SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No.___)

Filed by the Registrant R
Filed by a Party other than the Registrant £

Check the appropriate box:

£
Preliminary Proxy Statement

£
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

R
Definitive Proxy Statement

£
Definitive Additional Materials

£
Soliciting Material Pursuant to § 240.14a-12

LA-Z-BOY INCORPORATED
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box)

R
No fee required.

£
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

1.
Title of each class of securities to which transaction applies:

2.
Aggregate number of securities to which transaction applies:

3.
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):

4.
Proposed maximum aggregate value of transaction:

5.
Total fee paid:

£
Fee paid previously with preliminary materials.

£
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

6.
Amount Previously Paid:

7.
Form, Schedule or Registration Statement No.:

8.
Filing Party:

9.
Date Filed:



 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

Day: Wednesday, August 21, 2013

Time: 11:00 a.m., Eastern Daylight Time

Place: La-Z-Boy Incorporated Auditorium
1284 North Telegraph Road
Monroe, Michigan

Monroe, Michigan
July 9, 2013

To our shareholders:

You are invited to attend our 2013 annual meeting of shareholders to be held Wednesday, August 21, 2013, at our auditorium in Monroe, Michigan. Only shareholders of record at the close of business on June 28, 2013, will be entitled to vote at the meeting. At the meeting we intend to:

· Elect 11 directors for one-year terms expiring in 2014,

· Consider and vote on approving the board’s proposal to amend our 2010 Omnibus Incentive Plan,

· Hold a non-binding advisory vote on a proposal to approve the compensation of our named executive officers,

· Ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal 2014, and

· Transact any other business that may properly come before the meeting.

Please vote your proxy 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
2013 PROXY STATEMENT OF LA-Z-BOY INCORPORATED

General Information about the Annual Meeting and Voting

The 2013 annual meeting of the shareholders of La-Z-Boy Incorporated will be held in the La‑Z‑Boy auditorium on August 21, 2013, beginning at 11:00 A.M. (local time). La-Z-Boy’s board of directors is soliciting your proxy. This proxy statement and the accompanying form of proxy are being furnished to shareholders by the company beginning July 9, 2013.

Meeting Purposes. At the meeting, shareholders will elect 11 directors for one-year terms expiring at the shareholders meeting in 2014. The board nominated Kurt L. Darrow, John H. Foss, Richard M. Gabrys, Janet L. Gurwitch, David K. Hehl, Edwin J. Holman, Janet E. Kerr, Michael T. Lawton, H. George Levy, M.D., W. Alan McCollough, and Dr. Nido R. Qubein for these seats. We are asking shareholders to approve an amendment and restatement of our 2010 Omnibus Incentive Plan to increase the number of shares available under the plan and make other changes to the plan as described later in this proxy statement. We are also asking shareholders to approve, by advisory vote, the compensation of our named executive officers and to ratify the selection of our independent registered public accounting firm for fiscal year 2014. We do not expect that any other business, except for routine or procedural matters, will be brought up at the meeting. If any other business is properly brought up at the meeting, the persons named in the enclosed proxy will have authority to vote on it at their discretion.

Proxy Materials Available on Internet. In an effort to reduce the cost of delivering the proxy materials to our shareholders, we are making the materials available to our shareholders on the Internet. On July 9, 2013, we sent shareholders a one-page “Notice of Internet Availability of Proxy Materials,” which included instructions on how to access our proxy materials on the Internet. The proxy materials, consisting of this proxy statement and our fiscal 2013 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 your shares. By making the materials available through the Internet, we expect to reduce our costs, conserve natural resources, and expedite the delivery of the proxy materials. However, if you prefer to receive hard 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 June 28, 2013, 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 52,848,258 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 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 the proposal to amend the company’s 2010 Omnibus Incentive Plan to increase the shares available under the plan and make other changes as described in this proxy statement,

· FOR approval of the compensation of our named executive officers, and

· FOR the proposal to ratify PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal year 2014.

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 the 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. If you wish to change your vote, you may do so 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 Secretary at 1284 N. Telegraph, Monroe, Michigan. 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. Your vote at the meeting will count and cancel any previous vote.

Vote Required. Under applicable Michigan corporate laws, directors will be elected by plurality vote. Provided there is a quorum at the meeting, the nominees receiving the highest through the eleventh 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 will have no effect on the election results. However, under our corporate governance guidelines, any director failing to receive a majority of the votes cast must offer to resign at the board meeting immediately following the shareholders’ meeting. The board must act on the offer of resignation at or before its next meeting, which is currently planned for mid-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 proposal to amend the 2010 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.

The non-binding advisory proposal to approve the compensation of our named executive officers requires a majority of votes cast on the proposal to pass. Abstentions and broker non-votes will have no effect as they are considered votes not cast.

The proposal to ratify the selection of the independent registered public accounting firm requires a majority of votes cast on the proposal to pass. Abstentions and broker non-votes will have no effect as they are considered as votes not cast. If the audit committee’s selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm does not receive a majority of the votes cast, the audit committee as a matter of good corporate practice will reconsider its selection.

Number of Copies Sent to Household. If there are two or more shareholders sharing the same address, we are only sending your household a single copy of our annual report and proxy statement unless you previously withheld your consent to “householding” or 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.
However, we will promptly provide additional copies of our 2013 annual report or this proxy statement to the other shareholders in your household if you send a written request to: Office of the Secretary, La-Z-Boy Incorporated, 1284 North Telegraph Road, 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 SEC’s website at www.sec.gov.

You may revoke your consent to householding at any time by contacting Broadridge Financial Solutions, Inc., either by calling toll-free 800-542-1061, 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. The shareholders’ annual meeting will be held at the company’s principal executive office at 1284 North Telegraph Road, Monroe, Michigan, 48162. Any communication for the company’s secretary or directors may be directed to the corporate secretary at this address.

CORPORATE GOVERNANCE

Board of Directors. In performing their duties in overseeing the management of the company, our directors consider the interests of the various stakeholders of the company, including our shareholders, employees, customers, vendors and the communities we impact. The board abides by a set of corporate governance guidelines which can be found on our website at: http://investors.la-z-boy.com/phoenix.zhtml?c=92596&p=irol-govhighlights. These guidelines outline, among other governance matters, the role of the board and our policies related to director criteria, independence, qualification, orientation, and assessment of board performance. The guidelines are regularly reviewed and updated to reflect regulatory requirements and evolving practices in corporate governance. The board recently made minor clarifying changes to the guidelines. In addition to the Corporate Governance Guidelines, we also post at the same site our other key governance documents such as the lead director charter, the charters for each of the board’s key committees, and our Code of Business Conduct, which establishes our expectations for the business behavior of our employees, officers and directors.

Leadership Structure. Currently the board utilizes both a chairman and a lead director. Mr. Darrow serves as our chairman and chief executive officer, and Mr. Gabrys serves as our lead director. The directors have determined that this structure provides the most effective leadership structure for our company under the current circumstances. In operation, this structure provides substantially all of the benefits to the company and its shareholders that having an independent chairman would provide, while yielding the added benefit of combining the chief executive officer and chairman roles in a single person who is unambiguously the company’s leader.

Under our current structure, the lead director facilitates communications between management and the independent directors and serves as the principal liaison between the independent directors and the chairman. Among other duties, the lead director:

· reviews board meeting agendas in collaboration with the chairman and the various committee chairs 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, coordinates on issues involving multiple committees, and appropriately reports to the board;

· meets with the chief executive officer to discuss the chief executive officer’s performance; and

· presides at board meetings when the chairman is absent.

By combining a strong independent lead director structure with a board composed of independent directors (excluding the chairman), the board can effectively monitor the performance of the executive chairman and oversee the interests of the shareholders.

Risk Oversight. The board of directors is responsible for overseeing our risks. The nominating and governance committee ensures that the oversight of our identified risk categories is appropriately assigned to the various board committees or the full board of directors. The nominating and governance committee regularly reviews our process for identifying, prioritizing, and mitigating various risks. In addition, the committee reviews our risk tolerance and its alignment with our strategic plan. The board and each other committee, as part of their oversight efforts, review and report on their respective risk categories.

Director Independence. Our board of directors strongly supports the concept of director independence. Our board is currently composed of nine (expanding to ten at the shareholders meeting) independent directors and one employee director, Kurt L. Darrow, our chairman and chief executive officer. The chairman and chief executive officer is the only member of the board who is a current or past company employee. Under our Corporate Governance Guidelines, we mandate that a majority of directors must be independent. In addition, we limit membership on the audit, compensation, and nominating and governance committees to independent directors. The board annually reviews and affirmatively determines the independence of each director. With the exception of our chairman and chief executive officer, we have determined that each of the directors is an independent director and lacks any material relationship with the company, its management, or other directors that would impede the director’s autonomy. In making its determination, the board used the following criteria, as reflected in our Corporate Governance Guidelines:

· Within the last three years, a director or immediate family member was not an employee of the company or its independent registered public accounting firm;

· Within the last three years, a director or immediate family member was not part of an interlocking directorship in which any of our executive officers served on the compensation committee of another company that employed the director or family member;

· Within the last three years, a director or immediate family member did not receive more than $120,000 during any 12-month period in direct compensation from La-Z-Boy, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided the compensation was not contingent in any way on continued service); and

· A director or immediate family member was not 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 within the last three years, exceeded the greater of $1 million or 2% of the other entity’s consolidated gross revenues.

The following categorical standards identify relationships that a director may have with us that are not considered material:

· If a director is an executive officer, director, or shareholder of another company that does business with us and the annual revenues derived from that business are less than 1% of each company’s total revenues;
· If a director is an executive officer, director, or shareholder of another company that is indebted to us, or to which we are indebted, and the total amount of each company’s indebtedness to the other is less than 1% of the total consolidated assets of each company; or if the 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;

· If a director is an executive officer or director of another company in which we own common stock, and the amount of our common stock interest is less than 5% of the total shareholders’ equity of the other company;

· If any family member of a director is or was employed by us in a non-executive capacity and the family member’s compensation has not exceeded $120,000 in any one fiscal year;

· If a director is a director, officer, or trustee of a charitable organization, our annual charitable contributions to the organization (exclusive of gift-match payments) are less than 1% of the organization’s total annual charitable receipts, all of our contributions to the organization were approved through our normal approval process, and no contribution was made “on behalf of” any of our officers or directors; or if a director is a director of the La-Z-Boy Foundation; and

· If a director is a member of, employed by, or of counsel to a law firm or investment banking firm that performs services for us, payments made by us to the firm during a fiscal year do not exceed 1% of the firm’s gross revenues for the fiscal year, and the director’s relationship with the firm is such that the director’s compensation is not linked directly or indirectly to the amount of payments the firm receives from us.

The NYSE listed company rules also require that a majority of our directors be independent directors. Applying these standards and the criteria in our Corporate Governance Guidelines, the board of directors has affirmatively determined that each of the following current directors, comprising all of the non-management directors, meets the criteria for “independent” directors set forth in the listing standards of the NYSE and is an “independent” director under those standards and under our Corporate Governance Guidelines: Ms. Gurwitch and Ms. Kerr, Messrs. Foss, Gabrys, Hehl, Holman, McCollough, and Dr. Levy and Dr. Qubein. In addition, the director nominee, Mr. Lawton, also meets these independence criteria and will be considered an independent director.

Majority Vote Standard for Director Elections. Under our Corporate Governance Guidelines, we have established a majority vote standard for directors in an uncontested election. Should a director not receive a majority of the votes cast in an uncontested election, the director is required to submit his or her resignation at the board meeting immediately following the annual shareholders’ meeting. The other directors must act on the resignation at or before the next regularly scheduled meeting and publicly report the board’s decision. For purposes of this rule, an election is treated as contested when there are more nominees than positions to be filled by election at the meeting.

Related Party Transactions. Our company’s Code of Business Conduct, which applies to all of our employees, executive officers, and directors, requires avoidance of any situation creating a potential conflict of interest. Where a potential conflict is unavoidable, it must be disclosed to our president or secretary, or to the chairman of the audit committee. Each year, we require our directors and executive officers to complete a questionnaire disclosing any transactions between them or their immediate family members and the company. The audit committee is responsible for reviewing and approving any related party transactions involving directors or executives. The audit committee reviews any transactions related to directors or executive officers reported, or identified from the questionnaires, and takes appropriate action. We will disclose on our website any waivers of the Code of Business Conduct related to the directors or executive officers. We granted no waivers in fiscal 2013.
Independent Audits. The lead partner of our independent registered public accounting firm is rotated at least once every five years. PricewaterhouseCoopers LLP has been selected as the independent registered public accounting firm for fiscal 2014.

Meetings. The board met five times during the fiscal year ended in April 2013, including five times in executive session. The non-employee directors meet in executive session without management present at each regularly scheduled board meeting. These executive sessions are chaired by the lead director. During fiscal 2013, each director attended at least 75 percent of the total of all meetings of the board and committees on which the director served. All of the then-current directors attended the 2012 shareholders’ meeting, and we expect all the current directors to attend the 2013 shareholders’ meeting.

Communication with Directors. Interested parties wishing to communicate their comments, concerns or questions about La-Z-Boy to the board of directors, the chairman, the lead director, or any or all of the other non-employee directors may do so by U.S. mail addressed to the board, the chairman, the lead director, or the non-employee directors (or any of them) at:

Office of the Corporate Secretary
La-Z-Boy Incorporated
1284 North Telegraph Road
Monroe, Michigan 48162

The corporate secretary reviews and compiles any communications received for the board, board committees, or individual non-employee directors. He provides a summary of any lengthy or repetitive communications and forwards them to the appropriate director or directors. The complete communication is furnished to the appropriate director or directors upon their request.

Board Committees. We currently have three standing committees of the board: the audit, compensation, and nominating and governance committees. At the board of directors meeting immediately following the annual shareholders’ meeting, the directors establish the membership and determine the chairman for each committee. In accordance with our Corporate Governance Guidelines and the independence standards of the NYSE rules, only independent directors serve on these committees.

The board of directors reviews and approves each of the committees’ charters and amendments. Each committee of the board, and the board itself, has the authority to engage independent consultants and advisors at the company’s expense. The chairman of the board is not a member of any of the board committees, but he coordinates the agendas and activities of the committees with the lead director and each committee chair and attends the committee meetings. Our lead director serves on our audit and compensation committees and generally attends the nominating and governance committee meetings. Committee chairs do not sit on any other committee. Other non-employee directors generally sit on two committees. The current membership of each of the key committees is shown in the following table:

Name
 
Audit
 
Compensation
 
Nominating and
Governance
Kurt L. Darrow                                        
 
 
 
 
 
 
John H. Foss                                        
 
Chair
 
 
 
 
Richard M. Gabrys                                        
 
Member
 
Member
 
 
Janet L. Gurwitch                                        
 
 
 
Member
 
Member
David K. Hehl                                        
 
Member
 
 
 
Member
Edwin J. Holman                                        
 
Member
 
 
 
Member
Janet E. Kerr                                        
 
 
 
 
 
Chair
H. George Levy, MD
 
 
 
Member
 
Member
W. Alan McCollough
 
 
 
Chair
 
 
Dr. Nido R. Qubein                                        
 
 
 
Member
 
Member

Upon his election to the board, we expect that Mr. Lawton will be appointed to the audit committee.
Audit Committee

The audit committee assists the board in the oversight of our financial reporting process, our compliance with legal and regulatory requirements, and the effectiveness of the internal and external audit functions. The audit committee does not provide any expert or special assurance about the financial statements or any professional certification of the outside auditor’s work. The committee selects the independent registered public accounting firm to perform the annual audit of financial statements and internal controls. The committee oversees all aspects of dealing with the independent registered public accounting firm, including its appointment, retention and compensation. The committee monitors the auditor’s independence and annually requests and reviews the outside auditor’s written statement of relationships between the auditor and the company. The committee limits our use of the outside auditors for non-audit work. In addition, the audit committee discusses the quality and adequacy of internal controls with management and the outside auditor. The committee’s charter requires that each member meet the enhanced independence standards for audit committees established in the SEC and NYSE listing standards. The board has determined each of the four committee members meets these independence standards, is financially literate and has accounting or related financial management expertise within the meaning of the NYSE’s corporate governance listing standards, and is an audit committee financial expert within the meaning of the SEC rules. The committee met ten times during fiscal 2013. For further discussion of the audit committee’s activities, see “Audit Committee Report” below.

Compensation Committee

The compensation committee assists the board in overseeing the compensation programs for our executives and directors, including the related risks. The compensation committee regularly reviews and approves the compensation package for our chief executive officer, chief financial officer, and the executive officers named in the Summary Compensation Table (referred to as the named executive officers), with the intent of providing a total compensation package that is competitive with market-median levels for expected performance. In establishing the compensation packages for the named executive officers, the committee annually evaluates the performance of our chief executive officer and reviews with the chief executive officer the performance of the other named executive officers. Membership on the committee requires directors to meet standards of independence as 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. In performing its duties, the committee has access to our human resources and legal personnel and senior management and utilizes an independent outside compensation consultant (Hay Group since fiscal 2010) to advise it on executive compensation matters. The compensation committee annually produces a report on executive compensation for inclusion in the proxy statement (see “Compensation Committee Report” below). The compensation committee met five times during fiscal 2013. The charter of the compensation committee will be provided to any shareholder upon request and can be found on our website at http://investors.la-z-boy.com, under “Corporate Governance.”

COMPENSATION RISK ASSESSMENT. The compensation committee, with the assistance of its outside compensation consultant, reviewed management’s risk assessment related to our compensation plans and concluded that our policies and practices are not reasonably likely to have a material adverse effect on the company. At the committee’s request, management undertook a detailed review of its compensation programs to identify material risks and the existing processes mitigating those risks. Management reviewed the existing compensation plans with a focus on incentive compensation plans and evaluated the plans for various factors including alignment with business strategy, consistent performance metrics, the use of hurdles, market competitiveness, impact on motivation, and the opportunities for management discretion. The review probed for material financial, operational, and reputational risks. Management discussed the results of this review with Hay Group, the committee’s independent compensation consultant. Management subsequently reviewed with the committee the identified risks and management’s determination that the plans and policies do not create risks that are reasonably likely to have a material adverse effect on the company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Messrs. Gabrys and McCollough, Dr. Levy, and Dr. Qubein and Ms. Gurwitch served throughout fiscal 2013 as members of the compensation committee. None of the members of the committee has been an officer or employee of the company or any of its subsidiaries. No named executive officer serves on the board of directors of any company at which a compensation committee member is employed.

Nominating and Governance Committee

The nominating and governance committee is composed of independent directors who met five times during fiscal 2013. The nominating and governance committee identifies, evaluates, and recommends director candidates to the board. The committee also oversees the board’s practices, policies, and procedures and makes recommendations on general corporate governance issues including the size, structure, and composition of the board and its committees. The committee considers candidates identified by the committee’s own members or referrals from other board members, management, or outside sources, including candidates recommended by shareholders. (For information on how to propose a candidate to the nominating and governance committee and on the requirements for a shareholder’s own nomination of a director, see “Next Annual Meeting—Shareholder Proposals for the 2014 Annual Meeting” below.) In evaluating proposed candidates, the committee may review their résumés, obtain references and conduct personal interviews. The committee considers, among other factors, the board’s current and future need for specific skills and the candidate’s experience, leadership qualities, integrity, diversity, ability to exercise mature judgment, independence, and ability to make the appropriate time commitments to the board. The committee also assists the board in overseeing the company’s enterprise risk management process, including risk assessment, mitigation, and determination of risk tolerance levels. The committee’s charter can be found on our website at http://investors.la-z-boy.com, under “Corporate Governance.”

Director Compensation. Working with an independent compensation consultant, we designed the annual pay package for directors to attract and retain highly qualified professionals to represent our shareholders. Directors who are also 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 also reimburse our directors for their costs of travel, lodging, and related expenses while on company-related business. The company provides membership in the National Association of Corporate Directors (NACD) for each director and reimburses directors for fees and expenses for participation in NACD and other programs intended to increase their knowledge of corporate governance and other issues related to their duties as directors. We encourage our directors to visit our company facilities, independently owned retail outlets, and our competitors to improve their understanding of our operations and the industry.

During fiscal 2012, the compensation committee engaged Hay Group, the independent compensation consultant, to review market compensation practices for non-employee directors among comparable public companies. Based on Hay Group’s recommendation, and consistent with the market trends in director compensation, the committee recommended and the full board approved, effective August 1, 2012, eliminating the board and committee meeting fees (except in extraordinary cases where directors are required to attend more than 25 meetings annually) and increasing the annual cash retainer for each director to $70,000 (from $65,000). In addition, the annual retainers for the audit, compensation, and nominating and governance committee chairs were increased to $15,000, $12,000, and $8,500, respectively, up from $12,000, $8,500 and $6,000 previously. Early in fiscal 2014, the committee, after considering the relevant current market information for director compensation, increased the annual retainers for our directors by $5,000, or approximately 3.6%. The additional retainer will be split evenly between cash and equity compensation. Beginning August 1, 2013, the non-employee directors’ annual cash retainer will increase to $72,500, and on September 2, 2013, each non-employee director will receive a grant of restricted stock units (settled in shares) with a value of $72,500.

For fiscal 2013, we paid each director cash and equity compensation in the following amounts:

Cash Compensation

Each non-employee director received an annual cash retainer of $70,000. Meeting fees of $1,500 per meeting were eliminated effective August 1, 2012, concurrent with the increased annual retainer, except in any fiscal year in which the number of board and committee meetings (in person or by conference call) exceeds 25. In such a year, directors will receive a $1,500 fee for each meeting in excess of 25. The board held fewer than 25 meetings in fiscal 2013.

· The lead director received an additional cash retainer of $20,000 for serving in that capacity.

· The chairs of the audit, compensation, and nominating and governance committees received an additional cash retainer of $15,000, $12,000, and $8,500, respectively.

Equity Compensation

· On September 4, 2012, each non-employee director received a grant of 5,004 restricted stock units with a grant date value of $70,006. 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 when the director leaves the board and are settled in shares only.

The following table provides details regarding each of the non-employee directors’ compensation for fiscal 2013. The amount of annual cash compensation includes fees for attending meetings prior to the August meetings. The compensation varied between directors based on lead director status, committee participation, committee chairs held and meetings attended. Stock awards reflect the grant date fair value.

Fiscal 2013 Non-employee Director Compensation

Name
 
Fees Earned
 or Paid in
 Cash
$(1)
 
 
Stock
Awards
$(2)
 
 
All Other
 Compensation
$(3)
 
 
Total
($)
 
John H. Foss                                                                        
 
 
83,000
 
 
 
70,006
 
 
 
3,047
 
 
 
156,053
 
Richard M. Gabrys                                                                        
 
 
91,750
 
 
 
70,006
 
 
 
3,047
 
 
 
164,803
 
Janet L. Gurwitch                                                                        
 
 
70,250
 
 
 
70,006
 
 
 
2,126
 
 
 
142,382
 
David K. Hehl                                                                        
 
 
71,750
 
 
 
70,006
 
 
 
3,047
 
 
 
144,803
 
Edwin J. Holman                                                                        
 
 
71,750
 
 
 
70,006
 
 
 
2,126
 
 
 
143,882
 
Janet E. Kerr                                                                        
 
 
75,125
 
 
 
70,006
 
 
 
2,760
 
 
 
147,891
 
H. George Levy, MD                                                                        
 
 
70,250
 
 
 
70,006
 
 
 
3,047
 
 
 
143,303
 
W. Alan McCollough                                                                        
 
 
78,375
 
 
 
70,006
 
 
 
3,047
 
 
 
151,428
 
Dr. Nido R. Qubein                                                                        
 
 
70,250
 
 
 
70,006
 
 
 
3,047
 
 
 
143,303
 

(1) Includes actual annual board retainer fee, lead director retainer fees, committee chairman fees, and meeting fees (prior to August 1, 2012).

(2) Reflects the grant date fair value computed in accordance with FASB ASC Topic 718. Each director then in office received 5,004 restricted stock units on September 4, 2012. Restricted stock units granted to non-employee directors in prior years under our former plans 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 27, 2013, 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
 
John H. Foss                                            
   
16,514
     
21,572
 
Richard M. Gabrys                                            
   
16,514
     
21,572
 
Janet L. Gurwitch                                            
   
5,000
     
21,572
 
David K. Hehl                                            
   
16,514
     
21,572
 
Edwin J. Holman                                            
   
5,000
     
21,572
 
Janet E. Kerr                                            
   
12,927
     
21,572
 
H. George Levy, MD                                            
   
16,514
     
21,572
 
W. Alan McCollough                                            
   
16,514
     
21,572
 
Dr. Nido R. Qubein                                            
   
16,514
     
21,572
 

(3) Reflects payments of dividend equivalents on the restricted stock units at the time and in the amount that dividends were declared for common shares.

Non-Employee Director Stock Ownership Guideline. Under our stock ownership guidelines for non-employee directors, the non-employee directors are expected to own La-Z-Boy equity (including deferred or restricted stock units) at least equal in value to five times the annual cash retainer, with a five-year timetable to comply. As of April 27, 2013, each director has met the ownership requirements. We prohibit directors, officers or employees from engaging in short-term speculative trading in our shares, including short sales, trading in puts and calls, or buying on margin.

AUDIT COMMITTEE REPORT

The audit committee assists the board in its oversight of the integrity of the financial reporting process, internal controls and procedures, and compliance with legal and regulatory requirements. Management is responsible for the company’s financial reporting process and related internal controls. It is the independent registered public accounting firm’s responsibility to independently audit the company’s financial statements and its internal controls in accordance with the auditing standards of the Public Company Accounting Oversight Board. The audit committee and its members do not replace or duplicate the activities of management or the independent registered public accounting firm. A copy of the current committee charter, which provides more information regarding the committee’s 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 met ten times during fiscal 2013. The committee regularly meets with the senior members of the company’s financial management team and the company’s 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 and in separate private sessions with each of the chairman and chief executive officer, chief financial officer, head of internal audit services, and other members of senior management. At these meetings, the committee discussed with the various parties the company’s financial estimates and judgment, the internal controls over financial reporting, the company’s accounting principles, as well as the company’s regulatory compliance. To assist the committee in performing its duties, the committee utilizes, at the company’s expense, outside accounting, legal and other advisors as appropriate.

The audit committee selects the independent registered public accounting firm and manages all of the other aspects of the relationship, including the firm’s compensation, retention, replacement and the scope of any additional work. In addition, the committee reviews and approves the non-audit services work and fees prior to the performance of such work by PricewaterhouseCoopers. As part of the selection process, the committee evaluated the independence of PricewaterhouseCoopers. The committee discussed with the independent auditors their independence and the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T, and the committee received the written disclosures and the letter from PricewaterhouseCoopers required by the Public Company Accounting Oversight Board. After consideration of these factors, the committee determined that PricewaterhouseCoopers is independent of the company and management and selected PricewaterhouseCoopers as the company’s independent registered public accounting firm for fiscal 2014.

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-Boy’s Annual Report on Form 10-K for the fiscal year ended April 27, 2013, for filing with the Securities and Exchange Commission.

The Audit Committee
John H. Foss, Chairman
Richard M. Gabrys
David K. Hehl
Edwin J. Holman

Audit Fees

For professional services rendered to us for fiscal years 2013 and 2012, PricewaterhouseCoopers LLP has billed us as follows:

 
 
Fiscal 2013
   
Fiscal 2012
 
Audit Fees                                                                                                                    
 
$
1,283,000
   
$
1,012,500
 
Audit Related Fees                                                                                                                    
   
112,500
     
150,979
 
Tax Fees                                                                                                                    
   
14,100
     
35,927
 
All Other Fees                                                                                                                    
   
3,000
     
2,600
 
Total                                                                                                                
 
$
1,412,600
   
$
1,202,006
 

Audit fees are for the audit work performed on our annual financial statements, our internal controls over financial reporting, management’s 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.

Audit-related fees relate to (i) audit of our employee benefit plan (2012 only) (ii) review of controls related to the implementation of new accounting systems associated with our enterprise resource planning project and (iii) accounting and SEC consultations. Tax fees include fees for foreign tax compliance and advisory services. All other fees represent accounting research software subscription fees.

The audit committee’s current policy requires pre-approval of all audit and non-audit services provided by the independent auditors before the engagement of the independent auditors to perform them.

PROPOSAL NO. 1: ELECTION OF DIRECTORS

Until 2011, our board of directors was divided into three classes, with members of each class elected for staggered three-year terms. Beginning in 2011, we opted to declassify the board and to provide for annual elections of all directors for one-year terms. Beginning with this election, shareholders will elect the entire board, with each director elected to a one-year term. In order to ensure an orderly transition as current directors retire, we increased the size of the board to 11 members effective at the time of the shareholders’ meeting. Thus, 11 directors will be elected to serve until our 2014 annual meeting of shareholders and until their successors are elected and qualified.

Upon the recommendation of the nominating and governance committee, the board has nominated for reelection the ten incumbent directors, all of whose terms expire at this year’s meeting. They are: Kurt L. Darrow, John H. Foss, Richard M. Gabrys, Janet L. Gurwitch, David K. Hehl, Edwin J. Holman, Janet E. Kerr, H. George Levy, M.D., W. Alan McCollough and Dr. Nido R. Qubein. In addition, acting on the recommendation of the nominating and governance committee, the board has nominated Michael T. Lawton for the additional seat on the board. Mr. Lawton was first recommended to us by the chief executive officer of another consumer-focused public company. Before deciding to recommend his nomination to the board, the nominating and governance committee considered more than a dozen potential candidates. Based on the committee’s review of Mr. Lawton’s and the other candidates’ résumés and director interviews with several potential candidates, the committee recommended, and the board approved, Mr. Lawton’s nomination. All of the nominees have consented to serve if elected. In the absence of other instruction, the persons named in the accompanying form of proxy will vote in favor of these nominees. If, at the time of the meeting, any nominee has become unable or unwilling to serve, a circumstance we do not expect, the proxy holders will vote for a substitute nominee designated by the board.

Under applicable Michigan corporate law, directors will be elected at the meeting by a plurality of votes cast from among those persons duly nominated, with separate balloting for the eleven positions. The nominees who receive the highest through eleventh highest numbers of votes will be elected, regardless of the number of votes that for any reason are not cast for the election of those nominees, including abstentions, broker non-votes, or 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 immediately following the shareholders’ meeting. The board then must act on the offer of resignation at or before its next meeting, which is currently planned for mid-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.

We provide information below about each nominee for election at the meeting. Unless otherwise indicated, the principal occupation of each director or director nominee has been the same for at least five years.

Kurt L. Darrow, age 58, has been a director, and our president and chief executive officer, since 2003, and has served as our chairman since 2011. Since joining the company in 1979, he has served in positions of increased responsibility, including president of La-Z-Boy Residential, our largest division. He is a member of the Business Leaders for Michigan, a non-profit executive leadership organization, and serves on its executive committee. He served as chairman of the American Home Furnishings Alliance (an industry association) and continues to serve on its board. He is vice chairman of the board of directors of the Mercy Memorial Hospital Corporation in Monroe, Michigan. He served as a Trustee of Adrian College (Adrian, Michigan) for nine years, until May 2011. Mr. Darrow’s proven leadership skills and extensive knowledge of the company and the furniture industry, developed over his nearly 35 years at La-Z-Boy Incorporated, qualify him to serve on our board.

John H. Foss, age 70, has been a director since 2001. He retired as Vice President, Treasurer, and Chief Financial Officer of Tecumseh Products Company (manufacturer of compressors) in 2001. He has served as a director of United Bancorp, Inc. since 1992 and sits on its audit committee and its compensation and corporate governance committee. Mr. Foss’s service as the chief financial officer and director of a public company, which provided him experience in strategic planning, compensation management, internal controls, mergers and acquisitions, and corporate governance, qualifies him for service on our board.

Richard M. Gabrys, age 71, serves as our lead director and has been a director since 2006. Mr. Gabrys worked for 42 years with Deloitte & Touche (a professional services firm providing audit and financial advisory services) and retired as its Vice Chairman. He maintains his license to practice as a certified public accountant in the State of Michigan. He currently serves as a director of CMS Energy Corp. (an integrated energy company) and TriMas Corporation (a manufacturer of high-quality trailer products, recreational accessories, packaging systems, energy products and industrial specialty products). He also serves on the boards of several not-for-profit organizations, including The Detroit Institute of Arts, Karmanos Cancer Institute, Alliance for Safer Streets in Detroit (Crime Stoppers), Detroit Regional Chamber and Ave Maria University. He is a member of the Management Board of Renaissance Venture Capital Fund, an affiliate of Business Leaders for Michigan, a non-profit executive leadership organization. In addition, within the past five years, Mr. Gabrys served (until June 2011) on the board of directors of Massey Energy Company, a coal producer. Mr. Gabrys’ extensive knowledge and experience related to public reporting, international business, mergers and acquisitions, risk oversight, executive compensation and corporate governance matters gained from 42 years in public accounting and service on the boards of multiple publicly-traded companies qualify him to serve on our board.
Janet L. Gurwitch, age 60, has been a director since 2010. Since 2011, she has been an operating partner of Castanea Partners, Inc. (a private equity and venture capital firm) and she has served as chairman of Gurwitch Consulting Group LLC since 2009. She also served as an adjunct professor in management at Rice University for the 2009-2010 academic year. Previously she was co-founder and chief executive officer of Laura Mercier Cosmetics from 1995-2008. Prior to co-founding Laura Mercier Cosmetics, she served as executive vice president of Neiman Marcus (1992-1995) and senior vice president of merchandising for Foley’s Department Store, where she worked from 1974-1992. Ms. Gurwitch is a board member of Drybar Holdings, LLC (hair salon chain offering blow drying services) and a former member of the board of directors for Urban Decay Cosmetics, LLC (a cosmetics company located in Newport Beach, California). She also is a member of the Council of Overseers (an advisory board) of the Jesse H. Jones Graduate School of Business at Rice University and is on the Development Board of the University of Texas Health Science Center. Ms. Gurwitch’s unique mix of experience as an entrepreneur, builder of consumer brands, and an executive at the highest levels of both public and private, consumer focused, and fashion oriented companies, qualifies her to serve on our board.

David K. Hehl, age 66, has been a director since 1977. He is a certified public accountant and a member of the public accounting firm of Cooley Hehl Wohlgamuth & Carlton P.L.L.C. Mr. Hehl’s long tenure on our board provides a unique historical perspective and appreciation of our heritage. Through his extensive experience in providing audit and tax services as a certified public accountant, along with his experience on the board, Mr. Hehl has developed financial, risk oversight and corporate governance skills that qualify him to serve on our board.

Edwin J. Holman, age 66, has been a director since 2010. Mr. Holman served as interim chief executive officer of The Pantry, Inc. from October 5, 2011 until March 5, 2012. Previously he served as chairman and chief executive officer of Macy’s Central (2004-2009), a division of Macy’s Inc. (an operator of department stores). He also served in senior executive positions at a variety of retailers, including Galyan’s Trading Company, Bloomingdale’s, the Rich’s/Lazarus/Goldsmiths divisions of Federated Department Stores, Inc., Petrie Retail, Inc., Woodward & Lothrop, The Carter Hawley Hale Stores, and The Neiman Marcus Group. Mr. Holman has served as a director on the board of the independently operated convenience chain store, The Pantry, Inc., since 2005. Except for the six months that he acted as interim chief executive officer, he has served as that company’s chairman since 2009. Mr. Holman previously served as a director on the boards of several public companies including Office Max (2003), an office supply retailer, and Circle International (1994-2000), a provider of international transportation and logistics. He served as the non-executive chairman of RGIS International (retail inventory solutions), a portfolio company of the Blackstone Group from March 2010 until March 2013. Mr. Holman is a 2011 National Association of Corporate Directors (NACD) Governance Fellow and has demonstrated his commitment to boardroom excellence by completing NACD’s comprehensive program of study for corporate directors. Mr. Holman’s 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.

Janet E. Kerr, age 58, has been a director since 2009. She is currently a professor of law and the Executive Director of the Geoffrey H. Palmer Center for Entrepreneurship and the Law at Pepperdine University School of Law in Malibu, California, where she holds the Laure Sudreau-Rippe Endowed Chair. Professor Kerr has consulted with various companies on corporate governance, including compliance with the Sarbanes-Oxley Act, and has consulted on cases dealing with financial institution fraud. She has authored articles and a book on securities, corporate law, and corporate governance. She is a member of the board of directors of TCW Strategic Income Fund, Inc. (a NYSE-listed closed-end registered investment company), TCW Funds, Inc. (an open-end investment company) and Tilly’s, Inc. (a publicly held, since May 2012, retailer of apparel and accessories), where she chairs the nominating and governance committee. Professor Kerr served on the board of directors and as chair of the corporate governance/nominating committee of CKE Restaurants, Inc. for six years while it was a publicly held company. She founded several technology companies including X-Laboratories, which she co-founded with HRL Laboratories, LLC to assist in the commercialization of technologies in research institutions. Professor Kerr has also served as an advisor on corporate issues and entrepreneurial strategies to the People’s Republic of China, France, and Thailand and has represented the U.S. Department of Commerce as a speaker at international events. Ms. Kerr’s 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.

Michael T. Lawton, age 54, is nominated for his first term as a director. He currently serves as executive vice president and chief financial officer of Domino’s Pizza, Inc. (since August 2010). He also served as its interim chief information officer from October 2011 until March 2012. He served as its executive vice president of international from October 2004 until March 2011 and previously served as its senior vice president finance and administration of international from June 1999 until October 2004. Prior to joining Domino’s Pizza, Inc., Mr. Lawton was employed in various financial and general management positions with Gerber Products Company starting in 1986. Mr. Lawton’s experience as a public company chief financial officer will help ensure continuity of financial expertise on the board and the audit committee, and coupled with his experience managing a growing international operation of a well-known consumer brand, qualifies him to serve on our board.

H. George Levy, M.D., age 63, has been a director since 1997. He currently practices otorhinolaryngology and formerly was chairman and chief executive officer of USI, Inc. (a private firm engaged in consulting on e-commerce, Web design, and systems integration) and chief executive officer and founder of Enduenet, Inc. (a firm providing electronic medical records for physicians and hospitals). Dr. Levy’s entrepreneurial experience, coupled with his board experience, qualifies him for service on our board.

W. Alan McCollough, age 63, has been a director since 2007. He was 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 and a director from 1999 to 2006. He has served on the boards of VF Corporation (branded apparel) since 2000 and The Goodyear Tire & Rubber Company since 2007. Mr. McCollough’s experience leading a large publicly traded consumer products company, as well as his service on public company boards, qualifies him to serve on our board.

Dr. Nido R. Qubein, age 64, has been a director since 2006. He has been president of High Point University since 2005 and chairman of the board of bakery franchisor Great Harvest Bread Company since 2001. He also served from 2000 to 2008 as chairman of Biz Life, Inc. (magazine publishing) and was chairman of Creative Services, Inc. (publishing and consulting) from 1978 to 2006. He has been a director of BB&T Corporation, a provider of banking and financial services, since 1990, and of Dots, LLC, a privately held women’s apparel company, since 2011. Dr. Qubein has authored a dozen books on leadership, sales, communication and marketing and serves as advisor to businesses and organizations throughout the world on how to brand and position their enterprises successfully. Dr. Qubein’s experience as a business advisor, entrepreneur, director on public company boards and leader at multiple companies qualifies him to serve on our board.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE ABOVE NOMINEES.

SHARE OWNERSHIP INFORMATION

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, 2012, except as otherwise indicated)

Name and Address
 
Number of Shares
 
 
Percent of Class
 
 
 
 
 
 
 
 
Franklin Resources, Inc. and related parties
One Franklin Parkway
San Mateo, CA 94403                                                                                                                                  
 
 
4,286,172
 
 
 
8.11
 
 
 
 
 
 
 
 
 
 
BlackRock Inc.
40 East 52nd Street
New York, NY 10022                                                                                                                                  
 
 
3,996,898
 
 
 
7.56
 
 
 
 
 
 
 
 
 
 
State Street Corporation
One Lincoln Street
Boston, MA 02111                                                                                                                                  
 
 
3,243,430
 
 
 
6.14
 
 
 
 
 
 
 
 
 
 
The Vanguard Group, Inc.
100 Vanguard Blvd.
Malvern, PA 19355                                                                                                                                  
 
 
3,097,597
 
 
 
5.86
 
 

· Information about Franklin Resources, Inc., Charles B. Johnson and Rupert H. Johnson, principal shareholders of Franklin Resources, Inc., and Franklin Advisory Services, LLC is based on an amended Schedule 13G they filed jointly after December 31, 2012, in which they reported that as of that date they had sole voting power over 4,036,172 common shares and sole dispositive power over 4,286,172 common shares through their control of Franklin Mutual Advisers, LLC, a wholly owned subsidiary of Franklin Resources, Inc., that acts as investment manager to various investment companies that hold our shares.

· Information about BlackRock Inc. and its related companies is based on an amended Schedule 13G they filed jointly after December 31, 2012, in which they reported that as of that date they had sole voting and dispositive power over 3,996,898 common shares. The other companies reported as beneficial owners of our common shares were BlackRock Advisors, LLC, BlackRock Investment Management, LLC, BlackRock Asset Management Australia Limited, BlackRock Asset Management Canada Limited, BlackRock Asset Management Ireland Limited, BlackRock Advisors (UK) Limited, BlackRock Fund Advisors, BlackRock Institutional Trust Company, N.A., BlackRock Japan Co. Ltd., and BlackRock Investment Management (UK) Limited.

· Information about State Street Corporation and its related companies is based on a Schedule 13G they filed jointly after December 31, 2012, in which they reported that as of that date they had shared voting and dispositive power over 3,243,430 common shares. The other companies reported as beneficial owners of our common shares were State Street Bank And Trust Company, SSGA Funds Management, Inc, State Street Global Advisors Limited, State Street Global Advisors Ltd, and State Street Global Advisors, Australia Limited.

· Information about The Vanguard Group, Inc. is based on an amended Schedule 13G it filed after December 31, 2012, in which it reported that as of that date it had sole voting power over 84,079 common shares, sole dispositive power over 3,016,018 common shares and shared dispositive power over 81,579 common shares.
Security Ownership of Current Management
(as of the record date for the annual meeting)

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)
 
 
Units
Settleable in
 Cash(3)
 
Mark S. Bacon, Sr.                                                                                                        
 
 
92,543
 
 
 
 
Kurt L. Darrow                                                                                                        
 
 
526,031
 
 
 
 
John H. Foss                                                                                                        
 
 
36,672
 
 
 
16,514
 
Richard M. Gabrys                                                                                                        
 
 
30,572
 
 
 
16,514
 
Janet L. Gurwitch                                                                                                        
 
 
21,572
 
 
 
5,000
 
David K. Hehl(5)                                                                                                        
 
 
47,028
 
 
 
16,514
 
Edwin J. Holman                                                                                                        
 
 
24,572
 
 
 
5,000
 
Janet E. Kerr                                                                                                        
 
 
22,472
 
 
 
12,927
 
Steven M. Kincaid                                                                                                        
 
 
188,141
 
 
 
 
 
Michael T. Lawton                                                                                                        
 
 
 
 
 
 
 
H. George Levy, MD                                                                                                        
 
 
39,672
 
 
 
16,514
 
W. Alan McCollough                                                                                                        
 
 
28,572
 
 
 
16,514
 
Dr. Nido R. Qubein                                                                                                        
 
 
45,317
 
 
 
16,514
 
Louis M. Riccio, Jr.                                                                                                        
 
 
145,605
 
 
 
 
 
Otis S. Sawyer                                                                                                        
 
 
105,168
 
 
 
 
 
 
 
 
 
 
 
 
 
 
All current directors and current executive officers as a group (14 persons) own 2.531% of the outstanding shares (4)
 
 
1,353,937
 
 
 
122,011
 

(1) This column lists beneficial ownership as calculated under the SEC rules, including stock options and restricted stock units that that may be exercised or converted without the company’s consent within 60 days of our record date of June 28, 2013. Each current director and officer individually owns less than one percent (1%) of our outstanding shares.

(2) These amounts include 21,572 restricted stock units for each non-employee director which vest and settle in shares when the director leaves the board. See the Fiscal 2013 Non-employee Director Compensation table and related footnotes beginning on page 9 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 June 28, 2013, 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 individual’s ownership percentage, shares representing restricted stock units and shares subject to options held by other directors or executives are not counted.
In addition to the restricted stock units described in footnote 2, the table includes the following numbers of shares subject to options:

Mr. Bacon                                                                        
 
 
47,173
 
Mr. Darrow                                                                        
 
 
214,124
 
Mr. Kincaid                                                                        
 
 
67,820
 
Mr. Riccio                                                                        
 
 
60,268
 
Mr. Sawyer                                                                        
 
 
54,579
 
All current directors and current executive officers as a group
 
 
443,964
 

(5) The table also includes 1,956 shares owned by Mr. Hehl’s wife, of which shares Mr. Hehl disclaims beneficial ownership.

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 2013, all Section 16(a) filing requirements were complied with in a timely fashion.

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). 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 29.

Executive Summary

Our strategic initiatives have been focused on sales growth, positive operating income generated on the sales growth and turning our Retail segment profitable. During fiscal 2013, we made continual progress against our strategic initiatives, which translated into improvements in our operating results. Most prominently, we grew over $100 million in sales compared to fiscal 2012, improved our operating margin by over 27% to 5.1% and turned our Retail segment profitable in the year. Additionally, we continued to strengthen our balance sheet, ending the year with a debt to capital ratio of 1.6%, and a strong cash position of $131 million. For a more complete and detailed explanation of our financial results, please review our financial press released filed with the Form 8-K on June 18, 2013, or our Form 10-K, both of which can be found on our website at http://investors.la-z-boy.com/phoenix.zhtml?c=92596&p=irol-sec. We establish our incentive performance measures to focus our efforts on sales growth and margin improvement. As further discussed below in the section on Short Term Incentive Awards (page 22), we met and exceeded our financial targets for the year.

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. 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 97% of the votes cast by our shareholders in both 2011 and 2012 were to approve the compensation we paid to our named executive officers. In determining executive compensation for fiscal 2013, the Committee took into account the results of the advisory votes, which reflected shareholder approval of our compensation philosophy, among the many factors considered.
We believe our executive compensation programs continue to provide a competitive pay-for-performance package that helps us attract, retain, and motivate our executives. We made no significant changes to these programs during fiscal 2013. Our compensation committee worked with Hay Group, the committee’s independent executive compensation consultant, to evaluate our programs, and the committee took the following actions during the year.

Fiscal Year 2013 Executive Compensation Actions

·            Base Salary In June 2012, the committee reviewed the salary levels for each named executive officer. As part of the salary review process, the committee considered the performance of each named executive officer, relevant market data provided by Hay Group, the parity of compensation between various levels of management, and the company’s overall performance. Consistent with increases we paid to our other managers in fiscal 2013, the committee approved salary increases for each named executive officer of 2.5%, rounded up to the nearest thousand dollars.

·            Long-term Equity Incentive Awards The committee determined that equity grants made July 11, 2012 (for fiscal 2013) would be composed of stock options (50%) and performance-based shares (50%). The size of an award was based on a percentage of the recipient’s 2013 base salary, and the percentage varied by salary grade. The mix of stock options and performance-based shares was adjusted to align with Hay Group’s report of best practices of U.S. companies utilizing both long-term incentive vehicles as part of their executive compensation strategy.

On the following pages, we provide additional detail for each compensation element.

Executive Compensation Approach

Our executive pay programs are designed to reflect the following objectives:

· Market competitive. Pay packages, including base salaries and incentive opportunities, are designed to be competitive with industry peers and pay practices for similar companies and business models at U.S. retailers and U.S. manufacturers with a retail focus.

· Pay for performance. The majority of the named executive officers’ target pay opportunity is provided through annual and long-term incentive award opportunities, which are earned, or increase in value, based on company and stock performance.

· Align with shareholder interests. The named executive officers are required to own company stock over a sustained period to ensure they have the perspective of long-term shareholders.

· Program effectiveness. We have clearly defined programs that provide meaningful award opportunities aligned to the achievement of our business strategy.

· Cost effıcient. 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 executive’s 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, the chief executive officer’s pay level and at-risk pay portion are higher than those of other officers due to his greater level of responsibility.
Compensation Committee’s 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 corporate vice president human resources) provide input on program design (including goals and weighting) and information on the company’s and the furniture industry’s performance. Management is responsible for implementing the executive pay program that the committee approves.

The compensation committee has retained Hay Group as its independent executive compensation consultant to advise the committee on matters related to executive compensation. Hay Group does not provide any services to the company other than its work for the board of directors. Under the committee’s direction, Hay Group does interact 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. The committee has sole authority to retain and terminate consultants used to assist in the evaluation of executive compensation.

In February 2013, the committee received Hay Group’s report on the consulting firm’s independence. The report included the following factors: (1) other services provided to us by the consultant; (2) the fees paid by us as a percentage of the consultant’s total revenue; (3) the consultant’s 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 consultant’s work did not present any conflict of interest. In reaching that conclusion, the committee considered all factors specified in the NYSE’s new rules related to compensation advisor independence.

Pay-Setting Process Methodology

We assign executives to pay grades based on their duties and responsibilities. For each pay grade, 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 executive’s competencies, skills, experience, and performance, as well as our business needs, cost, and internal pay equity relationships.

In setting the named executive officers’ pay levels, the committee reviews pay of the chief executive officer and other named officers. Annually we review current total direct compensation (salary, annual and long-term incentive awards) among a peer group of companies. The peer group is composed of publicly-traded U.S. companies with comparable revenues and market capitalization that are either competitors or manufacturing companies with a retail focus. The 15 peer companies considered in setting fiscal 2013 pay levels were Acuity Brands, Inc.; Callaway Golf Company; Ethan Allen Interiors, Inc.; Furniture Brands International, Inc.; Haverty Furniture Companies, Inc.; Herman Miller, Inc.; Knoll, Inc.; Pier 1 Imports, Inc.; Polaris Industries, Inc.; Sealy Corporation; Select Comfort Corporation; Tempur-Pedic International, Inc.; The Toro Company; Under Armour, Inc.; and Wolverine Worldwide.

To maximize year-over-year comparability, the committee prefers that the peer group remain consistent from year to year. The committee evaluates each member annually, however, to ensure that its inclusion remains appropriate. The committee worked with Hay Group to review and revise the peer group of companies for fiscal 2014. Due to significant growth over recent years of review, Polaris Industries, Inc. and Under Armour, Inc. will be removed as their revenue levels and business models no longer meet the selection criteria of the committee. These companies will be replaced by Libby Inc. and Restoration Hardware Holdings, Inc., specialty manufacturers and retailers in the home furnishings market, which better align with the committee’s size and business model criteria. With the merger of Sealy Corporation and Tempur-Pedic International, Inc., the new company known as Tempur Sealy International will be considered a member of the peer group, subject to annual review. These changes result in a peer group of 14 companies for fiscal 2014 with median revenues and market capitalization that provide an appropriate basis of comparison for La-Z-Boy.
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 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 2013 compensation, the target total direct compensation of our named executive officers as a group was 115% of the median total direct compensation for comparable general industry companies and 83% of the median total direct compensation for retail companies.

Periodically, we also review the 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 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 company’s peer group. In addition, the committee annually reviews estimated amounts to be paid to the named executive officers under various employment termination situations, including a change in control of the company. 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.

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 officer’s 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 committee’s independent compensation consultant coordinates the committee’s evaluation of the CEO’s 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.

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:

· Base salary

· Management Incentive Program (“MIP”) (annual cash incentive opportunity)

· Long-term equity incentive awards

· Other executive compensation program elements (stock ownership guidelines, retirement benefits, deferred compensation)

Some elements vary based on the company’s performance, and some provide no benefit unless the company achieves specific results. 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 at pages 26 and 27. These elements are intended to assist us in attracting and retaining quality executive talent and ensure continuity of our leadership.
Base Salary

Base salaries paid to our named executive officers are based on their duties, competencies, experience and performance. In setting base salaries for our executive team, 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 2013

In June 2012, the committee reviewed the salary levels for each named executive officer. As part of the salary review process, the committee reviewed and considered the performance of each named executive officer, relevant market data provided by Hay Group, the parity of compensation between various levels of management, and the company’s overall performance. Consistent with increases we paid to our other managers in fiscal 2013, the committee approved salary increases for each named executive officer of 2.5%, rounded up to the nearest thousand dollars.

Salary Changes for Fiscal 2014

In April 2013, the committee reviewed salary levels for each of our named executive officers. The committee took into consideration a combination of performance, level of responsibility, and current salary relative to market data provided by Hay Group in determining increases, and approved increases for four of the named executive officers. Salaries are rounded to the nearest thousand dollars.

The named executive officers’ fiscal 2013 and 2014 salaries are presented in the table below.

Executive
 
Fiscal 2013
 Salary
$ (1)
 
 
Fiscal 2014
 Salary
$ (1)
 
 
% Change
 
 
 
 
 
 
 
 
 
 
 
Kurt L. Darrow                                                                                                                
 
 
846,000
 
 
 
880,000
 
 
 
4.0
%
Louis M. Riccio, Jr                                                                                                                
 
 
410,000
 
 
 
425,000
 
 
 
3.7
%
Mark S. Bacon, Sr                                                                                                                
 
 
462,000
 
 
 
480,000
 
 
 
3.9
%
Steven M. Kincaid                                                                                                                
 
 
380,000
 
 
 
380,000
 
 
 
0.0
%
Otis S. Sawyer                                                                                                                
 
 
339,000
 
 
 
350,000
 
 
 
3.2
%


(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 2013 Summary Compensation Table on page 29 below.

Incentive Compensation

The La-Z-Boy Incorporated 2010 Omnibus Incentive Plan is designed 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 our long-term strategic plan and reduces any incentive to pursue risky or unsustainable results.

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 designed to motivate and reward executives for the achievement of 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 up to 200% of their target incentive opportunity, based on performance. For the named executive officers, we base the financial goals on the company’s overall consolidated financial performance.
Fiscal 2013 financial measures were:

· 60% weight  operating margin (operating income as a percentage of net sales)
· 40% weight — net sales

The compensation 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. 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 2013.

The committee set the target financial performance goals to be challenging but achievable. Over the prior five years (fiscal years 2008 to 2012), our payouts under the MIP for overall company financial performance averaged approximately 59% of target.

The following table summarizes the fiscal 2013 MIP performance goals.

Fiscal 2013 MIP Goals

Performance Level
 
Net Sales
(in Billions)
   
Operating
 Margin
 
Maximum                                                                                                                                      
 
$
1.389
     
7.0
%
Target                                                                                                                                      
 
$
1.321
     
5.5
%
Threshold                                                                                                                                      
 
$
1.238
     
3.5
%

Analysis — 2013 MIP Awards Were Above Target Reflecting Our Financial Performance

Our 2013 company financial performance results exceeded, on a combined basis, the established target levels, reflecting the strong operating results during the year. Our 2013 sales of $1,332,525,000 exceeded our target of $1,321,407 and produced a payout of 117% of the sales goal opportunity, and our operating margin of 5.3% was slightly under our target of 5.5% and produced a 95% payout of the operating margin opportunity. The overall payout level, after applying the weighting factors, was 104% of target. Thus, 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 2013 were above target levels.

Our named executive officers’ fiscal 2013 target, achieved performance level, and actual MIP awards, expressed as a percentage of base salary, were as follows:

Executive
 
Fiscal 2013
Target
 Incentive
(% of base
 salary)
 
 
Achieved
Performance
 Level (% of
 target
 performance)
 
 
Actual
Fiscal 2013
 Incentive
 Payout
 (% of base
salary)
 
Kurt L. Darrow                                                                                                                
 
 
100
%
 
 
104
%
 
 
104.0
%
Louis M. Riccio, Jr.                                                                                                                
 
 
75
%
 
 
104
%
 
 
78.0
%
Mark S. Bacon, Sr.                                                                                                                
 
 
75
%
 
 
104
%
 
 
78.0
%
Steven M. Kincaid                                                                                                                
 
 
60
%
 
 
104
%
 
 
62.4
%
Otis S. Sawyer                                                                                                                
 
 
60
%
 
 
104
%
 
 
62.4
%

Fiscal 2014 MIP Awards

The committee has approved the following target incentives percentage of base salary for fiscal 2014: Mr. Darrow, 100%; Messrs. Riccio and Bacon, 75%; and Messrs. Kincaid and Sawyer, 60%. The committee established operating margin (60% weight) and net sales (40% weight) as the financial measures for fiscal 2014.
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, options, or other forms of equity based compensation) intended 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 received by executives from these awards varies based on the company’s 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 are granted in the first quarter of the new fiscal year. Our chief executive officer has discretion during the year to approve limited grants of restricted stock to new or newly promoted 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. Our stock options and performance-based stock awards are generally designed 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. However, we may not be able to deduct the cost of restricted stock awards to certain named executive officers for federal income tax purposes in a given year. For more discussion of the tax treatment, see Deductibility of Executive Compensation on page 27.

Fiscal 2013 Grants

Early in fiscal 2013, we granted two types of stock-based awards to the named executive officers under the La-Z-Boy Incorporated 2010 Omnibus Incentive Plan: stock options and performance-based shares.

The fiscal 2013 award types are summarized below.

Stock Options (50% of total fiscal 2013 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 company’s stock price appreciates, directly aligning executive compensation with the value created for shareholders as reflected in stock price appreciation from the date of grant. Stock options granted in fiscal 2013 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.

Performance-Based Stock Awards (50% of total fiscal 2013 long-term incentive opportunity)

Performance-based stock represents an 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 2013, executives will earn stock if the company achieves specified financial goals. The value of any earned shares depends on La-Z-Boy’s future stock price. An executive’s award opportunity ranges from 50% of the executive’s target award if minimum performance requirements are met to a maximum of 200% of the target award. Payout of shares earned will be made following the conclusion of the three-year performance period.
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 2013, 2014, and 2015, 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:

· Sales Growth (40%): 50% of the payout based on the sales growth factor will be based on fiscal 2013 results, 30% on fiscal 2014 results, and 20% on fiscal 2015 results.
· Operating Margin (40%): 50% of the payout based on the operating margin factor will be based on fiscal 2013 results, 30% on fiscal 2014 results, and 20% on fiscal 2015 results.
· Total Shareholder Return (20%): Payout based on total shareholder return will be based on shareholder return over the entire three-year performance period relative to the performance of the S&P 600 small cap index.

Shares may be earned based on each factor independent of 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. If the company performs at the designated target level of all three factors, the target number of shares is earned. The actual number of shares earned can be more or less than target level depending on performance.

Earnings and Payouts for Prior Equity Grants

The named executive officers realized value in fiscal 2013 when the restrictions lapsed on a portion of restricted grants made in fiscal 2008 through fiscal 2010.

The named executive officers earned payouts on the performance-based equity grants made in fiscal 2011 for the three-year performance period that ended with our fiscal 2013 year end. The performance targets for fiscal 2011 grants were sales growth of 11% from our fiscal 2010 results and diluted earnings per share in fiscal 2013 of $1.25. We achieved 13% sales growth, resulting in the maximum payout for the sales growth goal. The named executive officers earned no payout for the earnings per share goal. In addition, our performance-based equity grants made in fiscal 2013 (which are more fully described above) provide for 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. The goals established for fiscal 2013 were sales growth of 7% and operating margin of 5.5%. Based on our sales growth of 8.2% and our 5.3% operating margin, the named executive officers earned 130% of the sales growth target and 80% of the operating margin target. These awards are earned contingent on the executive’s remaining with the company through the end of fiscal 2015, when they will be paid.

Our named executive officers also exercised stock options during fiscal 2013. The pre-tax amounts realized from these sources are shown in the fiscal 2013 Option Exercises and Stock Vested table (on page 34).

Fiscal 2014 Grants

Awards made to executive officers during the past several fiscal years have included a mix of stock options, restricted stock, and performance-based shares. The committee determined that equity grants made June 17, 2013 (for fiscal 2014) will 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 600 small cap index. The size of an equity award will be based on a percentage of the recipient’s base salary, and the percentage will vary by grade. In fiscal 2014, the committee granted our named executive officers stock options totaling 174,595 shares and performance-based equity awards covering 106,538 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. Our executives are expected to own a fixed number of shares of company stock equal in value to a multiple of their annual base salary (four times base salary for our CEO and two times base salary for the other named executive officers). Executives must achieve compliance within five years of becoming subject to the ownership guidelines. Until June 2013, we computed the requirement for each executive based on each executive’s annual salary and our stock’s average closing price in the month of April 2010, which resulted in requirements ranging from approximately 45,000 to 210,000. We reassessed the share requirement in June 2013 based on each executive’s salary and a representative share price at the end of fiscal year 2013. The new share requirements for the named executive officers range from approximately 37,000 to 189,000. The committee will reassess the share requirement again in 2016, and, subject to variation in our stock price, executives can expect their requirements to increase as their compensation increases.

In determining compliance with the guidelines, we include shares owned directly, shares held in a family trust or qualified retirement program, service-based restricted stock, and performance-based shares contingently earned in completed performance periods but not yet paid out. As of April 27, 2013, all of the named executive officers were in compliance with their guidelines.

Retirement Benefits

We provide retirement benefit plans to encourage long-term employment and to help employees save for their retirement. Our named executive officers are eligible to participate in the same retirement benefit programs we offer to salaried employees at the corporate level.

We currently offer 401(k) and profit sharing plans to which the company may contribute. Company matching contributions vary by operating unit and range from 0% to a maximum of 50% of the first 4% contributed by the employee. Profit sharing contributions for each participant (including all of the named executive officers) can range from 0% to 10% of the participant’s salary and bonus, based on the company’s annual profitability. Profit sharing contributions were suspended for fiscal 2009 for all participants and have not been reinstated. The company introduced an annual profit-sharing component to the 401(k) plan for fiscal year 2013, however, employees who are eligible for the MIP, including our named executive officers, are not eligible to participate in this benefit.

Performance Compensation Retirement Plan

Effective April 27, 2013, our board of directors adopted the La-Z-Boy Incorporated Performance Compensation Retirement Plan. All of our executive officers and executive management employees will participate in the plan, as may certain other key management employees designated from time to time by our compensation committee. The plan is a bonus-style arrangement that allows contribution credits to be made to accounts for the participants, based on performance, for their retirement.

The plan calls for the compensation committee to set company performance criteria and minimum performance levels (called "thresholds") for those criteria shortly after the beginning of a fiscal year for that fiscal year (although we may choose not to make any contributions in any particular year). During any year in which we set forth these criteria and thresholds, we will also set forth a percentage factor (which may differ among participants). If, at the end of the fiscal year, the performance criteria and thresholds are met or exceeded, the accounts for executives participating in the plan for the full fiscal year will receive contribution credits measured by the applicable percentage factor chosen for that year multiplied by the sum of the participant's base salary and bonus. The contribution credits are bookkeeping credits that are each equivalent to one U.S. dollar if the participant becomes vested in the account and is later entitled to a distribution. The contribution credits will be increased each year by tracking an interest element corresponding with corporate bond yields. Any contribution credits made to any account that are determined to be the result of financial errors or omissions will be eliminated.

Distribution of an account balance will generally be made upon a participant's separation from service (except in certain circumstances where a delay is required by law or where a participant elects to delay a distribution) as long as the participant is vested at that time. To achieve vesting, the plan requires that a participant reach age 55 and that the sum of the participant's age and credited years of vesting service equals or exceeds 65. If a participant is not vested upon separation from service, all contribution credits in the participant's account will be forfeited. Distributions of accounts will generally be made on a monthly basis over a period of 5, 10, or 20 years, as chosen by a participant; however, distributions will be made over a 20-year period if no valid election is made. Regardless of the period of distribution actually chosen, the plan applies a limit (based on a 20-year distribution period) to all participants so that a participant's monthly distribution amount may not exceed 65% of the participant's average monthly total cash compensation earned during the participant's final three complete fiscal years of service. Participants may designate beneficiaries to receive their benefits if they die before their distributions are complete.

At its June meeting, the compensation committee set total operating income as the sole performance criterion for the current fiscal year and established threshold and target levels. It also set percentage factors for the current fiscal year. If the company’s total operating income does not meet the threshold level participants will receive no contribution credits. If total operating income meets the threshold but is less than target, participants will receive contribution credits calculated by applying 50% of their respective percentage factors. If total operating income equals or exceeds the target level, then each participant will receive contribution credits equal to his percentage factor applied against the sum of his base salary and bonus earned for fiscal 2014. The fiscal 2014 percentage factor is 25% for Messrs. Bacon, Riccio, Kincaid, and Sawyer and 35% for Mr. Darrow.

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 up to 100% of the portion of their annual cash incentive award (under the MIP) that is based on company performance. In addition, the company may contribute to this plan any company 401(k) match and profit sharing contributions that cannot be credited to the executives’ accounts due to the Internal Revenue Code compensation limitations that apply to the tax-qualified retirement plans. (Such limits may apply because the executive’s contributions to the 401(k) plan were returned following discrimination testing for highly compensated personnel, the executive’s contributions and the company’s matching contributions were limited by either the annual contribution limit — $17,500 for 2013 — or the annual compensation limit — $255,000 for 2013, or a contribution to the executive’s account in the profit-sharing plan would have caused the plan to fail discrimination testing. Contributions returned to executives are not deferrable into this plan.) Named executive officers’ salary and bonus deferrals are detailed in the Fiscal 2013 Non-Qualified Deferred Compensation table on page 34.

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 company’s 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 our stock, if a person, entity or group acquires an amount that increases its holding to more than 50% of the value or voting power of the company stock, if a majority of the company’s 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 before the date of the appointment or election, or if 40% or more of the company’s assets are acquired.
The agreements provide for the following cash severance payouts upon the occurrence of both a change in control and a qualifying termination of employment within a two-year period (three years for the CEO) following the change in control. Payouts are calculated as two times the executive’s current base salary plus two times the executive’s average annual bonus amount paid over the three-year period immediately prior to the change in control (three times salary plus three-year average bonus for the CEO). During their respective cash severance terms following the change in control, executives will also receive a continuation of medical and life insurance benefits. With respect to outstanding equity awards under our La-Z-Boy Incorporated 2004 Long-Term Equity Award Plan, we utilize a single-trigger approach whereby an executive’s outstanding unvested stock options and restricted shares will immediately fully vest upon the occurrence of the change in control. Similarly, upon a change in control, outstanding performance-based share awards will be payable based on performance through the change in control date. The La-Z-Boy Incorporated 2004 Long-Term Equity Award Plan was replaced by the La-Z-Boy Incorporated 2010 Omnibus Incentive Plan, and awards under the new plan have a double trigger vesting requirement (change in control, followed by a qualifying termination of employment). Under our current change in control agreements, we utilize a ‘‘best-net’’ approach wherein the company will reduce payments below the safe harbor limit (defined as the amount below which no excise tax liability is incurred with respect to change in control payments to executives) only if doing so results in a greater after-tax benefit to the executive. The executive is responsible for the excise tax, and the company does not pay any tax gross-up on the excise tax. Additional information regarding the change in control agreements and estimated termination payments to executives is presented on page 35.

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 provides that the company is to pay a named executive officer severance if the company discharges the executive except ‘‘for cause’’ or if the named executive officer leaves the company with ‘‘good reason.’’ In that event, the company would pay the CEO severance for 24 months after the CEO’s employment ends and would pay the other named executive officers severance for 12 months after a qualifying termination of employment. Severance is to be paid at the level of a departing executive’s base salary at the time the executive’s employment ended. Discharge ‘‘for cause’’ would generally include employee acts of fraud, reckless misconduct, substandard performance that is not corrected, and similar acts or failures to act. Resignation for ‘‘good reason’’ would generally include a resignation triggered by a reduction in the employee’s pay, unless similarly situated employees are similarly affected, or a requirement that the executive relocate.

Executives will receive medical benefits during the time they receive severance. The severance periods of 24 and 12 months were established based on the market and peer company analysis. Entitlement to severance benefits is subject to the officer’s compliance 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.

Other Considerations

Deductibility of Executive Compensation

We monitor our executive pay programs with respect to current federal tax law to maximize the deductibility of compensation paid to named executives. 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. Performance-based stock awards and stock option grants made under both the 2004 Long-term Equity Award Plan and the La-Z-Boy Incorporated 2010 Omnibus Incentive Plan, and the short term cash incentive awards under the 2010 Omnibus Incentive Plan, all are intended to qualify as performance-based compensation exempt from the tax deduction limit so long as the performance goal requirements of Section 162(m) have been met. Restricted stock awards generally do not qualify.

Recoupment of Incentive Payments

In accordance with our policy, we will require reimbursement of annual or long-term incentive payments, and we will eliminate contribution credits under the Performance Compensation Retirement Plan, made to any management employee if the board of directors determines that the employee engaged in misconduct that resulted in a material inaccuracy in our financial statements or performance metrics used to make incentive payments or awards, and the employee would have received a lower payment if calculated based on accurate financial statements or performance metrics. If it is determined that any contribution credits to the La-Z-Boy Incorporated Performance Compensation Retirement Plan were made based on a contribution formula that took into account any erroneous financial statements or other financial errors or misstatements, the participant accounts will be adjusted to reflect contribution credits based on the complete and accurate financial information.

COMPENSATION COMMITTEE REPORT

The compensation committee has 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 company’s Annual Report on Form 10-K and this proxy statement.

W. Alan McCollough, Chairman
Richard M. Gabrys
Janet L. Gurwitch
H. George Levy, MD
Dr. Nido R. Qubein
EXECUTIVE COMPENSATION

The Summary Compensation Table and other tables present pay for our named executive officers received for fiscal 2013.

Named Executive Offıcers as of April 27, 2013
· Kurt L. Darrow (age 58), Chairman, President, and Chief Executive Officer
· Louis M. Riccio, Jr. (age 50), Senior Vice President and Chief Financial Officer
· Mark S. Bacon, Sr. (age 50), Senior Vice President and President La-Z-Boy Branded Business
· Steven M. Kincaid (age 64), Senior Vice President and President Casegoods Product
· Otis S. Sawyer (age 55), Senior Vice President and President Non-Branded Upholstered Product

Summary Compensation Table

The Summary Compensation Table presents ‘‘total compensation’’ (see footnotes for the included pay elements) for the named executive officers.

· Actual value realized in fiscal 2013 for previously granted long-term incentives is presented in the Option Exercises and Stock Vested table on page 34.

· Target annual and long-term incentive opportunities for fiscal 2013 are presented in the Grants of Plan-Based Awards table on page 31.

2013 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                                  
2013
   
842,484
     
859,350
     
974,534
     
876,183
     
39,789
     
3,592,340
 
Chairman, President &
2012
   
816,651
     
2,008,230
     
510,452
     
881,983
     
24,087
     
4,241,403
 
Chief Executive Officer
2011
   
766,652
     
748,728
     
146,521
     
124,198
     
38,944
     
1,825,043
 
 
 
                                               
Louis M. Riccio, Jr.
2013
   
408,325
     
208,230
     
236,147
     
318,494
     
16,203
     
1,187,399
 
Senior Vice President &
2012
   
395,826
     
486,845
     
123,747
     
320,619
     
10,066
     
1,337,103
 
Chief Financial Officer
2011
   
370,826
     
217,949
     
42,653
     
33,374
     
13,885
     
678,687
 
 
 
                                               
Mark S. Bacon, Sr.
2013
   
459,991
     
234,648
     
266,093
     
358,793
     
264,631
     
1,584,156
 
Senior Vice President &
2012
   
441,658
     
547,695
     
139,211
     
357,743
     
10,592
     
1,496,899
 
President La-Z-Boy
2011
   
395,826
     
217,949
     
42,653
     
35,624
     
15,555
     
707,607
 
Branded Business
 
                                               
 
 
                                               
Steven M. Kincaid
2013
   
378,326
     
154,401
     
175,092
     
236,075
     
16,583
     
960,477
 
Senior Vice President &
2012
   
368,326
     
360,265
     
91,576
     
238,675
     
11,254
     
1,070,096
 
President Casegoods
2011
   
359,993
     
217,949
     
42,653
     
32,399
     
15,180
     
668,174
 
Product
 
                                               
 
 
                                               
Otis S. Sawyer                                  
2013
   
337,269
     
137,739
     
156,204
     
210,456
     
363
     
842,031
 
Senior Vice President &
2012
   
326,923
     
321,313
     
81,670
     
211,846
     
363
     
942,115
 
President Non-Branded
2011
   
310,000
     
217,949
     
42,653
     
27,900
     
363
     
598,865
 
Upholstered Product
 
                                               

(1) Reflects the value at target of the performance-based awards granted during fiscal 2011, 2012 and 2013. We valued the performance-based share awards using the closing price of La-Z-Boy stock on the date of grant, except that we valued the 2011 performance-based awards using the closing price of $7.65 of La-Z-Boy stock on August 18, 2010, the date the 2010 Omnibus Incentive Plan was approved by shareholders. Of the total long term incentive opportunity, grants for 2011 and 2012 were composed of stock options (25%) and performance-based shares (75%). The committee determined that the grants for 2013 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
 
2013
   
2012
   
2011
 
Kurt L. Darrow*                                                                                                                
 
$
1,718,700
   
$
3,272,500
   
$
1,497,457
 
Louis M. Riccio, Jr.                                                                                                                
 
$
416,460
   
$
973,690
   
$
435,897
 
Mark S. Bacon, Sr.                                                                                                                
 
$
469,296
   
$
1,095,390
   
$
435,897
 
Steven M. Kincaid                                                                                                                
 
$
308,802
   
$
720,530
   
$
435,897
 
Otis S. Sawyer                                                                                                                
 
$
275,478
   
$
642,626
   
$
435,897
 

*Maximum value of Mr. Darrow’s 2012 award reflects the Omnibus Plan annual share limit of 350,000 shares

(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 12 for fiscal 2011 and 2012 and Note 14 for fiscal 2013).

(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 2013 consists of the following:

·    Company contributions to the 401(k) and Executive Deferred Compensation Plans of the following amounts: Mr. Darrow $34,449, Mr. Riccio $14,579, Mr. Bacon $16,355, and Mr. Kincaid $12,340.

·    Company paid life insurance premiums, financial planning services, physicals and tax reimbursements related to company contributions to the deferred compensation plans (made in the prior year).

·    Pursuant to our relocation reimbursement policy, Mr. Bacon received relocation reimbursements of $247,088 including $70,252 as reimbursement of the taxes related to his relocation.

Grants of Plan-Based Awards

The following table provides details of all incentive plan-based awards granted to the named executive officers during fiscal 2013. Specifically, the table presents the following fiscal 2013 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 presented in the Summary Compensation Table (see page 29).

·    Performance-based shares

·    Stock options
Fiscal 2013 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
   
All Other
 Option
 Awards: Number of Securities Underlying
   
Exercise or Base Price of Option
   
Grant Date Fair Value of Stock &
 
 
Grant
Threshold
Target
Maximum
Threshold
Target
Maximum
or Units
Options
Awards
Option
Name
Date
 
($)
   
($)
   
($)
     
(#
 
   
(#)
 
   
(#)
 
   
(#)
 
   
(#)
 
 
($/Share)
   
Awards(3)($)
 
Kurt L. Darrow
 
 
   
   
                                           
   
 
2013 Annual Incentive (MIP)
 
   
168,497
     
842,484
     
1,684,968
                                           
   
 
Performance-Based Shares
7/11/2012
                           
2,872
     
71,792
     
143,584
                   
     
859,350
 
Non-Qualified Stock Options
7/11/2012
                                                           
123,829
     
11.97
     
974,534
 
 
 
                                                                               
Louis M. Riccio, Jr.
 
                                                                               
2013 Annual Incentive (MIP)
 
   
61,249
     
306,244
     
612,488
                                                         
Performance-Based Shares
7/11/2012
                           
696
     
17,396
     
34,792
                             
208,230
 
Non-Qualified Stock Options
7/11/2012
                                                           
30,006
     
11.97
     
236,147
 
 
 
                                                                               
Mark S. Bacon, Sr.
 
                                                                               
2013 Annual Incentive (MIP)
 
   
68,999
     
344,993
     
689,987
                                                         
Performance-Based Shares
7/11/2012
                           
784
     
19,603
     
39,206
                             
234,648
 
Non-Qualified Stock Options
7/11/2012
                                                           
33,811
     
11.97
     
266,093
 
 
 
                                                                               
Steven M. Kincaid
 
                                                                               
2013 Annual Incentive (MIP)
 
   
45,399
     
226,996
     
453,991
                                                         
Performance-Based Shares
7/11/2012
                           
516
     
12,899
     
25,798
                             
154,401
 
Non-Qualified Stock Options
7/11/2012
                                                           
22,248
     
11.97
     
175,092
 
 
 
                                                                               
Otis S. Sawyer
 
                                                                               
2013 Annual Incentive (MIP)
 
   
40,472
     
202,361
     
404,723
                                                         
Performance-Based Shares
7/11/2012
                           
460
     
11,507
     
23,014
                             
137,739
 
Non-Qualified Stock Options
7/11/2012
                                                           
19,848
     
11.97
     
156,204
 

(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 ($11.97). The value of non-qualified stock options is the fair value ($7.87 per share) and will be expensed over the vesting period.
Outstanding Equity Awards at 2013 Fiscal Year-End

The following table presents all outstanding stock options and unvested stock awards (performance-based stock and restricted 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 company’s stock on April 26, 2013, of $17.69.

 
  
 
Option Awards
 
Stock Awards
 
Name
Grant
 Year
 
Number of
 Securities
Underlying
 Unexercised
Options
 Exercisable
(#)
   
Number of
Securities
 Underlying
Unexercised
Options
 Unexercisable
(#)(1)
   
Option
 Exercise
 Price
($)
 
Option
 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
 
 
   
   
 
 
 
   
   
   
 
Restricted Shares                                    
 
 
   
   
 
 
   
44,598
     
788,939
   
   
 
Performance-Based Shares
 
 
   
   
 
 
   
30,152
     
533,389
     
371,538
     
6,572,507
 
Stock Options                                    
2013
   
     
123,829
     
11.97
 
7/11/2022
                               
  2012
19,103
57,312
9.35
7/13/2021
 
2011
17,157
17,157
7.75
7/14/2020
  2010
69,225
4.37
7/08/2014
  2004
33,100
22.20
9/30/2013
  2004
16,900
20.44
8/12/2013
 
 
                       
 
                               
Louis M. Riccio, Jr.
 
                       
 
                               
Restricted Shares                                    
 
                       
 
   
13,562
     
239,912
                 
Performance-Based Shares
 
                       
 
   
7,305
     
129,225
     
109,357
     
1,934,525
 
Stock Options                                    
2013
   
     
30,006
     
11.97
 
7/11/2022
                               
  2012
4,631
13,894
9.35
7/13/2021
 
2011
4,994
4,995
7.75
7/14/2020
 
2010
31,013
4.37
7/08/2014
 
2004
5,000
20.44
8/12/2013
 
 
                       
 
                               
Mark S. Bacon, Sr.
 
                       
 
                               
Restricted Shares                                    
 
                       
 
   
15,262
     
269,985
                 
Performance-Based Shares
 
                       
 
   
8,233
     
145,642
     
123,035
     
2,176,489
 
Stock Options                                    
2013
   
     
33,811
     
11.97
 
7/11/2022
                               
  2012
15,630
9.35
7/13/2021
  2011
4,995
7.75
7/14/2020
  2010
31,013
4.37
7/08/2014
 
 
                       
 
                               
Steven M. Kincaid
 
                       
 
                               
Restricted Shares                                    
 
                       
 
   
13,562
     
239,912
                 
Performance-Based Shares
 
                       
 
   
5,418
     
95,844
     
80,932
     
1,431,687
 
Stock Options                                    
2013
   
     
22,248
     
11.97
 
7/11/2022
                               
 
2012
3,427
10,282
9.35
7/13/2021
  2011
4,994
4,995
7.75
7/14/2020
  2010
31,013
4.37
7/08/2014
  2004
16,900
20.44
8/12/2013
 
 
                       
 
                               
Otis S. Sawyer
 
                       
 
                               
Restricted Shares                                    
 
                       
 
   
13,562
     
239,912
                 
Performance-Based Shares
 
                       
 
   
4,833
     
85,496
     
72,182
     
1,276,900
 
Stock Options                                    
2013
   
     
19,848
     
11.97
 
7/11/2022
                               
 
2012
3,056
9,170
9.35
7/13/2021
 
2011
4,994
4,995
7.75
7/14/2020
 
2010
31,013
4.37
7/08/2014
 
2004
5,000
20.44
8/12/2013
(1)    Stock options that were unvested will vest as follows:

Grant Year
 
Options Vesting Schedule
2013
 
Unvested options vest 25% on July 11, 2013, 25% on July 11, 2014, 25% on July 11, 2015, and 25% on July 11, 2016.
2012
 
1⁄3 of the unvested options vest on July 13, 2013, 1⁄3 on July 13, 2014, and 1⁄3 on July 13, 2015.
2011
 
50% of the unvested options vest on July 14, 2013 and 50% on July 14, 2014.
2010
 
Unvested options vest July 8, 2013.

(2)    Unvested restricted share grants will vest as follows:

 
 
2010
Grant(a)
   
2009
Grant(b)
   
Total
 
Kurt L. Darrow  
   
17,325
     
27,273
     
44,598
 
Louis M. Riccio, Jr.  
   
7,762
     
5,800
     
13,562
 
Mark S. Bacon, Sr.  
   
7,762
     
7,500
     
15,262
 
Steven M. Kincaid  
   
7,762
     
5,800
     
13,562
 
Otis S. Sawyer  
   
7,762
     
5,800
     
13,562
 

(a) 25% of the original shares vested on July 8, 2012. Unvested shares are shown and vest 25% on July 8, 2013 (1⁄3 of the unvested shares) and 50% on July 8, 2014 (2⁄3 of the unvested shares).

(b) 25% of the original shares vested on July 9, 2011 and 25% on July 9, 2012. The unvested shares are shown and vest on July 9, 2013. For Mr. Bacon, 25% of the original shares vested on October 17, 2011 and 25% on October 17, 2012. Unvested shares are shown and vest on October 17, 2013.

The earned but unvested performance-based shares will vest in April 2015.

(3)    Unearned performance-based shares are shown assuming threshold performance for fiscal year 2013 and maximum performance for fiscal year 2012 for each goal.

 
Performance-Based Shares
 
 
Name
Fiscal year
2013
Grant At
Threshold(a)
 
Fiscal year
2012
Grant At
Maximum(b)
 
Total
 
Kurt L. Darrow                                                                                              
   
21,538
     
350,000
     
371,538
 
Louis M. Riccio, Jr.                                                                                              
   
5,219
     
104,138
     
109,357
 
Mark S. Bacon, Sr.                                                                                              
   
5,881
     
117,154
     
123,035
 
Steven M. Kincaid                                                                                              
   
3,870
     
77,062
     
80,932
 
Otis S. Sawyer                                                                                              
   
3,452
     
68,730
     
72,182
 

(a) Three-year performance period ends fiscal 2015 (April 2015).
(b) Three-year performance period ends fiscal 2014 (April 2014).
Maximum value of Mr. Darrow’s 2012 award reflects the Omnibus Plan annual share limit of 350,000 shares

Option Exercises and Stock Vested

The following table provides details for each of the named executive officers regarding stock options exercised and stock awards vested during fiscal 2013.
Option Exercises and Stock Vested in Fiscal 2013

 
 
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                                                                                          
   
69,225
     
1,002,346
     
96,112
     
1,618,735
 
Louis M. Riccio, Jr.                                                                                          
   
31,012
     
426,738
     
27,382
     
464,093
 
Mark S. Bacon, Sr.                                                                                          
   
41,216
     
349,191
     
25,332
     
452,571
 
Steven M. Kincaid                                                                                          
   
41,835
     
618,216
     
27,382
     
464,093
 
Otis S. Sawyer                                                                                          
   
81,537
     
1,168,344
     
27,382
     
464,093
 

(1)    Amounts reflect the difference between the exercise price of the stock option and the market price of La-Z-Boy Incorporated’s stock at the time of exercise.

(2)    The dollar value of the vested restricted stock reflects the total pre-tax value realized (based on the price of La-Z-Boy stock at vesting). The dollar value of the vested performance-based shares is based on the closing price of the company’s stock on the vesting date, June 17, 2013.

Non-Qualified Deferred Compensation

The following table provides details for the named executive officers regarding their non-qualified deferred compensation accounts as of April 27, 2013. 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 2013 Non-Qualified Deferred Compensation

Name
 
Executive
Contribution
in FY 2013
($)(1)
   
Registrant
Contributions
in FY 2013
($)(2)
   
Aggregate
Earnings in
FY 2013
($)(3)
   
Aggregate
Withdrawals/
Distributions
($)
   
Aggregate
Balance at
FYE 2013
($)(4)
 
Kurt L. Darrow                                                                    
   
174,422
     
29,349
     
204,376
     
     
1,689,041
 
Louis M. Riccio, Jr.                                                                    
   
105,804
     
10,512
     
42,460
     
     
256,093
 
Mark S. Bacon, Sr.                                                                    
   
     
11,275
     
(22
)
   
     
17,749
 
Steven M. Kincaid                                                                    
   
     
8,573
     
199,499
     
     
1,717,544
 
Otis S. Sawyer                                                                    
   
     
     
9,235
     
     
323,750
 

(1)    Elective deferrals of base salary or fiscal 2012 MIP awards paid in fiscal 2013. Amounts included in Base Salary and Non- Equity Incentive Plan Compensation in the Summary Compensation Table on page 29 are: Mr. Darrow Base Salary $42,125 and Non-Equity Incentive Plan Compensation $132,297 and Mr. Riccio Non-Equity Incentive Plan Compensation $105,804.

(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 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 or profit sharing amounts are added to a recordkeeping account. The account is credited with earnings or losses, depending upon actual performance of the mutual-fund-type investment options the participant has chosen. These are the same investment options available to non-executive participants.

Payment of a participant’s account balance is deferred until a date designated by the participant upon making the deferral election. The deferral amounts are paid either in one lump sum or in annual installments for up to 15 years. Upon a participant’s death, any remaining balance in the participant’s account is paid to the participant’s designated beneficiary.

Estimated Payments Upon Termination or Change in Control

This section presents the estimated incremental payments to the named executive officers upon a termination of 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.
 
Payments Made Upon Termination

An officer is entitled upon termination to receive amounts earned during the term of employment. 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.

No other payments are made upon a termination of employment except when the termination is due to the executive’s 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 executive’s 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 27. We have change in control agreements only with the named 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 officer will receive the following incremental benefits:

·    Stock options: Accelerated vesting of unvested options.
·    Restricted shares: For grants made prior to fiscal year 2011, restrictions lapse at retirement provided the employee remained in the employ of La-Z-Boy or a subsidiary for at least one year after the grant date of the award. In the event of disability, the restrictions will lapse. Grants made beginning in fiscal year 2011 under the La-Z-Boy Incorporated 2010 Omnibus Incentive Plan do not have an accelerated vesting provision at retirement and restricted shares will be forfeited. In the event of disability, the restrictions will lapse.

·    Performance-based shares: If the executive remained in the employ of the company or a subsidiary for at least one year after the grant date of the award, awards will remain outstanding until the end of the three-year duration of the grant. If, at that time, awards are paid for the period, the executive will receive an award prorated based on the number of full calendar months the executive worked during the performance period applicable to the grant and the company’s performance up to the executive’s termination of active employment.

·    MIP awards: Payment of the MIP percentage award an officer would have received based on performance results, applied to the officer’s actual earnings during the year. The MIP awards earned and paid for fiscal 2013 performance, which are reported in the Summary Compensation Table on page 29, are not included in the table below.

Payments Made Upon Death

In the event of death, the officer’s beneficiary will receive the following incremental benefits:

·    Stock options: Accelerated vesting of unvested options.

·    Restricted shares: Restrictions lapse.

·    Performance-based shares: The committee may, in its discretion, provide for payment of awards, in whole or in part. Where the committee provides for payment, the company may, in its discretion and at the request of a deceased employee’s personal representative, provide for payment prior to the conclusion of the performance period as follows:

o Pay 35% of the maximum award if the officer’s last day of active employment was during the first half of the performance period; or

o Pay 50% of the maximum award if the officer’s last day of active employment was during the second half of the period.

·    MIP awards: Payment of the MIP percentage award an officer would have received based on performance results, applied to actual earnings during the year. The MIP awards earned and paid for fiscal 2013 performance, which are reported in the Summary Compensation Table on page 29, are not included in the following table.

Additionally, the officer will receive benefits under disability or life insurance plans available generally to all salaried employees. These potential payments are not reflected in the table.

Change in Control

The change in control agreements are designed to ensure continued management in the event of an actual or threatened change in control of the company. The agreements provide that in the event a named executive officer 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:

·    Cash severance payments equal to two times annualized salary plus two times the average bonus amount paid in the prior three years. The CEO will receive payments equal to three times annualized salary plus three times the average bonus amount paid in the prior three years.

·    Continuation of health benefits and life insurance for two years for the other named executive officers and three years for the CEO.

·    Reimbursement of certain legal fees and expenses incurred by the employee in enforcing the agreement.

The agreements automatically renew for an additional one-year period unless either party gives the other 90 days’ prior notice of non-extension. If a change in control occurs, the agreements automatically extend for 36 months.

The agreements employ a ‘‘best-net’’ approach to excise taxes related to change in control payments. The executive is responsible for excise taxes on any parachute payments, and we do not pay any tax gross-ups on these payments. We will reduce payments below the parachute payment threshold only if doing so results in a greater after-tax benefit to the executive. This ‘‘best-net’’ approach delivers a greater portion of the intended severance benefit to the executive without the company incurring the additional expense of a tax gross-up.

Under the 2010 Omnibus Incentive Plan, awards have a double trigger vesting requirement (change in control, followed by a qualifying termination of employment).

Table of Estimated Payments

The following table presents estimated incremental payments (payable as the result of the specified termination event) that would have been payable 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 $17.69 of the company’s stock on April 26, 2013 (the last business day of the fiscal year). The amounts provided below are the estimated incremental amounts that would have been payable to the named executive officer. The actual amounts paid in future years, if any, will depend upon the executive’s pay, terms of separation, severance and/or change in control policy in place, and the company’s stock price at the time of termination.
Estimated Payments Upon Termination or Change in Control

<
Name and Benefit
 
Change in
Control
$
   
Retirement
$(1)(2)
   
Disability/
Death
$(1)
   
Involuntary
Termination or
Termination
with Good
Cause Under
Severance Plan
$
 
Kurt L. Darrow
 
   
   
   
 
Base Salary (3 times annual salary)                                                                                        
   
2,538,000
   
   
   
 
Annual Incentive (3 times average actual MIP amount paid in prior 3 years)
   
1,965,356
   
   
   
 
Stock Options (accelerated vesting)                                                                                        
   
260,155
     
2,278,902
     
2,278,902
   
 
Restricted Shares (accelerated vesting)                                                                                        
   
41,240
     
788,939
     
788,939
   
 
Broad-Based Benefits(4)                                                                                        
   
15,533
                     
9,189
 
Severance Payment                                                                                        
                           
1,692,000
 
Total Incremental Pay(3)                                                                                        
   
4,820,284
     
3,067,841
     
3,067,841
     
1,701,189
 
 
                               
Louis M. Riccio, Jr.
                               
Base Salary (2 times annual salary)                                                                                        
   
820,000
                         
Annual Incentive (2 times average actual MIP amount paid in prior 3 years)
   
407,495
                         
Stock Options (accelerated vesting)                                                                                        
   
67,703
             
750,254
         
Restricted Shares (accelerated vesting)                                                                                        
   
16,144
             
239,912
         
Broad-Based Benefits(4)                                                                                        
   
26,835
                     
13,135
 
Severance Payment                                                                                        
                           
410,000
 
Total Incremental Pay(3)                                                                                        
   
1,338,177
     
     
990,166
     
423,135
 
 
                               
Mark S. Bacon, Sr.
                               
Base Salary (2 times annual salary)                                                                                        
   
924,000
                         
Annual Incentive (2 times average actual MIP amount paid in prior 3 years)
   
445,995
                         
Stock Options (accelerated vesting)                                                                                        
   
74,603
             
786,497
         
Restricted Shares (accelerated vesting)                                                                                        
   
22,163
             
269,985
         
Broad-Based Benefits(4)                                                                                        
   
27,011
                     
13,187
 
Severance Payment                                                                                        
                           
462,000
 
Total Incremental Pay(3)                                                                                        
   
1,493,772
     
     
1,056,482
     
475,187
 
 
                               
Steven M. Kincaid
                               
Base Salary (2 times annual salary)                                                                                        
   
760,000
                         
Annual Incentive (2 times average actual MIP amount paid in prior 3 years)
   
357,116
                         
Stock Options (accelerated vesting)                                                                                        
   
53,547
     
675,754
     
675,754