SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
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[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
LA-Z-BOY CHAIR COMPANY
(Name of Registrant as Specified In Its Charter)
LA-Z-BOY CHAIR COMPANY
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
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[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] 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:*
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* Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] 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:
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4) Date Filed:
LA-Z-BOY CHAIR COMPANY
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of June 24, 1994
La-Z-Boy Chair Company:
Notice is hereby given that the annual meeting of shareholders of
La-Z-Boy Chair Company will be held at the La-Z-Boy Chair Company
Auditorium, 1314 North Telegraph Road, Monroe, Michigan, on Monday, July
25, 1994 at 11:00 o'clock A.M. Eastern Daylight Time for the following
purposes:
(1) To elect three (3) directors of the Company to three year
terms expiring in 1997.
(2) To transact such other business as may properly come
before the meeting or any adjournments thereof.
A copy of the Annual Report, containing the financial statements of
the Company for the year ended April 30, 1994, is enclosed herewith.
Only shareholders of record at the close of business on June 17,
1994 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 24, 1994
PROXY STATEMENT
The following statement is furnished in connection with the
solicitation of proxies by the Board of Directors of La-Z-Boy Chair
Company to be used at the annual meeting of shareholders to be held on
Monday, July 25, 1994 and at any adjournments thereof. The meeting will be
held at the La-Z-Boy Chair Company 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 proxy will vote upon the same and act in accordance with their
judgment. Shares represented by properly executed proxies in the form
accompanying this proxy statement 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 referred to under Proposal 1 on page 4. A proxy may be
revoked at any time insofar as it has not been exercised by executing and
returning a later 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 48161.
As of June 17, 1994, there were 18,303,223 shares of the Common
Stock, $1.00 par value, of the Company ("common shares") issued and
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 17, 1994 will be entitled to vote at the meeting. There
were no shares of preferred stock issued and outstanding at the close of
business on June 17, 1994.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Under rules adopted by the Securities and Exchange Commission, a
person is deemed to be the beneficial owner of the Company's common shares
if he or she has or shares the right to vote the shares or if he has or
shares the investment power over such shares. There may be, therefore,
more than one beneficial owner with respect to any share or group of
shares. A person may also be deemed to be the beneficial owner if he is
the settlor of a trust with a right to revoke the trust and regain the
shares or has the power to acquire shares by means of outstanding options
or rights to convert other securities into common shares.
The following information is furnished in compliance with these
rules with respect to security ownership of each person known to the
Company to beneficially own more than 5% of the Company's common shares as
of June 17, 1994, based in each case on data provided by such person.
T A B L E I
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
------------------- -------------------- --------
Edwin J. Shoemaker
8 Sylvan Drive
Monroe, Michigan 48161.............. 1,023,178(1) 5.590%
Monroe Bank & Trust
Monroe, Michigan 48161.............. 5,420,634(2) 29.616%
FMR Corp.
Boston, Mass. 02109................. 986,700(3) 5.391%
(1) Mr. Shoemaker beneficially owns and is the donor of a revocable trust
which holds 1,023,178 shares.
(2) Monroe Bank & Trust is the trustee of a number of revocable and
irrevocable trusts under which it, under certain conditions, has sole or
shared voting power over the above-mentioned shares. It may in certain
instances have sole or shared investment power with respect to such
shares. The shares referred to above include the shares identified in
footnote (1) above as being beneficially owned by Mr. Shoemaker, since
Monroe Bank & Trust is the trustee of his trust.
(3) Based on information contained in the named shareholders' Schedule 13G
dated February 11, 1994, filed pursuant to the Securities and Exchange Act
of 1934 and based on information delivered to the Company by the named
shareholder in February 1994. The Schedule states that the shares were
acquired for investment.
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as to the common shares
beneficially owned as of June 17, 1994 by each director and each executive
officer of the Company, based in each case on data provided by such person.
T A B L E I I
Amount and Nature of Percent
Name Beneficial Ownership of Class
---- -------------------- --------
Edwin J. Shoemaker.................... 1,023,178 (1) 5.590%
Charles T. Knabusch................... 763,554 (2) 4.172%
Lorne G. Stevens...................... 29,002 (3) .158%
Frederick H. Jackson.................. 239,188 (4) 1.307%
Gene M. Hardy......................... 174,178 (5) .952%
Patrick H. Norton..................... 53,100 (6) .290%
Warren W. Gruber...................... 3,000 (7) .016%
David K. Hehl......................... 7,430 (8) .041%
John F. Weaver........................ 158,500 (9) .866%
Rocque E. Lipford..................... 3,300 (10) .018%
James W. Johnston..................... 320,800 (11) 1.753%
Charles W. Nocella.................... 21,454 (12) .117%
All Directors and Executive Officers
As A Group (12)..................... 2,376,684 12.985%
(1) See footnote 1 to Table I.
(2) Mr. Knabusch owns 202,455 shares of record and beneficially. He has
options to purchase 67,579 shares which are exercisable within 60 days of
June 17, 1994. His wife owns 74,720 shares individually and as a trustee
for their children. He is also one of the members of the advisory
committee of an irrevocable trust holding 278,800 shares and as such has
shared voting and investment powers with respect to such shares. In
addition, he has shared investment power as a member of the Investment
Committee under the Company's Employees' Profit Sharing Plan which holds
140,000 shares. He may be deemed to own all of such shares beneficially.
(3) Mr. Stevens owns 12,500 shares of record and beneficially and his wife
owns 16,502 shares of record and beneficially.
(4) Mr. Jackson owns 89,113 shares of record and beneficially and his wife
owns 800 shares of record and beneficially. He has options to purchase
9,275 shares which are exercisable within 60 days of June 17, 1994. In
addition, he has shared investment power as a member of the Investment
Committee under the Company's Employees' Profit Sharing Plan which holds
140,000 shares. He is deemed to own all of such shares beneficially.
(5) Mr. Hardy owns 32,454 shares of record and beneficially and he has
options to purchase 1,724 shares which are exercisable within 60 days of
June 17, 1994. In addition, he has shared investment power as a member of
the Investment Committee under the Company's Employees' Profit Sharing
Plan which holds 140,000 shares. He is deemed to own all of such shares
beneficially.
(6) Mr. Norton owns 41,525 shares of record and beneficially and his wife
owns 2,300 shares. He has options to purchase 9,275 shares which are
exercisable within 60 days of June 17, 1994.
(7) Mr. Gruber owns 2,900 shares of record and beneficially. His wife owns
100 shares of record and beneficially.
(8) Mr. Hehl owns 4,901 shares of record and beneficially. His wife owns
652 shares individually and their three sons own 1,877 shares of record
and beneficially.
(9) Mr. Weaver owns 2,900 shares of record and beneficially and his wife
owns 15,600 shares. In addition, he has shared investment power as a
member of the Investment Committee under the Company's Employees' Profit
Sharing Plan which holds 140,000 shares. He is deemed to own all of such
shares beneficially.
(10) Mr. Lipford owns 2,500 shares of record and beneficially. His wife
owns 800 shares of record and beneficially.
(11) Mr. Johnston owns 268,140 shares of record and beneficially and his
wife owns 52,660 shares of record and beneficially.
(12) Mr. Nocella owns 7,394 shares of record and beneficially and his wife
owns 12,085 shares. He has options to purchase 1,975 shares which are
exercisable within 60 days of June 17, 1994.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than 10% of the Company's
Common Stock, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission ("SEC") and the New York Stock
Exchange. Executive officers, directors and greater than ten percent
stockholders are required by SEC regulations to furnish the Company with
all copies of Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by
it, or written representations from certain reporting persons that no
Forms 5 were required for those persons, the Company believes that during
the fiscal year ended April 30, 1994, all filing requirements were
complied with in a timely fashion.
PROPOSAL 1: ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes, one
consisting of three directors and two consisting of four directors.
Directors serve for three-year, staggered terms, such that the terms of
office of directors comprising one of the classes expires each year. This
year, three directors are to be elected, to serve until the Company's
annual meeting of shareholders in 1997 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 Stock who are present in person, or represented by
proxy, and entitled to vote at the meeting. Thus, for this year, those
nominees who receive the highest through third-highest numbers of votes
for their election as directors will be elected, regardless of the number
of votes which for any reason, including abstention, withholding of
authority, or broker non-vote, are not cast for the election of such
nominees.
The Board's nominees for election as directors are the three current
directors whose terms expire with the 1994 annual meeting. In the absence
of other instruction, the persons named in the accompanying form of proxy
intend to vote in favor of these three nominees (or, if any such nominee
should become unable or unwilling to serve, which is not presently
anticipated, for such substitute nominee as is designated by the Board).
The tables which follow provide background information concerning each of
the Board's nominees and each other director of the Company whose term of
office will continue beyond the 1994 annual meeting.
Nominees for Director for Three Year Term Expiring July, 1997
Director Business Experience
Name Age Since and Other Directorships
---- --- -------- -----------------------
Frederick H. Jackson........ 66 1971 Mr. Jackson has been Vice
President Finance for more than
five years.
Lorne G. Stevens............ 66 1972 On April 30, 1988, Mr. Stevens
retired from the Company as Vice
President of Manufacturing, a
position he held for more than
five years.
Patrick H. Norton........... 72 1981 Mr. Norton has been Senior Vice
President, Sales and Marketing
for more than five years.
Members of Board of Directors Continuing in Office
Director Business Experience
Name Age Since and Other Directorships
---- --- -------- -----------------------
Edwin J. Shoemaker.......... 87 1941 Mr. Shoemaker has been Vice
Chairman of the Board and Executive
Vice President of Engineering for
more than five years.
Charles T. Knabusch......... 54 1970 Mr. Knabusch has been Chairman of
the Board and President of the
Company for more than five years.
John F. Weaver.............. 77 1971 Mr. Weaver has been Executive
Vice President and a Director of
the Monroe Bank & Trust for more
than five years.
David K. Hehl............... 47 1977 Mr. Hehl has been a partner in the
public accounting firm of Cooley,
Hehl, Wohlgamuth & Carlton for
more than five years.
Rocque E. Lipford........... 55 1979 Mr. Lipford has been a principal in
the law firm of Miller, Canfield,
Paddock and Stone, P.L.C., since
January 1994 and previously was a
partner of Miller, Canfield,
Paddock and Stone for more than
five years.
Warren W. Gruber............ 73 1981 Mr. Gruber has been President and
Chief Operating Officer and a
Director of Gruber Valu-World for
more than five years.
Gene M. Hardy............... 57 1982 Mr. Hardy has been Secretary and
Treasurer of the Company for more
than five years.
James W. Johnston........... 55 1991 Mr. Johnston has been a self-
employed financial and business
consultant for more than five
years. He was appointed a
Director in January 1991.
BOARD OF DIRECTORS AND COMMITTEES
Edwin J. Shoemaker and Charles T. Knabusch may be deemed to be
persons who are in control of the Company.
During the Company's fiscal year ending April 30, 1994, the Board of
Directors held ten meetings. Each director attended at least 90% of the
total number of meetings of the Board and of all committees on which he
served. All directors are in regular touch with the Company's affairs.
Employee directors receive a fee of $250 for each meeting of the Board of
Directors attended. Non-employee directors receive an annual retainer of
$12,000 and a fee of $400 for each Board meeting and for each committee
meeting attended.
In addition, each non-employee director receives an initial grant of
30-day options on 1,500 common shares of Restricted Stock upon election to
the Board and a subsequent annual grant at the beginning of each fiscal
year of 30-day options on 200 common shares of Restricted Stock. Such
grants are made pursuant to the La-Z-Boy Chair Company Restricted Stock
Plan for Non-Employee Directors approved by the shareholders effective
September 1, 1989. The Plan contemplates a present sale of the optioned
shares at 25% of market value, but provides restrictions on the transfer
or other disposition of the shares by the non-employee director during the
restricted time, which expires upon the earliest to occur of the following
events: death or disability, retirement from the Board, change of control,
or termination of the participant's service as a director with the consent
of a majority of the Company's employee members of the Board, all as
defined in the Plan.
The Board of Directors has an Audit Committee and a Compensation
Committee.
The Audit Committee, which held two meetings during the fiscal year,
consists of Mr. Hehl, Chairman, and Messrs. Weaver, Gruber, Stevens and
Lipford, all of whom are non-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 three meetings during the
fiscal year, consists of Mr. Weaver, Chairman, and Messrs. Hehl, Gruber
and Lipford, all non-employee directors. The functions of the Compensation
Committee include recommending to the Board of Directors remuneration of
the officers of the Company, recommending to the Board of Directors
remuneration of the members of the Board and of the Board Committees, and
the administration of the Company's executive incentive compensation and
stock option plans.
The Board of Directors has no nominating committee. Nominations for
Director are considered by the entire Board.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to or earned by
the Chief Executive Officer and each of the Company's four other most
highly compensated executive officers (the "named executives") during the
last three fiscal years.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation Awards
- - - - - ------------------------------------------------------------------- --------------------------------
Awards Payouts
--------------------- ---------
Incentive Long-
Restricted Stock Term
Other Annual Stock Option Incentive All Other
Name and Principal Salary(1) Bonus(2) Compensation Awards(3) Grants Plan Compensation(4)
Position Year $ $ $ $ # Payouts $
------------------ ---- --------- -------- ------------ ---------- --------- --------- ---------------
Charles T. Knabusch 1994 386,625 264,046 0 0 22,500 0 70,913
Chairman of the Board 1993 377,550 198,056 0 0 24,400 0 67,206
President and Chief 1992 353,200 133,765 0 0 36,410 0 56,961
Executive Officer.........
Edwin J. Shoemaker 1994 127,345 62,373 0 0 0 0 17,347
Vice Chairman and 1993 124,350 45,030 0 0 0 0 16,229
Executive Vice President 1992 118,850 31,012 0 0 0 0 18,892
of Engineering............
Frederick H. Jackson 1994 238,250 132,503 0 0 9,600 0 44,147
Vice President Finance 1993 232,550 97,180 0 0 10,500 0 41,055
and Chief Financial 1992 217,800 65,661 0 117,000 4,300 0 36,744
Officer...................
Patrick H. Norton 1994 238,250 132,503 0 0 9,600 0 44,504
Senior Vice President 1993 232,550 97,180 0 0 10,500 0 41,921
Sales & Marketing......... 1992 217,800 65,661 0 117,000 4,300 0 37,465
Charles W. Nocella 1994 149,650 84,111 0 0 4,600 0 28,566
Vice President of 1993 146,050 61,688 0 0 5,000 0 26,645
Manufacturing............. 1992 135,050 41,229 0 21,750 2,900 0 23,198
(1) Includes, where applicable, amounts electively deferred by a named
executive under 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 Chair Company Board of
Directors' meetings.
(2) Allocated to named executives for the applicable fiscal year under the
Company's Executive Incentive Compensation Plan.
(3) At the close of the Company's 1994 fiscal year, the named executives
held the following numbers of shares of restricted stock, which had the
following aggregate values on such date (based on the closing market price
for unrestricted shares of the Company's Common Stock): Mr. Knabusch, -0-
shares worth $-0-; Mr. Shoemaker, $-0- shares worth $-0-; Mr. Jackson,
7,800 shares worth $261,300; Mr. Norton, 7,800 shares worth $261,300; and
Mr. Nocella, 1,450 shares worth $48,575.
The value of restricted stock listed in the Summary Compensation Table
represents the fair market value of the Company's stock at the grant date
less the 25% required payment for the stock by the executive. While all
shares of restricted stock require three years of post-grant service to
vest in the ordinary course, such shares may vest in less than three years
in certain circumstances, such as upon a change of control of the Company
or the holder's death, permanent mental or physical disability or normal
retirement. Normal dividends are paid on the restricted stock and are not
subject to forfeiture.
(4) The amounts in this column include amounts allocated for the named
executives to the Supplemental Executive Retirement Plan (SERP), earnings
credited under the SERP, and Company matching contributions in the form of
Company stock to the Matched Retirement Savings Plan. Set forth below is a
breakdown of the totals contained in the Table for fiscal 1994:
Amounts allocated to the Supplemental Executive Retirement Plan of the
Company were as follows:
1994
----
Charles T. Knabusch................. $57,656
Edwin J. Shoemaker.................. 13,733
Frederick H. Jackson................ 35,362
Patrick H. Norton................... 35,362
Charles W. Nocella.................. 22,447
Earnings credited on supplemental retirement balances under the Company's
Supplemental Executive Retirement Plan were as follows:
1994
----
Charles T. Knabusch................. $11,941
Edwin J. Shoemaker.................. 3,614
Frederick H. Jackson................ 7,387
Patrick H. Norton................... 7,325
Charles W. Nocella.................. 4,609
Contributions under the Company's Matched Retirement Savings Plan were as
follows:
1994
----
Charles T. Knabusch................. $1,316
Edwin J. Shoemaker.................. -0-
Frederick H. Jackson................ 1,398
Patrick H. Norton................... 1,817
Charles W. Nocella.................. 1,510
The following table shows all stock options granted to each of the
named executive officers of the Company during fiscal year 1994 and the
potential realizable value of the grants assuming stock price appreciation
rates of 5% and 10% over the five-year term of the options.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at
Assumed Annual Rates of Stock Price
Individual Grants (1) Appreciation for Option Terms ($)(2)
-------------------------------------------- ------------------------------------------
5% Per Year 10% Per Year
% of Total -------------------- --------------------
Options
Granted To
Options Employees Exercise or Price Aggregate Price Aggregate
Granted In Fiscal Base Price Expiration Per Share Value Per Share Value
Name (#) Year ($/SH) Date ($/SH) ($) ($/SH) ($)
---- ------- ---------- ----------- ---------- --------- --------- --------- ---------
Charles T. Knabusch..... 22,500 18.27 32.5875 09/01/98 41.5908 935,793 52.4825 1,180,856
Edwin J. Shoemaker...... -0- -0- -0- N/A -0- -0- -0- -0-
Frederick H. Jackson.... 9,600 7.80 29.6250 09/01/98 37.8098 362,974 47.7114 458,029
Patrick H. Norton....... 9,600 7.80 29.6250 09/01/98 37.8098 362,974 47.7114 458,029
Charles W. Nocella...... 4,600 3.74 29.6250 09/01/98 37.8098 173,925 47.7114 219,472
All Optionees........... 123,130 100.00 30.1664 09/01/98 38.5000 4,740,505 48.5833 5,982,062
(1) All of the above options were granted September 2, 1993 pursuant to
the terms of the Company's 1986 Incentive Stock Option Plan as approved by
the shareholders of the Company in 1986 and in effect as of the date of
the grant. One-fourth of the shares purchasable under each option normally
becomes exercisable beginning in the second, third, fourth and fifth years
after the date of the grant. However, under the terms of the agreements
described under "Certain Agreements" below, then-outstanding options would
be accelerated upon the occurrence of a change in control. Options once
exercisable generally remain exercisable until the expiration of the fifth
year after the date of grant. In the event of the optionee's death or
retirement, the right to exercise the option will exist for a period of
one year following the date of such event for the full amount of shares
remaining unexercised. The optionee's right to exercise an option
immediately terminates in the event the optionee's employment terminates
for any reason other than death or retirement. The per share exercise
price at which the options were granted was 100% of the fair market value
of the Company's Common Stock on the date the options were granted, except
that in the case of options granted to Mr. Knabusch, such price was 110%
of fair market value on the grant date.
(2) The 5% and 10% rates of appreciation are required to be disclosed by
the Securities and Exchange Commission ("SEC") and are not intended to
forecast possible future actual appreciation, if any, in the Company's
stock prices. It is important to note that options have potential value
for the 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 each of the named executive officers in fiscal year 1994 and
the value of the remaining options held by each such executive officer at
the Company's year-end, April 30, 1994:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Value of Unexercised
Number of Unexercised In-The-Money Options
Options at Fiscal Year-End At Fiscal Year-End(2)
-------------------------- --------------------------
Shares
Acquired Value
On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Name # $(1) # # $ $
---- ----------- -------- ----------- ------------- ----------- -------------
Charles T. Knabusch..... 10,100 117,786 67,579 65,431 833,881 520,532
Edwin J. Shoemaker...... -0- -0- -0- -0- -0- -0-
Frederick H. Jackson.... 4,500 65,250 13,700 21,100 196,791 187,334
Patrick H. Norton....... -0- -0- 13,700 21,100 196,791 187,334
Charles W. Nocella...... 2,700 45,975 1,975 10,700 24,475 98,900
(1) Based on the closing market price of the Company's Common Stock on the
date of exercise, minus the exercise price. An individual, upon exercise
of an option, does not receive cash equal to the amount contained in the
Value Realized column of this table. No cash is realized until the shares
received upon exercise of an option are sold.
(2) Based on the closing market price of the Company's Common Stock on
April 30, 1994 ($33.50), minus the exercise price.
LONG-TERM INCENTIVE COMPENSATION UNDER THE
LA-Z-BOY CHAIR COMPANY 1993 PERFORMANCE-BASED STOCK PLAN
At the 1993 Annual Meeting, shareholders approved a long-term
incentive compensation plan designated as the La-Z-Boy Chair Company 1993
Performance-Based Stock Plan ("Performance Plan"). The purpose of the
Performance Plan is to provide the Company and its subsidiaries with an
additional means to (a) attract and retain competent new personnel and
other key employees, (b) insure retention of the services of existing
executive personnel and key employees, and (c) provide incentive to all
such personnel to devote their utmost effort and skills to the long-term
advancement and betterment of the Company and its shareholders. The
Performance Plan seeks to accomplish that purpose through the grant to
selected employees of contingent awards ("Target Awards") the potential
pay-outs on which ("Performance Awards") are linked to achievement by the
end of a cycle of three Company fiscal years (a "Performance Cycle") of
Company performance goals specified toward the beginning of the
Performance Cycle, and by structuring all Performance Awards which may be
earned as options to purchase or outright grants of Company Common Stock.
After the 1993 Annual Meeting, the Compensation Committee granted
Target Awards to certain employees for the Performance Cycle ending at the
close of the Company's 1996 fiscal year. In addition, shortly before the
end of fiscal 1994, the Compensation Committee granted additional Target
Awards for the Performance Cycle ending at the close of fiscal 1997. In
each case, the Committee determined to establish four uniform financial
goals for these Target Awards, each relating to operating performance of
the Company and its consolidated subsidiaries for the pertinent
Performance Cycle: (1) sales growth at a rate greater than that of the
industry, (2) an increase in earnings before income tax at a rate equal to
or greater than sales growth, (3) operating profit margin growth at a rate
equal to or greater than sales growth, and (4) return on total capital at
a specified rate.
The table which follows provides information concerning the Target
Awards granted during fiscal 1994 to executive officers named in the
Summary Compensation Table:
Long Term Incentive Plan -- Awards in Last Fiscal Year
Estimated Future Payouts
-----------------------------------
Number of Performance
Performance Period Until
Shares(1) Maturation Threshold(2) Target(3) Maximum(4)
Name # Or Payout # # #
---- ----------- ------------ ------------ --------- ----------
Charles T. Knabusch... 3,122 (5) 3,122 6,245 12,490
2,810 (6) 2,810 5,620 11,240
Edwin J. Shoemaker.... -0- (5) -0- -0- -0-
-0- (6) -0- -0- -0-
Frederick H. Jackson.. 1,335 (5) 1,335 2,670 5,340
1,200 (6) 1,200 2,400 4,800
Patrick H. Norton..... 1,335 (5) 1,335 2,670 5,340
1,200 (6) 1,200 2,400 4,800
Charles W. Nocella.... 637 (5) 637 1,275 2,550
575 (6) 575 1,150 2,300
(1) Numbers reported are the base numbers of shares subject to Target
Awards granted.
(2) Numbers reported are the numbers of shares which would become subject
to 30-day option if only one performance goal is achieved. The per share
exercise price for any such option would be 50% of the "Fair Market Value"
(as defined in the Performance Plan) of a common share at date of grant of
the Target Awards.
(3) Numbers reported are the numbers of shares which would become subject
to 30-day option if two performance goals are achieved. The per share
exercise price for each such option would be 25% of Fair Market Value of a
common share on date of grant of the Target Awards. For achievement of
three performance goals, an outright grant of the same number of shares
would be made. Under the terms of the Performance Plan, if a Target Award
grantee's employment terminates due to death, or if termination is due to
disability (as therein defined) or retirement with the consent of 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) until maturation or payout
is three fiscal years ending April 28, 1996.
(6) The performance period is three fiscal years ending April 27, 1997.
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 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, 1994 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.
All of these agreements originally were entered into prior to 1993,
but it is possible none of them would be eligible for "grandfathering" for
purposes of $1,000,000 compensation deductibility limit imposed last
August by enactment of sect.162(m) of the Internal Revenue Code (further
discussed under "Report of the Compensation Committee on Executive
Compensation"), due to the renewal feature of the agreements. Therefore,
if a payment obligation under an agreement is triggered by termination
after a change in control, it also is possible that a substantial portion
of the amount payable will not be deductible by the Company.
PERFORMANCE COMPARISON
The following table 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 28,
1989 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 Stock.
La-Z-Boy Chair Company
Comparison of Total Return to Shareholders
April 28, 1989 through April 29, 1994
1989 1990 1991 1992 1993 1994
------ ------ ------ ------ ------ ------
LA-Z-BOY CHAIR COMPANY 100.00 105.62 118.27 134.16 163.98 200.15
PEER GROUP INDEX 100.00 95.13 95.14 122.55 146.72 147.88
NYSE MARKET INDEX 100.00 108.42 126.98 143.05 158.40 169.90
PEER GROUP INDEX
The Peer Group consists of seven public companies operating
primarily in the residential segment of the furniture industry and two
other larger public companies which operate in that business segment as
well as in other business segments. The returns of each company have been
weighted according to their respective stock market capitalization for
purposes of arriving at a peer group average: RESIDENTIAL -- Bassett
Furniture, Bush Industries, DMI Furniture, Flexsteel Industries, LADD
Furniture, Pulaski Furniture, and Rowe Furniture; OTHERS -- MASCO
Corporation and Leggett & Platt.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The compensation of the Chief Executive Officer and other four
highest paid executive officers, as well as the corporation's other senior
executives at La-Z-Boy and all subsidiaries, is determined by the
Compensation Committee of the Board of Directors. The Committee is a
standing committee of the Board of Directors which is comprised entirely
of non-employee directors. The Committee has access to an independent
compensation consultant to enable it to carry out its responsibilities.
The Compensation Committee met three times in fiscal 1994. No member of
the Committee is eligible to participate in any of the employee
compensation plans or programs it administers. The Committee presents the
following report on compensation for the Company's executive officers for
fiscal 1994. Actual awards for fiscal year 1994 for the named executives
are shown in the Summary Compensation Table preceding this report.
COMPENSATION PHILOSOPHY
The Company's executive compensation programs are premised on the
belief that the interests of executives should be closely aligned with
those of the Company's stockholders. Based on this philosophy, the
Committee believes that 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
Company's stockholders in both the short and long-term. Since the
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 stock.
* 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
In carrying out its duties, the Committee regularly reviews the
executive compensation programs of the Peer Group identified under
"Performance Comparison" and of various manufacturing companies of similar
size whose executives have similar responsibilities and operations. In
fiscal 1994, this review included an analysis by an independent
compensation consultant retained by the Company to permit the Committee to
assure itself that the Company's total compensation program is properly
integrated with both the Company's annual and longer term objectives and
is competitive with compensation programs of other companies with which
the Company must directly compete for executive talent. The chief
components of the Company's executive compensation program consist of
three elements: (1) base salary, (2) annual short-term incentive award,
and (3) long-term incentives utilizing stock-based awards.
BASE SALARY
The base salary of the Chief Executive Officer and each of the other
senior executives is initially determined by evaluating the
responsibilities of the position against the competitive marketplace. By
utilizing an independent compensation consulting firm and various salary
surveys, each position is assigned a salary range which consists of
minimum, mid-point and maximum salaries. Generally, base salary for senior
executives is targeted at the mid-point of salary ranges for comparable
positions. In fiscal 1994, all base salaries, including that of Mr.
Knabusch, were approximately 90% of the mid-point salaries.
An annual salary adjustment within each applicable salary range is
determined by evaluating the performance of the individual, in the context
of the financial results of the Company. Mr. Knabusch's salary for the
1994 fiscal year, set forth in the Summary Compensation Table below,
reflects the Committee's consideration of these factors.
SHORT-TERM INCENTIVE AWARD
Annually, the Compensation 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 is based on the
Committee's assessment of the key short-term priorities of the
corporation. 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 independent compensation consultant. The award paid is based on
actual results compared to the established performance targets. For fiscal
1994, the performance criteria were improvement in sales revenue and net
earnings. One-third of the award was based on sales revenue and two-thirds
was based on earnings. This weighting is the result of the Board's
continuing emphasis on improving earnings. For fiscal 1994, the Company's
consolidated sales revenue increased 18% over fiscal 1993, and the
Company's net earnings for fiscal 1994 increased 27% over fiscal 1993.
Based on the sliding scale of performance goals established prior to the
start of the fiscal year, the Company's financial performance resulted in
the bonus payments as set forth in the Summary Compensation Table. The
annual incentive awards paid to the CEO and the other executives named in
the table were based exclusively on the overall corporate performance
using the system described above.
LONG-TERM INCENTIVES
The Company and the Compensation Committee have long recognized the
importance of linking executive compensation and value created for
shareholders. Consequently, stock-based awards are an important component
of executive compensation and one which particularly links executive
compensation to the maximization of shareholder values. For fiscal 1994,
stock-based awards were potentially available to executive officers and
management personnel under the Performance Plan approved by the
shareholders last year, as well as under the Company's previously
established and approved employee stock option and restricted stock plans.
However, in light of the new availability of awards under the Performance
Plan, the Committee determined for fiscal 1994 not to make any grants of
restricted stock to any executive officers or other employees eligible to
receive Target Awards under the Performance Plan. The Committee's present
intention is to follow that same practice for the current year and future
fiscal years. Awards under the programs are based both on a combination of
an individual's contribution to the Company's performance and on the
executive's individual performance. The Committee relies heavily on
competitive data and the recommendations of an independent compensation
consultant who utilizes comparative practices followed by a number of
Fortune 500 companies.
In determining the number of incentive stock option shares to be
awarded to the CEO and other senior executives in fiscal 1994, the
committee considered grants made by comparable companies and the
cumulative grants to the CEO in the past. Based upon that review, the CEO
was granted options to acquire 22,500 shares at an exercise price equal to
110% of the market value on the date of grant, all as reported in the
Summary Compensation Table preceding this report. No restricted stock
awards have ever been made to the CEO in the past and none were granted to
the CEO or the four senior officers in fiscal 1994.
To continue the alignment of stock compensation with shareholder
interests the Committee has granted Performance-Based Shares in 1994. This
plan focuses on the achievement of predetermined target levels of
performance of both financial and non-financial objectives which are
consistent with the Committee's strategic business goals for the award
period.
In the opinion of the Committee, the Company's performance-based
cash compensation system, together with the various equity-based plans,
provides all of the management employees, including its executive officers
and CEO, with an incentive to advance objective targets designed to
increase shareholder value.
CHIEF EXECUTIVE OFFICER COMPENSATION
The salary, short-term incentive bonus, and long-term incentive
awards of the CEO are determined by the Committee substantially in
accordance with the policies described above for all other executives of
the Company. The Committee evaluates the CEO's contribution to the
Company's achievement of both its short-term and long-term financial and
non-financial objectives on an ongoing basis. In addition, the Committee
evaluates performance of the CEO at least annually based upon a variety of
factors, including the extent to which strategic and business plan goals,
including such factors as earnings per share, return on equity, growth in
sales and similar ratios are achieved.
In summary, based on the strong performance of the Company versus
peer companies, and the Committee's determination of the CEO's
contribution to this performance and to the positioning of the Company for
future long-term growth, the Committee has determined that the
compensation paid to the CEO, as described in the Summary Compensation
Table preceding this report, is in the best interests of the Company and
its shareholders.
RECENT TAX LAW DEVELOPMENTS
In August 1993, the Internal Revenue Code was amended to add a new
sect.162(m), which, in general, limits the deductibility of certain
compensation in excess of $1,000,000 per year paid on or after January 1,
1994 by a publicly-held corporation to individuals named in the
corporation's Summary Compensation Table for the year. Proposed
regulations concerning sect.162(m) were issued by the Internal Revenue
Service last December. Final regulations have not yet been issued.
Some types of compensation are excluded from sect.162(m)'s
million-dollar deductibility limit, including certain compensation payable
under "grandfathered" agreements entered into before enactment of
sect.162(m) and certain "performance-based" compensation. Compensation
associated with stock options or their exercise can qualify for a
performance-based exclusion, as can other forms of compensation based on
objective performance criteria, provided certain requirements are
satisfied.
While there is necessarily some uncertainty in this area in light of
the absence of final regulations, the Committee believes sect.162(m) does
not affect deductibility by the Company of any fiscal 1994 compensation
and does not expect it to affect deductibility of compensation paid or
payable for the current year. The Committee also believes that the
deductibility of any compensation that might arise in connection with
exercises of currently outstanding employee stock options will not be
affected by sect.162(m) and expects in due course to take or propose such
additional actions as may be necessary or appropriate to preserve such
deductibility with respect to options granted in the future.
However, as noted under "Certain Agreements," compensation payable
in the future under the change of control agreements there discussed may
not be fully deductible under sect.162(m). In addition, despite the use of
objective performance criteria in the Performance Plan, at least some of
the compensation associated with Performance Awards earned in the future
with respect to Target Awards previously or hereafter granted may be
non-deductible.
The maximum utilization of legally available tax deductions is
beneficial to the Company and its shareholders, and this factor, like
other relevant factors, is taken into account by the Compensation
Committee as it reviews existing compensation programs and considers
whether changes should be implemented or new programs developed. However,
there are circumstances in which, on balance, the interests of
shareholders are best served by the implementation of policies that may
not maximize the tax deductible expenses of the Company. This is at least
as true in the area of executive compensation as it is in other areas.
While the Committee has considered and expects to continue to consider the
impact of sect.162(m) in the course of its deliberations, decisions and
recommendations will continue to be made with the goal of maximizing the
creation of long-term shareholder value within the framework of the
general compensation philosophy described above, rather than by rigid
adherence to compensation deductibility standards.
The Compensation Committee
John F. Weaver, Chairman
Rocque E. Lipford
David K. Hehl
Warren Gruber
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The above named non-employee directors constitute the Compensation
Committee of the Company's Board of Directors and served in that capacity
for the entire 1994 fiscal year. No other persons served on the
Compensation Committee during that fiscal year.
John F. Weaver is an Executive Vice President of Monroe Bank and
Trust. Charles T. Knabusch, Chairman of the Board, President and CEO of
the Company is a member of the Board of Directors of Monroe Bank and Trust
and serves as a member of the Personnel Committee of the Bank.
The law firm of Miller, Canfield, Paddock and Stone, P.L.C., of which
Rocque E. Lipford is a principal, provides legal services to the Company,
and as Miller, Canfield, Paddock and Stone, has done for the past 14 years.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The Board of Directors, at the recommendation of its Audit
Committee, has reappointed the firm of Price Waterhouse as its independent
accountants. Price Waterhouse has served as independent accountants for
the Company continuously since 1968. It is expected that a representative
of Price Waterhouse will be present at the annual shareholders' meeting
with the opportunity to make a statement if he or she desires and to
answer appropriate questions which may be raised by shareholders at the
meeting.
SHAREHOLDER PROPOSALS
Shareholders who intend to present a proposal at the annual meeting
to be held in 1995 must furnish such information to the Company by
February 24, 1995 for the proposal to be included in the Company's proxy
statement for that meeting. The Company may omit a proposal and any
statement in support thereof from its proxy statement and form of proxy in
accordance with rules issued by the Securities and Exchange Commission.
OTHER MATTERS
The Management is not aware of any other matters which may come
before the meeting. However, if any other matters properly come before the
meeting, it is the intention of the persons named in the accompanying form
of proxy to vote the proxy in accordance with their judgment on such matters.
The total expense of sending out notices, proxies and the proxy
statement will be paid by the Company. This expense is 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 24, 1994
A copy of the Company's Annual Report to the Securities and Exchange
Commission (Form 10-K) may be obtained by writing the Secretary's office.
LA-Z-BOY CHAIR COMPANY PROXY
The undersigned hereby appoints C. T. Knabusch, and E. J. Shoemaker, and
both of them Proxies with power of substitution to attend the Annual Meeting
of Shareholders of La-Z-Boy Chair Company to be held at the La-Z-Boy Chair
Company Auditorium, 1314 North Telegraph Road, Monroe, Michigan, July 25 1994
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)
[X] Please mark your
votes as in this
example.
WITHHOLD Authority
to vote for all
FOR all nominees nominees listed
listed to right to right Nominees:
1. Election of [ ] [ ] Frederick H. Jackson
Directors Lorne G. Stevens
Patrick H. Norton
(INSTRUCTIONS: To withhold authority to vote for any individual nominees,
write that nominee's name on the line below.)
_____________________________________________________
2. 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
Proposals 1 "and 2".
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(s).
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.
