SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN
PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
HERMAN MILLER, INC.
(Name of registrant as specified in its charter)
(Name of person(s) filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:________
(2) Aggregate number of securities to which transaction applies:___________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):_______________________________________________________
(4) Proposed maximum aggregate value of transaction:_______________________
(5) Total fee Paid:________________________________________________________
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:________________________________________________
(2) Form, schedule, or registration statement no.:_________________________
(3) Filing party:__________________________________________________________
(4) Date filed:____________________________________________________________
Preliminary Proxy Materials: Dated_________, 1998
[LOGO]
1998
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
and PROXY STATEMENT
August ______, 1998
Dear Shareholder:
Herman Miller, Inc.'s fiscal year ended May 30, 1998. Enclosed you will find
this year's Annual Report and a proxy card to vote your shares. Also, let us
know if you expect to attend the annual Shareholders Meeting scheduled for
September 29, 1998, by mailing a reservation card or by contacting Robbie Kroll
at 616-654-3305.
The Shareholders' Meeting will take place at the Zeeland High School Performing
Arts Center, 3333 - 96th Avenue, Zeeland, Michigan. (A map is enclosed.)
Chairman of the Board David Nelson will convene the business meeting promptly at
4 p.m. EDT. Please allow time for parking and registration. After the business
meeting, we will serve hors d'oeuvres and light refreshments to all who indicate
on the reservation card that they will be staying.
The Annual Report discusses our performance for fiscal 1998 and presents some of
the reasons behind a great year at Herman Miller. If you have any questions for
us or for other senior managers, please write them on the enclosed card and
return it to us. If there isn't time at the meeting to answer all the questions
we receive, one of us or a member of our team will mail you a response. We will
also take questions during the meeting.
During the business meeting we will elect five directors to the Board of
Directors, take action on four proposals, and transact any other business as may
come before the meeting.
We hope to see you there.
Sincerely,
Michael A. Volkema David L. Nelson
President and Chief Executive Officer Chairman of the Board of Directors
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE
AND PROMPTLY RETURN YOUR PROXY
CARD IN THE ENCLOSED ENVELOPE
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
The annual meeting of the shareholders of Herman Miller, Inc. (the
"Company"), will be held at the Zeeland High School Performing Arts Center, 3333
- - 96th Avenue, Zeeland, Michigan, on Tuesday, the 29th of September, 1998, at 4
p.m. (E.D.T.) for the following purposes:
1. To elect five directors, four each for a term of three years, and one
director for a term of two years.
2. To consider and vote upon a proposal to amend the Company's Articles
of Incorporation to increase the authorized Common Stock from
120,000,000 shares to 240,000,000 shares, $.20 par value.
3. To consider and vote upon a proposal to amend the Company's Long-Term
Incentive Plan.
4. To consider and vote upon a proposal to approve and adopt the
Company's Incentive Cash Bonus Plan.
5. To consider and vote upon a proposal to ratify the appointment of
Arthur Andersen LLP as independent public accountants for the Company
for the fiscal year ending May 29, 1999.
6. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on August 3, 1998, will be
entitled to vote at the meeting.
Whether or not you expect to be present at this meeting, you are urged to
sign the enclosed proxy and return it promptly in the enclosed envelope. If you
do attend the meeting and wish to vote in person, you may do so even though you
have submitted a proxy.
By order of the Board of Directors
James N. DeBoer, Jr., Secretary of the Board
August _____, 1998
PRELIMINARY PROXY STATEMENT DATED ___________, 1998
HERMAN MILLER, INC.
855 East Main Avenue
P.O. Box 302
Zeeland, Michigan 49464-0302
PROXY STATEMENT DATED AUGUST _____, 1998
This Proxy Statement is furnished to the shareholders of Herman Miller,
Inc. (the "Company"), in connection with the solicitation by the Board of
Directors of proxies to be used at the Annual Meeting of Shareholders. This
meeting will be held on Tuesday, September 29, 1998, at 4 p.m. (E.D.T.) at the
Zeeland High School Performing Arts Center, 3333 - 96th Avenue, Zeeland,
Michigan.
SOLICITATION OF PROXIES
Each shareholder, as an owner of the Company, is entitled to vote on
matters scheduled to come before the Annual Meeting. The use of proxies allows a
shareholder of the Company to be represented at the Annual Meeting if he or she
is unable to attend the meeting in person. The proxy card accompanying this
Proxy Statement is to be used for such purpose.
If the proxy card is properly executed and returned to the Company, the
shares represented by the proxy will be voted at the Annual Meeting of
Shareholders and at any adjournment of that meeting. Where shareholders specify
a choice, the proxy will be voted as specified. If no choice is specified, the
shares represented by the proxy will be voted for the election of all nominees
named in the proxy and for each of the proposals described in this Proxy
Statement.
A proxy may be revoked prior to its exercise by (1) delivering a written
notice of revocation to the Secretary of the Company, (2) executing a proxy at a
later date, or (3) attending the meeting and voting in person. However,
attendance at the meeting does not automatically serve to revoke a proxy.
ELECTION OF DIRECTORS
The Board of Directors has nominated Dorothy A. Terrell, Dr. E. David
Crockett, Michael A. Volkema, and C. William Pollard for election as directors,
each to serve until the 2001 annual meeting. The Board of Directors has
nominated David L. Nelson for election as a director for a two-year term to
expire at the 2000 annual meeting. Each of the nominees previously has been
elected as a director by the Company's shareholders.
The latter portion of this Proxy Statement contains more information about
the nominees. Unless otherwise directed by a shareholder's proxy, the persons
named as proxy voters in the accompanying proxy will vote for the nominees named
above. If any of the nominees become unavailable, which is not anticipated, the
Board of Directors, at its discretion, may designate substitute nominees, in
which event the enclosed proxy will be voted for such substituted nominees.
Proxies cannot be voted for a greater number of persons than the number of
nominees named.
A plurality of the votes cast at the meeting is required to elect the
nominees as directors of the Company. Accordingly, the four persons who receive
the largest number of votes cast at the meeting for the three-year terms, and
the one person who receives the largest number of votes cast at the meeting for
the two-year term, will be elected as directors. Shares not voted at the
meeting, whether by abstention, broker nonvote, or otherwise, will not be
treated as votes cast at the meeting. The Board of Directors recommends a vote
FOR the election of all persons nominated by the Board.
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PROPOSED INCREASE IN AUTHORIZED COMMON STOCK
The Company's Board of Directors has proposed that the first paragraph of
Article III of the Company's Articles of Incorporation (the "Articles") be
amended to read as follows:
The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is two hundred
fifty million (250,000,000) shares, of which two hundred forty
million (240,000,000) shares shall be Common Stock of the par
value of $.20 per share and ten million shares (10,000,000)
shares shall be series preferred stock, without par value.
This amendment will increase the Company's authorized Common Stock from
120,000,000 shares to 240,000,000 shares of Common Stock, $.20 par value. The
purpose of the amendment is to provide additional shares of Common Stock for
future issuance. As of August 3, 1998, there were _____ shares of Common Stock
issued and outstanding and _____ shares of Common Stock reserved for issuance
under the Company's stock compensation plans and Employee Stock Purchase Plan.
As a result, as of August ____, 1998, only ________ shares of Common Stock
remain available for future issuance. The Company has no series preferred stock
issued or outstanding. This proposed amendment will not affect those shares.
The Board of Directors believes it desirable to increase the authorized
number of shares of Common Stock in order to provide the Company with adequate
flexibility in corporate planning and strategies. The availability of additional
Common Stock for issuance could be used for a number of purposes, including
corporate financing, future acquisitions, stock dividends, stock options, and
other stock-based compensation. There are currently no agreements or
understandings regarding the issuance of any of the additional shares of Common
Stock that would be available if this proposal is approved. Such additional
authorized shares may be issued for such purposes and for such consideration as
the Board of Directors may determine without further shareholder approval,
unless such action is required by applicable law or the rules of the Nasdaq
stock market or any stock exchange on which the Company's securities may be
listed.
The additional shares of Common Stock for which authorization is sought
would be part of the existing class of Common Stock, and, to the extent issued,
would have the same rights and privileges as the shares of Common Stock
presently outstanding. Ownership of shares of the Company's Common Stock confers
no preemptive rights.
The increase in the authorized but unissued shares of Common Stock which
would result from adoption of the proposed amendment could have a potential
anti-takeover effect with respect to the Company, although management is not
presenting the proposal for that reason and does not presently anticipate using
the increased authorized shares for such a purpose. The potential anti-takeover
effect of the proposed amendment arises because it would enable the Company to
issue additional shares of Common Stock up to the total authorized number with
the effect that the shareholdings and related voting rights of then existing
shareholders would be diluted to an extent proportionate to the number of
additional shares issued.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock of the Company is required for approval of the proposed
amendment. Unless otherwise directed by a shareholder's proxy, the persons named
as proxy voters in the accompanying proxy will vote FOR the amendment.
The Board of Directors recommends a vote "FOR" the approval of the proposed
amendment to the Company's Articles of Incorporation to increase the number of
shares of authorized Common Stock.
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PROPOSED AMENDMENT TO THE COMPANY'S
1994 LONG-TERM INCENTIVE PLAN
In 1994, the Board of Directors adopted, and the shareholders approved, the
Herman Miller, Inc. Long-Term Incentive Plan (the "Plan"). The Plan provides for
the grant of a variety of equity-based Awards, described in more detail below,
such as stock options, including incentive stock options as defined in Section
422 of the Internal Revenue Code, as amended (the "Code"), reload options, stock
appreciation rights, restricted stock, performance shares, and other stock based
Awards. As of August 3, 1998, ____ shares of Common Stock were available for the
grant of future Awards under the Plan; all of the Plan's shares have been either
issued or are subject to outstanding Awards.
The Plan is intended to promote the long-term success of the Company for
the benefit of its shareholders through stock-based compensation, by aligning
the personal interests of the Company's key employees with those of its
shareholders. The Plan is designed to allow selected key employees of the
Company and certain of its subsidiaries to participate financially in the
Company's future, as well as to enable the Company to attract, retain, and
reward such employees.
The Board of Directors has approved amendments to the Plan, subject to
shareholder approval, to (i) make an additional 5,000,000 shares available for
issuance under the Plan, (ii) increase the limitation on individual Plan Awards
from 10 percent of Plan shares to 15 percent; and (iii) authorize the Plan to
use shares reacquired by the Company in the open market or otherwise for future
Plan Awards, provided that the aggregate price of the shares repurchased may not
exceed the total cash proceeds received by the Company from prior sale of shares
under the Plan. At the annual meeting, the Company's shareholders are being
requested to consider and approve this amendment. The following paragraphs
summarize the material features of the Plan, as amended.
Description of the Plan
The Plan is administered by the Executive Compensation Committee of the
Board (the "Committee"), which is required to consist of not less than three
nonemployee directors, as defined in Rule 16b-3(b)(3) of the Securities Exchange
Act of 1934. The Committee determines the employees of the Company and its
subsidiaries who are to be granted Awards, the types of Awards (or combinations
thereof) to be granted, the number of shares of Common Stock to be covered by
each Award, the terms and conditions of any Award, such as conditions of
forfeiture, transfer restrictions, and vesting requirements. The term of the
Plan is ten years; no Awards may be granted under the Plan after October 5,
2004.
The Plan provides that no more than 10 percent of the total shares subject
to issuance may be awarded to any one employee. If the amendment is approved,
this limitation would be raised to 15 percent. In addition, if the amendment is
approved, the maximum number of shares which may be issued under the Plan
pursuant to Plan Awards would be 10,000,000 shares plus (i) any shares subject
to Awards that have expired unexercised or that are forfeited, canceled,
terminated, or settled in cash in lieu of Common Stock (provided that any shares
subject to a forfeited or canceled Award may not again be made subject to an
Award from a participant who received, directly or indirectly, any of the
benefits of ownership of the securities underlying the Award, excluding the
right to vote such shares), plus (ii) any shares surrendered to the Company in
payment of the exercise price of options or tax withholding obligations or
options withheld to pay the exercise price or tax withholding obligations, plus
(iii) the number of shares repurchased by the Company in the open market and
otherwise with an aggregate purchase price no greater than the cash proceeds
received by the Company from the sale of shares under the Plan.
Types of Awards
The following types of Awards may be granted under the Plan.
An "Option" is a contractual right to purchase a number of shares at a
price determined at the date the option is granted. The exercise price included
in both incentive stock options and nonqualified stock options must equal at
least 100 percent of the fair market value of the stock at the date of the
grant. Awards of certain options also may include reload options. A reload
option is an option to purchase shares equal to the number of shares of Common
Stock delivered in payment of the exercise price (including, in the discretion
of the Committee, the number of shares tendered to the Company to satisfy any
withholding tax liability arising upon exercise), and is automatically granted
upon delivery
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of the shares without further action by the Committee. A reload option retains
the same terms of the original option, including the exercise period; however,
the exercise price of the reload option must equal the fair market value of the
Company's Common Stock on the date of grant of the reload option.
A "Stock Appreciation Right" is an Award of the right to receive stock or
cash of an equivalent value in an amount equal to the difference between the
price specified in the stock appreciation right and the prevailing market price
of the Company's Common Stock at the time of exercise. Stock appreciation rights
may be granted only in tandem with options.
"Restricted Stock" are shares of Common Stock granted to an employee for no
or nominal consideration. Title to the shares passes to the employee at the time
of that grant; however, the ability to sell or otherwise dispose of the shares
is subject to restrictions and conditions determined by the Committee. In
administering the Plan, the Committee has limited the number of shares which
could be issued as restricted stock or as performance shares to 600,000 shares.
This would be increased, by the Committee, to 1,200,000 shares if the proposed
amendment is approved by the Company's shareholders.
"Performance Shares" are an Award of the right to receive stock or cash of
an equivalent value at the end of the specified performance period upon the
attainment of specified performance goals.
An "Other Stock-Based Award" is any other Award that may be granted under
the Plan that is valued in whole or in part by reference to or is payable in or
otherwise based on Common Stock.
The Board may at any time amend, discontinue, or terminate the Plan or any
part thereof; however, unless otherwise required by law, after shareholder
approval, the rights of a participant may not be impaired without the consent of
such participant. In addition, without the approval of the Company's
shareholders, no amendment may be made which would increase the aggregate number
of shares of Common Stock that may be issued under the Plan, change the
definition of employees eligible to receive Awards under the Plan, extend the
maximum option period under the Plan, decrease the option price of any option to
less than 100 percent of the fair market value on the date of grant, or
otherwise materially increase the benefits to participants in the Plan.
Federal Tax Consequences
The following summarizes the consequences of the grant and acquisition of
Awards under the Plan for federal income tax purposes, based on management's
understanding of existing federal income tax laws. This summary is necessarily
general in nature and does not purport to be complete. Also, state and local
income tax consequences are not discussed and may vary from locality to
locality.
Options. Plan participants will not recognize taxable income at the time an
option is granted under the Plan unless the option has a readily ascertainable
market value at the time of grant. Management understands that options to be
granted under the Plan will not have a readily ascertainable market value;
therefore, income will not be recognized by participants before the time of
exercise of an option. For Nonqualified Stock Options, the difference between
the fair market value of the shares at the time an option is exercised and the
option price generally will be treated as ordinary income to the optionee, in
which case the Company will be entitled to a deduction equal to the amount of
the optionee's ordinary income. With respect to incentive stock options,
participants will not realize income for federal income tax purposes as a result
of the exercise of such options. In addition, if Common Stock acquired as a
result of the exercise of an incentive stock option is disposed of more than two
years after the date the option is granted and more than one year after the date
the option was exercised, the entire gain, if any, realized upon disposition of
such Common Stock will be treated as capital gain for federal income tax
purposes. Under these circumstances, no deduction will be allowable to the
Company in connection with either the grant or exercise of an incentive stock
option. Exceptions to the general rules apply in the case of a "disqualifying
disposition."
If a participant disposes of shares of Common Stock acquired pursuant to
the exercise of an incentive stock option before the expiration of one year
after the date of exercise or two years after the date of grant, the sale of
such stock will be treated as a "disqualifying disposition." As a result, such a
participant would recognize ordinary income and the Company would be entitled to
a deduction in the year in which such disposition occurred. The amount of the
deduction and the ordinary income recognized upon a disqualifying disposition
would generally be equal to the lesser of: (a) the sale price of the shares sold
minus the option price, or (b) the fair market value of the shares at the time
of
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exercise and minus the option price. If the disposition is to a related party
(such as a spouse, brother, sister, lineal descendant, or certain trusts for
business entities in which the seller holds a direct or indirect interest), the
ordinary income recognized generally is equal to the excess of the fair market
value of the shares at the time of exercise over the exercise price. Any
additional gain recognized upon disposition, in excess of the ordinary income,
will be taxable as capital gain. In addition, the exercise of incentive stock
options may result in an alternative minimum tax liability.
Reload Stock Options. Participants will recognize no income on the grant of
any reload option. On exercise of a reload option, the tax consequences to the
participant and the Company are the same as that for a nonqualified stock
option.
Stock Appreciation Rights. Upon the grant of a stock appreciation right,
the participant will realize no taxable income and the Company will receive no
deduction. A participant will realize income at the time of exercise if the
Award becomes vested and is no longer subject to forfeiture and the participant
is entitled to receive the value of the Award. The Company will receive a
deduction of an equal amount in the same year the participant recognized income.
Restricted Stock. Recipients of shares of restricted stock that are not
"transferable" and are subject to "substantial risk of forfeiture" at the time
of grant will not be subject to federal income taxes until the lapse or release
of the restrictions or sale of the shares, unless the recipient files a specific
election under the Code to be taxed at the time of grant. The recipient's income
and the Company's deduction will be equal to the excess of the then fair market
value (or sale price) of the shares less any purchase price.
Performance Shares. Participants are not taxed upon the grant of
performance shares. Upon receipt of the underlying shares or cash, a participant
will be taxed at ordinary income tax rates (subject to withholding) on the
amount of cash received and/or the current fair market value of stock received,
and the Company will be entitled to a corresponding deduction. The participant's
basis in any Performance shares received will be equal to the amount of ordinary
income on which he or she was taxed and, upon subsequent disposition, any gain
or loss will be capital gain or loss.
Required Vote for Approval
The affirmative vote of a majority of the Company's outstanding Common
Stock represented and voted at the annual meeting, by person or by proxy, is
required to approve the adoption of the amendment to the Plan. While broker
nonvotes will not be treated as votes cast on the approval of this Amendment,
shares voted as abstentions will be counted as votes cast. Since a majority of
the votes cast is required for approval, the sum of any negative votes and
abstentions will necessitate offsetting affirmative votes to assure approval.
Unless otherwise directed by marking the accompanying proxy, the proxy holders
named therein will vote for the approval of the adoption of the amendment to the
Plan.
The Board of Directors recommends a vote "FOR" the approval of the proposed
Amendment to the Company's Long-Term Incentive Plan to increase the number of
shares available for issuance by 5,000,000 shares, increase the limitation on
individual Awards from 10 percent of Plan shares to 15 percent, and authorize
the use of certain shares reacquired by the Company for future Plan Awards.
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PROPOSAL TO APPROVE THE HERMAN MILLER, INC.
INCENTIVE CASH BONUS PLAN AND MATERIAL TERMS OF THE
COMPANY'S PERFORMANCE-BASED COMPENSATION SYSTEM
On July 21, 1998, the Board of Directors adopted the Herman Miller, Inc.
Incentive Cash Bonus Plan (the "Plan"), subject to approval by the Company's
shareholders. Since 1997, the Board has utilized an "Economic Valued Added"
("EVA(R)")1 performance measurement system to provide the framework for the
Company's incentive compensation plans. The Board has elected to adopt the Plan
formally and incorporate the EVA(R) measurement system and related concepts to
provide performance-based cash compensation to Plan participants. The following
is a description of the Plan, which is qualified in its entirety by reference to
the complete text of the Plan set forth in attached Appendix A.
Purpose. The purpose of the Plan is to more closely link incentive cash
compensation to the creation of shareholder wealth. The Plan is intended to
focus performance on long-term continuous improvements in shareholder value. In
order to achieve this objective, the targeted improvements in EVA is set above
the actual EVA earned for the prior year, thereby requiring further EVA
improvements to earn the same level of incentive-based pay. The improvement
factor in EVA performance is established by the Board or the Committee for a
period of three years. As a result of these features of the Plan, the Board
believes that the Plan will foster long-term improvements in shareholder value,
not merely near-term gains in reported financial performance.
Administration. The Plan is administered by the Executive Compensation
Committee of the Board of Directors (the "Committee"). Subject to the terms of
the Plan, the Committee is authorized to establish target bonus thresholds,
target improvements in annual EVA(R) growth, and other factors affecting the
operation of the Plan. Each year, and based upon the Financial Audit Committee's
determination of EVA(R) performance, the Committee is required to certify, in
writing, EVA(R) growth or diminution, before any payments to Plan participants
may be made. The Committee also has the authority to interpret the Plan and to
establish rules and regulations for purposes of administering the Plan.
Eligibility. Although changes in the Company's EVA(R) provide a means for
determining bonus compensation to substantially all of the Company's employees,
eligibility for participation in the Plan is designated to include corporate
officers, vice presidents, and directors of each of the Company's business
units. At present, there are 223 employees who are eligible to participate in
the Plan. For fiscal 1998, the aggregate amount of bonus payments to employees
that qualify as participants in the Plan was $12.3 million, ($2.0 million to
executive officers as a group). Bonus payments to the Named Executives are set
forth in the Summary Compensation Table appearing below in this Proxy Statement.
If the Plan and the EVA(R) performance system are not approved by the Company's
shareholders, the amount of compensation payable to any one of the Company's
Named Executives will be limited (when aggregated with other
nonperformance-based compensation within the meaning of Section 162(m) of the
Code), to the maximum amount of compensation that would be deductible by the
Company as an expense under Section 162 of the Code.
Description of the Performance Measurement System. The Plan establishes a
means of providing performance-based cash compensation to the Company's
employees based upon changes in the Company's EVA(R). As defined in the Plan,
EVA(R) equals the Company's net operating profit after taxes (NOPAT), less the
Company's Capital Charge. NOPAT is defined as the Company's pre-tax profit, as
determined from the Company's audited financial statements, and as adjusted by
the Committee in a manner consistent with the Herman Miller EVA(R) Management
System Technical Manual (the "Manual"). The adjustments are intended to convert
the Company's accounting based after-tax profits to an economic basis. The
Company's Capital Charge is defined as the Company's cost of capital, multiplied
by its aggregate capital (as calculated by the Committee in a manner consistent
with the adjustments required in the Manual) The Company's cost of capital is
determined by the Committee each year, based upon the Company's prevailing cost
of equity and cost of debt. The cost of capital is fixed at the beginning of
each Plan year.
Using these criteria and standards, the Committee establishes a Target
Bonus for each participant, expressed as a percentage of base salary, and the
target improvement in annual EVA(R) growth ("Expected Improvement"). The
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1 EVA(R) is a registered trademark of Stern Stewart & Co.
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Expected Improvement is intended to reflect the stock market's expectation of
annual EVA(R) growth, based upon the share price of the Company's common stock.
A Target Bonus is earned if Expected Improvement is achieved.
The Plan provides for achievement in excess of or below the Target Bonus,
based upon the Bonus Intervals, as established by the Committee. The Upside
Bonus Interval is the amount of EVA(R) growth above Expected Improvement that is
required to double the Target Bonus. The Downside Bonus Interval (which is the
same EVA(R) value differential between the Upside Bonus Interval and the
Expected Improvement) represents the EVA(R) growth or diminution below Expected
Improvement that would result in no Target Bonus. For instance, if Expected
Improvement in annual EVA(R) growth is established at $400,000, and the Upside
Bonus Interval is set at $1,000,000, the Company would have to achieve annual
EVA(R) growth of $1,000,000 above Expected Improvement for the Target Bonus to
double. Conversely, no Target Bonus would be paid if EVA(R) decreased by
$600,000 (the $400,000 Expected Improvement less the $1,000,000 interval).
Bonus calculations resulting from performance above or below the Bonus
Intervals can be calculated through simple linear interpolation. For instance,
based upon the above example, EVA(R) growth of $800,000 would result in a Target
Bonus of 1.4 times the Target Bonus ($400,000 excess EVA(R) growth out of the
$1,000,000 excess needed to achieve the Bonus Interval). On the other hand,
EVA(R) diminution of $400,000 would result in a bonus of .2 times the Target
Bonus ($200,000 above the Downside Bonus Interval). There is no limit on either
the upside or downside bonus amount. If the Plan is approved by shareholders,
the Board will utilize the EVA(R) measurement system as the performance criteria
in determining earned loan repayments under the Company's Key Executive Stock
Purchase Assistance Plan. That plan, previously approved and adopted by the
Company's shareholders, permits participants to earn the repayment of loans
based upon Company performance.
Payment of Bonus Amounts. All bonuses earned under the Plan are first
subject to a Bonus Reserve prior to payment. Each Plan participant has their own
bonus reserve account. The utilization of the reserve is intended to promote
management's attention to long-term objectives, ensure that only sustained
improvement in EVA(R) is rewarded and facilitate a payment system under which
both unlimited upside and downside potential are recognized.
Bonuses are subject to the reserve account to the extent the Target Bonus
is exceeded. If the sum of the bonus earned in a year (plus any amounts in the
reserve account from the prior years) exceeds the Target Bonus, the payment for
the year is limited to the Target Bonus plus one-third of the reserve account.
The remaining two-thirds is required to be left in the bonus account and is
subject to reduction if the improvement in EVA(R) is less than the Downside
Bonus Interval. If the sum of the bonus earned in a year (plus any amounts in
the reserve account from the prior years) is less than the Target Bonus, the
entire balance is paid. Similarly, if a negative balance exists in a bonus
reserve account, it must be earned back before any bonus is paid.
A Plan participant's Target Bonus may be subject to the Expected
Improvement for the Company only, or, at the discretion of the Committee, may be
subject to Expected Improvement in EVA(R) growth for a particular division,
operation or subsidiary, combined with overall Company EVA(R) growth.
Termination or Amendment of the Plan. The Board may amend, discontinue or
terminate the Plan at any time; however, no amendment, discontinuance or
termination may alter or otherwise affect any amounts held in a bonus reserve
account or affect bonuses earned through the date of termination. In addition,
without the prior approval of the Company's shareholders, no amendment to the
Plan may be made that would replace the EVA(R) performance measurement system
for determining bonuses under the Plan. The Board or Committee would, however,
retain the authority to adjust and establish targeted EVA(R) performance, Bonus
Intervals and other criteria utilized in the EVA(R) performance measurement
system.
-7-
Federal Tax Consequences. The following summarizes the consequences of the
achievement of earned bonuses and payment of bonuses under the Plan for federal
income tax purposes, based upon management's understanding of existing federal
income tax laws. This summary is necessarily general in nature and does not
purport to be complete. Also, state and local income tax consequences are not
discussed, and may vary from locality to locality.
Based upon the terms and conditions of the Plan, Plan participants will not
recognize any compensation at the time a bonus amount is determined. Upon
payment of a bonus from a bonus reserve account, a participant will recognize
ordinary income in the amount of the bonus paid. Any bonuses held in the reserve
account will not be recognized as ordinary income until paid. The Company will
be entitled to a deduction in the year in which a Plan participant recognizes
ordinary income under the Plan.
Required Vote for Approval. The affirmative vote of a majority of the
Company's Common Stock voted at the Annual Meeting, by person or by proxy, is
required to approve the Plan and the EVA(R) performance system. Broker nonvotes
and abstentions will not be counted as votes cast on this proposal. Since a
majority of the votes cast is required for approval, any negative votes will
necessitate offsetting affirmative votes to assure approval. Unless otherwise
directed by marking the accompanying proxy, the proxy holders named therein will
vote for the approval of the Plan.
The Board of Directors recommends a vote FOR the approval of the proposed
Plan and the adoption of the EVA(R) performance system.
-8-
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Arthur Andersen LLP as independent
public accountants for the Company for the fiscal year ending May 29, 1999.
Representatives of Arthur Andersen LLP will be present at the annual meeting of
shareholders and available to respond to appropriate questions. The Arthur
Andersen LLP representatives will have the opportunity to make a statement if
they so desire.
Although the submission of this matter for approval by shareholders is not
legally required, the Board of Directors believes that such submission follows
sound corporate business practice and is in the best interests of the
shareholders. If the shareholders do not approve the selection of Arthur
Andersen LLP, the selection of such firm as independent public accountants for
the Company will be reconsidered by the Board of Directors.
The Board of Directors recommends a vote FOR the ratification of the
appointment of Arthur Andersen LLP as the Company's independent public
accountants.
-9-
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
On August 3, 1998, the Company had _______ shares of Common Stock issued
and outstanding, par value $.20 per share. Shareholders are entitled to one vote
for each share of Common Stock registered in their names at the close of
business on August 3, 1998, the record date fixed by the Board of Directors.
Votes cast at the meeting and submitted by proxy will be tabulated by the
Company's transfer agent. As of August 3, 1998, no person was known by
management to be the beneficial owner of more than 5 percent of the Company's
Common Stock.
DIRECTOR AND EXECUTIVE OFFICER INFORMATION
Security Ownership of Management. The following table shows, as of August
3, 1998, the number of shares beneficially owned by each of the Named Executives
identified in the executive compensation tables of this Proxy Statement and by
all directors and executive officers as a group. Except as described in the
notes following the table, the following persons have sole voting and
dispositive power as to all of their respective shares.
Amount and Nature
Named Executive of Beneficial Ownership(1) Percent of Class(3)
Michael A. Volkema
Andrew C. McGregor
Brian C. Walker
Christopher A. Norman
Robert I. Frey
All executive officers and directors
as a group (23 persons)(2)
(1) Includes the following numbers of shares with respect to which the
Named Executives have the right to acquire beneficial ownership under
stock options exercisable in 60 days: Mr. Volkema - 164,300; Mr.
McGregor - 74,404; Mr. Walker - 83,843; Mr. Norman - 81,730; and Mr.
Frey - 68,000. Includes the following number of shares which are
restricted and subject to certain conditions: Mr. Volkema - _____; Mr.
McGregor - _____; Mr. Walker - _____; Mr. Norman - _____; and Mr. Frey
- _____.
(2) Included in this number are _____ shares with respect to which
executive officers and directors have the right to acquire beneficial
ownership under options exercisable within 60 days.
(3) Calculated based on the number of shares outstanding plus the option
shares referred to in notes (1) and (2) above.
-10-
The Board of Directors. The information in the following table relating to
each nominee's and director's age, principal occupation or employment for the
past five years, and beneficial ownership of shares of Common Stock as of August
3, 1998, has been furnished to the Company by the respective nominees and
directors. Except as described in the notes following the table, the following
nominees and directors have sole voting and dispositive power as to all of the
shares set forth in the following table.
Year First
Became a Shares Percent of
Name and Principal Occupation Age Director Owned(1) Class(2)
Nominees for Election as Directors for Terms to Expire in 2001
C. William Pollard 60 1985 (3)
Chairman of the Board, The ServiceMaster Company
(Management and Consumer Services for Health
Care, Industrial, and Educational Facilities)
Dorothy A. Terrell 53 1997
Since February 1998-President,
Service Group, Senior Vice President Operations,
Natural Micro Systems, Inc.
August 1991 to September 1997-President,
Sun Express, Inc., Sun Micro System, Inc.
Dr. E. David Crockett 62 1982
Since November 1992--Chairman of the Board,
Cornerstone Imaging, Inc. (Document Image
Processing)
Since May 1991--General Partner, Aspen Ventures
(Venture Capitalists)
Michael A. Volkema 42 1995 (4)
Since July 1995- Chief Executive Officer, Herman
Miller, Inc.
Since May 1995- President, Herman Miller, Inc.
From February 1995 to May 1995- President and Chief
Executive Officer, Coro, Inc. (a subsidiary of
Herman Miller, Inc.)
From May 1993 to September 1994- Chairman of the
Board, Meridian, Inc. (a subsidiary of Herman
Miller, Inc.)
Nominee for Election as Director for Term to Expire in 2000:
David L. Nelson 68 1972 (5)
Since October 1995--Chairman of the Board,
Herman Miller, Inc.
From January 1994--Vice President, Customer Support,
America's Region, Asea, Brown, Boveri, Inc.
Prior to January 1994--Vice President, Customer
Satisfaction, Industry Segment, Asea, Brown,
Boveri, Inc. (Electronics Manufacturer)
-11-
Year First
Became a Shares Percent of
Name and Principal Occupation Age Director Owned(1) Class(2)
Directors Whose Terms Expire in 1999:
J. Harold Chandler 49 1995
Since November 1993--Chairman, President and Chief
Executive Officer, Provident Companies, Inc.
From June 1993 to November 1993--President,
MidAtlantic NationsBank and Maryland National
Corporation
From January 1992 to June 1993--President,
NationsBank/Washington, D.C., Maryland, and N.
Virginia
William K. Brehm 69 1991
Chairman of the Board, SRA International, Inc.
(Systems Integrator and Information Technology
Consulting)
Brian Griffiths, Lord Griffiths of Fforestfach 56 1991
Since 1990--International Advisor, Goldman Sachs
International Limited (International Investment
Banking Firm)
Directors Whose Terms Expire in 2000
Ruth Alkema Reister 62 1985 (6)
Private Investments and Civic and Charitable Activities
Richard H. Ruch 68 1986 (7)
From July 1995 to October 1995--Chairman of the Board,
Herman Miller, Inc.
From April 1992 to July 1995--Vice Chairman of the
Board, Herman Miller, Inc.
James R. Carreker 51 1997
Since October 1995-Chairman of the Board and CEO
of Aspect Telecommunications Corp.
From August 1985-October 1995-President and CEO
of Aspect Telecommunications Corp.
(1) Shares shown for each director who is not an officer of the Company
include 116,000 shares for Mr. Nelson; 36,000 shares for Mr. Crockett,
and Ms. Reister; 42,000 shares for Mr. Griffiths; and 6,000 shares for
Messrs. Pollard and Carreker, with respect to which the director has
the right to acquire beneficial ownership under options exercisable
within 60 days.
(2) Percentages are calculated based upon shares outstanding, plus shares
which the director has the right to acquire under stock options
exercisable within 60 days.
(3) Includes 1,612 shares owned of record and beneficially by Mr.
Pollard's wife. Mr. Pollard disclaims beneficial ownership of these
shares.
(4) Includes 164,3000 shares with respect to which Mr. Volkema has a right
to acquire beneficial ownership under options exercisable within 60
days and _____ shares of restricted stock which are subject to
forfeiture under certain conditions.
(5) Shares are owned jointly by Mr. Nelson and his wife. Includes 4,800
shares owned of record and beneficially by Mr. Nelson's wife, with
respect to which Mr. Nelson disclaims beneficial ownership.
(6) Includes 2,400 shares owned by Mrs. Resister's husband. Mrs. Reister
disclaims beneficial ownership of these shares.
(7) Includes 12,000 shares with respect to which Mr. Ruch has a right to
acquire beneficial ownership under options exercisable within 60 days.
In addition, Mr. Ruch's wife owns 9,800 shares to which Mr. Ruch
disclaims beneficial ownership and a Ruch Family Foundation Charitable
Trust owns 21,838 shares to which Mr. Ruch disclaims beneficial
ownership.
-12-
Mr. Carreker also is a director of Aspect Telecommunication Corporation.
Mr. Chandler is also a director of Provident Companies, Inc., AmSouth
Bancorporation and Storage Technology Corp. Mr. Crockett also is a director of
Cornerstone Imaging, Inc., and Metatec Corporation. Brian Griffiths, Lord
Griffiths of Fforestfach, also is a director of The ServiceMaster Company. Mr.
Nelson also is a director and trustee of Cardinal Fund, Inc. Mr. Pollard also is
a director of The ServiceMaster Company and Provident Companies, Inc. Ms.
Terrell also is a director of General Mills, Inc. and Sears, Roebuck & Co.
The Board of Directors held five meetings during the last fiscal year. All
of the directors attended at least 75 percent of the aggregate number of
meetings of the Board and the Board committees on which they served.
Financial Audit Committee. The Company has a Financial Audit Committee
comprised of Richard H. Ruch (chair) and Dr. E. David Crockett (vice chair). The
Financial Audit Committee recommends to the Board of Directors the selection of
independent auditors and reviews the scope of their audit, their audit reports,
and any recommendations made by them. The committee approves fees paid for audit
and nonaudit services by the independent public accountants. The committee also
reviews the activities of the Company's internal auditors, determines EVA(R)
performance each year, and reviews and recommends to the Board issues concerning
the Company's dividend policies, capital expenditures, welfare benefits plans,
and other related financial matters. The committee met ____ times during the
last fiscal year.
Executive Compensation Committee. The Company has an Executive Compensation
Committee, comprised of J. Harold Chandler (chair), James R. Carreker, and
Dorothy A. Terrell. The Executive Compensation Committee recommends to the Board
the annual executive incentive plan, the grant of employee stock options, and
the annual remuneration of the Company's Chairman, Vice Chairman, and Chief
Executive Officer, and acts as the administrative committee for the Company's
employee stock option and long term incentive plans. The committee met ______
times during the last fiscal year.
Nominating Committee. The Company has a Nominating Committee comprised of
C. William Pollard (chair) and William K. Brehm. The Nominating Committee
selects and presents to the Board candidates for election to fill vacancies on
the Board. The committee will consider nominees recommended by shareholders,
provided recommendations are submitted in writing, on or before the 60th day
preceding the date of the annual meeting, including a description of the
proposed nominee's qualifications, his or her consent to serve as a director, as
well as other required data on the nominee and the shareholder submitting the
proposal and other relevant biographical data, to C. William Pollard, at Herman
Miller, Inc., 855 East Main Avenue, P.O. Box 302, Zeeland, Michigan 49464-0302.
The committee met ____ times during the last fiscal year.
Executive Committee. The Company has an Executive Committee comprised of
David L. Nelson (chair), William K. Brehm, C. William Pollard, Richard H. Ruch,
and Michael A. Volkema. The Executive Committee acts from time to time on behalf
of the Board in managing the business and affairs of the Company (except as
limited by law or the Company's Bylaws), and is delegated certain assignments
and functions by the Board of Directors. The Committee met _____ times during
the last fiscal year.
COMPENSATION OF BOARD MEMBERS AND NONEMPLOYEE OFFICERS
The Company pays directors' fees to nonemployee directors at the rate of
$32,500 per year, plus $1,000 per regular meeting and $1,500 per special
committee meeting held at a time other than at the time of a Board meeting, and
$750 per committee meeting held by video or teleconference. Directors may elect
to receive a share grant, having a market value equal to the cash retainer, up
to 100% of the retainer. If a share grant is selected, the director will receive
a cash stipend of 25% of the value of the shares granted. No other amounts are
payable for service on committees of the Board or for any other assignments that
may be undertaken by a director as a director.
In 1997, the Board established Director Stock Ownership Guidelines. These
guidelines, like those of the management team, are intended to reinforce the
importance of linking shareholder and director interests. Under these
guidelines, each director is expected to reach a minimum level of share
ownership which as a value equivalent to six (6) times the annual retainer fee
of $32,500 or a minimum total ownership valued at $195,000.
-13-
Mr. Nelson became the Chairman of the Board on October 30, 1995. For the 12
month period ending October 1998, Mr. Nelson agreed to devote at least 80
percent of his business time to the Board of Directors for the payment of
$250,000 plus director fees, and an annual library allowance of $1,500. In
addition, he will receive an annual benefit package of $10,000.
The Company has in effect a stock option plan, approved and adopted by its
shareholders, under which officers and directors who are not employees of the
Company or its subsidiaries are granted options to purchase shares of the
Company's Common Stock. Subject to certain exceptions, the options are not
exercisable until 12 months after the date of grant and expire 10 years after
the date of the grant. The option price is payable upon exercise in cash or,
subject to certain limitations, in shares of the Company's Common Stock already
owned by the optionee, or a combination of shares and cash. This Plan also
provides for the grant of reload options, which allows optionees to purchase
shares equal to the number of shares of Common Stock delivered in payment of the
exercise price (and any corresponding tax liability). As a result, reload
options may be granted automatically without any further action by the Board or
the Company. A reload option contains the same terms as the original option
except that the exercise price is required to equal the fair market value of the
Company's stock at the date of grant of the reload option.
In recent years, the grant of options was done annually in February of each
year. However, the Board has elected to adjust the grant date to July,
consistent with the timing of option grants to employees, subject to Board
approval of any annual option awards. Accordingly, during fiscal 1998, no
options were granted to nonemployee officers and directors. Reload options
providing for the purchase of 56,498 shares were granted automatically during
fiscal 1998, each at an exercise price of $32.50.
EXECUTIVE COMPENSATION COMMITTEE REPORT
General
The Company has long recognized the importance of a well-founded executive
compensation program and the role it plays in achieving the Company's short- and
long-term objectives of promoting superior corporate performance, creating
shareholder value, and maintaining fairness and relative equity in the
compensation of and between its executives and all other employee-owners. The
Executive Compensation Committee of the Board of Directors, which comprises
three nonemployee directors, was established over 20 years ago to provide an
ongoing review of the executive compensation program to ensure that it is
structured and administered to support the Company's mission and strategy. The
committee is responsible for recommendations to the full Board for several
aspects of executive compensation, including the annual remuneration of the
Company's Chief Executive Officer, which includes base salary, incentive pay,
and equity-based compensation. In addition, the Committee also establishes the
performance objectives for the annual executive incentive plan which covers the
Chief Executive Officer, corporate officers, vice presidents, and directors at
each of the Company's business units. The Company's Chief Executive Officer
establishes the base salary of the Company's other executive officers.
Compensation Philosophy
The Company's compensation philosophy, as formulated by the Executive
Compensation Committee and endorsed by the Board of Directors, is designed to
engender and preserve a sense of fairness and equity among employees,
shareholders and customers. Consistent with this philosophy, an Economic Value
Added ("EVA"(R)) performance measurement and incentive compensation system has
been created and implemented. This system, which is an internal measurement of
operating and financial performance, has been shown by extensive independent
market research to more closely correlate with shareholder value than any other
performance measure.
Beginning in fiscal 1997, the incentive compensation plans of corporate
officers, vice presidents, and directors at each of the Company's business units
were linked to the EVA concept. Under the terms of the EVA performance system,
focus is shifted from budget performance to long-term continuous improvements in
shareholder value. Each year, the EVA target is raised over the actual EVA
earned the prior year by an improvement factor so that higher EVA targets must
be attained in order to earn the same level of incentive pay. This improvement
factor is established by the Board of Directors for a period of three years.
This year the Company's shareholders are being asked to approve the
-14-
Company's Incentive Cash Bonus Plan which utilizes this EVA performance
measurement system to determine the amount of annual cash bonus compensation. A
detailed description of this EVA based incentive compensation system is included
in that proposal.
The Committee believes that the utilization of the EVA measurement system,
with its focus on maximizing the Company's return on capital investments
relative to its cost of capital, will be a more effective means of evaluating
and rewarding management performance. The Committee believes the adoption of the
EVA measurement system is consistent with its objective of endorsing an
executive compensation program designed to:
- Link a material portion of annual compensation directly to operating
performance.
- Promote achievement of long-term strategic goals and objectives.
- Align the interests of executives with the long-term interests of the
shareholders.
- Attract, motivate, and retain executives of outstanding ability.
Executive Stock Ownership Requirements. The Board of Directors believes
that significant stock ownership by management is of critical importance to the
ongoing success of the Company since it closely links the interests of
management and Company shareholders. To emphasize this, the Board adopted stock
ownership requirements for approximately 170 executives, including all officers.
Under these requirements, the CEO must own shares of Company stock which have an
aggregate value of at least twelve (12) times his base salary. The other
executives must own shares with an aggregate value of between one (1) and six
(6) times their base salaries. All participants must achieve their ownership
requirement over a five to ten year period. The level of ownership and
attainment period is determined by the executive's responsibility level and
corresponding management position within the Company. Ownership for the purposes
of the guidelines is defined to include shares owned by the executives, as well
as shares held in profit sharing, 401(k) and deferred compensation accounts for
his/her benefit. Stock options are not included in the calculation of an
executive's total ownership.
The Company has several equity-based compensation plans which serve as
tools to assist executives in attaining their required levels of ownership.
These plans include (1) the 1994 Long-Term Incentive Plan, under which stock
options, restricted stock, reload options and other equity instruments may be
granted, and (2) the 1994 Key Executive Stock Purchase Assistance Plan, which
authorizes the Executive Compensation Committee to extend loans to selected
executives to acquire shares of Company stock. Under the later plan, executives
can earn repayment of a portion of the principal and interest due on these
loans, provided that certain corporate performance goals are attained. Both of
these plans have previously been approved by the Company's shareholders.
In addition to these plans, the Company has a Key Executive Deferred
Compensation Plan whereby executives can elect to defer a portion of the EVA
cash bonus and have it denominated in Company stock. For 1998 the Company also
provided an incentive in the form of a premium denominated in Herman Miller
common shares equal to 30 percent of the amount deferred up to a maximum of 50
percent of the cash bonus. Each year the Committee may adjust the premium
percentage and the maximum amount of the deferral that is subject to the
premium. The Committee believes that this program provides an additional
opportunity and incentive for the key executives to increase their ownership
level in the Company. Sixteen executives were elected to participate in this
program for fiscal 1998 and deferred $2.3 million, which was invested in Company
stock and received a premium totaling $650,000, which was also invested in
Company stock.
An executive's level of participation in each of these plans is directly
related to the level of his or her ownership requirements. These plans have been
designed and are intended to be used by executives to attain their required
ownership levels and to build additional ownership. Failure by an executive to
use the plans as tools to build their stock ownership may result in his or her
reduced participation or withdrawal from further participation in the plans.
-15-
During the past 4 years, executives have increased their ownership by 1.57
million shares as a result of their participation in these plans. Approximately
749,000 shares have been acquired by the exercise of options, 634,000 through
the Stock Purchase Assistance Plan, and 187,000 through the Deferred
Compensation Plan.
In addition to the foregoing plans, stock ownership is also made available
to all the Company's employees through the Employee Stock Purchase Plan and
various Employee Ownership and Profit Sharing Plans.
-16-
Company Performance and Executive Compensation
The salaries of the Company's Chief Executive Officer and other executives
are established on a performance-based evaluation system. Each executive
officer's performance, except that of the Chief Executive Officer, is evaluated
by his or her superior and reviewed by the Executive Compensation Committee.
This review considers the employee's overall performance relative to the
achievement of corporate objectives as well as individual contributions and
achievements. This same evaluation system is applied to the Company's Chief
Executive Officer by this committee.
The Company's EVA measurement system provides the basis for determining the
award of both annual stock options and the formula for awarding cash incentive
bonuses. As discussed earlier, the Herman Miller EVA Incentive Compensation Plan
is intended to more closely link incentive awards to the creation of shareholder
wealth and to promote a culture of performance and ownership. The Executive
Compensation Committee approves an expected annual improvement in EVA for which
a target bonus is paid for attaining performance which matches the annual
planned improvement factor that has been established for a 3 year period by the
Board of Directors. For the Company's Chief Executive Officer and other
executives, the EVA plan is intended to motivate growth above the expected
annual improvement in EVA with a straight line payoff profile offering a cash
bonus award that has a unlimited upside potential, as well as unlimited downside
potential. The potential for suffering a negative bonus is made possible because
annual bonus awards are not fully paid out but instead are banked forward and
put at risk with their full payout contingent upon continued successful
performance.
The Executive Compensation Committee also authorizes the grant of stock
options to employees of the Company, including executive officers. Under the EVA
program, the Committee initially approves a target option grant which is then
multiplied by the same bonus multiple that is applied to the target cash bonus.
However, executives are limited by an upside potential of two times the target
option grant and on the downside by a zero grant.
During fiscal 1998 Mr. Michael A. Volkema, the Company's Chief Executive
Officer, earned a base salary and cash bonus of $367,000, and $465,658,
respectively, representing total cash compensation of $832,658. In addition,
under the Key Executive Deferred Compensation Plan, Mr. Volkema elected to defer
50 percent of his EVA cash bonus denominated in Herman Miller Common Stock. Mr.
Volkema received a premium also denominated in Herman Miller Common Stock equal
to _____ shares which vests over a three year period.
In July 1997 Mr. Volkema was also awarded a stock option grant of 80,000
shares representing a multiple of two times his target option of 40,000. The
Committee believes that the significant ownership position created by these
actions will more closely align Mr. Volkema's interests with those of the
shareholders. The size of the equity based compensation awards and the cash
compensation reflect the Committee's evaluation and recognition of Mr. Volkema's
contribution to the significant accomplishments and successes achieved by the
Company in fiscal 1998.
The income tax laws of the United States limit the amount the Company may
deduct for compensation paid to the Company's CEO and the other four most highly
paid executives. Certain compensation that qualifies as "performance-based"
under IRS guidelines is not subject to this limit. Stock options granted under
the Company's Long- Term Incentive Plan, as well as compensation earned under
the Company's 1994 Key Executive Stock Purchase Assistance Plan, are designed to
qualify as performance-based compensation, thereby permitting the Company to
deduct the related expenses. Moreover, subject to shareholder approval of the
Company's Incentive Cash Bonus Plan, amounts paid under that plan are intended
to qualify as performance-based compensation.
J. Harold Chandler (Chair)
James R. Carreker
Dorothy A. Terrell
-17-
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation received by the Named
Executives for each of the three fiscal years ended May 30, 1998, May 31, 1997,
and June 1, 1996.
Annual Compensation Long Term Compensation
Awards Payouts
Securities
Restricted Stock Underlying LTIP All Other
Name and Principal Year Salary(1) Bonus(2) Other Awards Options/SARs Payouts(4) Compensation(5)
Position ($) ($) ($) ($) (#)(3) ($) ($)
Michael A. Volkema, 1998 367,000 465,658 -0- -0- 80,000 5,643
President & Chief Executive 1997 352,900 316,783 -0- -0- 80,000 631,765 4,199
Officer 1996 357,771 274,269 -0- 1,435,000(6) 80,000 592,745 2,718
Andrew C. McGregor, 1998 220,000 189,300 -0- -0- 40,000 9,598
Executive Vice President, 1997 205,000 129,261 84,145 108,375(7) 40,000 125,329 7,433
President Herman Miller 1996 194,923 185,317 -0- -0- 48,000 125,652 6,099
Choices
Brian C. Walker. 1998 210,000 183,964 -0- -0- 40,000 6,648
Executive Vice President, Chief 1997 195,000 122,860 -0- 108,375(6) 40,000 126,092 4,724
Financial Officer and Treasurer 1996 137,307 128,024 -0- -0- 48,000 122,035 2,837
Christopher A, Norman, 1998 213,079 174,444 -0- -0- 40,000 7,759
Executive Vice President, 1997 205,000 109,793 -0- 108,375(6) 20,000 91,732 5,774
Information Services and Chief 1996 207,692 180,930 -0- -0- 24,000 91,966 4,551
Information Officer
Robert I. Frey,(8) 1998 205,000 129,729 -0- -0- 40,000 3,002
Executive Vice President, 1997 115,384 56,153 -0- -0- 40,000 110,399 -0-
Herman Miller International 1996 -0- -0- -0- -0- -0- -0- -0-
(1) Includes amounts deferred by employees pursuant to Section 401(k) of
the Internal Revenue Code. Includes 52 weeks of compensation for all
three years, consistent with the Company's fiscal year.
(2) Represents amounts earned under the Company's Earned Share Bonus Plan
and Executive Incentive Plan, but excludes amounts foregone at the
election of the Named Executives and payable in shares of the
Company's Common Stock under the Key Executive Deferred Compensation
Plan, as reported in the Long-Term Incentive Plan table.
(3) The options reflected as being granted in fiscal 1997 and 1998 were
awarded in the following fiscal year but relate to fiscal 1997 and
1998 performance, respectively.
(4) Represents amounts earned under the Company's Key Executive Stock
Purchase Assistance Plan and applied to the repayment of loans made
thereunder.
(5) Includes amounts attributable during fiscal 1998 to benefit plans of
the Company as follows: (a) amounts contributed by the Company
pursuant to the Company's profit sharing plan for the account of
Messrs. Volkema, McGregor, Walker, Norman, and Frey were $5,643;
$8,464; $6,348; $7,759; and $3,002, respectively; and (b) payments by
the Company in fiscal 1998 of premiums for life insurance for the
benefit of Mr. McGregor was $ _____.
(6) This amount represents the value of 120,000 and 80,000 shares of the
Company's Common Stock (based on the closing price on the date of
grant of $6.625 and $8.00 per share, respectively) granted to Mr.
Volkema under the terms of two Incentive Share Grant Agreements. Mr.
Volkema elected to use 28 percent of his grants to pay his federal
taxes on these grants which resulted in his receipt (net of taxes) of
86,400 and 57,600 shares, respectively. The shares are subject to
forfeiture provisions which lapse as the number of shares become
vested each year over a five- or six-year period. The minimum annual
rate of vesting is 10% of the total shares granted during the first
five years following the date of grant, with the balance vesting at
the end of the sixth year (fiscal 2001 and 2002, respectively). The
rate of vesting may be accelerated if certain corporate performance
goals are achieved, which would permit full vesting not earlier than
fiscal 2000 and 2001, respectively. Dividends are payable on the
restricted shares at the same rate as dividends on the Company's
Common Stock. At May 30, 1998, the value of the _____ restricted
shares held by Mr. Volkema based on the closing price of the Company's
Common Stock on that date ($27.6875 per share) equaled $ _____.
-18-
(7) The amount represents the value of 6,000 shares of the Company's
Common Stock (based on the closing price on the date of grant of
$18.0625) granted to Mr. McGregor, Mr. Norman and Mr. Walker under the
terms of their respective Share Grant Agreements. Each elected to use
45% of the grant to pay federal and state taxes, which resulted in a
net receipt of 3,300 shares to each participant. The shares are
subject to the same provisions described in footnote (5) above. Full
vesting would occur not earlier than fiscal 2002 and no later than
fiscal 2003. At May 30, 1998, the value of each participant's 3,300
restricted shares based on the closing price of the Company's Common
Stock on that date ($27.6875 per share) equaled $ _____.
(8) Mr. Frey's employment with the Company began in November 1997.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on options granted to the Named
Executives during the year ended May 30, 1998.
Percentage of
Total Options
Number of Granted to Exercise or Grant Date
Securities Employees in Base Price Expiration Present
Name Underlying Fiscal Year (per share)(3) Date Value(3)
Options/
Granted
Michael A. Volkema 80,000(1) 5.21% $19.88 7/08/07 $464,472
38,336(2) 2.50% $25.81 5/17/05 $289,874
45,964(2) 2.99% $25.81 5/15/06 $347,552
Andrew C. McGregor 40,000(1) 2.61% $19.88 7/08/07 $232,236
22,222(2) 1.45% $32.50 5/17/05 $207,353
22,136(2) 1.44% $25.81 5/15/06 $167,379
Brian C. Walker 40,000(1) 2.61% $19.88 7/08/07 $232,236
26,010(2) 1.69% $25.81 7/10/05 $196,672
17,822(2) 1.16% $25.81 5/15/06 $134,759
Christopher A. Norman 40,000(1) 2.61% $19.88 7/08/07 $232,236
15,720(2) 1.02% $25.81 5/17/05 $118,865
26,010(2) 1.69% $25.81 5/15/06 $196,672
Robert I. Frey 40,000(1) 2.61% $19.88 7/08/07 $232,236
(1) Indicates number of shares that may be purchased pursuant to options
granted under the Company's 1994 Long- Term Incentive Plan. The
Company granted options on July 8, 1997, October 1, 1997, January 20,
1998, and March 17, 1998, totaling 1,089,000, 13,000, 46,226, and
7,950 shares, respectively, to eligible employees to the Company and
its subsidiaries. In general, options may not be exercised in full or
in part prior to the expiration of one year from the date of grant.
(2) Reflects options granted automatically as part of the Company's reload
program which grants reload options when an employee exercises options
by trading in already owned shares. The employees received new options
equal to the shares that were traded in. The reload options retain the
expiration date of the original option but the exercise price equals
the fair market value of the Company's Common stock on the date of
grant of the reload option.
(3) The exercise price equals the prevailing market price of the Company's
common stock on the date of grant. The exercise price may be paid in
cash or by delivery of previously owned shares, or a combination of
cash and previously owned shares.
(4) For the options expiring on May 17, 2005, July 10, 2005, May 15, 2006,
and July 8, 2007, the values reflect standard application of the
Black-Scholes option pricing model based on (a) expected stock price
volatility of .3404, (b) risk free rate of return of 6.1%, 6.1%, 6.1%,
and 6.03%, respectively, (c) a cash dividend yield of
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.5%, and (d) an expected time of three years to exercise. The actual
value, if any, of the options granted is dependant upon the market
values of the Company's common stock subsequent to the date the
options become exercisable.
AGGREGATED STOCK OPTION EXERCISES IN FISCAL 1998 AND YEAR END OPTION VALUES
The following table provides information on the exercise of stock options
during fiscal 1998 by the Named Executives and the number and value of
unexercised options at May 30, 1998.
Number of Securities Value of Unexercised
Underlying Unexercised In the Money Options
Options at May 30, 1998 at May 30, 1998(2)
Shares
Acquired
on Value
Name Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
Michael A. Volkema 160,000 $ 3,070,000 80,000 84,300 $ 625,000 $158,063
Andrew C. McGregor 136,612 2,968,177 75,388 22,136 1,089,264 41,505
Brian C. Walker 88,000 1,640,000 40,000 43,832 312,500 82,185
Christopher A. Norman 133,400 2,437,123 40,000 41,730 312,500 78,244
Robert I. Frey -0- -0- 68,000 -0- 779,750 -0-
(1) Represents the aggregate market value of shares acquired at time of
exercise, less the aggregate exercise price paid by the employee.
(2) Values are based on the difference between the closing price of the
Company's Common Stock on May 30, 1998 ($27.6875) and the exercise
prices of the options.
LONG-TERM INCENTIVE PLANS-AWARDS IN LAST FISCAL YEAR
Name Number of Performance
Shares, units or other
or other period until
rights (#) (1) maturation
or payout(2)
Michael A. Volkema 3 years
Andrew C. McGregor 3 years
Brian C. Walker 3 years
Christopher A. Norman 3 years
Robert I. Frey 3 years
(1) Represents the number of units credited to an employee's account under
the terms of the Company's Key Executive Deferred Compensation Plan
(the "Plan"). Under the terms of the Plan, participants may elect to
defer all or a portion of their EVA cash incentive. Deferred amounts
are credited in stock units, based on the value of the Company's stock
as of the end of the month in which the bonus would have been paid to
the
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employee. Stock units are payable only in shares of the Company's
Common Stock. Includes the following number of units credited to each
of the Named Executives premium account, as described in footnote (2):
Michael A. Volkema - _________; Andrew C. McGregor - ___________;
Christopher A. Norman - ___________; Brian C. Walker - _________; and
Robert I. Frey - ____________.
(2) Each year the Company's Executive Compensation Committee establishes
the maximum percentage of EVA cash bonus that may be deferred, the
maximum amount of EVA cash incentive which may be subject to a premium
percentage, and the amount of the premium percentage. For fiscal 1998,
the maximum percentage of EVA bonus that is subject to a premium
percentage was 50%, and the premium percentage was established at 30%.
Stock units credited to a participant's account due to the premium
percentage are credited to a separate premium account, which vests at
the rate of 33-1/3%, beginning on the first anniversary of the
deferral, and each anniversary thereafter, provided that the
participant is an employee of the Company. The plan allows for
accelerated vesting in the event of a participant's death, disability,
retirement or termination due to a change in control, as defined in
the Company's Plan for Severance Compensation After Hostile Takeover,
as amended and restated.
PENSION PLAN TABLE
The following table sets forth the estimated annual benefits payable upon
normal retirement at age 65, on May 30, 1998, to persons in specified
compensation and years of service classifications under the Company's Retirement
Income Plan. Projected benefits are computed on a straight line annuity basis,
and such benefits are in addition to any amounts which may be received under the
Social Security Act. Under current tax rates, annual benefits payable at
retirement may not exceed $130,000.
Years of Benefit Service(2)
Average Annual
Compensation(1) 20 25 30 35 40
--------- -------- -------- -------- -----
$150,000................ 52,277 65,346 78,415 91,484 104,553
$180,000................ 63,377 79,221 95,065 110,909 126,753
$210,000................ 74,477 93,096 111,715 130,334 148,953
$240,000................ 85,577 106,971 128,365 149,759 171,153
$270,000................ 96,677 120,846 145,015 169,184 193,353
$300,000................ 107,777 134,721 161,665 188,609 215,553
(1) Average annual compensation is determined under the Retirement Income
Plan by the average of the five highest consecutive years of annual
compensation (the amounts included under the columns "Salary" and
"Bonus" in the Summary Compensation Table) during the last ten years
of employment, subject to a maximum of $160,000 for fiscal 1998.
(2) The Named Executives have credited years of service and "average
annual compensation" under the Retirement Income Plan as follows:
Michael A. Volkema, 3 years - $ ______, Andrew C. McGregor, 23 years -
$ _____, Brian C. Walker, 9 years - $ ______, Christopher A. Norman,
19 years - $ _______, Robert I. Frey 1 year - $ _______.
OTHER ARRANGEMENTS
The Company maintains a Salary Continuation Plan, which provides that an
officer's base salary (as shown in the "Salary" column of the Summary
Compensation Table) will be continued for twelve months after termination of the
officer's employment. Under this plan, benefits terminate if the officer
performs services for a competitor of the Company, and benefits are offset for
any noncompetitor payments for services. No benefits are payable under the plan
if an officer dies, retires, voluntarily terminates employment, or is terminated
for malfeasance.
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SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock with that
of the cumulative total return of the Standard & Poor's 500 Stock Index and the
NASD Non-Financial Index for the five year period ended May 30, 1998. The
following information is based on an annual investment of $100, on May 28, 1993,
in the Company's Common Stock, the Standard & Poor's 500 Stock Index and the
NASD Non-Financial Index, with dividends reinvested.
Total Shareholder Return Herman Miller, Inc.
1993 1994 1995 1996 1997 1998
NASD Non-Financial 100 103 123 180 195 244
S&P 500 Index 100 104 125 161 208 272
Herman Miller, Inc. 100 99 89 128 299 465
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16 of the Securities Exchange Act of 1934, the
Company's directors and officers, as well as any person holding more than 10
percent of its Common Stock, are required to report initial statements of
ownership of the Company's securities and changes in such ownership to the
Securities and Exchange Commission. Based upon written representations by each
director and officer, all the reports were filed by such persons during the last
fiscal year, except for one late report, each, filed by Gary VanSpronson, Gene
Miyamoto, and James DeBoer, each covering one transaction.
SHAREHOLDER PROPOSALS--1999 ANNUAL MEETING
Any shareholder proposal intended to be presented at the next annual
meeting of the Company must be received by the Company at 855 East Main Avenue,
PO Box 302, Zeeland, MI 49464-0302 not later than April ___, 1999, if the
shareholder wishes the proposal to be included in the Company's proxy materials
relating to the meeting.
In addition, the Company's Bylaws contain certain notice and procedural
requirements applicable to director nominations and shareholder proposals,
irrespective of whether the proposal is to be included in the Company's proxy
materials. A copy of the Company's Bylaws has been filed with the Securities and
Exchange Commission and can be obtained from the Public Reference Section of the
Commission or the Company.
MISCELLANEOUS
If any matters, other than the matters set forth herein, properly come
before the meeting, it is the intention of the persons named in the enclosed
proxy to vote the shares thereby represented in accordance with their judgment.
The cost of the solicitation of proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited personally or by
telephone or telegraph by a few regular employees of the Company without
additional compensation. The Company may reimburse brokers and other persons
holding stock in their names or in the names of nominees for their expenses in
sending proxy materials to the principals and obtaining their proxies.
The annual report of the Company for the fiscal year ended May 30, 1998,
including financial statements, is being mailed to shareholders with this proxy
statement.
Shareholders are urged to date and sign the enclosed proxy and return it
promptly to the Company in the enclosed envelope.
Questions related to your holdings can be directed as follows:
First Chicago Trust Company of New York
PO Box 2500
Jersey City, NJ 07303-2500
Phone: 1 800 446 2617
By Order of the Board of Directors
James N. De Boer, Jr., Secretary of the Board
August ____, 1998.
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Herman Miller, Inc.
By signing this card, the shareholders appoints Richard H. Ruch, Michael A.
Volkema, and David L. Nelson and each of them, as attorneys, with the power of
substitution, to vote the shares of Common Stock of Herman Miller, Inc. ("the
company") held of record by the undersigned on August 3, 1998, at the Annual
Meeting of Shareholders to be held at the Zeeland High School Performing Arts
Center, 3333 - 96th Avenue, Zeeland, Michigan on Tuesday, September 29, 1998, at
4:00 p.m. (E.D.T.) and at the adjournment thereof.
Election of four directors, each for a term of three years. Nominees: C. William
Pollard, Dorothy A. Terrell, Dr. E. David Crockett, and Michael A. Volkema.
Election of one director, for a term of two years. Nominee: David L. Nelson.
The Proxies will vote your shares in accordance with your direction on this
card. If you do not indicate your choice on this card, the Proxies will vote
your shares "FOR" the nominees and "FOR" the proposals.
All shares votable hereby and the undersigned includes shares, if any, held for
my account in the Company's Employee Stock Ownership Plan and Employee Stock
Purchase Plan.
Please mark
your vote as
in this example
This proxy is solicited on behalf of the Board of Directors
1. Election of Directors as For For For
listed on reverse side 2. Proposal to increase the 3. Proposal to amend the
For except vote withheld Withheld authorized Common Stock Against Company's Long-Term Against
from the following to 240,000,000 shares Incentive Plan
nominees: Abstain Abstain
4. Proposal to adopt the For 5. Proposal to ratify the For 6. At their discretion, the Proxies are
Company's Incentive appointment of Arthur authorized to vote upon such other business
Cash Bonus Plan Against Anderson LLP as Against as may properly come before the meeting
Independent auditors for or adjournment thereof
Abstain the year ending May 29, Abstain
1999
Signature___________________________________________
Title if required__________________ Date_____/_____/_____
Signature___________________________________________
Title if required__________________ Date_____/_____/_____
Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title
as such.
o FOLD AND DETACH HERE o
Please mark the boxes on the above proxy to indicate how you wish your shares to
be voted.
SIGN AND DATE THE PROXY, DETACH IT, AND RETURN IT IN THE ENCLOSED POSTAGE PAID
ENVELOPE.
We must receive your vote before the Annual Meeting of Shareholders on September
29, 1998.
