EXHIBIT 10.4
 

 

   [logo_lazboy-cmyk.jpg]  
JAMES W. JOHNSTON 
Chairman of the Board
 
1284 N. TELEGRAPH ROAD
MONROE, MICHIGAN 48162-3390
PHONE: (734) 242-1444

 

June 11, 2010
 
Kurt L. Darrow

La-Z-Boy Incorporated (the “Company”) considers the establishment and
maintenance of a sound and vital management to be essential to protecting and
enhancing the best interests of the Company and its shareholders. In this
connection, the Company recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may arise and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders. The Company further
recognizes that it is absolutely vital to the Company to retain well-qualified
executives and to assure itself of continuity of management in considering any
actual or threatened change of control of the Company.

For the above reasons, the Board of Directors of the Company (the "Board") has
determined that appropriate steps should be taken to reinforce and encourage the
continued attention and dedication of members of the Company's management to
their assigned duties without distraction in circumstances arising from the
possibility of a change in control of the Company. In particular, the Board
believes that it is important, should the Company or its shareholders receive a
proposal for transfer of control of the Company, that you be able to assess and
advise the Company and its shareholders and to take such other action regarding
such proposal as the Board might determine to be appropriate, without being
influenced by the uncertainties of your own situation.

In order to induce you to remain in the employ of the Company, this letter
agreement (sometimes called the “Agreement”), which has been approved by the
Board, sets forth the severance benefits which the Company agrees will be
provided to you in the event your employment with the Company is terminated
subsequent to a "change in control" of the Company under the circumstances
described below.

1.  
Agreement to Provide Services; Right to Terminate.

(i)  
Except as otherwise provided in paragraph (ii) below, the Company or you may
terminate your employment at any time, subject to the Company's providing the
benefits hereinafter specified in accordance with the terms hereof.

 

--------------------------------------------------------------------------------

 
(ii)  
In the event a tender offer or exchange offer is made by a Person (as
hereinafter defined) for more than 30% of the combined voting power of the
Company's outstanding common stock, you agree that you will not leave the employ
of the Company (other than as a result of Disability, as that term is
hereinafter defined) and will continue to render your employment services until
such tender offer or exchange offer has been abandoned or terminated or a change
in control of the Company, as defined in Section 3 hereof, has occurred. For
purposes of this Agreement, the term "Person" shall mean and include any
individual, corporation, partnership, group, association or other "person", as
such term is used in Section 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), other than the Company, a wholly-owned subsidiary of the
Company or any employee benefit plan(s) sponsored by the Company.

2.  
Term of Agreement.

This Agreement shall commence on June 11, 2010, and shall continue in effect
until December 31, 2010; provided, however, that commencing on January 1, 2011
and each January 1 thereafter, the term of this Agreement shall automatically be
extended for one additional year unless at least 90 days prior to such January
1st date, the Company or you shall have given notice that this Agreement shall
not be extended; and provided, further, that this Agreement shall continue in
effect for a period of thirty-six (36) months beyond the term provided herein if
a change in control of the Company, as defined in Section 3 hereof, shall have
occurred during such term. Notwithstanding anything in this Section 2 to the
contrary, this Agreement shall terminate if you or the Company terminates your
employment prior to a change in control of the Company, as defined in Section 3
hereof.

3.  
Change in control.

For purposes of this Agreement, a "change in control" of the Company shall mean
a change in the ownership or effective control of the Company or in the
ownership of a substantial portion of the assets of the Company, as more fully
described in attached Exhibit A, which shall be interpreted in accordance with
Code §409A(a)(2)(A)(v) and regulations and other guidance thereunder.
Notwithstanding anything in the foregoing to the contrary, no change in control
shall be deemed to have occurred for purposes of this Agreement by virtue of any
transaction which results in you, or a group of Persons which includes you
acquiring, directly or indirectly, 30% or more of the combined voting power of
the Company's Voting Securities.

4.  
Termination Following change in control.

If any of the events described in Section 3 hereof constituting a change in
control of the Company shall have occurred, you shall be entitled to the
benefits provided in paragraphs (iii) and (iv) of Section 5 hereof upon the
termination of your employment within thirty-six (36) months after such event,
unless such termination is (a) because of your death, (b) by the Company for
Cause or Disability (c) by you other than for Good Reason (as all capitalized
terms are hereinafter defined) or unless (d) such termination does not
constitute a “Separation from Service” as described in attached Exhibit B.
 

--------------------------------------------------------------------------------

 
(i)  
Disability. Termination by the Company of your employment based on "Disability"
shall mean termination due to the fact that you (i) are unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months, or (ii) is by reason of
any medically determinable physical or mental impairment which can be expected
to result in death or can be expected to last for a continuous period of not
less than 12 months, receiving income replacement benefits for a period of not
less than 3 months under an accident and health plan covering Employees of the
Company, provided that this definition shall be interpreted in accordance with
Code §409A(a)(2)(A)(v) and regulations and other guidance
thereunder.  Notwithstanding (i) and (ii), you shall be deemed to have a
Disability when determined to be totally disabled by the Social Security
Administration.

(ii)  
Cause. Termination by the Company of your employment for "Cause" shall mean
termination upon (a) the willful and continued failure by you to perform
substantially your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness) after a demand
for substantial performance is delivered to you by the duly authorized
representative of the Compensation Committee of the Board which specifically
identifies the manner in which such executive believes that you have not
substantially performed your duties, or (b) the willful engaging by you in
illegal conduct which is materially and demonstrably injurious to the Company.
For purposes of this paragraph (ii), no act, or failure to act, on your part
shall be considered "willful" unless done, or omitted to be done, by you in bad
faith and without reasonable belief that your action or omission was in, or not
opposed to, the best interests of the Company. Any act, or failure to act, based
upon authority given pursuant to a resolution duly adopted by the Board or based
upon the advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by you in good faith and in the best interests of
the corporation. Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
you a copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for the purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the Board),
finding that in the good faith opinion of the Board you were guilty of the
conduct set forth above in (a) or (b) of this paragraph (ii) and specifying the
particulars thereof in detail.

(iii)  
Good Reason. Termination by you of your employment for "Good Reason" shall mean
termination based on:

(A)  
an adverse change in your status or position(s) as a corporate officer of the
Company as in effect immediately prior to the change in control, including,
without limitation, any adverse change in your status or position as a result of
a material diminution in your duties or responsibilities (other than, if
applicable, any such change directly attributable to the fact that the Company
is no longer publicly-owned) or the assignment to you of any duties or
responsibilities which, in your reasonable judgment, are inconsistent with such
status or position(s), or any removal of you from or any failure to reappoint or
reelect you to such position(s) (except in connection with the termination of
your employment for Cause or Disability or as a result of your death or by you
other than for Good Reason);

 

--------------------------------------------------------------------------------

 
(B)  
a reduction by the Company in your compensation as in effect immediately prior
to the change in control;

(C)  
the failure by the Company to continue in effect any Plan (as hereinafter
defined) in which you are participating at the time of the change in control of
the Company (or Plans providing you with at least substantially similar
benefits) other than as a result of the normal expiration of any such Plan in
accordance with its terms as in effect at the time of the change in control, or
the taking of any action, or the failure to act, by the Company which would
adversely affect your continued participation in any of such Plans on at least
as favorable a basis to you as is the case on the date of the change in control
or which would materially reduce your benefits in the future under any of such
Plans or deprive you of any material benefit enjoyed by you at the time of the
change in control;

(D)  
the failure by the Company to provide and credit you with the number of paid
vacation days to which you are then entitled in accordance with the Company's
normal vacation policy as in effect immediately prior to the change in control;

(E)  
the Company's requiring you to be based anywhere other than where your office is
located immediately prior to the change in control except for required travel on
the Company's business to an extent substantially consistent with the business
travel obligations which you undertook on behalf of the Company prior to the
change in control;

(F)  
the failure by the Company to obtain from any Successor (as hereinafter defined)
the assent to this Agreement contemplated by Section 6 hereof;

(G)  
any purported termination by the Company of your employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of
paragraph (iv) below (and, if applicable, paragraph (ii) above); and for
purposes of this Agreement, no such purported termination shall be effective or

(H)  
any refusal by the Company to continue to allow you to attend to matters or
engage in activities not directly related to the business of the Company which,
prior to the change in control, you were permitted by the Board to attend to or
engage in, including without limiting the foregoing, serving on the Boards of
Directors of other companies or entities.

For purposes of this Agreement, "Plan" shall mean any compensation plan such as
an incentive, stock option or restricted stock plan or any employee benefit plan
such as a savings, pension, profit sharing, medical, disability, accident, life
insurance plan or a relocation plan or policy or any other plan, program or
policy of the Company intended to benefit employees.
 

--------------------------------------------------------------------------------

(iv)  
Notice of Termination. Any purported termination by the Company or by you
following a change in control shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon.

(v)  
Date of Termination. "Date of Termination" following a change in control shall
mean (a) if your employment is to be terminated for Disability, thirty (30) days
after Notice of Termination is given (provided that you shall not have returned
to the performance of your duties on a full-time basis during such thirty (30)
day period), (b) if your employment is to be terminated by the Company for Cause
or by you pursuant to Sections 4(iii)(F) and 6 hereof or for any other Good
Reason, the date specified in the Notice of Termination, or (c) if your
employment is to be terminated by the Company for any reason other than Cause,
the date specified in the Notice of Termination, which is no event shall be a
date earlier than ninety (90) days after the date on which a Notice of
Termination is given, unless an earlier date has been expressly agreed to by you
in writing either in advance of, or after, receiving such Notice of Termination.
In the case of termination by the Company of your employment for Cause, if you
have not previously expressly agreed in writing to the termination, then within
thirty (30) days after receipt by you of the Notice of Termination with respect
thereto, you may notify the Company that a dispute exists concerning the
termination, in which event the Date of Termination shall be the date set either
by mutual written agreement of the parties or by the arbitrators in a proceeding
as provided in Section 15 hereof. During the pendency of any such dispute, the
Company will continue to pay you your full compensation in effect just prior to
the time the Notice of Termination is given and until the dispute is resolved in
accordance with Section 15.

5.  
Compensation Upon Termination or During Disability; Other Agreements.

During any period following a change in control that you fail to perform your
duties as a result of incapacity due to physical or mental illness, you shall
continue to receive your salary at the rate then in effect and any benefits or
awards under any Plans shall continue to accrue during such period, to the
extent not inconsistent with such Plans, until your employment is terminated
pursuant to and in accordance with paragraphs 4(i) and 4(v) hereof.  Thereafter,
your benefits shall be determined in accordance with the Plans then in effect.

(i)  
If your employment shall be terminated for Cause following a change in control
of the Company, the Company shall pay you your salary through the Date of
Termination at the rate in effect just prior to the time a Notice of Termination
is given plus any benefits or awards (including both the cash and stock
components) which pursuant to the terms of any Plans have been earned or become
payable, but which have not yet been paid to you. Thereupon the Company shall
have no further obligations to you under this Agreement.

 

--------------------------------------------------------------------------------

 
(ii)  
Subject to Section 8 hereof, if, within thirty-six (36) months after a change in
control of the Company shall have occurred as defined in Section 3 above, your
employment by the Company shall be terminated (a) by the Company other than for
Cause, Disability, or death or (b) by you for Good Reason, then, by no later
than the fifth day following the Date of Termination (except as otherwise
provided), you shall be entitled, without regard to any contrary provision of
any Plan, to the benefits provided below:

(A)  
the Company shall pay your salary through the Date of Termination at the rate in
effect just prior to the time a Notice of Termination is given plus any benefits
or awards (including both the cash and stock components) which pursuant to the
terms of any Plans have been earned or become payable, but which have not yet
been paid by you; and

(B)  
as severance pay and in lieu of any further salary for periods subsequent to the
Date of Termination, the Company shall pay to you an amount in cash equal to
three (3) times the sum of (i) your annualized salary at the rate in effect at
the Date of Termination and (ii) an amount equal to the average bonus paid you
in the previous three (3) years.

(iii)  
Following a change in control of the Company, unless you are terminated for
Cause, Disability, or death or you terminate your employment other than for Good
Reason, the Company shall maintain in full force and effect, for the continued
benefit of you and your dependents for a period terminating on the earliest of
(a) thirty-six (36) months after the Date of Termination, (b) the commencement
date of equivalent benefits from a new employer or (c) your normal retirement
date under the terms of the La-Z-Boy Incorporated Retirement Contribution and
Profit Sharing Plan (or any successor or substitute plan or plans of the Company
put into effect prior to a change in control), all insured and self-insured
employee welfare benefits plans in which you were entitled to participate
immediately prior to the Date of Termination, provided that your continued
participation is possible under the general terms and provisions of such Plans
(and any applicable funding media) and you continue to pay an amount equal to
your regular contribution under such Plans for such participation.  If permitted
by applicable law, right to continuation coverage pursuant to COBRA will run
concurrently with such continued participation provided by the Company.  If the
terms of the Company’s medical and dental plans do not permit your continued
participation after the termination of your employment and you elect to continue
medical or dental coverage as provided for by COBRA, the Company will, for the
lesser of 36 months or the period during which you maintain such COBRA
continuation coverage, pay the difference between the cost of your COBRA
premiums for medical and dental insurance and the normal employee contribution
for such coverage.  Such payments will be made by the Company in accordance with
its normal schedule for premium payments in accordance with the applicable
plan.  (You may thereafter have the right under COBRA to continue such insurance
at your expense for the remaining months of your eligibility.)  You will be
responsible for any tax on such benefits or payments made by the Company. If, at
the end of thirty-six (36) months after the Termination Date, you have not
reached your normal retirement date and you have not previously received or are
not then receiving equivalent benefits from a new employer, the Company shall
arrange to enable you to convert your and your dependents' coverage under such
Plans to individual policies or programs upon the same terms as employees of the
Company may apply for such conversions.

 

--------------------------------------------------------------------------------

 
(iv)  
Except as specifically provided herein, the amount of any payment provided for
in this Section 5 shall not be reduced, offset or subject to recovery by the
Company by reason of any compensation earned by you as the result of employment
by another employer after the Date of Termination, or otherwise.

Certain Section 409A Rules.

(a) Specified Employee. Notwithstanding any provision of this Agreement to the
contrary, if you are a Specified Employee, any payment or benefit under this
Agreement that constitutes deferred compensation subject to Section 409A of the
Code and for which the payment event is a Separation from Service shall not be
made or provided before the date that is six months after the date of your
Separation from Service. Any payment or benefit that is delayed pursuant to
these Rules shall be made or provided on the first business day of the seventh
month following the month in which the your Separation from Service occurs. With
respect to any cash payment delayed pursuant to these Rules, the first payment
shall include interest, at the Wall Street Journal Prime Rate published in the
Wall Street Journal on the Separation from Service date of (or the previous
business day if such date is not a business day), for the period from the date
the payment would have been made but for these Rules through the date payment is
made. These Rules shall apply to the extent required to avoid your incurrence of
any additional tax or interest under Section 409A of the Code.

(b) Reimbursement and In-Kind Benefits. Notwithstanding any provision of this
Agreement to the contrary, with respect to in-kind benefits provided or expenses
eligible for reimbursement under this Agreement which are subject to Section
409A of the Code, (i) the benefits provided or the amount of expenses eligible
for reimbursement during any calendar year shall not affect the benefits
provided or expenses eligible for reimbursement in any other calendar year,
except as otherwise provided in Treas. Reg. §1.409A-3(i)(1)(iv)(B), and (ii) the
reimbursement of an eligible expense shall be made as soon as practicable after
your request for such reimbursement (subject to (a), above), but not later than
the December 31 following the calendar year in which the expense was incurred.

(c) “Specified Employee” shall mean a specified employee as defined in Section
409A of the Code as of the date of a Separation from Service.

(d)  Interpretation and Construction. This Agreement is intended to comply with
Section 409A of the Code and shall be administered, interpreted and construed in
accordance therewith to avoid the imposition of additional tax under Section
409A of the Code.
 

--------------------------------------------------------------------------------

 
 
6.  
Successors; Binding Agreement.

(i)  
Upon your written request, the Company will seek to have any Successor (as
hereinafter defined), by agreement in form and substance satisfactory to you,
assent to the fulfillment by the Company of its obligations under this
Agreement. Failure of the Company to obtain such assent at least three (3)
business days prior to the time a Person becomes a Successor (or where the
Company does not have at least three (3) business days advance notice that a
Person may become a Successor, within one (1) business day after having notice
that such Person may become or has become a Successor) shall constitute Good
Reason for termination by you of your employment and, if a change in control of
the Company has occurred, shall entitle you immediately to the applicable
benefits provided in Section 5 hereof upon delivery by you of a Notice of
Termination. For purposes of this Agreement, "Successor" shall mean any Person
that succeeds to, or has the practical ability to control (either immediately or
with the passage of time), the Company's business directly, by merger or
consolidation, or indirectly, by purchase of the Company's Voting Securities,
all or substantially all of its assets or otherwise.

(ii)  
This Agreement shall inure to the benefit of and be enforceable by your personal
or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If you should die while any amount would
still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
be no such designee, to your estate.

(iii)  
For purposes of this Agreement, the "Company" shall include any corporation or
other entity which is the surviving or continuing entity in respect of any
merger, consolidation or form of business combination in which the Company
ceases to exist.

7.  
Fees and Expenses; Mitigation.

(i)  
The Company shall pay all reasonable legal fees and related expenses incurred by
you in connection with this Agreement following a change in control of the
Company, including, without limitation, (a) all such fees and expenses, if any,
incurred in contesting or disputing any such termination or incurred by you in
seeking advice with respect to the matters set forth in Section 8 hereof or (b)
your seeking to obtain or enforce any right or benefit provided by this
Agreement.

(ii)  
You shall not be required to mitigate the amount of any payment the Company
becomes obligated to make to you in connection with this Agreement, by seeking
other employment or otherwise.

 

--------------------------------------------------------------------------------

 
8.  
Taxes.

(i)  
All payments to be made to you under this Agreement will be subject to required
withholding of federal, state and local income and employment taxes.

(ii)  
Notwithstanding any other provision of this Agreement, if any of the payments or
benefits received or to be received by you pursuant to this Agreement, when
taken together with payments and benefits provided to you under any other plans,
contracts, or arrangements with the Company or its subsidiaries (the “Total
Payments”), will be subject to any excise tax imposed under Code Section 4999
(together with any interest or penalties, the “Excise Tax”), then such Total
Payments shall be reduced to the extent necessary so that no portion thereof
will be subject to the Excise Tax; provided, however, that if you would receive
in the aggregate greater value (as determined under Code Section 280G and the
regulations thereunder) on an after tax basis if the Total Payments were not
subject to such reduction, then no such reduction shall be made.  In
effectuating the reduction described above, if applicable, the Company will
first reduce or eliminate the payments and benefits provided under this
Agreement.  All calculations required to be made under this Section will be made
by the Company’s independent public accountants, subject to the right of your
representative to review the same.  If the Company’s independent public
accountants refuse to make the required determinations, then such determinations
will be made by an independent accounting firm with national reputation
reasonably selected by the Company.  As a result of the uncertainty in the
application of the Internal Revenue Code, it is possible that the Company will
in good faith make payments to you that it should not make.  In the event of
such overpayment, the Company shall have no further liability or obligation to
you for any resulting excise taxes, interest, or penalty that you are required
to pay.

9.  
Survival.

The respective obligations of, and benefits afforded to, the Company and you as
provided in Sections 5, 6(ii), 7, 8, 13, and 15 of this Agreement shall survive
termination of this Agreement.

10.  
Notice.

For the purposes of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have
been duly given when sent by electronic mail or when delivered or mailed by
United States registered mail, return receipt requested, postage prepaid and
addressed, in the case of the Company, to the address set forth on the first
page of this Agreement or, in the case of the undersigned employee, to the most
current address he has provided to the Company on its records, provided that all
notices to the Company shall be directed to the attention of the duly authorized
representative of the Compensation Committee of the Board, with a copy to the
Secretary of the Company, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
 

--------------------------------------------------------------------------------

 
11.  
Miscellaneous.

No provision of this Agreement may be modified, waived or discharged unless such
modification, waiver or discharge is agreed to in a writing signed by you and
the duly authorized representative of the Compensation Committee of the Board.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or of compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement.  The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Michigan.

12.  
Full Settlement.

The Company's obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
circumstances, including without limitation any setoff, counterclaim,
recoupment, defense or other right which the Company may have against you.

13.  
Confidential Information.

You agree that you will hold in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their respective businesses,
which shall have been obtained by you during your employment by the Company or
any of its affiliated companies and which shall not be public knowledge. After
termination of your employment with the Company you shall not, without the prior
written consent of the Company, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those designated by it.
In no event shall an asserted violation of the provisions of this Section 13
constitute a basis for deferring or withholding any amounts otherwise payable to
you under this Agreement.

14.  
Validity.

The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.

15.  
Arbitration.

You and the Company agree that final and binding arbitration is and will be the
sole and exclusive remedy and forum for resolving any dispute or claim between
you and the Company arising out of this Agreement, including:

(i)  
The Company's termination of your employment; and/or

(ii)  
Any dispute or claim concerning or arising out of whether your termination was
for “Cause” or for “Good Reason.”

 

--------------------------------------------------------------------------------

 
You have a right to appeal your dispute to arbitration. The arbitrator will be
selected by mutual agreement. If the arbitrator is not selected by mutual
agreement, then the arbitrator will be selected from a panel of experienced
labor and employment arbitrators supplied by the American Arbitration
Association (AAA). The parties will alternatively strike names from the AAA
panel until one name (the Arbitrator) remains. The arbitrator will decide the
time and place of a hearing, which will be conducted according to AAA Rules. At
the arbitration hearing, you will have the opportunity to rebut the evidence
presented by the Company and you may present witnesses and evidence to support
your case. The arbitrator will decide, in writing, the resolution of the
dispute.

The Company will be responsible for its and your own costs including attorney
fees. If you decide to be represented by an attorney, you must notify the
Company at least one month before the arbitration hearing. If you do not choose
to be represented by an attorney, then the Company will not be represented by an
attorney.

This arbitration procedure and the decision of the arbitrator is your exclusive
remedy in case of discharge, and is final and binding on both the Company and
you and is fully enforceable in court. If this letter correctly sets forth our
agreement on the subject matter hereof, kindly sign and return to the Company
the enclosed copy of this letter which will then constitute our agreement on
this subject.

This letter agreement replaces the letter agreement you and La-Z-Boy
Incorporated entered into on or about November 17, 2008 (“Prior Agreement”).  By
signing below, you acknowledge that the Prior Agreement is terminated as of the
date and time this Agreement takes effect.

[Signatures on next page]
 
 
 
 

--------------------------------------------------------------------------------

 
Sincerely,

LA-Z-BOY INCORPORATED

______________________________
By:  James W. Johnston
Chairman of the Board

Agreed to June 11, 2010.

______________________________
Kurt L. Darrow
President and Chief Executive Officer
La-Z-Boy Incorporated
 

--------------------------------------------------------------------------------

 
 
 
Exhibit A
Change in control

“Change in control” means any change required to be reported in Item 6(e) of
Schedule 14A of Regulation 14A issued under the Securities Exchange Act of 1934
(the “Exchange Act”) that qualifies as a change in control event pursuant to
Code §409A.  A “change in control event” pursuant to Code §409A includes the
occurrence of a change in the ownership of the Company (as defined in Reg.
§1.409A-3 (i)(5)(v)), a change in effective control of the Company (as defined
in Reg. §1.409A-3(i)(5)(vi)), or a change in the ownership of a substantial
portion of the assets of the Company (as defined in Reg. §1.409A-3(i)(5)(vii),
and, in particular, any one or more of the following events:

a. A change in ownership of the Company in which any one person, or more than
one person acting as a group acquires beneficial ownership of stock of the
Company that, together with stock held by such person or group, constitutes more
than 50 percent of the total fair market value or total voting power of the
stock of the Company; provided, however, that for purposes of this subsection
(a), the following acquisitions shall not constitute a Change in Control: (i)
any acquisition by the Company, or (ii) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or by any
corporation controlled by the Company.

b. A change in the effective control of the Company, pursuant to which either:

(i)Any one person, or more than one person acting as a group acquires (or has
acquired during the 12-month period ending on the date of the most recent
acquisition by such person or persons) beneficial ownership of stock of the
Company possessing 30 percent or more of the total voting power of the stock of
the Company.

(ii)A majority of members 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 members of the Company’s board of directors before the date
of the appointment or election.

c. A change in the ownership of a substantial portion of the Company’s assets
pursuant to which any one person, or more than one person acting as a group
acquires (or has acquired during the 12-month period ending on the date of the
most recent acquisition by such person or persons) assets from the Company that
have a total gross fair market value equal to or more than 40 percent of the
total gross fair market value of all of the assets of the Company immediately
before such acquisition or acquisitions.  As used herein, gross fair market
value means the value of the assets of the Company, or the value of the assets
being disposed of, determined without regard to any liabilities associated with
such assets.  However, there is no change in control event under this
paragraph  when there is a transfer to a related person as described in Reg.
§1.409A-3(i)(5)(vii)(B)

However, a change in control shall not include a merger of the Company with
another entity, a consolidation involving the Company, or the sale of all or
substantially all of the assets or equity interests of the Company to another
entity if, in any such case, (a) the holders of equity securities of the Company
immediately prior to such event beneficially own immediately after such event
equity securities of the resulting entity entitled to more than fifty percent of
the votes then eligible to be cast in the election of directors (or comparable
governing body) of the resulting entity in substantially the same proportions
that they owned the equity securities of the Company immediately prior to such
event or (b) the persons who were members of the Board immediately prior to such
event constitute at least a majority of the board of directors of the resulting
entity immediately after such event.
 

--------------------------------------------------------------------------------

 
For purposes of this definition:

(A) “Beneficial owner” (or “beneficial ownership”) includes ownership by
attribution as provided in Reg. §1.409A.

(B) Where applicable, “person” means a person as defined in Section 3(a)(9) of
Securities Exchange Act of 1934, as amended (the “Exchange Act”);

(C) “Acting as a group” means so acting within the meaning of the applicable
portion of Reg. §1.409A-3(i)(5).  Persons will be considered to be acting as a
group if they are owners of a corporation that enters into a merger,
consolidation, purchase or acquisition of stock, or similar business transaction
with the Company.  If a person, including an entity, owns stock in both
corporations that enter into a merger, consolidation, purchase or acquisition of
stock, or similar transaction, such shareholder is considered to be acting as a
group with other shareholders only with respect to the ownership in that
corporation before the transaction giving rise to the change and not with
respect to the ownership interest in the other corporation.  Where applicable,
“group” means a group as described in Rule 13d-5 promulgated under the Exchange
Act or any successor regulation.

 

--------------------------------------------------------------------------------

 
Exhibit B
Separation From Service

A Separation From Service occurs on the date upon which a Participant is no
longer an Employee of the Company, as determined in accordance with Code §409A
and Treasury Regulations promulgated thereunder.

For purposes of this Plan, an Employee separates from service with the Company
if the Employee dies, retires or otherwise has a termination of employment with
the Company.  However, the employment relationship is treated as continuing
intact while the Employee is on military leave, sick leave, or other bona fide
leave of absence (such as temporary employment by the government) if the period
of such leave does not exceed six months, or if longer, so long as the
Employee’s right to reemployment with the Company is provided either by statute
or by contract. If the period of leave exceeds six months and the Employee’s
right to reemployment is not provided either by statute or by contract, the
employment relationship is deemed to terminate on the first date immediately
following such six-month period.

Whether a termination of employment has occurred is determined based on the
facts and circumstances. Where an Employee either actually or purportedly
continues in the capacity as an Employee, such as through the execution of an
employment agreement under which the Employee agrees to be available to perform
services if requested, but the facts and circumstances indicate that neither the
Company nor the Employee intended for the Employee to provide more than
insignificant services to the Company, an Employee will be treated as having a
Separation From Service.  For purposes of the preceding sentence, the Company
and Employee will not be treated as having intended for the Employee to provide
insignificant services where the Employee continues to provide services at an
annual rate that is at least equal to 20 percent of the services rendered, on
average, during the immediately preceding three full calendar years of
employment (or, if employed less than three years, such lesser period) and the
annual remuneration for such services is at least equal to 20 percent of the
average annual remuneration earned during the final three full calendar years of
employment (or, if less, such lesser period). Where an Employee continues to
provide services to the Company in a capacity other than as an Employee, a
Separation From Service will not be deemed to have occurred if such former
Employee is providing services at an annual rate that is 50 percent or more of
the services rendered, on average, during the immediately preceding three full
calendar years of employment (or if employed less than three years, such lesser
period) and the annual remuneration for such services is 50 percent or more of
the annual remuneration earned during the final three full calendar years of
employment (or if less, such lesser period). For purposes of this paragraph, the
annual rate of providing services is determined based upon the measurement used
to determine the Company’s base compensation (for example, amounts of time
required to earn salary, hourly wages, or payments for specific projects).

 

--------------------------------------------------------------------------------