UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



 

SCHEDULE 14A INFORMATION

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



 
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Filed by a Party other than the Registrant o

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x Definitive Proxy Statement
o Definitive Additional Materials
o 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)

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[GRAPHIC MISSING]

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

Day: Wednesday, August 18, 2010
Time: 11:00 a.m., Eastern Daylight Time
Place: La-Z-Boy Incorporated Auditorium
1284 North Telegraph Road
Monroe, Michigan

Monroe, Michigan
July 6, 2010

To our shareholders:

You are invited to attend our 2010 annual meeting of shareholders to be held Wednesday, August 18th, at our auditorium in Monroe, Michigan. Only shareholders of record at the close of business on June 22, 2010, will be entitled to vote at the meeting. At the meeting we intend to:

Elect four directors for three-year terms expiring in 2013,
Ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal 2011,
Approve the La-Z-Boy Incorporated 2010 Omnibus Incentive Plan,
Vote on the shareholder proposal described in the accompanying proxy statement, 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, which will revoke your previous vote.

BY ORDER OF THE BOARD OF DIRECTORS
James P. Klarr, Secretary


 
 

2010 PROXY STATEMENT OF LA-Z-BOY INCORPORATED

General Information about the Annual Meeting and Voting

The 2010 annual meeting of the shareholders of La-Z-Boy Incorporated will be held in the La-Z-Boy auditorium on August 18, 2010, beginning at 11:00 A.M. (local time). This proxy statement is being furnished to the shareholders by the company. La-Z-Boy’s board of directors is soliciting your proxy.

Meeting Purpose.  At the meeting, shareholders will elect four directors for three-year terms expiring in 2013. The board nominated Richard M. Gabrys, Janet L. Gurwitch, David K. Hehl and Edwin J. Holman for these seats (see page 3). We are also asking shareholders to ratify the selection of our independent registered accounting firm for fiscal year 2011 (see page 35) and to approve the La-Z-Boy Incorporated 2010 Omnibus Incentive Plan (see page 36). If properly presented at the meeting, the shareholders will also act on a shareholder proposal to revise the election of directors so that all directors are elected annually rather than in three classes (see page 47). We do not expect 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 the 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 6, 2010, 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 the Proxy Statement and Annual Report 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 on June 22, 2010, 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 52,799,388 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 and one 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 receive and returning the cards in the enclosed envelope. The proxies will be voted according to your direction 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 ratify PricewaterhouseCoopers LLP as our independent registered accounting firm for fiscal year 2011,
FOR the approval of the La-Z-Boy Incorporated 2010 Omnibus Incentive Plan, and
AGAINST the shareholder proposal.

By signing and returning 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. You can vote your shares at the meeting.

Electronic 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, where your shares are held in the name of your broker, bank or other nominee, you will receive voting instructions from them, which will include the means to vote by telephone or the Internet.

Shares held by a 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. In prior years, if you did

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not provide voting direction, your broker, bank or financial institution could vote your shares on your behalf on matters considered routine, including the election of directors. Under recently changed New York Stock Exchange rules, however, your broker, bank or financial institution will no longer vote your shares in director elections without your specific instructions. To ensure your vote is counted, you will need to provide directions to your broker, bank or financial institution following their instructions.

Changing your vote.  If you choose 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 cancelled. If you wish to change your vote by mail, you should request a new proxy card from our Secretary (see Principal Executive Office below for the address). The 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 your previous vote.

Vote Required.  Under the applicable Michigan corporate laws, directors will be elected by plurality vote. Assuming there is a quorum at the meeting, the nominees receiving the highest through the fourth highest numbers of votes will be elected, regardless of the number of votes cast. Assuming 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.

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 will have no effect as they are considered as votes not cast. There can be no broker non-votes on this proposal. 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, as a matter of good corporate practice, the audit committee will reconsider its selection.

To be approved, the La-Z-Boy Incorporated 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 purposes, an abstention or broker non-vote will be considered as not voted.

Pursuant to our articles of incorporation and bylaws, the shareholder proposal to amend the bylaws to eliminate the three classes of directors requires the affirmative vote of 67% of the total shares outstanding. Any shares not voted for any reason, including abstentions or broker non-votes, will therefore have the same effect as “no” votes.

Number of Copies Sent to Household.  Where there are two or more shareholders sharing the same address, and unless you withheld your consent to “householding” or instruct us otherwise, we are only sending your household a single copy of our annual report and proxy statement. While “householding” saves us the expense of mailing duplicate documents to your home, and saves our natural resources, we hope this householding program also provides you greater convenience.

However, we will promptly provide additional copies of our 2010 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 734-457-3385 to request additional copies. Copies of the annual report, proxy statement and other reports we file with the SEC are also available on our Web site at www.la-z-boy.com or through the SEC’s Web site 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 Web site 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, 1284 North Telegraph, Monroe, Michigan, 48162. Any communication for the company’s secretary or directors may be directed to the corporate secretary at this address.

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PROPOSAL NO. 1: ELECTION OF DIRECTORS

Our board of directors is divided into three classes, with the number of directors in each class being as nearly equal as possible to the number of directors in each other class. Directors in each class serve for three-year, staggered terms. The terms of the four directors in one of the classes expire at this year’s annual meeting, so four directors will be elected to that class at the meeting. The four directors elected will serve until our annual meeting of shareholders in 2013 and until their successors are elected and qualified.

In anticipation of the retirement of two directors at this meeting, the board of directors expanded the board by electing two new directors earlier this year. Pursuant to our bylaws, these newly elected directors are required to stand for election at this shareholders’ meeting. The board has determined that, simultaneously with the expiration of the two retiring directors’ terms, the size of the board will automatically reduce to eleven seats from the current thirteen seats. Upon the recommendation of the board’s nominating and corporate governance committee, the board has nominated for the four available board seats two of the current directors whose seats are up for election, Richard M. Gabrys and David K. Hehl, and the two newly elected directors, Janet L. Gurwitch and Edwin J. Holman. 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 any nominee becomes unable or unwilling to serve, which 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 four positions. Thus, the nominees who receive the highest through fourth 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 abstention, broker non-votes, or withholding of authority. 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 resignation may then be filled by the board of directors pursuant to our bylaws.

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

Director Nominees for Terms Expiring in 2013

Richard M. Gabrys, age 68, has served as 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 in 2004 as its Vice Chairman. He continues to be licensed to practice as a certified public accountant in the State of Michigan. He recently was Dean of Wayne State University School of Business Administration (from 2006 through 2007). He currently serves as a director of CMS Energy Corp. (an integrated energy company), TriMas Corporation (a manufacturer of high-quality trailer products, recreational accessories, packaging systems, energy products and industrial specialty products) and Massey Energy Company (a coal producer). He also serves on the boards of several tax-exempt 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 also 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 on the board of directors of Dana Corporation, an automotive supplier. Mr. Gabrys brings to our board his knowledge and experience related to public reporting, mergers and acquisitions, risk oversight, executive compensation and corporate governance matters gained from 42 years in public accounting and by having served on the boards of multiple publicly-traded companies.

Janet L. Gurwitch, age 57, was elected director of La-Z-Boy in January 2010. Since 2009, she has been the chairman of Gurwitch Consulting Group LLC. She also served as an adjunct professor in management at Rice University for the 2009 – 2010 academic year. Previously she was co-founder & CEO of Laura Mercier Cosmetics from 1995 – 2008. She also served as the 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 member of the board of directors for Urban Decay Cosmetics, LLC (a

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cosmetics company located in Newport Beach, CA) and Castanea Partners, Inc. (a private equity and venture capital firm). 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 brings to our board her experience as a CEO of a consumer focused, fashion oriented company as well as her experience as an executive at several large retail operations.

David K. Hehl, age 63, 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 is the longest serving director and provides a unique historical perspective. Through his 40 years in audit and tax services, along with his experience on the board, Mr. Hehl has developed the financial, risk oversight and corporate governance skills to qualify him for service on our board.

Edwin J. Holman, age 63, was elected director of La-Z-Boy in January 2010. Mr. Holman served as chairman and CEO of Macy’s Central (2004 – 2009), a division of Macy’s Inc. (an operator of department stores in the Midwest and Southern United States). He also served as president and CEO of Galyan’s Trading Company (2003 – 2004) (sporting goods retailer). Previously, Mr. Holman was the president and COO of Bloomingdale’s (2000 – 2003), a division of Federated Department Stores Inc.; president and COO of Rich’s/Lazarus/Goldsmiths divisions, a division of Federated Department Stores, Inc. (1999 – 2000); chairman and CEO of Petrie Retail, Inc. (1996 – 1999); president and COO of the department stores, Woodward & Lothrop (1994 – 1996); vice chairman and COO of The Carter Hawley Hale Stores; and a senior operating executive of The Neiman Marcus Group. Mr. Holman is currently the chairman of the board (since September 2009) of The Pantry, Inc. (convenience stores) where he has been a director since 2005. He previously served as a director on the boards of several public companies including Office Max (2003) and Circle International (1994 – 2000), a provider of international transportation and logistics. He is the non-executive chairman of RGIS International (retail inventory solutions), a portfolio company of the Blackstone Group. Mr. Holman’s 40 years of executive and operational experience in department stores and specialty retailing, combined with his experience on public company boards, makes him qualified to serve on our board.

The Board of Directors recommends a vote FOR each of the above nominees.

Continuing Directors with Terms Expiring in 2011

Kurt L. Darrow, age 55, has been a director since 2003, and is currently our president and chief executive officer (also since 2003). From 1979 to 2003, he served in positions of increasing responsibility in sales and marketing, culminating in his being named president of La-Z-Boy Residential, our largest division. He is a member of the board of directors of the Mercy Memorial Hospital Corporation in Monroe, Michigan, and a Trustee of Adrian College (Adrian, Michigan). He is also a member of the Business Leaders for Michigan, a non-profit executive leadership organization. With the leadership and knowledge related to La-Z-Boy and the industry, developed over his 30 years at La-Z-Boy, Mr. Darrow is qualified to serve on our board.

James W. Johnston, age 71, has been a director since 1991 and has been the chairman of our board since August 2006. Prior to his election as chairman of the board, Mr. Johnston served as chairman of the nominating and governance committee. Prior to his retirement in 2003, Mr. Johnston was a self-employed financial and business consultant and is currently a private investor. He brings to the board experience in board leadership, corporate governance and company strategy.

H. George Levy, M.D., age 60, has been a director since 1997. He currently practices otorhinolaryngology and formerly was chairman and CEO of USI, Inc. (a private firm engaged in consulting on e-commerce, Web design and systems integration) and formerly CEO and founder of Enduenet, Inc. (a firm providing electronic medical records for physicians and hospitals). He is also a director of Michigan Trust Bank. Dr. Levy’s entrepreneurial experience, coupled with his public company board experience, qualifies him for service on our board.

W. Alan McCollough, age 60, has been a director since 2007. He formerly was chairman and CEO of Circuit City Stores, Inc. (retailer of consumer electronics, home office products, entertainment software, and related services) from 2000 to 2006. He began his career at Circuit City in 1987, progressed through its ranks and was named its president in 1997. He was a Circuit City director from 1999 to 2006. He has served on the

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boards of VF Corporation (branded apparel) since 2000 and The Goodyear Tire & Rubber Company since 2007. He also serves as a trustee of the Joslin Diabetes Center, a nonprofit organization. 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.

Continuing Directors with Terms Expiring in 2012

John H. Foss, age 67, has been a director since 2001. He retired as Vice President, Treasurer and Chief Financial Officer of Tecumseh Products Company (manufacturer of compressors and pumps) in 2001. He serves as a director of United Bancorp, Inc. (since 1992). Mr. Foss’s service as the chief financial officer and director of a public company provided him experience in strategic planning, compensation management, internal controls, mergers and acquisitions, and corporate governance, all of which qualifies him for service on our board.

Janet E. Kerr, age 55, 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. Professor Kerr has served as a consultant to various companies on Sarbanes-Oxley Act compliance and corporate governance. She has founded several technology companies and is a well-known author in the areas of securities, corporate law and corporate governance, having published several articles and a book on the subjects. Professor Kerr was a co-founder of X-Labs, a technology company co-founded with HRL Laboratories. Professor Kerr is also a member of the board of directors of CKE Restaurants, Inc., Tilly’s, Inc. (a privately held retailer of apparel and accessories) and TCW Strategic Income Fund, Inc. (a NYSE listed closed end registered investment company). 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.

Nido R. Qubein, age 61, has been a director since 2006. He has been the president of High Point University since 2005 and chairman of the board of Great Harvest Bread Company (bakery franchise) 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 served as a director on the boards of BB&T Corporation (banking and financial services) since 1990 and the Great Harvest Bread Company since 2001. Dr. Qubein has written 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 an entrepreneur, a director on public company boards and a leader at multiple companies qualifies him to serve on our board.

Directors Not Standing For Reelection

Under our governance guidelines, a director will not be nominated for reelection after having reached the age of 70. Two of our current directors, Rocque Lipford (a director since 1979) and Jack Thompson (a director since 2001), have reached the mandatory retirement age and their terms of service as a director will end at this shareholders’ meeting. The directors, management and employees of La-Z-Boy extend our gratitude for their service to La-Z-Boy.

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SHARE OWNERSHIP INFORMATION

The tables below provide information about beneficial owners of our common shares. Under applicable SEC rules, anyone that 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, 2009, except as otherwise indicated)

   
Name and Address   Number
of Shares
  Percent
of Class
BlackRock Inc.
40 East 52nd Street
New York, NY 10022
    4,175,104       7.91  
Dimensional Fund Advisors, LP
Palisades West, Building One
6300 Bee Cove Road
Austin, TX 78746
    3,129,586       5.93  
Franklin Resources, Inc. and related parties
One Franklin Parkway
San Mateo, CA 94403
    2,691,100       5.10  

Information about BlackRock Inc. and its related companies is based on a Schedule 13G they filed jointly after December 31, 2009, in which they reported that as of that date they had sole voting and dispositive power over 4,175,104 common shares. The other companies reported as beneficial owners of our common shares were BlackRock Asset Management Japan Limited, BlackRock Advisors (UK) Limited, BlackRock Institutional Trust Company, N.A., BlackRock Fund Advisors, BlackRock Asset Management Australia Limited, and BlackRock Investment Management, LLC.
Information about Dimensional Fund Advisors LP is based on an amended Schedule 13G it filed after December 31, 2009, in which it reported that as of that date it had sole voting power over 3,073,487 common shares and sole dispositive power over 3,129,586 common shares. It also reported that it serves as an investment manager and an investment advisor to various investment companies, trusts and accounts, and that the shares are owned by its clients, no one of which, to the knowledge of Dimension Fund Advisors LP, owns more than 5% of the class. Dimensional Fund Advisors LP disclaims beneficial ownership of all the shares.
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, 2009, in which they reported that as of that date they had sole voting power over 2,589,800 common shares and sole dispositive power over 2,691,000 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.

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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, 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.

   
Name   Number
of Shares
  Percent
of Class
Mark S. Bacon, Sr.     69,362       *  
Kurt L. Darrow     663,688       1.25  
John H. Foss     15,100       *  
Richard M. Gabrys     9,000       *  
Janet L. Gurwitch     0       *  
David K. Hehl     56,772       *  
Edwin J. Holman     0       *  
James W. Johnston     1,394,029       2.64  
Janet E. Kerr     0       *  
Steven M. Kincaid     238,025       *  
H. George Levy     19,000       *  
Rocque E. Lipford     22,300       *  
W. Alan McCollough     7,000       *  
Nido R. Qubein     20,960       *  
Louis M. Riccio, Jr.     138,020       *  
Otis S. Sawyer     142,087       *  
Jack L. Thompson     15,400       *  
All current directors and current executive officers as a group (17 persons)     2,810,743       5.25  

* less than 1%
For purposes of calculating the percentage ownership of the group in the table above, all shares subject to options held by any group member that currently are exercisable or that will become exercisable within 60 days of July 1, 2010, are treated as outstanding, but for purposes of calculating the percentage of ownership of any individual, only the optioned shares held by that individual are treated as outstanding. The table includes the following numbers of optioned shares:

 
Mr. Bacon     31,012  
Mr. Darrow     379,225  
Mr. Kincaid     126,962  
Mr. Riccio     86,562  
Mr. Sawyer     91,162  
All current directors and current executive officers as a group     714,923  
The table also includes the following numbers of shares owned by a named person’s wife or held in trust, beneficial ownership of which is disclaimed by him:

 
Mr. Hehl     13,272  
Mr. Johnston     453,829  
Shares shown in the table for Mr. Lipford do not include 111,879 common shares held by the Edwin J. and Ruth M. Shoemaker Foundation. Mr. Lipford acts as one of the six members of the board of directors of the Foundation. He disclaims beneficial ownership with respect to these shares.
None of the shares shown in the table are pledged as security.

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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 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 2010 all Section 16(a) filing requirements were complied with in a timely fashion.

CORPORATE GOVERNANCE

Board of Directors.  Our board is currently composed of twelve independent directors and one employee director, our president and chief executive officer. The board was expanded during the past year to include two new directors to allow for an orderly transition related to two directors that have reached the mandatory director retirement age. Simultaneously with the shareholders’ meeting and election of the directors, the size of the board will automatically reduce from thirteen to eleven directors.

Leadership.  Our company has a history of adapting its leadership structure to meet the company’s needs and best serve the interest of our shareholders. Until the late ’90s, the roles of chairman and CEO were combined. In 1999, we separated the roles of the chairman and chief executive officer; and since 2006, James W. Johnston has served as the independent chairman of our board of directors. We believe that by maintaining a structure with an independent chairman, the chairman can work to focus the attention of the board on its oversight role while allowing the chief executive officer to focus his efforts on developing and implementing strategy as well as providing leadership to the employees. With the separation of roles, the chairman is able to concentrate on matters of corporate governance, oversight, and strategic guidance at the board level that are distinct from the many operational and strategic reports and recommendations brought to the board by the CEO. The directors have determined that in the current business environment this structure continues to be effective for La-Z-Boy.

The chairman, working with the chief executive officer, approves meeting agendas and presides over all the regular board meetings. The chairman also serves as a liaison between the board and the CEO to expedite communications among all the directors. While the chairman and the chief executive officer confer on the meeting agendas, any director may suggest items for the agenda or request additional information from management.

The board met eight times during the fiscal year ended in April 2010, including six times in executive session. Beginning in mid-fiscal 2010, the directors adopted a policy to meet in executive session without management present following each regularly scheduled board meeting. In prior years, the board scheduled the executive sessions for four meetings. These executive sessions are chaired by the chairman of the nominating and governance committee. Each director attended at least 75% of the total of all meetings of the board and committees on which each served during the fiscal year 2010. Last year, all the then-current directors attended the 2009 shareholders’ meeting, and we expect all the current directors to attend the 2010 shareholders’ meeting.

The board has adopted and operates under a set of guidelines that 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. These guidelines can be found on our Web site at http://www.la-z-boy.com/about/corp_governance.aspx. In addition to the Corporate Governance Guidelines, you will also find the charter for each of the board’s key committees as well as our Code of Business Conduct, which establishes our expectations for the business behavior of our employees, officers and directors. We will provide print copies of these materials, at no cost, to any shareholder who requests a copy from the Corporate Secretary at 1284 N. Telegraph, Monroe, Michigan 48162.

Risk Oversight.  The board of directors is responsible for overseeing our risks. The board recently established a risk oversight committee comprised of six independent directors to assist in the board’s oversight efforts. The risk oversight committee, working with outside risk consultants and the other board committees, has allocated the oversight responsibility of our identified risk categories to the various committees and the board as appropriate. The risk oversight committee, utilizing the services of outside risk consultants as needed,

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will regularly review our process for identifying, prioritizing and mitigating various risks. In addition, the committee will review our risk tolerance and its alignment with our strategic plan. The board and each committee, as part of their oversight efforts, will review their respective risk categories.

Director Compensation.  We designed the annual pay package for directors to attract and retain highly qualified professionals to represent our shareholders. Directors who also are 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 for each director, and reimburses them 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. For the fiscal year ended April 2010, we paid each director cash and equity compensation in the following amounts:

Cash Compensation

Each non-employee director received an annual cash retainer of $35,000. Ms. Gurwitch and Mr. Holman received pro-rated cash retainers of $10,082 for their services from January through April.
The non-executive chairman of the board received an additional annual cash retainer of $100,000.
The chairman of the audit committee received an additional annual cash retainer of $10,000.
The chairmen of the other board committees each received additional annual cash retainers of $6,000. Ms. Kerr received a pro-rated retainer of $4,217 for her services as chairman of the risk oversight committee from August, 2009 until April, 2010.
In addition to the annual retainers, which are paid in quarterly installments, non-employee directors received $1,500 for each board meeting or committee meeting attended in person or by conference call.

Equity Compensation

On September 1, 2009, each non-employee director then in office received a grant of 7,927 restricted stock units with a grant date value of $65,001.
On February 1, 2010, Ms. Gurwitch and Mr. Holman each received a grant of 5,000 restricted stock units with a grant date value of $51,250.
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 cash only.

The following table provides details regarding each of the non-employee directors’ compensation for fiscal 2010. The amount of annual cash compensation varied based on committee participation, committee chairs held, meetings attended, and mid-year election to the board and committees. Stock awards reflect the grant date fair value.

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Fiscal 2010 Non-employee Director Compensation

     
Name   Fees Earned or
Paid in Cash
$(1)
  Stock Awards
$(2)
  Total
($)
John H. Foss     73,500       65,001       138,501  
Richard M. Gabrys     71,000       65,001       136,001  
Janet L. Gurwitch     14,582       51,250       65,832  
David K. Hehl     63,500       65,001       128,501  
Edwin J. Holman     14,582       51,250       65,832  
James W. Johnston     147,000       65,001       212,001  
Janet E. Kerr     64,717       65,001       129,718  
H. George Levy     66,500       65,001       131,501  
Rocque E. Lipford     66,500       65,001       131,501  
W. Allan McCollough     62,000       65,001       127,001  
Nido R. Qubein     62,000       65,001       127,001  
Jack L. Thompson     53,000       65,001       118,001  

(1) Includes actual annual board retainer fee, committee chairman fees, and meeting fees.
(2) Reflects the grant date fair value computed in accordance with FASB ASC Topic 718. Except for Janet L. Gurwitch and Edwin J. Holman, each director received 7,927 restricted stock units on September 1, 2009. Upon joining the board, Janet L. Gurwitch and Edwin J. Holman were awarded 5,000 restricted stock units. As of April 24, 2010, the number of restricted stock units held by each non-employee director (which vest and settle when the director leaves the board) were:

 
John H. Foss     16,514  
Richard M. Gabrys     16,514  
Janet L. Gurwitch     5,000  
David K. Hehl     16,514  
Edwin J. Holman     5,000  
James W. Johnston     16,514  
Janet E. Kerr     12,927  
H. George Levy     16,514  
Rocque E. Lipford     16,514  
W. Allan McCollough     16,514  
Nido R. Qubein     16,514  
Jack L. Thompson     16,514  

We are proposing to replace the Deferred Stock Unit Plan for Non-Employee Directors (and 2004 Long-Term Equity Plan for employees) with the 2010 Omnibus Incentive Plan (see proposal 3 on page 36). The new plan is subject to shareholder approval. If approved, the directors will receive, on September 1, 2010, a grant of restricted stock units with terms similar to the current Deferred Stock Unit Plan, except that the settlement at the time the director leaves the board will be made in shares rather than cash. The grant date value of the restricted stock units will remain $65,000 for each director.

Non-Employee Director Stock Ownership Guideline.  In June 2010, the directors adopted a minimum stock ownership guideline for non-employee directors under which the 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.

Independence.  Our board of directors strongly supports the concept of director independence. The Chief Executive Officer is the only member of the board who is a current or past La-Z-Boy 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, nominating and corporate governance, and risk oversight committees to independent directors. The board annually reviews and affirmatively determines the

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independence of each director. With the exception of our chief executive officer, Kurt L. Darrow, we have determined that each of the directors is an independent director and lacks any material relationship with the company that would impede his or her autonomy. In making its determination, the board utilized the following criteria, as reflected in our Corporate Governance Guidelines:

Within the last three years a director or immediate family member may not have been an employee of the company or its independent registered public accounting firm.
Within the last three years a director or immediate family member may not have been part of an interlocking directorship in which any of our executive officers serves on the compensation committee of another company that employs the director or family member.
Within the last three years a director or immediate family member may not have received 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 is not contingent in any way on continued service).
A director or immediate family member may not be an executive officer or employee of an entity that makes payments to or receives 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, exceed 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 will not be considered material:
º 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 either company’s total revenues.
º 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 either 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.
º 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.
º 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 $100,000 in any one fiscal year.
º 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.
º 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 his or her 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 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

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“independent” director under those standards and under our Corporate Governance Guidelines: Ms. Kerr and Ms. Gurwitch, Messrs. Foss, Gabrys, Hehl, Holman, Johnston, Lipford, McCollough, Qubein and Thompson, and Dr. Levy. Mr. Lipford is “Of Counsel” to the law firm of Miller, Canfield, Paddock and Stone, P.L.C., which provided us with legal services in 2010 and has done so for many years. The board determined that Mr. Lipford is independent under the last of the categorical standards listed above because of the nature of his relationship with Miller Canfield and because Miller Canfield advised us that the total amount we paid it during the past fiscal year was less than 0.5% of its gross revenues for that period.

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, he or she is required to submit his or her resignation at the annual 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.

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

Related Party Transactions.  Our company’s Code of Business Conduct, which applies to all 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 the directors and executive officers to complete a questionnaire disclosing any transactions between the directors or executive officers, including their immediate family members, and La-Z-Boy. 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 any waivers of the Code of Business Conduct related to the directors or executive officers on our Web site. We granted no waivers in fiscal 2010.

Independent Audits.  The lead partner of our independent registered public accounting firm is rotated at least every five years. PricewaterhouseCoopers LLP has been selected as the independent registered public accounting firm for fiscal 2011.

Board Committees.  We currently have four standing committees of the board: the audit, compensation, nominating and corporate governance, and risk oversight committees. At the annual board of directors 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.

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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 does coordinate the agendas and activities of the committees with each committee chairman and attends the committee meetings. The current membership of each of the key committees is shown in the following table:

       
Name   Audit   Compensation   Nominating and
Corporate
Governance
  Risk Oversight
Kurt L. Darrow                                    
John H. Foss     Chair                         X  
Richard M. Gabrys     X       Chair                    
Janet L. Gurwitch              X                X  
David K. Hehl     X                         X  
Edwin J. Holman     X                X           
James W. Johnston                                    
Janet E. Kerr                       X       Chair  
H. George Levy              X                X  
Rocque E. Lipford                       Chair       X  
W. Alan McCollough              X       X           
Nido R. Qubein              X       X           
Jack L. Thompson              X                    

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. Under its charter, each member of the committee must meet the enhanced independence standards for audit committees as 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 within the meaning of the SEC rules, and is an audit committee financial expert within the meaning of the NYSE’s corporate governance listing standards. For further discussion of the audit committee’s activities see the “Audit Committee Report” at page 15.

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. The committee annually evaluates the performance of our chief executive officer and reviews the performance of the other named executive officers with the chief executive officer. 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 utilizes an independent outside compensation consultant (Towers Perrin and subsequently Hay Group during fiscal 2010)

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and has access to our human resources and legal personnel and senior management. The compensation committee annually produces a report on executive compensation for inclusion in the proxy statement (see page 24). The compensation committee met six times during fiscal 2010. The charter of the compensation committee will be provided to any shareholder upon request and can be found on our Web site at http://www.la-z-boy.com/about/corporate_governance.aspx.

Compensation Risk Assessment.  The compensation committee, with the assistance of its outside compensation consultant, reviewed management’s risk assessment related to the 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 the 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 compensation committee’s independent compensation consultant. Management subsequently reviewed with the compensation 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, Levy, McCollough, Qubein, and Thompson served throughout fiscal 2010 as members of the compensation committee. After her appointment to the board, Janet L. Gurwitch was added to the committee. None of the members of the committee has been an officer or an employee of La-Z-Boy Incorporated 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 Corporate Governance Committee

The nominating and corporate governance committee is composed of independent directors who met five times during fiscal 2010. The nominating and corporate 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 corporate governance committee and on the requirements for a shareholder’s own nomination of a director, see Next Annual Meeting — Shareholder Proposals for the 2011 Annual Meeting on page 49.) During fiscal 2010, the committee utilized a recruiting firm to assist in identifying and evaluating director candidates and checking their references. In evaluating proposed candidates, the committee may review their resumes, obtain references and conduct personal interviews. The Committee considers, among other factors, 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’s charter can be found on our Web site at http://www.la-z-boy.com/about/corp_governance.aspx.

Risk Oversight Committee

The risk oversight committee assists the board in its oversight of the company’s risks and in assessing the appropriateness of our strategy in light of those risks. The committee is comprised of six independent directors who met four times during fiscal 2010 and worked with outside risk consultants and the other committees of the board to ensure that the oversight responsibility of the identified risk categories was allocated to the appropriate committee or full board. The committee oversees our risk assessment, mitigation processes, and determination of risk tolerance. The risk oversight committee charter can be found on our Web site at http://www.la-z-boy.com/about/corp_governance.aspx.

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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. The audit committee members do not replace or duplicate the activities of management or the independent registered public accounting firm. While management is directly responsible for its internal controls and financial reporting process, the independent registered public accounting firm is responsible for performing an independent audit of the company’s consolidated financial statements and its internal controls over financial reporting in accordance with the auditing standards of the Public Company Accounting Oversight Board. The audit committee manages all aspects of the relationship with the independent registered public accounting firm, including its selection, compensation, retention, replacement and the scope of any additional work.

The audit committee met seven times during fiscal 2010 with the senior members of the company’s financial management team and the independent registered public accounting firm. The committee also met with other key managers selected by the committee to review some of the key financial risks. To assist the committee in performing its duties, the committee has access to advice and assistance from outside legal, accounting and other advisors at company expense. As part of its process in selecting the independent registered public accounting firm to perform the annual audit and review of internal controls, the audit committee discussed with the independent auditors the matters required to be discussed under the applicable standards promulgated by the Public Company Accounting Oversight Board. The audit committee also received the written disclosures and the letter from the independent accountant required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence and discussed with the independent accountant the independent accountant’s independence. In order to monitor the independence of PricewaterhouseCoopers LLP, the committee discusses the work they propose to perform and fees they will earn related to non-audit services prior to the performance of such work. The audit committee recently reviewed and amended its charter, and a copy of the current audit committee charter is available on the La-Z-Boy Web site at http://www.la-z-boy.com/about/corp_governance.aspx.

In order to recommend that the audited financial statements be included in the company’s Annual Report, the audit committee reviewed and discussed the fiscal 2010 audited financial statements and its internal controls over financial reporting with management and PricewaterhouseCoopers LLP. In addition, the audit committee regularly met in executive session without management and in separate private session with the independent registered public accounting firm to discuss management’s financial estimates and judgment, the internal control over financial reporting, accounting principles, and regulatory compliance. The audit committee also met individually in executive session with the chief executive officer, chief financial officer, head of audit services, and other members of senior management to discuss these same topics. As a result, the audit committee recommended to the board of directors, and the board of directors has approved, including the audited financial statements in La-Z-Boy’s Annual Report on Form 10-K for the fiscal year ended April 24, 2010, for filing with the Securities and Exchange Commission.

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

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Audit Fees

For professional services rendered to us for fiscal years 2010 and 2009, PricewaterhouseCoopers LLP has billed us as follows:

   
  Fiscal 2010   Fiscal 2009
Audit Fees   $ 1,100,800     $ 1,397,400  
Audit Related Fees     102,500       132,824  
Tax Fees     28,000       32,100  
All Other Fees     1,500       1,500  
Total   $ 1,232,800     $ 1,563,824  

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 Forms 10-Q, as well as audit services that are normally provided in connection with our statutory and regulatory filings.

Audit-related fees relate to audits of our employee benefit plans and review of controls related to new accounting systems. Tax fees include fees for domestic and 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. A limited amount of tax services have been pre-approved. Services, including tax services not covered by the general pre-approval, require specific pre-approval by the committee.

COMPENSATION DISCUSSION AND ANALYSIS

The following section summarizes the compensation programs for our named executive officers (who are those individuals named in the “Summary Compensation Table” that follows this Compensation Discussion and Analysis). Information about our compensation objectives is provided, along with a description of 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. This section should be reviewed with the pay disclosure tables that begin with the Summary Compensation Table on page 25.

Executive Summary

Despite a challenging business environment, for fiscal 2010 our company has reported sales and earnings growth in each successive quarter. These results demonstrate the effectiveness of strategic initiatives implemented by the board and management over the past several years, which have improved operational efficiencies and reflect changes we made to our cost structure in the fall of 2008, when sales volumes dropped sharply. Although we did not increase executives’ pay at the outset of fiscal 2010, our improved financial performance during the year resulted in increased incentive compensation for the named executive officers after the year concluded, in accordance with the terms of our compensation programs and consistent with our performance results.

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.

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Program effectiveness.  We have clearly defined programs that provide meaningful award opportunities aligned to the achievement of our business strategy.
Cost efficient.  In designing our executive pay program, we take into account the cost of various possible elements (share usage, cash flow and accounting/tax impact).

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 and individual performance factors. All named executive officers participate in the same compensation program 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 and 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, weighting, etc.) and information on the company’s and the furniture industry’s performance. The committee also receives input from legal counsel. Management is responsible for implementing the executive pay program that the committee approves.

Towers Perrin, an international human resources consulting firm, assisted the committee as an outside executive compensation consultant from 2003 to 2009. Towers Perrin conducted officer pay level benchmarking, provided input on pay program design, and presented recommendations consistent with our pay philosophy. During fiscal 2009, Towers Perrin provided information about market practices and executive pay levels that was considered by the committee and management in developing our executive pay program.

Towers Perrin served as the compensation committee’s independent compensation consultant through June 2009. At the beginning of fiscal 2010, the compensation committee requested proposals from several national consulting firms, including Towers Perrin, for services to the committee regarding all aspects of executive compensation. The compensation committee selected Hay Group as its consultant beginning August 2009. Overall experience, presentation style and content, references, and cost were factors considered in the selection. A representative of Towers Perrin or Hay Group (as applicable) attended all compensation committee meetings in fiscal 2010. As part of the initial engagement of Hay Group, the compensation committee instructed Hay Group to review and compare various elements of our compensation package to current compensation market practices and trends. Among other items, this review covered director and named executive officer compensation, long-term incentive design, change in control and severance arrangements, and executive retirement plan design. Hay Group does not provide any services to the company other than its work for the committee. Under the direction of the committee, Hay Group does interact with members of the senior executive team to provide insight into company and industry practices and to ensure that executives are informed with regard to emerging best practices and market trends.

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, an executive’s competencies, skills, experience, and performance, as well as our business needs, cost, and internal relationships.

In setting the named executive officers’ pay levels, the committee reviews pay of the chief executive officer and other named officers as a team. Annually we review current total direct compensation (salary, annual and long-term incentive awards) among a peer group of furniture companies similar in size to La-Z-Boy. The peer group considered in setting fiscal 2009 pay levels comprised the following companies: Bassett Furniture Industries, Inc., Ethan Allen Interiors, Inc., Flexsteel Industries, Inc., Furniture Brands International, Inc., Herman Miller, Inc., Hooker Furniture Corp., Stanley Furniture Co., Inc. and Steelcase, Inc.

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In view of the decreasing size of some of the company’s industry competitors, and the company’s increased focus on retail, the committee worked with Hay Group to review and revise the peer group of companies for fiscal 2010. In selecting the 2010 peer group, the committee used the following criteria: US domiciled and publicly-traded companies, size parameters measured by revenues, and known competitors or companies adhering to a similar business model (manufacturer with a retail focus). The 2010 peer companies approved by the committee were Acuity Brands, Inc., Ethan Allen Interiors, Inc., Furniture Brands International, Inc., Haverty Furniture, 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.

In addition, we review target total direct compensation among comparably sized jobs in retail and general industry companies. Our consultant provides the retail and general industry data, which is based on published compensation surveys conducted annually by Hay Group.

Periodically, we review the market practices for executive retirement benefits, deferred compensation plans, and change in control agreements. In fiscal 2010, the committee reviewed our severance and change in control arrangements in light of best practices in these areas. Actions taken by the committee are discussed in the “Other Executive Compensation Program Elements” section (see page 22).

To aid in its oversight of our executive compensation program, the committee reviews tally sheets containing three years of history for each of the named executive officers. These tally sheets detail dollar amounts for base salary, short- and long-term incentives, and accumulated pay. In addition, the tally sheets include 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 tally sheets provides the committee with a complete picture of the named executive officers’ current and historical compensation.

A formal, individual performance evaluation is conducted each year for each executive and considered in decisions on the executive’s compensation. The independent members of the board of directors assess the chief executive officer’s performance each year. This formal assessment includes an evaluation of critical areas, including customer relations, human capital, shareholder value, operating results and strategic goals. The chief executive officer assesses the individual performance of the other named executive officers 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 comprising the following primary elements:

Base salary
Management Incentive Plan (annual incentive opportunity)
Long-term Equity Award Plan
Other executive compensation program elements (stock ownership guidelines, retirement benefits and 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 fiscal 2010 pay decisions are detailed below.

Base Salary

Base salaries to compensate our executives are based on their duties, competencies, experience and performance, and provide a basic degree of financial security. In setting base salaries for our executive team, we consider market levels, specific job responsibilities, internal pay relationships and the total cost. Executives are eligible for annual merit salary increases based on individual performance, comparison to market levels and the total salary budget. Executives are also eligible for salary adjustments if they are promoted or their job responsibilities change.

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No Salary Changes in Fiscal 2010

Due to economic conditions and the company’s financial performance at the beginning of fiscal 2010, we did not increase the base salaries of any of our named executive officers for the year. Their salaries were, in the aggregate, competitive with market median levels.

Salary Changes for Fiscal 2011

In June 2010, the committee reviewed salary levels for each of the named executive officers and approved certain salary increases based on their individual performance, the company’s improved financial position and market data provided by Hay Group. Effective July 2010, three of the named executive officers received salary increases based on the following:

Kurt L. Darrow, President and Chief Executive Officer.  Based on overall improvements in the company’s performance and financial position during fiscal 2010, the execution of our strategic plan and the position’s compensation level relative to our peer group, the committee determined that an increase of base salary for fiscal 2011 was appropriate. While sales for fiscal 2010 were down year over year 3.9%, net income increased significantly each quarter over the same period in the prior year. The company recorded net income of $0.62 per share after reporting successive quarters of sales and earnings growth for fiscal 2010. In addition, senior management focused on managing cash, and in fiscal 2010, we generated $90 million in net cash provided by operating activities and increased cash on its balance sheet by $91 million to $108 million. We strengthened our position to improve profitability in anticipation of sales volume increases.
Louis M. Riccio, Jr., Senior Vice President and Chief Financial Officer.  The committee increased Mr. Riccio’s base salary for fiscal 2011 based on his performance and the position’s compensation level relative to the company’s peer group. Despite substantial business challenges and reduced sales year over year, the company strengthened its financial position significantly during fiscal 2010 and the third and fourth quarters of fiscal 2009. Cost reductions led to increased operating margin, and during fiscal 2010, the company increased the cash on its balance sheet from $17 million to $108 million. Over the previous six quarters, the company reduced its debt by nearly 60% from $117 million to $48 million. The company finished the year with net income of $0.62 per share.
Mark S. Bacon, Sr., Senior Vice President and Chief Retail Officer.  The committee increased Mr. Bacon’s base salary for fiscal 2011. In spite of slightly lower sales in a very challenging retail environment, the company’s retail division increased its gross margin and reduced its operating loss by 43%, or $15 million, during fiscal 2010. During the year, the retail division overhauled its sales associate system, making strategic changes to the business designed to grow revenue and reduce selling expense. The division continues to make progress toward improving sales and profitability while maintaining overall cost reductions.
Steven M. Kincaid, Senior Vice President and President Casegoods.  In fiscal 2010, Mr. Kincaid continued to refine the casegoods division’s operations, consolidated operating companies, and achieved improved efficiencies that should result in $4 million to $5 million in cost savings to be realized by the end of fiscal 2011. Our casegoods business sales declined 17.6% compared to the prior year, and the division operating margin declined to (0.2)%. With the division’s reduced size and the current level of salary compared to the market, along with the casegoods division not contributing at an expected level of profitability to the organization, Mr. Kincaid did not receive an increase in his base salary for fiscal 2011.
Otis S. Sawyer, Senior Vice President & President Non-Branded Upholstered Product.  During fiscal 2010, Mr. Sawyer continued to manage the company’s England, Inc. and Bauhaus U.S.A., Inc. subsidiaries for improved performance, overseeing an improvement in operating margin in spite of a 4.2% decline in sales. Because his current salary is in line with market median levels for comparable positions, Mr. Sawyer did not receive an increase in his base salary for fiscal 2011.

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The named executive officers’ fiscal 2009, 2010, and 2011 annualized salaries are presented in the table below. There was no change in base salary for the named executive officers for fiscal 2010.

         
Executive   Fiscal 2009
Salary
$
  Fiscal 2010
Salary
$
  % Change   Fiscal 2011
Salary
$
  % Change
Kurt L. Darrow     725,000       725,000       0 %      775,000       6.9 % 
Louis M. Riccio, Jr.     350,000       350,000       0 %      375,000       7.1 % 
Mark S. Bacon, Sr.     375,000       375,000       0 %      400,000       6.7 % 
Steven M. Kincaid     360,000       360,000       0 %      360,000       -0-  
Otis S. Sawyer     310,000       310,000       0 %      310,000       -0-  

Management Incentive Plan

The named executive officers and the management team participate in the Management Incentive Plan (MIP), which is an annual incentive (bonus) plan. The MIP is 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. Employees have the opportunity to earn awards up to 200% of their target, based on performance. For the named executive officers, we base the financial goals on the company’s overall financial performance.

Fiscal 2010 financial measures were:

 2/3 weight — operating margin (operating income as % of annual revenues)
 1/3 weight — net cash provided by operating activities

The compensation committee approved these financial measures because they drive shareholder value and reflect our emphasis on profitability (operating margin). For these purposes, we calculated operating margin and operating cash flow without taking into account payments received relating to import duties arising from an anti-dumping order on wooden bedroom furniture from China, gains or losses on the sale of real estate, restructuring costs, reduction in cash flow arising from termination of factoring arrangement, and expense accruals for the MIP payments themselves. After defining required performance, the committee has discretion, in extraordinary circumstances, to modify incentive awards, either up or down, for the named executive officers but did not exercise such discretion in awarding MIP payments for 2010.

Target financial performance goals are set to be challenging but achievable. Over the prior five years (fiscal years 2005 to 2009), our payouts under the MIP for overall company financial performance averaged approximately 25% of target.

For fiscal 2010, executives were not eligible to receive any award unless we achieved an operating margin of 2.0% or net cash provided by operating activities of $60,954,000, compared with our fiscal 2009 operating margin results of (7.7)% and net cash provided by operating activities of $51,688,000. Executives were eligible to earn their target bonus amount if we achieved both an operating margin of at least 4.0% and operating cash flow of at least $77,794,000. Executives would receive 200% of their target bonus if the company achieved both an operating margin of at least 6.0% and operating cash flow of at least $99,288,000.

Analysis — 2010 MIP Awards Were Above Target Reflecting Our Financial Performance

Our 2010 company financial performance results were above target levels, reflecting the effectiveness of the strategic initiatives and cost structure adjustments. Results for operating cash flow were 172% of target and operating margin was 135% of target resulting in an achieved performance level of 147% of target. 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 2010 were above target levels.

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Our named executive officers’ fiscal 2010 target, achieved performance level, and actual MIP awards, expressed as a percentage of base salary, were as follows:

     
Executive   Fiscal 2010
Target Incentive
(% of base salary)
  Achieved Performance Level
(% of target performance)
  Actual Fiscal 2010 Incentive Payout
(% of base salary)
Kurt L. Darrow     90 %      147 %      132.3 % 
Louis M. Riccio, Jr.     50 %      147 %      73.5 % 
Mark S. Bacon, Sr.     50 %      147 %      73.5 % 
Steven M. Kincaid     50 %      147 %      73.5 % 
Otis S. Sawyer     50 %      147 %      73.5 % 

Long-term Equity Award Plan

Our 2004 Long-term Equity Award Plan is designed to motivate and reward executives for creating shareholder value and to enhance our ability to retain employees. The value our employees receive varies based on the company’s performance and the future price of our common stock.

We establish award levels for each eligible pay grade after considering market median practices and total cost (share usage and accounting/tax impact). The committee grants annual equity-based awards on the second Wednesday in July. Our chief executive officer has discretion during the year to approve limited grants of restricted stock to recruit executives and reward promoted employees other than the named executive officers, but we made no such grants during fiscal 2010.

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/tax impact and past practices. We determine the accounting cost of the stock-based awards as of the date of grant and accrue the expense over the vesting period. The ultimate expense for performance-based stock awards is based on the number of shares earned.

Our stock options and performance-based stock awards will be designed and drafted to be tax deductible by the company. When executives exercise options or receive performance-based shares, they are taxed at ordinary income rates, and we intend to qualify for a tax deduction. We may not be able to deduct 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 24.

Fiscal 2010 Grants

For fiscal 2010, we granted two types of stock-based awards: restricted stock and stock options. Because our stock price had declined significantly during the preceding 9 months, the total award values at the time of grant were on average approximately 50% below the prior year’s grant. In light of the decreased value and the difficulty of establishing meaningful long-term goals in the midst of the very uncertain economic climate, the committee did not grant performance-based share awards and instead utilized stock options, which provide value only if our stock increases in value.

The fiscal 2010 award types are summarized below.

Restricted Stock (25% of fiscal 2010 long-term incentive opportunity for named executive officers)

Restricted stock awards are an incentive for executives to remain with our company and to work to enhance the value of the company’s stock over time. Executives receive value from restricted stock awards only if they are still employed by the company when the awards vest. For our named executive officers, the restricted shares granted in fiscal 2010 vest in three installments:

After three years: 25% of the shares vest
After four years: an additional 25% of the shares vest
After five years: the remaining 50% of the shares vest

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Prior to vesting, executives have voting rights and receive dividends on the restricted shares at the same rate provided to other shareholders. Executives receive the shares when they vest, and the restriction on trading these shares is removed. The actual value executives realize on the shares reflects the stock price at the time the shares vest, multiplied by the number of shares that vest at that time.

Stock Options (75% of fiscal 2010 long-term incentive opportunity for named executive officers)

Stock options entitle executives to purchase stock at the exercise price (closing price on date of grant) for up to five years. Options expire at the end of five years if they have not been exercised by that time. Stock options have no value to executives if the company’s stock price does not rise, and they therefore encourage executives to work in ways that will improve the company’s performance and result in a higher stock price.

Stock options granted in fiscal 2010 vest in equal installments over four years (25% per year) and have a five-year term.

Once a stock option vests, an executive may purchase stock at the price fixed at the time of grant. The executive realizes value equal to the difference between the grant price (the price the executive pays) and the price at which our stock is trading publicly at the time the executive exercises the option.

Payouts for Equity Grants Made Prior to Fiscal 2010

The named executive officers (except for Mr. Bacon) realized value in fiscal 2010 for restricted stock grants and performance-based share grants made prior to fiscal 2010. The restriction period lapsed on a portion of restricted grants made in fiscal 2005 through fiscal 2007 and performance-based stock awards granted in fiscal 2008. The pre-tax amounts realized are shown in the fiscal 2010 Option Exercises and Stock Vested table (on page 29). Named executive officers did not exercise any stock options during fiscal 2010.

Fiscal 2011 Grants

Awards made to executive officers under the Long-Term Equity Award Plan for fiscal years 2006 – 2010 have included a mix of options, restricted stock, and performance-based shares. The committee determined that equity grants made in July 2010 (fiscal 2011) will be composed of stock options (25%) and performance-based shares (75%). We are proposing that our current 2004 Long-Term Equity Award Plan be replaced by a new incentive compensation plan (see proposal on page 36). The plan includes both short-term and long-term incentives, payable in cash, stock options, restricted stock, and other stock-based awards. The purpose of the plan is to promote the interests of the company and our shareholders through (a) attracting and retaining participants essential to the company’s success; (b) motivating participants with incentives linked to appropriate performance goals; and (c) enabling such individuals to share in our success and appreciation in the value of our stock. The committee has approved grants under the new plan to current employees, to be issued subject to shareholder approval of the plan, and has approved performance targets as applicable for the awards.

Other Executive Compensation Program Elements

Executive Management Stock Ownership Guidelines

The committee annually monitors compliance by our executive management with stock ownership guidelines. In June 2005, we set minimum stock ownership guidelines for executive management, including the named executive officers. The ownership guidelines were expressed as a number of shares and varied from approximately 38,000 to 144,000 shares, depending on the named executive officer’s responsibilities and the timing of when the executive became subject to the guidelines. Each executive had five years from when the executive first became subject to the guidelines to achieve the required level of stock ownership and was required to remain in compliance thereafter. Effective June 2010, the compensation committee amended the guidelines based on a review of peer group and Fortune 250 companies’ guidelines. Under the amended 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), using our stock’s average closing price in the month of April 2010. The share requirements for our named executive officers now range from approximately 45,000 to 210,000, but their deadline for compliance has not changed. The share requirement will be reassessed in June 2013 based on each executive’s salary and a representative share price at the end of fiscal year 2013, and, subject to variation in our stock price, executives can expect their requirement to increase as their compensation increases.

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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 contingently earned (but unvested) performance-based stock awards. As of April 24, 2010, Messrs. Darrow, Kincaid, Riccio and Sawyer were in compliance with their guidelines. Mr. Bacon began in his position during fiscal 2009 and has until May 1, 2014, to meet his required ownership level.

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. 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. Due to the company’s financial performance and desire to conserve cash, profit sharing contributions were suspended for fiscal 2009 and have not been reinstated. Matching company contributions to the 401(k) plan were suspended effective January 1, 2009, and reinstated at a reduced level effective January 1, 2010.

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 bonus award (under the Management Incentive Plan) 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 (because the executive’s contributions to the 401(k) plan were returned following discrimination testing for highly compensated personnel, the executive’s contributions either were limited by the annual contribution limit — currently $16,500 — or the annual compensation limit — currently $245,000 — or a contribution to the executive’s account in the profit-sharing plan would have caused the plan to fail discrimination testing). None of the named executive officers elected to defer compensation in fiscal 2010, and the company made no contributions.

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 it 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.

In fiscal 2010, based on market data provided by Hay Group and subsequent review and discussion, the committee reduced the cash severance payouts and benefit continuation periods for the non-CEO named executive officers. 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 sum of an executive’s base salary plus the executive’s average annual bonus 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 long-term incentive plan, we currently 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. 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

23


 
 

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 30.

Named Executive Officer Severance Plan

We did not have severance arrangements in place in fiscal year 2010 for our named executive officers. After analyzing US market and peer company severance practices, the committee adopted a severance plan to assist the company in attracting and retaining quality executive talent while providing the company some protection against competition and solicitation by a former executive.

The severance plan provides that unless a named executive officer is discharged “for cause,” or if the named executive officer terminates employment with “good reason,” then upon termination of employment, the CEO will receive severance for 24 months, and the other named executive officers will receive severance for 12 months, equal to their respective base salaries at the time their employment ended. Discharge “for cause” would generally include employee acts of fraud, reckless misconduct, substandard performance (that is not corrected) or 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 also similarly affected, or a transfer requiring the employee to 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 new 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 the 2004 Long-term Equity Award Plan 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 do not qualify.

Recoupment of Incentive Payments

In accordance with our policy, we will require reimbursement of annual or long-term incentive payments 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.

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.

Richard M. Gabrys, Chairman
Janet L. Gurwitch
Dr. H. George Levy
W. Alan McCollough
Nido R. Qubein
Jack L. Thompson

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EXECUTIVE COMPENSATION

The Summary Compensation Table and other tables present pay for our named executive officers received for fiscal 2010.

Named Executive Officers as of April 24, 2010

Kurt L. Darrow (age 55), President and Chief Executive Officer
Louis M. Riccio, Jr. (age 47), Senior Vice President and Chief Financial Officer
Mark S. Bacon, Sr. (age 47), Senior Vice President and Chief Retail Officer
Steven M. Kincaid (age 61), Senior Vice President and President Casegoods Product
Otis S. Sawyer (age 52), 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 2010 for previously granted long-term incentives is presented in the Option Exercises and Stock Vested table on page 29.
Target annual and long-term incentive opportunities for fiscal 2010 are presented in the Grants of Plan-Based Awards table on page 26.

2010 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
President &
Chief Executive
Officer
    2010       725,000       100,947       717,171       959,175       8,556       2,510,849  
    2009       725,000       1,385,443                0       47,338       2,157,781  
    2008       675,000       785,470       254,592       202,000       75,695       1,992,757  
     
Louis M. Riccio, Jr.
Senior Vice President
& Chief Financial
Officer
    2010       350,000       45,230       321,290       257,250       3,751       977,521  
    2009       350,000       294,640                0       19,793       664,433  
    2008       320,000       200,375       65,088       61,000       25,190       671,653  
     
Mark S. Bacon, Sr.(5)
Senior Vice President
& Chief Retail Officer
    2010       375,000       45,230       321,290       275,625       828       1,017,973  
    2009       203,362       98,100                0       311       301,773  
     
Steven M. Kincaid
Senior Vice President
& President Casegoods Product
    2010       360,000       45,230       321,290       264,600       5,237       996,357  
    2009       360,000       294,640                0       29,511       684,151  
    2008       360,000       200,375       65,088       27,000       38,444       690,907  
     
Otis S. Sawyer
Senior Vice President
& President Non-
Branded Upholstered
Product
    2010       310,000       45,230       321,290       227,850       193       904,563  
    2009       310,000       294,640                0       6,842       611,482  
    2008       285,000       200,375       65,088       42,000       20,388       612,851  
     

(1) Reflects the total value of the restricted share and performance-based awards granted during the fiscal year. We valued the restricted shares and performance-based shares using the closing price of La-Z-Boy stock on the date of the grant. No 2009 performance-based share awards were earned due to fiscal 2009 financial results.

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Maximum value of performance-based shares:

   
Name   2009   2008
Kurt L. Darrow   $ 1,558,623     $ 1,046,530  
Louis M. Riccio, Jr.   $ 331,470     $ 267,930  
Steven M. Kincaid   $ 331,470     $ 267,930  
Otis S. Sawyer   $ 331,470     $ 267,930  
(2) Reflects the total grant date 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 Note 13 (Stock-Based Compensation) to the Consolidated Financial Statements found in Item 8 of Part II of our fiscal 2010 Form 10-K.
(3) Consists of cash awards for the achievement of performance results for the respective year made under our management incentive plan (MIP). Payments are made in the first quarter following completion of the fiscal year.
(4) All Other Compensation for fiscal 2010 consists of company paid life insurance premiums and tax reimbursements related to company contributions to the deferred compensation plans (made in the prior year).
(5) Mr. Bacon was hired on October 17, 2008, and the salary shown for 2009 reflects his service during the remainder of that year.

Grants of Plan-Based Awards

The following table provides details of all incentive plan-based awards granted to the named executive officers during fiscal 2010. Specifically, the table presents the following fiscal 2010 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 25).
Restricted shares
Stock Options

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Fiscal 2010 Grants of Plan-Based Awards

                     
                     
Name   Grant Date  
 
 
 
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards(1)
  Estimated Future Payout Under
Equity Incentive Plan Awards
  All Other
Stock
Awards:
Number of
Shares or
Units
(#)
  All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
  Exercise or
Base Price
of Option
Awards
($/Share)
  Fair Value
of Stock &
Option
Awards(2)
  Threshold
($)
  Target
($)
  Maximum
($)
  Threshold
(#)
  Target
(#)
  Maximum
(#)
Kurt L. Darrow
                                                                                                  
2010 Annual Incentive (MIP)              0       652,500       1,305,000                                                                 
Restricted Shares     7/8/2009                                                             23,100                         100,947  
Non-Qualified Stock Options     7/8/2009                                                                      276,900       4.37       717,171  
Louis M. Riccio, Jr.                                                                                                   
2010 Annual Incentive (MIP)              0       175,000       350,000                                                                 
Restricted Shares     7/8/2009                                                             10,350                         45,230  
Non-Qualified Stock Options     7/8/2009                                                                      124,050       4.37       321,290  
Mark S. Bacon, Sr.                                                                                                   
2010 Annual Incentive (MIP)              0       187,500       375,000                                                                 
Restricted Shares     7/8/2009                                                             10,350                         45,230  
Non-Qualified Stock Options     7/8/2009                                                                      124,050       4.37       321,290  
Steven M. Kincaid  
2010 Annual Incentive (MIP)              0       180,000       360,000                                                                 
Restricted Shares     7/8/2009                                                             10,350                         45,230  
Non-Qualified Stock Options     7/8/2009                                                                      124,050       4.37       321,290  
Otis S. Sawyer  
2010 Annual Incentive (MIP)              0       155,000       310,000                                                                 
Restricted Shares     7/8/2009                                                             10,350                         45,230  
Non-Qualified Stock Options     7/8/2009                                                                      124,050       4.37       321,290  

(1) Actual awards could have been up to 200% of target for the MIP based on performance results.
(2) For restricted shares, represents the FASB ASC Topic 718 grant-date fair value ($4.37 per share), which would be expensed, as appropriate, over the vesting/performance period.

27


 
 

Outstanding Equity Awards at 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 stock price of the company’s stock on April 23, 2010, of $14.75.

                 
                 
Name   Grant Year   Option Awards   Stock Awards
  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                                                  129,170       1,905,258                    
Stock Options     2010       0       276,900       4.37       07/08/2014                                      
       2009       0       0                                                        
       2008       44,200       44,200       11.45       7/11/2012                                      
       2007       66,300       22,100       13.26       8/16/2011                                      
       2006       88,400       0       13.57       8/23/2010                                      
       2004       33,100       0       22.20       9/30/2013                                      
       2004       16,900       0       20.44       8/12/2013                                      
       2003       16,900       0       22.60       8/14/2012                                      
 
Louis M. Riccio, Jr.
                                                                                
Restricted Shares                                                  32,900       485,275                    
Stock Options     2010                124,050       4.37       07/08/2014                                      
       2009       0       0                                                        
       2008       11,300       11,300       11.45       7/11/2012                                      
       2007       16,950       5,650       13.26       8/16/2011                                      
       2006       6,000       0       13.57       8/23/2010                                      
       2004       5,000       0       20.44       8/12/2013                                      
       2003       5,000       0       22.60       8/14/2012                                      
Mark S. Bacon, Sr.
                                                                                
Restricted Shares                                                  25,350       373,913                    
Stock Options     2010                124,050       4.37       07/08/2014                                      
Steven M. Kincaid
                                                                                
Restricted Shares                                                  35,000       516,250                    
Stock Options     2010                124,050       4.37       07/08/2014                                      
       2009       0       0                                                        
       2008       11,300       11,300       11.45       7/11/2012                                      
       2007       16,950       5,650       13.26       8/16/2011                                      
       2006       22,600       0       13.57       8/23/2010                                      
       2004       16,900       0       20.44       8/12/2013                                      
       2003       16,900       0       22.60       8/14/2012                                      
Otis S. Sawyer
                                                                                
Restricted Shares                                                  33,850       499,288                    
Stock Options     2010                124,050       4.37       07/08/2014                                      
       2009       0       0                                                        
       2008       11,300       11,300       11.45       7/11/2012                                      
       2007       16,950       5,650       13.26       8/16/2011                                      
       2006       13,600       0       13.57       8/23/2010                                      
       2004       5,000       0       20.44       8/12/2013                                      
       2003       2,000       0       22.60       8/14/2012                                      

28


 
 

(1) Stock options that were unvested will vest as follows:

 
Grant Year   Vesting Schedule
2010   ¼ of the unvested options vest on each July 8 during 2010 to 2013
2008   ½ of the unvested options vest on each July 11 during 2010 to 2011
2007   Vest August 16, 2010
(2) Unvested restricted share grants will vest as follows:

           
  Restricted Shares
Grant Dates   2010
Grant
(a)
  2009
Grant
(b)
  2008
Grant
(c)
  2007
Grant
(d)
  2006
Grant
(e)
  Total
Kurt L. Darrow     23,100       54,545       22,900       17,175       11,450       129,170  
Louis M. Riccio, Jr.     10,350       11,600       5,800       4,350       800       32,900  
Mark S. Bacon, Sr.     10,350       15,000       0       0       0       25,350  
Steven M. Kincaid     10,350       11,600       5,800       4,350       2,900       35,000  
Otis S. Sawyer     10,350       11,600       5,800       4,350       1,750       33,850  

(a) Shares vest 25% on July 8, 2012, 25% on July 8, 2013, and 50% on July 8, 2014.
(b) For Messrs. Darrow, Riccio, Kincaid, and Sawyer, shares vest 25% on July 9, 2011, 25% on July 9, 2012, and 50% on July 9, 2013. For Mr. Bacon, shares vest 25% on October 17, 2011, 25% on October 17, 2012, and 50% on October 17, 2013.
(c) Shares vest 25% on July 11, 2010, 25% on July 11, 2011, and 50% on July 11, 2012.
(d) 25% of the original grant vested August 16, 2009. The unvested shares are shown and vest 25% on August 16, 2010 ( 1/3 of the unvested shares), and 50% on August 16, 2011 ( 2/3 of the unvested shares).
(e) 25% of the original grant vested on August 23, 2008, and 25% on August 23, 2009. The unvested shares are shown and vest on August 23, 2010.
(3) There are no outstanding unearned or unvested performance-based 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 2010.

Option Exercises and Stock Vested in Fiscal 2010

       
  Option Awards   Stock Awards
Name   Number of
Shares Acquired
on Exercise
(#)
  Value Realized
on Exercise
($)
  Number of
Shares Acquired
on Vesting
(#)
  Value Realized
on Vesting
($)(1)
Kurt L. Darrow     0       0       63,350       815,262  
Louis M. Riccio, Jr.     0       0       14,050       190,519  
Mark S. Bacon, Sr.     0       0       0       0  
Steven M. Kincaid     0       0       16,600       211,604  
Otis S. Sawyer     0       0       15,275       200,601  

(1) The dollar value of the vested restricted stock award and vested performance-based shares reflects the total pre-tax value realized (based on the price of La-Z-Boy stock at vesting).

29


 
 

Non-Qualified Deferred Compensation

The following table provides details for the named executive officers regarding their non-qualified deferred compensation accounts as of April 24, 2010. 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 2010 Non-Qualified Deferred Compensation

         
Name   Executive
Contribution in
Last FY
($)(1)
  Registrant
Contributions in Last FY
($)(2)
  Aggregate
Earnings in
Last FY
($)(3)
  Aggregate
Withdrawals/
Distributions
($)
  Aggregate
Balance at
Last FYE
($)(4)
Kurt L. Darrow     0       0       227,441       0       1,022,026  
Louis M. Riccio, Jr.     0       0       22,617       0       72,971  
Mark S. Bacon, Sr.     0       0       0       0       0  
Steven M. Kincaid     0       0       336,991       0       1,306,575  
Otis S. Sawyer     0       0       21,103       0       292,539  

(1) There were no elective deferrals of base salary or fiscal 2010 MIP awards.
(2) No company contributions were made in fiscal 2010.
(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.

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 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
Amounts contributed under retirement and non-qualified deferred compensation plans

30


 
 

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.” We make payments in those circumstances for all participants in the pertinent plans. Payments made 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 24. 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 also receive the following incremental benefits:

Stock options:  accelerated vesting of unvested options.
Restricted shares:  restrictions lapse, provided the employee remains in the employ of La-Z-Boy or a subsidiary for at least one year past the grant date of the award.
Performance-based shares:  provided the employee remains in the employ of the company or a subsidiary for at least one year past the grant date of the award, awards will continue to 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.
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 2010 performance, which are reported in the Summary Compensation Table on page 25, are not included in the table below.

Payments Made Upon Death

In the event of death, the officer’s beneficiary will also 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, rather than waiting until the conclusion of the performance period, the company may, in its discretion and at the request of a deceased employee’s personal representative, provide for payment 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 2010 performance, which are reported in the Summary Compensation Table on page 25, 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. Effective June 2010, the board of directors approved new agreements to reduce the protection period and potential payout for the named executive officers, other than the CEO, and to change to the best-net approach described below. The agreements provide that in the event a

31


 
 

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 new agreements employ a “best-net” approach. The previous agreements reduced payments if necessary to avoid non-deductible “parachute payments” under Section 280G of the Internal Revenue Code. In the new agreements, the executive is responsible for excise taxes on any parachute payments, and we do not pay any tax gross-ups. 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 our incurring the additional expense of a tax gross-up.

Under the 2004 Long-term Equity Award Plan, unvested stock options and restricted shares immediately vest upon a change in control. Performance-based shares would be paid based on performance through the date of the change in control. Under the proposed 2010 Omnibus Incentive Plan, awards would 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 amounts shown assume the termination occurred under the current agreements and plans (excluding the 2010 Omnibus Incentive Plan) and was effective as of the last business day of fiscal 2010. The value of equity awards is based on the closing price of $14.75 of the company’s stock on April 23, 2010 (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.

32


 
 

Estimated Payments Upon Termination or Change in Control

       
Name and Benefit   Change in
Control
$(1)
  Retirement
$(2)(3)
  Disability/
Death
$(2)
  Involuntary
Termination or
Termination
with Good
Cause Under
Severance
Plan
$(4)
Kurt L. Darrow
                                   
Base Salary (3 times annual salary)     2,175,000                             
Annual Incentive (3 times average actual bonus amount paid in prior 3 years)     352,000                             
Stock Options (accelerated vesting)     694,074       3,053,011       3,053,011           
Restricted Shares (accelerated vesting)     563,822       1,564,533       1,905,258           
Broad-Based Benefits(6)     15,891                         9,652  
Severance Payment                                1,450,000  
Total Incremental Pay     3,800,787       4,617,544       4,958,269       1,459,652  
Louis M. Riccio, Jr.
                                   
Base Salary (2 times annual salary)     700,000                             
Annual Incentive (2 times average actual bonus amount paid in prior 3 years)     64,000                             
Stock Options (accelerated vesting)     307,996                1,333,348           
Restricted Shares (accelerated vesting)     163,799                485,275           
Broad-Based Benefits(6)     19,436                         9,490  
Severance Payment                                350,000  
Total Incremental Pay     1,255,231       0       1,818,623       359,490  
Mark S. Bacon, Sr.
                                   
Base Salary (2 times annual salary)     750,000                             
Annual Incentive (2 times average actual bonus amount paid in prior 3 years)                                 
Stock Options (accelerated vesting)     304,079                1,287,639           
Restricted Shares (accelerated vesting)     164,296                373,913           
Broad-Based Benefits(6)     19,468                         9,490  
Severance Payment                                375,000  
Total Incremental Pay     1,237,843       0       1,661,552       384,490  
Steven M. Kincaid
                                   
Base Salary (2 times annual salary)(5)     570,533                             
Annual Incentive (2 times average actual bonus amount paid in prior 3 years)     91,334                             
Stock Options (accelerated vesting)     307,996       1,333,348       1,333,348           
Restricted Shares (accelerated vesting)     165,118       363,588       516,250           
Broad-Based Benefits(6)     18,104                         8,829  
Severance Payment                                360,000  
Total Incremental Pay     1,153,085       1,696,936       1,849,598       368,829  
Otis S. Sawyer
                                   
Base Salary (2 times annual salary)     620,000                             
Annual Incentive (2 times average actual bonus amount paid in prior 3 years)     46,666                             
Stock Options (accelerated vesting)     307,996       1,333,348       1,333,348           
Restricted Shares (accelerated vesting)     164,396       346,625       499,288           
Broad-Based Benefits(6)     9,596                         4,654  
Severance Payment                                310,000  
Total Incremental Pay     1,148,654       1,679,973       1,832,636       314,654  

33


 
 

1. Amounts shown reflect values as if the current change in control agreements had been in effect at the end of fiscal 2010. The estimated net benefit and related excise tax for each named executive officer are shown below. The executive is responsible for the excise tax; we do not pay a tax gross-up.

   
  Estimated Excise Tax
$
  Net Benefit Received
$
Kurt L. Darrow     576,990       3,223,798  
Louis M. Riccio, Jr.     187,048       1,068,183  
Mark S. Bacon, Sr.     179,491       1,058,352  
Steven M. Kincaid              1,153,085  
Otis S. Sawyer     168,326       980,328  

The estimated benefits under the prior agreements would have been:

           
  Base Salary
$
  Bonus
$
  Stock Options (accelerated vesting)
$
  Restricted Shares (accelerated vesting)
$
  Broad-based Benefits
$
  Total Incremental pay
$
Kurt L. Darrow     1,121,730       352,000       694,074       563,822       15,891       2,747,517  
Louis M. Riccio, Jr.     363,022       96,000       307,996       163,799       29,154       959,971  
Mark S. Bacon, Sr.     523,588                304,079       164,296       29,202       1,021,165  
Steven M. Kincaid     515,815       137,000       307,996       165,118       27,156       1,153,085  
Otis S. Sawyer     364,284       70,000       307,996       164,396       14,394       921,070  

The Base Salary amount was reduced so the total change in control payments would not result in excise taxes.

2. Reflects value as of April 23, 2010, of all outstanding restricted shares and stock options.
3. Messrs. Riccio, Bacon, and Sawyer are not eligible for retirement because they are not 55 years old.
4. These amounts are as if the current severance plan was in effect at the end of fiscal 2010. There was no severance plan in effect at the end of fiscal 2010.
5. Base Salary amount was reduced to reflect the best net after tax benefit to the employee.
6. Change in Control — two years (three years for CEO) of health/insurance coverage.

Severance Plan — health insurance during the time of severance.

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PROPOSAL NO. 2: TO RATIFY THE SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The audit committee has selected PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal 2011. PricewaterhouseCoopers LLP acted as our independent registered public accounting firm for fiscal 2010, and we believe it is well qualified to act in that capacity again this year. Representatives of PricewaterhouseCoopers LLP will be present at the meeting with the opportunity to make a statement and to answer questions.

We are asking you to ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm. Although ratification is not required by our bylaws or otherwise, the board is submitting the selection of PricewaterhouseCoopers LLP to you for ratification as a matter of good corporate practice. If the audit committee’s selection is not ratified, it will reconsider the selection. In addition, the audit committee, in its discretion, may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of La-Z-Boy and our shareholders.

Our management will present the following resolution to the meeting:

RESOLVED, that the audit committee’s selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm for La-Z-Boy Incorporated for fiscal 2011 is ratified.

The board of directors recommends a vote FOR Proposal No. 2.

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PROPOSAL NO. 3: TO APPROVE THE LA-Z-BOY INCORPORATED
2010 OMNIBUS INCENTIVE PLAN

Overview

On June 11, 2010, the board of directors unanimously approved and adopted the La-Z-Boy Incorporated 2010 Omnibus Incentive Plan, subject to the approval of our shareholders. The new omnibus plan provides the board the ability to design compensatory awards that are responsive to La-Z-Boy’s needs. It provides for a variety of awards designed to advance La-Z-Boy’s interests and long-term success by encouraging share ownership among our officers and other key executives, employees, nonemployee directors and consultants and other advisors and otherwise linking their compensation to share price performance or the achievement of specific corporate goals. These awards include equity and cash awards intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Internal Revenue Code.

We have historically granted equity awards under various plans, including most recently our 2004 Long-Term Equity Award Plan and Deferred Stock Unit Plan for Non-Employee Directors. If the new omnibus plan is approved by our shareholders as proposed, no further awards will be made under either of those existing plans. As of April 24, 2010, under the two existing plans, stock options covering 3.0 million shares of our common stock were outstanding with a weighted average exercise price of $10.41 and a weighted average remaining term of 1.7 years, and there were 1.0 million restricted share units outstanding. Under the existing plans, there were 0.8 million shares available for grant as of April 24, 2010. The closing price of our common stock on June 1, 2010, was $11.42 per share.

To be approved, the new omnibus plan must receive a majority of the votes cast on the proposal, provided that a majority of shares entitled to vote actually vote “For” or “Against” the proposal. For this purpose, an abstention or broker non-vote will be considered as not voted. If it is approved by shareholders, the new omnibus plan will become effective immediately, and no further grants will be made under the 2004 Long-Term Equity Award Plan or the Deferred Stock Unit Plan for Non-Employee Directors. If shareholders do not approve the new omnibus plan, it will not become effective, and the 2004 Long-Term Equity Award Plan and Deferred Stock Unit Plan for Non-Employee Directors, as they presently exist, will continue in effect. The results of the vote will not affect any awards outstanding under the two existing plans at the time of the annual meeting.

Summary of the New Omnibus Plan

The following summary of the new omnibus plan is qualified in its entirety by reference to the complete text of the new omnibus plan included as Annex A to this proxy statement. You should read the complete text of the new omnibus plan for more details regarding its operation.

Purpose

We believe the new omnibus plan will enhance our long-term financial success and materially increase shareholder value by:

Improving our ability to attract and retain highly qualified executive and director talent by providing competitive compensation opportunities;
strengthening our ability to develop, maintain, and motivate our management team;
motivating superior performance by means of long-term performance related incentives; and
encouraging and providing executives and directors the opportunity to gain an ownership interest in La-Z-Boy to participate in our long-term growth and financial success.
Plan Term

The new omnibus plan will be effective upon shareholder approval. No new awards may be granted under it after June 11, 2020. However, the term and exercise of awards granted before then may extend beyond that date. The board may terminate the new omnibus plan at any time with respect to all future awards.

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Eligibility

The board or the compensation committee will select the officers, executives, and other employees of La-Z-Boy or its subsidiaries and the non-employee directors to receive awards under the new omnibus plan. In addition, the board may select certain consultants and advisors providing services to La-Z-Boy or its subsidiaries to receive awards under the new omnibus plan. The board will determine which eligible persons will receive awards and the award’s size, terms, conditions and restrictions. We estimate that approximately 110 people will be eligible to participate in the new omnibus plan.

Administration

The new omnibus plan is to be administered by the board or a committee to which the board delegates the appropriate authority. The board may grant awards to eligible persons and, to the extent permitted by applicable law, may delegate to (1) a board committee of one or more directors any of the board’s authority under the new omnibus plan or (2) one or more executive officers, or a committee of executive officers, the right to grant awards to employees who are not directors or executive officers of La-Z-Boy and the authority to take action on behalf of the board pursuant to the plan to cancel or suspend awards to employees who are not directors or executive officers of La-Z-Boy. The board is authorized to interpret the plan and related agreements and documents and to take various other related actions. Upon adoption of the new omnibus plan, the board delegated the powers and authority to administer the plan to the compensation committee.

Available Awards

The new omnibus plan provides for equity-based compensation in the form of (1) stock options, including incentive stock options (“ISOs”); (2) stock appreciation rights (“SARs”); (3) restricted stock and restricted stock units (“RSUs”); (4) unrestricted stock awards; (5) performance awards and (6) related dividend equivalent rights. Each type of award is described below under “Types of Awards Authorized Under the New Omnibus Plan.” Each award granted under the new omnibus plan will be evidenced by an award agreement containing such terms and provisions, consistent with the new omnibus plan, as the committee may approve.

Shares Available Under the New Omnibus Plan

Subject to adjustment as provided for in the new omnibus plan, the number of shares of common stock subject to grants under the plan will not exceed in the aggregate 4.6 million shares.

After the effective date of the new omnibus plan, no awards will be granted under the 2004 Long-Term Equity Award Plan or the Deferred Stock Unit Plan for the Non-Employee Directors.

Award Limitations

Subject to adjustments as provided for in the new omnibus plan:

No participant may be granted stock options or SARs for more than 500,000 shares of common stock for each type of award during any calendar year.
No participant may be granted stock awards other than an option or SAR for more than 350,000 shares of La-Z-Boy common stock for each type of award during any calendar year.
The maximum dollar value that may be earned by any participant with respect to performance awards denominated in cash and intended to be “performance-based compensation” under Section 162(m) of the Internal Revenue Code for any 12-month performance period (as established by the board) is $3 million, and for a longer-term performance period, $4 million.
Share Counting

Under the new omnibus plan, each share of common stock covered by an option or SAR counts against the aggregate plan limit as one share and each share of stock covered by an award that is not an option or SAR counts against the limit as 1.26 shares. However, for each share that is forfeited, expires or is settled for cash (in whole or in part) under the plan, one share, or 1.26 shares, as applicable, will be added back to the aggregate limit. The following will not increase the number of shares available for grant under the plan:

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any shares tendered by a participant or withheld by us in full or partial payment of the exercise price of stock options or the full or partial satisfaction of a tax withholding obligation on any award under the new omnibus plan or either of the two existing plans;
shares we reacquire on the open market or otherwise using cash proceeds from the exercise of stock options granted either under the new omnibus plan or the 2004 Long-Term Equity Award Plan.
Section 162(m) of the Internal Revenue Code

The new omnibus plan is designed to allow us to grant awards that satisfy, to the extent feasible, the requirements for the performance-based compensation exclusion from the deduction limitations under Section 162(m) of the Internal Revenue Code. The new omnibus plan has been structured in a manner such that stock options, SARs, and performance awards can be granted that satisfy the requirements as performance-based compensation and be excluded from the deduction limitations under Section 162(m). Restricted stock and RSUs, however, cannot be excluded from the Section 162(m) limitations. We consider tax deductibility an important consideration in determining executive compensation, but there are other important considerations as well, and as a result, we may sometimes grant awards to our named executive officers that are not deductible or are deductible only in part.

Repricing Prohibited

Except in connection with an adjustment involving a corporate transaction or similar event, the board may not authorize the amendment of any outstanding stock option or SAR to reduce the exercise or base price, and no outstanding stock option or SAR may be cancelled in exchange for other awards, or cancelled in exchange for stock options or SARs having a lower exercise or base price, or cancelled in exchange for cash, without the approval of our shareholders.

Types of Awards

Stock Options.  Stock options may be granted that entitle the optionee to purchase shares of La-Z-Boy common stock at a price not less than fair market value as of the date of grant. The maximum term for stock options is 10 years except that ISOs granted to any person who owns, as of the date of grant, stock possessing more than 10% of the total combined voting power of all classes of our stock must have an exercise price that is not less than 110% of the fair market value of the common stock on the date of grant and may not have a term extending beyond the fifth anniversary of the date of grant. Stock options may be granted as ISOs, nonqualified stock options, or combinations of the foregoing. The exercise price for each grant of stock options will be specified in the award agreement, which will also provide whether the price is payable: (1) in cash or by cash equivalents; (2) by the transfer to us of previously acquired shares of La-Z-Boy common stock owned by the optionee; (3) with the consent of the compensation committee, by delivery of other consideration having a fair market value on the exercise date equal to the total purchase price; (4) pursuant to a net exercise arrangement whereby the participant directs us to deduct from shares issuable upon exercise of his or her stock options a number of shares having an aggregate fair market value equal to the sum of the total purchase price; (5) by delivery (on a form acceptable to the committee) of an irrevocable direction to a licensed securities broker acceptable to us to sell shares of stock and to deliver all or part of the sales proceeds to us in payment of the option price and any withholding taxes; (6) by such other methods as may be specified in the award agreement; or (7) by a combination of those payment methods.

SARs.  An SAR is a right to receive from La-Z-Boy an amount equal to a specified number of shares of La-Z-Boy common stock multiplied by the difference between the fair market value of one share on the date of exercise and the grant price of the SAR. The grant price may not be less than the market value per share at the date of grant. Any grant may specify that the amount payable on exercise of the SAR may be paid in cash, in shares of La-Z-Boy common stock or other property, or in any combination thereof, in the sole discretion of the committee. No SAR may be exercisable more than 10 years from the date of grant.

Restricted Stock and RSUs.  A grant of restricted stock involves the immediate transfer of ownership of a specified number of restricted shares of La-Z-Boy common stock in consideration of the performance of services. The participant is entitled immediately to voting, dividend and other ownership rights in the shares, but at least a portion of the restricted stock must be subject to a “substantial risk of forfeiture” within the meaning of Section 83 of the Internal Revenue Code for a period to be determined by the committee at the

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date of grant or to the achievement of specified performance measures. An RSU represents the right of the grantee to receive a payment upon vesting of the RSU of an amount equal to a specified number of shares of La-Z-Boy common stock multiplied by the value of one share as of the vesting date. At the discretion of the committee, RSUs may be settled in cash, shares of La-Z-Boy common stock or any combination thereof. RSUs may entitle the participant to receive credits for dividend equivalents, but not voting or other rights as a shareholder.

If the restricted stock or RSUs vest upon the passage of time rather than the achievement of performance measures, the period of time for vesting may not be shorter than three years from the date of grant (with the possibility of ratable vesting during the three-year period). If the restricted stock or RSUs vest upon the achievement of performance measures, the restrictions may not terminate sooner than one year after the date of grant. In each case, awards are subject to accelerated vesting in the committee’s discretion in the event of a change of control (as defined in the plan) or the death or disability of the participant.

Unrestricted Stock Awards.  The committee may, subject to limitations under applicable law, grant to any participant other unrestricted stock awards, entitling the participant to receive shares of La-Z-Boy common stock free of any restrictions. The committee will determine the terms and conditions of these awards. No more than 10% of the shares reserved for issuance under the new omnibus plan may be granted as unrestricted stock awards.

Dividend Equivalent Rights.  The committee may award dividend equivalent rights entitling the recipient to receive credits based on cash distributions that would have been paid on the shares of stock specified in the award agreement if the shares had been issued to and held by the recipient. Dividend equivalents credited to the holder of a dividend equivalent right may be paid currently or may be deemed to be reinvested in additional shares of stock, which may thereafter accrue additional equivalents. Any such reinvestment will be at fair market value on the date of reinvestment. Dividend equivalent rights may be settled in cash or stock or a combination thereof, in a single installment or installments, all determined in the sole discretion of the committee. Any dividends or dividend equivalents provided with respect to performance awards, as well as with respect to restricted stock, RSUs and other share-based awards that are subject to the attainment of performance measures, will be subject to the same restrictions and risk of forfeiture as the underlying awards.

Performance Awards.  The committee may grant to any participant performance awards in the form of performance shares or performance units, as determined by the committee in its sole discretion. Performance shares entitle the grantee to units valued by reference to a designated number of shares of La-Z-Boy common stock. Performance units entitle the grantee to units valued by reference to a designated amount of cash or property other than shares of La-Z-Boy common stock. Each performance award will specify one or more performance measures that must be satisfied within a specified period, which may not be shorter than one year (referred to as the performance period), in order for the performance awards to be earned.

To the extent earned, the performance awards will be paid to the participant in the manner and at the time determined by the committee. Any grant may specify that the amount payable may be paid in cash, shares of La-Z-Boy common stock or other property or any combination thereof at the committee’s discretion. Performance awards may be paid in a lump sum or in installments following the close of the performance period or, in accordance with procedures established by the committee, on a deferred basis subject to the requirements of Section 409A of the Internal Revenue Code.

Performance Measures

The committee will establish measurable performance objectives for participants who receive performance awards under the new omnibus plan. Performance measures may be described in terms of either company-wide objectives or objectives that are related to the performance of the subsidiary or division, business segment or business unit within La-Z-Boy or a subsidiary in which the participant is employed. Performance measures applicable to any award or portion of an award that is intended to be a qualified performance-based award to a participant who is, or is determined by the committee to be likely to become, a “covered employee” within the meaning of Section 162(m) of the Internal Revenue Code will be based on the attainment of specified levels of one or any combination of the following:

(a) net earnings or net income;

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(b) operating earnings;
(c) pretax earnings;
(d) earnings per share;
(e) share price, including growth measures and total stockholder return;
(f) earnings before interest and taxes;
(g) earnings before interest, taxes, depreciation and/or amortization;
(h) sales or revenue growth, whether in general, by type of product or service, or by type of customer;
(i) gross or operating margins;
(j) return measures, including return on assets, capital, investment, equity, sales or revenue;
(k) cash flow, including operating cash flow, free cash flow, cash flow return on equity and cash flow return on investment;
(l) productivity ratios;
(m) expense targets;
(n) market share;
(o) financial ratios as provided in credit agreements of La-Z-Boy and its subsidiaries;
(p) working capital targets;
(q) completion of acquisitions of businesses or companies;
(r) completion of divestitures and asset sales; and
(s) any combination of any of the foregoing business criteria.
Amendment and Termination of the New Omnibus Plan

The committee may, at any time and from time to time, amend, suspend, or terminate the plan as to any shares of stock as to which awards have not been made, except that we must submit for shareholder approval any amendment required to be submitted for shareholder approval by applicable law or stock exchange listing requirements, or that would otherwise materially: (i) increase the benefits accrued to participants under the plan, (ii) increase the numbers of securities that may be issued under the plan (other than an increase pursuant to the adjustment provisions in the plan), or (iii) modify the requirements for participation in the plan.

The committee may not amend the plan to impair the rights of a participant in any material respect under any award previously granted without the participant’s consent.

Vesting and Exercise of an Award

The applicable award agreement governing an award will specify the period during which the right to exercise the award in whole or in part vests, including the events or conditions upon which the vesting of an award will occur or may accelerate. No portion of an award that is not vested at the time of the participant’s termination of service with us will become vested, except as may be otherwise provided in the agreement relating to the award or determined by the committee.

Generally, a stock option or SAR may only be exercised while a participant remains an officer, executive, or other employee of La-Z-Boy or its subsidiaries or a nonemployee director of La-Z-Boy or, in the case of a stock option, for 30 days following the participant’s termination of service, but no more than the remainder of the term of the award as established on the date of grant. An award may be exercised for any vested portion of the shares subject to such award until the award expires or as otherwise determined by the committee.

If permitted by applicable law, in the case of a termination of employment by reason of the death or disability of a participant who holds any restricted stock or RSUs as to which the substantial risk of forfeiture or the prohibition or restriction on transfer has not lapsed, or other share-based awards that have not been fully earned, or who holds shares of La-Z-Boy common stock subject to any other transfer restriction imposed

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under the plan, the committee, may, in its sole discretion, take such action as it deems equitable in the circumstances or in the best interests of La-Z-Boy, including accelerating vesting and waiving or modifying any performance or other period, any performance measure, or any other requirement, condition, restriction or limitation applicable to any such award.

Unless otherwise provided in the applicable award agreement, in the event of a change of control of La-Z-Boy (as defined in the new omnibus plan) in which the successor company assumes or substitutes for stock options, SARs, restricted stock or RSUs or other share-based awards, if a participant’s employment is terminated within one year following a change of control, (1) stock options and SARs will immediately vest and become exercisable for one year following the date of such change of control; (2) the restrictions, limitations and other conditions applicable to any restricted stock or RSUs as of the date of termination of employment will lapse and the restricted stock or RSUs will become vested; and (3) the restrictions, limitations and other conditions applicable to any other share-based awards will lapse and the other share-based awards will become fully vested and transferable to the full extent of the original grant.

Adjustments

The committee may, in its sole discretion exercised in good faith, adjust the number and kind of shares covered by outstanding awards under the new omnibus plan and, in the case of stock options and SARs, the applicable exercise or base prices, to equitably prevent dilution or enlargement of the rights of participants or optionees in the event of any merger, reorganization, consolidation, recapitalization, dividend or distribution, share split, reverse share split, spin-off or similar transaction or other change in corporate structure affecting the shares of common stock or its value. In the event of any such transaction or event or in the event of a change in control of La-Z-Boy (as defined in the new omnibus plan), the committee, in its discretion, may provide in substitution for any or all outstanding awards under the plan such alternative consideration (including cash), if any, as it, in good faith, may determine to be equitable in the circumstances and may require the surrender of all awards so replaced in a manner that complies with Section 409A of the Internal Revenue Code. In addition, for each stock option or SAR with an exercise price or base price greater than the consideration offered in connection with any such transaction or event or change in control, the committee may in its sole discretion elect to cancel the stock option or SAR without any payment to the holder. The committee will also make or provide for such adjustments in the number of shares available under the plan, including the individual participant limits, as the committee may determine appropriate to reflect any transaction or event described above, except that any such adjustment will be made only to the extent that it would not cause any stock option intended to qualify as an ISO to fail to so qualify. Additionally, we may eliminate fractional shares or settle fractional shares in cash.

Limited Transferability

No award and no shares of La-Z-Boy common stock that have not been issued or as to which any applicable restriction, performance or deferral period has not lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution. An award may be exercised during the life of the participant only by the participant or the participant’s guardian or legal representative. A participant may assign or transfer an award to: (1) the participant’s spouse, children or grandchildren (including any adopted and step children or grandchildren), parents, grandparents or siblings; (2) a trust for the benefit of one or more of the participants or the persons referred to in clause (1); or (3) a partnership, limited liability company or corporation in which the participants or the persons referred to in clause (1) are the only partners, members or shareholders, so long as, in each case, the permitted assignees are bound by and subject to all of the terms and conditions of the new omnibus plan and the award agreement relating to the transferred award and they execute an agreement satisfactory to us evidencing those obligations.

Withholding Taxes

To the extent that we are required to withhold federal, state, local or foreign taxes in connection with any payment made or benef