Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section
14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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Preliminary Proxy Statement |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Under Rule
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La-Z-Boy Incorporated
(Name of Registrant as Specified In Its
Charter)
(Name of Person(s) Filing Proxy
Statement, if Other Than the Registrant)
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Table of Contents
Notice of Annual Meeting of
Shareholders
Day |
|
Time |
|
Place |
|
Tuesday, August 29, 2017 |
|
8:00 a.m., Eastern Daylight Time |
|
The Westin Detroit
Metropolitan Airport Wright Room 2501 Worldgateway Place Romulus,
Michigan |
Monroe, Michigan
July 18,
2017
To our shareholders:
We invite you to attend our 2017 annual
meeting of shareholders to be held Tuesday, August 29, 2017, in the Wright Room
of The Westin Detroit Metropolitan Airport, located at 2501 Worldgateway Place,
Romulus, Michigan. Only shareholders of record at the close of business on July
6, 2017, will be entitled to vote at the meeting. At the meeting, we intend
to:
● |
Elect nine directors for one-year terms
expiring in 2018; |
● |
Consider and vote on approving the
boards proposed 2017 Omnibus Incentive Plan; |
● |
Hold a non-binding advisory vote on a
proposal to approve the compensation of our named executive
officers; |
● |
Hold a non-binding advisory vote on the
frequency of holding future advisory votes to approve the compensation of
our named executive officers; |
● |
Ratify the selection of
PricewaterhouseCoopers LLP as our independent registered public accounting
firm for fiscal 2018; and |
● |
Transact any other business that
properly comes before the meeting. |
The board of directors recommends a
vote FOR each director, 1 YEAR for the frequency of approving executive
compensation, and FOR each other proposal. The proxy holders will use their
discretion to vote on any other matters that come before the shareholders at the
annual meeting.
We encourage you to exercise your right
as a shareholder and cast your vote promptly. If you received a paper copy of
the proxy materials, you may vote by mail by signing, dating, and returning the
enclosed proxy card in the accompanying envelope. You may also vote by telephone
or on the Internet (see the instructions attached to the proxy card or on the
Notice of Internet Availability of Proxy Materials). Even if you vote by one of
these methods prior to the meeting, you may still vote your shares in person at
the meeting, and doing so will revoke your previous vote.
BY ORDER OF THE BOARD OF
DIRECTORS
James P. Klarr,
Secretary
Table of Contents
PROXY
SUMMARY
When: |
Where: |
August 29, 2017 |
The Westin Detroit Metropolitan
Airport |
at 8:00 A.M. (Eastern) |
Wright Room |
|
2501 Worldgateway Place |
|
Romulus,
Michigan |
Proposals
1. Elect nine directors
2. Approve 2017 Omnibus Incentive Plan
3. Advisory approval of our executive
compensation
4. Advisory approval of the
frequency of future votes seeking advisory approval of our executive
compensation
5. Ratify the selection of an
independent registered public accounting firm
How:
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|
|
|
|
|
|
Online www.proxyvote.com |
|
By
Phone 1.800.690.6903 |
|
By
Mail Completing, signing and returning your proxy card |
|
In
Person With proof of ownership and a
valid photo ID |
We are furnishing this proxy statement,
form of proxy and accompanying materials to our
shareholders on or about July
18, 2017.
Nominee |
|
Director since |
|
Primary (or Former)
Occupation |
|
Committees |
Kurt Darrow |
|
2003 |
|
Our
Chairman, President and CEO |
|
|
Sarah
Gallagher* |
|
2016 |
|
Former President of
Ralph Lauren North America e-commerce |
|
Comp; Nom & Govern |
Edwin Holman* |
|
2010 |
|
Former
CEO of Macys Central, a division of Macys Inc. |
|
Audit; Comp (C) |
Janet
Kerr* |
|
2009 |
|
Vice Chancellor,
Pepperdine University |
|
Comp; Nom & Govern |
Michael Lawton* |
|
2013 |
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Former
Executive Vice President and CFO, Dominos Pizza, Inc. |
|
Audit (C); Comp |
Dr. George
Levy* |
|
1997 |
|
Otorhinolaryngologist |
|
Comp; Nom & Govern |
Alan McCollough* |
|
2007 |
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Former
Chairman and CEO of Circuit City Stores, Inc. |
|
Audit (LD) |
Lauren
Peters* |
|
2016 |
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Executive Vice
President and CFO of Foot Locker, Inc. |
|
Audit; Nom & Govern |
Dr. Nido Qubein* |
|
2006 |
|
President of High Point University |
|
Comp; Nom & Govern (C) |
* Independent
directors (C)-Committee chair (LD)- Lead
director |
● |
Annually elected directors, no
classified board |
● |
89% independent
board |
● |
100% independent
committees |
● |
Strong lead
director framework |
● |
Regular executive sessions of independent
directors |
● |
Annual board and
committee evaluations |
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| investors.la-z-boy.com
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Consolidated Five-Year Sales and Operating Margin ($ in
Millions) |
*Fiscal 2016 includes 53 weeks. All
other years presented include 52 weeks.
Capital Allocation: Business
Investments and Returns to Shareholders ($ in Millions) |
*Fiscal 2016 includes 53 weeks. All
other years presented include 52 weeks.
PROXY STATEMENT
| 2017
3
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Executive Compensation
Highlights |
Compensation Program
Key
Elements |
|
Key
Terms |
Base Salary |
|
Annual merit increases
based on individual performance, market comparison and total salary
budget |
Management Incentive Plan (MIP) |
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Annual incentive focused on sales and
operating margin. Maximum award 200% of target |
Stock Options |
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Price at share value on
grant date. Four year vesting; ten year term. |
Performance-based stock awards |
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3-year award cycle with annual goals,
payouts made after the full 3 year period is complete |
Performance-based retirement plan |
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Annual contribution (maximum 35% CEO; 25% NEOs) based on
operating income performance |
Target Pay Mix of CEO and Other Named
Executive Officers (as a % of Total Direct Compensation) |
CEO |
Other Named Executive
Officers (average) |
|
|
|
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What we do |
|
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What we dont
do |
✓ |
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Pay for performance emphasizing
variable pay linked to our financial or market results |
|
✗ |
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We do not provide employment
agreements |
✓ |
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Executive stock ownership
guidelines to align executives interests with our
shareholders |
|
✗ |
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We do not gross up excise taxes
upon change in control |
✓ |
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Use relative total shareholder
return (TSR) in long-term performance award |
|
✗ |
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We do not reprice options without
shareholder approval |
✓ |
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Base company contributions to
executive compensation retirement plans on performance |
|
✗ |
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We do not pay dividends on
unearned performance shares or units |
✓ |
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Mitigate undue risk with caps on
potential incentive payments and a clawback policy |
|
✗ |
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We do not use single-trigger
vesting for equity-based awards upon a change-in-control |
✓ |
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Utilize double-trigger change in
control agreements |
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✓ |
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Include only independent directors
on the compensation committee |
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|
✓ |
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Engage an independent compensation
consulting firm to assist the compensation committee |
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✓ |
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Align severance and change in
control arrangements with market practices |
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✓ |
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Prohibit executives from hedging
and short selling of our shares |
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Table of Contents
|
|
|
|
|
|
|
Online www.proxyvote.com |
|
By
Phone 1.800.690.6903 |
|
By
Mail Completing, signing and returning your proxy card |
|
In
Person With proof of ownership and a
valid photo ID |
The Board of Directors
recommends you vote
●FOR each director nominee
●FOR approval of the 2017 Omnibus
Incentive Plan
●FOR approval of the compensation of our
executive officers
●FOR 1 Year on the frequency of
holding advisory votes to approve the compensation of our executive
officers
●FOR ratifying the selection of
PricewaterhouseCoopers LLP as our independent registered public accounting
firm |
PROXY STATEMENT
| 2017 5
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2017 PROXY STATEMENT
TABLE OF CONTENTS
6
La-Z-Boy Incorporated
| investors.la-z-boy.com
Table of Contents
CORPORATE GOVERNANCE
Our board of directors is committed to
good governance practices that further the companys strategic growth plans and
enhance shareholder value over the long term, while also considering the
interests of other stakeholders, including our employees, customers, vendors,
and the communities we impact. The board oversees the companys performance,
including its strategic direction and critical corporate policies that have the
largest impact on our operations. In exercising its oversight responsibility,
the board evaluates the performance of our president and chief executive officer
and directs succession planning for the chief executive officer, directors, and,
to the degree appropriate, other leadership positions. The board monitors our
strategic plan, our performance against the plan, and managements assessment
and remediation of the companys risks. As part of the strategic planning
process, the board reviews the companys capital allocation plan and its
investment in research and product development, information technology,
and employee development, with a focus on
promoting the companys long-term growth. The board regularly reviews our
governance practices and processes to ensure they remain effective, making
changes when appropriate. It also monitors the companys culture to encourage a
focus on sustainable growth and to ensure we maintain the highest levels of
ethics and integrity, especially with respect to our financial statements and
disclosures.
In the following section, we describe
our governance policies and practices. Our governance guidelines can be found on
our website at http://investors.la-z-boy.com, under Corporate Governance, and
they address our policies related to director selection, membership criteria,
independence, orientation, and assessment of board performance. At the same
site, we post our other key governance documents, such as the lead director
charter, the charters for each of the boards key committees, and our Code of
Business Conduct.
Our current leadership structure
incorporates a combined position of chairman and chief executive officer
reporting to a board of otherwise independent directors, and working with a
strong independent lead director. At the time we combined the roles of chairman
and CEO, we felt it was imperative that the leadership of the company be focused
in one position to ensure effective management and direction to implement our
strategic plan and initiatives. The interaction between management and board
roles related to strategic and long-term planning calls for a more streamlined
and accountable leadership structure. At the same time, our strong, effective
independent lead director and independent committees ensure significant
oversight over company management. We believe this structure has worked well for
us and remains the appropriate structure for our company.
Our Corporate Governance Guidelines
require that when the roles of our chairman and CEO are combined, we elect an
independent lead director. Our lead director serves as the principal liaison
between our independent directors and our chairman, facilitating a steady stream
of communications between management and our independent directors. Among other
duties, the lead director:
● |
collaborates on the board and
committee meeting agendas; |
● |
solicits and recommends
matters for the board and committees to consider; |
● |
advises the chairman as to the
quality, quantity, and timeliness of the information submitted to the
directors; |
● |
calls meetings of the
independent directors or calls for executive sessions during board
meetings; |
● |
serves as chairman of the
meetings of the independent directors or executive sessions of the board; |
● |
collaborates with committee chairs to
ensure board work is conducted at the appropriate level, coordinating on
issues involving multiple committees; |
● |
meets with our CEO to discuss
his performance; |
● |
communicates directly
with shareholders when appropriate; and |
● |
presides at board meetings
when the chairman is absent. |
In addition to the formal division of
duties among the board chair, lead director, and committee chairs, these board
leaders compose an informal executive committee that address any significant
issues that arise between board meetings. In light of our strong independent
lead director structure, annual evaluations of the lead directors performance,
a board composed almost solely of independent directors, ready access to
management by the directors, and regular executive session meetings without
management, our board exercises effective oversight of our executive chairman,
and the current leadership structure operates efficiently to protect and advance
the interests of our shareholders.
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| 2017
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While management is responsible for the
day-to-day assessment, monitoring and remediation of the companys risks, our
board of directors is responsible for oversight of these risk activities. To
ensure vigilant monitoring of the risks, the board has delegated risk oversight
to various committees while maintaining certain key risks, such as
cybersecurity, at the full board level. The board has directed the nominating
and governance committee to assign oversight of the various risk categories,
including strategic, operational, IT, and financial risk, to the various
committees or the full board, while ensuring that all risks, including any
emerging risks, are monitored. The nominating and governance committee regularly
reviews managements enterprise risk management process and discusses with
management changes in risk assessment and
remediation plans. In conjunction with the boards strategic plan review,
management identifies risks directly related to the plan as well as new and
emerging risks.
Each committee regularly reviews and
reports to the board on its respective risk categories. Throughout the year, our
board and board committees review and discuss the various risks confronting the
company, paying special attention to new operating and strategic initiatives.
Our nominating and governance committee and our board as a whole encourage open
communication and appropriate escalation of reporting of risk throughout the
enterprise, striving to ensure that enterprise risk management is part of our
corporate culture.
We work diligently to reduce and manage
our environmental footprint and learn and build on our experiences as we
continue our environmentally sustainable journey forward. Our strong commitment
to responsible stewardship of the environment includes integrating
environmentally sound and sustainable business practices into our daily business
decisions. We are focused on reducing waste, increasing recycling and energy
efficiency, and consuming fewer resources.
We currently have ten locations
registered under the American Home Furnishings Alliance (AHFA) Enhancing
Furnitures Environmental Culture (EFEC) program, including the La-Z-Boy
upholstery plants, La-Z-Boy casegoods facilities, and our cut and sew center in
Saltillo, Mexico (the first international facility to be EFEC registered). The
EFEC program is an environmental management system designed by AHFA that
requires strong environmental programs and analysis of environmental impacts. In
addition, we received LEED Silver certification for our world headquarters from
the U.S. Green Building Council. Our 120-acre headquarters site includes a
geothermal heating system and an endangered oak savanna ecosystem, which we have
committed to preserve. Three of our business units, including the La-Z-Boy
upholstery operations, are registered by AHFA as Sustainable By Design. The
Sustainable By Design program provides a roadmap for home furnishings companies
to create a corporate culture of conservation and environmental stewardship by
integrating socioeconomic policies and sustainable business practices into their
manufacturing operations and sourcing strategies. As part of our continuous
improvement initiatives, we recently added a Social Compliance Manager to our
global trading company operations in Hong Kong.
Over a six-year period (20082014), our
La-Z-Boy upholstery plants reduced their energy consumption by 22 percent and
eliminated more than 7.7 million pounds of waste going to the landfill per year.
We now reuse, recycle or reutilize 91 percent of
the waste generated from these manufacturing operations. Nine of our facilities,
including four of our manufacturing plants (in Arkansas, California, Missouri,
and Tennessee), four distribution centers and our World Headquarters now send
nothing to the landfill and have been recognized with sustainability awards. We
continue to utilize renewable wood fuels generated on site for the production of
steam used in some of our processes, and we sell excess wood residuals for
further reuse by other industries. Wood fuel from sustainably managed forests is
a renewable energy source that helps reduce greenhouse gas emissions and
eliminate solid waste disposal. We recently enhanced our monitoring capabilities
by entering a partnership with a third-party specialist for utility bill
management, strategic energy sourcing and utilization of comprehensive energy
and sustainability data management.
We have worked to reduce our retail
stores environmental footprint by using greener construction materials,
lowering our energy use, and reducing waste. We transitioned to eco-friendly
paint, rubber wall base, and vinyl and carpet flooring, and we are adding
recycling bins at our stores and reducing the amount of packaging we use. We are
currently converting our retail store lighting systems to LED light-bulbs, and
we are piloting a new energy-management system to further reduce energy
waste.
We obtain many of our wood materials
and components from suppliers that have implemented sustainable forest
management practices or from sustainable plantation-grown renewable rubber wood.
We use other wood- and fiber-based materials made with recycled or recovered
paper. Our furniture designs have won the Innovative Green Design Award (IGDA)
from New York House magazine by demonstrating outstanding effort to provide
environmentally-friendly furniture to consumers. We have also won the American
Society for Furniture Designers Pinnacle Green Leaf Award given for
distinguished designs that are also eco-friendly. We also received the Tennessee
Department of
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| investors.la-z-boy.com
Table of Contents
Environment and Conservation Green
Three-Star Partnership award for our environmental management efforts at our
largest upholstered furniture manufacturing facility located in Dayton,
Tennessee.
We have not reached our ultimate
destination, but we strive every day to be greener than we were the day
before.
Our board of directors engages in an
effective planning process to identify, evaluate and select potential successors
to the CEO and other members of executive management. The CEO provides quarterly
updates to the directors of the significant changes in key personnel and the
chief human resources officer annually reviews with the board executive
management succession planning. Each board member has complete and open access
to any member of management. The senior members of management are invited
regularly to make presentations at board and
committee meetings and meet with directors in informal settings to allow the
directors to form a more complete understanding of the executives skill and
character. The board periodically reviews and revises as necessary the companys
emergency management succession plan, which details the actions to be taken by
specific individuals in the event the CEO suddenly dies or becomes
incapacitated.
Our nominating and governance committee
is responsible for recommending director candidates to fill current and
anticipated board vacancies. The committee identifies and evaluates potential
candidates from recommendations from the committees own members, referrals from
other board members, management, shareholders, or other outside sources,
including professional recruiting firms. (For information on how to propose a
candidate to the committee or nominate a director, see Next Annual MeetingShareholder Proposals for the 2018 Annual Meeting, page 62.) In evaluating
proposed candidates, the committee may review
their résumés, obtain references, and conduct personal interviews. The committee
considers, among other factors, the boards current and future needs for
specific skills and the candidates experience, leadership qualities, integrity,
diversity, ability to exercise mature judgment, independence, and ability to
make the appropriate time commitment to the board. The committee strives to
ensure the board has a rich mix of relevant skills and experiences to address
the companys needs as dictated by our strategic plan.
Our board of directors strongly
supports the concept of director independence, and only our chairman is a
company employee. Consistent with the NYSE rules, our Corporate Governance
Guidelines require that a majority of our directors be independent, and we limit
membership on each of our committees to independent directors.
Our board annually reviews and
determines if any director has any material relationship with our company, our
management, or our other directors that would impede the directors autonomy. As
reflected in our Corporate Governance Guidelines, a director cannot be deemed
independent if, in the previous three years, either the director or an immediate
family member:
● |
was employed by our company or
our independent registered public accounting firm; |
● |
was employed by a company with
a compensation committee that included one of our executive
officers; |
● |
received more than $120,000
during any 12-month period in direct compensation from La-Z-Boy, other
than director compensation or pension or other forms of
deferred compensation for prior service (provided such compensation was
not contingent in any way on continued service); and |
● |
was an executive officer or
employee of an entity that made payments to or received payments (other
than contributions to a tax-exempt organization or charity) from us for
property or services that, in any single fiscal year, exceeded the greater
of $1 million or 2% of the other entitys consolidated gross
revenues. |
In addition, our board has adopted the
following categorical standards to clarify if a relationship is material. We
will not treat a relationship as material if:
● |
A director is an executive
officer, director, or shareholder of a company that does business with us
and the annual revenues derived from that business are less than 1% of
each companys total revenues; |
● |
A director is an executive
officer, director, or shareholder of a company that is indebted to us, or
to which we are indebted, and the total amount of each companys
indebtedness to the other is less than 1% of the total consolidated assets
of each company; or |
PROXY STATEMENT
| 2017 9
Table of Contents
|
a director is an
executive officer, director, or shareholder of a bank or other financial
institution (or its holding company) that extends credit to us on normal
commercial terms and the total amount of our indebtedness to the bank or
other financial institution is less than 3% of our total consolidated
assets; |
● |
A director is an executive
officer or director of a company in which we own common stock but our
interest is less than 5% of that companys total shareholders
equity; |
● |
A directors family member is
or was employed by us in a non-executive capacity with compensation that
has not exceeded $120,000 in any fiscal year; |
● |
A director is a director,
officer, or trustee of a charitable organization to which we contribute,
but our annual contributions (exclusive of gift-match payments) are less
than 1% of the organizations total annual
charitable receipts, all of our contributions were approved through our
normal approval process, and no contribution was made on behalf of any of
our officers or directors; or a director is a director of the La-Z-Boy
Foundation; or |
● |
A director is a member of,
employed by, or of counsel to a law firm or investment banking firm that
performs services for us, our payments to the firm during a fiscal year do
not exceed 1% of the firms gross revenues, and the directors
relationship with the firm is such that the directors compensation is not
linked directly or indirectly to our payments to the
firm. |
Following the NYSE listing standards
and our Corporate Governance Guidelines described above, our board of directors
has determined that each of our directors other than our chairman/CEO is an
independent director.
Related Party Transactions |
Our Code of Business Conduct, which
applies to all of our employees and directors, requires that any potential
conflict of interest be either avoided or fully disclosed. Each year, we require
our directors and executive officers to disclose any transactions between them
or their immediate family members and the company. The audit committee reviews
any transactions related to directors or
executive officers reported and takes appropriate action. We will disclose on
our website any waivers of the Code of Business Conduct granted to our directors
or executive officers. We granted no waivers in fiscal 2017.
We encourage significant stock
ownership by our directors and executive management to align the interests of
our leadership with those of our shareholders. We have established stock
ownership guidelines that require each non-employee director to own La-Z-Boy
equity (including deferred or restricted stock units) at least equal in value to
five times the directors annual cash retainer or salary.
As of April 29, 2017, each director,
other than our three newest directors, had met the ownership requirements. Under
our guidelines, Ms. Gallagher and Ms. Peters,
each of whom have been on the board less than a year, have until May 1, 2022 to
meet the requirement, while Mr. Lawton, currently in his fourth year as a
director, has until May 1, 2019.
We prohibit directors, officers, or
employees from hedging or pledging our shares or engaging in short-term
speculative trading, including short sales, trading in puts and calls, or buying
on margin.
Majority Vote Standard for Director
Elections |
Our Corporate Governance Guidelines
require that any director who fails to receive a majority of votes cast in an
uncontested election must submit his or her resignation at the board meeting
that immediately follows the annual shareholders meeting. The other directors
must then act on the resignation at or before the
next regularly scheduled meeting and publicly report the boards decision. An
election is treated as contested for purposes of this rule if there are more
nominees for board seats than there are positions to be filled by election at
the meeting.
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| investors.la-z-boy.com
Table of Contents
Communication with the Company or the
Directors |
Interested parties may communicate
their comments, concerns or questions about La-Z-Boy to the company, or
specifically to our chairman, lead director, or any or all of our other
directors, by letter addressed to them and sent by U.S. mail to the attention of
the Corporate Secretary at:
|
|
La-Z-Boy Incorporated One
La-Z-Boy Drive Monroe, Michigan 48162 |
The corporate secretary reviews and compiles any
communications received, provides a summary of any lengthy or repetitive
communications, and forwards them to the appropriate director or directors. The
complete communication is provided when requested by the appropriate director or
directors.
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| 2017
11
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BOARD AND COMMITTEE
OPERATIONS
Our board of directors met six times
during fiscal 2017. At most meetings, the non-employee directors met in
executive session, chaired by our lead director, without management present.
During fiscal 2017, each of our current directors attended at least 75 percent
of the meetings of the board and committees on which the director served. All of
the current directors attended the 2016 shareholders meeting, and we expect all
the nominated directors to attend the 2017 shareholders meeting.
We currently have three standing
committees of the board: the audit, compensation, and nominating and governance
committees. Each committee is composed of only independent directors. Each
committee operates under its own charter (which
can be found at http://investors.la-z-boy.com, under Corporate Governance)
and has the ability to engage independent consultants and advisors at the
companys expense to assist the committee in fulfilling its duties. While our
board chairman is not a member of any of the board committees, he coordinates
the agendas and activities of the committees with the lead director and each
committee chair. Our current lead director serves on our audit committee and
generally attends the meetings of the compensation and nominating and governance
committees. The current membership and chair of each of the committees are shown
in the following table:
Current Committee Membership
Name |
|
Audit |
|
Compensation |
|
Nominating and Governance |
Kurt L. Darrow (Chairman and CEO) |
|
|
|
|
|
|
Sarah M. Gallagher |
|
|
|
✓ |
|
✓ |
Edwin J. Holman |
|
✓ |
|
Chair |
|
|
Janet E. Kerr |
|
|
|
✓ |
|
✓ |
Michael T. Lawton |
|
Chair |
|
✓ |
|
|
H. George Levy, MD |
|
|
|
✓ |
|
✓ |
W. Alan McCollough (Lead Director) |
|
✓ |
|
|
|
|
Lauren B. Peters |
|
✓ |
|
|
|
✓ |
Dr.
Nido R. Qubein |
|
|
|
✓ |
|
Chair |
Key oversight duties:
● |
Financial reporting
process |
● |
Compliance with legal and
regulatory requirements |
● |
Effectiveness of our internal and
external audit functions |
● |
Selection of the independent
registered public accounting firm |
Members: |
Michael T. Lawton,
Chairman |
|
Edwin J.
Holman |
|
W. Alan McCollough |
|
Lauren B.
Peters |
|
Fiscal 2017 meetings:
9 |
The committee monitors our auditors
independence, annually requests and reviews the firms written statement of
relationships with the company, and reviews and limits our use of our outside
auditors for non-audit work. The committee reviews the staff assigned to our
audit and ensures the lead partner is rotated at least once every five years.
The committee discusses with management and our outside auditor the quality and
adequacy of our internal controls for financial reporting. Each member meets the
enhanced independence standards for audit committees established in the SEC and
NYSE listing standards, is financially literate, and is an audit committee
financial expert within the meaning of the SEC rules. The committee does not
provide any professional certification of our outside auditors work or any
expert or special assurance about our financial statements.
For further discussion of the audit
committees activities, see Audit Committee Report below at page
59.
12
La-Z-Boy Incorporated | investors.la-z-boy.com
Table of Contents
Board and Committee
Operations |
Key Oversight Duties:
● |
Executive and director cash and
equity compensation programs |
● |
Evaluating the CEOs and
executive officers performance
|
Members: |
Edwin J. Holman,
Chairman |
|
Sarah M.
Gallagher |
|
Janet E. Kerr |
|
Michael T.
Lawton |
|
H. George Levy,
MD |
|
Dr. Nido R.
Qubein |
|
Fiscal 2017 meetings: 4 |
Only directors who meet standards of
independence promulgated by the SEC (i.e., non-employee director as
defined in the rules under Section 16 of the Securities Exchange Act of 1934),
the Internal Revenue Service (i.e., outside director as defined in
the regulations under Section 162(m) of the Internal Revenue Code), and the NYSE
listing standards may serve on the committee. The committee obtains advice on
executive compensation matters from an independent outside compensation
consultant (Korn Ferry Hay Group since fiscal 2010). Each year, the committee
reviews and discusses the independence of its advisers pursuant to NYSE rules,
and it has determined that Korn Ferry Hay Group is independent and its work for
the committee does not raise any conflicts of interest. The committee annually
produces a report on executive compensation for inclusion in the proxy statement
(see Compensation Committee Report below).
Compensation Committee Interlocks
and Insider Participation. Following her
election to the board last August, Ms. Gallagher joined the compensation
committee. All the other committee members served on the committee throughout
fiscal 2017. None of our named executive officers serves on the board of
directors of any company that employs a member of our compensation
committee.
Nominating and
Governance Committee |
Key Oversight Duties:
● |
Board governance
practices |
● |
Director candidates |
● |
Enterprise risk management
process
|
Members: |
Dr. Nido R. Qubein,
Chairman |
|
Sarah M.
Gallagher |
|
Janet E. Kerr |
|
H. George Levy,
MD |
|
Lauren
B.Peters |
|
Fiscal 2017 meetings: 4 |
Our nominating and governance committee
is composed entirely of independent directors. The committee makes
recommendations on general corporate governance issues including the size,
structure, and composition of the board and its committees. The committee also
assists our board in overseeing our risks, including risk assessment,
mitigation, and the determination of risk tolerance levels. See Risk Oversight
above for more discussion of our risk oversight process. The committees charter
can be found on our website at http://investors.la-z-boy.com, under Corporate
Governance.
PROXY STATEMENT | 2017 13
Table of Contents
SHARE OWNERSHIP
Directors and Executive
Officers |
The following table shows the
beneficial ownership of our common stock by each director, director nominee,
each executive officer named in the Summary Compensation Table, and all
directors and current executive officers as a group as of the record date for
the annual meeting. The table and footnotes also contain information about
restricted stock units credited to the non-employee directors that derive their
value based on the market value of our shares. None of the shares shown in the
table are pledged as security.
|
|
Number of Shares or
Units |
Beneficial Owner |
|
Common Stock(1)(2) |
|
Percent of Class |
|
Units Settleable
in Cash(3) |
Mark S. Bacon,
Sr. |
|
65,017 |
|
* |
|
|
J. Douglas Collier |
|
96,516 |
|
* |
|
|
Kurt L. Darrow |
|
886,384 |
|
1.81 |
|
|
Darrell D. Edwards |
|
67,858 |
|
* |
|
|
Sarah M.
Gallagher |
|
2,953 |
|
* |
|
|
Edwin J. Holman |
|
37,013 |
|
* |
|
5,000 |
Janet E. Kerr |
|
34,324 |
|
* |
|
12,927 |
Michael T. Lawton |
|
12,402 |
|
* |
|
|
H. George Levy,
MD |
|
52,074 |
|
* |
|
16,514 |
W. Alan McCollough |
|
40,974 |
|
* |
|
16,514 |
Lauren B. Peters |
|
2,953 |
|
* |
|
|
Dr. Nido R. Qubein |
|
40,974 |
|
* |
|
16,514 |
Louis M. Riccio
Jr. |
|
141,138 |
|
* |
|
|
All
current directors and executive officers as a group (13
persons)(4) |
|
1,566,371 |
|
3.17 |
|
67,469 |
* |
|
Less than 1% |
|
|
|
(1) |
|
This column lists beneficial
ownership as calculated under the SEC rules, including stock options and
restricted stock units that may be exercised or converted without the
companys consent within 60 days of our record date of July 6,
2017. |
|
|
|
(2) |
|
These amounts include 2,953
restricted stock units for Ms. Gallagher and Ms. Peters, 12,402 restricted
stock units for Mr. Lawton, and 33,974 restricted stock units for each
other non-employee director which vest and settle in shares when the
director leaves the board. See the Fiscal 2017 Non-employee Director
Compensation table and related footnotes beginning on page 17 for
additional detail. |
|
|
|
(3) |
|
These restricted stock units vest
and settle in cash, at the fair market value determined at the settlement
date, when the director leaves the board. |
|
|
|
(4) |
|
For purposes of calculating the
percentage ownership of the group, all shares representing the restricted
stock units (footnote 2) and shares subject to options held by any group
member that currently are exercisable or that will become exercisable
within 60 days of our record date of July 6, 2017, are treated as
outstanding. For purposes of calculating the percentage of ownership of
any individual, however, only the shares representing the restricted stock
units and the shares subject to options exercisable or that become
exercisable as described above that are held by that individual are
treated as outstanding. For the computation of each individuals ownership
percentage, shares representing restricted stock units and shares subject
to options held by other directors or executives are not
counted. |
14
La-Z-Boy Incorporated |
investors.la-z-boy.com
Table of Contents
In addition to the restricted stock
units described in footnote 2, the table includes the following numbers of
shares subject to options:
|
J. Douglas
Collier |
22,317 |
|
Kurt L. Darrow |
398,226 |
|
Darrell D.
Edwards |
49,059 |
|
Louis M. Riccio Jr. |
65,910 |
|
All current directors and executive officers as a
group |
809,857 |
The tables below provide information
about beneficial owners of our common shares. Under applicable SEC rules, anyone
who has or shares the right to vote any of our common shares, or has or shares
dispositive power over any of them, is a beneficial owner of those shares. The
settlor of a trust with a right to revoke the trust and regain the shares, or a
person who can acquire shares by exercising an
option or a conversion right, may also be considered a beneficial owner under
these rules. Consequently, more than one person can be considered the beneficial
owner of the same common shares. Unless otherwise indicated below, each owner
named in a table has sole voting and sole dispositive power over the shares
reported for that person.
Security Ownership of Known Over 5%
Beneficial Owners
(as of December 31, 2016,
except as otherwise indicated)
Name and
Address |
|
Number of
Shares |
|
Percent of
Class |
BlackRock, Inc. and
subsidiaries |
|
|
|
|
55 East
52nd Street |
|
|
|
|
New York, NY
10055 |
|
5,978,494 |
|
12.31 |
The Vanguard Group |
|
|
|
|
100 Vanguard
Blvd. |
|
|
|
|
Malvern, PA
19355 |
|
4,197,415 |
|
8.64 |
Wellington Management
Group LLP |
|
|
|
|
280 Congress
Street |
|
|
|
|
Boston, MA
02210 |
|
3,073,952 |
|
6.33 |
Dimensional Fund Advisors LP |
|
|
|
|
Building
One |
|
|
|
|
6300 Bee Cave
Road |
|
|
|
|
Austin, TX
78746 |
|
2,943,288 |
|
6.06 |
● |
Information about BlackRock, Inc.
and its subsidiaries is based on an amended Schedule 13G BlackRock, Inc.
filed after December 31, 2016, in which it reported that as of that date,
it and its subsidiaries had sole voting power over 5,828,335 common shares
and sole dispositive power over 5,978,494 common shares. The other
companies reported as beneficial owners of our common shares were
BlackRock (Netherlands) B.V., BlackRock Advisors, LLC, BlackRock Asset
Management Canada Limited, BlackRock Asset Management Ireland Limited,
BlackRock Asset Management Schweiz AG, BlackRock Fund Advisors, BlackRock
Institutional Trust Company, N.A., BlackRock International Limited,
BlackRock Investment Management (Australia) Limited, BlackRock Investment
Management (UK) Ltd, BlackRock Investment Management, LLC, and BlackRock
Japan Co. Ltd. |
|
|
● |
Information about The Vanguard
Group is based on an amended Schedule 13G it filed after December 31,
2016, in which it reported that as of that date, it had sole voting power
over 74,841 common shares, shared voting power over 7,477 common shares,
sole dispositive power over 4,117,723 common shares and shared dispositive
power over 79,692 common shares. |
|
|
● |
Information about Wellington
Management Group LLP, Wellington Group Holdings LLP, Wellington Investment
Advisors Holdings LLP and Wellington Management Company LLP is based on a
Schedule 13G they filed jointly filed after December 31, 2016, in which
they reported that as of that date, they had shared voting power over
1,459,534 common shares and shared dispositive power over 3,073,952 common
shares. They also report as beneficial owners one or more of the following
investment advisors Wellington Management Company LLP - IA, Wellington
Management Canada LLC IA, Wellington Management Singapore Pte Ltd IA,
Wellington Management Hong Kong Ltd- IA, Wellington Management
International Ltd - IA, Wellington Management Japan Pte Ltd - IA,
Wellington Management Australia Pty Ltd IA. |
PROXY STATEMENT | 2017 15
Table of Contents
● |
Information about Dimensional
Fund Advisors LP is based on a Schedule 13G it filed after December 31,
2016, in which it reported that as of that date it had sole voting power
over 2,803,984 common shares and sole dispositive power over 2,943,288
common shares. It also reported that it serves as an investment manager
and an investment advisor to various investment companies, trusts, and
accounts and that the shares are owned by its clients, no one of which, to
the knowledge of Dimension Fund Advisors LP, owns more than 5% of the
class. Dimensional Fund Advisors LP disclaims beneficial ownership of all
the shares. |
Section 16(a)
Beneficial Ownership Reporting Compliance |
Section 16(a) of the Securities
Exchange Act of 1934 requires our executive officers and directors, some over
10% owners of our common shares, and some persons who formerly were directors,
executive officers, or over 10% owners to file reports of ownership and changes
in ownership with the SEC and the NYSE and to furnish us with a copy of each report filed. Based solely on our review of
copies of the reports filed by some of those persons and written representations
from others that no reports were required, we believe that during fiscal 2017,
all Section 16(a) filing requirements were complied with in a timely
fashion.
16
La-Z-Boy Incorporated | investors.la-z-boy.com
Table of Contents
DIRECTOR COMPENSATION
Working with an independent
compensation consultant, we designed our annual pay package for directors to
attract and retain highly qualified professionals to represent our shareholders.
The compensation committee reviews compensation data for directors of the same
peer group companies selected for evaluating our executive compensation, see
page 29. The committees analysis of compensation includes retainers, meeting
fees, committee fees, and equity compensation. The committee targets the
directors total compensation at the median level of the peer groups total
compensation.
Directors who are also our employees
receive no additional compensation for serving on the board. Non-employee
directors receive a combination of cash and restricted stock units as
compensation for their service. We reimburse our directors for their costs of
travel, lodging, and related expenses while on company-related business. We
provide membership in the National Association of Corporate Directors (NACD) for
each director and reimburse directors for fees and expenses for participation in
NACD and other programs on corporate governance and other issues related to
their duties as directors. We encourage our directors to enhance their
understanding of our operations and business by visiting our facilities, retail
outlets, and competing retailers.
Effective May 1, 2017, we increased our
directors equity portion of the annual retainers by $8,000 to $88,000, while
the cash portion remains at $80,000, effectively a 5% increase. For fiscal 2017, we paid each director cash and equity
compensation in the following amounts:
Cash Compensation
We paid each non-employee director an
annual cash retainer of $80,000. We paid our lead director an additional cash
retainer of $30,000 for serving in that capacity, and we paid the chairs of our
audit, compensation, and nominating and governance committees additional cash
retainers of $20,000, $15,000, and $10,000, respectively. The board held fewer
than 10 board meetings in fiscal 2017, so we did not pay additional meeting
fees.
Equity Compensation
On August 26, 2016, we issued each
non-employee director a grant of 2,953 restricted stock units with a grant date
value of $80,026. Each restricted stock unit is equivalent in value to a share
of La-Z-Boy common stock. Dividend equivalents are awarded on restricted stock
units at the same time and in the same amount as dividends declared on our
common shares. The restricted stock units do not include voting rights. The
units vest and are settled, in shares only, when the director leaves the
board.
The following table provides details of
each non-employee directors compensation for fiscal 2017. Compensation varied
between directors based on lead director status, committee membership, and
committee chairs held. Stock awards reflect the grant date fair
value.
Fiscal 2017 Non-employee Director
Compensation
Name |
|
Fees Earned or Paid
in Cash $(1) |
|
Stock Awards $(2) |
|
All
Other Compensation $(3) |
|
Total ($) |
Sarah M.
Gallagher |
|
55,111 |
|
80,026 |
|
945 |
|
136,082 |
Edwin J. Holman |
|
95,000 |
|
80,026 |
|
16,074 |
|
191,100 |
Janet E. Kerr |
|
80,000 |
|
80,026 |
|
19,403 |
|
179,429 |
Michael T. Lawton |
|
100,000 |
|
80,026 |
|
4,914 |
|
184,940 |
H. George Levy,
MD |
|
80,000 |
|
80,026 |
|
20,910 |
|
180,936 |
W. Alan McCollough |
|
110,000 |
|
80,026 |
|
20,910 |
|
210,936 |
Lauren B. Peters |
|
55,111 |
|
80,026 |
|
945 |
|
136,082 |
Dr.
Nido R. Qubein |
|
90,000 |
|
80,026 |
|
20,910 |
|
190,936 |
(1) |
|
Includes actual annual board retainer fees,
lead director retainer fees, and committee chairman
fees. |
PROXY STATEMENT | 2017 17
Table of Contents
(2) |
|
Reflects the grant date fair
value computed in accordance with FASB ASC Topic 718. Each director then
in office received 2,953 restricted stock units on August 26, 2016.
Restricted stock units granted to non-employee directors in 2008 and 2009
under our former plan were settleable in cash; units granted since
September 1, 2010, and to be granted in future years under our 2010
Omnibus Incentive Plan, will be settleable in shares. As of April 29,
2017, the number of restricted stock units of each type held by each
non-employee director (which vest and settle when the director leaves the
board) were: |
|
|
|
Units Settleable in Cash |
|
Units Settleable in Shares |
|
Sarah M.
Gallagher |
|
|
|
2,953 |
|
Edwin J. Holman |
|
5,000 |
|
33,974 |
|
Janet E. Kerr |
|
12,927 |
|
33,974 |
|
Michael T. Lawton |
|
|
|
12,402 |
|
H. George Levy,
MD |
|
16,514 |
|
33,974 |
|
W. Alan McCollough |
|
16,514 |
|
33,974 |
|
Lauren B. Peters |
|
|
|
2,953 |
|
Dr.
Nido R. Qubein |
|
16,514 |
|
33,974 |
(3) |
|
Reflects payments of dividend
equivalents on restricted stock units at the time and in the amount that
dividends were declared for common shares. |
18
La-Z-Boy Incorporated | investors.la-z-boy.com
Table of Contents
PROPOSAL NO. 1: ELECTION OF
DIRECTORS
Shareholders will elect nine directors
to serve a one-year term until our 2018 annual meeting of shareholders when
their successors are elected and qualified. Our board currently has nine
directors and upon the recommendation of the boards nominating and governance
committee, the board has nominated for re-election all the current
directors:
Kurt L.
Darrow |
Sarah M. Gallagher |
Edwin J.
Holman |
Janet E. Kerr |
Michael T.
Lawton |
H. George Levy, M.D. |
W. Alan
McCollough |
Lauren B. Peters |
Dr. Nido R.
Qubein |
Each nominee has consented to being
named in this proxy statement and has agreed to serve if elected. If a nominee
is unable to stand for election, the board may either reduce the number of
directors to be elected or select a substitute
nominee. If a substitute nominee is selected, the proxy holders may vote your
shares for the substitute nominee.
In accordance with Michigan law,
directors will be elected at the meeting by a plurality of votes cast from among
those persons duly nominated, with separate balloting for each of the nine
positions. The nominees who receive the highest through the ninth highest number
of votes will be elected, regardless of any votes that are not cast for the
election of those nominees, including abstentions, broker non-votes, and
withholding of authority. Under our corporate governance guidelines, however,
any director who does not receive a majority of the votes cast must tender his
or her resignation at the board meeting that immediately follows the
shareholders meeting. The board must act on the offer of resignation at or
before its next meeting, which is currently planned for late-November, and
publicly disclose its decision. Any vacancy created by such a resignation could
then be filled by the board of directors pursuant to our bylaws. For more
information, please see Corporate Governance Matters Majority-Voting Standard
for Director Elections.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
ELECTION OF EACH OF THE NINE NOMINEES. |
The board, acting through its
nominating and governance committee, seeks directors who collectively possess
the experience, skills, backgrounds, and qualifications necessary to effectively
oversee our company in our current and evolving business circumstances. The
committee seeks directors with established records of significant
accomplishments in business and areas relevant to our strategies. In determining
the slate of nominees and whether to seek one or
more new candidates, the committee reviews the boards size and our current
directors qualifications. All of our current directors and nominees bring to
our board a wealth of executive leadership experience derived from their service
as executives and entrepreneurs, as well as valuable board experience. The
following chart summarizes the director nominees key qualifications,
experience, and skills.
PROXY STATEMENT | 2017 19
Table of Contents
Proposal No. 1: Election of
Directors |
La-Z-Boy Board of Directors Nominees: |
|
Kurt Darrow |
Sarah Gallagher |
Edwin Holman |
Janet Kerr |
Michael Lawton |
George Levy |
Alan McCollough |
Lauren Peters |
Nido Qubein |
|
|
|
|
|
|
|
|
|
|
|
Leadership
experience |
|
✓ |
✓ |
✓ |
✓ |
✓ |
✓ |
✓ |
✓ |
✓ |
Public Company
Board Experience |
|
✓ |
✓ |
✓ |
✓ |
✓ |
|
✓ |
|
✓ |
Finance |
|
✓ |
|
✓ |
✓ |
✓ |
|
✓ |
✓ |
✓ |
Technology |
|
✓ |
✓ |
✓ |
✓ |
✓ |
✓ |
✓ |
✓ |
|
Global
Perspective |
|
✓ |
✓ |
✓ |
✓ |
✓ |
|
✓ |
✓ |
✓ |
Sourcing/Manufacturing |
|
✓ |
✓ |
|
|
✓ |
|
✓ |
|
|
Consumer
Marketing |
|
✓ |
✓ |
✓ |
✓ |
✓ |
|
✓ |
✓ |
✓ |
Retail |
|
✓ |
✓ |
✓ |
✓ |
✓ |
|
✓ |
✓ |
✓ |
We provide information below about each
person nominated for election at the meeting. Unless otherwise indicated, the
principal occupation of each nominee has been the same for at least five
years.
20
La-Z-Boy Incorporated | investors.la-z-boy.com
Table of Contents
Proposal No. 1: Election of
Directors |
|
|
Kurt L.
Darrow |
Age 62 |
Director
since 2003 |
|
|
Executive Roles:
●Our president and chief executive officer since 2003
●Our chairman since 2011
●Formerly president of La-Z-Boy, our largest division
Public Boards:
●CMS Energy Corp., an integrated energy company
Other Leadership
Roles:
●Member of the board and the executive committee of Business Leaders
for Michigan, a non-profit executive leadership organization
●Member of the ProMedica Board of Trustees and Chairman of the
ProMedica Monroe Regional Hospital Board of Trustees
●Former chairman of the American Home Furnishings Alliance (an
industry association) and continues to serve as director emeritus on its
board
●Former Trustee of Adrian College (Adrian, Michigan)
Mr. Darrows proven leadership
skills and extensive knowledge of the company and the furniture industry,
developed over his many years at La-Z-Boy, qualify him to serve on our
board. |
|
Leadership Experience
|
Public Company Board Experience
|
Finance |
Technology
|
Global Perspective
|
Sourcing/ Manufacturing
|
Consumer Marketing
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sarah M.
Gallagher |
Age 65 |
Director
since 2016 |
|
|
Compensation Committee member /
Nominating and Governance Committee member
Executive Roles:
●Former executive chairperson of Rebecca Taylor (womens apparel), a
division of Kellwood Company, August 2014 August 2015
●Former president of Ralph Lauren North America e-Commerce (2007
2013)
●Former president Ralph Lauren Media LLC (2001 2006)
●Senior vice president roles at Banana Republic Direct and Gap
Direct (divisions of Gap, Inc., an international retailer of clothing,
accessories and personal care products) (1997 2001)
●Senior executive positions at various retailers including Avon
Products, Inc. (beauty products), Victorias Secret Catalogue, Lord &
Taylor (retail department store chain)
Public Boards:
●Abercrombie & Fitch Co., specialty retailer of casual apparel,
since 2014
Other Leadership
Roles:
●Executive Advisor of FitforCommerce (retail consultants) since
April 2016
Ms. Gallaghers extensive retail
experience with consumer-focused and fashion-orientated brands and over 15
years involvement in e-commerce retailing to consumers qualify her to
serve on our board. |
|
Leadership Experience
|
Public Company Board Experience
|
Technology
|
Global Perspective
|
Sourcing/ Manufacturing
|
Consumer Marketing
|
Retail
|
|
|
PROXY STATEMENT | 2017 21
Table of Contents
Proposal No. 1: Election of
Directors |
|
|
Edwin J.
Holman |
Age 70 |
Director
since 2010 |
|
|
Chair of Compensation Committee /
Audit Committee member / Financial expert
Executive Roles:
●Interim chief executive officer of The Pantry, Inc. (October 2011
until March 2012)
●Formerly chairman of RGIS International (20102013), a portfolio
company of the Blackstone Group
●Formerly chairman and chief executive officer of Macys Central, a
division of Macys Inc. (an operator of department stores)
●Formerly president and CEO Galyans Trading Company, a publicly
traded sporting goods chain
●Formerly senior executive positions at a variety of retailers,
including Bloomingdales, the Richs/Lazarus/Goldsmiths divisions of
Federated Department Stores, Inc., Petrie Retail, Inc., Woodward &
Lothrop, The Carter Hawley Hale Stores, and The Neiman Marcus
Group
Public Boards:
●Formerly Christopher and Banks Corporation (womens apparel) 2015
to 2016
●Formerly The Pantry, Inc. (convenience chain store), and its
chairman from 2009 to 2014
●Formerly Office Max, an office supply retailer
●Formerly Circle International, a provider of international
transportation and logistics
Other Leadership
Roles:
●National Association of Corporate Directors (NACD) Governance
Fellow (2011) and named a Top 100 Director by NACD in 2011
Mr. Holmans 40 years of
executive and operational experience in department stores and specialty
retailing, combined with his experience on public company boards, qualify
him to serve on our board. |
|
Leadership Experience
|
Public Company Board Experience
|
Finance |
Technology
|
Global Perspective
|
Sourcing/ Manufacturing
|
Retail
|
|
|
22
La-Z-Boy Incorporated | investors.la-z-boy.com
Table of Contents
Proposal No. 1: Election of
Directors |
|
|
Janet E. Kerr |
Age 62 |
Director since 2009 |
|
|
Compensation Committee member / Nominating and Governance
Committee member
Executive Roles:
●Vice Chancellor, Pepperdine University since 2016
●Of counsel to Navé & Cortel (law firm) since 2015
●Strategic adviser to Bloomberg BNA (2014 2015)
●Professor (1983 2013) and Professor Emeritus (since 2013) of the
Pepperdine University School of Law
●Former chief strategy officer of Exemplify, Inc., a technology
knowledge management company, until its acquisition by Bloomberg BNA in
2014
●Founder and former Executive Director of the Palmer Center for
Entrepreneurship and the Law at Pepperdine Law School
●Professor Kerr was awarded the Laure Sudreau-Rippe Endowed Chair at
Pepperdine University School of Law in 2011
●A nationally recognized author, lecturer and consultant in the area
of securities law compliance, banking law, corporate governance, and
general corporate law
●Co-Founder (with HRL Laboratories, LLC) of
X-Laboratories
Public Boards:
●Fidelity National Financial, Inc., service provider to real estate
and mortgage industries (listed on NYSE)
●AppFolio, Inc., provider of cloud-based business management
software (listed on NASDAQ)
●Tillys, Inc., a NYSE listed retailer of apparel and
accessories
●Formerly TCW Strategic Income Fund, Inc., a NYSE-listed closed-end
registered investment company
●Formerly CKE (Carl Karcher Enterprises), previously a publicly
traded NYSE- listed company
Other leadership roles:
●Advisor on corporate issues and entrepreneurial strategies to the
Peoples Republic of China, France, and Thailand
●Representative of the U.S. Department of Commerce as a speaker at
international events
Ms. Kerrs service on public
and private company boards and her skills and experience in the practice
of law and corporate governance qualify her for service on our
board. |
|
Leadership Experience
|
Public Company Board
Experience
|
Finance |
Technology
|
Global Perspective
|
Consumer
Marketing
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael T. Lawton |
Age 58 |
Director since 2013 |
|
|
Chair of
Audit Committee / Compensation Committee member / Financial
expert
Executive Roles
●Retired chief financial officer of Dominos Pizza, Inc. (2010
2015)
●Previous roles at Dominos Pizza, Inc.:
○Executive vice president, supply chain services from October 2014
until June 2015
○Interim chief information officer from October 2011 until March
2012
○Executive vice president of international from October 2004 until
March 2011
○Senior vice president finance and administration of
international
●Various financial and general management positions with Gerber
Products Company
Public Boards:
●Universal Corporation, a leading global supplier of leaf tobacco
(listed on NYSE)
Mr. Lawtons experience as a
senior executive of a public company and well-known consumer brand, along
with his experience on a public company board, qualify him to serve on our
board. |
|
Leadership Experience
|
Public Company Board
Experience
|
Finance |
Technology
|
Global Perspective
|
Sourcing/ Manufacturing
|
Consumer
Marketing
|
Retail
|
|
PROXY STATEMENT
|
2017 23
Table of Contents
Proposal No. 1: Election of
Directors |
|
|
Dr. H. George Levy |
Age 67 |
Director since 1997 |
|
|
Compensation Committee member / Nominating and Governance
Committee member
Executive
Roles:
●Maintains a practice specializing in
otorhinolaryngology
●Formerly chairman and chief executive officer of USI, Inc., a
private firm engaged in consulting on e-commerce, Web design, and systems
integration
●Formerly Chief Executive Officer and founder of Enduenet, Inc., a
firm providing electronic medical records for physicians and
hospitals
Dr. Levys entrepreneurial
experience, coupled with his board experience, qualifies him for service
on our board. |
|
Leadership Experience
|
Technology
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W. Alan
McCollough |
Age
67 |
Director since
2007 |
|
|
Our Lead
Director / Audit Committee member / Financial expert
Executive
Roles:
●Former chairman and chief executive officer of Circuit City Stores,
Inc., (retailer of consumer electronics, home office products,
entertainment software, and related services) from 2000 to
2006
Public
Boards:
●VF Corporation (branded apparel)
●The Goodyear Tire & Rubber Company
●Formerly Circuit City Stores, Inc.
Mr. McColloughs experience
leading a large publicly traded consumer products company and his service
on multiple public company boards, qualify him to serve on our
board. |
|
Leadership Experience
|
Public Company Board
Experience
|
Finance |
Technology
|
Global Perspective
|
Sourcing/ Manufacturing
|
Consumer
Marketing
|
Retail
|
|
24 La-Z-Boy Incorporated |
investors.la-z-boy.com
Table of Contents
Proposal No. 1: Election of
Directors |
|
|
Lauren B. Peters |
Age 55 |
Director since 2016 |
|
|
Audit
Committee member/Nominating and Governance Committee member/Financial
expert
Executive Roles:
●Executive vice president and chief financial officer of Foot
Locker, Inc. since 2011
●Senior vice president of strategic planning of Foot Locker, Inc.
(2002 2011)
●Various senior financial management positions at Foot Locker, Inc.
and Robinsons-May, a division of May Department Stores
●Formerly audit manager with Arthur Andersen &
Company
Ms. Peterss extensive
financial and strategic planning experience with consumer focused and
global retailers qualifies her to serve on our
board. |
|
Leadership Experience
|
Finance |
Technology
|
Global Perspective
|
Consumer
Marketing
|
Retail
|
|
|
|
|
|
Dr. Nido R. Qubein |
Age 68 |
Director since 2006 |
|
|
Chair of
Nominating and Governance Committee / Compensation Committee
member
Executive
Roles:
●President of High Point University
●Executive Chairman (beginning 2016) of the board of bakery
franchisor Great Harvest Bread Company (previously Chairman)
Public
Boards:
●BB&T Corporation (banking and financial services)
Other
leadership roles:
●Author of a dozen books on leadership, sales, communication, and
marketing
●Serves as advisor to businesses and organizations throughout the
world on how to brand and position their enterprises
successfully
Dr. Qubeins experience as a
business advisor, entrepreneur, director of public companies and leader at
multiple companies qualifies him to serve on our board. |
|
Leadership Experience
|
Public Company Board
Experience
|
Finance |
Technology
|
Global Perspective
|
Consumer
Marketing
|
Retail
|
|
|
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR EACH OF THE ABOVE
NOMINEES. |
PROXY STATEMENT
| 2017 25
Table of Contents
COMPENSATION DISCUSSION AND
ANALYSIS
In this section we summarize the
compensation programs for our named executive officers (the individuals named in
the Summary Compensation Table that follows this Compensation Discussion and
Analysis). One named executive officer, Mark S. Bacon, Sr., Senior Vice
President and President of the La-Z-Boy Branded Business, resigned from the
company, immediately following the end of our fiscal year and his compensation
is included where appropriate. We discuss our
compensation objectives and describe each pay element, the role it plays in the
overall compensation program, and whether it pertains only to the named
executive officers or to a broader group of employees. You should review this
section with the pay disclosure tables that begin with the Summary Compensation
Table on page 39.
2017
Operating Performance
Our goal is to continue to deliver
value to our shareholders with improved sales and earnings over the long term
through the execution of our strategic initiatives. We believe our integrated
retail platform, industry-leading brand, and innovative product will drive
long-term profitable sales growth that, when combined with our efficient
operating platform, will continue to deliver results and returns to our
shareholders. During fiscal 2017, we generated $1.5 billion in sales, with the
weaker demand throughout the home furnishings sector and the extra week in
fiscal 2016 contributing to a 0.3% decline in our net sales versus the prior
year. Our efficient operating platform allowed us to grow operating margin to
8.6% in fiscal 2017 from 8.0% in fiscal 2016, and increase earnings per diluted
share attributable to La-Z-Boy Incorporated to $1.73 in fiscal 2017, an 11.6%
increase over the prior year earnings per diluted share of $1.55.
Fiscal 2017
Compensation Actions
We continue to monitor all of our
compensation program elements and practices to determine how they compare with
current market practices and align with our overall compensation philosophy. Our
compensation committee worked with Korn Ferry Hay Group, the committees
independent executive compensation consultant, to evaluate our programs during
fiscal 2017, and we made no significant changes to existing programs during the
year.
At our annual meeting of shareholders
in August 2011, we began providing our shareholders with the opportunity
to cast an annual advisory vote on our executive
compensation (a say-on-pay proposal). Approximately 98% of the votes cast by
our shareholders in 2016 were to approve the compensation we paid to our named
executive officers. In determining executive compensation for fiscal 2017, the
Committee took into account the results of our history of the advisory votes,
which reflected shareholder approval of our compensation philosophy, and
considered many other factors. We believe our executive compensation programs
continue to provide a competitive pay-for-performance package that helps us
attract, retain, and motivate our executives.
The Compensation Committee took the
following actions during the year:
● |
Reviewed and approved increases to base
salaries for the named executive officers (see pg. 31) |
● |
Reviewed and approved fiscal 2017 Management
Incentive Program (MIP) performance levels (sales growth and margin
improvement) and payouts based on fiscal 2016 performance, which qualified
executives for payment above target levels (see pg. 32) |
● |
Approved fiscal 2017 long-term incentive awards
composed of stock options (50%) and performance-based shares (50%), and
payouts and contingently earned awards for prior performance-based equity
grants (see pg. 33) |
● |
Approved the fiscal 2017 Performance
Compensation Retirement Plan performance goals and contribution
percentages and fiscal 2016 company contribution (see pg.
36) |
26 La-Z-Boy Incorporated |
investors.la-z-boy.com
Table of Contents
Compensation Discussion and
Analysis |
Summary of
Executive Compensation Practices
|
|
|
What We
Do |
|
What We
Dont Do |
|
|
|
✓Pay for performance Our compensation program for named executive
officers emphasizes variable pay over fixed pay. A majority of their
target compensation is at risk and linked to our financial or market
results
✓Executive stock ownership guidelines Our expectations for
ownership align executives interests with those of our
shareholders
✓Use relative total shareholder return (TSR) in long-term
performance awards
✓Require company contributions to the executive compensation
retirement plan to be determined by company performance
✓Mitigate undue risk we have caps on potential incentive payments
and a clawback policy on performance-based compensation
✓Use double-trigger change-in-control agreements
✓Include only independent directors on the compensation
committee
✓Engage an independent compensation consulting firm to assist the
compensation committee and board with executive program design and
compensation reviews
✓Provide severance and change-in-control arrangements that are
aligned with market practices
✓Prohibit hedging and short sales by executive officers and
directors |
|
✗Do not provide employment agreements
✗Do not gross up excise taxes upon change in control
✗Do not reprice options without shareholder approval
✗Do not pay dividends on unearned performance shares or
units
✗Do not have single trigger vesting of equity-based awards upon
change-in-control |
|
|
|
PROXY STATEMENT
|
2017 27
Table of Contents
Compensation Discussion and
Analysis |
Executive Compensation
Approach |
Our executive pay programs are designed
to reflect the following objectives:
● |
Reward for total shareholder return. We
align our executives interests with our shareholders by basing a portion
of our executives long-term incentive opportunity on the total return our
stock produces for our shareholders compared with returns of other
companies. |
● |
Require significant stock ownership. We
require our named executive officers to own our stock over a sustained
period to ensure they have the perspective of long-term
shareholders. |
● |
Pay for performance. We provide the
majority of our named executive officers potential compensation in annual
and long-term incentive awards that are earned, or increase in value,
based on company and stock performance. |
● |
Design for program effectiveness. We
have clearly defined programs that provide meaningful award opportunities
aligned to the achievement of our business strategy. |
● |
Provide market competitive
opportunities. We design our compensation packages, including
base salaries and incentive opportunities, to be market competitive based
on data from U.S. manufacturers, retailers, and manufacturers with a
retail focus. |
● |
Manage costs. In designing our executive
pay programs, we take into account the cost of various possible elements
(share usage, cash flow, and accounting and tax
impacts). |
Our compensation philosophy is to
provide a base salary targeted to the median of the competitive market, with the
opportunity to earn a significantly higher level of compensation under incentive
programs that link executive pay to company performance factors. All named
executive officers participate in the same compensation programs and are subject
to the same pay policies. The majority of each executives target compensation
is at risk with the amount realized, if any, based on company performance. The
pay level and at-risk portion increases as an executive assumes greater levels
of responsibility with greater impact on the company. Accordingly, our chief
executive officers pay level and at-risk pay portion are higher than those of
other officers due to his greater level of responsibility.
Compensation
Committees Role
Each year, the compensation committee
reviews and approves the overall design of our executive pay program and all pay
elements for the named executive officers. Three senior executives (chief
executive officer, chief financial officer, and chief human resources officer)
provide input on program design (including goals and weighting) and information on the companys and the furniture industrys
performance. Management is responsible for implementing the executive pay
program that the committee approves.
The compensation committee has sole
authority to retain and terminate consultants used to assist in the evaluation
of executive compensation. The committee has retained Korn Ferry Hay Group as
its independent executive compensation consultant to advise the committee on
matters related to executive compensation. Under the committees direction, Korn
Ferry Hay Group interacts with members of the senior executive team to provide
insight into company and industry practices and ensure that executives are
informed with regard to emerging best practices and market trends. With the
committees approval, management engaged Korn Ferry Hay Group in fiscal 2016 to
develop a compensation structure for our broad base of employees. This work
continued through fiscal 2017.
The committee reviews Korn Ferry Hay
Groups report on the consulting firms independence on an annual basis. The
report includes the following factors: (1) other services the consultant
provided to us; (2) the fees we paid as a percentage of the consultants total
revenue; (3) the consultants policies and procedures designed to prevent a
conflict of interest; (4) any business or personal relationship of the
consultant with a member of the committee; (5) any company stock owned by the
consultant; and (6) any business or personal relationships between our executive
officers and the consultant. The committee discussed the report and concluded
that the consultants work did not present any conflict of interest. In reaching
that conclusion, the committee considered all factors specified in the NYSEs
rules related to compensation advisor independence.
Pay-Setting Process
Methodology
We assign executives to pay grades
based on their duties and responsibilities. For each position, we establish a
salary range and the target annual and long-term incentive award opportunities
based on market median pay levels. In setting individual pay levels, we consider
market pay data, company performance, and the executives competencies, skills,
experience, and performance, as well as our business needs, cost, and internal
pay equity.
In setting the named executive
officers pay levels (salary, annual and long-term incentive awards), the
committee annually reviews pay data for the chief executive officer and other
named executive officers of peer group companies. The peer group is composed of
publicly-traded U.S. companies that generate annual revenues between 50% and
200% of our annual revenue and are either our direct competitors or
manufacturing companies with a retail focus. In setting fiscal 2017 pay levels,
the committee considered the following 16 peer companies:
28 La-Z-Boy Incorporated |
investors.la-z-boy.com
Table of Contents
Compensation Discussion and
Analysis |
Aarons, Inc. Acuity Brands,
Inc. Callaway Golf Company Ethan Allen Interiors, Inc. Haverty
Furniture Companies, Inc. Herman
Miller, Inc.
Interface, Inc. Knoll, Inc.
Libbey Inc. MDC Holdings, Inc. Pier 1 Imports, Inc.
RH Select Comfort Corporation
Tempur Sealy International The Toro Company Wolverine
Worldwide |
The committee evaluates each peer
company annually to ensure that its inclusion remains appropriate. To maximize
year-over-year comparability, the committee prefers that the peer group remain
consistent from year to year. The committee worked with Korn Ferry Hay Group to
review and revise the peer group of companies for fiscal 2018 and removed The
Toro Company, which is in an industry that is dissimilar from our other current
peers, and added Overstock.com, Inc. based on our growing focus on e-commerce.
The peer group for fiscal 2018 is composed of publicly-traded U.S. companies
that generate annual revenues between 40% and 250% of our annual revenue and are
either our direct competitors or manufacturing companies with a retail focus.
The peer group includes e-commerce retailers and retailers without a focus on
manufacturing that compete with us on a product and talent basis.
In addition, we review target total
direct compensation for comparable jobs generally in retail and general industry
companies based on compensation surveys conducted annually by Korn Ferry Hay
Group. We use both peer group comparator data and market survey data to
benchmark pay. We believe this dual benchmarking provides a more rigorous
process to validate pay decisions. Based on our fiscal 2017 compensation, the
target total direct compensation of our named executive officers as a group
was 112% of the median total direct compensation
for comparable general industry companies and 97% of the median total direct
compensation for retail companies.
Periodically, we also review market
practices for executive retirement benefits, deferred compensation plans, and
severance and change-in-control agreements.
To aid in its oversight of our
executive compensation program, the committee requested that Korn Ferry Hay
Group conduct a total compensation review for each of the named executive
officer positions. The analysis included base salary, short-term incentives, and
long-term incentives and compared the compensation of the named executive
officers with median levels for general industry, retail industry, and the
companys peer group. The committee believes its use of data supplied by the
independent consultant along with a review of current and historical
compensation for the named executive officers provides the committee with a more
complete picture of the named executive officers compensation. In addition, the
committee annually reviews estimated amounts to be paid to the named executive
officers under various employment termination situations, including severance
and a change in control of the company.
Our process for setting compensation
for our named executive officers includes a formal, individual performance
evaluation each year for each executive. The independent members of our board of
directors assess our chief executive officers performance each year. This
assessment includes an evaluation of critical areas, including customer
relations, human capital, shareholder value, operating results, and strategic
goals. Every third year, the committees independent compensation consultant
coordinates the committees evaluation of the CEOs performance focusing on the
same criteria. The consultant compiles the evaluations provided by each board
member and prepares a detailed report for the board. The chief executive officer
assesses the individual performance of the other named executive officers each
year based on their overall performance throughout the year, accomplishment of
specific goals, and their future potential within the organization. This
assessment is used in determining base salary as noted below.
PROXY STATEMENT
|
2017 29
Table of Contents
Compensation Discussion and
Analysis |
Executive Compensation
Program Elements |
To best achieve our objectives for the
executive pay program, we provide a compensation package composed of the
following primary elements:
Compensation Elements |
Component |
|
Description |
|
Performance-Based? |
Base salary (pg.
31) |
|
Fixed compensation for services
rendered |
|
No1 |
Management Incentive Program
(MIP) (pg. 32) |
|
Short-term incentive plan that pays
cash bonuses to participants based on performance against pre-established
goals for net sales and operating margin |
|
Yes |
Long-Term Incentives (pg.
33) |
|
Annual awards of stock options/stock
appreciation rights and performance shares/units. Stock options and stock
appreciation rights attain value only if our stock price increases
following the date of grant. Performance shares and units are earned based
on performance against pre-established goals for net sales and operating
margin, and total shareholder return relative to the S&P Small-Cap 600
Index |
|
Yes |
Retirement Benefits (pg.
36) |
|
A qualified 401(k) plan and
non-qualified executive deferred compensation plan. Amounts contributed to
401(k) and deferred compensation plans are determined by an executives
election. Matching contributions to 401(k) plans in excess of IRC limitations may
be credited to the executive deferred compensation plan |
|
No2 |
Performance Compensation
Retirement Plan (pg. 36) |
|
A non-qualified retirement account
to which contributions (percentage of the sum of base salary plus bonus
earned) are made by the company depending on performance relative to
pre-established operating income goals |
|
Yes |
(1) |
|
We consider performance in making
any adjustments to base salaries |
|
(2) |
|
Executives may only contribute or
elect to defer amounts earned and paid during the year (i.e. actual base
salaries and bonuses paid) |
The mechanics of these pay elements and
our pay decisions are detailed below. In addition, we have change-in-control
agreements with our named executive officers, and they participate in a
severance plan. Additional information regarding the change-in-control
agreements and executive severance plan can be
found on page 37. We believe these elements assist us in attracting and
retaining quality executive talent and ensure continuity of our
leadership.
30 La-Z-Boy Incorporated |
investors.la-z-boy.com
Table of Contents
Compensation Discussion and
Analysis |
Total Direct Compensation Mix
Pay-for-Performance
In line with our pay-for-performance
philosophy, the majority of each executives total target direct compensation is
performance-based and therefore at risk. Target total direct compensation is
composed of base salary, target bonus, and target value of long-term equity
incentives. The chart below shows the percentage of each element in the target
direct compensation for our CEO and the average for our other Named Executive
Officers.
Target Pay
Mix of CEO and Other Named Executive Officers (as a % of Total Direct
Compensation) |
CEO |
|
Other Named
Executive Officers (average) |
|
|
|
|
|
|
We set base salaries for our named
executive officers based on their scope of responsibility, competencies,
experience, leadership, and performance. We consider market competitiveness,
specific job responsibilities, internal pay relationships, and total cost.
Consistent with our practices for all management employees, named executive
officers are eligible for annual merit salary increases based on individual
performance, comparison with market levels, and the total salary
budget.
Salary
Changes in Fiscal 2017
In May 2016, the committee reviewed the
salary levels for each of the then named executive officers. As part of the
salary review process, the committee reviewed and considered the performance of
each named executive officer, relevant market data provided by Korn Ferry Hay
Group, the comparison of compensation among various levels of management, and
the companys overall performance. The committee approved salary increases for
the named executive officers, rounded to the nearest thousand
dollars.
Salary
Changes for Fiscal 2018
In June 2017, the committee reviewed
salary levels for each of our named executive officers. In determining the
appropriate salary changes, the committee considered a combination of
performance, scope of responsibility based upon recent corporate re-alignment,
and market data provided by Korn Ferry Hay Group. Salaries were rounded to the
nearest thousand dollars.
The named executive officers fiscal
2017 and 2018 salaries are presented in the following table.
Executive |
|
Fiscal 2017 Salary $(1) |
|
Fiscal 2018 Salary $(1) |
|
% Change |
Kurt L. Darrow |
|
965,000 |
|
995,000 |
|
3.11% |
Louis M. Riccio Jr. |
|
462,000 |
|
475,000 |
|
2.81% |
Mark S. Bacon, Sr.
(2) |
|
535,000 |
|
------- |
|
n/a |
J. Douglas Collier |
|
450,000 |
|
475,000 |
|
5.56% |
Darrell D. Edwards |
|
425,000 |
|
475,000 |
|
11.76% |
(1) |
Salary increases become effective
on July 1, two months after the start of the fiscal year. As a result, the
amounts shown here are higher than those shown in the 2017 Summary
Compensation Table on page 39 below. |
|
(2) |
As noted earlier, Mr. Bacons
employment with the company ended as of April 30,
2017. |
Incentive Compensation
We designed the La-Z-Boy Incorporated
2010 Omnibus Incentive Plan to reward executives for achievement of both
short-term and long-term corporate performance goals and enhance our ability to
retain employees. The committee believes that designing the incentive
compensation program with multiple objectives and performance periods promotes
behavior consistent with creating shareholder value and reduces any incentive to
pursue risky or unsustainable results.
PROXY STATEMENT
|
2017 31
Table of Contents
Compensation Discussion and
Analysis |
Short Term
Incentive Awards (Management Incentive Program)
Our annual cash bonus program, which we
refer to as the Management Incentive Program, or MIP, is a short-term incentive
award plan that we designed to motivate and reward executives for achieving
annual goals. Target awards, specified as a percentage of base salary, vary by
pay grade. The named executive officers have the opportunity to earn awards
between 50% of their target awards if we meet minimum performance requirements
to a maximum of 200% of their target incentive opportunity, based on
performance. For the named executive officers, we base the financial goals on
the companys overall consolidated financial performance.
Fiscal 2017 financial measures
were:
Fiscal 2017 Financial Measures |
|
|
The committee approved these financial
measures because they drive shareholder value and reflect our emphasis on
profitability (operating margin) and sales growth. For these purposes, we
calculated operating margin without taking into account the impact of
restructuring, goodwill and other intangible impairments. After defining
required performance, the committee has discretion, in extraordinary
circumstances, to modify incentive awards for the named executive officers, either up
or down, to ensure a linkage between incentive plan payouts and the quality of
performance. The committee did not exercise such discretion in awarding MIP
payments for fiscal 2017.
The committee set the target financial performance
goals to be challenging but achievable. For fiscal years 2013 through 2017 our
payouts under the MIP for overall company financial performance averaged
approximately 96% of target.
Analysis 2017 MIP Payouts Were Above Threshold But Below
Target, Reflecting Our Financial Performance
Our 2017 company financial performance
results, on a combined basis, exceeded the established threshold levels, but
reflected sales results that were below our target expectations. In line with
our compensation philosophy and in accordance with standards we set at the
outset of the year, MIP payments to our named executive officers for 2017 were
above threshold but below target levels.
Fiscal 2017
MIP Goals and Results
Performance Level |
|
Net Sales (in Billions) |
|
Operating Margin |
Maximum |
|
$1.724 |
|
9.03% |
Target |
|
$1.600 |
|
8.58% |
Threshold |
|
$1.496 |
|
8.06% |
Actual |
|
$1.520 |
|
8.62% |
Individual Metric
Payout |
|
62% |
|
107% |
Individual Metric Weight |
|
40% |
|
60% |
Overall Payout (% of Target) |
|
|
|
89% |
Our named executive officers fiscal
2017 target, achieved performance level, and actual MIP awards, expressed as a
percentage of base salary, were as follows:
32 La-Z-Boy Incorporated |
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Table of Contents
Compensation Discussion and
Analysis |
|
|
Fiscal 2017 Target Incentive (% of
base salary) |
|
Achieved Performance Level (% of
target performance) |
|
Actual Fiscal
2017 Incentive Payout (% of base salary) |
Kurt L. Darrow |
|
110% |
|
89% |
|
97.90% |
Louis M. Riccio Jr. |
|
75% |
|
89% |
|
66.75% |
Mark S. Bacon,
Sr. |
|
75% |
|
89% |
|
66.75% |
J. Douglas Collier |
|
60% |
|
89% |
|
53.40% |
Darrell D. Edwards |
|
60% |
|
89% |
|
53.40% |
Fiscal 2018 MIP Awards
The committee approved the following
target incentives percentage of base salary for fiscal 2018: Mr. Darrow, 115%;
Messrs. Riccio, Collier and Edwards 75%. The committee established operating
margin (50% weight) and net sales (50% weight) as
the financial measures for fiscal 2018. The committee approved these financial
measures because they drive shareholder value and reflect our emphasis on
profitability (operating margin) and increased sales growth.
Long-term Equity
Incentive Awards |
The long-term incentive award
provisions of our 2010 Omnibus Incentive Plan provide for equity-based
compensation (restricted stock, restricted stock units, stock options, or other
forms of equity-based compensation) that we designed to align executive pay with
long-term shareholder returns, motivate our executive officers to focus on
long-term business objectives, and encourage long-term strategic thinking. The
value our executives receive from these awards varies based on the companys
performance and the future price appreciation of our common stock.
We establish award levels for each
eligible pay grade after considering market median practices and total cost
(share usage, accounting, and tax impacts). The committee approves annual
equity-based awards that we grant in the first quarter of the new fiscal year.
Our chief executive officer has discretion during the year to approve additional
limited grants of restricted stock or units to employees other than the named
executive officers.
Each year the committee determines the
appropriate long-term incentive award types and mix based on our objectives for the grants, as well as market practices, share
usage, accounting and tax impacts, and past practices. We review the accounting
treatment of the relevant incentive award types, including stock options and
performance-based stock awards. We generally design our stock options and
performance-based stock awards to enable the company to deduct their cost for
tax purposes, while executives who exercise options or receive performance-based
shares are taxed at ordinary income rates. For more discussion of the tax
treatment, see Deductibility of Executive Compensation on page 37.
Fiscal 2017
Grants
Early in fiscal 2017, pursuant to the
La-Z-Boy Incorporated 2010 Omnibus Incentive Plan, we granted to our named
executive officers two types of stock-based awards: stock options and
performance-based shares, which we summarize below.
Stock Options (50% of
total fiscal 2017 long-term incentive
opportunity) |
Stock options entitle executives to
purchase stock at the exercise price (closing price on date of grant) for up to
ten years. Options expire at the end of ten years if they have not been
exercised by that time. Stock options deliver value to executives if the
companys stock price rises, directly aligning executive compensation with the
value created for shareholders as reflected in stock price appreciation from the
date of grant. The stock options we granted in fiscal 2017 vest in equal installments over four years (25% per year) and have a
ten-year term.
Once a stock option vests, an executive
may purchase stock at the exercise price. The executive realizes value equal to
the difference between the exercise price and the price at which our stock is
trading on the New York Stock Exchange at the time of exercise.
PROXY STATEMENT
|
2017 33
Table of Contents
Compensation Discussion and
Analysis |
Performance-Based Stock
Awards (50% of total fiscal 2017 long-term incentive
opportunity) |
Performance-based stock gives our
executives the opportunity to earn a defined number of shares of our common
stock if we achieve pre-set performance goals. Through performance-based stock
awards granted in fiscal 2017, executives will earn stock if the company
achieves specified financial goals. The value of any earned shares depends on
La-Z-Boys future stock price. An executives award opportunity ranges from 50%
of the executives target award if we meet minimum performance requirements to a
maximum of 200% of the target award. Following the conclusion of the three-year
performance period, we will pay out the shares that our executives have
earned.
The number of shares our executives
receive, if any, will depend on how the company performs against sales growth
and operating margin targets in fiscal years 2017, 2018, and 2019, and against
the total shareholder return goal over the three-year performance period.
Targets for the awards are based 40% on the growth in sales, 40% on operating
margin, and 20% on total shareholder return. Payouts for sales growth and
operating margin results are weighted 50% on fiscal 2017 results, 30% on fiscal
2018 results, and 20% on fiscal 2019 results. Total shareholder return is measured over the entire three-year performance
period relative to the performance of the S&P Small-Cap 600
Index.
Metric (Total Weight) |
|
Fiscal 2017
Weight (50%) |
|
Fiscal 2018
Weight (30%) |
|
Fiscal 2019
Weight (20%) |
Sales Growth
(40%) |
|
20% |
|
12% |
|
8% |
Operating Margin (40%) |
|
20% |
|
12% |
|
8% |
Total Shareholder Return (20%) |
|
|
|
|
|
20% |
Executives may earn shares based on
each factor independent of our performance on the other factors. Each factor
includes a minimum performance level that must be achieved before any shares are
earned based on that factor. No shares are earned if the company performs below
the threshold performance level of all three factors. Executives earn the target
number of shares if the company performs at the designated target level of all
three factors. The actual number of shares executives earn can be more or less
than target level depending on the companys performance.
Earnings and Payouts
for Prior Equity Grants |
All of our named executive officers
earned payouts on the performance-based equity grants we made in fiscal 2015 for
the three-year performance period that ended with our fiscal 2017 year end. The
following table shows the three fiscal years and how the company performed
against the sales growth, operating margin, and TSR goals. For these
purposes, we calculated operating margins without the
impact of restructuring, goodwill, and other intangible impairments. Following
the end of the three-year performance period, we paid out earned shares, the
number and value of which are shown in the Option Exercises and Stock Vested
table on page 44.
Performance
Period Fiscal 2015-2017
|
|
Goals |
|
Results |
|
Percent of Goal Earned |
|
|
Sales (in Billions) |
|
Operating Margin |
|
TSR
Over 3 Years |
|
Sales (in Billions) |
|
Operating Margin |
|
TSR Over 3 Years |
|
Sales |
|
Operating Margin |
|
TSR Over 3 Years |
FY15 |
|
$1.452 |
|
8.01% |
|
50th Percentile |
|
$1.425 |
|
7.21% |
|
39.86th Percentile |
|
80.15% |
|
58% |
|
80% |
FY16 |
|
$1.549 |
|
9.18% |
|
|
$1.525 |
|
8.06% |
|
|
83.61% |
|
0% |
|
FY17 |
|
$1.648 |
|
10.48% |
|
|
$1.520 |
|
8.62% |
|
|
0% |
|
0% |
|
The performance-based equity grants we
made in fiscal 2016 and fiscal 2017 provide executives with the opportunity to
earn a portion of the awards based on sales and operating margin targets
established for each of the three years covered
by the grant and against the total shareholder return goal over the three-year
performance period. Goals and results are shown in the following
tables.
34 La-Z-Boy Incorporated |
investors.la-z-boy.com
Table of Contents
Compensation Discussion and
Analysis |
Performance
Period Fiscal 2016-2018
|
|
Goals |
|
Results |
|
Percent
of Goal Earned |
|
|
Sales (in Billions) |
|
Operating Margin |
|
Sales (in Billions) |
|
Operating Margin |
|
Sales |
|
Operating Margin |
FY16 |
|
$1.525 |
|
7.74% |
|
$1.525 |
|
8.06% |
|
100.18% |
|
130% |
FY17 |
|
$1.571 |
|
8.27% |
|
$1.520 |
|
8.62% |
|
66% |
|
133% |
|
Performance Period Fiscal
2017-2019 |
|
|
|
Goals |
|
Results |
|
Percent of Goal Earned |
|
|
Sales (in Billions) |
|
Operating Margin |
|
Sales (in Billions) |
|
Operating Margin |
|
Sales |
|
Operating Margin |
FY17 |
|
$1.600 |
|
8.58% |
|
$1.520 |
|
8.62% |
|
62% |
|
107% |
These awards for the grants made in
fiscal 2016 and fiscal 2017 have been earned contingent on the executives
remaining with the company through the end of the three-year performance period,
when they will be paid. For information on the treatment of these awards at
retirement, see Payments Made Upon Disability or Retirement on page
46.
Messrs. Darrow, Bacon and Collier
exercised stock options during fiscal 2017 and Messrs. Collier and Edwards
exercised stock appreciation rights. The pre-tax amount realized from these
exercises is shown in the fiscal 2017 Option Exercises and Stock Vested table
(on page 44).
Fiscal 2018
Grants
The awards we made to our named
executive officers in the past five fiscal years have included a mix of stock
options or stock appreciation rights and
performance-based shares or units. The committee determined that equity grants
we made on June 19, 2017 (for fiscal 2018) would be composed of stock options
and performance-based shares of equal value. We intend this mix to provide a
balanced focus on stock-price appreciation and multi-year goal
achievement.
The financial measures and related
weightings for the performance-based shares will be sales growth (40%),
operating margin (40%), and total shareholder return (20%) relative to the
performance of the S&P Small-Cap 600 Index. The size of each equity award
will be based on a percentage of the recipients base salary, and the percentage
will vary by grade. In fiscal 2018, the committee granted our named executive
officers stock options totaling 298,097 shares and performance-based equity
awards covering 78,324 shares (at target).
Other Executive Compensation Program
Elements |
Executive
Management Stock Ownership Guidelines
The committee annually monitors
compliance by our executive management with stock ownership guidelines. We
establish a minimum fixed number of shares of company stock that we expect each
executive to own based on a multiple of the executives annual base salary at
the time we set the guideline. Executives are expected to achieve compliance
with the initial guideline within five years. We reset the stock ownership
requirement every three years and did so in June 2016 based on each executives
salary and a representative share price at the end of fiscal year 2016. The
committee will reassess the share requirement again in 2019, and, subject to
variation in our stock price, executives can expect their requirements to
increase as their compensation increases. Current stock ownership guideline
values and approximate share requirements for the named executive officers are
as follows:
|
Guideline Value (Multiple of Salary) |
|
Share Requirement |
CEO |
5x |
|
179,000 |
Other named |
|
|
|
executive officers |
3x
|
|
45,000
59,000 |
In determining compliance with the
guidelines, we include shares owned directly, shares held in a family trust or
qualified retirement program, and performance-based shares contingently earned
in completed performance periods but not yet paid out. As of April 29, 2017,
Messrs. Darrow, Riccio, Bacon and Collier were in compliance with their
guidelines. Mr. Edwards became an executive officer during fiscal 2015 and has
until May 1, 2020, to meet his required ownership level.
PROXY STATEMENT
| 2017 35
Table of Contents
Retirement
Benefits
We provide retirement benefit plans as
an incentive for employees to remain with the company long-term and to assist
with retirement planning. Our named executive officers are eligible to
participate in the same retirement benefit programs that we offer to salaried
employees at the corporate level, but employees who are eligible for the MIP,
including our named executive officers, are not eligible to participate in the
supplemental match that, beginning with fiscal 2013, we have contributed to
401(k) accounts based on our operating income.
Our named executive officers are
eligible to participate in our 401(k) plan to which the company may contribute.
Company matching contributions to our 401(k) plan vary by operating unit and
range from 0% to a maximum of 50% of the first 4% contributed by the
employee.
Performance
Compensation Retirement Plan
All of our executive officers and
executive management employees participate in the La-Z-Boy Incorporated
Performance Compensation Retirement Plan, as do certain other key management
employees designated from time to time by our compensation committee. Pursuant
to the plan, the compensation committee establishes company performance criteria
and minimum threshold performance levels shortly after a fiscal year begins. If
the company performs at or above the threshold level for the year, we issue
credits to each plan participants account, and those credits later convert to
cash when a vested participant receives a distribution following separation from
service. The credits represent a percentage of the base salary and bonus a
participant earned during the fiscal year, and the percentages come from a
sliding scale that produces a larger contribution for better performance.
Contribution credits created in prior years increase each year based on an
interest rate that corresponds to yields on 20-year AA corporate bonds. We will
delete any contribution credits that we later determine resulted from financial
errors or omissions.
At its June 2016 meeting, the
compensation committee set total operating income as the sole performance
criterion for fiscal 2017. Named executive officers received contribution
credits based on operating income performance relative to threshold and target
performance levels and individual percentage factors as follows:
Performance Level |
|
Contribution Percentage Factor* |
Target and Above |
|
CEO: 35% |
|
|
Other named executive
officers: 25% |
Threshold |
|
CEO: 17.5% |
|
|
Other named executive officers:
12.5% |
Below Threshold |
|
All named executive officers:
0% |
* |
|
The Contribution percentage
increases proportionately for performance between threshold and target
levels. |
Actual operating income performance
(without taking into account the impact of restructuring, goodwill and other
intangible impairments) exceeded the threshold performance level but was below
the target performance level. As a result, Mr. Darrow and the other named
executive officers received contributions of 28.4% and 20.29%, respectively, of
the sum of their base salary and bonus earned for fiscal 2017.
Fiscal 2017 Performance Compensation
Retirement Plan Goals, Results, and Contribution Percentage |
|
|
Performance Level |
|
Operating Income |
Target |
|
$137,351,000 |
Threshold |
|
$120,566,460 |
Actual |
|
$131,022,171 |
CEO Contribution |
|
28.40% |
Other Named Executive Officers Contribution |
|
20.29% |
At its June 2017 meeting, the
compensation committee again set total operating income as the sole performance
criterion for fiscal 2018, and the above table showing the relationship between
the performance level and contribution percentage will again apply.
Executive
Deferred Compensation Plan
Our 2005 Executive Deferred
Compensation Plan allows executives to defer pay they have earned. Participants
may elect to defer up to 100% of their salaries and annual cash incentive awards
made under the MIP. In addition, the company may contribute to this plan any
company 401(k) match that cannot be credited to executives accounts due to the
Internal Revenue Code compensation limitations that apply to the tax-qualified
retirement plans. Such limits may apply because the executives contributions
and the companys matching contributions were limited by either the annual
contribution limit $18,000 for 2017 or the annual compensation limit
$270,000 for 2017. Named executive officers salary and bonus deferrals are
detailed in the Fiscal 2017 Non-Qualified Deferred Compensation table on page
45. Executives may not defer into this plan any 401(k) plan contributions they
made that were returned to them following discrimination testing for highly
compensated personnel.
Named
Executive Officer Change-in-Control Agreements
We have change-in-control agreements
with our named executive officers to ensure continuity of our leadership in the
event the companys ownership changes. The agreements define a change in control
as any event that must be reported in Item 6(e) of Schedule 14A of Regulation
14A issued under the Securities Exchange Act of 1934 that qualifies as a change
of control event pursuant to Internal Revenue Code Section 409A. This generally
occurs when a person, entity or group acquires ownership of 30% of a companys
stock, increases its holding to more than 50% of
36
La-Z-Boy Incorporated | investors.la-z-boy.com
Table of Contents
Compensation Discussion and
Analysis |
the value or voting power of a
companys stock, or acquires 40% or more of a companys assets, or if a majority
of a companys board of directors is replaced during any 12-month period by
directors whose appointment or election is not endorsed by a majority of the
directors who were serving before the date of the appointment or
election.
Our agreements provide that a named
executive officer will receive severance in cash if we have a change in control
and in the succeeding two years (or three years for our CEO), the executives
employment terminates under certain conditions. In that event, we would pay an
executive other than our CEO two times the executives base salary at the time
of termination plus two times the average of the annual bonuses the executive
received over the previous three years. We would pay our CEO three times his
base salary and three times his average bonus. The executive is responsible for
any excise tax, and the company does not pay any gross-up. We utilize a
best-net approach where we reduce payments to the safe harbor limit to avoid
excise tax only if doing so results in a greater after-tax benefit to the
executive. During the period that we pay severance, we also continue to provide
medical, dental, and life insurance benefits. Similar to this severance
arrangement, our executives receive accelerated vesting in outstanding stock
options or stock appreciation rights issued under the La-Z-Boy Incorporated 2010
Omnibus Incentive Plan following a change in control only if their employment is
terminated. Additional information regarding the change-in-control agreements
and estimated termination payments to executives is presented on page
45.
Named Executive
Officer Severance Plan
The severance plan for the named
executive officers is designed to assist the company in attracting and retaining
quality executive talent while providing the
company some protection against competition and solicitation by former
executives.
The severance plan requires the company
to pay a named executive officer severance if the company discharges the
executive other than for cause or if the executive leaves the company with
good reason. Following a qualifying termination of employment, the company
would pay the CEO severance for 24 months and pay the other named executive
officers severance for 12 months at the level of their base salary when their
employment ended. Discharge for cause includes employee acts of fraud,
reckless misconduct, substandard performance that is not corrected, and similar
acts or failures to act. Resignation for good reason includes a resignation
triggered by a reduction in the executives pay unless similarly situated
employees are similarly affected or a requirement that the executive relocate.
Executives will receive medical and dental benefits during the time they receive
severance. If a named executive officers employment terminates following a
change of control of the company, the executive receives benefits under the
severance plan only to the extent they exceed benefits the executive receives
pursuant to the executives change-in-control agreement with the company.
Information regarding the change-in-control agreements and estimated termination
payments to executives is presented on page 45.
We established the severance periods of
24 and 12 months based on the market and peer company analysis. To receive
severance, executives must comply with non-competition and non-solicitation
covenants for the duration of the severance term. Executives are entitled to
receive and retain only that portion of the severance pay that is in excess of
compensation they receive from other employment during the severance
period.
Deductibility of
Executive Compensation
We monitor our executive pay programs
with respect to current federal tax law to maximize the deductibility of the
compensation we pay to named executive officers. Section 162(m) of the Internal
Revenue Code generally precludes public companies from taking a tax deduction
for compensation over $1 million paid to a named executive officer unless the
compensation is performance-based. We intend that
the performance-based stock awards, stock option/stock appreciation rights
grants, and the short-term cash incentives we make under the La-Z-Boy
Incorporated 2010 Omnibus Incentive Plan qualify as performance-based
compensation exempt from the tax deduction limit. Restricted stock awards
generally do not qualify as performance-based compensation.
Recoupment of Incentive
Payments |
In accordance with our policy, we will
require a management employee to reimburse us for annual or long-term incentive
payments we made to the employee, and we will eliminate any contribution credits
we made for the employee under the Performance Compensation Retirement Plan, to the extent our board of directors
determines that the employee engaged in misconduct that resulted in a material
inaccuracy in our financial statements or the performance metrics we used to
make incentive payments or awards, and the employee received a higher
PROXY STATEMENT
| 2017
37
Table of Contents
Compensation Committee Report |
payment as a result of the
inaccuracies. If we determine that any contribution credits we made to the
La-Z-Boy Incorporated Performance Compensation Retirement Plan were based on
erroneous financial statements or other financial
errors or misstatements, we will adjust all participant accounts to reflect
contribution credits calculated based on complete and accurate financial
information.
COMPENSATION COMMITTEE
REPORT
The compensation committee reviewed and
discussed with management the Compensation Discussion and Analysis. Based on
this review and discussion, the compensation committee recommended to the board
of directors that the Compensation Discussion and Analysis be included in the
companys Annual Report on Form 10-K and this proxy statement.
Edwin J. Holman, Chairman
Sarah M.
Gallagher
Janet E. Kerr
Michael T. Lawton
H. George Levy, MD
Dr.
Nido R. Qubein
38
La-Z-Boy Incorporated
| investors.la-z-boy.com
Table of Contents
EXECUTIVE
COMPENSATION
The Summary Compensation Table and
other tables present pay for our named executive officers received for fiscal
2017.
Named Executive
Officers as of April 29, 2017
● |
Kurt L. Darrow (age 62),
Chairman, President, and Chief Executive Officer |
● |
Louis M. Riccio Jr. (age 54),
Senior Vice President and Chief Financial Officer |
● |
Mark S. Bacon, Sr. (age 54),
Senior Vice President and President, La-Z-Boy Branded
Business |
● |
J. Douglas
Collier (age 50), Senior Vice President, Chief Commercial Officer, and
President, International |
● |
Darrell D.
Edwards (age 53), Senior Vice President and Chief Supply Chain
Officer |
Summary Compensation
Table |
The Summary Compensation Table presents
fiscal year 2015, 2016, and 2017 total compensation (see footnotes for the
included pay elements) for the named executive officers.
● |
Actual value realized in
fiscal 2017 for previously granted long-term incentives is presented in
the Option Exercises and Stock Vested table on page 44. |
● |
Target annual and long-term
incentive opportunities for fiscal 2017 are presented in the Grants of
Plan-Based Awards table on page 41. |
2017 Summary
Compensation Table
Name and Principal Position |
|
Year |
|
Salary ($) |
|
Stock Awards ($)(1) |
|
Option Awards ($)(2) |
|
Non-Equity Incentive
Plan Compensation ($)(3) |
|
All Other Compensation ($)(4) |
|
Total ($) |
Kurt L. Darrow |
|
2017 |
|
960,315 |
|
1,206,248 |
|
1,206,250 |
|
940,148 |
|
635,707 |
|
4,948,668 |
Chairman, President
& |
|
2016 |
|
932,482 |
|
1,171,237 |
|
1,171,250 |
|
1,100,329 |
|
806,284 |
|
5,181,582 |
Chief Executive
Officer |
|
2015 |
|
904,983 |
|
1,137,501 |
|
1,137,503 |
|
606,338 |
|
422,301 |
|
4,208,626 |
Louis M. Riccio Jr. |
|
2017 |
|
459,825 |
|
288,749 |
|
288,751 |
|
306,933 |
|
174,942 |
|
1,519,200 |
Senior
Vice President & |
|
2016 |
|
446,825 |
|
280,619 |
|
280,622 |
|
395,440 |
|
227,279 |
|
1,630,785 |
Chief
Financial Officer |
|
2015 |
|
434,158 |
|
272,501 |
|
272,505 |
|
218,165 |
|
119,844 |
|
1,317,173 |
Mark S. Bacon, Sr.
(5) |
|
2017 |
|
531,656 |
|
334,387 |
|
334,374 |
|
354,881 |
|
201,954 |
|
1,757,252 |
Senior Vice President
& |
|
2016 |
|
512,490 |
|
321,881 |
|
321,873 |
|
453,554 |
|
261,278 |
|
1,871,076 |
President, La-Z-Boy
Branded Business |
|
2015 |
|
496,657 |
|
312,507 |
|
312,497 |
|
249,570 |
|
136,530 |
|
1,507,761 |
J. Douglas Collier |
|
2017 |
|
444,325 |
|
224,995 |
|
224,998 |
|
237,270 |
|
155,338 |
|
1,286,926 |
Senior
Vice President, Chief |
|
2016 |
|
409,992 |
|
207,995 |
|
207,996 |
|
290,274 |
|
188,142 |
|
1,304,399 |
Commercial Officer & President, |
|
2015 |
|
379,993 |
|
190,009 |
|
190,002 |
|
152,757 |
|
90,545 |
|
1,003,306 |
International |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Darrell D.
Edwards |
|
2017 |
|
420,325 |
|
212,494 |
|
212,502 |
|
224,454 |
|
181,778 |
|
1,251,553 |
Senior Vice President
& |
|
2016 |
|
393,326 |
|
198,494 |
|
198,500 |
|
278,475 |
|
212,318 |
|
1,281,113 |
Chief Supply Chain
Officer |
|
2015 |
|
374,993 |
|
187,504 |
|
187,504 |
|
150,747 |
|
138,747 |
|
1,039,495 |
(1) |
|
Reflects the value at target of the performance-based
awards granted during fiscal 2015, 2016 and 2017. We valued the
performance-based share awards using the closing price of La-Z-Boy common
stock on the date of grant. The committee determined that the grants to
NEOs each year would be composed of stock options (50%) and
performance-based shares (50%) to align with best practices of U.S.
companies utilizing both of these long-term incentive vehicles as part of
their executive compensation strategy. Maximum value of performance-based
shares is shown below: |
|
Name |
|
2017 |
|
2016 |
|
2015 |
|
Kurt L. Darrow |
|
$ |
2,412,496 |
|
$ |
2,342,475 |
|
$ |
2,275,002 |
|
Louis M. Riccio Jr. |
|
$ |
577,498 |
|
$ |
561,237 |
|
$ |
545,002 |
|
Mark S. Bacon,
Sr. |
|
$ |
668,775 |
|
$ |
643,763 |
|
$ |
625,014 |
|
J. Douglas Collier |
|
$ |
449,991 |
|
$ |
415,990 |
|
$ |
380,018 |
|
Darrell D. Edwards |
|
$ |
424,988 |
|
$ |
396,987 |
|
$ |
375,008 |
PROXY STATEMENT
| 2017
39
Table of Contents
(2) |
|
Reflects the total grant date fair value of the stock
option awards granted during the fiscal year. For additional information
regarding the assumptions we used in valuing the awards, refer to the
Stock-Based Compensation notes to the Consolidated Financial Statements
found in Item 8 of Part II of our Forms 10-K (Note 14 for fiscal 2015,
Note 15 for fiscal 2016, and Note 14 for fiscal 2017). |
|
(3) |
|
Consists of cash awards for the achievement of
performance results for the respective year made under our management
incentive program. Payments are made in the first quarter following
completion of the fiscal year. |
|
(4) |
|
All Other Compensation for fiscal 2017 consists of the
following: |
● |
Company contributions
to the 401(k) Plan and contributions or credits to the Executive Deferred
Compensation and Performance Compensation Retirement Plans of the
following amounts: Mr. Darrow $580,898, Mr. Riccio $172,680, Mr. Bacon
$199,583, Mr. Collier $153,265, and Mr. Edwards $144,727. |
● |
Reimbursement for
education costs, including tuition and travel expense, of $35,254 for Mr.
Edwards. |
● |
Our incremental cost of
$45,709 for Mr. Darrows personal use of company aircraft, which is
calculated by multiplying the aircrafts hourly variable operating cost by
a trips flight time. Variable operating costs consist of fuel, landing
and parking fees, variable maintenance, variable pilot expenses for
travel, and any special catering costs and other miscellaneous variable
costs. On certain occasions, his spouse and other family members
accompanied Mr. Darrow on a flight. No additional incremental operating
cost is incurred in such situations under the foregoing methodology. We
did not pay Mr. Darrow any amounts in connection with taxes on income
imputed to him for personal use of our aircraft. |
● |
Company
paid life insurance premiums, physicals and tax reimbursements related to
company contributions to the deferred compensation plans (made in the
prior year). |
(5) |
|
Mr. Bacons employment with the
company ended as of April 30, 2017. |
40
La-Z-Boy Incorporated
| investors.la-z-boy.com
Table of Contents
Grants of Plan-Based
Awards |
The following table provides details of
all incentive plan-based awards granted to the named executive officers during
fiscal 2017. Specifically, the table presents the following fiscal 2017
incentive awards:
● |
Annual management incentive award (MIP)
potential award range (see Estimated Future Payouts Under Non-Equity Incentive
Plan Awards columns). The actual awards are shown in the Summary Compensation
Table (see page 39). |
● |
Performance-based shares |
● |
Stock options |
Fiscal 2017 Grants of Plan-Based
Awards
|
|
|
|
Estimated Future Payouts Under Non-Equity
Incentive Plan Awards (1) |
|
Estimated Future Payout Under Equity Incentive Plan
Awards(2) |
|
All Other Stock Awards: Number of Shares or
Units (#) |
|
All
Other Option Awards: Number
of Securities Underlying Options (#) |
|
Exercise or
Base Price of Option Awards ($/Share) |
|
Grant Date Fair Value of Stock &
Option Awards (3)($) |
Name |
|
Grant
Date |
|
Threshold ($) |
|
Target ($) |
|
Maximum ($) |
|
Threshold (#) |
|
Target (#) |
|
Maximum (#) |
|
|
|
|
|
|
|
|
Kurt L.
Darrow |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Annual Incentive
(MIP) |
|
|
|
211,269 |
|
1,056,346 |
|
2,112,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based Shares
|
|
6/20/2016 |
|
|
|
|
|
|
|
1,856 |
|
46,412 |
|
92,824 |
|
|
|
|
|
|
|
1,206,248 |
Non-Qualified Stock
Options |
|
6/20/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,970 |
|
25.99 |
|
1,206,250 |
Louis M. Riccio
Jr. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
Annual Incentive (MIP) |
|
|
|
68,974 |
|
344,868 |
|
689,736 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based Shares |
|
6/20/2016 |
|
|
|
|
|
|
|
444 |
|
11,110 |
|
22,220 |
|
|
|
|
|
|
|
288,749 |
Non-Qualified Stock Options |
|
6/20/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,139 |
|
25.99 |
|
288,751 |
Mark S. Bacon,
Sr. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Annual Incentive
(MIP) |
|
|
|
79,748 |
|
398,742 |
|
797,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based Shares
|
|
6/20/2016 |
|
|
|
|
|
|
|
515 |
|
12,866 |
|
25,732 |
|
|
|
|
|
|
|
334,387 |
Non-Qualified
Stock Options |
|
6/20/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,849 |
|
25.99 |
|
334,374 |
J. Douglas
Collier |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
Annual Incentive (MIP) |
|
|
|
53,319 |
|
266,595 |
|
533,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based Shares |
|
6/20/2016 |
|
|
|
|
|
|
|
346 |
|
8,657 |
|
17,314 |
|
|
|
|
|
|
|
224,995 |
Non-Qualified Stock Options |
|
6/20/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,160 |
|
25.99 |
|
224,998 |
Darrell D.
Edwards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Annual Incentive
(MIP) |
|
|
|
50,439 |
|
252,195 |
|
504,390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based Shares
|
|
6/20/2016 |
|
|
|
|
|
|
|
327 |
|
8,176 |
|
16,352 |
|
|
|
|
|
|
|
212,494 |
Non-Qualified Stock
Options |
|
6/20/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,596 |
|
25.99 |
|
212,502 |
(1) |
|
Actual awards could have been up
to 200% of target for the MIP based on performance results. |
|
(2) |
|
The Threshold estimated future
payout shown reflects meeting the threshold for just the sales growth or
operating margin goal in the third year of the performance
cycle. |
|
(3) |
|
The value of performance-based
shares equals the target number of shares at the closing price of La-Z-Boy
stock on the grant date ($25.99). The value of non-qualified stock options
is the fair value ($7.99 per share) and will be expensed over the vesting
period. |
PROXY STATEMENT
| 2017
41
Table of Contents
Outstanding Equity Awards at 2017 Fiscal
Year-End |
The following table presents all
outstanding stock options/stock appreciation rights and unvested stock awards
(performance-based stock) held by the named executive officers at the end of the fiscal year.
Market values for the unvested stock awards are presented based on the closing
price of the companys stock on April 28, 2017, of $27.90.
|
|
|
|
Option/SAR Awards |
|
Stock Awards |
Name |
|
Grant
Year |
|
Number
of Securities Underlying Unexercised Options/SARs Exercisable (#) |
|
Number
of Securities Underlying Unexercised Options/SARs Unexercisable (#)(1) |
|
Option/ SAR Exercise Price ($) |
|
Option/ SAR Expiration Date |
|
Number of
Shares or
Units of Stock that
Have Not
Vested
(#)(2)
|
|
Market Value
of Shares
or Units
of Stock
That Have
Not Vested
($)
|
|
Equity Incentive Plan Awards: Number
of Unearned Shares, Units or Other Rights That Have Not
Vested (#)(3) |
|
Equity Incentive Plan Awards: Market or Payout
Value of Unearned Shares, Units or Other Rights That
Have Not Vested ($)(3) |
Kurt L.
Darrow |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based
Shares |
|
|
|
|
|
|
|
|
|
|
|
46,368 |
|
1,293,667 |
|
43,645 |
|
1,217,696 |
Stock Options |
|
2017 |
|
|
|
150,970 |
|
25.99 |
|
6/20/2026 |
|
|
|
|
|
|
|
|
|
|
2016 |
|
30,218 |
|
90,654 |
|
26.69 |
|
6/15/2025 |
|
|
|
|
|
|
|
|
|
|
2015 |
|
54,426 |
|
54,426 |
|
23.63 |
|
6/16/2024 |
|
|
|
|
|
|
|
|
|
|
2014 |
|
70,935 |
|
23,645 |
|
19.06 |
|
6/17/2023 |
|
|
|
|
|
|
|
|
|
|
2013 |
|
123,829 |
|
|
|
11.97 |
|
7/11/2022 |
|
|
|
|
|
|
|
|
Louis M. Riccio
Jr. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based Shares |
|
|
|
|
|
|
|
|
|
|
|
11,106 |
|
309,857 |
|
10,451 |
|
291,583 |
Stock
Options |
|
2017 |
|
|
|
36,139 |
|
25.99 |
|
6/20/2026 |
|
|
|
|
|
|
|
|
|
|
2016 |
|
7,240 |
|
21,720 |
|
26.69 |
|
6/15/2025 |
|
|
|
|
|
|
|
|
|
|
2015 |
|
13,038 |
|
13,039 |
|
23.63 |
|
6/16/2024 |
|
|
|
|
|
|
|
|
|
|
2014 |
|
17,127 |
|
5,712 |
|
19.06 |
|
6/17/2023 |
|
|
|
|
|
|
|
|
|
|
2013 |
|
22,504 |
|
|
|
11.97 |
|
7/11/2022 |
|
|
|
|
|
|
|
|
Mark S. Bacon,
Sr.(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based
Shares |
|
|
|
|
|
|
|
|
|
|
|
12,780 |
|
356,562 |
|
12,062 |
|
336,530 |
Stock Options |
|
2017 |
|
|
|
41,849 |
|
25.99 |
|
6/20/2026 |
|
|
|
|
|
|
|
|
|
|
2016 |
|
8,304 |
|
24,913 |
|
26.69 |
|
6/15/2025 |
|
|
|
|
|
|
|
|
|
|
2015 |
|
14,952 |
|
14,952 |
|
23.63 |
|
6/16/2024 |
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
|
6,450 |
|
19.06 |
|
6/17/2023 |
|
|
|
|
|
|
|
|
J. Douglas
Collier |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based Shares |
|
|
|
|
|
|
|
|
|
|
|
8,374 |
|
233,635 |
|
8,000 |
|
223,200 |
Stock
Options |
|
2017 |
|
|
|
28,160 |
|
25.99 |
|
6/20/2026 |
|
|
|
|
|
|
|
|
|
|
2016 |
|
5,366 |
|
16,099 |
|
26.69 |
|
6/15/2025 |
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
|
9,092 |
|
23.63 |
|
6/16/2024 |
|
|
|
|
|
|
|
|
Stock
Appreciation Rights |
|
2014 |
|
|
|
3,338 |
|
19.06 |
|
6/17/2023 |
|
|
|
|
|
|
|
|
Darrell D.
Edwards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based
Shares |
|
|
|
|
|
|
|
|
|
|
|
7,963 |
|
222,168 |
|
7,583 |
|
211,566 |
Stock Options |
|
2017 |
|
|
|
26,596 |
|
25.99 |
|
6/20/2026 |
|
|
|
|
|
|
|
|
|
|
2016 |
|
5,121 |
|
15,364 |
|
26.69 |
|
6/15/2025 |
|
|
|
|
|
|
|
|
|
|
2015 |
|
8,970 |
|
8,973 |
|
23.63 |
|
6/16/2024 |
|
|
|
|
|
|
|
|
|
|
2012 |
|
14,820 |
|
|
|
9.35 |
|
7/13/2021 |
|
|
|
|
|
|
|
|
|
|
2011 |
|
3,893 |
|
|
|
7.75 |
|
7/14/2020 |
|
|
|
|
|
|
|
|
Stock Appreciation
Rights |
|
2014 |
|
8,994 |
|
3,000 |
|
19.06 |
|
6/17/2023 |
|
|
|
|
|
|
|
|
|
|
2013 |
|
7,203 |
|
|
|
11.97 |
|
7/11/2022 |
|
|
|
|
|
|
|
|
42
La-Z-Boy Incorporated
| investors.la-z-boy.com
Table of Contents
(1) |
|
Unvested options and stock appreciation
rights will vest as follows: |
|
Grant Year |
|
Options/SARs Vesting Schedule |
|
2017 |
|
Unvested options vest 25%
on June 20, 2017, 25% on June 20, 2018, 25% on June 20, 2019, and 25% on
June 20, 2020. |
|
2016 |
|
1/3 of the unvested options vest on June
15, 2017, 1/3 on June 15, 2018, and 1/3 on June 15, 2019. |
|
2015 |
|
50% of the unvested
options vest on June 16, 2017, and 50% on June 16, 2018. |
|
2014 |
|
Unvested options/stock appreciation rights vest June 17,
2017. |
(2) |
|
The earned but unvested performance-based
shares will vest as follows: |
|
|
|
2017 Grant(a) |
|
2016 Grant(b) |
|
Total |
|
Kurt L. Darrow |
|
15,687 |
|
30,681 |
|
46,368 |
|
Louis M. Riccio Jr. |
|
3,755 |
|
7,351 |
|
11,106 |
|
Mark S. Bacon,
Sr. |
|
4,348 |
|
8,432 |
|
12,780 |
|
J. Douglas Collier |
|
2,926 |
|
5,448 |
|
8,374 |
|
Darrell D. Edwards |
|
2,763 |
|
5,200 |
|
7,963 |
|
(a) |
|
Earned and unvested shares are shown and vest on April
27, 2019. |
|
|
|
(b) |
|
Earned and unvested shares are shown and vest on April
28, 2018. |
(3) |
|
Unearned performance-based shares are shown assuming target
performance for fiscal year 2017 and target performance for fiscal year 2016
for each goal. |
|
|
|
|
Performance-Based Shares |
|
|
|
Name |
|
Fiscal Year 2017 Grant at Target(a) |
|
Fiscal Year 2016 Grant at Target(b) |
|
Total |
|
Kurt L. Darrow |
|
27,847 |
|
15,798 |
|
43,645 |
|
Louis M. Riccio Jr. |
|
6,666 |
|
3,785 |
|
10,451 |
|
Mark S. Bacon,
Sr. |
|
7,720 |
|
4,342 |
|
12,062 |
|
J. Douglas Collier |
|
5,194 |
|
2,806 |
|
8,000 |
|
Darrell D. Edwards |
|
4,906 |
|
2,677 |
|
7,583 |
|
(a) |
|
Three-year performance period
ends fiscal 2019 (April 2019). |
|
|
|
(b) |
|
Three-year performance period
ends fiscal 2018 (April 2018). |
(4) |
|
Mr. Bacons unvested options and unvested
performance shares cancelled upon his resignation on April 30,
2017. |
PROXY STATEMENT
| 2017
43
Table of Contents
Option Exercises and Stock
Vested |
The following table provides details
for each of the named executive officers regarding stock options or stock
appreciation rights exercised and stock awards vested during fiscal
2017.
Option Exercises and Stock
Vested in Fiscal 2017
|
|
Option Awards |
|
|
Stock Awards |
Name |
|
Number of Shares Acquired on Exercise (#) |
|
Value Realized on Exercise ($)(1) |
|
|
Number of Shares Acquired on Vesting (#) |
|
Value Realized on Vesting ($)(2) |
Kurt L. Darrow |
|
110,729 |
|
2,096,778 |
|
|
25,834 |
|
703,977 |
Louis M. Riccio Jr. |
|
|
|
|
|
|
6,189 |
|
168,650 |
Mark S. Bacon,
Sr. |
|
41,459 |
|
507,965 |
|
|
7,097 |
|
193,393 |
J. Douglas Collier |
|
52,107 |
|
645,812 |
|
|
4,316 |
|
117,611 |
Darrell D. Edwards |
|
4,919 |
|
100,249 |
|
|
4,259 |
|
116,058 |
(1) |
|
Amounts reflect the difference
between the exercise price of the stock option/stock appreciation right
and the market price of La-Z-Boy Incorporateds stock at the time of
exercise. |
|
(2) |
|
The dollar value of the vested
performance-based shares is based on the closing price of the companys
stock on the vesting date, June 19, 2017. |
Non-Qualified Deferred Compensation Plans |
As described in the Compensation
Discussion and Analysis above, our named executive officers are eligible to
receive contribution credits under our Performance Compensation Retirement Plan,
and eligible to participate in our Executive Deferred Compensation Plan. The
following table provides details for the named executive officers regarding the
performance compensation retirement plan. Contributions are made in the first
quarter following the completion of the fiscal year.
Fiscal 2017 - Non-Qualified
Deferred Compensation
Pursuant to
Performance Compensation Retirement Plan
Name |
|
Executive Contribution in FY 2017 ($)(1) |
|
Registrant Contributions in FY 2017 ($)(2) |
|
Aggregate Earnings in FY 2017 ($)(3) |
|
Aggregate Withdrawals/ Distributions ($) |
|
Aggregate Balance at FYE 2017 ($)(4) |
Kurt L. Darrow |
|
|
|
539,732 |
|
63,016 |
|
|
|
2,332,904 |
Louis M. Riccio Jr. |
|
|
|
155,575 |
|
18,942 |
|
|
|
694,309 |
Mark S. Bacon, Sr.
(5) |
|
|
|
179,878 |
|
21,577 |
|
|
|
793,684 |
J. Douglas Collier |
|
|
|
138,296 |
|
14,798 |
|
|
|
560,101 |
Darrell D. Edwards |
|
|
|
130,826 |
|
14,173 |
|
|
|
534,801 |
(1) |
|
n/a no executive
contributions |
|
(2) |
|
Mr. Darrow and the other named
executive officers received company contributions equal to 28.40% and
20.29%, respectively, of the sum of their base salary and bonus earned for
fiscal 2017. Contributions are made in the first quarter following the
completion of the fiscal year. These contributions are included in the
Summary Compensation Table as part of All Other Compensation. |
|
(3) |
|
Aggregate earnings are based on
an interest rate that corresponds to yields on 20-year AA corporate
bonds. |
|
(4) |
|
Accrued balances reflect total
company contributions for fiscal 2017. Please refer to page 36 for a
discussion of vesting and distribution criteria. |
|
(5) |
|
Mr.Bacons full balance was
forfeited upon his resignation date of April 30,
2017. |
44
La-Z-Boy Incorporated
| investors.la-z-boy.com
Table of Contents
The following table provides details of
the named executive officers non-qualified deferred compensation accounts as of
April 29, 2017. Company contribution amounts reflect contributions to the 401(k)
plan that could not be made under the qualified plan due to IRS rules. Aggregate
balances include deferred salary and MIP awards
earned in prior years but voluntarily deferred by the officers. Additional
discussion of our non-qualified deferred compensation program is presented below
the table.
Fiscal 2017 Non-Qualified
Deferred Compensation
Pursuant to
Executive Deferred Compensation Plan
Name |
|
Executive Contribution in FY
2017 ($)(1) |
|
Registrant Contributions in FY
2017 ($)(2) |
|
Aggregate Earnings in FY
2017 ($)(3) |
|
Aggregate Withdrawals/ Distributions ($) |
|
Aggregate Balance at FYE
2017 ($)(4) |
Kurt L. Darrow |
|
|
|
35,726 |
|
313,884 |
|
|
|
2,801,278 |
Louis M. Riccio Jr. |
|
158,176 |
|
12,696 |
|
117,624 |
|
|
|
944,697 |
Mark S. Bacon,
Sr. |
|
|
|
14,271 |
|
(86) |
|
|
|
65,011 |
J. Douglas Collier |
|
116,515 |
|
9,165 |
|
73,989 |
|
|
|
829,867 |
Darrell D. Edwards |
|
307,368 |
|
8,489 |
|
128,968 |
|
|
|
1,352,323 |
(1) |
|
Elective deferrals of base salary
and/or fiscal 2016 MIP awards paid in fiscal 2017. Amounts included in
Base Salary and Non-Equity Incentive Plan Compensation in the Summary
Compensation Table on page 39 are: for Mr. Riccio, Non-Equity Incentive
Plan Compensation of $158,176; for Mr. Collier, Base Salary of $29,433 and
Non-Equity Incentive Plan Compensation of $87,082; and for Mr. Edwards,
Base Salary of $168,131 and Non-Equity Incentive Plan Compensation of
$139,237. |
|
(2) |
|
Company contributions to the
Executive Deferred Compensation Plan to cover 401(k) contributions that
could not be made under the qualified plans. Amounts are included in All
Other Compensation in the Summary Compensation Table. |
|
(3) |
|
Earnings were not reported in the
Summary Compensation Table because they were not above-market or
preferential. |
|
(4) |
|
The portions of the aggregate
balance representing executive and company contributions made for prior
years for each of the then named executive officers were reported in the
appropriate columns of our Summary Compensation Tables for the respective
years. Amounts shown are fully vested. |
All of the executives deferrals and
any company match amounts are added to a recordkeeping account. The account is
credited with earnings or losses, depending upon actual performance of the
investment options (mutual funds and similar vehicles) the participant has
chosen. These are the same investment options available to all other plan
participants.
Payment of a participants account
balance is deferred until the date the participant designated when making the
deferral election. Permissible distribution election changes require that the distribution be pushed out at least five
years beyond the previously-scheduled payment commencement date and to be
effective, changes must be made at least one year before the termination of
employment. The deferral amounts are paid either in one lump sum or in annual
installments for up to 15 years. Upon a participants death, any remaining
balance in the participants account is paid to the participants designated
beneficiary.
Estimated Payments Upon
Termination or Change in Control |
This section presents the estimated
incremental payments that would be made to the named executive officers upon
termination of their employment. Estimated payouts are provided for the
following termination events:
● |
Amounts payable upon termination,
regardless of manner. |
● |
Amounts potentially payable upon
disability, retirement or death. |
● |
Amounts potentially payable upon
a change in control and a subsequent termination of
employment. |
● |
Amounts potentially payable upon
involuntary termination without cause or termination by the named
executive officer with good reason under the terms of the severance
plan. |
PROXY STATEMENT
| 2017
45
Table of Contents
Payments Made Upon
Termination |
When an executives employment
terminates, the executive is entitled to receive amounts the executive earned
while employed. These amounts, which are not included in the table below,
consist of:
● |
Accrued salary and unused
vacation. |
● |
Amounts contributed and vested
under retirement and non-qualified deferred compensation
plans. |
An executive receives no other payments
except when the termination is due to the executives disability, retirement, or
death, change in control of the company, or involuntary termination without
cause or termination by the named executive officer with good reason. Payments
upon disability, retirement, or death are based
on plan provisions that apply to all participants in the pertinent plans.
Payments made to named executive officers upon a termination of employment due
to the executives disability, retirement, or death, or change in control of the
company are described below. Payments made upon involuntary termination without
cause or termination by the named executive officer with good reason are
described in Named Executive Officer Severance Plan on page 37. We have
change-in-control agreements only with executive officers. The Table of
Estimated Payments details each type of payment.
Payments Made Upon
Disability or Retirement |
In the event of disability or
retirement, the executive will receive the following incremental
benefits:
● |
Stock options/stock
appreciation rights:
Accelerated vesting of unvested options
or stock appreciation rights.
|
● |
Performance-based
shares: The executive is eligible to receive a partial payout
following the end of the three-year performance period based on the
companys performance in any fiscal years that have been completed at the
time the executive retires or becomes disabled. |
● |
MIP
awards: Payment of a MIP award following conclusion of the
fiscal year, determined by applying the bonus percentage the executive
would have been entitled to based on the companys performance to the
executives actual earnings during the year. The MIP awards earned and
paid for fiscal 2017 performance, which are reported in the Summary
Compensation Table on page 39, are not included in the table
below. |
In the event of death, the executives
beneficiary will receive the following incremental benefits:
● |
Stock options/stock
appreciation rights:
Accelerated vesting of unvested options
or stock appreciation rights. |
● |
Performance-based
shares: Unless the committee in its discretion determines
otherwise, we will make a partial payout at the end of the performance
period based on the companys performance in any fiscal years that had
been completed at the time of the executives death. |
● |
MIP
awards: Payment of a MIP award following conclusion of the
fiscal year, determined by applying the
bonus percentage the executive would have been entitled to based on the
companys performance to the executives actual earnings during the year.
The MIP awards earned and paid for fiscal 2017 performance, which are
reported in the Summary Compensation Table on page 39, are not included in
the following table. |
Additionally, the executive will
receive benefits under disability or life insurance plans available generally to
all salaried employees. These potential payments are not reflected in the
table.
We have change-in-control agreements
with our executive officers to ensure continued management in the event of an
actual or threatened change in control of the company. The agreements provide
that if a named executive officers employment is
terminated other than upon death, disability or for cause within two years
(three years for the CEO) after a change in control, the executive will be
entitled to the following:
46
La-Z-Boy Incorporated
| investors.la-z-boy.com
Table of Contents
● |
For executives other than our
CEO, two times the executives base salary at the time of termination plus
two times the average of the annual bonuses the executive received over
the previous three years. Our CEO would be entitled to three times his
base salary and three times his average bonus. |
● |
Continuation of medical and
dental benefits and life insurance for three years for the CEO and two
years for the other named executive officers. |
● |
Reimbursement of certain legal
fees and expenses incurred by the executive in enforcing the
agreement. |
The agreements automatically renew for
an additional one-year period unless either the company or the executive gives
the other at least 90 days prior notice of non-extension. If a change in control
occurs, the agreements automatically extend for 36 months.
The executive is responsible for any
excise tax, and the company does not pay any gross-up. We utilize a best-net
approach where we reduce payments to the safe
harbor limit to avoid excise tax only if doing so results in a greater after-tax
benefit to the executive.
Performance-based shares granted under
the 2010 Omnibus Incentive Plan will be paid as if their terms were complete,
based on the best financial information available about the companys
performance as of the close of business on the day immediately before a change
in control or corporate transaction (as defined in the plan). In determining
the extent to which performance criteria have been satisfied, where the
performance criteria are based on results that accumulate over the term of the
award or over one year of the term, the performance requirement will be prorated
in accordance with the portion of the term or year that was completed before the
change in control or corporate transaction.
Executives receive accelerated vesting
in outstanding stock options or stock appreciation rights issued under the
La-Z-Boy Incorporated 2010 Omnibus Incentive Plan following a change in control
only if their employment is terminated.
PROXY STATEMENT
| 2017
47
Table of Contents
Table of Estimated
Payments |
In the following table, we estimate
incremental payments (payable as the result of the specified termination event)
that would have been payable to named executive officers in the event of change
in control, disability, retirement, death, or involuntary termination under the
terms of the severance plan. The value of equity awards is based on the closing
price of $27.90 of the companys stock on April
28, 2017 (the last business day of the fiscal year). The amounts provided below
are estimates of amounts that would have been payable. The actual amounts paid
in future years, if any, will depend on the executives pay, terms of
separation, severance plan, and change-in-control agreement in place, and the
companys stock price at the time of termination.
Fiscal 2017 Estimated Payments
Upon Termination or Change in Control
Name and
Benefit |
|
Change
in Control $(1) |
|
Retirement $(2)(3)(4) |
|
Disability $(2)(4) |
|
Death $(2)(5) |
|
Involuntary Termination Other than for Cause
or Resignation with Good Reason Under Severance Plan
$ |
Kurt L. Darrow |
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary (3 times
annual salary) |
|
2,895,000 |
|
|
|
|
|
|
|
|
|
|
Annual Incentive (3 times
average actual MIP |
|
|
|
|
|
|
|
|
|
|
|
|
amount paid in prior 3
years) |
|
2,607,213 |
|
|
|
|
|
|
|
|
|
|
Stock Options
(accelerated vesting) |
|
108,478 |
|
839,465 |
|
839,465 |
|
839,465 |
|
|
|
|
Performance-Based Shares
(accelerated vesting) |
|
2,299,992 |
|
1,293,667 |
|
1,293,667 |
|
1,293,667 |
|
|
|
|
Broad-Based
Benefits(6) |
|
16,829 |
|
|
|
|
|
|
|
|
9,836 |
|
Severance
Payment |
|
|
|
|
|
|
|
|
|
|
1,930,000 |
|
Total Incremental
Pay(7) |
|
7,927,512 |
|
2,133,132 |
|
2,133,132 |
|
2,133,132 |
|
|
1,939,836 |
|
Louis M.
Riccio Jr. |
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary (2 times
annual salary) |
|
924,000 |
|
|
|
|
|
|
|
|
|
|
Annual Incentive (2 times
average actual MIP |
|
|
|
|
|
|
|
|
|
|
|
|
amount paid in prior 3
years) |
|
626,652 |
|
|
|
|
|
|
|
|
|
|
Stock Options
(accelerated vesting) |
|
25,986 |
|
|
|
201,477 |
|
201,477 |
|
|
|
|
Performance-Based Shares
(accelerated vesting) |
|
550,830 |
|
|
|
309,857 |
|
309,857 |
|
|
|
|
Broad-Based
Benefits(6) |
|
25,709 |
|
|
|
|
|
|
|
|
12,523 |
|
Severance
Payment |
|
|
|
|
|
|
|
|
|
|
462,000 |
|
Total Incremental
Pay(7) |
|
2,153,177 |
|
|
|
511,334 |
|
511,334 |
|
|
474,523 |
|
Mark S. Bacon, Sr.(9) |
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary (2 times
annual salary) |
|
1,070,000 |
|
|
|
|
|
|
|
|
|
|
Annual Incentive (2 times
average actual MIP |
|
|
|
|
|
|
|
|
|
|
|
|
amount paid in prior 3
years) |
|
714,400 |
|
|
|
|
|
|
|
|
|
|
Stock Options
(accelerated vesting) |
|
29,959 |
|
|
|
230,939 |
|
230,939 |
|
|
|
|
Performance-Based Shares
(accelerated vesting) |
|
634,558 |
|
|
|
356,562 |
|
356,562 |
|
|
|
|
Broad-Based
Benefits(6) |
|
23,716 |
|
|
|
|
|
|
|
|
11,475 |
|
Severance
Payment |
|
|
|
|
|
|
|
|
|
|
535,000 |
|
Total Incremental
Pay(7) |
|
2,472,633 |
|
|
|
587,501 |
|
587,501 |
|
|
546,475 |
|
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| investors.la-z-boy.com
Table of Contents
Name
and Benefit |
|
Change
in Control $(1) |
|
Retirement $(2)(3)(4) |
|
Disability $(2)(4) |
|
Death $(2)(5) |
|
Involuntary Termination Other than for Cause
or Resignation with Good Reason Under Severance Plan
$ |
J. Douglas Collier |
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary (2
times annual salary) |
|
900,000 |
|
|
|
|
|
|
|
|
|
|
Annual
Incentive (2 times average actual MIP |
|
|
|
|
|
|
|
|
|
|
|
|
amount paid in
prior 3 years) |
|
424,388 |
|
|
|
|
|
|
|
|
|
|
Stock
Options/SARs (accelerated vesting)(8) |
|
19,476 |
|
|
|
141,596 |
|
141,596 |
|
|
|
|
Performance-Based
Shares (accelerated vesting) |
|
417,635 |
|
|
|
233,635 |
|
233,635 |
|
|
|
|
Broad-Based
Benefits(6) |
|
19,584 |
|
|
|
|
|
|
|
|
9,472 |
|
Severance
Payment |
|
|
|
|
|
|
|
|
|
|
450,000 |
|
Total
Incremental Pay(7) |
|
1,781,083 |
|
|
|
375,231 |
|
375,231 |
|
|
459,472 |
|
Darrell D.
Edwards |
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary (2
times annual salary) |
|
850,000 |
|
|
|
|
|
|
|
|
|
|
Annual
Incentive (2 times average actual MIP |
|
|
|
|
|
|
|
|
|
|
|
|
amount paid in
prior 3 years) |
|
419,896 |
|
|
|
|
|
|
|
|
|
|
Stock
Options/SARs (accelerated vesting)(8) |
|
18,541 |
|
|
|
134,224 |
|
134,224 |
|
|
|
|
Performance-Based
Shares (accelerated vesting) |
|
396,682 |
|
|
|
222,168 |
|
222,168 |
|
|
|
|
Broad-Based
Benefits(6) |
|
21,647 |
|
|
|
|
|
|
|
|
10,521 |
|
Severance
Payment |
|
|
|
|
|
|
|
|
|
|
425,000 |
|
Total
Incremental Pay(7) |
|
1,706,766 |
|
|
|
356,392 |
|
356,392 |
|
|
435,521 |
|
(1) |
|
Amounts shown for
performance-based shares reflect their values as of April 28, 2017, as if
the entire three-year performance period had been completed, computed
based on the best financial performance information available at that
time. |
|
(2) |
|
Reflects value as of April 28,
2017, of all outstanding unvested stock options/SARs |
|
(3) |
|
Messrs. Riccio, Bacon, Collier,
and Edwards are not eligible for retirement, which requires that they be
at least 55 years old and have at least 10 years of service with the
company. |
|
(4) |
|
Amounts shown for
performance-based shares reflect their values as of April 28, 2017, based
on targets for fiscal year 2016 and 2017 and actual performance against
those targets. Awards will be paid out on retirement only if the
compensation committee determines that the payment would be deductible for
federal income tax purposes. In its discretion, the compensation committee
may reduce or eliminate payments that otherwise would be made under these
awards upon disability or retirement. |
|
(5) |
|
Amounts shown for
performance-based shares reflect their values as of April 28, 2017, based
on targets for fiscal year 2016 and 2017 and actual performance against
those targets. In its discretion, the compensation committee may eliminate
payments that otherwise would be made under these awards upon
death. |
|
(6) |
|
Change in Control: two years
(three years for CEO) continuation of medical, dental and life insurance
coverage. Severance Plan: continuation of medical and dental insurance
while the executive receives severance. |
|
(7) |
|
Total incremental pay represents
amounts received by the officer before the officers payment of applicable
excise and income taxes. |
|
(8) |
|
Messrs. Collier and Edwards
received SARs in grants made for fiscal year 2014. |
|
(9) |
|
Mr. Bacons employment with the
company ended as of April 30, 2017. |
PROXY STATEMENT
| 2017
49
Table of Contents
PROPOSAL NO. 2:
TO APPROVE THE LA-Z-BOY
INCORPORATED 2017 OMNIBUS INCENTIVE PLAN |
Overview
On June 20, 2017, our board of
directors unanimously approved and adopted the La-Z-Boy Incorporated 2017
Omnibus Incentive Plan, subject to the approval of our shareholders. The new
omnibus plan provides the board the ability to design compensatory awards that
are responsive to La-Z-Boys needs. It provides for a variety of awards designed
to advance La-Z-Boys interests and long-term success by encouraging share
ownership among our officers and other key executives, employees, nonemployee
directors, and consultants and other advisors and otherwise linking their
compensation to share price performance or the achievement of specific corporate
goals. These awards include equity and cash awards intended to qualify as
performancebased compensation within the meaning of Section 162(m) of the
Internal Revenue Code.
We have historically granted equity
awards under various plans, including most recently our 2010 Omnibus Incentive
Plan, amended and restated as of August 21, 2013 (the 2010 Plan). If our
shareholders approve the new omnibus plan as proposed, then effective April 29,
2018, we will not make any additional awards under the existing plans. As of
July 1, 2017, under the existing plans, stock options covering 2.0 million
shares of our common stock were outstanding with a weighted average exercise
price of $24.11 and a weighted average remaining term of 8.1 years, 0.3 million
restricted share units were outstanding, and 0.8 million unearned
performance-based shares (at maximum) were outstanding. Under the 2010 plan,
there are 1.0 million shares available for grant as of July 1, 2017 and we will
not award more than 150,000 shares of the shares remaining under the 2010 plan
before the new plan becomes effective. The closing price of our common stock on
June 30, 2017, was $32.50 per share.
To be approved, the new omnibus plan
must receive a majority of the votes cast on the proposal, provided that a
majority of shares entitled to vote actually vote For or Against the
proposal. For this purpose, an abstention or broker non-vote will be considered
as not voted. If it is approved by shareholders, the new omnibus plan will
become effective April 29, 2018, and no further grants will be made under the
2010 Plan. If shareholders do not approve the new omnibus plan, it will not
become effective, and the 2010 Plan, as it presently exists, will continue in
effect. The results of the vote will not affect any awards under the existing
plan that are outstanding at the time of the annual meeting.
Summary of the New Omnibus
Plan
The following summary of the new
omnibus plan is qualified in its entirety by reference to the complete text of
the new omnibus plan included as Annex A to this proxy statement. You should
read the complete text of the new omnibus plan for more details regarding its
operation.
Purpose
We believe the new omnibus plan will
enhance our long-term financial success and materially increase shareholder
value by:
● |
maintaining our ability to
attract and retain highly qualified executive and director talent by
providing competitive compensation opportunities; |
● |
continuing our ability to
develop, maintain, and motivate our management team; |
● |
continuing to align executive pay
with shareholders interests; |
● |
motivating superior performance
by means of long-term performance related incentives; and |
● |
encouraging and providing
executives and directors the opportunity to gain an ownership interest in
La-Z-Boy to participate in our long-term growth and financial
success. |
Plan Term
Upon shareholder approval, the new
omnibus plan will be effective April 29, 2018. No new awards may be granted
under it after June 19, 2027. However, the term and exercise of awards granted
before then may extend beyond that date. The board may terminate the new omnibus
plan at any time with respect to all future awards.
Eligibility
The board or the compensation committee
will select the officers, executives, and other employees of La-Z-Boy or its
subsidiaries and the non-employee directors to receive awards under the new
omnibus plan.
In addition, the board may select
certain consultants and advisors providing services to La-Z-Boy or its
subsidiaries to receive awards under the new omnibus plan. The board or the
compensation committee will determine which eligible persons will receive awards
and the awards size, terms,
50
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| investors.la-z-boy.com
Table of Contents
conditions and restrictions. We
estimate that approximately 300 people will be eligible to participate in the
new omnibus plan.
Administration
The new omnibus plan is to be
administered by the board or a committee to which the board delegates the
appropriate authority. The board may grant awards to eligible persons and, to
the extent permitted by applicable law, may delegate to (1) a board committee of
one or more directors any of the boards authority under the new omnibus plan or
(2) one or more executive officers, or a committee of executive officers, the
right to grant awards to employees who are not directors or executive officers
of La-Z-Boy and the authority to take action on behalf of the board pursuant to
the plan to cancel or suspend awards to employees who are not directors or
executive officers of La-Z-Boy. The board is authorized to interpret the plan
and related agreements and documents and to take various other related actions.
Upon adoption of the new omnibus plan, the board delegated the powers and
authority to administer the plan to the compensation committee.
Available
Awards
The new omnibus plan provides for
equity-based compensation in the form of (1) stock options, including incentive
stock options (ISOs); (2) stock appreciation rights (SARs); (3)
restricted stock and restricted stock units (RSUs); (4) unrestricted stock
awards; (5) performance awards; and (6) related dividend equivalent rights. Each
type of award is described below under Types of Awards Authorized Under the
New Omnibus Plan. Each award granted under the new omnibus plan will be
evidenced by an award agreement containing such terms and provisions, consistent
with the new omnibus plan, as the committee may approve.
Shares Available Under the New
Omnibus Plan
Subject to adjustment as provided for
in the new omnibus plan, the number of shares of common stock subject to grants
under the plan will not exceed in the aggregate 5,850,000 shares. We expect
these shares to meet our need for the next five years.
Until our next fiscal year when the new
omnibus plan becomes effective, we plan to grant additional awards, which will
not exceed 150,000 shares, under the old 2010 Plan. After April 29, 2018, the
effective date of the new omnibus plan, no awards will be granted under the 2010
Plan.
Award
Limitations
Subject to adjustments as provided for
in the new omnibus plan:
● |
No participant may be granted
stock options or SARs for more than 500,000 shares of common stock for
each type of award during any calendar year. |
● |
No participant may be granted
stock awards other than an option or SAR for more than 500,000 shares of
La-Z-Boy common stock for each type of award during any calendar
year. |
● |
The maximum dollar value that may
be earned by any participant with respect to performance awards
denominated in cash and intended to be performance-based compensation
under Section 162(m) of the Internal Revenue Code for any 12-month
performance period (as established by the board) is $3 million, and for a
longer-term performance period, $4 million. |
● |
No non-employee director may be
granted cash and equity awards in excess of $400,000
annually. |
Share
Counting
An outright award confers on the
recipient greater value per share than an option or SAR because it does not
require payment of an exercise or base price. Under the new omnibus plan, each
share of common stock covered by an option or SAR counts against the aggregate
plan limit as one share and each share of stock covered by an award that is not
an option or SAR counts against the limit as 1.54 shares. However, for each
share that is forfeited, expires or is settled for cash (in whole or in part)
under the plan, one share, or 1.54 shares, as applicable, will be added back to
the aggregate limit. The following will not increase the number of shares
available for grant under the plan:
● |
any shares tendered by a
participant or withheld by us in full or partial payment of the exercise
price of stock options or the full or partial satisfaction of a
tax-withholding obligation on any award under the new omnibus plan or the
2010 Plan; |
● |
shares we reacquire on the open
market or otherwise using cash proceeds from the exercise of stock options
granted either under the new omnibus plan or the 2010
Plan. |
Section 162(m) of the Internal
Revenue Code
The new omnibus plan is designed to
allow us to grant awards that satisfy, to the extent feasible, the requirements
for the performance-based compensation exclusion from the deduction limitations
under Section 162(m) of the Internal Revenue Code. The new omnibus plan has been
structured so that stock options, SARs, and performance awards can be granted
that satisfy the requirements as performance-based compensation and be excluded
from the deduction limitations under Section 162(m). Restricted stock and RSUs,
however, cannot be excluded from the Section 162(m) limitations. We consider tax
deductibility an important consideration in determining executive compensation,
but there are other important
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considerations, as well, and as a
result, we may sometimes grant awards to our named executive officers that are
not deductible or are deductible only in part.
Repricing
Prohibited
Except in connection with an adjustment
involving a corporate transaction or similar event, the board may not authorize
the amendment of any outstanding stock option or SAR to reduce the exercise or
base price, and no outstanding stock option or SAR may be cancelled in exchange
for other awards, or cancelled in exchange for stock options or SARs having a
lower exercise or base price, or cancelled in exchange for cash, without the
approval of our shareholders.
Types of
Awards
Stock Options. The committee may grant stock options that entitle the
recipient to purchase shares of La-Z-Boy common stock at a price not less than
fair market value on the date of grant. The maximum term for stock options is 10
years except ISOs granted to anyone who owns, as of the date of grant, stock
with more than 10% of the total combined voting power of all classes of our
stock must have a term of not more than five years and an exercise price not
less than 110% of the fair market value of the common stock on the grant date.
We may grant stock options as ISOs, nonqualified stock options, or combinations
of the two. The exercise price for each grant of stock options will be specified
in the award agreement, which will also provide whether the price is payable:
(1) in cash or by cash equivalents; (2) by the transfer to us of La-Z-Boy common
stock the option recipient already owned; (3) with the compensation committees
consent, by delivering other consideration having a fair market value on the
exercise date equal to the total purchase price; (4) pursuant to a net exercise
arrangement where, when the participant exercises options, we deduct from the
shares we are going to issue to the recipient shares having a fair market value
equal to the total purchase price; (5) by delivering (on a form acceptable to
the committee) an irrevocable direction to a licensed securities broker
acceptable to us to sell shares and deliver all or part of the sales proceeds to
us to pay the option price and any withholding taxes; (6) by any other methods
specified in the award agreement; or (7) by a combination of these payment
methods.
SARs. An SAR is a right to receive from La-Z-Boy an amount equal to a
specified number of shares of La-Z-Boy common stock multiplied by the difference
between the fair market value of one share on the date of exercise and the grant
price of the SAR. The grant price may not be less than the market value per
share at the date of grant. Any grant may specify in the committees sole
discretion that the amount payable when the SAR is exercised may be paid in
cash, in shares of La-Z-Boy common stock or other property, or in any combination thereof. No SAR may be exercisable more than
10 years from the date of grant.
Restricted Stock and
RSUs. If the committee grants restricted
stock, ownership of a specified number of restricted shares of La-Z-Boy common
stock is transferred immediately to the recipient in consideration of the
recipients performing services. The participant is immediately entitled to vote
the shares, receive dividends (subject to the same restrictions and risks as the
underlying shares), and other ownership rights, but at least a portion of the
restricted stock must be subject to a substantial risk of forfeiture within
the meaning of Section 83 of the Internal Revenue Code for a period determined
by the committee at the grant date or for the failure to achieve specified
performance measures. An RSU represents the recipients right to receive, when
the RSU vests, a specified number of shares of La-Z-Boy common stock multiplied
by the value of one share as of the vesting date. In the committees discretion,
RSUs may be settled in cash, shares of La-Z-Boy common stock or any combination
thereof. RSUs may entitle the participant to receive credits for dividend
equivalents, but unlike restricted stock, they do not convey voting or other
shareholder rights.
If restricted stock or RSUs vest upon
the passage of time rather than the achievement of performance measures, the
period of time for vesting must be at least three years from the date of grant
(with the possibility of ratable vesting during the three-year period). If the
restricted stock or RSUs vest upon the achievement of performance measures, the
restrictions may not terminate sooner than one year after the date of grant. In
each case, awards are subject to accelerated vesting in the committees
discretion in the event of a change of control (as defined in the plan) or the
death or disability of the participant.
Unrestricted Stock
Awards. The committee may, subject to
limitations under applicable law, grant to any participant other stock awards,
entitling the participant to receive shares of La-Z-Boy common stock free of any
restrictions. The committee will determine the terms and conditions of these
awards. The company may not grant more than 5% of the shares reserved for
issuance under the new omnibus plan as unrestricted stock awards.
Dividend Equivalent
Rights. The committee may award dividend
equivalent rights entitling the recipient to receive credits based on cash
distributions that would have been paid on the shares of stock specified in the
award agreement if the shares had been issued to and held by the recipient.
Dividend equivalents credited to a participant may be deemed to be reinvested in
additional shares of stock, which may thereafter accrue additional equivalents.
Any such reinvestment will be at the fair market value on the date of
reinvestment. In the committees sole discretion, dividend equivalent rights may
be settled in cash or stock or a combination thereof, and in a single
installment or multiple installments. Any dividends or dividend
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equivalents provided with respect to
performance awards, or restricted stock, RSUs, or other share-based awards
subject to the attainment of performance measures, will be subject to the same
restrictions and risk of forfeiture as the underlying awards.
Performance Awards. The committee may grant performance awards in the form of
performance shares or performance units, as the committee determines in its sole
discretion. Performance shares entitle the recipient to units valued based on a
designated number of shares of La-Z-Boy common stock. Performance units entitle
the recipient to units valued based on a designated amount of cash or property
other than shares of La-Z-Boy common stock. Each performance award will specify
one or more performance measures that must be satisfied within a specified
period, which must be at least one year, for the performance awards to be
earned.
To the extent they are earned, the
performance awards will be paid to the participant in the manner and at the time
determined by the committee. Any grant may specify in the committees discretion
that the amount payable may be paid in cash, shares of La-Z-Boy common stock or
other property, or any combination thereof. Performance awards may be paid in a
lump sum or in installments following the close of the performance period or, in
accordance with procedures established by the committee, on a deferred basis
subject to the requirements of Section 409A of the Internal Revenue
Code.
Performance
Measures
The committee will establish measurable
performance objectives for participants who receive performance awards under the
new omnibus plan. Performance measures may be based on either company-wide
objectives or objectives that relate to the performance of the subsidiary or
division, business segment, or business unit within La-Z-Boy or a subsidiary in
which the participant is employed. Performance measures applicable to any award
or portion of an award intended to be a qualified performance-based award to a
participant who is, or is determined by the committee to be likely to become, a
covered employee within the meaning of Section 162(m) of the Internal
Revenue Code will be based on the attainment of specified levels of one or any
combination of the following:
(a) |
|
net earnings or net income; |
|
(b) |
|
operating earnings; |
|
(c) |
|
pretax earnings; |
|
(d) |
|
earnings per share; |
|
(e) |
|
share price, including growth measures and total
stockholder return; |
|
(f) |
|
earnings before interest and taxes; |
|
(g) |
|
earnings before interest, taxes, depreciation and/or
amortization; |
|
(h) |
|
sales or revenue growth, whether
in general, by type of product or service, or by type of
customer; |
|
(i) |
|
gross or operating
margins; |
|
(j) |
|
return measures, including return
on assets, capital, investment, equity, sales or revenue; |
|
(k) |
|
cash flow, including operating
cash flow, free cash flow, cash flow return on equity and cash flow return
on investment; |
|
(l) |
|
productivity ratios; |
|
(m) |
|
expense targets; |
|
(n) |
|
market share; |
|
(o) |
|
financial ratios as provided in
credit agreements of La-Z-Boy and its subsidiaries; |
|
(p) |
|
working capital
targets; |
|
(q) |
|
completion of acquisitions of
businesses or companies; |
|
(r) |
|
completion of divestitures and
asset sales; and |
|
(s) |
|
any combination of any of the
foregoing business criteria. |
Amendment and Termination of
the New Omnibus Plan
The committee may, at any time and from
time to time, amend, suspend, or terminate the plan as to any shares of stock
for which awards have not been made, except that we must submit for shareholder
approval any plan amendment where shareholder approval is required by applicable
law or stock exchange listing requirements, or that would otherwise materially:
(i) increase the benefits accrued to participants under the plan, (ii) increase
the numbers of securities that may be issued under the plan (other than an
increase pursuant to the adjustment provisions in the plan), or (iii) modify the
requirements for participation in the plan.
The committee may not, without a
participants consent, amend the plan to impair in any material respect the
participants rights under any award that the participant has already been
granted.
Vesting and Exercise of an
Award
The award agreement governing an award
will specify the period during which the right to exercise the award in whole or
in part vests, including the events or conditions on which the vesting will
occur or may accelerate. All awards, except unrestricted stock awards, will be
subject to at least one year vesting. No portion of an award that is not vested
when a participants service with us terminates will vest, unless the award
agreement provides otherwise or the committee determines otherwise.
Generally, a stock option or SAR may be
exercised only while the recipient remains an employee of La-Z-Boy or
its
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subsidiaries or a nonemployee director
of La-Z-Boy or, in the case of a stock option, for 90 days following the
participants termination of service (unless the option expires earlier). In the
event of retirement, vesting for non-qualified stock options and SARs will
accelerate and remain exercisable for three years, unless the option expires
earlier. An award may be exercised for any vested portion of the shares subject
to such award until the award expires or as otherwise determined by the
committee.
When a participants employment
terminates because of death or disability, if the participant held restricted
stock or RSUs with a restriction on transfer that has not lapsed, or other
share-based awards that have not been fully earned, or shares of La-Z-Boy stock
subject to any other transfer restriction imposed under the plan, the committee
may, in its sole discretion and as permitted by law, take such action as it
deems equitable in the circumstances or in La-Z-Boys best interests, including
accelerating vesting and waiving or modifying any performance or other period,
any performance measure, or any other requirement, condition, restriction or
limitation applicable to any such award.
Adjustments
The committee may, in its sole
discretion exercised in good faith, adjust the number and kind of shares covered
by outstanding awards under the new omnibus plan and, in the case of stock
options and SARs, the applicable exercise or base prices, to equitably prevent
dilution or enlargement of the rights of participants in the event of any
merger, reorganization, consolidation, recapitalization, dividend or
distribution, share split, reverse share split, spin-off or similar transaction
or other change in corporate structure affecting the shares of common stock or
its value. In such an event or other change in control, the committee, in its
discretion, may provide in substitution for any or all outstanding awards under
the plan such alternative consideration (including cash), if any, as it, in good
faith, may determine to be equitable in the circumstances and may require the
surrender of all awards so replaced in a manner that complies with Section 409A
of the Internal Revenue Code. In addition, for each stock option or SAR with an
exercise price or base price greater than the consideration offered in
connection with any such transaction or event or change in control, the
committee may in its sole discretion elect to cancel the stock option or SAR
without any payment to the holder. The committee will also make or provide for
such adjustments in the number of shares available under the plan, including the
individual participant limits, as the committee may determine appropriate to
reflect any transaction or event described above, except that any such
adjustment will be made only to the extent that it would not cause any stock
option intended to qualify as an ISO to fail to
so qualify. Additionally, we may eliminate fractional shares or settle
fractional shares in cash.
Limited
Transferability
No award and no shares of La-Z-Boy
common stock that have not been issued or as to which any applicable
restriction, performance or deferral period has not lapsed, may be sold,
assigned, transferred, pledged or otherwise encumbered, other than by will or
the laws of descent and distribution. During a participants life, an award may
be exercised only by the participant or the participants guardian or legal
representative. A participant may assign or transfer an award to: (1) the
participants spouse, children or grandchildren (including any adopted and step
children or grandchildren), parents, grandparents or siblings; (2) a trust for
the benefit of one or more of the participant or the persons referred to in
clause (1); or (3) a partnership, limited liability company or corporation in
which the participant or the persons referred to in clause (1) are the only
partners, members or shareholders, so long as, in each case, the permitted
assignees are bound by and subject to all of the terms and conditions of the new
omnibus plan and the award agreement relating to the transferred award and they
execute an agreement satisfactory to us evidencing those obligations.
Withholding
Taxes
If we are required to withhold federal,
state, local or foreign taxes in connection with any payment made to or benefit
realized by a participant or other person under the new omnibus plan, and the
amounts available to us for withholding are insufficient, receipt of the payment
or benefit will be conditioned on the participants or other persons making
arrangements satisfactory to us to pay the balance of the taxes we are required
to withhold, which arrangements (in the committees discretion) may include
relinquishing a portion of the benefit. In certain circumstances, to settle tax
withholding obligations, we may withhold from a participants wages amounts that
are otherwise due to the participant or shares of stock that are deliverable to
the participant. To satisfy tax withholding obligations, participants may elect
to have shares of common stock withheld or may deliver other shares of common
stock, but the value of any shares withheld will not exceed the minimum amount
of taxes required to be withheld.
Compliance with Section 409A of
the Internal Revenue Code
We intend that the new omnibus plan and
any grants made under it comply with or be exempt from applicable provisions of
Section 409A of the Internal Revenue Code, so
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that the income inclusion provisions of
Section 409A(a)(1) do not apply to the participants. The new omnibus plan and
any grants made under it are to be administered in a manner consistent with this
intent.
Termination
No grant under the new omnibus plan may
be made after June 19, 2027, but all grants made on or before June 19, 2027 will
continue in effect after that date unless they terminate under their terms or
the terms of the plan.
Federal Income Tax
Consequences
The following is a brief summary of
some of the federal income tax consequences of some types of transactions under
the new omnibus plan based on federal income tax laws currently in effect. This
summary is not intended to be complete and does not describe any gift, estate,
social security or state or local tax consequences. It is not intended as tax
guidance to participants in the plan.
Nonqualified Stock
Options. A recipient of nonqualified stock
options will not realize any taxable income when the option are granted. When
the recipient exercises the options, the recipient generally will realize
ordinary income equal to the amount by which the shares fair market value on
that date exceeds the exercise price. When a recipient subsequently sells shares
of common stock purchased with the option, the recipient will recognize
short-term or long-term capital gain or loss depending on his or her holding
period of the shares. Officers and directors subject to Section 16(b) of the
Securities Exchange Act of 1934 may be subject to special tax rules and income
tax consequences concerning their options. We will not receive a deduction when
we grant options unless they have a readily ascertainable fair market value (as
determined under applicable tax law) at the time we grant them. When a recipient
exercises options, we will generally be allowed, subject to the limitations
under Sections 162(m) and 280G of the Internal Revenue Code (as described
below), a deduction equal to the amount recognized by the recipient as ordinary
income.
ISOs. In general, a recipient will not realize taxable income, and we will
not realize an income tax deduction, either when we grant ISOs or when the
recipient exercises them. For purposes of the alternative minimum tax, however,
the amount by which the fair market value of shares a recipient acquired from
exercising an ISO (determined at that time) exceeds the ISOs exercise price
generally will be considered income. If the recipient was continuously employed
from the date of grant at least until three months prior to exercising the ISO
and the recipient does not sell the shares received from exercising the ISO
within either (1) two years after the ISOs grant date, or (2) one year after
exercising the ISO, the recipients subsequent sale of the shares will result in
long-term capital gain or loss to the recipient but will not result in a tax
deduction to us.
If the recipient is not continuously
employed from the date of grant until at least three months prior to exercising
an ISO, or the recipient disposes of shares the recipient acquired from
exercising of an ISO within either of the time periods described in the
immediately preceding paragraph, the recipient will generally realize as
ordinary income the lesser of (1) the amount by which the fair market value of
the shares on the date the recipient exercises the ISOs exceeds the exercise
price, or (2) the amount by which what the recipient realized in disposing of
the shares exceeds the exercise price. In such event, subject to the limitations
under Sections 162(m) and 280G of the Internal Revenue Code (as described
below), we generally will be entitled to an income tax deduction equal to the
amount the recipient recognized as ordinary income. Any gain the recipient
realizes in excess of the amount the recipient realized as ordinary income would
be taxed at the rates applicable to short-term or long-term capital gains,
depending on how long the recipient held the shares.
SARs. Participants will not recognize income when SARs are granted. When a
participant exercises a SAR, the participant normally realizes ordinary income
equal to the cash the participant receives or the fair market value of any
unrestricted shares of La-Z-Boy common stock the participant
receives.
Restricted Stock. The recipient of restricted stock generally will be subject
to tax as ordinary income on the fair market value of the restricted stock
(reduced by any amount the participant paid for the restricted stock) when the
shares are no longer subject to forfeiture or restrictions on transfer. Any
dividends a recipient receives while the stock is subject to risk of forfeiture
or restrictions on transfer generally will be treated as compensation that is
taxable as ordinary income to the participant and deductible by us.
RSUs. Recipients of awards of RSUs generally will not be taxed when the
awards are granted but will be subject to tax as ordinary income on the cash
transferred to the participant, or, if applicable, on the fair market value of
unrestricted shares of La-Z-Boy common stock on the date they are transferred to
the participant (reduced in either case by any amount the participant paid for
the RSUs), in which event the holding period for determining capital gains or
losses for such stock will commence on the date of transfer.
Performance Awards. Generally, recipients do not recognize income when they
receive a grant of performance shares pursuant to a performance award. When
performance shares are later paid out, the recipient generally will be required
to include as taxable ordinary income the amount of cash the participant
receives or the fair market value on the transfer date of unrestricted shares of
La-Z-Boy common stock the participant receives.
New Omnibus Plan
Benefits
Due to the nature of the proposed plan,
we cannot predict in advance the benefits that any employee or director
ultimately may receive if the proposed plan is approved.
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Existing Equity
Compensation Plans |
The table below provides information,
as of the end of fiscal 2017, on our existing compensation plans under which we
may issue common shares.
Equity Compensation
Plan Information as of April 29, 2017
Plan category |
|
Number of securities to be issued
upon exercise of outstanding options (i) |
|
Weighted- average exercise price
of outstanding options (ii) |
|
Number of securities remaining available
for future issuance under equity compensation plans
(excluding securities reflected in column
(i)) (iii) |
|
Equity compensation plans approved by shareholders |
|
1,509,060(1) |
|
$22.70 |
|
3,113,095(2) |
|
Note 1: These options were issued under
our 2010 Plan.
Note 2: This amount is the aggregate
number of shares available for future issuance under our 2010 Plan. The 2010
Plan provides for awards of stock options, restricted stock, and performance
awards (awards of our common stock based on achievement of pre-set goals over a
performance period) to selected key employees and non-employee directors. We
have performance awards outstanding under the plan that would reduce the number
of shares remaining available for future issuance under the plan by 937,825
shares, assuming the maximum performance targets were achieved.
This table does not include shares that
may be issued under the new omnibus plan if it is approved by shareholders at
the meeting. If it is approved by shareholders, the new omnibus plan will become
effective April 29, 2018, and thereafter we will not make any other grants under
the 2010 Omnibus Incentive Plan.
Our board of directors has determined
that the proposed plan should be submitted for shareholder approval so as to
comply with the NYSE listing standards and the Section 162(m) regulations. To be
approved, the new omnibus plan must receive a majority of the votes cast on the
proposal, provided that a majority of shares entitled to vote actually vote
For or Against the proposal. For this purpose, an abstention or broker
non-vote will be considered as not voted. If it is approved by shareholders, the
new omnibus plan will become effective April 29, 2018, and thereafter we will
not make any future grants under the 2010 Omnibus Incentive Plan. If
shareholders do not approve the new omnibus plan, it will not become effective,
and 2010 Omnibus Incentive Plan, as it currently exists, will continue in
effect. The results of the vote will not affect any awards under the existing
plan that are outstanding at the time of the annual meeting.
If our shareholders approve the
proposed plan, that approval also will operate to approve the items for setting
performance goals. Based on the current Section 162(m) regulations, our board
believes that, upon such approval, any payouts earned under future performance
awards would satisfy the requirements for exclusion from Section 162(m)s
deduction limit.
If our shareholders do not approve the
proposed plan, the current plan will remain in effect with respect to the
remainder of the previously authorized shares and the Compensation Committee may
make future awards under the existing plan.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL
OF PROPOSAL NO. 2, WHICH APPROVES THE LA-Z-BOY INCORPORATED 2017 OMNIBUS
INCENTIVE PLAN. |
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PROPOSAL NO. 3:
ADVISORY VOTE ON THE
COMPENSATION OF THE COMPANYS NAMED EXECUTIVE
OFFICERS |
Section 14A of the Securities Exchange
Act of 1934 requires that we provide you the opportunity to vote to approve, on
a non-binding advisory basis, the compensation of our named executive officers
(those executive officers named in the Summary Compensation Table above), as
disclosed in this proxy statement in accordance with the compensation disclosure
rules of the SEC, including Item 402 of the SECs Regulation S-K.
As described in detail in the
Compensation Discussion and Analysis, we seek to closely align the interests
of our executive officers with those of our shareholders. We have endeavored to
design our compensation programs to reward our named executive officers and
other executive employees for individual and company-wide achievements without
encouraging them to subject our company to excessive risks. Before voting on
this proposal, please read the Compensation Discussion and Analysis and review
the compensation disclosure tables and related narrative discussion above. Those materials
provide a detailed explanation of our executive compensation philosophy and
practices.
The vote on this resolution is not
intended to address any specific element of compensation but is instead a vote
on approving the overall compensation of our named executive officers as
described in this proxy statement. The vote is advisory, which means that the
vote is not binding on La-Z-Boy, our board of directors, or our compensation
committee.
Our management will present the
following resolution to the meeting:
RESOLVED, that the compensation paid
to the companys named executive officers, as disclosed pursuant to Item 402 of
Regulation SK, including the Compensation Discussion and Analysis, compensation
tables, and narrative discussion, is hereby approved.
OUR BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR PROPOSAL NO. 3. |
PROPOSAL NO. 4:
ADVISORY VOTE ON THE
FREQUENCY OF ADVISORY VOTES ON EXECUTIVE
COMPENSATION |
The Dodd-Frank Wall Street Reform and
Consumer Protection Act provides that shareholders must be given the opportunity
to vote, on a non-binding advisory basis, for their preference as to how
frequently we should seek future advisory votes on the compensation of our named
executive officers, as disclosed in accordance with the compensation disclosure
rules of the SEC. By voting on this proposal, shareholders may indicate whether
they would prefer that we conduct future advisory votes to approve the
compensation of the named executive officers once every one, two, or three
years. Shareholders also may, if they wish, abstain from casting a vote on this
proposal.
Our board of directors has determined
that an annual advisory vote to approve the compensation of named executive
officers will allow our shareholders to provide the most timely input on
La-Z-Boys executive compensation philosophy and practices as disclosed in the
proxy statement each year. The vote is advisory, which means that the vote is
not binding on La-Z-Boy, our board of directors, or the compensation
committee.
Shareholders may cast a vote on the
preferred voting frequency by selecting the option of one year, two years, or
three years (or abstain) when voting in response to the resolution set forth
below.
Our management will present the
following resolution to the meeting:
RESOLVED, that the shareholders
determine, on an advisory basis, that they prefer that advisory votes on the
compensation of La-Z-Boys named executive officers as set forth in the annual
proxy statement be held at intervals of [one year] [two years] [three
years].
The proxy card enables shareholders to
vote for 1 year, 2 years, or 3 years or to abstain. The resolution set
forth above will be considered adopted with whichever of the three alternative
intervals receives the most votes as expressing our shareholders preference,
even if none of the alternatives receives a majority of the votes cast. While
Michigan law and our governing documents generally
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require approval by a majority of votes
cast for official shareholder action, this proposal is advisory and non-binding
in nature and is therefore not required to be approved by majority
vote.
OUR BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE FOR 1 YEAR AS THE PREFERRED INTERVAL FOR ADVISORY VOTES
ON EXECUTIVE COMPENSATION. |
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AUDIT COMMITTEE REPORT
The audit committee assists the board
in overseeing our financial reporting process, internal controls and procedures,
and compliance with legal and regulatory requirements. The committee and its
members do not replace or duplicate the activities of management or the
independent registered public accounting firm. Management is responsible for the
companys financial reporting process and related internal controls, while the
independent registered public accounting firm is responsible for independently
auditing the companys financial statements and internal controls in accordance
with the auditing standards of the Public Company Accounting Oversight Board.
The current audit committee charter, which provides more information regarding
the committees responsibilities and processes, is available on the La-Z-Boy
website at http://www.la-z-boy.com/about/corp_governance.aspx.
The audit committee selects the
companys independent registered public accounting firm and manages all aspects
of the relationship, including the firms compensation, retention, replacement
and the scope of any additional work. The committee reviews and approves the
firms non-audit services work and fees before the firm performs any such work.
In selecting PricewaterhouseCoopers LLP as the companys independent registered
public accounting firm for fiscal 2018, the committee evaluated the firms
independence, including receiving and discussing the written disclosures and
letter from PricewaterhouseCoopers LLP required by the Public Company Accounting
Oversight Board. The committee also discussed with PricewaterhouseCoopers LLP
matters that Auditing Standards No. 16, as adopted by the Public Company
Accounting Oversight Board, requires be discussed. The committee determined that PricewaterhouseCoopers LLP is
independent of the company and management.
In fulfilling its oversight duties, the
audit committee met nine times during fiscal 2017. The committee regularly meets
with the senior members of the companys financial management team and the
companys independent registered public accounting firm. The committee
selectively met with key managers of the company to review or discuss potential
financial risks related to the company. The committee also regularly met in
executive sessions, in separate private sessions with PricewaterhouseCoopers
LLP, the key members of the senior management team and the internal audit team.
At these meetings, the committee discussed the companys financial estimates and
judgments, internal controls over financial reporting, accounting principles,
and regulatory compliance. To assist the committee in performing its duties, the
committee utilizes, at the companys expense, outside accounting, legal and
other advisors as appropriate.
Based on the reviews and discussions
described above, the committee recommended to the board of directors, and the
board of directors approved, including the audited financial statements in
La-Z-Boys Annual Report on Form 10-K for the fiscal year ended April 29, 2017,
for filing with the Securities and Exchange Commission.
The Audit Committee
Michael T.
Lawton, Chairman
Edwin J. Holman
W. Alan McCollough
Lauren B.
Peters
For professional services rendered to
us for fiscal years 2017 and 2016, PricewaterhouseCoopers LLP has billed us as
follows:
|
|
|
Fiscal
2017 |
|
|
Fiscal 2016 |
Audit Fees |
|
|
$ |
1,761,538 |
|
|
$ |
1,575,000 |
Tax Fees |
|
|
|
10,445 |
|
|
|
1,840 |
All
Other Fees |
|
|
|
1,800 |
|
|
|
1,800 |
Total |
|
|
$ |
1,773,783 |
|
|
$ |
1,578,640 |
Audit fees are for the audit work
performed on our annual financial statements, our internal controls over
financial reporting, managements assessment of our internal controls over
financial reporting, and reviews of the quarterly
financial statements included in our quarterly reports on Form 10-Q, as well as
audit services that are normally provided in connection with our statutory and
regulatory filings.
Tax fees include fees for tax
compliance and advisory services in foreign jurisdictions. All other fees
represent accounting research software subscription fees.
The audit committees current policy
requires approval of all audit and non-audit services provided by the
independent auditors before the auditors are engaged to perform them and the
committee did approve all such services for fiscal year 2017.
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PROPOSAL NO. 5:
TO RATIFY THE SELECTION
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM |
The audit committee has selected
PricewaterhouseCoopers LLP as our independent registered public accounting firm
for fiscal 2018. PricewaterhouseCoopers LLP acted as our independent registered
public accounting firm for fiscal 2017, and we believe it is well qualified to
act in that capacity again this year. Representatives of PricewaterhouseCoopers
LLP will be present at the meeting with the opportunity to make a statement and
answer questions.
We ask you to ratify the selection of
PricewaterhouseCoopers LLP as our independent registered public accounting firm.
Although ratification is not required by our bylaws or otherwise, the board is
submitting the selection of PricewaterhouseCoopers LLP to you for ratification as a matter of good
corporate practice. The audit committee will reconsider the selection if it is
not ratified. In addition, the audit committee, in its discretion, may select a
different independent registered public accounting firm at any time during the
year if it determines that such a change would be in the best interests of
La-Z-Boy and our shareholders.
Our management will present the
following resolution to the meeting:
RESOLVED, that the audit committees
selection of PricewaterhouseCoopers LLP as the independent registered public
accounting firm for La-Z-Boy Incorporated for fiscal 2018 is
ratified.
OUR BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE FOR PROPOSAL NO. 5. |
OTHER MATTERS
General Information about the Annual Meeting
and Voting
The 2017 annual meeting of the
shareholders of La-Z-Boy Incorporated will be held in the Wright Room of the
Westin Detroit Metropolitan Airport on August 29, 2017, beginning at 8:00 A.M.
(Eastern Daylight Time). La-Z-Boys board of directors is soliciting your proxy.
We are furnishing this proxy statement and the accompanying form of proxy to our
shareholders beginning on July 18, 2017.
Meeting Purposes.
At the meeting, shareholders will elect nine
directors for one-year terms expiring at the shareholders meeting in 2018. We
are asking shareholders to approve the 2017 Omnibus Incentive Plan. We are also
asking shareholders to approve, by advisory votes, the compensation of our named
executive officers and the frequency of holding advisory votes on our executive
compensation. Finally, we are also asking shareholders to ratify the selection
of our independent registered public accounting firm for fiscal year 2018. We do
not expect any other business, except for routine or procedural matters, to be
conducted at the meeting. If any other business is properly brought up, the
persons named in the enclosed proxy will have authority to vote on it in their
discretion.
Proxy Materials Available on
Internet. We are making our proxy
materials available to our shareholders on the Internet. On July 18, 2017, we
sent shareholders a one-page Notice of Internet Availability of Proxy
Materials, which included instructions on how to access our proxy
materials. The materials, consisting of this proxy statement and our fiscal 2017
annual report to shareholders, are available at www.proxyvote.com. The Notice of
Internet Availability of Proxy Materials also provides instructions on how to
vote shares. By making the materials available through the Internet, we expect
to reduce our costs, conserve natural resources, and expedite delivery of the
proxy materials. If, however, you prefer to receive paper copies of the proxy
materials, please follow the instructions included on the Notice of Internet
Availability of Proxy Materials. If you previously elected to receive our proxy
materials electronically, you will continue to receive them by e-mail until you
elect otherwise.
Voting.
Only shareholders of record at the close of
business on July 6, 2017, the record date, will be eligible to vote. There is
only one class of stock entitled to vote at the meeting, our common stock, $1.00
par value, of which there were 48,577,316 shares outstanding on the record date.
A quorum, which is a majority of the outstanding shares, is needed to conduct a
meeting. Each share is entitled to one vote for each director position and one
vote for each issue; cumulative voting is not available. If you received a paper
copy of the proxy materials, you may vote your shares by signing and dating each
proxy card you received and returning the cards in
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the enclosed envelope. The proxies will
be voted according to your directions on the proxy card. If you return a signed
card without specifying your vote, your shares will be voted:
FOR the election of each of the director nominees named in this
proxy statement,
FOR approval of the 2017 Omnibus Incentive Plan, and
FOR approval of the compensation of our named executive
officers,
FOR 1 year on the frequency of holding advisory votes to approve
the compensation of named executive officers, and
FOR ratification of PricewaterhouseCoopers LLP as our independent
registered public accounting firm for fiscal year 2018.
If you sign and return your proxy card,
your shares will be voted on any other business that properly comes before the
meeting as determined by the persons named in the proxy. We urge you to sign,
date, and return your proxy card promptly, or vote by telephone or on the
Internet (see below), even if you plan to attend the meeting in person. If you
do attend in person, you will be able to vote your shares at the meeting even if
you previously signed a proxy card or voted by telephone or on the
Internet.
Telephone and Internet
Voting. We encourage you to vote by
telephone or on the Internet. If your shares are held in your name, you can vote
by telephone or on the Internet by following the instructions on the proxy card
or as explained in the Notice of Internet Availability of Proxy Materials. If
you are a beneficial holder with your shares held in the name of your broker,
bank, or other financial institution, you will receive telephone or Internet
voting instructions from your institution.
Shares Held by
Broker. If you hold your shares
through a broker, bank, or other financial institution, you will receive your
proxy materials and voting instructions from the institution. Under New York
Stock Exchange rules, your broker, bank, or financial institution will not vote
your shares in director elections without your specific instructions. To ensure
your vote is counted, you must provide directions to your broker, bank, or
financial institution by following its instructions.
Changing Your Vote.
You may change your vote by submitting a new
vote by proxy, telephone, Internet, or in person at the meeting. A later vote
will cancel an earlier vote. For example, if you vote by Internet and later vote
by telephone, the telephone vote will count, and the Internet vote will be
canceled. If you wish to change your vote by mail, you should request a new
proxy card from our Corporate Secretary at One La-Z-Boy Drive, Monroe, Michigan,
48162. Your last vote received before the meeting will be the only one counted.
You may also change your vote by voting in person at the meeting. In that event,
your vote at the meeting will count and cancel any previous vote.
Vote Required.
Under applicable Michigan law, directors are
elected by plurality vote. Provided there is a quorum at the meeting, the
nominees who receive the highest through the ninth highest numbers of votes will
be elected, regardless of the number of votes cast. So long as each candidate
receives at least one vote, withheld votes and broker non-votes have no effect
on the election results. However, our corporate governance guidelines require
that any director who fails to receive a majority of the votes cast must, at the
board meeting immediately following the shareholders meeting, offer to resign
as director. Our board must act on such an offer of resignation at or before its
next meeting, which is currently planned for late November, and publicly
disclose its decision. For purposes of this provision of our corporate
governance guidelines, only votes FOR or WITHHELD from a given candidate will be
counted as votes cast. Broker non-votes will not count.
To be approved, the La-Z-Boy
Incorporated 2017 Omnibus Incentive Plan must receive a majority of the votes
cast on the proposal, provided that a majority of shares entitled to vote
actually vote For or Against the proposal. For this purpose, an abstention
or broker non-vote will be considered as not voted.
To pass, the non-binding advisory
proposal to approve the compensation of our named executive officers must
receive a majority of the votes cast on the proposal. Abstentions and broker
non-votes have no effect as they are considered votes not cast.
For the non-binding advisory vote on
the frequency of future advisory votes on executive compensation, whichever of
the three choices1 year, 2 years, or 3 yearsreceives the most votes will
indicate our shareholders preference to the board of directors. Since that
preference will be indicated only by votes for one of the three choices,
abstentions and broker non-votes will have no effect.
Ratification of our selection of our
independent registered public accounting firm requires a majority of votes cast
on the proposal. Abstentions and broker non-votes have no effect as they are
considered as votes not cast.
Number of Copies Sent to
Household. If there are two or more
shareholders at your address, we have sent your household only one copy of our
annual report and proxy statement unless you previously withheld your consent to
householding or you instruct us otherwise. Householding saves us the expense
of mailing duplicate documents to your home and conserves our natural resources,
and we hope that receiving one copy rather than multiple copies is more
convenient for you. Nonetheless, we will promptly provide additional copies of
our 2017 annual report or this proxy statement to the other shareholders in your
household if you send a written request to: Corporate Secretary, La-Z-Boy
Incorporated, One La-Z-Boy Drive, Monroe, Michigan 48162, or you may call us at
734-242-1444 to request additional copies. Copies of the annual report, proxy
statement, and other reports we file with the SEC are also available on our
website at http://investors.la-z-boy.com or through the
SECs website at www.sec.gov.
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You may, at any time, revoke your
consent to householding by contacting Broadridge Financial Solutions, Inc.,
either by calling toll-free 866-540-7095, or by writing to Broadridge Financial
Solutions, Inc., Householding Department, 51 Mercedes Way, Edgewood, New York
11717. If you revoke your consent, you will be removed from the householding
program within 30 days of receipt of your revocation, and each shareholder at
your address will then begin receiving individual copies of our disclosure
documents.
More Information about
Voting Your Shares. Information
regarding the proxy process is available from the SEC on its website at:
http://www.sec.gov/spotlight/proxymatters.shtml.
Principal Executive
Office. Our principal executive
office is located at One La-Z-Boy Drive, Monroe, Michigan, 48162. Any
communication for the companys secretary or directors may be directed to the
corporate secretary at that address.
Costs of Proxy
Solicitation |
We will pay the expense of soliciting
proxies pursuant to this proxy statement.
Shareholder
Proposals for the 2018 Annual Meeting
Pursuant to the rules of the Securities
and Exchange Commission, if a shareholder wishes to submit a proposal for
possible inclusion in La-Z-Boy Incorporateds 2018 proxy statement pursuant to
Rule 14a-8 under the Securities Exchange Act of 1934, we must receive it on or
before March 20, 2018.
Our bylaws provide that a shareholder
may nominate a candidate for election as a director at an annual meeting of
shareholders, or propose business for consideration at such meeting outside of
Rule 14a-8, only by written notice containing the information required by the
bylaws delivered to the Secretary at our principal executive offices not later
than the 90th day, and not earlier than the 120th day, prior to the first
anniversary of the preceding years annual meeting. Accordingly, a shareholder
nomination or proposal intended to be considered at the 2018 annual meeting must
be received by the Secretary on or after May 1, 2018, and no later than May 31,
2018. Proxies for next years annual meeting may
confer discretionary authority to vote on any shareholder proposal for which we
do not receive a timely notice.
All proposals must be in writing and
should be mailed to La-Z-Boy Incorporated, to the attention of the Corporate
Secretary, One La-Z-Boy Drive, Monroe, MI 48162. A copy of the bylaws may be
obtained by written request to the same address.
You may vote by mail, by telephone, or
on the Internet. Your vote is important. Even if you plan to attend the meeting,
please vote by proxy card, telephone, or computer as soon as
possible.
BY ORDER OF THE BOARD OF
DIRECTORS
James P. Klarr, Secretary
Monroe, Michigan
July 18,
2017
We will
send you a copy of our Form 10-K Annual Report for the fiscal year ended
April 29, 2017, without charge if you send a written request to: Corporate Secretary, La-Z-Boy
Incorporated, One La-Z-Boy Drive, Monroe, Michigan 48162. You also
can obtain copies of our Form 10-K and the other reports we file with the
SEC on our website at http://investors.la-z-boy.com or through the SECs website at www.sec.gov. |
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ANNEX
A
LA-Z-BOY
INCORPORATED
2017 OMNIBUS INCENTIVE
PLAN
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LA-Z-BOY INCORPORATED
2017
OMNIBUS INCENTIVE PLAN
La-Z-Boy Incorporated, a Michigan
corporation (the Company), sets forth herein the terms of its 2017 Omnibus
Incentive Plan (the Plan), as follows:
1. PURPOSE
The Plan is intended to enhance the
Companys and its Subsidiaries ability to attract and retain highly qualified
officers, directors, key employees, and other persons, and to motivate such
persons to serve the Company and its Subsidiaries and to expend maximum effort
to improve the business results and earnings of the Company, by providing to
such persons an opportunity to acquire or increase a direct proprietary interest
in the operations and future success of the Company. To this end, the Plan
provides for the grant of stock options, stock appreciation rights, restricted
stock, stock units (including deferred stock units), unrestricted stock,
dividend equivalent rights, and short-term cash incentive awards. Any of these
awards may, but need not, be made as performance incentives to reward attainment
of annual or long-term performance goals in accordance with the terms hereof.
Stock options granted under the Plan may be non-qualified stock options or
incentive stock options, as provided herein, except that stock options granted
to outside directors and any consultants or advisers providing services to the
Company or a Subsidiary shall in all cases be non-qualified stock
options.
2.
DEFINITIONS
For purposes of interpreting the Plan
and related documents (including Award Agreements), the following definitions
shall apply:
2.1 Affiliate means,
with respect to the Company, any company or other trade or business that
controls, is controlled by or is under common control with the Company within
the meaning of Rule 405 of Regulation C under the Securities Act, including,
without limitation, any Subsidiary. For purposes of granting stock options or
stock appreciation rights, an entity may not be considered an Affiliate unless
the Company holds a controlling interest in such entity, where the term
controlling interest has the same meaning as provided in Treasury Regulation
1.414(c)-2(b)(2)(i), provided that the language at least 50 percent is used
instead of at least 80 percent and, provided further, that where granting of
stock options or stock appreciation rights is based upon a legitimate business
criteria, the language at least 20 percent is used instead of at least 80
percent each place it appears in Treasury Regulation 1.414(c)-2(b)(2)(i).
2.2 Applicable Laws means the legal requirements relating to the Plan and the Awards under
applicable provisions of the corporate, securities, tax and other laws, rules,
regulations and government orders, and the rules of any applicable stock exchange or national market system, of any
jurisdiction applicable to Awards granted to residents therein.
2.3 Award means a grant
of an Option, Stock Appreciation Right, Restricted Stock, Unrestricted Stock,
Stock Unit, Dividend Equivalent Rights, Performance Share, Performance Unit or
cash award under the Plan.
2.4 Award Agreement means the agreement between the Company and a Grantee that evidences and
sets out the terms and conditions of an Award.
2.5 Benefit Arrangement shall have the meaning set forth in Section 15 hereof.
2.6 Board means the
Board of Directors of the Company. Pursuant to Section 3.2 hereof, matters or
responsibilities allocated to the Board under this Plan are (pursuant to the
Boards adoption of this Plan) hereby delegated to the Committee except to the
extent such matters or responsibilities relate to the compensation or benefits
of one or more Outside Directors, unless otherwise determined by the
Board.
2.7 Cause means, as
determined by the Board and unless otherwise provided in an applicable agreement
with the Company or a Subsidiary, (a) a Grantees conviction of any crime
(whether or not involving the Company or Subsidiary) constituting a felony in
the jurisdiction involved; (b) conduct of a Grantee related to the Grantees
employment for which either criminal or civil penalties against the Grantee or
the Company or Subsidiary may be sought; (c) material violation of the Companys
(or Subsidiarys) policies, including the disclosure or misuse of confidential
information, or those set forth in manuals or statements of policy issued by the
Company and/or any Subsidiary; or (d) serious neglect or misconduct in the
performance of a Grantees duties for the Company or willful or repeated failure
or refusal to perform such duties.
2.8 Code means the
Internal Revenue Code of 1986, as now in effect or as hereafter
amended.
2.9 Committee means a
committee of, and designated from time to time by resolution of, the Board,
which shall be constituted as provided in Section 3.2. The initial Committee
shall be the Compensation Committee of the Board.
2.10 Company means
La-Z-Boy Incorporated or any successor thereto.
2.11 Company Achievement Percentage means a percentage based on the achievement of Company-related
performance goals, as approved by the Committee, and may range between 0% and
200%.
2.12 Company Weighted MIP Component means a percentage, which shall be established for the
Employee by
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the Committee or its delegatee and
shall not exceed 100% (provided that the sum of the Company Weighted MIP
component and the Individual Weighted MIP Component shall equal
100%).
2.13 Corporate Transaction means (i) the dissolution or liquidation of the Company or a merger,
consolidation, or reorganization of the Company with one or more other entities
in which the Company is not the surviving entity, (ii) a sale of substantially
all of the assets of the Company to another person or entity, or (iii) any
transaction (including without limitation a merger or reorganization in which
the Company is the surviving entity) which results in any person or entity
(other than persons who are stockholders or affiliates immediately prior to the
transaction) owning 50% or more of the combined voting power of all classes of
stock of the Company.
2.14 Covered Employee means a Grantee who is a covered employee within the meaning of Section
162(m)(3) of the Code.
2.15 Disability or
Disabled means, as determined by the Board and unless otherwise
provided in an applicable agreement with the Company or a Subsidiary, the
Grantee is unable to perform each of the essential duties of such Grantees
position by reason of a medically determinable physical or mental impairment
which is potentially permanent in character or which can be expected to last for
a continuous period of not less than twelve (12) months; provided, however,
that, with respect to rules regarding expiration of an Incentive Stock Option
following termination of the Grantees Service, Disability shall mean the
Grantee is unable to engage in any substantial gainful activity by reason of a
medically determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous
period of not less than twelve (12) months. For purposes of Section 14 and
Short-Term Incentive Awards, Disabled means an Employee is on leave due to a
disability that has been approved by the Company or a Subsidiary.
2.16 Dividend Equivalent Right means a right, granted to a Grantee under Section 12 hereof, to receive
cash, Stock, other Awards or other property equal in value to dividends paid
with respect to a specified number of shares of Stock, or other periodic
payments.
2.17 Eligible Earnings means an Employees base compensation, including vacation and holiday
pay, earned during a particular Fiscal Year.
2.18 Effective Date means April 29, 2018.
2.19 Employee means an
officer or employee (as defined in accordance with Section 3401(c) of the Code)
of the Company, or of any corporation that is a Subsidiary.
2.20 Exchange Act means
the Securities Exchange Act of 1934, as now in effect or as hereafter
amended.
2.21 Fair Market Value means the value of a share of Stock, determined as follows: if on the
Grant Date or other determination date the Stock is listed on an established
national or regional stock exchange, or is publicly traded on an established
securities market, the Fair Market Value of a share of Stock shall be the
closing price of the Stock on such exchange or in such market (if there is more
than one such exchange or market the Board shall determine the appropriate
exchange or market) on the Grant Date or such other determination date (or if
there is no such reported closing price, the Fair Market Value shall be the mean
between the highest bid and lowest asked prices or between the high and low sale
prices on such trading day) or, if no sale of Stock is reported for such trading
day, on the closest preceding day for which a sale shall have been reported. If
the Stock is not listed on such an exchange or traded on such a market, Fair
Market Value shall be the value of the Stock as determined by the Board by the
reasonable application of a reasonable valuation method, in a manner consistent
with Section 409A of the Code (Code Section 409A).
2.22 Family Member means
a person who is a spouse, former spouse, child, stepchild, grandchild, parent,
stepparent, grandparent, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother, sister, brother-in-law, or sister-in-law,
including adoptive relationships, of the Grantee, any person sharing the
Grantees household (other than a tenant or employee), a trust in which any one
or more of these persons have more than fifty percent of the beneficial
interest, a foundation in which any one or more of these persons (or the
Grantee) control the management of assets, and any other entity in which one or
more of these persons (or the Grantee) own more than fifty percent of the voting
interests.
2.23 Fiscal Year means
the twelve (12)-month accounting period maintained by the Company on which it
keeps its annual books and records.
2.24 Grant Date means,
as determined by the Board, the latest to occur of (i) the date as of which the
Board approves an Award, (ii) the date on which the recipient of an Award first
becomes eligible to receive an Award under Section 6 hereof, or (iii) such other
date as may be specified by the Board.
2.25 Grantee means a
person who receives or holds an Award under the Plan.
2.26 Incentive Stock Option means an incentive stock option within the meaning of Section 422 of
the Code, or the corresponding provision of any subsequently enacted tax
statute, as amended from time to time.
2.27 Individual Achievement Percentage means the percentage established by an Employees manager,
which shall be reflective of the participating Employees performance towards
measurable goals that were previously set at the beginning of the Fiscal Year,
and may range between 0% and 200%.
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2.28 Individual Weighted MIP Component means a percentage, which shall be established for the
Employee by the Committee or its delegatee and shall not exceed 100% (provided
that the sum of the Individual Weighted MIP component and the Company Weighted
MIP Component shall equal 100%).
2.29 Long-Term Incentive Award means an Award made subject to the attainment of performance goals (as
described in Section 14.6) over a performance period of up to ten (10)
years.
2.30 Non-qualified Stock Option means an Option that is not an Incentive Stock Option.
2.31 Option means an
option to purchase one or more shares of Stock pursuant to the Plan.
2.32 Option Price means
the exercise price for each share of Stock subject to an Option.
2.33 Other Agreement shall have the meaning set forth in Section 15 hereof.
2.34 Outside Director means a member of the Board who is not an officer or employee of the
Company or a Subsidiary.
2.35 Performance-Based Compensation means compensation under an Award that is intended to satisfy
the requirements of Code Section 162(m) for certain performance-based
compensation paid to Covered Employees. Notwithstanding the foregoing, nothing
in this Plan shall be construed to mean that an Award which does not satisfy the
requirements for performance-based compensation under Code Section 162(m) does
not constitute performance-based compensation for other purposes, including Code
Section 409A.
2.36 Performance Measures means measures as described in Section 14.6 on which the performance
goals are based and which are approved by the Companys shareholders pursuant to
this Plan in order to qualify Awards as Performance-Based
Compensation.
2.37 Performance Period means the period of time during which the performance goals must be met
in order to determine the degree of payout and/or vesting with respect to an
Award.
2.38 Performance Share means an Award under Section 14 herein and subject to the terms of this
Plan, denominated in shares of Stock, the value of which at the time it is
payable is determined as a function of the extent to which corresponding
performance criteria have been achieved.
2.39 Performance Unit means an Award under Section 14 herein and subject to the terms of this
Plan, denominated in units, the value of which at the time it is payable is
determined as a function of the extent to which corresponding performance
criteria have been achieved.
2.40 Plan means this
La-Z-Boy Incorporated 2017 Omnibus Incentive Plan, as herein established and as
hereafter amended from time to time.
2.41 Purchase Price means the purchase price for each share of Stock pursuant to a grant of
Restricted Stock, Stock Units or Unrestricted Stock.
2.42 Reporting Person means a person who is required to file reports under Section 16(a) of the
Exchange Act.
2.43 Restricted Stock means shares of Stock, awarded to a Grantee pursuant to Section 10
hereof.
2.44 Retired or
Retirement means an Employees employment relationship with the Company
and all of its Subsidiaries has terminated after the Employee has attained age
fifty-five (55) and been credited with ten (10) Years of Service.
2.45 SAR Exercise Price means the per share exercise price of a Stock Appreciation Right granted
to a Grantee under Section 9 hereof.
2.46 Securities Act means the Securities Act of 1933, as now in effect or as hereafter
amended.
2.47 Service means
service as a Service Provider to the Company or a Subsidiary. Unless otherwise
stated in the applicable Award Agreement, a Grantees change in position or
duties shall not result in interrupted or terminated Service, so long as such
Grantee continues to be a Service Provider to the Company or a Subsidiary.
Subject to the preceding sentence, whether a termination of Service shall have
occurred for purposes of the Plan shall be determined by the Board, which
determination shall be final, binding and conclusive, and shall comply with Code
Section 409A (and its applicable guidance), to the extent applicable, and other
Applicable Laws.
2.48 Service Provider means an Employee, officer or director of the Company or a Subsidiary, or
a consultant or adviser currently providing services to the Company or a
Subsidiary, if and only if (1) the consultant or adviser is a natural person,
(2) the consultant or advisor provides bona fide services to the Company, and
(3) the services are not in connection with the offer or sale of securities in a
capital-raising transaction and do not directly or indirectly promote or
maintain a market for the Companys securities.
2.49 Short-Term Incentive Award means an Award as described in Section 14.8 (which shall be in the form
of a short-term cash incentive award unless otherwise specified in the Award
Agreement) made subject to attainment of performance goals (as described in
Section 14.6) over a performance period of up to one year (the Companys fiscal
year, unless otherwise specified by the Committee).
2.50 Stock means the
shares of common stock, $1 par value, of the Company.
2.51 Stock Appreciation Right or SAR
means a right granted to a Grantee under
Section 9 hereof.
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2.52 Stock Unit means a
bookkeeping entry representing the equivalent of one share of Stock awarded to a
Grantee pursuant to Section 10 hereof.
2.53 Subsidiary means
any subsidiary corporation of the Company within the meaning of Section 424(f)
of the Code that is also a subsidiary of the Company within the meaning of
Rule 405 of Regulation C under the Securities Act.
2.54 Target Short-Term Cash Incentive Opportunity
means a predetermined percentage of Eligible
Earnings used to calculate the total incentive amount. The predetermined
percentages are as follows:
(a) While in salary grades twenty-five
(25) to twenty-nine (29) (both inclusive), an Employees Target Short-Term Cash
Incentive Opportunity is 10% of Eligible Earnings, unless the Committee or its
delegatee determines, on an individual case, or on an aggregate, entity,
division or similar basis, that such opportunity shall be a higher or lower
percentage; and
(b) While in a salary grade above
twenty-nine (29), an Employees Target Short-Term Cash Incentive Opportunity
shall be a percentage of Eligible Earnings as determined for that Employee by
the Committee or its delegatee; provided, however, that the Committee has the
authority to review and approve all Target Short-Term Cash Incentive
Opportunities if it so chooses, as well as the authority to transfer the salary
grades, employee classification structure and corresponding percentages to any
new scale used by the Company to classify its employees (and if the Company
employs a new scale, the percentages designated above for salary grades
twenty-five (25) to twenty-nine (29), and above twenty-nine (29), will apply to
the new grades that the Company determines, in its discretion, to be
comparable).
2.55 Ten Percent Stockholder means an individual who owns more than ten percent (10%) of the total
combined voting power of all classes of outstanding stock of the Company, its
parent or any of its Subsidiaries. In determining stock ownership, the
attribution rules of Section 424(d) of the Code shall be applied.
2.56 Unrestricted Stock means an Award pursuant to Section 11 hereof.
2.57 U.S. Grantee means
any Grantee who is or becomes a taxpayer in the United States.
2.58 Year of Service means a 12-month period, beginning with an Employees employment
commencement date, and each successive 12-month period, during which an Employee
is credited with 1,000 hours of service (as defined in the Employee Retirement
Income Security Act of 1974, as amended) with the Company and/or a
Subsidiary.
3. ADMINISTRATION OF THE
PLAN
3.1.
Board
The Board shall have such powers and
authorities related to the administration of the Plan as are not inconsistent
with the Companys articles of incorporation and by-laws and applicable law. The
Board shall have full power and authority to take all actions and to make all
determinations required or provided for under the Plan, any Award or any Award
Agreement, and shall have full power and authority to take all such other
actions and make all such other determinations not inconsistent with the
specific terms and provisions of the Plan that the Board deems to be necessary
or appropriate to the administration of the Plan, any Award or any Award
Agreement. All such actions and determinations shall be by the affirmative vote
of a majority of the members of the Board present at a meeting or by unanimous
consent of the Board executed in writing in accordance with the Companys
articles of incorporation and by-laws and applicable law. The interpretation and
construction by the Board of any provision of the Plan, any Award or any Award
Agreement shall be final, binding and conclusive.
3.2.
Committee
The Board, from time to time, may
delegate to the Committee such powers and authorities related to the
administration and implementation of the Plan, as set forth in Section 3.1 above
and other applicable provisions, as the Board shall determine, consistent with
the articles of incorporation and by-laws of the Company and applicable law.
Upon adoption of this Plan by the Board, the foregoing powers and authorities
are delegated to the Committee except to the extent specifically retained or
hereafter withdrawn from the Committee by Board action, or such powers and
authorities involve Plan benefits or compensation payable to Outside
Directors.
(a) Except as provided in Subsection
(b) and except as the Board may otherwise determine, the Committee appointed by
the Board to administer the Plan shall consist of two or more Outside Directors
of the Company who: (1) qualify as outside directors within the meaning of
Section 162(m) of the Code and who (2) meet such other requirements as may be
established from time to time by the Securities and Exchange Commission for
plans intended to qualify for exemption under Rule 16b-3 (or its successor)
under the Exchange Act and who (3) comply with the independence requirements of
the stock exchange on which the Common Stock is listed.
(b) The Board may also appoint one or
more separate committees of the Board, each composed of one or more directors of
the Company who need not be Outside Directors, who may administer the Plan with
respect to employees or other Service Providers who are not officers or
directors of the Company, may grant Awards under the Plan to such employees or
other Service Providers, and may determine all terms of such Awards.
In the event that the Plan, any Award
or any Award Agreement entered into hereunder provides for any action
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to be taken by or determination to be
made by the Board, such action may be taken or such determination may be made by
the Committee if the power and authority to do so has been delegated to the
Committee by the Board as provided for in this Section. Unless otherwise
expressly determined by the Board, any such action or determination by the
Committee shall be final, binding and conclusive. The Committee may seek the
assistance or advice of any persons it deems necessary to the proper
administration of the Plan.
To the extent permitted by law, the
Committee may delegate its authority under the Plan to the Companys Chief
Executive Officer.
3.3.
Jurisdictions
In order to assure the viability of
Awards granted to Grantees employed in various jurisdictions, the Committee may
provide for such special terms as it may consider necessary or appropriate to
accommodate differences in local law, tax policy, or custom applicable in the
jurisdiction in which the Grantee resides or is employed. Moreover, the
Committee may approve such supplements to, or amendments, restatements, or
alternative versions of, the Plan as it may consider necessary or appropriate
for such purposes without thereby affecting the terms of the Plan as in effect
for any other purpose; provided, however, that no such supplements, amendments,
restatements, or alternative versions shall increase the share limitations
contained in Section 4.1 of the Plan. Notwithstanding the foregoing, the
Committee may not take any actions hereunder, and no Awards shall be granted,
that would violate any Applicable Laws, including Code Section 409A.
3.4. Terms of
Awards
Subject to the other terms and
conditions of the Plan, the Board or its delegatee shall have full and final
authority to:
(a) designate Grantees,
(b) determine the type or types of
Awards to be made to a Grantee,
(c) determine the number of shares of
Stock to be subject to an Award,
(d) establish the terms and conditions
of each Award (including, but not limited to, the exercise price of any Option,
the nature and duration of any restriction or condition (or provision for lapse
thereof) relating to the vesting, exercise, transfer, or forfeiture of an Award
or the shares of Stock subject thereto, the treatment of an Award in the event
of a change of control, and any terms or conditions that may be necessary to
qualify Options as Incentive Stock Options),
(e) prescribe the form of each Award
Agreement evidencing an Award, and
(f) amend, modify, or supplement the
terms of any outstanding Award. Such authority specifically includes the
authority, in order to effectuate the purposes of the Plan but without amending
the Plan, to make or modify Awards to U.S. Grantees and eligible individuals who
are foreign nationals or are individuals who are employed outside the United
States to recognize differences in local law, tax policy, or custom.
Notwithstanding the foregoing, no amendment, modification or supplement of any
Award shall, without the consent of the Grantee, impair the Grantees rights
under such Award.
No Award granted under this Plan,
including an Award that may have accelerated vesting provisions for achieving
performance targets, may vest in less than one (1) year from the Grant Date;
provided, that an Award Agreement may accelerate vesting on death, Disability or
a Corporate Transaction, and provided further, that up to five (5) percent of
the shares reserved for issuance under this Plan (counted in the aggregate for
all awards) may be granted without being subject to the foregoing restrictions.
If an Award Agreement waives restrictions or conditions, the shares subject to
such Award shall be deducted from the five (5) percent limitation herein.
However, notwithstanding anything to the contrary contained herein, no Award may
be accelerated as to vesting or payment (or may be granted with such provisions)
if the grant or acceleration would not be in compliance with Code Section 409A
(including from the Grant Date), if it would subject an Award to Code Section
409A that was not previously subject to Code Section 409A unless it would be
compliant in its entirety (including with a fixed payout date if necessary), or
if it would not permit a deduction under Code Section 162(m) (except that with
respect to the deductibility under Code Section 162(m) only, the Board may
choose to forego deductibility, in its discretion).
Notwithstanding any other provision of
this Plan or any provision of any Award Agreement, if the Company is required to
prepare a material accounting restatement, then the Board (or its delegatee)
shall have the discretion to determine whether any Grantee shall forfeit any
Award, in whole or in part, including any cash or shares of Stock received in
connection with such Award (or an amount equal to the fair market value of such
Stock on the date of delivery if the Grantee no longer holds the shares of
Stock) if: (1) the Board or Committee, in their sole discretion, determines that
the Grantee engaged in misconduct relating to such accounting restatement, (2)
pursuant to the terms of the Award Agreement for such Award, the amount of the
Award earned or the vesting in the Award was explicitly based on the achievement
of pre-established performance goals set forth in the Award Agreement (including
earnings, gains, or other criteria) that are later determined, as a result of
the accounting restatement, not to have been achieved, and (3) the Award was
earned within the three (3) years following the date of the first public
issuance or filing with the Securities and Exchange
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Commission of the financial statements
that subsequently required restatement. In determining the amount of forfeiture,
the Company shall credit the Grantee with any taxes already paid in connection
with such Award.
In addition, if, at any time within one
(1) year after the date on which a Grantee exercises an Option or SAR, or
receives payment of a Short-Term Incentive Award, Long-Term Incentive Award, or
on which Restricted Shares or Stock Units vest or on which income is realized by
a Grantee in connection with any other Award (each of which events shall be a
realization event), the Board determines in its discretion that the Company
has been materially harmed by the Grantee, whether such harm (a) results in the
Grantees termination or deemed termination of employment for Cause or (b)
results from any activity determined by the Board to be prejudicial or harmful
to the interests of the Company, then any gain realized by the Grantee from the
realization event shall be paid by the Grantee to the Company upon notice from
the Company. Such gain shall be determined as of the date of the realization
event, without regard to any subsequent change in the Fair Market Value of the
Stock. The Company shall have the right to offset such gain against any amounts
otherwise owed to the Grantee by the Company (whether as wages, vacation pay, or
pursuant to any benefit plan or other compensatory arrangement).
In addition to the above but not by way
of limitation, and consistent with Section 954 of the Dodd-Frank Wall Street
Reform and Consumer Protection Act, in the event that the Company is required to
prepare an accounting restatement due to the material noncompliance of the
Company with any financial reporting requirement under the securities laws, the
Company will seek to recover from any current or former executive officer (as
that term is defined in Section 954 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act) of the Company who received incentive-based
compensation (including stock options and performance shares awarded as
compensation) during the 3-year period preceding the date on which the Company
is required to prepare the accounting restatement, the amount, based on the
erroneous data, in excess of what would have been paid to the executive officer
under the accounting restatement. The Company will implement this Policy in
accordance with the rules of the Securities Exchange Commission, as they are
promulgated. In the event that this paragraph applies, the executive officer
shall promptly return to the Company any and all amounts received pursuant to
this Plan to the extent the Company is entitled or required to recover such
amounts by the terms of (i) the Companys executive compensation recoupment
policy or other clawback or recoupment policy, as adopted, amended, implemented,
and interpreted by the Company from time to time, and/or (ii) Section 954 of the
Dodd-Frank Act (as may be amended) and any applicable rules or regulations
promulgated by the Securities Exchange Commission.
3.5. No
Repricing
Notwithstanding anything in this Plan
to the contrary, no amendment or modification may be made to an outstanding
Option or SAR, including, without limitation, by replacement of Options or SARs
with cash or other award type, that would be treated as a repricing under the
rules of the stock exchange on which the Stock is listed, in each case, without
the approval of the stockholders of the Company, provided, that, appropriate
adjustments may be made to outstanding Options and SARs pursuant to Section 17
or Section 5.3 and may be made to make changes to achieve compliance with
applicable law, including Code Section 409A.
3.6. Deferral
Arrangement
The Board may permit or require the
deferral of any award payment into a deferred compensation arrangement, subject
to such rules and procedures as it may establish, which may include provisions
for the payment or crediting of interest or dividend equivalents, including
converting such credits into deferred Stock equivalents. Any such deferrals
shall be made in a manner that complies with Code Section 409A.
3.7. No
Liability
No member of the Board or the Committee
or any Employee shall be personally liable for any action, omission or
determination made in good faith with respect to the Plan or any Award or Award
Agreement. To the maximum extent permitted in its Articles of Incorporation and
Bylaws, the Company shall indemnify and hold harmless the members of the
Committee, the Board and Employees from and against any and all loss which
results from liability to which any of them may be subjected by reason of any
act or conduct (except willful misconduct or gross negligence) in their official
capacities in connection with the administration of the Plan, including all
expenses reasonably incurred in their defense, in case the Company fails to
provide such defense. By participating in this Plan, each Employee agrees to
release and hold harmless the Company, its Subsidiaries and its Affiliates (and
their respective directors, officers and employees), the Board and the
Committee, from and against any tax or other liability, including without
limitation, interest and penalties, incurred by the Employee in connection with
his or her participation in the Plan.
3.8. Share
Issuance/Book-Entry
Notwithstanding any provision of this
Plan to the contrary, the issuance of the Stock under the Plan may be evidenced
in such a manner as the Board, in its discretion, deems appropriate, including,
without limitation, book-entry or uncertificated registration or issuance of one
or more Stock certificates. If book-entry or uncertificated registration is
used, the Companys corporate governance records shall be consistent with this
procedure, and, at the time that certificates would otherwise be issued, Awards
shall be evidenced by confirmation or similar documents from the
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Companys transfer agent. If required
by Applicable Laws or Company governance records, Stock certificates shall be
issued upon appropriate request.
4. STOCK SUBJECT TO THE
PLAN
4.1. Number of Shares
Available for Awards
Subject to adjustment as provided in
Section 17 hereof, the number of shares of Stock available for issuance under
the Plan shall be five million eight hundred fifty thousand (5,850,000) shares.
Stock issued or to be issued under the Plan shall be authorized but unissued
shares; or, to the extent permitted by applicable law, issued shares that have
been reacquired by the Company. The issuance of shares of Stock in connection
with the exercise of, or as other payment for, Awards under the Plan shall
reduce the number of shares of Stock available for future Awards under the
Plan.
4.2. Share
Usage
Shares covered by an Award shall be
counted as used as of the Grant Date. Any shares of Stock subject to Options or
SARs shall be counted against the limit set forth in Section 4.1 as one (1)
share for every one (1) share subject to an Award, and any shares of Stock
subject to Awards other than Options or SARs shall be counted against said limit
as one and fifty-four one hundredths (1.54) shares for every one (1) share
subject to the Award, except that shares encompassed by Stock Units to be
settled in cash or SARs to be settled in cash will not count against such limit.
With respect to SARs (but exclusive of SARs to be settled in cash), the number
of shares subject to an award of SARs will be counted against the aggregate
number of shares available for issuance under the Plan regardless of the number
of shares actually issued to settle the SAR upon exercise. If any shares covered
by an Award granted under the Plan are not purchased or are forfeited or expire,
or if an Award otherwise terminates without delivery of any Stock subject
thereto or is settled in cash in lieu of shares, then the number of shares of
Stock counted against the aggregate number of shares available under the Plan
with respect to such Award shall, to the extent of any such forfeiture,
termination or expiration, again be available for making Awards under the Plan
in the same amount as such shares were counted against the limit set forth in
Section 4.1. The number of shares of Stock available for issuance under the Plan
shall not be increased by (i) any shares of Stock tendered or withheld or Award
surrendered in connection with the purchase of shares of Stock upon exercise of
an Option as described in Section 13, (ii) any shares of Stock deducted or
delivered from an Award payment in connection with the Companys tax withholding
obligations as described in Section 18.3, or (iii) any shares of Stock
repurchased by the Company using proceeds from the purchase of shares of Stock
upon exercise of an Option as described in Section 13.
5. EFFECTIVE DATE, DURATION AND
AMENDMENTS
5.1. Effective
Date
The Plan shall be effective as of the
Effective Date, subject to approval of the Plan by the Companys stockholders
within one year of the Effective Date. Upon approval of the Plan by the
stockholders of the Company as set forth above, all Awards made under the Plan
on or after the Effective Date shall be fully effective as if the stockholders
of the Company had approved the Plan on the Effective Date. If the stockholders
fail to approve the Plan within one year of the Effective Date, any Awards made
hereunder shall be null and void and of no effect.
5.2.
Term
The Plan shall terminate automatically
ten (10) years after the Effective Date and may be terminated on any earlier
date as provided in Section 5.3.
5.3. Amendment and
Termination of the Plan
The Board may, at any time and from
time to time, amend, suspend, or terminate the Plan as to any shares of Stock as
to which Awards have not been made; provided however, that the Company shall
submit for stockholder approval any amendment required to be submitted for
stockholder approval by Applicable Law or applicable stock exchange listing
requirements, or that would otherwise materially: (i) increase the benefits
accrued to Participants under the Plan, (ii) increase the numbers of securities
which may be issued under the Plan (other than an increase pursuant to the
adjustment provisions of Section 17), or (iii) modify the requirements for
participation in the Plan. The foregoing authority to amend, suspend, or
terminate the Plan is specifically reserved to the Board and shall not be deemed
or otherwise delegated to the Committee; however, the Committee, in its
discretion, may amend an Award Agreement. No amendment, suspension, or
termination of the Plan or an Award Agreement shall, without the consent of the
Grantee, impair rights or obligations under any Award previously awarded under
the Plan.
6. AWARD ELIGIBILITY AND
LIMITATIONS
6.1. Service Providers and
Other Persons
Subject to this Section 6, Awards may
be made under the Plan to: any Service Provider to the Company or of any
Subsidiary, including any Service Provider who is an officer or director of the
Company, or of any Subsidiary, as the Board shall determine and designate from
time to time. However, an Award made to any Outside Director shall not exceed
four hundred thousand dollars ($400,000) in value on an annual basis.
6.2. Limitation on Shares of
Stock Subject to Awards and Cash Awards.
During any time when the Company has a
class of equity security registered under Section 12 of the Exchange Act and the
transition period under Treasury Reg. section 1.162-27(f)(2) has lapsed or does
not apply:
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(i) the maximum number of shares of
Stock subject to Options or SARs that can be awarded under the Plan to any
person eligible for an Award under Section 6 hereof is five hundred thousand
(500,000) per calendar year;
(ii) the maximum number of shares that
can be awarded under the Plan, other than pursuant to Options or SARs, to any
person eligible for an Award under Section 6 hereof is five hundred thousand
(500,000) per calendar year; and
(iii) the maximum amount that may be
earned as an Short-Term Incentive Award or other cash Award in any calendar year
by any one Grantee shall be three million dollars ($3,000,000) and the maximum
amount that may be earned as a Long-Term Incentive Award or other cash Award in
respect of a performance period by any one Grantee shall be four million dollars
($4,000,000).
The preceding limitations in this
Section 6.2 are subject to adjustment as provided in Section 17
hereof.
7. AWARD
AGREEMENT
Each Award granted pursuant to the Plan
shall be evidenced by an Award Agreement, in such form or forms as the Board
shall from time to time determine. Award Agreements granted from time to time or
at the same time need not contain similar provisions but shall be consistent
with the terms of the Plan and shall specify the terms, conditions and any rules
applicable to the Award, including but not limited to the effect of a Corporate
Transaction, or death, Disability, or other termination of employment of the
Grantee on the Award. Each Award Agreement evidencing an Award of Options shall
specify whether such Options are intended to be Non-qualified Stock Options or
Incentive Stock Options, and in the absence of such specification such options
shall be deemed Non-qualified Stock Options.
8. TERMS AND CONDITIONS OF
OPTIONS
8.1. Grant of
Option
Subject to the limitation set forth in
Section 6.2 and the other terms and provisions of the Plan and applicable law,
the Committee, at any time and from time to time, may grant Options to persons
as set forth in Section 6.1. The Committee shall have sole and complete
discretion in determining the type of Option granted, the Option Price, the
duration of the Option, the number of shares of Stock to which an Option
pertains, any conditions imposed upon the exercisability or the transferability
of the Option, including vesting conditions, the conditions under which the
Option may be terminated and any such other provisions as may be warranted to
comply with the law or rules of any securities trading system or stock
exchange.
8.2. Option
Price
The Option Price of each Option shall
be fixed by the Board and stated in the Award Agreement evidencing such Option.
The Option Price of each Option shall be at least the Fair Market Value on the
Grant Date of a share of Stock; provided,
however, that in the event that a Grantee is a Ten Percent Stockholder, the
Option Price of an Option granted to such Grantee that is intended to be an
Incentive Stock Option shall be not less than one hundred ten percent (110%) of
the Fair Market Value of a share of Stock on the Grant Date. Unless otherwise
permitted by Applicable Laws, in no case shall the Option Price of any Option be
less than the par value of a share of Stock. No Option shall provide by its
terms for the re-setting of its exercise price or for its cancellation and
reissuance, in whole or in part; provided that the foregoing shall not limit the
authority of the Committee to grant additional Options hereunder.
8.3.
Vesting
Subject to Sections 8.4 and 17.3
hereof, each Option granted under the Plan shall become exercisable at such
times and under such conditions as shall be determined by the Board and stated
in the Award Agreement, and need not be the same for each Grantee. For purposes
of this Section 8.3, fractional numbers of shares of Stock subject to an Option
shall be rounded down to the next nearest whole number.
8.4.
Term
Each Option granted under the Plan
shall terminate, and all rights to purchase shares of Stock thereunder shall
cease, upon the expiration of ten years from the date such Option is granted, or
under such circumstances and on such date prior thereto as is set forth in the
Plan or as may be fixed by the Board and stated in the Award Agreement relating
to such Option; provided, however, that in the event that the Grantee is a Ten
Percent Stockholder, an Option granted to such Grantee that is intended to be an
Incentive Stock Option shall not be exercisable after the expiration of five
years from its Grant Date. The Company may deduct from the shares of Stock
deliverable to the Grantee upon exercise the number of shares of Stock necessary
to satisfy payment of the Option Price and all withholding
obligations.
8.5. Termination of
Service
Unless otherwise stated in the
applicable Award Agreement or if Code Section 409A noncompliance would exist,
the Grantee shall have the right to exercise any Incentive Stock Option for
ninety (90) days following termination of the Grantees employment, unless
terminated for Cause, in which case there shall be no post-termination exercise
period, and further, unless otherwise stated in the applicable Award Agreement,
an Incentive Stock Option shall remain exercisable for twelve (12) months after
termination of the Grantees employment due to death or Disability. Unless
otherwise stated in the applicable Award Agreement, the Grantee shall have the
right to exercise any Non-qualified Stock Option for thirty-six (36) months
following termination of the Grantees Service if the termination is due to
death, Disability, or Retirement. The post-termination provisions shall be
determined in the sole discretion of the Board, need not be uniform among
all
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Options issued pursuant to the Plan,
and may reflect distinctions based on the reasons for termination of
Service.
8.6. Limitations on Exercise
of Option
Notwithstanding any other provision of
the Plan, in no event may any Option be exercised, in whole or in part, prior to
the date the Plan is approved by the stockholders of the Company as provided
herein or after the occurrence of an event referred to in Section 17 hereof
which results in termination of the Option.
8.7. Method of
Exercise
Subject to the terms of Section 13 and
Section 18.3, an Option that is exercisable may be exercised by the Grantees
delivery of notice of exercise according to any method provided by the Board,
which may include but is not limited to, physical delivery of notice on any
business day to the Company, at the Companys principal office (on the form
specified by the Company) or execution of delivery procedures provided by the
Company through a stock transfer or other agent in telephonic, electronic,
website or similar form regardless of whether default procedures may be used.
The notices and procedures shall specify, among other items requested, the
number of shares of Stock with respect to which the Option is being exercised
and shall be accompanied by payment in full of the Option Price of the shares
for which the Option is being exercised plus the amount (if any) of federal
and/or other taxes which the Company may, in its judgment, be required to
withhold with respect to an Award.
8.8. Rights of Holders of
Options
Unless otherwise stated in the
applicable Award Agreement, an individual holding or exercising an Option shall
have none of the rights of a stockholder (for example, the right to receive cash
or dividend payments or distributions attributable to the subject shares of
Stock or to direct the voting of the subject shares of Stock) until the shares
of Stock covered thereby are fully paid and issued to him. Except as provided in
Section 17 hereof, no adjustment shall be made for dividends, distributions or
other rights for which the record date is prior to the date of such
issuance.
8.9. Delivery of
Stock
Subject to Section 3.8 (and
specifically the discretion of the Company to use book-entry or uncertificated
registration), promptly after the exercise of an Option by a Grantee and the
payment in full of the Option Price, such Grantee shall be entitled to the
issuance of a stock certificate or certificates evidencing his or her ownership
of the shares of Stock subject to the Option.
8.10. Transferability of
Options
Except as provided in Section 8.11,
during the lifetime of a Grantee, only the Grantee (or, in the event of legal
incapacity or incompetency, the Grantees
guardian or legal representative) may exercise an Option. Except as provided in
Section 8.11, no Option shall be assignable or transferable by the Grantee to
whom it is granted, other than by will or the laws of descent and
distribution.
8.11. Family
Transfers
If authorized in the applicable Award
Agreement, a Grantee may transfer, not for value, all or part of an Option which
is not an Incentive Stock Option to any Family Member. For the purpose of this
Section 8.11, a not for value transfer is a transfer which is (i) a gift, (ii)
a transfer under a domestic relations order in settlement of marital property
rights; or (iii) unless applicable law does not permit such transfers, a
transfer to an entity in which more than fifty percent of the voting interests
are owned by Family Members (or the Grantee) in exchange for an interest in that
entity. Following a transfer under this Section 8.11, any such Option shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, and shares of Stock acquired pursuant to the
Option shall be subject to the same restrictions on transfer of shares as would
have applied to the Grantee. Subsequent transfers of transferred Options are
prohibited except to Family Members of the original Grantee in accordance with
this Section 8.11 or by will or the laws of descent and distribution. The events
of termination of Service of Section 8.5 hereof shall continue to be applied
with respect to the original Grantee, following which the Option shall be
exercisable by the transferee only to the extent, and for the periods specified,
in Section 8.5.
8.12. Limitations on
Incentive Stock Options
An Option shall constitute an Incentive
Stock Option only (i) if the Grantee of such Option is an employee of the
Company or any Subsidiary of the Company; (ii) to the extent specifically
provided in the related Award Agreement; and (iii) to the extent that the
aggregate Fair Market Value (determined at the time the Option is granted) of
the shares of Stock with respect to which all Incentive Stock Options held by
such Grantee become exercisable for the first time during any calendar year
(under the Plan and all other plans of the Grantees employer and its
Subsidiaries) does not exceed one hundred thousand dollars ($100,000). This
limitation shall be applied by taking Options into account in the order in which
they were granted.
8.13. Notice of
Disqualifying Disposition
If any Grantee shall make any
disposition of shares of Stock issued pursuant to the exercise of an Incentive
Stock Option under the circumstances described in Code Section 421(b) (relating
to certain disqualifying dispositions), such Grantee shall notify the Company of
such disposition within ten (10) days thereof.
9. TERMS AND CONDITIONS OF
STOCK APPRECIATION RIGHTS
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9.1. Right to Payment and
Grant Price
A SAR shall confer on the Grantee to
whom it is granted a right to receive, upon exercise thereof, the excess of (i)
the Fair Market Value of one share of Stock on the date of exercise over (ii)
the grant price of the SAR as determined by the Board. The Award Agreement for a
SAR shall specify the grant price of the SAR, which shall be at least the Fair
Market Value of a share of Stock on the Grant Date. SARs may be granted in
conjunction with all or part of an Option granted under the Plan or at any
subsequent time during the term of such Option, in conjunction with all or part
of any other Award or without regard to any Option or other Award; provided,
that a SAR that is granted subsequent to the Grant Date of a related Option must
have a SAR Price that is no less than the Fair Market Value of one share of
Stock on the SAR Grant Date.
9.2. Other
Terms
The Board shall determine at the Grant
Date or thereafter, the time or times at which and the circumstances under which
a SAR may be exercised in whole or in part (including based on achievement of
performance goals and/or future service requirements), the time or times at
which SARs shall cease to be or become exercisable following termination of
Service or upon other conditions, the method of exercise, method of settlement,
form of consideration payable in settlement, method by or forms in which Stock
will be delivered or deemed to be delivered to Grantees, whether or not a SAR
shall be in tandem or in combination with any other Award, and any other terms
and conditions of any SAR. Unless otherwise stated in the applicable Award
Agreement or if Code Section 409A noncompliance would exist, the Grantee shall
have the right to exercise any SAR for thirty-six (36) months following
termination of the Grantees Service if the termination is due to death,
Disability, or Retirement. The post-termination provisions shall be determined
in the sole discretion of the Board, need not be uniform among all SARs issued
pursuant to the Plan, and may reflect distinctions based on the reasons for
termination of Service. In the event that a SAR is exercised after the close of
the business market on a particular day, the Fair Market Value of the applicable
share of Stock shall be measured by the price of the Stock at the close of the
next business day.
9.3.
Term
Each SAR granted under the Plan shall
terminate, and all rights thereunder shall cease, upon the expiration of ten
years from the date such SAR is granted, or under such circumstances and on such
date prior thereto as is set forth in the Plan or as may be fixed by the Board
and stated in the Award Agreement relating to such SAR.
9.4. Transferability of
SARS
Except as provided in Section 9.5,
during the lifetime of a Grantee, only the Grantee (or, in the event of legal
incapacity or incompetency, the Grantees guardian or legal representative) may exercise a SAR. Except as provided in
Section 9.5, no SAR shall be assignable or transferable by the Grantee to whom
it is granted, other than by will or the laws of descent and
distribution.
9.5. Family
Transfers
If authorized in the applicable Award
Agreement, a Grantee may transfer, not for value, all or part of a SAR to any
Family Member. For the purpose of this Section 9.5, a not for value transfer
is a transfer which is (i) a gift, (ii) a transfer under a domestic relations
order in settlement of marital property rights; or (iii) unless applicable law
does not permit such transfers, a transfer to an entity in which more than fifty
percent of the voting interests are owned by Family Members (or the Grantee) in
exchange for an interest in that entity. Following a transfer under this Section
9.5, any such SAR shall continue to be subject to the same terms and conditions
as were applicable immediately prior to transfer, and shares of Stock acquired
pursuant to a SAR shall be subject to the same restrictions on transfer or
shares as would have applied to the Grantee. Subsequent transfers of transferred
SARs are prohibited except to Family Members of the original Grantee in
accordance with this Section 9.5 or by will or the laws of descent and
distribution.
10. TERMS AND CONDITIONS OF
RESTRICTED STOCK AND STOCK UNITS
10.1. Grant of Restricted
Stock or Stock Units
Awards of Restricted Stock or Stock
Units may be made for no consideration (other than par value of the shares which
is deemed paid by Services already rendered).
10.2. Restrictions
At the time a grant of Restricted Stock
or Stock Units is made, the Board may, in its sole discretion, establish a
period of time (a restricted period) applicable to such Restricted Stock or
Stock Units. Each Award of Restricted Stock or Stock Units may be subject to a
different restricted period. The Board may in its sole discretion, at the time a
grant of Restricted Stock or Stock Units is made, prescribe restrictions in
addition to or other than the expiration of the restricted period, including the
satisfaction of corporate or individual performance objectives, which may be
applicable to all or any portion of the Restricted Stock or Stock Units.
Notwithstanding the foregoing, Restricted Stock and Stock Units that vest solely
by the passage of time shall not vest in full in less than three (3) years from
the Grant Date (provided that, subject to Section 3.4 (including the provisions
regarding Code Section 409A and 162(m) compliance) and the remainder of this
Plan, Restricted Stock and Stock Units may vest pro-rata during that period and
vesting may accelerate on death, Disability or a Corporate Transaction). Neither
Restricted Stock nor Stock Units may be sold, transferred, assigned, pledged or
otherwise encumbered or disposed of during the restricted period or prior to the
satisfaction of any other restrictions prescribed by the Board with respect to
such Restricted Stock or Stock Units.
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10.3. Restricted Stock
Certificates
Subject to Section 3.8 (and
specifically the discretion of the Company to use book-entry or uncertificated
registration), the Company shall issue, in the name of each Grantee to whom
Restricted Stock has been granted, stock certificates representing the total
number of shares of Restricted Stock granted to the Grantee, as soon as
reasonably practicable after the Grant Date. The Board may provide in an Award
Agreement that either (i) the Secretary of the Company shall hold such
certificates for the Grantees benefit until such time as the Restricted Stock
is forfeited to the Company or the restrictions lapse, or (ii) such certificates
shall be delivered to the Grantee, provided, however, that such certificates (or
other appropriate documentation if book-entry or uncertificated registration is
used, such as the confirmation documentation issued to the Grantee and the
transfer agent records) shall bear a legend or legends that comply with the
applicable securities laws and regulations and makes appropriate reference to
the restrictions imposed under the Plan and the Award Agreement.
10.4. Rights of Holders of Restricted Stock
Unless the Board otherwise provides in
an Award Agreement, holders of Restricted Stock shall have the right to vote
such Stock and the right to receive any dividends declared or paid with respect
to such Stock; provided, that any such dividends shall not vest or be paid with
respect to any holders of Restricted Stock prior to the vesting of such
Restricted Stock and shall be paid at the same time as the underlying Stock is
vested consistent with this Plan and the Award Agreement and in compliance with
Code Section 409A (and governing guidance), where applicable. The Board may
provide that any dividends paid on Restricted Stock must be reinvested in shares
of Stock, subject to the same vesting conditions and restrictions applicable to
such Restricted Stock. All distributions, if any, received by a Grantee with
respect to Restricted Stock as a result of any stock split, stock dividend,
combination of shares, or other similar transaction shall be subject to the
restrictions applicable to the original Grant.
10.5. Rights of Holders of Stock Units
10.5.1. Voting and Dividend Rights
Holders of Stock Units shall have no
rights as stockholders of the Company. The Board may provide in an Award
Agreement evidencing a grant of Stock Units that the holder of such Stock Units
shall be entitled to receive, upon the Companys payment of a cash dividend on
its outstanding Stock, a cash payment for each Stock Unit held equal to the
per-share dividend paid on the Stock. Such Award Agreement may also provide that
such cash payment will be deemed reinvested in additional Stock Units at a price
per unit equal to the Fair Market Value of a share of Stock on the date that
such dividend is paid. Notwithstanding anything to the contrary contained
herein, cash payments provided for in this
Section 10.5.1 shall not vest or be paid with respect to any Stock Units prior
to the vesting of such Stock Units and shall be paid at the same time that the
distribution of Stock or cash is made for the underlying Award consistent with
this Plan and the Award Agreement and in compliance with Code Section 409A (and
governing guidance), where applicable. Notwithstanding anything to the contrary
contained herein, such cash payments will be subject to the same conditions as
the underlying Award and shall not vest or be paid with respect to any Award
prior to the vesting of such Award, and any such accrued cash payments shall be
paid at the same time as the underlying Stock or Award to which it relates vests
and is distributed consistent with this Plan and the Award Agreement, and such
provision, right, and payment must all be in compliance with Code Section 409A
(and governing guidance), where applicable, including any impact such a
provision, right, or payment may have on the exercise price or deemed deferral
of an Award in order to vest or be paid. The provisions of this Section 10.5.1
apply to any such cash payments that may be attached to any Award, although no
such cash payments shall be payable with respect to Options or SARs.
10.5.2. Creditors Rights
A holder of Stock Units shall have no
rights other than those of a general creditor of the Company. Stock Units
represent an unfunded and unsecured obligation of the Company, subject to the
terms and conditions of the applicable Award Agreement.
10.6. Termination of Service
Unless the Board otherwise provides in
an Award Agreement or in writing after the Award Agreement is issued, upon the
termination of a Grantees Service, any Restricted Stock or Stock Units held by
such Grantee that have not vested, or with respect to which all applicable
restrictions and conditions have not lapsed, shall immediately be deemed
forfeited. Upon forfeiture of Restricted Stock or Stock Units, the Grantee shall
have no further rights with respect to such Award, including but not limited to
any right to vote Restricted Stock or any right to receive dividends with
respect to shares of Restricted Stock or Stock Units.
10.7. Purchase of Restricted Stock and Shares Subject
to Stock Units
The Grantee shall be required, to the
extent required by applicable law, to purchase the Restricted Stock or shares of
Stock subject to vested Stock Units from the Company at a Purchase Price equal
to the greater of (i) the aggregate par value of the shares of Stock represented
by such Restricted Stock or Stock Units and (ii) the Purchase Price, if any,
specified in the Award Agreement relating to such Restricted Stock or Stock
Units. The Purchase Price shall be payable in a form described in Section 13 or,
in the discretion of the Board, in consideration for past or future Services
rendered to the Company or a Subsidiary.
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10.8. Delivery
10.8.1 Delivery for Restricted Stock Awards
Upon the expiration or termination of
any restricted period and the satisfaction of any other conditions prescribed by
the Board, the restrictions applicable to shares of Restricted Stock shall
lapse, and, subject to Section 3.8 and unless otherwise provided in the Award
Agreement, a stock certificate for such shares, or cash, as the case may be,
shall be delivered, free of all such restrictions, to the Grantee or the
Grantees beneficiary or estate, as applicable, no later than seventy-five (75)
days following the end of the Companys Fiscal Year in which the vesting
occurred (or the restrictions lapsed). Neither the Grantee, nor the Grantees
beneficiary or estate, shall have any further rights with regard to a Stock Unit
once the share of Stock represented by the Stock Unit has been delivered or the
transfer has been recorded on the Companys books and records.
10.8.2 Delivery for Stock Unit Awards
Upon the expiration or termination of
any restricted period and the satisfaction of any other conditions prescribed by
the Board, the restrictions applicable to Stock Units shall lapse, and, subject
to Section 3.8 and unless otherwise provided in the Award Agreement, a stock
certificate for such shares, or cash, as the case may be, shall be delivered,
free of all such restrictions, to the Grantee or the Grantees beneficiary or
estate, as applicable, no later than seventy-five (75) days following the end of
the Companys Fiscal Year in which the vesting occurred (or the restrictions
lapsed). Neither the Grantee, nor the Grantees beneficiary or estate, shall
have any further rights with regard to a Stock Unit once the share of Stock, or
cash, represented by the Stock Unit has been delivered or the transfer has been
recorded on the Companys books and records. With respect to a vested Stock Unit
settled in cash, the cash payment for each Stock Unit shall be equivalent to the
Fair Market Value of one share of Stock measured as of the date of
vesting.
11. TERMS AND CONDITIONS OF UNRESTRICTED STOCK AWARDS
The Board may, in its sole discretion,
grant (or sell at par value or such other higher purchase price determined by
the Board) an Unrestricted Stock Award to any Grantee pursuant to which such
Grantee may receive shares of Stock free of any restrictions (Unrestricted
Stock) under the Plan; provided, however, that in the aggregate, no more than
five percent of the shares reserved for issuance under this Plan may be granted
pursuant to this Section 11 and the exceptions set forth in Section 3.4.
Unrestricted Stock Awards may be granted or sold as described in the preceding
sentence in respect of past Service and other valid consideration, or in lieu
of, or in addition to, any cash compensation due to such Grantee.
12. TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS
12.1. Dividend Equivalent Rights
A Dividend Equivalent Right is an Award
entitling the recipient to receive credits based on cash distributions that
would have been paid on the shares of Stock specified in the Dividend Equivalent
Right (or other award to which it relates) if such shares had been issued to and
held by the recipient. A Dividend Equivalent Right may be granted hereunder to
any Grantee of an Award. The terms and conditions of Dividend Equivalent Rights
shall be specified in the Award Agreement. Dividend equivalents credited to the
holder of a Dividend Equivalent Right may be paid concurrently with the payment
of the actual dividend to which it relates or they may be deemed to be
reinvested in additional shares of Stock, which may thereafter accrue additional
equivalents. Any such reinvestment shall be at Fair Market Value on the date of
reinvestment. Dividend Equivalent Rights may be settled in cash or Stock or a
combination thereof, in a single installment or installments, all determined in
the sole discretion of the Board. A Dividend Equivalent Right granted as a
component of another Award may provide that such Dividend Equivalent Right shall
be settled upon exercise, settlement, or payment of, or lapse of restrictions
on, such other award, and that such Dividend Equivalent Right shall expire or be
forfeited or annulled under the same conditions as such other award. A Dividend
Equivalent Right granted as a component of another Award may also contain terms
and conditions different from such other award. Notwithstanding the foregoing, a
Dividend Equivalent Right granted as a component of a Performance Share or
Performance Unit award shall not settle prior to payment of such Performance
Share or Performance Unit award and shall expire or be forfeited and annulled
under the same conditions as such Performance Share or Performance Unit award.
Notwithstanding anything to the contrary contained herein, Dividend Equivalent
Rights will be subject to the same conditions as the underlying Award and shall
not vest or be paid with respect to any Award prior to the vesting of such
Award, and any such accrued Dividend Equivalent Rights shall be paid at the same
time as the underlying Stock or Award to which it relates vests and is
distributed consistent with this Plan and the Award Agreement, and such
provision, right, and payment must all be in compliance with Code Section 409A
(and governing guidance), where applicable, including any impact such a
provision, right, or payment may have on the exercise price or deemed deferral
of an Award in order to vest or be paid. The provisions of this Section 12.1
apply to any dividends and Dividend Equivalent Rights that may be attached to
any Award, although no dividends or dividend equivalents shall be payable with
respect to Options or SARs.
12.2. Termination of Service
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Except as may otherwise be provided by
the Board either in the Award Agreement or in writing after the Award Agreement
is issued, a Grantees rights in all Dividend Equivalent Rights or interest
equivalents shall automatically terminate upon the Grantees termination of
Service for any reason.
13. PAYMENT
13.1. General Rule.
Subject to Section 13.3, payment of the
Option Price for the shares purchased pursuant to the exercise of an Option or
the Purchase Price for Restricted Stock shall be made in a format acceptable to
the Company and as otherwise provided herein.
13.2. Surrender of Stock.
Subject to Section 13.3, payment of the
Option Price for shares purchased pursuant to the exercise of an Option or the
Purchase Price for Restricted Stock may be made all or in part through the
tender to the Company of shares of Stock, which shall be valued, for purposes of
determining the extent to which the Option Price or Purchase Price has been paid
thereby, at their Fair Market Value on the date of exercise or
surrender.
13.3. Cashless Exercise.
With respect to an Award where payment
is required, payment of the price for shares may be made all or in part by (i)
delivery (on a form acceptable to the Board) of an irrevocable direction to a
licensed securities broker acceptable to the Company to sell shares of Stock and
to deliver all or part of the sales proceeds to the Company in payment of the
price and any withholding taxes described in Section 18.3, or (ii) in its
discretion, the Companys issuance of the number of shares equal in value to the
difference between the price (and any withholding taxes described in Section
18.3) and the Fair Market Value of the shares subject to the portion of the
Option being exercised. The Company may provide procedures for executing the
delivery of the irrevocable direction to the licensed securities broker
referenced in this Section 13.3 by various methods including, but not limited
to, those available by telephonic, electronic, website or similar formats
regardless of whether default elections may be used by the procedures. In the
Companys discretion, appropriate fees, expenses and taxes may be deducted from,
and reduce, the amount of shares received by the Grantee. Notwithstanding the
above and the remainder of this Section 13, for an Award where payment by a
Reporting Person is required, payment of the price for shares must be made by
the Companys withholding that number of shares equal in value to the amount
owed by the Reporting Person (including provision for any withholding taxes
described in Section 18.3 or as additionally required by any otherwise
Applicable Law).
13.4. Other Forms of Payment.
To the extent the Award Agreement so
provides or as otherwise provided in writing by the Committee, payment of the
price for shares purchased pursuant to exercise of an Option or the Purchase
Price for Restricted Stock may be made in any other form that is consistent with
applicable laws, regulations, rules, and this Plan.
14. TERMS AND CONDITIONS OF PERFORMANCE SHARES, PERFORMANCE
UNITS, LONG-TERM INCENTIVE AWARDS AND SHORT-TERM INCENTIVE AWARDS
14.1. Grant of Performance Units/Performance Shares.
Subject to the terms and provisions of
this Plan, the Board, at any time and from time to time, may grant Performance
Units and/or Performance Shares to Grantees in such amounts and upon such terms
as the Committee shall determine.
14.2. Value of Performance Units/Performance Shares.
Each Performance Unit shall have an
initial value that is established by the Board at the time of grant. Each
Performance Share shall have an initial value equal to the Fair Market Value of
a share of Stock on the Grant Date. The Board shall set performance goals in its
discretion which, depending on the extent to which they are met, will determine
the value and/or number of Performance Units/Performance Shares that will be
paid out to the Grantee.
14.3. Earning of Performance Units/Performance Shares.
Subject to the terms of this Plan,
after the applicable Performance Period has ended, the holder of Performance
Units/Performance Shares shall be entitled to receive payout on the value and
number of Performance Units/Performance Shares earned by the Grantee over the
Performance Period, to be determined as a function of the extent to which the
corresponding performance goals have been achieved.
14.4. Form and Timing of Payment of Performance Units/Performance Shares.
Payment of earned Performance
Units/Performance Shares shall be as determined by the Board and as evidenced in
the Award Agreement. Subject to the terms of this Plan, the Board, in its sole
discretion, may pay earned Performance Units/Performance Shares in the form of
cash or in shares (or in a combination thereof) equal to the value of the earned
Performance Units/Performance Shares. The payments for the Performance Units or
Performance Shares, as the case may be, shall be made at the close of the
applicable Performance Period, or as soon as practicable after the end of the
Performance Period, but in no event later than seventy-five (75) days following
the close of the Companys Fiscal Year in which the term of the Award is
complete (i.e., it vests). Any shares of Stock may be granted subject to any
restrictions deemed appropriate by the Committee. The determination of the
Committee with respect to the form of payout of such Awards shall be set forth
in the Award Agreement pertaining to the grant of the Award.
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14.5. Performance Conditions.
The right of a Grantee to exercise or
receive a grant or settlement of any Award, and the timing thereof, may be
subject to such performance conditions as may be specified by the Board. The
Board may use such business criteria and other measures of performance as it may
deem appropriate in establishing any performance conditions. If and to the
extent required under Code Section 162(m), any power or authority relating to an
Award intended to qualify under Code Section 162(m), shall be exercised by the
Committee and not the Board.
Any Performance Awards for unexpired
terms shall be paid as if the term thereof were complete, based on the best
financial information available to the Company of the Companys performance as
of the close of business on the day immediately preceding a Corporate
Transaction (but only to the extent that the Corporate Transaction event
constitutes a permissible payout (e.g., and as applicable, a change in the
ownership or effective control of the corporation, or in the ownership of a
substantial portion of the assets of the corporation) as described in Code
Section 409A and its corresponding applicable guidance); provided, however, in
determining whether and to what extent performance criteria of such Performance
Awards have been satisfied, where such criteria are based on results that
accumulate over the term of such Awards or over one year of such term (e.g.,
earnings per share), the performance requirement of such Performance criteria
shall be prorated in accordance with the portion of the term or year that
occurred prior to the Corporate Transaction.
14.6. Long-Term Incentive Awards or Short-Term Incentive
Awards Granted to Designated Covered Employees.
If and to the extent that the Board
determines that an Award to be granted to a Grantee who is designated by the
Committee as likely to be a Covered Employee should qualify as
performance-based compensation for purposes of Code Section 162(m), the grant,
exercise and/or settlement of such Award shall be contingent upon achievement
of pre-established performance goals and other terms set forth in this Section
14.6.
14.6.1. Performance Goals Generally.
The performance goals for such Awards
shall consist of one or more business criteria and a targeted level or levels of
performance with respect to each of such criteria, as specified by the Committee
consistent with this Section 14.6; provided, that the full Board shall establish
any performance goals applicable to Outside Directors. Performance goals shall
be objective and shall otherwise meet the requirements of Code Section 162(m)
and regulations thereunder, including the requirement that the level or levels
of performance targeted by the Committee result in the achievement of
performance goals being substantially uncertain. The Committee (or, if
applicable, the full Board) may determine that such Awards shall be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of the performance
goals must be achieved as a condition to grant, exercise and/or settlement of
such Awards. Performance goals may differ for Awards granted to any one Grantee
or to different Grantees.
14.6.2. Timing For Establishing Performance Goals.
Performance goals shall be established
not later than ninety (90) days after the beginning of any performance period
applicable to such Awards, or at such other date as may be required or permitted
for performance-based compensation under Code Section 162(m).
14.6.3. Settlement of Awards; Other Terms.
Settlement of such Awards shall be in
cash, Stock, other Awards or other property, in the discretion of the Committee
and provided in the Award Agreement. The Committee may, in its discretion,
reduce the amount of a settlement otherwise to be made in connection with such
Awards. The Committee shall specify the circumstances in which such Long-Term or
Short-Term Incentive Awards shall be paid or forfeited in the event of
termination of Service by the Grantee prior to the end of a performance period
or settlement of Awards.
14.6.4. Performance Measures.
The performance goals upon which the
payment or vesting of an Award to a Covered Employee that is intended to qualify
as Performance-Based Compensation shall be limited to the following Performance
Measures:
(a) net earnings or net income;
(b)
operating earnings;
(c) pretax earnings;
(d) earnings per share;
(e) share price, including growth
measures and total stockholder return;
(f) earnings before interest and
taxes;
(g) earnings before interest, taxes,
depreciation and/or amortization;
(h) sales or revenue growth, whether in
general, by type of product or service, or by type of customer;
(i) gross or operating
margins;
(j) return measures, including return
on assets, capital, investment, equity, sales or revenue;
(k) cash flow, including operating cash
flow, free cash flow, cash flow return on equity and cash flow return on
investment;
(l) productivity ratios;
(m) expense targets;
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(n) market share;
(o) financial ratios as provided in
credit agreements of the Company and its subsidiaries;
(p) working capital targets;
(q) completion of acquisitions of
business or companies;
(r) completion of divestitures and
asset sales; and
(s) any combination of any of the
foregoing business criteria.
Any Performance Measure(s) may be used
to measure the performance of the Company, Subsidiary, and/or Subsidiary as a
whole or any business unit of the Company, Subsidiary, and/or Subsidiary or any
combination thereof, as the Committee may deem appropriate, or any of the above
Performance Measures as compared to the Companys previous performance on that
measure, the performance of a group of comparator companies or published or
special index, or other method of comparison that the Committee, in its sole
discretion, deems appropriate. The Committee also has the authority to provide
for accelerated vesting of any Award based on the achievement of performance
goals pursuant to the Performance Measures specified in this Section 14;
provided that, no Award may be accelerated (or may be granted with such
provisions) if the grant or acceleration would not be in compliance with Code
Section 409A (including from the Grant Date), if it would subject an Award to
Code Section 409A that was not previously subject to Code Section 409A unless it
would be compliant in its entirety (including with a fixed payout date if
necessary), or if it would not permit a deduction under Code Section 162(m)
(except that with respect to the deductibility under Code Section 162(m) only,
the Board may choose to forego deductibility, in its discretion).
14.6.5. Evaluation of Performance.
The Committee may provide in any such
Award that any evaluation of performance may include or exclude any of the
following events that occur during a Performance Period: (i) asset write-downs;
(ii) litigation or claim judgments or settlements; (iii) the effect of changes
in tax laws, accounting principles, or other laws or provisions affecting
reported results; (iv) any reorganization and restructuring programs; (v)
extraordinary nonrecurring items as described in Accounting Principles Board
Opinion No. 30 and/or in managements discussion and analysis of financial
condition and results of operations appearing in the Companys annual report to
shareholders for the applicable year; (vi) acquisitions or divestitures; (vii)
foreign exchange gains and losses; (viii) tax valuation allowance reversals;
(ix) impairment expense; (x) environmental expense; (xi) restructuring costs;
(xii) short-term cash incentive accruals; (xiii) gains or losses from the sales
of assets; and (xiv) payments received relating to import duties arising from
anti-dumping orders.
To the extent such inclusions or
exclusions affect Awards to Covered Employees, they shall be prescribed in a
form that meets the requirements of Code Section 162(m) for
deductibility.
14.6.6. Adjustment of Performance-Based Compensation.
Awards that are intended to qualify as
Performance-Based Compensation may not be adjusted upward. The Board shall
retain the discretion to adjust such Awards downward, either on a formula or
discretionary basis, or any combination as the Committee determines.
14.6.7. Board Discretion.
In the event that applicable tax and/or
securities laws change to permit Board discretion to alter the governing
Performance Measures without obtaining shareholder approval of such changes, the
Board shall have sole discretion to make such changes without obtaining
shareholder approval provided the exercise of such discretion does not violate
Code Section 409A. In addition, in the event that the Committee determines that
it is advisable to grant Awards that shall not qualify as Performance-Based
Compensation, the Committee may make such grants without satisfying the
requirements of Code Section 162(m) and base vesting on Performance Measures
other than those set forth in Section 14.6.4.
14.7. Status of Section 14.6 Awards Under Code Section
162(m).
It is the intent of the Company that
Awards under Section 14.6 hereof granted to persons who are designated by the
Committee as likely to be Covered Employees within the meaning of Code Section
162(m) and regulations thereunder shall, if so designated by the Committee,
constitute qualified performance-based compensation within the meaning of Code
Section 162(m) and regulations thereunder. Accordingly, the terms of Section
14.6, including the definitions of Covered Employee and other terms used
therein, shall be interpreted in a manner consistent with Code Section 162(m)
and regulations thereunder. The foregoing notwithstanding, because the Committee
cannot determine with certainty whether a given Grantee will be a Covered
Employee with respect to a fiscal year that has not yet been completed, the term
Covered Employee as used herein shall mean only a person designated by the
Committee, at the time of grant of an Award, as likely to be a Covered Employee
with respect to that fiscal year. If any provision of the Plan or any agreement
relating to such Awards does not comply or is inconsistent with the requirements
of Code Section 162(m) or regulations thereunder, such provision shall be
construed or deemed amended to the extent necessary to conform to such
requirements.
14.8. Short-Term Incentive Awards.
14.8.1. General Information and Eligibility.
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This Section 14.8 establishes a
short-term cash incentive program (known as the Management Incentive Program
or MIP) for Employees of the Company or a Subsidiary. Eligibility to
participate in the MIP shall be determined by the Committee (provided that the
Committee may delegate this function to the Companys Chief Executive Officer
for participation by Employees other than named executive officers, which
shall refer to the Companys Chief Executive Officer and other officers named in
the Companys annual proxy statement); however, unless the Committee (or its
delegatee) determines otherwise, an Employee is eligible to participate in the
Management Incentive Program for a particular Fiscal Year if all of the
following requirements are met:
(a) the Employee is designated in the
records of the Company (or a Subsidiary) as a salary grade 25 or above (or
comparable level under any revised salary grade system) for at least a portion
of the Fiscal Year;
(b) the Employee was employed by the
Company (or a Subsidiary) before February 1 of that particular fiscal year;
and
(c) the Employee is actively employed
on the last day of the Fiscal Year; provided, that
(i) the Employee may participate if the
Employee was otherwise participating in the Management Incentive Program during
a Fiscal Year and died, became Disabled in that Fiscal Year, or Retired in that
Fiscal Year (but only to the extent that, in the opinion of legal counsel, such
participation would not adversely affect the deductibility of his or her Total
MIP short-term cash incentive under applicable law and published guidance),
and
(ii) the Employee may participate if
the Employee was otherwise participating in the Management Incentive Program
during a Fiscal Year but was on an approved leave of absence (including workers
compensation leave, military leave, or leave approved pursuant to the Family
Medical Leave Act),
in which case, the Total MIP Short-term
cash incentive (if any) shall be determined based on Eligible Earnings during
the applicable Fiscal Year while the Employee participates in the MIP. In the
event that a participating Employee dies prior to the payout of any Total MIP
Short-term cash incentive (if any), the Total MIP Short-term cash incentive
shall be paid to his or her estate.
In respect of each Employee, the
Committee or its delegatee shall (at the time of establishing applicable
Performance Measures) also establish and communicate a Target Short-term Cash
Incentive Opportunity which shall be a dollar amount payable with respect to
the applicable performance measurement period (normally, the Fiscal
Year).
14.8.2. Amount of Short-term Cash Incentive.
The MIP short-term cash incentive
payment, if any, awarded to an eligible Employee shall be the product of some or
all of the following as the Committee in its sole discretion determines: Target
Short-term Cash Incentive Opportunity; Eligible Earnings; Company Achievement
Percentage, Individual Achievement Percentage, or both; and Company Weighted MIP
Component, Individual Weighted MIP Component, or both. Provided, however, that
in no event will a short-term cash incentive be paid hereunder unless the
applicable performance goals have been accomplished to the degree necessary for
such award, including as required to maintain the tax deductibility of such
payments. The maximum individual Short-Term Incentive Award for a Performance
Period of twelve months will be three million dollars ($3,000,000). In the event
that a Short-Term Incentive Award is made for a Performance Period of less than
twelve calendar months or for the Performance Period in which the Grantee dies,
becomes Disabled, or becomes Retired, the maximum Short-Term Incentive Award of
three million dollars ($3,000,000) shall be prorated in accordance with Section
14.8.1.
14.8.3. Time of Payment.
A Service Providers Total MIP
Short-term Cash Incentive payment (if any) shall be paid as soon as
administratively feasible during the second month following the close of the
performance period to which the Total MIP incentive payment relates. (For
example, if the performance period is the Companys fiscal year, the payment
date shall occur during the month of June.) Such payment shall be subject to
applicable tax and withholding of income and employment taxes and elective
contributions to the Companys 401(k) plan, but shall not be subject to
reduction for health care premiums, flex spending contributions, life insurance
contributions or similar premium sharing under any Company health or welfare
plan, all as determined by the Committee. No Short-Term Cash Incentive Award may
be paid without a certification by the Committee that the Company goals under
the applicable Performance Measures have been achieved. If awards are made in
whole or in part based on achievement by eligible Employees of individual goals,
a named executive officer will receive such an award only after determination by
the Committee that the named executive officer has achieved such
goals.
14.8.4. Employment Transfers.
If a participating Service Provider
transfers between locations, the Total MIP Short-term Cash Incentive for him or
her (if any) shall be based on the following rules:
(a) The Total MIP Short-term Cash
Incentive payment (if any) shall be based on Eligible Earnings earned at the
first location using the first locations Company Achievement Percentage plus
Eligible Earnings earned at the second location using the second locations
Company Achievement Percentage; and
(b) Only one Individual Achievement
Percentage will be used, which shall be based on the overall attainment of
individual goals for the Fiscal Year;
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provided, that the location of the
participating Employee when the short-term cash incentive is paid shall be
charged for the Total MIP incentive payment.
14.8.5. Salary Grade Changes.
If a participating Employees salary
grade and Target Short-term Cash Incentive Opportunity changes during a Fiscal
Year in which that Employee is participating in the Management Incentive
Program, any Total MIP payment shall be based on the Eligible Earnings and
Target Short-term Cash Incentive Opportunity in the beginning salary grade, plus
the Eligible Earnings and Target Short-term Cash Incentive Opportunity while in
the subsequent salary grade.
15. PARACHUTE LIMITATIONS
Notwithstanding any other provision of
this Plan or of any other agreement, contract, or understanding heretofore or
hereafter entered into by a U.S. Grantee with the Company or any Subsidiary,
except an agreement, contract, or understanding that expressly addresses Section
280G or Section 4999 of the Code (an Other Agreement), and notwithstanding any
formal or informal plan or other arrangement for the direct or indirect
provision of compensation to the U.S. Grantee (including groups or classes of
U.S. Grantees or beneficiaries of which the U.S. Grantee is a member), whether
or not such compensation is deferred, is in cash, or is in the form of a benefit
to or for the U.S. Grantee (a Benefit Arrangement), if the U.S. Grantee is a
disqualified individual, as defined in Section 280G(c) of the Code, any
Option, Restricted Stock, Stock Unit, Performance Share or Performance Unit held
by that U.S. Grantee and any right to receive any payment or other benefit under
this Plan shall not become exercisable or vested (i) to the extent that such
right to exercise, vesting, payment, or benefit, taking into account all other
rights, payments, or benefits to or for the U.S. Grantee under this Plan, all
Other Agreements, and all Benefit Arrangements, would cause any payment or
benefit to the U.S. Grantee under this Plan to be considered a parachute
payment within the meaning of Section 280G(b)(2) of the Code as then in effect
(a Parachute Payment) and (ii) if, as a result of receiving a Parachute
Payment, the aggregate after-tax amounts received by the U.S. Grantee from the
Company under this Plan, all Other Agreements, and all Benefit Arrangements
would be less than the maximum after-tax amount that could be received by the
U.S. Grantee without causing any such payment or benefit to be considered a
Parachute Payment. In the event that the receipt of any such right to exercise,
vesting, payment, or benefit under this Plan, in conjunction with all other
rights, payments, or benefits to or for the U.S. Grantee under any Other
Agreement or any Benefit Arrangement would cause the U.S. Grantee to be
considered to have received a Parachute Payment under this Plan that would have
the effect of decreasing the after-tax amount received by the U.S. Grantee as
described in clause (ii) of the preceding sentence, then the U.S. Grantee shall have the right, in the U.S.
Grantees sole discretion, to designate those rights, payments, or benefits
under this Plan, any Other Agreements, and any Benefit Arrangements that should
be reduced or eliminated so as to avoid having the payment or benefit to the
U.S. Grantee under this Plan be deemed to be a Parachute Payment; provided,
however, that in order to comply with Code Section 409A, the reduction or
elimination will be performed in the order in which each dollar of value subject
to an Award reduces the Parachute Payment to the greatest extent.
16. REQUIREMENTS OF LAW
16.1. General
The Company shall not be required to
sell or issue any shares of Stock under any Award if the sale or issuance of
such shares would constitute a violation by the Grantee, any other individual
exercising an Option, or the Company of any provision of any law or regulation
of any governmental authority, including without limitation any federal or state
securities laws or regulations. If at any time the Company shall determine, in
its discretion, that the listing, registration or qualification of any shares
subject to an Award upon any securities exchange or under any governmental
regulatory body is necessary or desirable as a condition of, or in connection
with, the issuance or purchase of shares hereunder, no shares of Stock may be
issued or sold to the Grantee or any other individual exercising an Option
pursuant to such Award unless such listing, registration, qualification, consent
or approval shall have been effected or obtained free of any conditions not
acceptable to the Company, and any delay caused thereby shall in no way affect
the date of termination of the Award. Without limiting the generality of the
foregoing, in connection with the Securities Act, upon the exercise of any
Option or any SAR that may be settled in shares of Stock or the delivery of any
shares of Stock underlying an Award, unless a registration statement under such
Act is in effect with respect to the shares of Stock covered by such Award, the
Company shall not be required to sell or issue such shares unless the Board has
received evidence satisfactory to it that the Grantee or any other individual
exercising an Option may acquire such shares pursuant to an exemption from
registration under the Securities Act. Any determination in this connection by
the Board shall be final, binding, and conclusive. The Company may, but shall in
no event be obligated to, register any securities covered hereby pursuant to the
Securities Act. The Company shall not be obligated to take any affirmative
action in order to cause the exercise of an Option or a SAR or the issuance of
shares of Stock pursuant to the Plan to comply with any law or regulation of any
governmental authority. As to any jurisdiction that expressly imposes the
requirement that an Option (or SAR that may be settled in shares of Stock) shall
not be exercisable until the shares of Stock covered by such Option (or SAR) are
registered or are exempt from registration, the exercise of such Option (or SAR)
under
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circumstances in which the laws of such
jurisdiction apply shall be deemed conditioned upon the effectiveness of such
registration or the availability of such an exemption.
16.2. Rule 16b-3
During any time when the Company has a
class of equity security registered under Section 12 of the Exchange Act, it is
the intent of the Company that Awards pursuant to the Plan and the exercise of
Options and SARs granted hereunder will qualify for the exemption provided by
Rule 16b-3 under the Exchange Act. To the extent that any provision of the Plan
or action by the Board does not comply with the requirements of Rule 16b-3, it
shall be deemed inoperative to the extent permitted by law and deemed advisable
by the Board, and shall not affect the validity of the Plan. In the event that
Rule 16b-3 is revised or replaced, the Board may exercise its discretion to
modify this Plan in any respect necessary to satisfy the requirements of, or to
take advantage of any features of, the revised exemption or its
replacement.
17. EFFECT OF CHANGES IN CAPITALIZATION
The provisions in this Section 17 are
intended to provide equivalency for certain capitalization events, and, in all
events, and notwithstanding anything to the contrary contained herein, may not
be accomplished, provided for or be applicable to an Award, if, at any time,
such Award is not in compliance with Code Section 409A (including from the Grant
Date), if it would subject an Award to Code Section 409A that was not previously
subject to Code Section 409A unless it would be compliant in its entirety
(including with a fixed payout date if necessary), or if it would not permit a
deduction under Code Section 162(m) (except that with respect to the
deductibility under Code Section 162(m) only, the Board may choose to forego
deductibility, in its discretion).
17.1. Changes in Stock
If the number of outstanding shares of
Stock is increased or decreased or the shares of Stock are changed into or
exchanged for a different number or kind of shares or other securities of the
Company on account of any recapitalization, reclassification, stock split,
reverse split, combination of shares, exchange of shares, stock dividend or
other distribution payable in capital stock, or other increase or decrease in
such shares effected without receipt of consideration by the Company occurring
after the Effective Date, the number and kinds of shares for which grants of
Options and other Awards may be made under the Plan, shall be adjusted
proportionately and accordingly by the Company. In addition, the number and kind
of shares for which Awards are outstanding shall be adjusted proportionately and
accordingly so that the proportionate interest of the Grantee immediately
following such event shall, to the extent practicable, be the same as
immediately before such event. Any such adjustment in outstanding Options or
SARs shall not change the aggregate Option Price or SAR Exercise Price payable
with respect to shares that are subject to the unexercised portion of an
outstanding Option or SAR, as applicable, but shall include a corresponding
proportionate adjustment in the Option Price or SAR Exercise Price per share.
The conversion of any convertible securities of the Company shall not be treated
as an increase in shares affected without receipt of consideration.
Notwithstanding the foregoing, in the event of any distribution to the Companys
stockholders of securities of any other entity or other assets (including an
extraordinary dividend but excluding a non-extraordinary dividend of the
Company) without receipt of consideration by the Company, the Company shall, in
such manner as the Company deems appropriate, adjust (i) the number and kind of
shares subject to outstanding Awards and/or (ii) the exercise price of
outstanding Options and Stock Appreciation Rights to reflect such
distribution.
17.2. Reorganization in Which the Company Is the Surviving
Entity Which does not Constitute a Corporate Transaction
Subject to Section 17.3 hereof, if the
Company shall be the surviving entity in any reorganization, merger, or
consolidation of the Company with one or more other entities which does not
constitute a Corporate Transaction, any Option or SAR theretofore granted
pursuant to the Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to such Option or SAR would have
been entitled immediately following such reorganization, merger, or
consolidation, with a corresponding proportionate adjustment of the Option Price
or SAR Exercise Price per share so that the aggregate Option Price or SAR
Exercise Price thereafter shall be the same as the aggregate Option Price or SAR
Exercise Price of the shares remaining subject to the Option or SAR immediately
prior to such reorganization, merger, or consolidation. Subject to any contrary
language in an Award Agreement evidencing an Award, any restrictions applicable
to such Award shall apply as well to any replacement shares received by the
Grantee as a result of the reorganization, merger or consolidation. In the event
of a transaction described in this Section 17.2, Stock Units shall be adjusted
so as to apply to the securities that a holder of the number of shares of Stock
subject to the Stock Units would have been entitled to receive immediately
following such transaction.
17.3. Corporate Transaction in which Awards are not
Assumed
The Board may make provisions in an
Award Agreement, in its discretion, to provide for vesting, exercise,
cancellation, payout and/or similar events upon the occurrence of a Corporate
Transaction in which an Award is not being assumed or continued.
17.4. Corporate Transaction in which Awards are Assumed
The Plan, Options, SARs, Stock Units
and Restricted Stock theretofore granted shall continue in the manner and
under
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the terms so provided in the event of
any Corporate Transaction to the extent that provision is made in writing in
connection with such Corporate Transaction for the assumption or continuation of
the Options, SARs, Stock Units and Restricted Stock theretofore granted, or for
the substitution for such Options, SARs, Stock Units and Restricted Stock for
new common stock options and stock appreciation rights and new common stock
units and restricted stock relating to the stock of a successor entity, or a
parent or subsidiary thereof, with appropriate adjustments as to the number of
shares (disregarding any consideration that is not common stock) and option and
stock appreciation right exercise prices.
17.5. Adjustments
Adjustments under this Section 17
related to shares of Stock or securities of the Company shall be made by the
Board, whose determination in that respect shall be final, binding and
conclusive. No fractional shares or other securities shall be issued pursuant to
any such adjustment, and any fractions resulting from any such adjustment shall
be eliminated in each case by rounding downward to the nearest whole share. The
Board shall determine the effect of a Corporate Transaction upon Awards other
than Options, SARs, Stock Units and Restricted Stock, and such effect shall be
set forth in the appropriate Award Agreement. The Board may provide in the Award
Agreements at the time of grant, or any time thereafter with the consent of the
Grantee, for different provisions to apply to an Award in place of those
described in Sections 17.1, 17.2, 17.3 and 17.4. This Section 17.5 does not
limit the Companys ability to provide for alternative treatment of Awards
outstanding under the Plan in the event of change of control events that are not
Corporate Transactions.
17.6. No Limitations on Company
The making of Awards pursuant to the
Plan shall not affect or limit in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations, or changes of its capital
or business structure or to merge, consolidate, dissolve, or liquidate, or to
sell or transfer all or any part of its business or assets.
18. GENERAL PROVISIONS
18.1. Disclaimer of Rights
No provision in the Plan or in any
Award or Award Agreement shall be construed to confer upon any individual the
right to remain in the employ or service of the Company or any Subsidiary, or to
interfere in any way with any contractual or other right or authority of the
Company either to increase or decrease the compensation or other payments to any
individual at any time, or to terminate any employment or other relationship
between any individual and the Company. In addition, notwithstanding anything
contained in the Plan to the contrary, unless otherwise stated in the applicable
Award Agreement, no Award granted under the Plan shall be affected by any change
of duties or position of the Grantee, so long as
such Grantee continues to be a director, officer, consultant or employee of the
Company or a Subsidiary. The obligation of the Company to pay any benefits
pursuant to this Plan shall be interpreted as a contractual obligation to pay
only those amounts described herein, in the manner and under the conditions
prescribed herein. The Plan shall in no way be interpreted to require the
Company to transfer any amounts to a third party trustee or otherwise hold any
amounts in trust or escrow for payment to any Grantee or beneficiary under the
terms of the Plan.
18.2. Nonexclusivity of the Plan
Neither the adoption of the Plan nor
the submission of the Plan to the stockholders of the Company for approval shall
be construed as creating any limitations upon the right and authority of the
Board to adopt such other incentive compensation arrangements (which
arrangements may be applicable either generally to a class or classes of
individuals or specifically to a particular individual or particular
individuals) as the Board in its discretion determines desirable, including,
without limitation, the granting of stock options otherwise than under the
Plan.
18.3. Withholding Taxes
No shares of Stock shall be delivered
under the Plan to any Grantee until such Grantee has made arrangements
acceptable to the Committee for the satisfaction of any income and employment
tax withholding obligations under Applicable Laws. The Company or any Subsidiary
shall have the authority and the right to deduct or withhold, or require a
Grantee to remit to the Company, an amount sufficient to satisfy federal, state,
local or foreign taxes (including the Grantees payroll tax obligations)
required or permitted by law to be withheld with respect to any taxable event
concerning a Grantee arising as a result of this Plan. The Committee may in its
discretion and in satisfaction of the foregoing requirement allow a Grantee to
elect to have the Company withhold shares of Stock otherwise issuable under an
Award or allow the return of shares of Stock having a Fair Market Value equal to
the sums required to be withheld. Notwithstanding any other provision of the
Plan, the number of shares which may be withheld with respect to the issuance,
vesting, exercise or payment of any Award (or which may be repurchased from the
Grantee of such Award after such shares of Stock were acquired by the Grantee
from the Company) in order to satisfy the Grantees federal, state, local and
foreign income and payroll tax liabilities with respect to the issuance,
vesting, exercise or payment of the Award shall, unless specifically approved by
the Committee, be limited to the number of shares of Stock which have a Fair
Market Value on the date of withholding or repurchase equal to the aggregate
amount of such liabilities based on the minimum statutory withholding rates for
federal, state, local and foreign income tax and payroll tax purposes that are
applicable to such supplemental taxable income. Notwithstanding the
86 La-Z-Boy
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discretionary provisions above, for an
Award where a tax payment is required with respect to a Reporting Person, the
Company shall withhold shares of Stock otherwise issuable under an Award to
satisfy the tax payment obligation.
18.4. Captions
The use of captions in this Plan or any
Award Agreement is for the convenience of reference only and shall not affect
the meaning of any provision of the Plan or such Award Agreement.
18.5. Other Provisions
Each Award granted under the Plan may
contain such other terms and conditions not inconsistent with the Plan as may be
determined by the Board, in its sole discretion.
18.6. Number and Gender
With respect to words used in this
Plan, the singular form shall include the plural form, the masculine gender
shall include the feminine gender, etc., as the context requires.
18.7. Severability
If any provision of the Plan or any
Award Agreement shall be determined to be illegal or unenforceable by any court
of law in any jurisdiction, the remaining provisions hereof and thereof shall be
severable and enforceable in accordance with their terms, and all provisions
shall remain enforceable in any other jurisdiction.
18.8. Governing Law
The validity and construction of this
Plan and the instruments evidencing the Awards hereunder shall be governed by the laws of the state of
Michigan, other than any conflicts or choice of law rule or principle that might
otherwise refer construction or interpretation of this Plan and the instruments
evidencing the Awards granted hereunder to the substantive laws of any other
jurisdiction.
18.9. Code Section 409A
The Board intends to comply with Code
Section 409A, or an exemption to Code Section 409A, with regard to Awards
hereunder that constitute nonqualified deferred compensation within the meaning
of Code Section 409A. To the extent that the Board determines that a Grantee
would be subject to the additional twenty percent (20%) tax imposed on certain
nonqualified deferred compensation plans pursuant to Code Section 409A as a
result of any provision of any Award granted under this Plan, such provision
shall be deemed amended to the minimum extent necessary to avoid application of
such additional tax. The nature of any such amendment shall be determined by the
Board.
To record adoption of the Plan by the
Board as
of ,
2017, and approval of the Plan by the stockholders on
,
2017, the Company has caused its authorized officer to execute the
Plan.
LA-Z-BOY INCORPORATED
PROXY STATEMENT | 2017 87
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Meeting Information
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When
August 29, 2017 at 8:00 am (local
time) |
Vote |
Online |
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Where
Wright Room, Westin Detroit
Metropolitan Airport
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www.proxyvote.com
By Phone
1.800.690.6903
By Mail
Completing, signing and returning your proxy
card
In Person
With proof of ownership and a valid photo
ID |
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Proposals to Be Voted On |
Your Board Recommends |
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1
Election of Nine
Directors |
VOTE FOR EACH |
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Kurt L. Darrow Sarah M.
Gallagher Edwin J. Holman |
Janet E. Kerr Michael T.
Lawton H. George Levy, M.D. |
W. Alan McCollough Lauren B.
Peters Dr. Nido R. Qubein
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2
Approval of the 2017 Omnibus
Incentive Plan
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VOTE FOR |
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3
Approval of the Compensation of
Our Named Executive Officers
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VOTE FOR |
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4
Frequency of voting on the
Compensation of our Named Executive Officers
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VOTE 1 YEAR |
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5
Ratification of
PricewaterhouseCoopers LLP as our independent registered public accounting
firm for fiscal year 2018 |
VOTE
FOR |
Table of Contents
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DETACH AND RETURN THIS PORTION
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND
DATED. |
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For |
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Withhold |
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For All |
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All |
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All |
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Except |
The Board of Directors recommends you vote FOR the
following: |
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1. |
Election of Directors |
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Nominees |
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To withhold authority to vote for any individual
nominee(s), mark For All Except and write the number(s) of the
nominee(s) on the line below. |
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01 |
Kurt L. Darrow |
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02 |
Sarah M. Gallagher |
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03 |
Edwin J. Holman |
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04 |
Janet E. Kerr |
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05 |
Michael T. Lawton |
06 |
H. George Levy, MD |
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07 |
W. Alan McCollough |
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08 |
Lauren B. Peters |
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09 |
Dr. Nido R. Qubein |
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The Board of Directors recommends you vote FOR proposals 2
and 3. |
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For |
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Against |
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Abstain |
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2 |
Board's proposal to approve the 2017
Omnibus Incentive Plan. |
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3 |
To approve, on an advisory basis, the
compensation of the Company's named executive officers as set forth in the
Proxy Statement. |
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The Board of Directors
recommends you vote 1 YEAR on the following proposal: |
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1
year |
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2
years |
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3
years |
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Abstain |
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4 |
To vote, on an advisory basis, on the
frequency with which future advisory votes on the compensation of the
Company's named executive officers will be conducted. |
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The Board of
Directors recommends you vote FOR proposal 5. |
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For |
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Abstain |
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5 |
Board's proposal to ratify
PricewaterhouseCoopers LLP as our independent registered public accounting
firm for fiscal year 2018. |
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NOTE:
In their
discretion the Proxies are authorized to act upon such other business as
may properly come before the meeting or any adjournment thereof. |
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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. |
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Signature [PLEASE SIGN WITHIN BOX] |
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Signature (Joint Owners) |
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Table of Contents
Important Notice Regarding the Availability of Proxy
Materials for the Annual Meeting: The Notice & Proxy Statement, Annual
Report is/are available at www.proxyvote.com. |
LA-Z-BOY INCORPORATED
Annual Meeting of
Shareholders
August 29, 2017 8:00
AM
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby appoints Kurt
L. Darrow and W. Alan McCullough, and each of them, Proxies, each with power of
substitution, to attend the Annual Meeting of the shareholders of La-Z-Boy
Incorporated to be held at the Wright Room of the Westin Detroit Metropolitan
Airport, 2501 Worldgateway Place, Romulus, Michigan, August 29, 2017 at 8:00
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.
This proxy, when properly executed,
will be voted in the manner directed by the undersigned shareholder. If no
direction is made, this proxy will be voted FOR all the director nominees listed
in Proposal 1, FOR Proposals 2, 3 and 5, and FOR 1 year on Proposal 4 for the
frequency vote on executive compensation.
Continued and to be signed on reverse
side
This regulatory filing also includes additional resources:
lzb_courtesy-pdf.pdf
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