determined uniformly to follow its prior practice and, accordingly,
adjusted the salary of each executive, including Mr. Knabusch, who was then the
CEO, to approximately 90% of the midpoint for his position as reflected in MRC's
report to the Committee. Following Mr. Knabusch's death, the Committee adjusted
Mr. Kiser's salary to reflect his promotion to President of the Company. The
salary amounts so established for Messrs. Knabusch and Norton and the other
executives named in the Summary Compensation table, as well as the salary
adjustment for Mr. Kiser, are reflected in that table.
Short-Term Incentive Awards
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 1998, the maximum award
opportunity available for each executive named in the Summary Compensation Table
was 110% of his salary for Mr. Knabusch, 90% of salary for Messrs. Kiser,
Norton, and Jackson and 70% of salary for Mr. Hardy. The performance criteria
for fiscal 1998 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 1998, the Company's consolidated sales revenue
increased 10% over fiscal 1997, and the Company's pretax income for fiscal 1998
increased 7% over fiscal 1997. 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 $130,736 to Mr. Knabusch
for the fiscal year (based on wages paid to him from May 1, 1997 through October
31, 1997) and, to each of the other named executives, including Messrs Kiser and
Norton, a cash incentive bonus award equal to the fiscal 1998 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 their cash incentive
bonuses, Mr. Kiser and one other executive officer named in the Summary
Compensation Table received the additional cash bonuses discussed in note (10)
to that table, due to their participation in the Company's Personal Executive
Life Insurance Program.
Long-Term Incentives
The Company and the Compensation Committee long have 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 1998, awards under the 1997
Incentive Stock Option Plan and awards under the Company's Performance Plan both
were used to further these objectives with respect to executive officers. Awards
under the 1997 Restricted Share Plan also were available for this purpose. With
respect to that plan, however, the Subcommittee decided to follow the same
practice that 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 concerning the practices in this area followed by
other companies (including companies in the 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 2000 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 incentive stock options on
4,897 common shares and nonqualified stock options on 4,703 common shares to Mr.
Kiser; incentive stock options on 2,982 common shares and nonqualified options
on 6,618 common shares to Mr. Norton and incentive and/or nonqualified stock
options on an aggregate 12,850 common shares to the other named executives. No
incentive or nonqualified stock options were granted Mr. Knabusch in fiscal 1998
prior to his death.
For all named executives other than Mr. Knabusch, the Performance Awards
under the Performance Plan reported as 1998 long-term incentive plan payouts in
the Summary Compensation Table were awarded to the named executives after the
close of fiscal 1998 for the three-year Performance Cycle then ended (the "1998
cycle"). As administrator of that plan when the Target Awards for that cycle
were made, the Compensation Committee had established four performance goals for
each of those Target Awards. As new administrator of that Performance Plan, the
Subcommittee determined after the close of fiscal 1998 that two of those goals
had been achieved. Accordingly, since each named executive had been a recipient
of a Target Award for the 1998 cycle, each of them other than Mr. Knabusch
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 at an exercise price equal
to 25% of the Fair Market Value of the optioned shares on the grant date of that
Target Award.
As permitted by the terms of the Performance Plan, after Mr. Knabusch's
death last October, Monroe Bank & Trust as administrator of his estate elected
an early settlement of his Target Awards for the 1998 cycle and for the
Performance Cycles to end at the close of fiscal 1999 and fiscal 2000. Pursuant
to that election and the terms of the plan, Mr. Knabusch's estate received a
grant of twice the base number of shares reflected in his Target Award for the
1998 (as if three performance goals had been achieved) and was granted 30-day,
75%-discounted options on twice the base numbers of shares reflected in his
Target Awards for the 1999 and 2000 cycles (as if two performance goals had been
achieved).
The Compensation Committee
John F. Weaver, Chairman
David K. Hehl*
Rocque E. Lipford
H. George Levy, M.D.*
- -------------------
*Member of the Compensation Subcommittee
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. No one other than the
current members served on either the Compensation Committee or the Compensation
Subcommittee at any time during fiscal 1998.
John F. Weaver is Vice Chairman of Monroe Bank & Trust. Before his death
last October, Charles T. Knabusch, the Company's former Chairman, President and
CEO was a member of the Board of Directors of Monroe Bank & Trust and served as
a member of that board's Personnel Committee.
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 18 years.
PROPOSAL 2:
PROPOSAL TO AMEND ARTICLES OF INCORPORATION
TO INCREASE NUMBER OF AUTHORIZED SHARES OF COMPANY STOCK
General
The Board of Directors unanimously has adopted a resolution approving and
recommending to the shareholders for their adoption an amendment to the Articles
of Incorporation of the Company that would increase the number of common shares
the Company has authority to issue to 150,000,000. The authorized capital stock
of the Company currently consists of 40,000,000 common shares and 5,000,000
shares of preferred stock. On the record date for the upcoming meeting,
17,804,571 currently authorized common shares were issued and outstanding and
4,972,676 common shares were reserved for future issuance pursuant to the
Company's various stock-related plans for employees or non- employee directors.
No shares of preferred stock ever have been issued, and none currently are
reserved for issuance.
The proposed amendment involves amending the first paragraph of Article IV
of the Articles of Incorporation to read in its entirety as follows:
(1) The aggregate number of shares which the Corporation has authority
to issue is (a) 150,000,000 shares of Common Stock and (b) 5,000,000 shares
of Preferred Stock.
If the proposal to adopt this amendment is approved at the annual meeting,
it will become effective upon the filing of a certificate of amendment with the
appropriate State of Michigan authorities which would occur as soon as
practicable after the meeting. Once the amendment is effective, the additional
authorized common shares, like the currently authorized, unissued and not
reserved common shares, may be issued from time to time at the direction of the
Board of Directors for such purposes, to such persons and for such consideration
as the Board of Directors shall determine to be appropriate, without further
shareholder approval except to the extent such approval may be required by
Article VIII of the Company's Articles of Incorporation or Chapter 7A of the
Michigan Business Corporation Act (the "MBCA") , both of which are discussed
below.
The proposed amendment would not alter any of the rights incident to the
ownership of common shares or affect the terms and conditions upon which common
shares presently may be issued. Holders of common shares currently have no
preemptive rights to acquire any additional securities of the Company, including
any common shares, and this will continue to be the case if the proposed
amendment is adopted. The proposed amendment also will make no changes in the
authorized preferred stock, the nature of which is further discussed below.
The subsections of this section of the Proxy Statement that follow provide
additional information shareholders should consider as they deliberate upon the
proposed amendment and concerning the vote required for approval of the
proposal. In connection with their consideration of the proposal, shareholders
also may wish to review the financial statements contained in the Company's 1998
Annual Report accompanying this Proxy Statement.
Reasons for the Proposed Amendment
The Board of Directors has no present plans, arrangements, understandings
or commitments with respect to the issuance of any Company shares other than
those already reserved for issuance or of any rights to acquire Company shares
other than under the Company's stock-related plans. However, if the proposed
Articles amendment is adopted, the Board intends shortly afterward to consider
whether or not it would be advisable to issue some of the authorized common
shares in a split of the then outstanding common shares. It also expects that
from time to time it will consider whether it would be to the benefit of the
Company and its shareholders to issue shares or rights to acquire shares for
various other corporate purposes. These corporate purposes may include the
issuance of shares or rights to acquire shares to the then current shareholders
of the Company in connection with stock dividends or stock splits, as well as
the issuance of shares or rights under employee benefit plans, or to other
persons, either in public offerings or in private placements, in connection with
acquisitions or the accumulation of additional capital. The Board of Directors
believes that the availability of additional common shares for issuance, without
the necessity and expense of calling a special meeting of shareholders, is
worthwhile. Moreover, in view of the delay incident to convening such a special
meeting, the availability of additional common shares would have the added
benefit of enabling the Company promptly to issue such shares, or rights to
acquire them, if an appropriate occasion should arise.
Certain Other Considerations
While the proposed amendment is not the result of management's knowledge of
any effort on the part of any person or entity to accumulate securities of the
Company or to obtain control of the Company by means of a merger, tender offer,
proxy solicitation in opposition to management, or otherwise, it should be noted
that, because the amendment would increase the authorized common shares, it also
would increase the ability of the Board of Directors to implement defensive
strategies against initiatives of this sort---for example, by causing common
shares to be issued to persons who support the position of the then-incumbent
directors or by using common shares for a shareholder rights plan of the type
commonly known as a "poison pill". Although the Board has no present plans or
intentions to take any such actions, the proposed amendment therefore may be
viewed as having the potential to some extent to deter or discourage a future
takeover attempt which some or a majority of shareholders may wish to occur.
Such a deterrent effect might also prove to be beneficial to then-incumbent
management.
Moreover, any such "anti-takeover" effect that could result from adoption
of the proposed amendment may augment or be augmented by certain existing
provisions of the Company's Articles of Incorporation and Bylaws which, under
certain circumstances, also may have anti-takeover effects. (The Board of
Directors has no present plans or intentions to adopt or propose to the
shareholders for their adoption any other amendments to the Bylaws or Articles
of Incorporation that could be considered to have an anti-takeover effect.) The
existing provisions in the Articles of Incorporation and Bylaws that could have
such an effect are:
1. Article VIII of the Articles of Incorporation, which provides that a
Business Combination involving the Company and a Related Entity must be approved
by a favorable vote of the holders of at least 67% of then outstanding shares of
Company stock entitled to vote for election of directors unless (i) certain
specified conditions are satisfied, including conditions that the aggregate
consideration per share be equal to the highest consideration, and be the same
kind of consideration, previously paid by the Related Entity for any shares,
(ii) the transaction was approved by a majority of the Company's directors
before the Related Entity attained such status, or (iii) after the Related
Entity attained such status, the transaction was approved by a majority of
Continuing Directors. For purposes of Article VIII, a "Business Combination" is
defined to include mergers, consolidations, sales of substantial assets and
other similar transactions between the Company and a Related Entity, as well as
issuance of voting securities of the Company to a Related Entity. A "Related
Entity" is defined to include any person, corporation or other entity which owns
or controls or has the right to acquire 10% or more of the sum of the
outstanding shares of the Company entitled to vote for election of directors and
any such unissued shares which the person or entity has the right to acquire,
and would include all of the affiliates and associates of such a person or
entity. A "Continuing Director" is defined to mean a director who was a member
of the Board of Directors immediately prior to the time that the Related Entity
involved in the Business Combination became a Related Entity or a director who
was designated a Continuing Director by a majority of the then-remaining
Continuing Directors.
2. Article X of the Articles of Incorporation, which provides that any
adoption, alteration or repeal of the Bylaws of the Company by shareholders
requires the affirmative vote of 67% of the Company's outstanding shares
entitled to vote for directors. In addition, under Article X, any amendment or
repeal of Articles VIII or X of the Articles of Incorporation requires the
affirmative vote of 67% of the Company's outstanding shares entitled to vote on
such matter unless such amendment or repeal is approved by a majority of the
members of the Board of Directors who would qualify as Continuing Directors (as
defined above).
3. The provisions of Article IV of the Articles of Incorporation concerning
the 5,000,000 currently authorized shares of preferred stock, which authorize
the Board to divide the preferred shares into one or more series and to
designate the respective rights (including voting rights), preferences and
privileges of the various series without further shareholder approval. As is
true of the authorized common shares, shares of any such series of preferred
stock may be issued at any time or from time to time at the direction of the
Board for such purposes, to such persons and for such consideration as it
determines appropriate, without shareholder approval except to the extent
required by Article VIII of the Articles of Incorporation or Chapter 7A of the
MBCA.
4. Article IV of the Bylaws, which, among other things, provides that the
Board of Directors shall be constituted of three classes of directors, with such
classes serving staggered three-year terms and also provides that a shareholder
intending to nominate a candidate for election to the Board of Directors may do
so only after giving a notice containing specified information about the
shareholder's proposed nominee(s) to the Secretary of the Company at least 90
days prior to the first anniversary of the preceding year's annual meeting. (For
the required candidate information, see "Shareholder Proposals and Director
Nominations, below.)
In addition, the Company currently is subject to Chapters 7A and 7B of the
MBCA, each of which Chapters under certain circumstances also may discourage or
make more difficult a takeover of the Company, particularly on terms deemed
unacceptable by the Board of Directors. Chapter 7A imposes "supermajority" vote
requirements more stringent than those imposed by Article VIII for any of a wide
range of defined "business combinations" (including, among other transactions,
mergers, share exchanges, certain significant asset transfers and
disproportionate issuances of shares, including any preferred shares, having an
aggregate market value of 5% or more of the total market value of then
outstanding Company shares) involving the Company or any subsidiary and any
"interested shareholder" (generally including any 10%-or-more beneficial owner
of Company shares entitled to vote for directors, as well as certain Company
affiliates which previously had such ownership) , unless either (i) the
transaction in question is not consummated for at least five years after
interested shareholder status is attained and certain "fair price" and other
conditions are satisfied, or (ii) the transaction is approved by the Board of
Directors before the interested shareholder attains that status. Subject to
certain exceptions (including exceptions for shares acquired from the Company
itself or in a merger to which the Company is a party) , Chapter 7B would divest
of their normal voting rights any Company voting shares acquired in a "control
share acquisition" (generally, any acquisition of ownership or the right to
direct the voting of shares which, if not for the Chapter, would move the
acquiror over any of a 20%, 33-1/3% or majority voting power threshold), unless
such voting rights are approved by vote of the Company's shareholders, including
by a majority of shares other than "interested shares", voting by class if a
class vote otherwise would be required. (Generally, shares owned or controlled
by Company officers or employee-directors or by the prospective acquiror or its
affiliates are deemed "interested" for this purpose.) Possibly, such
anti-takeover potential as may be presented by the proposed amendment also might
enhance or be enhanced by the provisions of one or both of these Chapters.
The proposed amendment, either alone or in combination with Chapters 7A and
7B and existing provisions of the Company's Articles of Incorporation or Bylaws,
would not, however, necessarily prevent a takeover of the Company and may enable
the Board to influence the terms of a takeover proposal in a manner that would
be more favorable to Company shareholders than otherwise would occur. In any
event, any exercise of Board discretion with respect to issuance of shares, in
connection with a takeover attempt or otherwise, would, of course, be subject to
the Board's continuing duties to act with due care, in good faith and in a
manner determined to be in the best interests of the Company and its
shareholders as a whole, under the circumstances then prevailing.
Vote Required For Approval; Recommendation
The affirmative vote of the holders of a majority of the issued and
outstanding common shares is required for the adoption of the proposed Articles
amendment to increase the authorized common shares. Therefore, for purposes of
the vote on this proposal, any abstention or broker non- vote will have the same
effect as a vote "against" the proposal. Approval of the proposal will not
constitute shareholder approval of any future issuance of shares to any party
for purposes of Article VIII of the Company's Articles of Incorporation or of
Chapter 7A of the MBCA. The Board of Directors has considered the advantages and
disadvantages described above and has unanimously determined that the adoption
of the proposed amendment is in the best interests of the Company and its
shareholders. Proxies solicited by the Board of Directors will be voted in favor
of the proposed amendment unless a contrary vote is specified.
THE BOARD RECOMMENDS A VOTE FOR ADOPTION OF THE AMENDMENT.
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 AND DIRECTOR NOMINATIONS
A shareholder who intends to present a proposal at the annual meeting to be
held in 1999 must notify the Company of that intention by February 26, 1999 in
order for the proposal to be included in the Company's proxy statement for that
meeting. The Company may omit any such proposal and any statement in support
thereof from its proxy statement and form of proxy in accordance with SEC rules.
Under the Company's Bylaws, a shareholder desiring to nominate one or more
candidates for election to the Board at the 1999 annual meeting must deliver
notice to the Secretary of the Company no later than April 28, 1999. The notice
must set forth for each proposed nominee his or her name, age, residence and
business address and principal occupation, the number of shares of Company
capital stock beneficially owned by the nominee, and all other information
concerning the nominee that would be required by SEC rules in a proxy statement
soliciting proxies for election of the nominee.
OTHER MATTERS
The total expense of soliciting proxies pursuant to 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 26, 1998
A copy of the Company's Form 10-K Annual Report for the fiscal year ended
April 25, 1998, may be obtained by writing the Secretary's office.
La-Z-Boy Incorporated PROXY PRIVATE
The undersigned hereby appoints Gerald L. Kiser and Patrick H. Norton, 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 27, 1998 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)
- --------------------------------------------------------
Please mark your
vote as in this
example: [x]
1. ELECTION OF DIRECTORS
WITHHOLD Authority Nominees:
FOR all nominees to vote for all Gene M. Hardy
listed to right nominees listed to right David K. Hehl
Rocque E. Lipford
[ ] [ ] [ ]
(INSTRUCTIONS: To withhold authority to vote for any individual nominees, write
that nominee's name on the line below.)
- --------------------------------------------
2. AMEND Articles of Incorporation to increase shares of common stock.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. 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.
