UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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Leggett & Platt, Incorporated
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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March 25, 201030, 2011
Dear Shareholder:
I am pleased to invite you to attend the annual meeting of shareholders of Leggett & Platt, Incorporated to be held on Thursday, May 13, 2010,12, 2011, at 10:00 a.m. Central Time, at the Company’s Wright Conference Center. Directions are included on the back cover of this Proxy Statement.
The Proxy Statement contains threefour proposals from our Board of Directors: (i)(i) the election of twelve directors, (ii)(ii) the ratification of the Audit Committee’s selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2010,2011, (iii) an advisory vote on executive compensation, and (iii)(iv) a vote concerning the approvalfrequency of the amendment and restatement of the Company’s Flexible Stock Plan.future advisory votes on executive compensation. The Board encourages you to voteFOR each of these proposals.proposals 1, 2 and 3, andFOR a 3-year frequency on proposal 4.
The Proxy Statement also contains a shareholder proposal seeking to add sexual orientation and gender identity to the Company’s written non-discrimination policy. For reasons explained in the Proxy Statement, the Board encourages you to voteAGAINST this proposal.
Your vote is important. Whether or not you plan to attend the meeting, please vote as soon as possible. You may vote your shares by Internet atwww.eproxy.com/www.eproxy/legor by returning the enclosed proxy or voting instruction card. Specific instructions for these voting alternatives are contained on the proxy or voting instruction card.
I appreciate your continued interest in Leggett & Platt.
Sincerely,
LEGGETT & PLATT, INCORPORATED Richard T. Fisher Board Chair |
Leggett & Platt, Incorporated
No. 1 Leggett Road
Carthage, Missouri 64836
NOTICE OF 20102011 ANNUAL MEETING OF SHAREHOLDERS
The annual meeting of shareholders of Leggett & Platt, Incorporated (the “Company”) will be held at the Company’s Wright Conference Center, No. 1 Leggett Road, Carthage, Missouri 64836, on Thursday, May 13, 2010,12, 2011, at 10:00 a.m. Central Time:
1. | To elect twelve directors; |
2. | To ratify the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the year ending December 31, |
3. | To |
4. | To provide an advisory vote concerning the frequency of future votes on executive compensation; |
5. | If presented at the meeting, to vote on a shareholder proposal requesting the addition of sexual orientation and gender identity to the Company’s written non-discrimination policy; and |
To transact such other business as may properly come before the meeting or any postponement or adjournment thereof. |
You are entitled to vote only if you were a Leggett & Platt shareholder at the close of business on March 5, 2010.7, 2011.
An Annual Report to Shareholders outlining the Company’s operations during 20092010 accompanies this Notice of Annual Meeting and Proxy Statement.
By Order of the Board of Directors,
John G. Moore |
Secretary |
Carthage, Missouri
March 25, 2010
30, 2011
Important Notice Regarding the Availability of Proxy Materials
for the Shareholder Meeting to Be Held on May 13, 201012, 2011
The enclosed proxy materials and access to the proxy voting site are also available to you on the Internet.
You are encouraged to review all of the information contained in the proxy materials before voting.
The Company’s Proxy Statement and Annual Report to Shareholders are available at:
www.leggett.com/proxy/2010/2011/default.asp
The Company’s proxy voting site can be found at:
www.eproxy.com/leg
Leggett & Platt, Incorporated
ANNUAL MEETING—MAY 13, 2010
PROXY STATEMENT
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Why did I receive these materials?
The Board of Directors (the“BoardBoard””) of Leggett & Platt, Incorporated (the“Company” orCompany“Leggett”” or “Leggett”) is providing these materials to you in connection with its solicitation of proxies for the Company’s annual meeting of shareholders on May 13, 2010.12, 2011. We first sent these materials to shareholders on March 25, 2010.30, 2011. As a Leggett shareholder, you are entitled and encouraged to vote on the proposals presented in these proxy materials. We invite you to attend the annual meeting, but you do not have to attend to be able to vote.
Where can I obtain financial information about Leggett?
Our Annual Report to Shareholders, including our Form 10-K with financial statements for 2009,2010, is enclosed in the same mailing with this proxy statement. The Company’s Proxy Statement and Annual Report to Shareholders (including Form 10-K) are also available atwww.leggett.com/proxy/2010/2011/default.asp. Information on our website does not constitute part of this proxy statement.
What business will be voted on at the annual meeting?
Shareholders will vote on the following proposals at the annual meeting:
Election of twelve directorsdirectors.
• | Ratification of PricewaterhouseCoopers LLP (“PwC” ) as our independent registered public accounting firm for 2011 |
RatificationAdvisory vote on executive compensation.
Advisory vote concerning the frequency of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2010future votes on executive compensation.
Approval of the amendment and restatement of the Company’s Flexible Stock Plan
A shareholder proposal requesting the addition of sexual orientation and gender identity to the Company’s written non-discrimination policy, if presented at the meetingmeeting.
Any other business that is properly brought before the meetingmeeting.
How does the Board recommend that I vote?
The Board recommends that you vote:
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voteFOR each of the director nominees,FORthe ratification of PwC,FORthe executive compensation package, as presented,FORa three-year frequency for the advisory vote on executive compensation, andAGAINST the shareholder proposal. If you return a signed proxy card without marking one or more proposals, your proxy will be voted in accordance with the Board’s recommendation.recommendations.
What shares can I vote?
The only class of outstanding voting securities is the Company’s $.01 par value common stock. Each share of common stock issued and outstanding at the close of business on March 5, 20107, 2011 (the“Record DateDate””) is entitled to one vote on each matter submitted to a vote at the annual meeting. On the Record Date, we had 148,265,741145,839,047 shares of common stock issued and outstanding.
You may vote all shares of Leggett common stock you owned on the Record Date. This includes (i)(i) shares held directly in your name as theshareholder of record (ii), (ii) shares held for you as thebeneficial owner through a broker, trustee or other nominee, sometimes referred to as shares held in “street name,” and (iii)(iii) shares held for you in Companybenefit plans.plans.
Shareholder of RecordRecord—
If your shares are registered directly in your name with our transfer agent, Wells Fargo, you are the shareholder of record, and these proxy materials were sent to you directly. As the shareholder of record, you have the right to grant your proxy vote directly or to vote in person at the annual meeting. We have enclosed a proxy card for you to use.
Beneficial OwnerOwner—
If you hold shares in a brokerage account or through some other nominee, you are the beneficial owner of the shares held in street name, and these proxy materials were forwarded to you from the broker, trustee or nominee, together with a voting instruction card. As the beneficial owner, you have the right to direct your broker, trustee, or nominee how to vote your shares by proxy. Although you are invited to attend the annual meeting, you may not vote these shares in person unless you obtain a legal proxy from the broker, trustee, or nominee.
Benefit PlansPlans—
If you hold Leggett stock in the Company’s Stock Bonus Plan or 401(k) Plan, you will receive a voting instruction form in a separate mailing. You will need to complete and return the voting instruction form to vote these shares (voting in person at the Annual Meeting or by Internet is not available). The Company must receive your completed voting instruction form by April 30, 2010;May 4, 2011; otherwise, the plan trustees will vote the shares credited to your account according to the recommendations of their respective investment committees.
How do I submit my vote?
You may vote your shares (i)(i) by Internet atwww.eproxy.com/leg, (ii)(ii) by signing and returning the proxy or voting instruction card, or (iii)(iii) in person at the meeting (except shares held in the Company’s Stock Bonus Plan or 401(k) Plan must be voted by returning a voting instruction form as described above). If you vote by Internet, you do not need to return your proxy or voting instruction card, but you will need to have it in hand when you access the voting website. Specific voting instructions are found on the proxy card or voting instruction card included with this proxy statement.
Can I change my vote?
Shareholder of Record—If you are a shareholder of record, you may change your vote or revoke your proxy any time before the annual meeting by (i)(i) submitting a valid, later-dated proxy, (ii)(ii) submitting a valid, subsequent vote by the Internet, (iii)(iii) notifying the Company’s Secretary that you have revoked your proxy, or (iv)(iv) completing a written ballot at the annual meeting.
Beneficial Owner—If you hold shares as the beneficial owner, you may change your vote (i)(i) by submitting new voting instructions to your broker, trustee, or nominee or (ii)(ii) by voting in person at the annual meeting if you have obtained a legal proxy from your broker, trustee, or nominee.
Benefit Plans—If you hold shares in Company benefit plans, you can revoke your vote instructions by delivering a valid, later-dated voting instruction form prior to the deadline specified in the voting instructions.
How many votes are needed to conduct business at the annual meeting?
A majority of the outstanding shares of common stock entitled to vote must be present at the annual meeting, or represented by proxy, in order to meet the quorum requirement to transact business. Both abstentions and broker non-votes (described below) are counted in determining a quorum. If a quorum is not present, the annual meeting will be adjourned for no more than 90 days to reach a quorum.
What vote is required to elect a director?
A director nominee must receive the affirmative vote of a majority of those shares present (either in person or by proxy) and entitled to vote.
As required by our Corporate Governance Guidelines, each nominee has submitted a contingent resignation to the Nominating & Corporate Governance Committee (the“N&CG Committee” ) in order to be nominated for election as a director. If a nominee fails to receive a majority of the votes cast in the director election, the N&CG Committee will make a recommendation to the Board of Directors whether to accept or reject the director’s resignation and whether any other action should be taken. If a director’s resignation is not accepted, that director will continue to serve until the
Company’s next annual meeting and his or her successor is duly elected and qualified. If the Board accepts the director’s resignation, it may, in its sole discretion, either fill the resulting vacancy or decrease the size of the Board to eliminate the vacancy.
What vote is required to approve the other proposals?
The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote is required for ratification of the appointment of PricewaterhouseCoopers LLP (“PwC”) as Leggett’s independent registered public accounting firm, and for the shareholder proposal. For the approval of the amendment and restatement of the Company’s Flexible Stock Plan, NYSE rules require an additional level of shareholder approval—a majority ofSince the votes cast must be in favor of the proposalon executive compensation and the total number of votes cast must be more than 50% of all shares entitled to vote on the proposal.frequency of future votes on executive compensation are each advisory votes, the Board will give due consideration to the outcomes; however, those proposals are not approved as such.
What is the effect of an “abstention” vote on the election of directors and other proposals?
A share voted “abstain” with respect to any proposal is considered as present and entitled to vote with respect to that proposal. Because each ofFor the non-advisory proposals requiresrequiring a majority vote in order to pass, an abstention will have the effect of a vote against the proposal.
What is the effect of a “broker non-vote”?non-vote?”
If you holdare the beneficial owner of shares in street nameheld through a broker or other nominee and do not vote your shares or provide voting instructions, your broker may vote for you on “routine” proposals but not on “non-routine” proposals. The ratification of PwC as the Company’s auditor is consideredthe only routine butproposal, and the election of directors, the approvaladvisory vote on executive compensation, the vote on the frequency of the amendment and restatement of the Company’s Flexible Stock Plan,future advisory votes on executive compensation and the shareholder proposal are non-routine. Therefore, if you do not vote on the non-routine proposals or provide voting instructions, your broker will not be allowed to vote your shares—this will result in abroker non-vote. Broker non-votes are not counted as shares present and entitled to vote, so they will not affect the outcome of the vote, except in the case of the approval of the amendment and restatement of the Company’s Flexible Stock Plan to the extent the total votes cast do not represent more than 50% of the shares entitled to vote.
Who pays the cost of soliciting votes at the annual meeting?
Leggett is making this solicitation and will pay the full cost of preparing, printing, assembling, and mailing these proxy materials. Upon request, we will also reimburse brokers and other nominees for forwarding proxy and solicitation materials to shareholders. If you choose to access proxy materials or vote by Internet, you are responsible for any Internet access charges you may incur.
We have hired Georgeson Inc. to assist in the solicitation of proxies by mail, telephone, in person, or otherwise. Georgeson’s fees are expected to be $10,000$10,500 plus expenses. If necessary to assure sufficient representation at the meeting, Company employees, at no additional compensation, may request the return of proxies.
Where can I find the voting results of the annual meeting?
We will announce preliminary voting results at the annual meeting and plan to issue a press release immediately after the meeting. Within four business days after the annual meeting, we will file a Form 8-K reporting the vote count.
What should I do if I receive more than one set of proxy materials?
You may receive multiple sets of proxy materials if you hold shares in more than one brokerage account or if you are a shareholder of record and have shares registered in more than one name. Please vote the shares on each proxy card or voting instruction card you receive.
We have adopted “householding” which allows us, unless a shareholder withholds consent, to send one proxy statement and annual report to multiple shareholders sharing the same address. Each shareholder at a given address will receive a separate proxy card. If you currently receive multiple sets of proxy materials and wish to have your accounts householded, or if you no longer want to participate in householding and wish to revoke your consent, call Wells Fargo Shareowner Services at 877-602-7615 or send written instructions to Wells Fargo Shareowner Services, Attn: Leggett & Platt, Incorporated, P.O. Box 64854, St. Paul, MN 55164-0854. You will need to provide Leggett’s company number (203) and your 10-digit Wells Fargo account number which is printed at the bottom of your proxy card.
Many brokerage firms practice householding as well. If you have a householding request for your brokerage account, please contact your broker.
How may I obtain another set of proxy materials?
If you received only one set of proxy materials for multiple shareholders of record and would like us to send you another set this year, please call 800-888-4569 or write to Leggett & Platt, Incorporated, Attn: Investor Relations, No. 1 Leggett Road, Carthage, MO 64836. You can also access a complete set of proxy materials—the Notice of Meeting, Proxy Statement, and Annual Report to Shareholders including Form 10-K—online atwww.leggett.com/proxy/2010/2011/default.asp. To ensure that you receive multiple copies in the future, please contact your broker or Wells Fargo at the number or address in the preceding answer to withhold your consent for householding.
What is the deadline to propose actions for next year’s annual meeting or to nominate a director?
Shareholders may propose actions for consideration at future annual meetings either by presenting them for inclusion in the Company’s proxy statement or by soliciting votes independent of our proxy statement. To be properly brought before the meeting, all shareholder actions must comply with our bylaws, as well as SEC requirements under Regulation 14A. Leggett’s bylaws are posted on our website atwww.leggett-search.com/governance. Notices specified for the types of shareholder actions set forth below must be addressed to Leggett & Platt, Incorporated, Attn: Corporate Secretary, No. 1 Leggett Road, Carthage, MO 64836.
Shareholder Proposal Included in Proxy StatementStatement—
If you intend to present a proposal at the 20112012 annual meeting, the SEC requires that the Corporate Secretary receive the proposal at the address given above by November 25, 2010December 1, 2011 for possible inclusion in the proxy statement. We will decide whether to include a proposal in the proxy statement in accordance with SEC rules governing the solicitation of proxies.
Shareholder Proposal Not Included in Proxy StatementStatement—
If you intend to present a proposal at the 20112012 annual meeting by soliciting votes independent of the Company’s proxy statement, Section 1.2 of our bylaws requires that the Company receive timely notice of the proposal—no earlier than January 13, 20112012 and no later than February 12, 2011.2012. This notice must include a description of the proposed business, your name and address, the number of shares you hold, any of your material interests in the proposal, and other matters specified in the bylaws. The nature of the business also must be appropriate for shareholder action under applicable law.
The bylaw requirements also apply in determining whether notice is timely under SEC rules relating to the exercise of discretionary voting authority.
Director Nominee Included in Proxy StatementStatement—
If you wish to recommend a director candidate to the Nominating & Corporate GovernanceN&CG Committee for possible inclusion in the proxy statement, please see the requirements described under Consideration of Director Nominees and Diversity on page 9.7.
Director Nominee Not Included in Proxy StatementStatement—
If you intend to nominate a director candidate for election outside of the Company’s nomination process, our bylaws require that the Company receive timely notice of the nomination—no earlier than January 13, 20112012 and no later than February 12, 2011.2012. This notice must include the information specified in Section 2.2 of the bylaws, including your name and address, the number of shares you hold, and the name, address and occupation of each proposed nominee.
Leggett has a long-standing commitment to sound corporate governance principles and practices. The Board has adopted Corporate Governance Guidelines that establish the roles and responsibilities of the Board and Company management. The Board has also adopted a Code of Business Conduct and Ethics applicable to all Company employees, officers and directors, as well as a separate Financial Code of Ethics applicable to the Company’s CEO, CFO, principal accounting officer and corporate controller. These documents are posted on our website atwww.leggett-search.com/governance.
The Board reviews director independence annually and upon learning of any change in circumstances during the year that may affect a director’s independence. The Company has adopted Categorical Standards for Director Independence (the“Categorical StandardsStandards””) that satisfy the NYSE listing standards. The Categorical Standards are posted on our website atwww.leggett-search.com/governance. A director who meets all the Categorical Standards will be presumed to be independent.
While the Categorical Standards help the Board to determine director independence, they are not the exclusive measure for doing so. The Board also reviews the relevant facts and circumstances of any relationships between the Company and its directors during the independence assessment. When confirming directorthe independence of Robert Brunner, Ray Griffith and Joseph McClanathan’s independence,McClanathan, the Board consideredreviewed Company purchases from and sales to Mr. McClanathan’s employertheir respective employers and found the transactions were on arms-length terms and the amounts were well below the threshold provided in the Categorical Standards.
Based on its review, the Board has determined that all of its current non-management directors andare independent (the director nominee Ray Griffith are independent. (See the table below for a complete listbiographies accompanying Proposal 1 “Election of Directors” identify our independent directors.)and management directors). The Board found no business or other relationship involving an independent director and the Company that violated the Categorical Standards or undermined independence.
All Audit Committee members meet the higher independence standard for audit committee service under NYSE and SEC rules and are financially literate, as defined by NYSE rules. Five members—Robert Brunner, Richard Fisher, Joseph McClanathan, Judy Odom, and Phoebe Wood—meet the SEC’s definition of an “audit committee financial expert.” None of the members serves on the audit committee of more than three public companies.
Independent Board Chair and Board Leadership Structure
Richard Fisher, a non-management director of the Company, was elected by the Board of Directors in 2008 to serve as the independent Board Chair. The Company has split the positions of Board Chair and Chief Executive Officer since 2006, when David Haffner was appointed Leggett’s CEO. During Mr. Haffner’s tenure as CEO, the Board has chosen as its Board Chair directors with a long view of Leggett’s evolution—Mr. Fisher has been a director since 1972 and his predecessor, Felix E. Wright, had been on the Board since 1977. The Board evaluates annually the responsibilities of the independent Board Chair and whether the separation of the chairmanship and CEO continues to best serve the Board and our shareholders. The Board does not have a fixed policy with respect to the separation of the Board Chair and the CEO and maintains the flexibility to make this determination on a case-by-case basis in a manner it deems in the Company’s best interests.
In accordance with our Corporate Governance Guidelines, non-management directors regularly hold executive sessions without management present. At least one executive session per year is attended by only independent, non-management directors.directors (typically, these executive sessions take place at each regularly scheduled quarterly Board meeting). Mr. Fisher presides over these meetings of the non-management directors.
Shareholders and all other interested parties may e-mail Mr. Fisher atboardchair@leggett.com. They can also write to Leggett & Platt Board Chair, P.O. Box 637, Carthage, MO 64836. The Corporate Secretary’s office reviews this correspondence and periodically sends Mr. Fisher all communications except items unrelated to Board functions (for example, advertisements and junk mail). In his discretion, Mr. Fisher may forward communications to the full Board or to any of the other independent directors for further consideration.
Board and Committee Composition and Meetings
The Board held four meetings in 2009,2010, and its committees met the number of times listed in the table below. All directors attended at least 75% of the Board meetings and their respective committee meetings. Directors are expected to attend the Company’s annual meeting of shareholders, and all of them attended the 20092010 annual meeting.
The Board has a standing Audit Committee, Compensation Committee, Nominating & Corporate Governance Committee, and Executive Committee. Except for the Executive Committee (comprised of Richard Fisher—Chair, David Haffner and Maurice Purnell), each committee consists entirely of independent directors and operates under a written charter adopted by the Board. The Audit, Compensation and Nominating & Corporate Governance Committee charters are posted on our website atwww.leggett-search.com/governance.
Audit | Compensation | Nominating & Corporate Governance | ||||
Independent Non-Management Directors: | ||||||
Robert E. Brunner | Member | — | — | |||
Ralph W. Clark | Member | — | — | |||
R. Ted Enloe, III | — | Chair | — | |||
Richard T. Fisher | Member | Member | Member | |||
Joseph W. McClanathan | Member | Member | Member | |||
Judy C. Odom | Chair | Member | Member | |||
Maurice E. Purnell, Jr. | — | — | Chair | |||
Phoebe A. Wood | Member | Member | — | |||
Management Directors: | ||||||
Karl G. Glassman | — | — | — | |||
David S. Haffner | — | — | — | |||
Number of Meetings in 2009 | 4 | 7 | 4 |
Audit Committee Judy C. Odom (Chair) Robert E. Brunner Richard T. Fisher Ray A. Griffith Joseph W. McClanathan Phoebe A. Wood Meetings in 2010: 6 | The Audit Committee assists the Board in the oversight of: • Independent registered public accounting firm’s qualifications, independence, appointment, compensation, retention, and performance. • Internal controls over financial reporting. • Guidelines and policies to govern risk assessment and management. • Performance of the Company’s internal audit function. • Integrity of the financial statements and external financial reporting. • Legal and regulatory compliance. • Complaints and investigations of any questionable accounting, internal control, or auditing matters. | |
Compensation Committee R. Ted Enloe, III (Chair) Robert E. Brunner Richard T. Fisher Joseph W. McClanathan Judy C. Odom Phoebe A. Wood Meetings in 2010: 6 | The Compensation Committee assists the Board in the oversight and administration of: • Corporate goals and objectives regarding CEO compensation and evaluation of the CEO’s performance in light of those goals and objectives. • Non-CEO executive officer compensation. • Cash and equity compensation for directors. • Incentive compensation and equity-based plans that are subject to Board approval. • Grants of awards under bonus, option or other incentive plans required to comply with applicable tax laws. • Employment agreements and severance benefit agreements with the CEO and executive officers, as applicable. • Related person transactions of a compensatory nature. | |
Nominating & Corporate Governance Committee Maurice E. Purnell, Jr. (Chair) Ralph W. Clark Richard T. Fisher Joseph W. McClanathan Judy C. Odom Meetings in 2010: 3 | The N&CG Committee assists the Board in the oversight of: • Corporate governance principles, policies and procedures. • Identifying qualified candidates for Board membership and recommending director nominees. • Director independence and related person transactions. |
All Audit Committee members meet the higher independence standard for audit committee service under NYSE and SEC rules and are financially literate, as defined by NYSE rules. Five members—Robert Brunner, Richard Fisher, Joseph McClanathan, Judy Odom, and Phoebe Wood—possess the training, skills, and experience to meet the SEC’s definition of an audit committee “financial expert.” None of the members serves on the audit committee of more than three public companies.
The Audit Committee assists the Board in the oversight of (i) the independent registered public accounting firm’s qualifications, independence, appointment, compensation, retention, and performance, (ii) the Company’s internal controls over financial reporting, (iii) the guidelines and policies to govern risk assessment and management, (iv) the performance of the Company’s internal audit function, (v) the integrity of the Company’s financial statements and its external financial reporting, and (vi) the Company’s legal and regulatory compliance.
We have posted on our website and corporate intranet a procedure for employees and others to confidentially inform the Audit Committee of any questionable accounting, internal control, or auditing matters. The Vice President of Internal Audit reports directly to the Audit Committee and is responsible for receiving, processing, and maintaining records of the reports. The Chair of the Audit Committee reviews all complaints and accompanying investigations and may request the full Committee’s review of a complaint to determine appropriate actions.
Board’s Oversight of Risk Management
The Audit Committee is responsible for oversight of our guidelines and policies to assess and manage risk. The Company’s CEO and other senior management are responsible for assessing and managing various risk exposures on a day-to-day basis. In 2003, we established the Enterprise Risk Management Committee (“(the“ERM CommitteeCommittee””) which is currently comprised of twelve12 executives and chaired by our CFO. The ERM Committee adopted guidelines by which the Company identifies, assesses, monitors and reports financial and non-financial risks material to the Company. The ERM Committee meets regularly throughout the year and provides an annual report to senior management and the Audit Committee of(i) the likelihood and significance of risks,(ii) the policies and guidelines regarding risk assessment and management,(iii) management’s steps to monitor and control risks, and(iv) an evaluation of the process. The Audit Committee reviews and discusses the report with management and the independent auditor.
An overall review of risk is inherent in the Board’s consideration of the Company’s strategies and other matters. In furtherance of this review, our CFO updates other senior managers and the entire Board every quarter on notable activities of the ERM Committee.
In addition, the Compensation Committee assesses risks related to the Company’s compensation policies and practices, as discussed in the following section.
The Compensation Committee assists management and the Board in developing and maintaining the Company’s policies relating to (i) CEO,Committee’s oversight of executive officer and director compensation, and (ii) Company equity and incentive compensation plans that are subject to Board approval. The Committee strives for policies that will (i) supportincluding the Company’s business objectives, (ii) attract and retain high quality leadership, and (iii) link compensation with business objectives and performance. The Committee may delegate its duties and responsibilities to one or more Committee members or Company officers, as it deems appropriate, but may not delegate authority to non-members for any action involving executive officers.
The Committee sets the compensation for the Company’s executive officers. The Compensation Discussion & Analysis section on page 31 includes detailsassessment of the Committee’s oversight. The Committee also periodically reviews cash and equity compensation for directors and recommends any director compensation changes to the full Board.
Company managers in the Human Resources and Corporate Affairs departments provide data needed for compensation decisions at the Committee’s request. The Committee may hire outside compensation consultants as needed for the proper discharge of its duties, but it did not use any outside consulting services in connection with executive or director compensation decisions in 2009.
The Committee also assesses the risk of the Company’s compensation policies and practices to all employees to ensure that compensation arrangements do not provide incentives that could present material adverse risk to the Company. Details about compensation risk for executive officers, are discussedis detailed in the Compensation Discussion & Analysis section on page 31.27. The Committee reviewedalso assesses our compensation structure for employees generally and has concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. The following factors contributed to this determination:
Our employees below key management levels have a small percentage of their total pay in variable compensation.
We use a common variable compensation designannual incentive plan across all business units.
We use a combination of short-term and long-term incentive rewards that are tied to different measures of performance.
Our annual incentive plan and our omnibus equity plan contain clawback provisions that enable the Committee to recoup incentive payments.
Our employees below key management levels have a small percentage of their total pay in variable compensation.
We promote an employee ownership culture to better align employees with shareholders, with over 4,000approximately 3,500 employees contributing their own funds to purchase Company stock under various stock purchase plans.
Compensation Committee Interlocks and Insider Participation
No Compensation Committee member had an interlocking relationship as described in Item 407(e)(4) of Regulation S-K.
Nominating & Corporate Governance Committee
The Nominating & Corporate Governance Committee (i) assists the Board in developing and maintaining the Company’s corporate governance principles, policies, and procedures, (ii) identifies qualified candidates for Board membership and recommends director nominees to the Board, (iii) reviews director independence and related person transactions, and (iv) reviews and makes recommendations to the Board regarding the Board’s size, composition, and policies.
Consideration of Director Nominees and Diversity
The Nominating & Corporate Governance Committee (the “Committee”) is responsible for identifying and evaluating qualified candidates for election to the Board of Directors. Following its evaluation, the N&CG Committee recommends to the full Board a slate of director candidates for inclusion in the Company’s proxy statement and proxy card. This procedure is posted on the Company’s website atwww.leggett-search.com/governance.
In the case of incumbent directors, the N&CG Committee reviews each director’s overall service during his or her current term, including the number of meetings attended, level of participation, quality of performance, and any transactions between the director and the Company. The Company’s Bylaws and Corporate Governance Guidelines set the director retirement age at 72; however, the Board Chair, CEO or President may request a waiver for any director. At the request of Leggett’s CEO, the N&CG Committee recommended, and the full Board granted, retirement age waivers for Mr. Enloe and Mr. Fisher so they may stand for re-election at the 2011 annual meeting.
In the case of new director candidates, the N&CG Committee first determines whether the nominee must be independent under NYSE rules, then identifies any special needs of the current Board. The N&CG Committee will consider individuals recommended by Board members, Company
management, shareholders and, if it deems appropriate, a professional search firm. In 2009, the Company retained DHR International to assist with identifying and evaluating potential director candidates, including Mr. Brunner and Mr. Griffith. DHR International also arranged interviews between the candidates and the Board of Directors.
The Board of Directors may also consider candidates to fill a vacancy in the Board outside of the annual shareholder meeting process. The N&CG Committee will use the same criteria as are used to evaluate a director nominee to be elected by shareholders. In the event of a vacancy to be filled by the Board, the N&CG Committee will recommend one or more candidates for election and proxies will not be solicited.
The N&CG Committee seeks to identify and recruit the best available candidates. Qualified candidates will be considered without regard to race, color, religion, sex, ancestry, national origin or disability. The N&CG Committee believes director candidates should have the following minimum qualifications:
Character and integrityintegrity.
A commitment to the long-term growth and profitability of the CompanyCompany.
A willingness and ability to make a sufficient time commitment to the affairs of the Company in order to effectively perform the duties of a director, including regular attendance at Board and committee meetingsmeetings.
Significant business or public experience relevant and beneficial to the Board and the CompanyCompany.
In addition to the minimum qualifications described above, the N&CG Committee may also consider the following factors in evaluating candidates for recommendation to the Board:
Present and anticipated needs of the Board for particular experience or expertise and whether the candidate would satisfy those needsneeds.
Requirement for the Board to have a majority of independent directors and whether the candidate would be considered independentindependent.
Whether the candidate would be considered an audit“audit committee “financialfinancial expert” or “financially literate” as described in NYSE listing standards, SEC rules and the Audit Committee chartercharter.
Accomplishments of each candidate in his or her fieldfield.
Outstanding professional and personal reputationreputation.
Relevant experience, including experience at the strategy/policy setting level, high level managerial experience in a complex organization, industry experience, and familiarity with the products and processes used by the CompanyCompany.
Ability to exercise sound business judgmentjudgment.
Breadth of knowledge about issues affecting the CompanyCompany.
Ability and willingness to contribute special competencies to Board activitiesactivities.
A willingness to assume broad fiduciary responsibilityresponsibility.
Fit with the Company’s cultureculture.
Following the N&CG Committee’s initial review of a candidate’s qualifications, one or more N&CG Committee members will interview the candidate. The N&CG Committee may arrange subsequent interviews with the Board Chair and/or members of the Company’s management. The N&CG Committee does not intend to alter the manner in which it evaluates candidates, including the minimum criteria set forth above, for candidates recommended by a shareholder.
Shareholders who wish to recommend candidates for the N&CG Committee’s consideration must submit a
written recommendation to the Secretary of the Company at No. 1 Leggett Road, Carthage, MO 64836. Recommendations must be sent by certified or registered mail and received by December 15th for the N&CG Committee’s consideration for the following year’s annual meeting of shareholders. Recommendations must include the following:
Shareholder’s name, number of shares owned, length of period held, and proof of ownershipownership.
Candidate’s name, address, phone number and ageage.
• | A resume describing, at a minimum, the candidate’s educational background, occupation, employment history, and material outside commitments (e.g., memberships on other boards and committees, charitable foundations, etc.). |
A supporting statement which describes the candidate’s reasons for seeking election to the Board of Directors and documents his or her ability to satisfy the director qualifications described aboveabove.
The candidate’s consent to a background investigationinvestigation.
The candidate’s written consent to stand for election if nominated by the Board and to serve if elected by the shareholdersshareholders.
Any other information that will assist the N&CG Committee in evaluating the candidate in accordance with this procedureprocedure.
The Corporate Secretary will promptly forward these materials to the N&CG Committee Chair and the Board Chair. The N&CG Committee may contact recommended candidates to request additional information necessary for its evaluation or for disclosure under applicable SEC rules.
Separate procedures apply if a shareholder wishes to nominate a director candidate for election at a meeting of shareholders. Those procedures, contained in our bylaws, are discussed in the Question and Answer section on page 6.4.
Although the N&CG Committee does not have a formal policy concerning its consideration of diversity in identifying director nominees, as the foregoing description of the N&CG Committee’s procedure for identifying and evaluating director candidates shows, the N&CG Committee develops the Board’s diversity by seeking candidates with business and public experience relevant to the Board’s current and anticipated needs as well as Leggett’s businesses. The N&CG Committee seeks to identify and recruit the best available candidates, without regard to race, color, religion, sex, ancestry, national origin or disability.
Transactions with Related Persons
According to the Company’s Corporate Governance Guidelines, the Nominating & Corporate Governance Committee reviews and approves or ratifies transactions with related persons unless the transaction concerns compensation, in which case the duty falls to the Compensation Committee.
A “Related Person” is (i)(i) a person who has served as an executive officer, director or director nominee of the Company at any time since the beginning of the last fiscal year, (ii)(ii) a shareholder beneficially owning in excess of 5% of any class of the Company’s voting securities, (iii)(iii) an immediate family member of any person described in clause (i)(i) or (ii)(ii), or (iv)(iv) an entity in which any of the foregoing persons has, or will have, a direct or indirect material interest.
An “Interested Transaction” is any transaction, arrangement or relationship, or series of similar transactions, (i)(i) involving an amount that exceeds or is expected to exceed $120,000 in the aggregate, (ii)(ii) in which the Company or its subsidiaries was, is, or will be a participant, (iii) and (iii) in which a Related Person had, has, or will have a direct or indirect material interest, and (iv) the transaction, arrangement or relationshipwhich (iv) is not specifically excluded from the disclosure requirements of Item 404(a) of Regulation S-K.
The Company’s executive officers and directors are expected to notify the Company’s Corporate Secretary or Deputy Corporate Secretary of any current or proposed transaction that may be an Interested Transaction. The Corporate Secretary will determine if it is an Interested Transaction and, if so, will include it for consideration at the next meeting of the appropriate Committee.
Approval should be obtained in advance of an Interested Transaction whenever practicable. If it becomes necessary to approve an Interested Transaction between meetings, the Chair of the appropriate Committee is authorized to act on behalf of the Committee. The Chair will provide a report on the matter to the full Committee at its next meeting.
Although the appropriate Committee may review any transaction with a Related Person, the following Interested Transactions are specifically pre-approved, and no further action need be taken:
Any employment by the Company of an executive officer of the Company if (i) the related compensation is required to be reported in the Company’s proxy statement under Item 402 of the SEC’s compensation disclosure requirements (generally applicable to named executive officers), or (ii) the compensation is paid to an executive officer who is not required to be named in the Summary Compensation Table if the Compensation Committee has approved the compensation arrangement.
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Any compensation paid to a director if the compensation is required to be reported in the Company’s proxy statement under Item 402(k) of the SEC’s compensation disclosure requirements and is approved by the Board of Directors.
Transactions in fulfillment of contractual obligations where the contract or arrangement was previously approved by the Board or a committee of the Board.committee.
Any transaction with another company at which a Related Person’s only relationship is as an employee (other than an executive officer), director or beneficial owner of less than 10% of that company’s shares, if the aggregate amount involved over any 12-month period does not exceed the greater of $1,000,000, or 2% of that company’s total annual revenues.
Any charitable contribution, grant, or endowment by the Company to a charitable organization, foundation or university at which a Related Person’s only relationship is as an employee (other than an executive officer) or a director, if the aggregate amount involved does not exceed the greater of $1,000,000, or 2% of the charitable organization’s total annual receipts.
Transactions available to all employees generally and conducted on similar terms.
• | Any transaction where the Related Person’s interest arises solely from the ownership of the Company’s common stock and all holders of the Company’s common stock received the same benefit on a pro rata basis (e.g., dividends). |
Any transaction involving a Related Person where the rates or charges involved are determined by competitive bids.
Any transaction with a Related Person involving the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority.
Any transactions with a Related Person involving services as a bank depository of funds, transfer agent, registrar, trustee under a trust indenture or similar services.
Employee compensatory arrangements, other than executive officers, established in the ordinary course of business.
Any transaction, contract, or arrangement approved by the Board of Directors.
Each of the following transactions werewas approved in accordance with the foregoing procedures.
In 2009 and early 2010, two of our officersMr. Haffner purchased shares of Leggett common stock from the Company’s treasury shares, as set out below. The price per share in each transaction was at fair market value at the closing price on the daytime of sale. The executivesissuance. Mr. Haffner also paid an administrative fee of two cents per share, which reimburses the Company for the average commission paid for its open market share repurchases.
Name | Date | Number of Shares | Market Price per Share | Administrative Fee | Total Purchase Price | Date | Number of Shares | Market Price per Share | Administrative Fee | Total Purchase Price | |||||||||||||||||||||||
Jack D. Crusa | 2/18/09 | 4,000 | $ | 12.45 | $ | 80 | $ | 49,880 | |||||||||||||||||||||||||
David S. Haffner | 2/9/09 | 5,000 | 13.78 | 100 | 69,000 | 1/29/10 | 7,000 | $18.26 | $140 | $127,960 | |||||||||||||||||||||||
2/10/09 | 4,000 | 12.97 | 80 | 51,960 | 10/25/10 | 1,000 | 20.29 | 20 | 20,310 | ||||||||||||||||||||||||
2/12/09 | 6,000 | 12.81 | 120 | 76,980 | 11/2/10 | 5,000 | 19.98 | 100 | 100,000 | ||||||||||||||||||||||||
2/17/09 | 5,000 | 12.57 | 100 | 62,950 | |||||||||||||||||||||||||||||
2/18/09 | 3,000 | 12.45 | 60 | 37,410 | |||||||||||||||||||||||||||||
2/20/09 | 8,000 | 12.26 | 160 | 98,240 | |||||||||||||||||||||||||||||
2/23/09 | 10,000 | 11.75 | 200 | 117,700 | |||||||||||||||||||||||||||||
3/2/09 | 5,000 | 10.78 | 100 | 54,000 | |||||||||||||||||||||||||||||
3/5/09 | 5,000 | 10.60 | 100 | 53,100 | |||||||||||||||||||||||||||||
3/6/09 | 15,000 | 10.31 | 300 | 154,950 | |||||||||||||||||||||||||||||
1/29/10 | 7,000 | 18.26 | 140 | 127,960 |
We buy shares of our common stock from our employees from time to time, and, in 2009,2010, we purchased shares from three of our officers. All employees, including the officers listed below, pay a $25 administrative fee for each transaction. If the Company agrees to purchase stock before noon, the purchase price is the closing stock price on the prior business day; if the agreement is made after noon, the purchase price is the closing stock price on the day of purchase.
Name | Date | Number of Shares | Market Price per Share | Total Purchase Price | ||||||
Jack D. Crusa | 8/20/09 | 3,000 | $ | 18.23 | $ | 54,690 | ||||
Karl G. Glassman (son) | 8/10/09 | 615 | 17.93 | 11,027 | ||||||
Paul R. Hauser (son) | 8/19/09 | 1,120 | 18.23 | 20,418 |
Name | Date | Number of Shares | Market Price per Share | Total Sales Proceeds | ||||||||||||
Dennis S. Park | 3/22/10 | 5,000 | $21.47 | $107,325 | ||||||||||||
Karl G. Glassman | 4/30/10 | 17,751 | 24.77 | 439,667 | ||||||||||||
Matthew C. Flanigan | 7/27/10 | 20,000 | 22.09 | 441,775 |
The Company employs certain relatives of its directors and executive officers; however, none of those related employees had total compensation in excess of the $120,000 Interested Transaction threshold.
Our non-employee directors receive an annual retainer, consisting of a mix of cash and restricted stock as set forth below. Our employee directors (Mr. Haffner, Mr. Glassman and Mr. Flanigan) do not receive additional compensation for their Board service. The restricted stock vests one year after the grant date. Directors may elect to receive restricted stock units (“(RSUs“RSUs””) instead of restricted stock. Electing RSUs enables directors to defer receipt of the shares for 2-102 to 10 years while accruing dividend equivalents at a 20% discount to market price over the deferral period.
Item | Amount | ||
Cash Compensation | |||
Board Retainer | $ | 50,000 | |
Audit Committee | |||
Chair | 12,000 | ||
Member | 8,000 | ||
Committee Meeting Fees | 1,000 | ||
Compensation Committee | |||
Chair | 10,000 | ||
Member | 6,000 | ||
Committee Meeting Fees | 1,000 | ||
N&CG Committee | |||
Chair | 7,500 | ||
Member | 5,000 | ||
Committee Meeting Fees | 1,000 | ||
Equity Compensation—Restricted Stock or RSUs | |||
Board Retainer | 100,000 | ||
Independent Chair Retainer | 75,000 |
Item | Amount | |||
Cash Compensation | ||||
Director Retainer(Non-Employee) | $50,000 | |||
Audit Committee Retainer | ||||
Chair | 18,000 | |||
Member | 8,000 | |||
Compensation Committee Retainer | ||||
Chair | 15,000 | |||
Member | 6,000 | |||
N&CG Committee Retainer | ||||
Chair | 10,000 | |||
Member | 5,000 | |||
Equity Compensation—Restricted Stock or RSUs | ||||
Independent Chair Retainer (including director retainer) | 260,000 | |||
Director Retainer | 110,000 |
The Compensation earnedCommittee reviews director compensation every year and recommends any changes to the full Board for consideration at its May meeting. The Committee considers national survey data and trends but does not target director compensation to any specific percentage of the median. In light of these considerations, the Compensation Committee recommended, and the Board approved, the following changes to the director compensation package in 2010:
The Independent Chair’s additional retainer was raised to $150,000 in light of Mr. Fisher’s specific role and responsibilities.
The chair retainers were increased due to greater time demands affecting each committee and the director survey data.
Recognizing that our Committee members’ contributions surpass their mere attendance at committee meetings, the $1,000 meeting attendance fees were eliminated and the reduction was offset by and paid or awarded to, ourincreasing the annual equity grant by $10,000 (the average annual payment under the fee arrangement).
Our non-employee directors in 2009directors’ 2010 compensation is set forth in the table below.following table. Directors may elect to defer their cash compensation into a cash deferral arrangement, stock options or stock units under the Company’s Deferred Compensation Program, described on page 52.32. We also pay for all travel expenses the directors incur to attend Board meetings.
Mr. Bentele did not stand for re-election in 2009, and Mr. Brunner began his service as director at the May 2009 annual meeting of shareholders. Compensation reported for these directors reflects a partial year of service.
Director Compensation in 20092010
Director | Fees Earned or Paid in Cash (1) | Stock Awards (2) | Option Awards | Non-Qualified Deferred Compensation Earnings (3) | All Other Compensation | Total | Fees Earned or Paid in Cash (1) | Stock Awards (2) | Non-Qualified Deferred Compensation Earnings (3) | All Other Compensation (4) | Total | ||||||||||||||||||||||||||
Raymond F. Bentele | $ | 16,500 | $ | — | — | $ | — | $ | 3,090 | $ | 19,590 | ||||||||||||||||||||||||||
Robert E. Brunner | 45,500 | 100,000 | — | — | 3,380 | 148,880 | $66,500 | $110,000 | $5,844 | $182,344 | |||||||||||||||||||||||||||
Ralph W. Clark | 62,000 | 100,000 | — | 1,151 | 7,230 | 170,382 | 57,750 | 110,000 | $2,787 | 9,958 | 180,495 | ||||||||||||||||||||||||||
R. Ted Enloe III | 67,000 | 100,000 | — | 2,530 | 11,511 | 181,040 | |||||||||||||||||||||||||||||||
R. Ted Enloe, III | 66,500 | 110,000 | 4,319 | 18,667 | 199,486 | ||||||||||||||||||||||||||||||||
Richard T. Fisher | 84,000 | 179,200 | — | 2,066 | 15,569 | 280,834 | 78,000 | 260,000 | 576 | 19,294 | 357,870 | ||||||||||||||||||||||||||
Ray A. Griffith (5) | 44,500 | 110,000 | 2,398 | 156,898 | |||||||||||||||||||||||||||||||||
Joseph W. McClanathan | 78,500 | 100,000 | — | — | 6,470 | 184,970 | 78,000 | 110,000 | 5,844 | 193,844 | |||||||||||||||||||||||||||
Judy C. Odom | 88,000 | 100,000 | — | 1,072 | 10,757 | 199,829 | 85,000 | 110,000 | 672 | 8,534 | 204,206 | ||||||||||||||||||||||||||
Maurice E. Purnell, Jr. | 61,500 | 100,000 | — | 1,676 | 10,085 | 173,261 | 60,750 | 110,000 | 1,869 | 13,320 | 185,939 | ||||||||||||||||||||||||||
Phoebe A. Wood | 75,000 | 100,000 | — | 3,359 | 18,831 | 197,191 | 71,000 | 110,000 | 4,331 | 29,408 | 214,739 |
(1) | These amounts include cash compensation deferred under our Deferred Compensation Program. Mr. Clark deferred 50% of his cash compensation ($28,875) into a cash deferral; Mr. Fisher deferred |
(2) | Amounts reported in this column reflect the grant date fair value of the annual restricted stock or RSU awards, which was |
(3) | Directors who (i) elect to receive RSUs instead of restricted stock for their equity retainer |
The
(4) | Items in excess of $10,000 that are included in the total reported in this column consist of dividends paid on the annual restricted stock or RSU awards and dividends paid on stock units acquired under our Deferred Compensation Program: Mr. Enloe—$17,276; Mr. Fisher—$14,003; Mr. Purnell—$13,320; and Ms. Wood—$20,518. |
(5) | Mr. Griffith began his service as director at the May 2010 annual meeting of shareholders; his reported compensation reflects a partial year of service. |
Seven of our non-employee directors held outstanding stock options as of December 31, 20092010 as described below.in the following table. Options that were granted in lieu of cash compensation under our Deferred Compensation Program are listed separately in the “DC Options” column.
Director | Options | DC Options | Total | Options | DC Options | Total | ||||||||||||
Raymond F. Bentele | 10,482 | 16,712 | 27,194 | |||||||||||||||
Robert E. Brunner | — | — | — | |||||||||||||||
Ralph W. Clark | 10,482 | 5,441 | 15,923 | 10,384 | 4,338 | 14,722 | ||||||||||||
R. Ted Enloe III | 10,482 | 36,150 | 46,632 | |||||||||||||||
R. Ted Enloe, III | 24,263 | 21,168 | 45,431 | |||||||||||||||
Richard T. Fisher | 10,482 | — | 10,482 | 9,281 | 9,281 | |||||||||||||
Joseph W. McClanathan | 1,454 | — | 1,454 | 1,454 | 1,454 | |||||||||||||
Judy C. Odom | 6,007 | 5,076 | 11,083 | 6,007 | 5,076 | 11,083 | ||||||||||||
Maurice E. Purnell Jr. | 10,482 | 16,351 | 26,833 | |||||||||||||||
Maurice E. Purnell, Jr. | 25,632 | 25,632 | ||||||||||||||||
Phoebe A. Wood | 976 | 12,344 | 13,320 | 976 | 12,344 | 13,320 |
Six
The non-employee directors held unvested restricted stock or stock units as of December 31, 20092010 as set forth below. These restricted stock shares and RSUs will vest on May 12, 2010.11, 2011.
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Six non-employee directors currently have stock unit accounts for Deferred Compensation or RSUs. Details of the units they acquired in 2009 and their ending account balances are set forth below.
Director | Beginning Balance | Stock Units Credited for 2009 Compensation & Dividend Equivalents | Stock Units Credited in 2009 for Dividend Equivalents on Previous Deferrals | Stock Units Distributed in 2009 | Stock Units in Account on 12/31/09 | ||||||
Ralph W. Clark | 1,120 | 6,627 | 303 | (573 | ) | 7,477 | |||||
R. Ted Enloe III | 6,421 | 6,627 | 781 | — | 13,829 | ||||||
Richard T. Fisher | 14,187 | 1,196 | 677 | (13,054 | ) | 3,006 | |||||
Judy C. Odom | 5,323 | — | 348 | (1,637 | ) | 4,034 | |||||
Maurice E. Purnell Jr. | 6,421 | — | 537 | — | 6,958 | ||||||
Phoebe A. Wood | 11,837 | — | 990 | — | 12,827 |
PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING
1
ONE: Election of Directors
At the annual meeting, twelve12 directors will be electedare nominated to hold office until the next annual meeting of shareholders or until their successors are elected and qualified. All the director nominees have been previously elected by our shareholders, except Matthew Flanigan and Ray Griffith who are being nominated for the first time.shareholders. If any nominee named below is unable to serve as a director (an event the Board does not anticipate), the proxy will be voted for a substitute nominee, if any, designated by the Board. Our employment agreements with Mr. Haffner and Mr. Glassman provide that they may terminate their agreements if not re-elected as directors (see page 5446 for a description of the agreements).
In recommending the slate of director nominees, our Board has chosen individuals of character and integrity, with a commitment to the long-term growth and profitability of the Company. Each of the nominees brings significant business or public experience relevant and beneficial to the Board and the Company, as well as a work ethic and disposition that fostersfoster the collegiality necessary for the Board and its committees to function efficiently and best represent the interests of our shareholders.
Robert E. Brunner Independent Director since 2009 Committees: Audit Compensation Age: 53 | Professional Experience: Mr. Brunner has been the Executive Vice President of Illinois Tool Works (ITW), a diversified manufacturer of advanced industrial technology, since 2006. He previously served ITW as President—Global Auto beginning in 2005 and President—North American Auto from 2003. Education: Mr. Brunner holds a degree in finance from the University of Illinois and an MBA from Baldwin-Wallace College. Director Qualifications: Mr. Brunner’s experience and leadership with ITW, a diversified manufacturer with a global footprint, provides valuable insight to our Board on operational and international issues. As a director of the National Association of Manufacturers, his familiarity with public policy issues and advocacy affecting the Company is a great asset. | |
Ralph W. Clark Independent Director since 2000 Committees: Nominating & Corporate Governance Age: 70 | Professional Experience: Mr. Clark has held various executive positions at International Business Machines Corporation (IBM) from 1988 until 1994, including Division President—General and Public Sector. He also served as Chairman of Frontec AMT Inc., a software company, from 1994 until his retirement in 1998 when the company was sold. Education: Mr. Clark holds a master’s degree in economics from the University of Missouri. Director Qualifications: Through Mr. Clark’s career with IBM and Frontec and his current board service with privately-held companies, he has valuable experience in general management, marketing, information technology, finance and strategic planning. |
R. Ted Enloe, III Independent Director since 1969 Committees: Compensation, Chair Age: 72 Professional Experience: Mr. Enloe has been Managing General Partner of Balquita Partners, Ltd., a family securities and real estate investment partnership, since 1996. Previously, he served as President and Chief Executive Officer of Optisoft, Inc., a manufacturer of intelligent traffic systems, from 2003 to 2005. His former positions include Vice Chairman of the Board and member of the Office of the Chief Executive for Compaq Computer Corporation and President of Lomas Financial Corporation and Liberte Investors. Education: Mr. Enloe holds a degree in petroleum engineering from Louisiana Polytechnic University and a law degree from Southern Methodist University. Public Company Boards: Mr. Enloe currently serves as a director of Silicon Laboratories Inc., a designer of mixed-signal integrated circuits, and Live Nation, Inc., a venue operator, promoter and producer of live entertainment events. Director Qualifications: Mr. Enloe’s professional background and experience, previously held senior-executive level positions, financial expertise and service on other company boards, qualifies him to serve as a member of our Board of Directors. Further, his wide-ranging experience combined with his intimate knowledge of the Company from over 40 years on the Board provides an exceptional mix of familiarity and objectivity. Richard T. Fisher Independent Director since 1972 Committees: Audit Compensation Executive, Chair Nominating & Corporate Governance Age: 72 Professional Experience: Mr. Fisher has been Senior Managing Director, Midwest Division of Oppenheimer & Co., an investment banking firm, since 2002. He served as Managing Director of CIBC World Markets Corp., an investment banking firm, from 1990 to 2002. Education: Mr. Fisher holds a degree in economics from the Wharton School of the University of Pennsylvania. Director Qualifications: Mr. Fisher’s career in investment banking provides the Board with a unique perspective on the Company’s strategic initiatives, financial outlook and investor markets. His valuable business skills and long-term perspective of the Company bolster his leadership as the Company’s independent Board Chair. He has served as the independent Board Chair since 2008.Ralph W. Clark, age 69, held various executive positions at International Business Machines Corporation (IBM) from 1988 until 1994, including Division President—General and Public Sector. He also served as Chairman of Frontec AMT Inc., a software company, from 1994 until his retirement in 1998 when the company was sold. Mr. Clark holds a master’s degree in economics from the University of Missouri. Through Mr. Clark’s career with IBM and Frontec and his current board service with privately-held companies, he has valuable experience in general management, marketing, information technology, finance and strategic planning. He was first elected as a director of the Company in 2000.
Matthew C. Flanigan Management Director since 2010 Committees: None Age: 49 Professional Experience: Mr. Flanigan was appointed Senior Vice President—Chief Financial Officer of the Company in 2005. He previously served the Company as Vice President—Chief Financial Officer from 2003 to 2005, President of the Office Furniture Components Group from 1999 to 2003, and in various other capacities since 1997. Education: Mr. Flanigan holds a degree in finance and business administration from the University of Missouri. Public Company Boards: Mr. Flanigan serves as a director of Jack Henry Associates, Inc., a provider of core information processing solutions for financial institutions. Director Qualifications: As the Company’s CFO, Mr. Flanigan adds valuable knowledge of the Company’s finance, risk and compliance functions to the Board. In addition, his prior experience as one of the Company’s group presidents provides valuable operations insight. Karl G. Glassman Management Director since 2002 Committees: None Age: 52 Professional Experience: Mr. Glassman was appointed Chief Operating Officer of the Company in 2006 and Executive Vice President in 2002. He previously served the Company as President of the Residential Furnishings Segment from 1999 to 2006, Senior Vice President from 1999 to 2002, President of Bedding Components from 1996 to 1998, and in various capacities since 1982. Education: Mr. Glassman holds a degree in business management and finance from California State University—Long Beach. Director Qualifications: With over two decades experience leading the Company’s largest segment and serving as its Chief Operating Officer, Mr. Glassman provides in-depth operational knowledge to the Board and is a key interface between the Board’s oversight and strategic planning and its implementation at all levels of the Company around the world. Mr. Glassman also serves on the Board of Directors of the National Association of Manufacturers.R. Ted Enloe, III, age 71, has been Managing General Partner of Balquita Partners, Ltd., a family securities and real estate investment partnership, since 1996. He also served as President and Chief Executive Officer of Optisoft, Inc., a manufacturer of intelligent traffic systems, from 2003 to 2005. Mr. Enloe currently serves as a director of Silicon Laboratories Inc., a designer of mixed-signal integrated circuits, and Live Nation, Inc., a venue operator, promoter and producer of live entertainment events. He holds a bachelor’s degree in petroleum engineering from Louisiana Polytechnic University and a law degree from Southern Methodist University. Mr. Enloe brings extensive knowledge of public and private company operations and oversight from his past and present directorships in various industries. His wide-ranging experience combined with his intimate knowledge of the Company from over forty years on the Board provides an exceptional mix of familiarity and objectivity. He was first elected as a director of the Company in 1969.
Ray A. Griffith Independent Director since 2010 Committees: Audit Age: 57 Professional Experience: Mr. Griffith has been the President and Chief Executive Officer of Ace Hardware Corporation (Ace), the largest hardware cooperative in the United States, since 2005. He was previously the Executive Vice President and Chief Operating Officer of Ace from 2004 to 2005, the Executive Vice President—Retail from 2000 to 2004, and served Ace in various other capacities since 1994. Education: Mr. Griffith holds a degree in marketing and finance from Southern Illinois University. Director Qualifications: As CEO of Ace, Mr. Griffith has significant leadership and operations experience, while adding valuable retailing, consumer marketing, sourcing and distribution knowledge to the Board. David S. Haffner Management Director since 1995 Committees: Executive Age: 58 Professional Experience: Mr. Haffner was appointed Chief Executive Officer of the Company in 2006 and has served as President of the Company since 2002. He previously served as the Company’s Chief Operating Officer from 1999 to 2006, Executive Vice President from 1995 to 2002, and in other capacities since 1983. Education: Mr. Haffner holds a degree in engineering from the University of Missouri and an MBA from the University of Wisconsin. Public Company Boards: Mr. Haffner serves as a director of Bemis Company, Inc., a manufacturer of flexible packaging and pressure sensitive materials. Director Qualifications: As the Company’s CEO, Mr. Haffner provides comprehensive insight to the Board across the spectrum from strategic planning to implementation to execution and reporting, as well as its relationships with investors, the finance community and other key stakeholders.Richard T. Fisher, age 71, has been Senior Managing Director, Midwest Division of Oppenheimer & Co., an investment banking firm, since 2002. He served as Managing Director of CIBC World Markets Corp., an investment banking firm, from 1990 to 2002. Mr. Fisher holds a degree in economics from the Wharton School of the University of Pennsylvania. Mr. Fisher’s career in investment banking provides the Board a unique perspective on the Company’s strategic initiatives, financial outlook and investor markets. His valuable business
skills and long-term perspective of the Company fully inform his leadership as the Company’s independent Board Chair. He was first elected as a director of the Company in 1972 and has served as the independent Board Chair since 2008.
Joseph W. McClanathan Independent Director since 2005 Committees: Audit Compensation Nominating & Corporate Governance Age: 58 | Professional Experience: Mr. McClanathan has served as President and Chief Executive Officer of the Energizer Household Products Division of Energizer Holdings, Inc., a manufacturer of portable power solutions, since November 2007. Prior to his current position, he served Energizer as President and Chief Executive Officer of the Energizer Battery Division from 2004 to 2007, as President—North America from 2002 to 2004, and as Vice President–North America from 2000 to 2002. Education: Mr. McClanathan holds a degree in management from Arizona State University. Director Qualifications: Through his leadership experience at Energizer and as a director of the Retail Industry Leaders Association, Mr. McClanathan offers an exceptional perspective to the Board on manufacturing operations, marketing and development of international capabilities. | |
Judy C. Odom Independent Director since 2002 Committees: Audit, Chair Compensation Nominating & Corporate Governance Age: 58 | Professional Experience: Until her retirement in 2002, Ms. Odom was Chief Executive Officer and Chairman of the Board at Software Spectrum, Inc., a global business to business software services company, which she co-founded in 1983. Prior to founding Software Spectrum, she was a partner with the international accounting firm, Grant Thornton. Education: Ms. Odom is a licensed Certified Public Accountant and holds a degree in business administration from Texas Tech University. Public Company Boards: Ms. Odom is a director of Harte-Hanks, a direct marketing service company. Director Qualifications: Ms. Odom’s director experience with several companies offers a broad leadership perspective on strategic and operating issues facing companies today. Her experience co-founding Software Spectrum and growing it to a global Fortune 1000 enterprise before selling it to another public company provides the insight of a long-serving CEO with international operating experience. |
Matthew C. Flanigan, age 48, was appointed Senior Vice President—Chief Financial Officer of the Company in 2005. He previously served the Company as Vice President—Chief Financial Officer from 2003 to 2005, President of the Office Furniture Components Group from 1999 to 2003, and in various other capacities since 1997. Mr. Flanigan serves as a director of Jack Henry Associates, Inc., a provider of core information processing solutions for financial institutions. He holds a degree in finance and business administration from the University of Missouri. As the Company’s CFO, Mr. Flanigan will add an unparalleled knowledge of the Company’s financing, risk and compliance functions to the Board. In addition, his prior experience as one of the Company’s group presidents will provide valuable operations insight. Mr. Flanigan is being nominated as a director for the first time.
Maurice E. Purnell, Jr.
Independent Director since 1988 Committees: Executive Nominating & Corporate Governance, Chair Age: 71 | Professional Experience: Mr. Purnell was, until his retirement in July, Of Counsel to the law firm of Locke Lord Bissell & Liddell LLP, or its predecessor firm, since 2002, where he had been a partner since 1972. Education: Mr. Purnell holds a degree in history from Washington & Lee University, an MBA from the Wharton School of the University of Pennsylvania and a law degree from Southern Methodist University. Director Qualifications: With over 40 years of experience in securities law, financing and acquisitions in his corporate law practice, Mr. Purnell is well suited to advise the Board on business and compliance matters and chair our Nominating & Corporate Governance Committee. | |
Phoebe A. Wood Independent Director since 2005 Committees: Audit Compensation Age: 57 | Professional Experience: Ms. Wood has been a principal in CompaniesWood, a consulting firm specializing in early stage investments, since her 2008 retirement as Vice Chairman and Chief Financial Officer of Brown-Forman Corporation, a diversified consumer products manufacturer, where she served since 2001. Ms. Wood previously held various positions at Atlantic Richfield Company, an oil and gas company, from 1976 to 2000. Education: Ms. Wood holds a degree in psychology from Smith College and an MBA from UCLA. Public Company Boards: Ms. Wood is a director of Invesco, Ltd., an independent global investment manager, and Coca-Cola Enterprises, Inc., a major bottler and distributor of Coke products. Director Qualifications: From her career in business and various directorships, Ms. Wood provides the Board with a wealth of understanding of the strategic, financial, and accounting issues the Board faces in its oversight role. |
The Board recommends that you voteFOR the election of each of the director nominees.
2
TWO: Ratification of Selection of Independent Registered Public
Accounting Firm
The Audit Committee has selected PricewaterhouseCoopers LLP (“(PwC“PwC””) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2010.2011. PwC (or its predecessor firm) has been our independent registered public accounting firm since 1991.
We are asking our shareholders to ratify the Audit Committee’s selection of PwC as our independent registered public accounting firm. Although ratification is not required by the Company’s bylaws or otherwise, the Board is submitting the selection of PwC to our shareholders for ratification as a matter of good corporate practice. If our shareholders fail to ratify the selection, it will be considered a direction to the Audit Committee to consider a different firm. Even if this selection is ratified, the Audit Committee, in its discretion, may select a different independent registered public accounting firm at any time during the year if it determines that such a change is in the best interest of the Company and our shareholders.
PwC representatives are expected to be present at the annual meeting. They will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate shareholder questions.
The Board recommends that you voteFOR the ratification of PwC as independent registered public accounting firm.
18
The fees billed or expected to be billed by PwC for professional services rendered in fiscal years 20092010 and 20082009 are shown below.
Type of Service | 2009 | 2008 | 2010 | 2009 | ||||||||||
Audit Fees (1) | $ | 1,676,241 | $ | 2,371,964 | $1,651,875 | $1,676,241 | ||||||||
Audit-Related Fees (2) | 0 | 0 | 97 | 0 | ||||||||||
Tax Fees (3) | 343,984 | 505,194 | 391,035 | 343,984 | ||||||||||
All Other Fees (4) | 1,500 | 0 | 613 | 1,500 | ||||||||||
Totals | $ | 2,021,725 | $ | 2,877,158 | ||||||||||
Total | $2,043,620 | $2,021,725 |
(1) | Includes: rendering an opinion on the Company’s consolidated financial statements and the effectiveness of internal control over financial reporting; quarterly reviews of our financial statements; statutory audits as required; comfort and debt covenant letters; and services in connection with securities regulatory filings. |
(2) | Includes: consulting on accounting and financial reporting issues; limited procedures reports related to agreements or arbitrations; continuing professional education; audits of employee benefit plans and subsidiaries; and due diligence and audit procedures related to acquisitions and joint ventures. |
(3) | Includes: preparation and review of tax returns and tax filings; tax consulting and advice related to compliance with tax laws; tax planning strategies; and tax due diligence related to acquisitions and joint ventures. Of the tax fees listed above in |
(4) | Includes: use of an internet-based accounting research tool provided by PwC. |
The Audit Committee has determined that the provision of these approved non-audit services by PwC is compatible with maintaining PwC’s independence.
Pre-Approval Procedures for Audit and Non-Audit Services
The Audit Committee is responsible for the appointment and compensation of the Company’s independent registered public accounting firm. To fulfill this responsibility, the Audit Committee has established a procedure for pre-approving the services performed by the Company’s auditors. All services provided by PwC in 20092010 were approved in accordance with the adopted procedures. There were no services provided or fees paid in 20092010 for which the pre-approval requirement was waived.
The procedure provides standing pre-approval for:
Audit Services—rendering an opinion on the Company’s financial statements and the effectiveness of internal control over financial reporting; quarterly reviews of the Company’s financial statements; statutory audits as required; comfort and debt covenant letters; and services in connection with regulatory filings.
Audit-Related Services—consultation on new or proposed transactions, statutory requirements, or accounting principles; reports related to contracts, agreements, arbitration, or government filings; continuing professional education; audits of employee benefit plans and subsidiaries; and due diligence and audits related to acquisitions and joint ventures.
Tax Services—preparation and review of Company and related entity income, sales, payroll, property, and other tax returns and tax filings and permissible tax audit assistance; preparation or review of expatriate and similar employee tax returns and tax filings; tax consulting and advice related to compliance with applicable tax laws; tax planning strategies and implementation; and tax due diligence related to acquisitions and joint ventures.
Any other audit, audit-related, or tax services provided by the Company’s auditors require specific Audit Committee pre-approval. The Audit Committee must also specifically approve in advance all permissible non-audit internal control related services to be performed by the Company’s auditors. Management provides quarterly reports to the Audit Committee concerning any fees paid to the auditors for their services.
The Audit Committee is composed of six non-management directors who are independent as required by SEC and NYSE rules. The Audit Committee operates under a written charter adopted by the Board which is posted on the Company’s website atwww.leggett-search.com/governance.
Management is responsible for the Company’s financial statements and financial reporting process, including the system of internal controls. PwC, our independent registered public accounting firm is responsible for expressing an opinion on the conformity of the audited consolidated financial statements with generally accepted accounting principles. The Audit Committee is responsible for monitoring, overseeing and evaluating these processes, providing recommendations to the Board regarding the independence of and risk assessment procedures used by our independent registered public accounting firm, selecting and retaining our independent registered public accounting firm, and overseeing compliance with various laws and regulations.
At its meetings, the Audit Committee reviewed and discussed the Company’s audited financial statements with management and PwC. The Audit Committee also discussed with PwC all items required by the Statement on Auditing Standards No. 61, as amended.
The Audit Committee received the written disclosures and letter from PwC required by applicable requirements of the Public Company Accounting Oversight Board regarding PwC’s communications with the Audit Committee concerning independence and has discussed PwC’s independence with them.
The Audit Committee has relied on management’s representation that the financial statements have been prepared in conformity with generally accepted accounting principles and on the opinion of PwC included in their report on the Company’s financial statements.
Based on the review and discussions with management and PwC referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s 20092010 Annual Report on Form 10-K.
Judy C. Odom (Chair)
Robert E. Brunner
Ralph W. Clark
Richard T. Fisher
Ray A. Griffith
Joseph W. McClanathan
Phoebe A. Wood
3
PROPOSAL THREETHREE: Advisory Vote on Executive Compensation
Approval of the Amendment and Restatement of the Flexible Stock Plan
We are askingLeggett’s shareholders to approve the amended and restated Flexible Stock Plan (the “Plan”). The Plan provides for the award of stock options and other stock-based benefits for the purpose of attracting and retaining valuable employees, directors and other key individuals, aligning the interests of participants with the interests of shareholders, and rewarding outstanding performance. Shareholders last approved the Plan in 2008. At its meeting on February 24, 2010, the Board of Directors recommended the approval of the amended and restated Plan (the “2010 Restatement”).
As of February 28, 2010, there were 20,368,946 shares potentially issuable under options and other awards previously granted under the Plan and 1,879,110 shares remained available for grant. If shareholders approve the 2010 Restatement, the current 1.9 million shares available for grant will increase by 2.8 million shares for a total of approximately 4.7 million shares available for grant under the Plan. While we have tax-qualified stock purchase plans for employees generally, the Flexible Stock Plan is our only vehicle for granting non-qualified equity benefits.
Since its original adoption in 1989, the Plan has provided for a broad range of equity awards. The flexible design of the Plan permits equity awards to be tailored to the needs of the Company and to comply with changing tax and regulatory environments. A significant percentage of the shares used under the Plan are purchased by employees through payroll contributions or in exchange for deferred cash compensation.
How We Use Stock Compensation
Employees
We have encouraged and promoted employee stock ownership at all levels of the Company for many years. More than 4,000 employees contribute their own funds toward the purchase of Company stock under various stock purchase plans.
We grant non-qualified stock options (“NQSOs”) to a broad group of Company employees annually. Approximately 1,500 employees presently hold stock options. Options are granted with an exercise price equal to the closing price of the Company’s common stock on the grant date. Options have a 10-year term and vest and become exercisable in three annual installments beginning 18 months after the grant date.
We also have two executive programs established under the Plan, the Executive Stock Unit Program (the “ESU Program”) and the Deferred Compensation Program, that encourage key managers to defer cash compensation into Company equity. The ESU Program, offered to more than 300 key managers, is our primary retirement plan for executives. The Program allows executives to contribute up to 10% of their cash compensation above a certain threshold into stock units that accrue in an account and earn dividends until the executive retires or terminates employment. Stock units are acquired at a 15% discount to the market price of Company stock. The Company matches 50% of the executives’ contributions, and will match 100% if certain Company performance targets are met. About 110 executives also have the opportunity to defer cash compensation into stock units or stock options under the Deferred Compensation Program. Stock units are acquired and earn dividends at a 20% discount to the market price of Company stock under the Deferred Compensation Program. These programs, described in more detail on page 52, are a key component in our strategy to tie a significant portion of executive compensation to long-term shareholder return. Almost 20% of the stock options currently outstanding under the Plan were granted in lieu of cash compensation under our Deferred Compensation Program.
In addition, we began granting performance stock unit awards (“PSUs”) annually to a group of about 35 senior executives in 2008. These awards will vest at the end of a 3-year performance period based on how well the Company performs relative to a peer group of companies. These awards are described on page 39.
Directors
Our non-employee directors receive a portion of their annual compensation in restricted stock. On the date of the annual meeting of shareholders, each non-employee director receives restricted stock with a grant date value of $100,000 (except the Board Chair, whose award value is $175,000). The number of shares is determined by dividing $100,000 by the closing stock price on the grant date. The restricted stock vests one year after the grant date.
Directors may also participate in the Deferred Compensation Program described above. Most of the directors have elected to defer some portion of their cash compensation into stock options or stock units under the Program at some time.
Others
Our plan also allows the Committee to grant options or other equity awards to non-employees, but we rarely do so. None of the outstanding awards are held by non-employees other than the directors.
Burn Rate and Overhang
Two common measures of a stock plan’s cost are known as “burn rate” and “overhang.” Burn rate refers to how fast a company uses the supply of shares authorized for issuance under its stock plan. Over the last three years, we have maintained an average net burn rate of 1.38% per year. We calculate net burn rate as shares covered by new awards during each year, minus shares covered by forfeited or terminated awards, as a percentage of the weighted average common shares outstanding. Our burn rate calculation is set forth below.
Burn Rate Calculation
Year | Options | Full Value Awards (1) | Total Awards Granted | Weighted Average Shares Outstanding | Burn Rate | ||||||
2009 | 431,296 | 1,632,514 | 2,063,810 | 159,331,228 | 1.30 | % | |||||
2008 | 1,226,391 | 1,213,461 | 2,439,852 | 167,952,381 | 1.45 | % | |||||
2007 | 1,609,763 | 877,567 | 2,487,330 | 179,367,322 | 1.39 | % | |||||
3-year average | 1.38 | % | |||||||||
We believe we have been judicious in our use of stock previously authorized by shareholders under the Plan, and we are committed to closely monitoring share usage.
“Overhang” measures the degree to which an existing shareholder’s ownership may be diluted by stock-based compensation awarded to employees and directors under a company stock plan. Overhang is calculated by adding the current stock awards outstanding and the new awards that could be granted under the Plan and dividing that number by the current common shares outstanding.
As of February 28, 2010, our overhang was 13.74%, calculated as follows:
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Several factors influence our overhang percentage:
Many of the shares we use under our Plan are paid for by employees who choose to defer cash compensation into Company equity under the ESU and Deferred Compensation Programs. These purchased stock units are included in the overhang calculation, but the consideration paid for these shares reduces the cost of the Plan. For financial reporting purposes, we treat stock units in the same manner as issued shares for calculating earnings per share.
Because the ESU Program is a retirement program, stock units continue to accrue in employee accounts until they are converted to common stock when the employee retires or terminates employment. We recognize that the long-term design of this plan increases our overhang, but we believe this program serves shareholders well by tying an important element of key employees’ compensation to the Company’s stock.
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We have been actively repurchasing shares of our common stock. In 2009 alone, we repurchased 10 million shares. Because share repurchases reduce the denominator in the overhang calculation, they increase our overhang percentage.
We are strongly committed to a culture of employee stock ownership. Accordingly, we believe the approval of the 2010 Restatement is critical to our ability to attract, retain and reward the caliber of employees necessary to achieve superior performance. In addition to increasing the number of shares authorized for issuance under the Plan, the 2010 Restatement:
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Establishes the Committee’s right to cancel awards and “claw back” gains received by participants if they engaged in actions adverse to the Company’s interests, including fraud or conduct contributing to a financial restatement.
The following description of the Plan is qualified in its entirety by the full text of the 2010 Restatement attached to this proxy statement as Appendix A.
Description of Plan
If approved by the Company’s shareholders, the 2010 Restatement will become effective as of May 13, 2010 (the “Effective Date”) and will continue in effect until the tenth anniversary of the Effective Date.
The Plan provides for awards to eligible participants in the form of stock options, SARs, restricted stock, stock units, performance awards, other stock based awards and other awards (collectively, “Awards”). Awards may be granted to (i) employees, (ii) non-employee directors, and (iii) individuals or entities providing services
to the Company. The number of awards that may be granted to a participant under the Plan is in the discretion of the committee that administers the Plan (the “Committee,” described below) and therefore cannot be determined in advance.
Awards settled in cash do not reduce the number of shares available for grant. If an award expires or is terminated, canceled or forfeited, the shares covered by those awards will again be available for issuance under the Plan. The following shares will not become available for issuance under the Plan:
Shares tendered by participants as full or partial payment to the Company upon exercise of options granted under the Plan;
Shares reserved for issuance upon grant of SARs, to the extent the number of reserved shares exceeds the number of shares actually issued upon exercise of the SARs; and
Shares withheld by, or otherwise remitted to, the Company to satisfy a participant’s tax withholding obligations upon the lapse of restrictions on restricted stock or the exercise of options or SARs granted under the Plan or upon any other payment or issuance of shares under the Plan.
Of the shares available for grant under the Plan after the Effective Date, no more than 3,300,000 may be granted for awards other than options and SARs. The Committee may, however, exceed this limit, in which case the number of shares available under the Plan will be reduced by three shares for every one share awarded in excess of this limit. Up to one hundred percent of the shares available for options and SARs under the Plan may be available for grants of incentive stock options (“ISOs”).
The aggregate number of shares subject to options or SARs granted during any calendar year to any one participant may not exceed 1,000,000. The aggregate number of shares subject to performance awards, restricted stock or stock unit awards granted during any calendar year to any one participant may not exceed 1,000,000. The foregoing limitations are subject to adjustment for changes to the Company’s capital stock, but only to the extent that the adjustment will not affect the status of any award intended to qualify as “performance-based compensation” under Section 162(m) of the Code. The aggregate dollar amount of awards that are not denominated in shares or determined by reference to a number of shares, to the extent they are granted with the intent that they qualify as performance-based compensation under Section 162(m) of the Code, that can be paid during any calendar year to any one Participant may not exceed $4,000,000.
Outstanding awards, as well as the number of shares reserved under the Plan and the maximum number of shares issuable to participants, will be appropriately adjusted to reflect any stock split or similar change to the Company’s capital stock.
The Committee administering the Plan consists of at least two directors who are “non-employee directors” as defined in Rule 16b-3 of the 1934 Securities Exchange Act (the “Exchange Act”) and who are “outside directors” as defined in section 162(m) of the Internal Revenue Code (the “Code”). Members of the Committee are appointed by the Board. The Committee has full authority and discretion to (i) select participants, (ii) determine the type, size, and conditions applicable to awards, (iii) determine to what extent awards may be settled in cash, shares, or other property, (iv) determine to what extent amounts payable from an award under the Plan may be deferred, either automatically or at the election of the participant, (v) interpret and administer the Plan and any agreement, and (vi) establish rules, appoint agents, and take any other action necessary or desirable for the administration of the Plan. The Committee may delegate all or any part of its authority under the Plan to any employee or committee, except that it may not delegate any action related to grants of awards to individuals who are subject to Section 16 of the Exchange Act or who are “covered employees” as defined by Code Section 162(m)(3).
The Board has the sole right and power to amend or terminate the Plan at any time, except that it may not amend the Plan, without approval of Company shareholders, in a manner that would cause options which are intended to qualify as ISOs to fail to qualify or in a manner which would violate applicable law. The amendment
or termination of the Plan will not adversely affect a participant’s right to any award granted prior to such amendment or termination.
In the event of a change in control of the Company (as defined in the Plan), the Committee may provide such protection as it deems necessary to maintain participants’ rights. The Committee may, among other things, (i) accelerate any time periods relating to the exercise or realization of awards, (ii) purchase an award, upon the participant’s request, for an amount of cash equal to the amount which could have been attained upon the exercise or realization of the award had it been currently exercisable or payable, (iii) adjust outstanding awards it deems appropriate to reflect such transaction, and/or (iv) cause outstanding awards to be assumed or substituted by the surviving corporation.
Description of Awards
Stock Options. A stock option is the right to acquire shares of common stock at a fixed exercise price for a fixed period of time not to exceed ten years. The option price per share cannot be less than the fair market value of the Company’s common stock on the grant date.
The Committee may grant options intended to qualify as ISOs pursuant to Section 422 of the Code, as well as NQSOs under the Plan. ISOs must be granted at the fair market value of the stock on the grant date, must have a 10-year term and must meet the other requirements of Section 422 of the Code. We currently do not grant ISOs and do not have any outstanding ISOs.
Options cannot be exercised until they are vested. Options granted to date typically vest in three annual installments beginning 18 months after grant. All option terms and conditions will be determined by the Committee.
Stock Appreciation Rights. A stock appreciation right gives a participant the right to receive, for each SAR exercised, an amount equal to the excess of the fair market value of a share of common stock on the date the SAR is exercised and the fair market value of a share on the date the SAR was granted. SARs may have terms up to ten years, may be settled in cash or in stock, as determined by the Committee, and are subject to the terms and conditions expressed in the Award document. We currently do not grant SARs.
Restricted Stock. A restricted stock award is an award of shares of common stock, the grant, vesting, issuance, or retention of which is subject to certain conditions expressed in the award document. Recipients of restricted stock have full voting rights and are entitled to receive dividends with respect to the shares during the restriction period, unless otherwise determined by the Committee. The Committee will determine the price, if any, at which restricted stock is sold or awarded to participants. Restricted stock is not transferable during the restriction period.
Stock Units. A stock unit award is the award of a right to receive shares of common stock, the grant, vesting, issuance, or retention of which is subject to certain conditions expressed in the award document. Stock units may be settled in cash or in stock, as determined by the Committee. Stock units represent an unfunded and unsecured obligation of the Company. A participant has no rights as a shareholder with respect to stock units until the units have been converted to shares and delivered to the participant. Stock units may accrue dividend equivalents, as determined by the Committee. The Committee will determine the price, if any, at which stock units are sold or awarded to participants. We currently use stock units in our Executive Stock Unit Program and Deferred Compensation Program, described on page 52.
Performance Awards. A performance award entitles a Participant to receive a specified number of shares of common stock or cash equal to the fair market value of such shares at the end of a performance period, as specified in the award document. The ultimate number of shares distributed or cash paid depends upon the extent to which pre-established performance objectives are met during the applicable performance period. We grant PSUs to about 35 executives annually. These awards vest at the end of a three-year performance period, based on the Company’s total shareholder return as compared to that of a group of peer companies. See page 39 for additional information regarding PSUs.
Other Stock Based Awards. The Committee may grant other stock based awards which may include, without limitation, the grant of shares of common stock and the grant of securities convertible into shares of common stock.
Other Awards. The Committee may provide types of awards under the Plan in addition to those specifically listed, if the Committee believes that such awards would further the purposes for which the Plan was established.
Agreements and Provisions of Awards
Awards granted under the Plan may be evidenced by an agreement describing the specific award granted and the terms and conditions of the award. The Committee may require the grant of an award to be conditioned upon the recipient’s execution of an agreement. An agreement may include: description of the type of award; the award’s duration; if an option, the exercise price, the exercise period and the person or persons who may exercise the option; the effect of the participant’s death or termination of employment on the award; the award’s conditions; when, if, and how it may be forfeited, converted into another award, modified, exchanged for another award, or replaced; and the restrictions on any shares purchased or granted under the Plan.
The Committee may require the satisfaction of certain performance criteria as a condition to the grant or vesting of any award.
In the case of awards of restricted stock, performance awards and stock units, performance criteria may be applied to the Company, an affiliate, a subsidiary, division, business unit or individual, or any combination thereof, and may be measured in absolute levels or relative to another company or companies a peer group, an index or Company performance in a previous period. Performance may be measured annually or cumulatively over a longer period of time.
The types of performance criteria that may be used include the following:
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Performance may be evaluated including or excluding the effect of any of the following events that occur during the applicable performance period:
Extraordinary, unusual or non-recurring items
Gains or losses on the disposition of a business
Effects of changes in tax or accounting regulations
Effects of mergers or acquisitions
Asset write-downs
The Committee may allow the exercise price of an option or payment price of an award to be paid (i) in cash, (ii) by the tender to the Company of shares owned by the participant, or (iii) by a combination of both. Options also may be exercised in a broker-assisted cashless exercise or other cashless exercise, as permitted by the Committee.
The Company may withhold from option exercises or other awards any amount necessary to satisfy tax withholding requirements arising from the option exercise or award. The Committee or the Company may, at any time, require a participant to tender to the Company cash in the amount necessary to comply with withholding requirements.
An award may be granted in tandem with another award, except that only SARs may be granted in tandem with an ISO.
Subject to the requirements of Code Section 409A, and upon the terms established by the Committee, participants may defer receipt of awards for a time, interest may be paid on cash deferrals and dividends or dividend equivalents may be paid or credited on deferrals denominated in shares.
Modifications to Awards
Any award may be converted, modified, forfeited or cancelled, in whole or in part, by the Committee if and to the extent permitted in the Plan or applicable agreement or with the participant’s consent.
The Committee may permit a participant to surrender an award in exchange for a new award; however, the Committee may not cancel an outstanding option or SAR that is underwater in exchange for cash or for the purpose of reissuing the option to the participant at a lower exercise price or granting a replacement award of a different type without shareholder approval. Other than pursuant to a change in the Company’s capital stock, the exercise price of an option or SAR may not be reduced without shareholder approval.
If an award is subject to Section 409A of the Code, an award may be modified, replaced or terminated in the discretion of the Committee to the extent necessary to comply with such provision. In addition, in the event that a participant is determined to be a specified employee in accordance with Section 409A, any payment upon separation from service will be made or begin, as applicable, on the first day of the first month which is more than six months following the date of separation from service.
The Committee may, in its discretion, cancel all or any portion of a Participant’s award (i) if the Participant violates any confidentiality, non-solicitation or non-compete obligations or terms in his or her employment agreement, confidentiality agreement, separation agreement, and/or any other similar agreement, or (ii) if the Participant, during the period of employment of service, established a relationship with a competitor of the Company or engaged in activity that was in conflict with or adverse to the interests of the Company, including fraud or conduct contributing to any financial restatement.
Clawbacks
The Committee may require a Participant to forfeit any or all of the income or other benefit received on the vesting, exercise, or payment of an award (i) if, in its sole discretion, the Committee determines that the Participant engaged in any activity referred to in the preceding paragraph, or (ii) to the extent required or permitted under any written policy of the Company dealing with recoupment of compensation, and to the extent permitted by applicable law.
Federal Income Tax Consequences
The following is a summary of the general federal income tax consequences of awards granted under the Plan to U.S. taxpayers. Tax consequences for any particular individual or transaction may be different.
Non-Qualified Stock Options and Stock Appreciation Rights. A recipient recognizes no taxable income upon the grant of an NQSO or an SAR. Upon exercise of either, he or she will recognize taxable ordinary income
equal to the difference between the fair market value of Company stock on the exercise date and the exercise price. Any additional gain or loss recognized upon the subsequent sale or exchange of the stock will be taxed as a short-term or long-term capital gain or loss, as the case may be.
Incentive Stock Options. A recipient recognizes no taxable income upon the grant or exercise of an ISO (except for purposes of the Alternative Minimum Tax, in which case income recognition is the same as for NQSOs). If a recipient exercises an option and sells the shares more than two years after the grant date and more than one year after the exercise date, he or she will recognize a long-term capital gain or loss equal to the difference between the sale price and the exercise price. If a recipient exercises an option and sells the shares before the end of the 2-year or 1-year holding periods, he or she will generally recognize: (1) taxable ordinary income equal to the difference between (i) the fair market value of the shares at exercise (or at sale, if less) and (ii) the exercise price of the option, plus (2) short-term capital gain on any excess of the sale price over the exercise price.
Restricted Stock, Stock Unit and Performance Awards. A recipient of restricted stock, stock units, performance awards or other awards that are subject to forfeiture prior to vesting generally will recognize no taxable income at the time of grant. When the restrictions have lapsed or the performance criteria have been met (i.e., upon vesting), the recipient will recognize taxable ordinary income equal to the difference between the fair market value of the Company’s stock on the vesting date minus the amount paid, if any, for the shares. For restricted stock, a recipient may elect to be taxed based on the fair market value of the award at the time of grant.
Deferred Compensation. Participants may defer receipt of certain compensation by electing a future distribution date under the terms of an award or program under the Plan. Generally, such deferred compensation becomes taxable when the amounts are distributed. Section 409A of the Code significantly restricts the ability to defer taxation of compensation, including the deferral of income related to awards granted under the Plan. Any deferral of compensation under the Plan or the terms of an award that does not meet the requirements of Section 409A may cause the recipient to be subject to additional taxation and penalties.
Change in Control. If there is an acceleration of the vesting or payment of benefits or an acceleration of the exercisability of options upon a change in control of the Company, all or a portion of the accelerated benefits may constitute “excess parachute payments” under Section 280G of the Code. The recipient of an excess parachute payment incurs an excise tax of 20% of the amount of the payment in excess of his or her average annual compensation over the five calendar years preceding the year of the change in control. The Company is not entitled to a deduction for excess parachute payments.
Tax Effect to the Company. The Company will generally receive a tax deduction equal to the taxable ordinary income recognized by a participant from an award granted under the Plan. The Company’s deduction will be taken in the year the recipient recognizes taxable income.
Special rules limit the deductibility of certain compensation paid to the executive officers named in the Summary Compensation Table on page 44. Section 162(m) of the Code does not allow a deduction for compensation taxable to these executives to the extent such compensation exceeds $1 million, unless certain conditions are met. Compensation arising from the exercise of stock options or SARs granted at fair market value is not subject to the $1 million limit. In addition, certain other awards may qualify as performance-based compensation that is exempt from this deduction limit.
The adoption of this proposal requires the affirmative vote of (i) a majority of the shares present in person or represented by proxy and entitled to vote at the annual meeting and (ii) a majority of the votes cast on this proposal, provided that the total number of votes cast must be more than 50% of all shares entitled to vote on the proposal. (See “What vote is requiredan advisory resolution on our executive compensation package, commonly known as “Say-on-Pay,” to approve the other proposals?”compensation of Leggett’s named executive officers, as described in the “Executive Compensation” section beginning on page 4.)25. Because your vote is advisory, it will not be binding upon the Board; however, the Compensation Committee and the Board will take the outcome of the vote into account when considering future executive compensation arrangements.
Our Compensation Committee is committed to creating an executive compensation program that enables us to attract and retain a superior management team that has targeted incentives to build long-term value for our shareholders. The Company’s compensation package utilizes a mixture of cash and equity awards to align executive compensation with our annual and long-term performance. These programs reflect the Committee’s philosophy that executive compensation should provide greater rewards for superior performance, as well as accountability for underperformance. At the same time, we believe our programs do not encourage excessive risk-taking by management. The Board believes that our philosophy and practices have resulted in executive compensation decisions that are appropriate and that have benefited the Company over time.
For these reasons, the Board requests our shareholders approve the compensation of the Company’s named executive officers as described in this proxy statement pursuant to SEC disclosure rules, including the Compensation Discussion and Analysis, the executive compensation tables and the related footnotes and narrative accompanying the tables.
The Board recommends that you voteFOR approvalthe Company’s executive compensation package.
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PROPOSAL FOUR: Frequency of Future Advisory Votes on Executive Compensation
Leggett’s shareholders also have the opportunity at the annual meeting to cast an advisory vote on the frequency of future “Say-on-Pay” votes, such as Proposal 3, to be held every one, two or three years. Because your vote is advisory, it will not be binding upon the Board; however, the Board will take the outcome into account when determining the frequency of the amendmentSay-on-Pay vote.
After discussion, the Board has concluded that an advisory vote everythree years on executive compensation would be the most suitable for Leggett based on a number of considerations, including:
Our compensation program is designed to induce and restatementreward performance over a multi-year period, and the Board believes that a shareholder vote on executive compensation should occur over a similar time frame.
The Board and the Compensation Committee must have sufficient time to implement any necessary changes to our executive compensation policies and procedures in response to the shareholder advisory votes.
Following any changes to our compensation programs, investors require a sufficient period of time to evaluate the Flexible Stock Plan.effectiveness of our short and long-term compensation strategies and the related business results.
For these reasons, we believe that the analysis and recommendations from our shareholders and their proxy advisors will be more effective and valuable if the vote is held every three years.
The Board recommends that you vote for the advisory vote to be held everyTHREE years.
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FIVE: Shareholder Proposal Requesting the Addition of Sexual Orientation and
Orientation and Gender Identity to the Company’s Written Non-Discrimination Policy
The Office of the Comptroller of New York City, as custodian and a trustee of the New York City Employees’ Retirement System, the New York City Teachers’ Retirement System, the New York City Police Pension Fund and the New York City Fire Department Pension Fund, and as custodian of the New York City Board of Education Retirement System, has notified us of its intent to present the following proposal for consideration at the annual meeting. The addresses and number of shares held by such shareholders are available from the Company upon request to its Secretary.
The proposed resolution and supporting shareholder statement are followed by a statement of opposition and a recommendation from the Company’s Board. The Company accepts no responsibility for the proposed shareholder resolution and supporting statement.
Proposed Shareholder Resolution and Statement
Whereas: Leggett & Platt, Inc., does not explicitly prohibit discrimination based on sexual orientation and gender identity in its written employment policy;
Over 88% of the Fortune 500 companies have adopted written nondiscrimination policies prohibiting harassment and discrimination on the basis of sexual orientation, as have more than 98% of Fortune 100 companies, according to the Human Rights Campaign; over 30% now prohibit discrimination based on gender identity;
We believe that corporations that prohibit discrimination on the basis of sexual orientation and gender identity have a competitive advantage in recruiting and retaining employees from the widest talent pool;
According to a June, 2008 survey by Harris Interactive and Witeck-Combs, 65% of gay and lesbian workers in the United States reported facing some form of job discrimination related to sexual orientation; an earlier survey found that almost one out of every 10 gay or lesbian adults also reported that they had been fired or dismissed unfairly from a previous job, or pressured to quit a job because of their sexual orientation;
Twenty states, the District of Columbia and more than 160 cities and counties, have laws prohibiting employment discrimination based on sexual orientation; 12 states and the District of Columbia have laws prohibiting employment discrimination based on sexual orientation and gender identity;
Minneapolis, San Francisco, Seattle and Los Angeles have adopted legislation restricting business with companies that do not guarantee equal treatment for gay and lesbian employees;
Our company has operations in, and makes sales to, institutions in states and cities that prohibit discrimination on the basis of sexual orientation;
National public opinion polls consistently find more than three quarters of the American people support equal rights in the workplace for gay men, lesbians and bisexuals; for example, in a Gallup poll conducted in May, 2007, 89% of respondents favored equal opportunity in employment for gays and lesbians;
Resolved: The Shareholders request that Leggett & Platt, Inc. amend its written equal employment opportunity policy to explicitly prohibit discrimination based on sexual orientation and gender identity and to substantially implement the policy.
Supporting Statement: Employment discrimination on the basis of sexual orientation and gender identity diminishes employee morale and productivity. Because state and local laws are inconsistent with respect to employment discrimination, our company would benefit from a consistent, corporate-wide policy to enhance efforts to prevent discrimination, resolve complaints internally, and ensure a respectful and supportive atmosphere for all employees. Leggett & Platt, Inc. will enhance its competitive edge by joining the growing ranks of companies guaranteeing equal opportunity for all employees.
Company’s Statement in Opposition:
We believe the proposed resolution is unnecessary because Leggett is already an equal opportunity employer with a firm and long-standing commitment to preventing discrimination in the workplace. Leggett’s existing anti-discrimination policy states, “We are committed to equal opportunity, and strive to maintain a workplace free of discrimination based on any factors other than the skills and abilities of our applicants and employees. These principles of equal opportunity should be applied in all aspects of employment including: recruiting, hiring, promotion, training, compensation, termination and disciplinary action.”
We are committed to the highest ethical standards, which include assuring equal employment and promotional opportunitiesfree of discrimination on any basis other than merit and performance-related qualifications. Our policies reflect our high standards, and we implement these policies in our business operations through ongoing training.
We believe our employment record supports our commitment to nondiscrimination. In a company with more than 18,500approximately 19,000 employees, we are not aware of a single charge of discrimination based on sexual orientation or gender identity filed with any city, state or federal agency, nor has the Company received notice from any customer or supplier that its employment policies or practices jeopardize its relationship with them. In addition, for over twenty20 years Leggett has provided employees with access to a national hotline for anonymous reporting of discrimination or harassment in the workplace.
We believe our written policies should specifically list only those types of discrimination prohibited by federal law. This approach furthers the Company’s legal compliance efforts by highlighting categories of illegal discrimination and, thus, helps to reduce our compliance costs. We also believe the addition of sexual orientation and gender identity to the list would result in increased costs by encouraging frivolous lawsuits.
We believe singling out employees by sexual orientation or gender identity (or any other classification not mandated by federal law) would dilute our policy of prohibiting discrimination in any form and would divert attention from our primary goal of a completely non-discriminatory workplace.
We believe that adding sexual orientation to the list of prohibited forms of discrimination may lead to a more expansive agenda, including the addition of domestic partner benefits at a significant cost to the Company.
Leggett’s shareholders defeated similar proposals at the Company’s last fourfive annual meetings. We believe this consistent rejection by shareholders sends a clear message to our Board that Leggett should oppose this unnecessary and costly addition to our nondiscrimination policy.
The Board of Directors recommends that you voteAGAINST this shareholder proposal.
Discretionary Vote on Other Matters
We are not aware of any business to be acted upon at the annual meeting other than the four items described in this proxy statement. Your signed proxy, however, will entitle the persons named as proxy holders to vote in their discretion if another matter is properly presented at the meeting. If one of the director nominees is not available as a candidate for director, the proxy holders will vote your proxy for such other candidate as the Board may nominate.
Compensation Discussion & Analysis
This section discusses ourOur Compensation Committee, consisting of six independent directors, is committed to creating and overseeing an executive compensation program and the rationale for decisions in 2009 affecting the compensation of our named executive officers (or “NEOs”) listed below. For additional detail regarding the amount and form of compensation paid to these executive officers, see the Summary Compensation Table on page 44.
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The Compensation Committee of the Board of Directors (the “Committee”), consisting of five independent directors, sets executive officer compensation. The Committee works with management and is accountable to the full Board of Directors to ensure that our executive compensation program enables us to attract and retain a superior management team dedicatedthat has targeted incentives to buildingbuild long-term value for our shareholders.
To meet this objective,these objectives, the Committee targetshas implemented a total compensation package that:
Is significantly weighted towardEmphasizes performance-based equity;equity over cash compensation.
Sets incentive compensation targets that drive performance and strategic business objectives.
Balances rewards between short-term and long-term performance to ensure sustained excellence.
Retains executive talent by remaining sufficiently competitive with market norms.
Motivates our executive officers to take appropriate business risks, resulting in decisions that are in the best interests of shareholders but do not pose material adverse risks to the organization;
Provides greater rewards for superior performance and accountability for poor performance;
Provides rewards with clear ties to specific business objectives;
Is sufficiently competitive with market norms to encourage retention of executive talent; and
Balances rewards between short-term and long-term performance to ensure sustained excellence.Company.
Executive Summary—Key 2009This Compensation ActionsDiscussion and Analysis describes our executive compensation program and the decisions affecting the compensation of our named executive officers (the“NEOs” ):
David S. Haffner | Chief Executive Officer and President (CEO) | |
Karl G. Glassman | Chief Operating Officer and Executive Vice President (COO) | |
Matthew C. Flanigan | Chief Financial Officer and Senior Vice President (CFO) | |
Paul R. Hauser | Senior Vice President, President—Residential Furnishings Segment | |
Joseph D. Downes, Jr. | Senior Vice President, President—Industrial Materials Segment |
Executive Summary
This section provides an overview of the Committee’s key actions in 2010, the size and structure of our NEOs’ total direct compensation for the year, and the Committee’s pay practices and compensation risk management. Additional details regarding the NEOs’ pay package, the Committee’s annual review of NEO compensation and our equity pay practices are covered in the sections that follow.
Setting 2010 Performance Goals and Compensation Levels.In the face of extreme economic pressures, we took decisive action to right-size production, reduce working capital, cut costs, and maintain strong cash flow during 2009. As a result, our Total Shareholder Return (“TSR”)1 for 2009 ranked in the top 38%wake of the S&P 500recession that crippled economies around the world in 2008 and our cash flow from operations was the second highest in the Company’s history. We also improved both gross margins and earnings before income taxes (“EBIT”), while maintaining a strong balance sheet. These results reflect not only our responses to the uncertain 2009 economy, but also the continued successful execution of a strategic plan we announced in November 2007. For the two-year period following the launch of the new strategic plan (2008 and 2009), our TSR ranked in the top 4% of the S&P 500. Our strong performance during difficult times is evidence of our management team’s leadership and strong commitment to the strategic plan.
The Compensation Committee’s 2009 decisions reflect a departure from normal practice due to the unprecedented volatility of the global economy. The most significant decisions are summarized below; see the referenced sections for additional detail and analysis. In 2009, the Committee:
Committee believed our business would begin to recover in 2010 and set the performance goals for our NEOs accordingly:
• | Maintained the focus on strong Total Shareholder Return ( |
Set higher incentive compensation targets to reflect our expectations for higher earnings and rates of return as demand improved in many markets.
Held NEOs accountable for generating strong cash flow to fund our dividends, capital expenditures and other needs.
Increased the target percentage for the annual incentive by 10% for Mr. Haffner and by 5% for Mr. Glassman and Mr. Flanigan, which further weighted their pay packages toward performance-based compensation.
Raised NEO base salaries by 2.5%, in line with the Company’s merit budget for salaried personnel, with the exception of Mr. Downes whose base salary was increased by 7%, to reflect his segment’s outstanding recent performance.
TSR = (Change in Stock Price + |
(2) | The peer group for our performance stock units (PSUs) consists of those companies in the industrial, materials and consumer discretionary sectors of the S&P 500 and S&P Midcap 400 (about 320 companies). |
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As a result of these decisions, theTotal Direct Compensation.The Committee approved the following 2009 total direct compensation for the NEOs. “Total direct compensation” for this purpose includes base salary, annual incentive award, and equity awards. Annual incentive amounts report the award actually earned, based on 2009 performance. Amounts reported for equity compensation are valued at the grant date fair value of the award, the same valuation method usedNEOs in the Summary Compensation Table and Grants of Plan-Based Awards Tables on pages 44 and 47, respectively. The total compensation for the CEO, CFO and COO appears unusually high relative to the other NEOs because the full grant date fair value of the restricted stock unit (“RSU”) awards granted in connection with their employment agreements, which are multi-year awards providing compensation over a three-year period, are included in this disclosure.2010:
Cash | Equity | |||||||||||||||||
Name | Base Salary | Annual Incentive | Options | PSUs | RSUs | Total | ||||||||||||
David S. Haffner | $ | 900,000 | $ | 1,019,995 | $ | 383,937 | $ | 2,487,716 | $ | 1,906,730 | $ | 6,698,378 | ||||||
Mathew C. Flanigan | 395,000 | 339,702 | 140,409 | 596,516 | 1,021,463 | 2,493,090 | ||||||||||||
Karl G. Glassman | 675,000 | 685,125 | 287,953 | 1,059,466 | 1,498,145 | 4,205,689 | ||||||||||||
Joseph D. Downes, Jr. | 291,800 | 155,821 | 103,732 | 453,100 | 1,004,453 | |||||||||||||
Paul R. Hauser | 320,600 | 192,119 | 113,988 | 380,998 | 1,007,705 |
Cash | Equity | |||||||||||||||||||
Name, Title | Base Salary | Annual Incentive | PSUs | Options | Total Direct Compensation | |||||||||||||||
David S. Haffner, CEO | $922,500 | $1,100,081 | $2,826,252 | $605,517 | $5,454,350 | |||||||||||||||
Karl G. Glassman, COO | 692,000 | 688,194 | 1,233,054 | 454,138 | 3,067,386 | |||||||||||||||
Mathew C. Flanigan, CFO | 405,000 | 348,806 | 676,368 | 221,462 | 1,651,636 | |||||||||||||||
Paul R. Hauser, SVP | 328,600 | 183,688 | 439,200 | 179,736 | 1,131,224 | |||||||||||||||
Joseph D. Downes, Jr., SVP | 312,100 | 135,920 | 499,590 | 163,563 | 1,111,173 |
This table is not a substitute for the Summary Compensation Table required by the SEC and contained on(see page 44,37), but we believe it provides a more accuraterelevant picture of the Committee’s actions.
How Compensation Is Structured
Our executiveStructuring the Mix of Compensation.The Committee uses its discretion to determine the appropriate percentage of variable to fixed compensation, is structured as a mix of fixed and variable compensation paid inwell as the split between cash and equity.equity compensation. The variable elements are “at risk,” meaning that at risk—the ultimate payment and value of the compensation depends on additional performance or service conditions over different periods of time and could result in a zerono payout if those conditions are not met. The primary componentsfollowing table shows the key attributes of our executivethe compensation program,programs we use to drive performance and characteristics of each, are listed below.build long-term shareholder value:
Compensation Type | Fixed/Variable | Cash/Equity |
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Base Salary | Fixed | Cash | ||||||
Annual Incentive | Variable | Cash | ||||||
Performance Stock Units | Variable | Equity | ||||||
Variable | Equity |
For 2009,Sound Pay Practices.Underlying and shaping the Committee’s development of the NEOs’ 2010 compensation package were the Company’s existing compensation practices, including:
Strong emphasis on equity-based compensation to align executive and shareholder interests.
Internal pay relationships that reflect our executives’ differences in responsibilities, contributions and market conditions.
Stock ownership requirements at five times, three times or two times base salary, depending upon the executive’s position.
Use of tally sheets to gauge the total compensation package for the top three executives (CEO, CFO and COO) and for the remaining NEOs breaks downpotential severance payouts, as follows:well as wealth accumulation analysis to monitor long-term alignment with shareholders.
The variable components comprise a significant percentageRegular analysis of the totalfull compensation packageprogram and its components to ensure personal commitmentthey do not create an incentive for excessive risk-taking.
Clawback policies to recover cash and equity-based incentive compensation if the employee engages in activities adverse to the Company’s business priorities.interests of the Company, including fraud or conduct contributing to any financial restatement.
Double-trigger vesting of all incentive awards (other than stock options) following a change-in-control.
No re-pricing of options or equity awards without shareholder approval.
Minimal perquisite compensation, none of which is subject to tax gross-ups.
Additional Investment in Leggett Stock. In addition to having pay packages that are heavily weighted to Leggett equity, for many years our NEOs have voluntarily deferred substantial portions of their cash compensation into Company stock through the Executive Stock Unit Program and the Deferred Compensation Program. Through participation in these programs, in particular the Executive Stock Unit Program in which company equity is held until the executive leaves the Company, our NEOs are further invested in the long-term success of the Company.
Managing Compensation Risk. The Committee uses its discretion to determine the appropriate percentage of variable compensation, and the percentage may vary somewhat from year to year.
The charts below show the cash-to-equity and fixed-to-variable ratios of average NEO compensation in 2009.
By tyingannually reviews whether our executive officerscompensation policies and practices (as well as those that apply to Company stockour employees generally) create risks that are reasonably likely to have a material adverse effect on the Company.
We believe that our compensation programs align our employees’ incentives for risk taking with the long-term best interests of our shareholders. Allocating executive officer compensation across multiple components and weighting the variable compensation elements more heavily the Committee seeks to keep our executives focused on actions that create long-term shareholder value. The Committee also believes this structure reduces the incentive to take excessive risk because it:
Rewards achievement ofon a varietybalanced array of performance measures, thereby minimizing an unbalancedundue focus on any single measure of performance;target.
Is weighted towardStresses long-term performance, discouraging short-term actions that might not lead toendanger long-term value creation; andvalue.
Combines absolute and relative performance measures.
Additional safeguards, such as stock ownership guidelines, caps on incentive payouts and clawback policies, further balance risk and reward.
Our Compensation Components and Programs
Base Salary. Base salary is the only fixed portion of our NEOs’ compensation package. Our executive officers’ salary levels are intended to reflect their specific responsibilities, performance and experience, while taking into account market conditions for compensation. Although base salary makes up less than one-fourth of our NEOs’ combined pay, it provides the foundation for the total compensation package, since the variable compensation components are set as percentages or multiples of base salary:
Name | Base Salary | Annual Incentive: Target Percentage of Base Salary | PSU Awards: Multiple of Base Salary | Option Awards: Multiple of Base Salary | ||||||||||||
David S. Haffner | $922,500 | 90 | % | 2.75X | 3.0X | |||||||||||
Karl G. Glassman | 692,000 | 75 | % | 1.6X | 3.0X | |||||||||||
Matthew C. Flanigan | 405,000 | 65 | % | 1.5X | 2.5X | |||||||||||
Paul R. Hauser | 328,600 | 50 | % | 1.2X | 2.5X | |||||||||||
Joseph D. Downes, Jr. | 312,100 | 50 | % | 1.5X | 2.5X |
The Committee reviews and determines the NEOs’ base salaries (along with the rest of their compensation package) during the annual review, which is discussed on page 33.
Annual Incentive. Our NEOs earn their annual incentive, which is a cash bonus payment made under our Key Officers Incentive Plan (the“Incentive Plan” ), based on the Company’s operating results for the year.
Our executive officers are divided into two groups under the Incentive Plan depending upon their areas of responsibility: (i) corporate participants, whose performance criteria and payouts are based on the Company’s overall results and (ii) profit center participants whose performance targets are set for the operating locations under their control. Our CEO, COO and CFO are corporate participants, given their Company-wide responsibilities, and Mr. Hauser and Mr. Downes, who each head one of our operating segments, are profit center participants. All of our NEOs have individual performance goals (“IPGs” ) as part of their annual incentive.
Each executive officer has a target incentive amount—the amount he would receive if he achieved exactly 100% of each of his performance goals. The target incentive amount is the officer’s base salary multiplied by a target incentive percentage. The NEOs’ target percentages for 2010 were:
Name | Annual Incentive Target Percentage | |||
David S. Haffner | 90 | % | ||
Karl G. Glassman | 75 | % | ||
Matthew C. Flanigan | 65 | % | ||
Paul R. Hauser | 50 | % | ||
Joseph D. Downes, Jr. | 50 | % |
At the end of the year, the target incentive amount is multiplied by the payout percentages for the various performance metrics (each with its own weighting) to determine the annual incentive payout. The annual incentive award plan has additional risk safeguards, includingpayout is calculated as follows and more fully described below:
The 2010 annual incentive payouts for our NEOs were:
Name | Target Incentive Amount | Weighted Payout Percentage | Annual Incentive Payout | |||||||||||||||||
David S. Haffner | $830,250 | X | 132.5 | % | = | $1,100,081 | ||||||||||||||
Karl G. Glassman | 519,000 | X | 132.6 | % | = | 688,194 | ||||||||||||||
Matthew C. Flanigan | 263,250 | X | 132.5 | % | = | 348,806 | ||||||||||||||
Paul R. Hauser | 164,300 | X | 111.8 | % | = | 183,688 | ||||||||||||||
Joseph D. Downes, Jr. | 156,050 | X | 87.1 | % | = | 135,920 |
Performance Metrics.For the 2010 annual incentive, the Committee selected two performance metrics for corporate participants and two for profit center participants, in addition to each executive officer’s IPGs:
Participant Type | Performance Measures (1) | Relative Weight | ||||
Corporate Participants | Return on Capital Employed | 60 | % | |||
(Haffner, Glassman, Flanigan) | Cash Flow | 20 | % | |||
Individual Performance Goals | 20 | % | ||||
Profit Center Participants | Return on Capital Employed | 40 | % | |||
(Hauser, Downes) | Budgeted Earnings | 40 | % | |||
Individual Performance Goals | 20 | % |
(1) | Return on Capital Employed (ROCE) = Earnings Before Interest and Taxes (EBIT) ÷ quarterly average of Net Plant Property and Equipment (PP&E) and Working Capital (excluding cash and current maturities of long-term debt) |
Cash Flow = Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) – Capital Expenditures +/- Change in Working Capital (excluding cash and current maturities of long-term debt)
Budgeted Earnings = Operating Income + Corporate Allocations (general and administrative corporate income and expense allocated on the basis of sales and EBIT) + Intra-company Sales Credits (10% of product cost applied to certain operations that do not transfer products at approximate market-based selling prices)
The Committee chose ROCE for all participants because it rewards operating executives for improved earnings and the efficient use of assets under their supervision, such as reducing inventory, increasing production and managing working capital, and it focuses corporate executives on maximizing returns on key assets. In addition, studies have shown a caphigh correlation between return on incentive award payoutscapital metrics and TSR, a requirement that executives repay awards improperly paid ifkey feature of the CompanyCompany’s strategic plan. Corporate participants were also assessed on cash flow, which is requiredcritical to restate previously reported financial results.fund the Company’s dividend, capital expenditures and ongoing operations. The profit center participants were held accountable for achieving the budgeted earnings for the businesses under their authority.
Individual Performance Goals. In addition to the primaryfinancial metrics described above, the annual incentive includes IPGs that are tailored to each executive’s responsibilities and aligned with the Company’s strategic goals.
The executive officers proposed goals for their respective operations, which were reviewed by Mr. Haffner. The Committee then evaluated the proposals and made adjustments to develop the 2010 IPGs, which concern the following areas of responsibility:
Name | Individual Performance Goals | |
David S. Haffner | Strategic planning, new product development, international organizational structure and staffing, facilitating communication and interaction with the Board | |
Karl G. Glassman | Budget and forecast initiatives, talent management, remediation of internal audit findings | |
Matthew C. Flanigan | Credit facility planning, international accounting and audit administration, IT strategic planning, talent management | |
Paul R. Hauser | Strategic planning, improved internal controls, sales and operations planning, talent management | |
Joseph D. Downes, Jr. | Talent management, development of environmental technologies, utilization and efficiency initiatives, sales and operations planning |
The Committee evaluated the executives’ achievement of the 2010 IPGs at its February 2011 meeting, using the 1 to 5 performance scale detailed in the tables below. The IPGs’ subjective nature causes them not to qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code. The Committee believes the relatively small cost to the Company of any lost tax deduction under 162(m) is outweighed by the strategic and long-term impact of this portion of the annual incentive. Mr. Haffner and Mr. Glassman were the only executive officers whose total compensation resulted in non-deductible incentive compensation in 2010.
Targets and Payout Schedules. Upon selecting the metrics and IPGs, the Committee established performance achievement targets and payout schedules. In setting the payout schedules, the Committee evaluated various payout scenarios before selecting one that strikes an appropriate balance between accountability to shareholders and motivation for participants. The payouts for each portion of the annual incentive are capped at 150%. The NEOs’ receipt of their annual incentive ultimately depends upon how well they perform against the targets.
2010 Corporate Payout Schedule | ||||||||||||||||||||
ROCE | Cash Flow (millions) | Individual Performance Goals (1-5 scale) | ||||||||||||||||||
Achievement | Payout | Achievement | Payout | Achievement | Payout | |||||||||||||||
<19% | 0% | <$260.0 | 0% | 1 – Did not achieve goal | 0% | |||||||||||||||
19% | 50% | $260.0 | 50% | 2 – Partially achieved goal | 50% | |||||||||||||||
21% | 75% | $272.5 | 75% | 3 – Substantially achieved goal | 75% | |||||||||||||||
23% | 100% | $285.0 | 100% | 4 – Fully achieved goal | 100% | |||||||||||||||
25% | 125% | $297.5 | 125% | 5 – Significantly exceeded goal | 125 - 150% | |||||||||||||||
27% | 150% | $310.0 | 150% |
2010 Profit Center Payout Schedule | ||||||||
Earnings & ROCE (Relative to Target) | Individual Performance Goals (1-5 scale) | |||||||
Achievement (1) | Payout | Achievement | Payout | |||||
<80% | 0% | 1 – Did not achieve goal | 0% | |||||
80% | 60% | 2 – Partially achieved goal | 50% | |||||
90% | 80% | 3 – Substantially achieved goal | 75% | |||||
100% | 100% | 4 – Fully achieved goal | 100% | |||||
110% | 120% | 5 – Significantly exceeded goal | 125 -150% | |||||
120% | 140% | |||||||
125% | 150% |
(1) | As a profit center participant, Mr. Hauser’s target for a 100% payout on the budgeted earnings for his segment was $216 million, and the target for a 100% payout on ROCE achievement was 38.4%. Mr. Downes’ budgeted earnings target was $90 million and his ROCE target was 43.5%. |
Equity Awards. Each year, we grant performance stock units (“PSUs” ) to our senior managers and stock options to a broad group of employees. The PSUs and stock options tie our executive officers’ pay to the Company’s performance and shareholder returns. The payouts from these equity grants reflect our philosophy that executive compensation should provide greater rewards for superior performance, as well as accountability for underperformance.
Performance Stock Units.Leggett’s long-term strategic plan emphasizes our relative performance versus peer companies, and the Committee uses PSUs to drive and reward those results. Beginning in 2008, the Committee granted annual awards to a small group of senior management, including the NEOs. The number of PSUs granted to
each executive is determined by multiplying his base salary by the PSU award multiple (see table on page 27), and dividing this amount by the grant date fair value of the Company’s stock. The PSU award multiples are set by the Committee with the intent to place our total long-term incentive compensation below the market median.
The PSUs have a three-year performance period, and the payout is based on the Company’s Total Shareholder Return (“TSR” ) relative to the TSR of a peer group. This peer group consists of all the companies in the industrial, materials and consumer discretionary sectors of the S&P 500 and S&P Midcap 400 (about 320 companies). Although Leggett is a member of the S&P 500, our market capitalization is significantly below that group’s median, so the Committee included the S&P Midcap 400 in the peer group as well. In addition, nearly all of our business units fall into these industry sectors represented in the peer group. At the end of the three-year performance period, a percentage of each officer’s PSU base award is payable depending on how Leggett’s TSR ranks relative to that of the peer group.
PSU Payout Schedule
(based on Peer Group TSR)
Performance Level | Percentile Rank | Payout % | ||
Threshold | 25th | 25% | ||
Target | 50th | 75% | ||
Maximum | >75th | 175% |
The initial PSU awards, granted in January 2008, vested on December 31, 2010. Leggett’s TSR for the three-year period from 2008 to 2010 was in the 84th percentile of the peer group, resulting in the maximum payout of 175% of the base award. Our TSR ranks in the 40th percentile for the 2009 PSU awards with one year remaining in the performance period, and our TSR for the 2010 PSU awards ranks in the 37th percentile with two years remaining. The 2008 and 2009 PSU awards are paid out entirely in shares of Company stock; however, the 2010 awards will be paid out 35% in cash and 65% in Company stock.
Stock Options.The annual grant of stock options is one of our longer-running compensation practices, although its share of the NEOs’ total compensation package has decreased over the years as the PSUs have gained importance. The Committee believes that options align shareholder and executive wealth, since an option’s value is contingent on and directly proportional to increases in the Company’s stock price over an extended vesting period and option term.
Our options have a 10-year term and vest in three annual installments beginning 18 months after the grant date. Options tend to have a longer performance horizon, which complements the shorter horizons of our other variable compensation components (annual incentive—one year; PSUs—three years).
The number of options granted to each executive is determined based on the grant date fair value as a multiple of base salary (3X for our CEO and COO; 2.5X for the other NEOs). The option multiple for each executive position has remained constant for several years and reflects the levels of management responsibility.
Restricted Stock Units.In connection with the employment agreements the Company entered into with Mr. Haffner, Mr. Glassman and Mr. Flanigan in 2009, each was awarded restricted stock units (“RSUs” ) that vested 25% on the date of their agreements and 25% on each of the next three anniversaries. The Committee used these stand-alone awards to retain these key executives may participateduring a crucial period in a tax-qualified discount stock purchasethe execution of our strategic plan and a Section 401(k) retirement plan offeredin response to employees generally. We also offer executives two non-qualified equity-based programs,outside employment offers. It is not the Committee’s standard policy to grant restricted stock to our executive officers. These are the only outstanding time-vested RSUs the Company has granted to the NEOs; all other restricted stock is performance based.
Other Compensation Programs. The NEOs have voluntarily deferred substantial portions of their cash compensation into Company equity through the Executive Stock Unit Program (the“ESU ProgramProgram””) and the Deferred Compensation Program.Program for many years, building an additional long-term stake in the Company. The Company also provides a 401(k) and non-qualified excess plan in which some of our executives choose to participate.
Executive Stock Unit Program. All our NEOs have significant holdings in our ESU and Deferred Compensation Programs are intended to encourage executives to convert their cash compensation into equity.Program, our primary executive retirement plan. The ESU Program is our primary executive retirement plan, and is payablecurrently funded entirely in Company stock units; however, participant contributions will be allocated to diversified investments starting in 2011. ESU accounts are held until the executive terminates employment.
The ESU Program is a non-qualified retirement program that allows executives to make pre-tax deferrals of up to 10% of their compensation through payroll deduction to acquire Company stock units at a 15% discount to market. Dividends are credited to executives’ accounts as stock units, also at a 15% discount. We match 50% of the executive’s contribution and may match another 50% if the Company meets annual ROCE targets linked to the Incentive Plan. Matching contributions vest once employees have participated in the ESU Program for five years.
Deferred Compensation Program. The Deferred Compensation Program allows key managers to defer salary, incentive awards and other cash compensation in exchange for any combination of the following:
Stock units with dividend equivalents, acquired at a 20% discount to the fair market value of our common stock on the dates the compensation otherwise would have been paid or the dividends reinvested.
At-market stock options with the underlying shares of Company stock. These programs are describedcommon stock having an initial market value five times the amount of compensation forgone, with an exercise price equal to the closing market price of our common stock on the last business day of the year.
Cash deferrals with an interest rate intended to be slightly higher than otherwise available for comparable investments.
Participants who elect a cash or stock unit deferral may elect to receive distributions in a lump sum or in annual installments. Distribution payouts must begin no more detailthan 10 years from the effective date of the deferral and all amounts subject to the deferral must be distributed within 10 years of the first distribution payout. Participants who elect at-market stock options, which have a 10 year term, may exercise them approximately 15 months after the start of the year in which the deferral was made.
Retirement K and Excess Plan.The Company’s defined benefit Retirement Plan was frozen in 2006 (see description on page 52. Compensation earned through44). Employees who had previously participated in the Retirement Plan were offered a replacement benefit: a tax-qualified defined contribution Section 401(k) Plan, called the“Retirement K.” The Retirement K includes an age-weighted Company matching contribution designed to replicate the benefits pre-empted by the Retirement Plan freeze.
Many of our officers cannot fully participate in the Retirement K due to limitations imposed by the Internal Revenue Code or the Employee Retirement Income Security Act, or resulting from their participation in these programs is primarily reportedthe Deferred Compensation Program. Consequently, we maintain a non-qualified“Retirement K Excess Plan” which permits affected executives to receive the full matching benefit they would otherwise have been entitled to under the Retirement K. Amounts earned in the All Other Compensation columnRetirement K Excess Plan are paid out in cash no later than March 15 of the Summaryfollowing year and are eligible for the Deferred Compensation Table on page 44.Program.
Perquisites and Personal Benefits. The Committee believes perquisites should not be a significant part of our executive compensation program. In 2010, perquisites were less than 1% of each NEO’s total compensation. Accordingly, we believe these benefits are appropriate when viewed in the overall context of our executive compensation program.
How Compensation Decisions Are MadePSU Payout Schedule
The Committee uses its subjective discretion to decide the type and appropriate mix of compensation elements, to set performance target levels and payout schedules for incentive compensation, and to determine the level of salary and incentive awards for each executive officer. The Committee has the authority to engage its own external compensation consultant as needed, but it did not do so in 2009. The Committee reports its actions to the Board at each Board meeting. The full Board must review and approve certain actions, including employment and severance benefit agreements and amendments to stock plans.
John Moore, our Chief Legal & Human Resources Officer, provides any compensation data, research, and analysis the Committee may request. In addition to Mr. Moore, the Committee invites Mr. Haffner, our CEO, to attend Committee meetings. These officers participate in discussions about executive compensation matters, but they have no vote on Committee actions. The Committee frequently meets in executive session.
Mr. Haffner recommends to the Committee compensation levels for the other executive officers, including salary increases, equity award values, and incentive target levels, (based on his assessment of each executive’s performance and level of responsibility. The Committee generally accepts Mr. Haffner’s recommendations, but can make any adjustments it deems appropriate. The Committee meets in executive session without management present to discuss performance and set compensation levels for Mr. Haffner.
Normally, the Committee conducts a comprehensive review of executive officer compensation in March every year. Due to the economic uncertainty in 2009, the Committee suspended its normal review, keeping base salaries and incentive targets at the 2008 levels. The Committee did review a wealth accumulation analysis for all executive officers and confirmed their compliance with stock ownership guidelines.
Compensation Differences among Executives and the Role of Individual Performance
The Committee does not set the compensation level for any executive officer as an absolute percentage of any other executive position, but it does consider internal pay relationships. Compensation decisions involve a high degree of discretion and are influenced by:
The level of responsibility for each position relative to other executive positions within the Company
How the compensation package for that position compares to the competitive market for similar positions
The executive’s individual contributions
The executive’s tenure and experience in the position
The need to retain the executive
Any decisions to adjust compensation in recognition of individual excellence or weakness are subjective and are most likely to be reflected in the executive officer’s base salary. In addition, 20% of our executive officers’ bonus opportunity is determined by achievement of individual performance goals tied to specific business objectives within their scope of authority.
Base salaries, as well as annual incentive targets and stock option multiples, are higher for our CEO and COO in recognition of their greater level of authority and responsibility. The table below compares Mr. Haffner’s annual compensation package to that of the other NEOs. The differential is greater this year between the top three officers and the Senior Vice Presidents due to the one-time, multi-year equity awards granted to our CEO, CFO and COO in connection with their employment agreements. The Committee believes the internal relationships appropriately reflect differences in responsibility, contribution and market conditions between the executives.
Name | Position | CEO Multiple- Fixed Comp | CEO Multiple- Variable Comp | |||
Matthew C. Flanigan | Chief Financial Officer | 2.1 | 2.9 | |||
Karl G. Glassman | Chief Operating Officer | 1.3 | 1.7 | |||
Joseph D. Downes, Jr. | Senior Vice President | 4.9 | 7.4 | |||
Paul R. Hauser | Senior Vice President | 4.5 | 7.7 |
Compensation Elements
Base Salary. Base salary is the Company’s basic agreement with its executive officers for compensation in exchange for services and is intended to be reasonably competitive with the companies with which we may compete for executive talent. As previously discussed, the Committee did not conduct any compensation market research in connection with its decision to freeze base salaries in 2009.
Messrs. Haffner, Flanigan and Glassman have the option to terminate their respective employment agreements without further obligation to the Company if they do not receive a salary increase for any year, unless the failure to receive an increase was due to a company-wide salary freeze applicable for the year.
Annual Incentive Awards. We make annual incentive awards to our executive officers under our 2009 Key Officers Incentive Plan (the “Plan”) based on the Company’s operating results for the year. The Plan contains two award formulas, one for Corporate participants and one for Profit Center participants. Messrs. Haffner, Flanigan and Glassman are Corporate participants, while Messrs. Downes and Hauser are Profit Center participants. The different formulas tie participants’ award payouts to the portion of the Company’s performance they most directly affect. Corporate awards are based on the Company’s overall performance, and Profit Center awards are based on the achievement of targets set for the operating locations under the respective executive’s control. Both award formulas include individual performance goals.
A participant’s award is calculated as a percentage of his base salary (the “Target Percentage”), multiplied by the appropriate payout percentage for each performance metric. Generally, Target Percentages are based on the executive officer’s position in the Company: the higher the position, the higher the Target Percentage. The NEOs’ Target Percentages for 2009, which were unchanged from 2008, were as follows:
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Performance Criteria. In addition to individual performance goals, the Committee chose three performance measures for 2009 incentive awards: Return on Capital Employed (“ROCE”), cash flow, and achievement of budgeted earnings, as illustrated below. The Committee chose the ROCE measure because it rewards operating executives for the efficient use of assets under their supervision, such as reducing inventory, increasing production, and managing working capital, and it focuses corporate executives on maximizing returns on key assets. In addition, studies have shown a high correlation between return on capital metrics and TSR, a key feature of the Company’s strategic plan. Cash flow is critical, especially in the current economy, to fund the Company’s dividend, capital expenditures and ongoing operations. Finally, the budgeted earnings measure holds Profit Center participants accountable for the financial and operational outcomes most closely within their control.Peer Group TSR)
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ForThe initial PSU awards, granted in January 2008, vested on December 31, 2010. Leggett’s TSR for the first time, we included individual performance goals, both qualitative and quantitative,three-year period from 2008 to 2010 was in the 84th percentile of the peer group, resulting in the maximum payout of 175% of the base award. Our TSR ranks in the 40th percentile for the 2009 PSU awards with one year remaining in the performance period, and our TSR for the 2010 PSU awards ranks in the 37th percentile with two years remaining. The 2008 and 2009 PSU awards are paid out entirely in shares of Company stock; however, the 2010 awards will be paid out 35% in cash and 65% in Company stock.
Stock Options.The annual incentive awards. Executive officers worked with their managers to determinegrant of stock options is one of our longer-running compensation practices, although its share of the appropriate goals for their respective operations. Mr. Haffner then presentedNEOs’ total compensation package has decreased over the draft goals toyears as the Committee for review and approval.PSUs have gained importance. The Committee believes the extensive process of developing the goals was extremely valuable in focusing the executives on their specific contributions to the Company’s strategic goals. The subjective nature of the individual goals causes them not to qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code. The Committee favored the strategic and long-term impact of this plan design, given the relatively small cost to the Company of any lost tax deduction. Mr. Haffner and Mr. Glassman were the only executive officers whose total compensation resulted in non-deductible incentive compensation in 2009.
The respective individual performance goals for each NEO encompass the following areas of responsibility:
David S. Haffner—strategic planning, talent management/succession planning, and new product development
Matthew C. Flanigan—continuous improvement in corporate departments, implementation of certain S&P 500 best practices, and talent management
Karl G. Glassman—working capital reductions, sales and operations planning, and remediation of internal audit findings
Joseph D. Downes, Jr.—scrap-to-rod value stream capture, development of environmental technologies, and sales and operations planning
Paul R. Hauser—working capital and days inventory-on-hand reductions, strategic planning, and sales and operations planning
Performance Targets. Incentive awards become payable in accordance with the following schedules, depending on the percentage of achievement of each measure. In setting the payout schedule, the Committee evaluated several payout scenarios and chose one that it believed struck an appropriate balance between accountability to shareholders and incentive for participants. Payouts are capped at 150% for both Corporate and Profit Center participants.
2009 Corporate Payout Schedule | ||||||||||||
ROCE | Cash Flow (millions) | Individual Goals (1-10 scale) | ||||||||||
Achievement | Payout | Achievement | Payout | Achievement | Payout | |||||||
<14.1% | 0% | <$310 | 0 | % | <4 | 0 | % | |||||
14.10% | 50% | $310 | 50 | % | 4 | 50 | % | |||||
15.60% | 75% | $326.25 | 75 | % | 6 | 75 | % | |||||
17.00% | 100% | $342.50 | 100 | % | 8 | 100 | % | |||||
18.40% | 125% | $358.25 | 125 | % | 9 | 125 | % | |||||
19.80% | 150% | $375 | 150 | % | 10 | 150 | % |
2009 Profit Center Payout Schedule | |||||||
Earnings & ROCE (Relative to Target) | Individual Goals (1-10 scale) | ||||||
Achievement | Payout | Achievement | Payout | ||||
<80% | 0% | <4 | 0 | % | |||
80% | 60% | 4 | 50 | % | |||
90% | 80% | 6 | 75 | % | |||
100% | 100% | 8 | 100 | % | |||
110% | 120% | 9 | 125 | % | |||
120% | 140% | 10 | 150 | % | |||
125% | 150% |
For Mr. Downes, the aggregate earnings target for his operations was $88.7 million and the ROCE target was 33.1%. Mr. Hauser’s adjusted aggregate earnings target was $202.6 million and the adjusted aggregate ROCE target was 28.5%. The adjustments are described below.
Generally, target-setting for the Profit Center participants occurs each December in connection with the budget process. Targets for Corporate participants are determined in February and approved in March. Because of this timing difference, the continued economic deterioration of the global economy that occurred in late 2008 and early 2009 resulted in the target levels approved for Corporate participants more accurately reflecting the economic conditions.
At year end, these target differences resulted in an unwarranted and inequitable disparity between the two types of participants. For 2009, the Company achieved 19.9% ROCE and cash flow of $498.6 million, resulting in a 150% payout level on those targets for Corporate participants. Achievement against the Profit Center targets was significantly less. To mitigate this disparity and recognize the significant contributions of Profit Center participants, the Committee approved a 20% reduction in Profit Center target levels. This adjustment applied to all Profit Center participants, except that a small number of participants in certain business units received a smaller reduction or no reduction, based on circumstances specific to those operations. Mr. Hauser was the only NEO affected by this decision, as the adjustment did not apply to Mr. Downes’ operations. As a result, Mr. Hauser’s incentive bonus increased by approximately $55,000.
Performance Payouts. The payout calculations for 2009 performance are listed below.
Name | Metric | Base Salary | Target % | Weight | Payout % | Payout | |||||||||||||||||||
David S. Haffner | ROCE | $ | 900,000 | x | 80 | % | x | 60 | % | x | 150 | % | = | $ | 648,000 | ||||||||||
Cash Flow | 900,000 | x | 80 | % | x | 20 | % | x | 150 | % | = | 216,000 | |||||||||||||
Individual Goals | 900,000 | x | 80 | % | x | 20 | % | x | 108 | % | = | 155,995 | |||||||||||||
Total Incentive Award | $ | 1,019,995 | |||||||||||||||||||||||
Matthew C. Flanigan | ROCE | $ | 395,000 | x | 60 | % | x | 60 | % | x | 150 | % | = | $ | 213,300 | ||||||||||
Cash Flow | 395,000 | x | 60 | % | x | 20 | % | x | 150 | % | = | 71,100 | |||||||||||||
Individual Goals | 395,000 | x | 60 | % | x | 20 | % | x | 117 | % | = | 55,302 | |||||||||||||
Total Incentive Award | $ | 339,702 | |||||||||||||||||||||||
Karl G. Glassman | ROCE | $ | 675,000 | x | 70 | % | x | 60 | % | x | 150 | % | = | $ | 425,250 | ||||||||||
Cash Flow | 675,000 | x | 70 | % | x | 20 | % | x | 150 | % | = | 141,750 | |||||||||||||
Individual Goals | 675,000 | x | 70 | % | x | 20 | % | x | 125 | % | = | 118,125 | |||||||||||||
Total Incentive Award | $ | 685,125 | |||||||||||||||||||||||
Joseph D. Downes, Jr. | ROCE | $ | 291,800 | x | 50 | % | x | 40 | % | x | 125 | % | = | $ | 72,950 | ||||||||||
Earnings | 291,800 | x | 50 | % | x | 40 | % | x | 92 | % | = | 53,691 | |||||||||||||
Individual Goals | 291,800 | x | 50 | % | x | 20 | % | x | 100 | % | = | 29,180 | |||||||||||||
Total Incentive Award | $ | 155,821 | |||||||||||||||||||||||
Paul R. Hauser | ROCE | $ | 320,600 | x | 50 | % | x | 40 | % | x | 130 | % | = | $ | 83,356 | ||||||||||
Earnings | 320,600 | x | 50 | % | x | 40 | % | x | 114 | % | = | 72,775 | |||||||||||||
Individual Goals | 320,600 | x | 50 | % | x | 20 | % | x | 112 | % | = | 35,987 | |||||||||||||
Total Incentive Award | $ | 192,119 |
Equity Awards. We grant our annual equity awards on the first business day of the year. Any off-cycle grants (for new hires, promotions, etc.) are made at the end of each month. The Company does not grant equity awards when in possession of material inside information.
We grant stock options to a broad group of employee partners annually. We believe that options align shareholder and executive wealth, since an option’s value is contingent on and directly proportional to increases in the Company’s stock price. price over an extended vesting period and option term.
Our options have a 10-year term and vest in three annual installments beginning 18 months after the grant date. Even though they are fully vested after 3 1/2 years, optionsOptions tend to have a longer-termlonger performance horizon, which complements the shorter horizons of our other variable compensation components (incentive bonus—annual;(annual incentive—one year; PSUs—three years).
Beginning in 2008, the Committee began granting PSUs to a small group of senior management, including the NEOs. The PSU awards are directly linked to our strategic plan, rewarding achievement of TSR relative to a group of peer companies (as identified below). These PSU awards constitute a much higher percentage of the equity component of the compensation package than options (see charts on page 33) because the Committee places greater importance on the TSR performance measure.
The option and PSU awards tie our executive officers’ pay to the Company’s performance and shareholder returns. This is consistent with our philosophy that executive compensation should provide greater rewards for superior performance, as well as accountability for underperformance.
The Committee discusses potential equity awards at length at its November meeting, and then approves the final option and PSU grants during a telephone meeting on the first business day of the year. The equity awards reported in the Summary Compensation Table and Grants of Plan Based Awards Table on pages 44 and 47, respectively, were granted on January 2, 2009. The exercise price of the options is equal to the closing market price of the Company’s common stock on the option grant date.
The Committee monitors the value of past equity awards to gain an overall assessment of how current compensation decisions fit with past practices and to determine the executives’ accumulated variable compensation. As of the 2009 grant date, substantially all of the NEOs’ annual stock option grants were “underwater,” meaning they had no value at the then-current market price of our common stock. The fact that the value of past equity awards was well below expected levels did not influence the Committee’s 2009 executive compensation decisions generally, but it did influence the decision to award RSUs in connection with the new employment agreements for Messrs. Haffner, Flanigan, and Glassman, discussed on page 41.
The number of option shares and PSUsoptions granted to each executive is determined based on the grant date fair value as a multiple of base salary as set forth below.
Name | Position | 2009 Option Multiple | 2009 PSU Multiple | |||
David S. Haffner | Chief Executive Officer | 3.0 | 2.75 | |||
Matthew C. Flanigan | Chief Financial Officer | 2.5 | 1.5 | |||
Karl G. Glassman | Chief Operating Officer | 3.0 | 1.6 | |||
Joseph D. Downes, Jr. | Senior Vice President | 2.5 | 1.5 | |||
Paul R. Hauser | Senior Vice President | 2.5 | 1.2 |
(3X for our CEO and COO; 2.5X for the other NEOs). The option multiple for each executive position has remained constant for several years and reflects the different levels of management responsibility. When the PSU awards were introduced in 2008, the multiples were determined based on broad market data analyzed in
Restricted Stock Units.In connection with the Committee’s 2007 annual compensation reviewemployment agreements the Company entered into with Mr. Haffner, Mr. Glassman and were set at levelsMr. Flanigan in 2009, each was awarded restricted stock units (“RSUs” ) that placed our total long-term incentive (“LTI”) compensation belowvested 25% on the market median.date of their agreements and 25% on each of the next three anniversaries. The Committee usually monitorsused these stand-alone awards to retain these key executives during a crucial period in the execution of our LTIstrategic plan and in response to outside employment offers. It is not the Committee’s standard policy to grant restricted stock to our executive officers. These are the only outstanding time-vested RSUs the Company has granted to the NEOs; all other restricted stock is performance based.
Other Compensation Programs. The NEOs have voluntarily deferred substantial portions of their cash compensation relative to current market data but did not conductinto Company equity through the Executive Stock Unit Program (the“ESU Program” ) and the Deferred Compensation Program for many years, building an additional long-term stake in the Company. The Company also provides a review in 2009 because it froze compensation at 2008 levels.
We do not require a post-exercise holding period for option or PSU shares (unless stock ownership guidelines have not been met) because the Committee believes our ESU Program,401(k) and non-qualified excess plan in which allsome of our executives choose to participate.
Executive Stock Unit Program. All our NEOs have significant holdings effectively accomplishes the same purpose. Thein our ESU Program, our primary executive retirement plan,plan. The ESU Program is denominatedcurrently funded entirely in Company stock units. Participants do not receiveunits; however, participant contributions will be allocated to diversified investments starting in 2011. ESU accounts are held until the executive terminates employment.
The ESU Program is a non-qualified retirement program that allows executives to make pre-tax deferrals of up to 10% of their compensation through payroll deduction to acquire Company stock they accumulateunits at a 15% discount to market. Dividends are credited to executives’ accounts as stock units, also at a 15% discount. We match 50% of the executive’s contribution and may match another 50% if the Company meets annual ROCE targets linked to the Incentive Plan. Matching contributions vest once employees have participated in the ESU Program until they terminate employment, so executives buildfor five years.
Deferred Compensation Program. The Deferred Compensation Program allows key managers to defer salary, incentive awards and other cash compensation in exchange for any combination of the following:
Stock units with dividend equivalents, acquired at a 20% discount to the fair market value of our common stock on the dates the compensation otherwise would have been paid or the dividends reinvested.
At-market stock options with the underlying shares of common stock having an increasing stakeinitial market value five times the amount of compensation forgone, with an exercise price equal to the closing market price of our common stock on the last business day of the year.
Cash deferrals with an interest rate intended to be slightly higher than otherwise available for comparable investments.
Participants who elect a cash or stock unit deferral may elect to receive distributions in Company stock during theira lump sum or in annual installments. Distribution payouts must begin no more than 10 years from the effective date of the deferral and all amounts subject to the deferral must be distributed within 10 years of service.the first distribution payout. Participants who elect at-market stock options, which have a 10 year term, may exercise them approximately 15 months after the start of the year in which the deferral was made.
PSU awardsRetirement K and Excess Plan.The Company’s defined benefit Retirement Plan was frozen in 2006 (see description on page 44). Employees who had previously participated in the Retirement Plan were offered a replacement benefit: a tax-qualified defined contribution Section 401(k) Plan, called the“Retirement K.” The Retirement K includes an age-weighted Company matching contribution designed to replicate the benefits pre-empted by the Retirement Plan freeze.
Many of our officers cannot fully participate in the Retirement K due to limitations imposed by the Internal Revenue Code or the Employee Retirement Income Security Act, or resulting from their participation in the Deferred Compensation Program. Consequently, we maintain a non-qualified“Retirement K Excess Plan” which permits affected executives to receive the full matching benefit they would otherwise have been entitled to under the Retirement K. Amounts earned in the Retirement K Excess Plan are paid out in sharescash no later than March 15 of Company stock at the endfollowing year and are eligible for the Deferred Compensation Program.
Perquisites and Personal Benefits. The Committee believes perquisites should not be a significant part of a three-year performance period, based on the Company’s TSR relative to the TSRour executive compensation program. In 2010, perquisites were less than 1% of a group of peer companies. This peer group consists of all the companieseach NEO’s total compensation. Accordingly, we believe these benefits are appropriate when viewed in the industrial, materials and consumer discretionary sectors of the S&P 500 and S&P Midcap 400 (323 companies as of December 31, 2009). We selected this peer group because nearly alloverall context of our business units fall into these industry sectors.
As shown below, a percentage of each executive officer’s PSU base award becomes payable at the end of the three-year performance period, based on how our TSR ranks relative to the TSR of the peer group TSR. Performance for the 2008 and 2009 awards is currently at the 95th percentile and the 52nd percentile, respectively.compensation program.
PSU Payout Schedule
(based on Peer Group TSR)
Performance | Percentile Rank | Payout % | ||
Threshold |
| |||
Target | 50th | 75% | ||
Maximum | ||||
The initial PSU awards, granted in January 2008, vested on December 31, 2010. Leggett’s TSR for the three-year period from 2008 to 2010 was in the 84th percentile of the peer group, resulting in the maximum payout of 175% of the base award. Our TSR ranks in the 40th percentile for the 2009 PSU awards with one year remaining in the performance period, and our TSR for the 2010 PSU awards ranks in the 37th percentile with two years remaining. The 2008 and 2009 PSU awards are paid out entirely in shares of Company stock; however, the 2010 awards will be paid out 35% in cash and 65% in Company stock.
Stock Options.The annual grant of stock options is one of our longer-running compensation practices, although its share of the NEOs’ total compensation package has decreased over the years as the PSUs have gained importance. The Committee believes that options align shareholder and executive wealth, since an option’s value is contingent on and directly proportional to increases in the Company’s stock price over an extended vesting period and option term.
Our options have a 10-year term and vest in three annual installments beginning 18 months after the grant date. Options tend to have a longer performance horizon, which complements the shorter horizons of our other variable compensation components (annual incentive—one year; PSUs—three years).
The number of options granted to each executive is determined based on the grant date fair value as a multiple of base salary (3X for our CEO and COO; 2.5X for the other NEOs). The option multiple for each executive position has remained constant for several years and reflects the levels of management responsibility.
Restricted Stock Units.In connection with the employment agreements the Company entered into with Mr. Haffner, Mr. Glassman and Mr. Flanigan in 2009, each was awarded restricted stock units (“RSUs” ) that vested 25% on the date of their agreements and 25% on each of the next three anniversaries. The Committee used these stand-alone awards to retain these key executives during a crucial period in the execution of our strategic plan and in response to outside employment offers. It is not the Committee’s standard policy to grant restricted stock to our executive officers. These are the only outstanding time-vested RSUs the Company has granted to the NEOs; all other restricted stock is performance based.
Other Compensation Programs. As previously described, theThe NEOs may participate in the ESU Program and Deferred Compensation Program, described in more detail on page 52. Our executive officers have voluntarily deferred substantial portions of their cash compensation into Company equity through both of these programsthe Executive Stock Unit Program (the“ESU Program” ) and the Deferred Compensation Program for many years, effectively ensuring that they have abuilding an additional long-term stake in the Company. The Company also provides a 401(k) and non-qualified excess plan in which some of our executives choose to participate.
Executive Stock Unit Program. All our NEOs have significant holdings in our ESU Program, our primary executive retirement plan. The ESU Program is currently funded entirely in Company stock units; however, participant contributions will be allocated to diversified investments starting in 2011. ESU accounts are held until the executive terminates employment.
The ESU Program is a non-qualified retirement program that allows executives to make pre-tax deferrals of up to 10% of their compensation through payroll deduction to acquire Company stock units at a 15% discount to market. Dividends are credited to executives’ accounts as stock units, also at a 15% discount. We match 50% of the executive’s contribution and may match another 50% if the Company meets annual ROCE targets linked to the Incentive Plan. Matching contributions vest once employees have participated in the ESU Program for five years.
Deferred Compensation Program. The Deferred Compensation Program allows key managers to defer salary, incentive awards and other cash compensation in exchange for any combination of the following:
Stock units with dividend equivalents, acquired at a 20% discount to the fair market value of our common stock on the dates the compensation otherwise would have been paid or the dividends reinvested.
At-market stock options with the underlying shares of common stock having an initial market value five times the amount of compensation forgone, with an exercise price equal to the closing market price of our common stock on the last business day of the year.
Cash deferrals with an interest rate intended to be slightly higher than otherwise available for comparable investments.
Participants who elect a cash or stock unit deferral may elect to receive distributions in a lump sum or in annual installments. Distribution payouts must begin no more than 10 years from the effective date of the deferral and all amounts subject to the deferral must be distributed within 10 years of the first distribution payout. Participants who elect at-market stock options, which have a 10 year term, may exercise them approximately 15 months after the start of the year in which the deferral was made.
Retirement K and Excess Plan.The Company’s defined benefit Retirement Plan was frozen in 2006 (see description on December 31, 2006.page 44). Employees who had previously participated in the Retirement Plan were offered a replacement benefit: a tax-qualified defined contribution Section 401(k) Plan, called the“Retirement KK.”.” The Retirement K includes an age-weighted Company matching contribution designed to replicate the future benefitbenefits pre-empted by the Retirement Plan freeze.
NEOsMany of our officers cannot fully participate in the Retirement K due to limitations imposed by the Internal Revenue Code or the Employee Retirement Income Security Act, or resulting from their participation in the Deferred Compensation Program. Consequently, we maintain a non-qualified“Retirement K Excess PlanPlan”” which permits affected executives to receive the full matching benefit they would otherwise have been entitled to under the Retirement K. The Company’s pensionAmounts earned in the Retirement K Excess Plan are paid out in cash no later than March 15 of the following year and retirement programs are described on page 51.eligible for the Deferred Compensation Program.
Perquisites and Personal Benefits. The CompanyCommittee believes perquisites should not be a significant part of our executive compensation program. In 2009, the aggregate value of2010, perquisites averagedwere less than 1% of each NEO’s total compensation, the bulk of which is attributable to the use of a Company car.compensation. Accordingly, we believe these benefits are appropriate when viewed in the overall context of our total executive compensation program.
How Compensation Decisions Are Made
The Committee uses its discretion to determine the type and appropriate mix of compensation elements; to select performance measures, target levels and payout schedules for incentive compensation; and to determine the level of salary and incentive awards for each executive officer. The Committee has the authority to engage its own external compensation consultant as needed, but it did not do so in 2010. The Committee may delegate its duties and responsibilities to one or more Committee members or Company officers, as it deems appropriate, but may not
delegate authority to non-members for any action involving executive officers. The Committee reports its actions to the Board at each Board meeting; the full Board must review and approve certain actions, including employment and severance benefit agreements and amendments to stock plans.
John Moore, the Chief Legal & Human Resources Officer, provides compensation data, research and analysis that the Committee may request. In addition to Mr. Moore, the Committee invites Mr. Haffner, our CEO, to attend Committee meetings; however, the Committee meets in executive session without management present to discuss Mr. Haffner’s performance and set his compensation.
Mr. Haffner recommends to the Committee compensation levels for the other executive officers, including salary increases, annual incentive targets and equity award values, based on his assessment of each executive’s performance and level of responsibility. The Committee generally accepts Mr. Haffner’s recommendations, but makes any adjustments it deems appropriate. The Committee frequently meets in executive session.
The Annual Review and Use of Compensation Data
The Committee performs the“Annual Review” in March of each year. During the Annual Review, the Committee evaluates the four primary elements of the annual compensation package for executive officers: base salary, annual incentive, PSU and stock options awards. Based on this review, the Committee approves any base salary increases and sets the annual incentive target percentage for each executive officer. As discussed above, increases to base salary affect all four elements of the compensation package, because the variable compensation elements (annual incentive, PSUs and stock options) are each set as a multiple of base salary. Equity award sizes are reviewed again in November, prior to the grant of PSUs and stock options on the first business day of each year.
Prior to the Annual Review, the Committee reviews the total compensation package for the preceding year as described in the proxy statement. This review includes secondary compensation elements, such as voluntary equity plans and retirement plans, as well as potential payments upon termination or change in control. Decisions about secondary and post-termination compensation elements are made at various times throughout the year as the plans or agreements giving rise to the compensation are reviewed.
In connection with the 2010 Annual Review, the Committee evaluated the following data presented by Mr. Moore to develop a picture of each executive’s compensation package in the context of past decisions, internal pay relationships and the external market:
Compensation data from three surveys published by national consulting firms (described more fully below).
Current annual compensation for each executive officer.
The potential value of each executive officer’s compensation package under three Company performance scenarios (threshold, target and outstanding performance).
The cash-to-equity ratio and fixed-to-variable pay ratio of each executive officer’s compensation package.
A report on each executive’s compliance with our stock ownership requirements.
A summary of each executive’s accumulated wealth from outstanding equity awards, including a sensitivity analysis of the impact of changes in our stock price.
We have not compared our compensation to that of a specific peer group of companies. Given the complexity of our markets and the diversity of our product lines, we have not identified a large enough group of public companies that are enough like us to make such a comparison meaningful and accurate. Instead, for external market data, we used survey data disclosing 2009 compensation published by Watson Wyatt (“Survey Report of Top Management Compensation”), Towers Perrin (“Comp Online—Executive Database”) and Hewitt (“Total Compensation Measurement”) (collectively, the“2010 Survey Data” ). The use of multiple surveys enables us to develop a more balanced picture of the compensation market.
We sought the largest sample size possible from each survey, given that the validity of data increases with sample size. The Committee uses data from a broad base of companies that most closely match our revenues and the NEOs’ job descriptions. The industry groups and sample sizes of the three surveys with respect to the NEO positions were as follows:
Watson Wyatt | Towers Perrin | Hewitt | ||||
Survey Group | Manufacturing only, All revenue levels | All industries, $3-6 billion in revenue | All industries, $2.5-5.0 billion in revenue | |||
Companies in Survey Group, by Position | ||||||
CEO | 296 | 95 | 71 | |||
COO | 99 | 35 | 18 | |||
CFO | 315 | 94 | 71 | |||
SVP, Segment Head | 15 | 262* | Survey data not available | |||
* Business units with revenue over $800 million |
The Committee uses compensation surveys to get a general sense of the competitive market. The 2010 Survey Data generally showed our executive officers’ compensation was in line with the Committee’s philosophy of paying somewhat below market median for base salaries with the potential to move above the median with outstanding results under variable compensation programs (annual incentive, PSUs and stock options). Although the Committee views survey data as a useful guide, it gives significant weight to (i) the mix of fixed to variable pay, (ii) the ratio of cash to equity compensation, (iii) internal pay equity, and (iv) individual responsibilities and merit when establishing base salaries, annual incentive percentages, and PSU and stock option award multiples. While the Committee monitors these pay relationships, it does not target any specific pay ratios.
In addition to the 2010 Survey Data, the Committee also considers the Company’s merit increase budget for all salaried U.S. employees in determining salary increases for executive officers. The 2010 merit increase budget of 2.5% was based on the Consumer Price Index, other national economic data and our own business climate. Mr. Haffner, Mr. Glassman and Mr. Flanigan have the option to terminate their respective employment agreements without further obligation to the Company if they do not receive a salary increase for any year, unless the failure to receive an increase was due to a company-wide salary freeze.
In connection with the 2010 Annual Review, the Committee took the following actions:
Increased the target percentage for the annual incentive by 10% for Mr. Haffner and by 5% for Mr. Glassman and Mr. Flanigan in recognition of their excellent performance and to weight further their pay packages toward performance-based compensation.
Raised NEO base salaries by 2.5%, in line with the Company’s merit budget for salaried personnel, with the exception of Mr. Downes whose base salary was increased by 7% to reflect his segment’s outstanding recent performance.
Established the award formula for the Incentive Plan’s corporate and profit center participants, upon determining that the payout range (threshold, target and maximum) is consistent with the Company’s full-year sales and earnings projections.
Approved the executive officers’ 2010 individual performance goals, stressing specific and measurable targets that lead to improvements with long-term returns.
Equity Grant Practices
The Committee discusses potential equity awards at length at its November meeting, and then approves the final PSU and option grants during a telephone meeting on the first business day of the year. The exercise price of the options is equal to the closing market price of the Company’s common stock on the option grant date. The Company does not grant equity awards when in possession of material inside information.
Performance of Past Equity Awards. The Committee monitors the value of past equity awards to gain an overall assessment of how current compensation decisions fit with past practices and to determine the executives’ accumulated variable compensation. As of the 2010 grant date, a substantial majority of the NEOs’ annual stock option grants were “underwater,” meaning they had no value at the then-current market price of our common stock. The Committee did not inflate the 2010 equity awards, or any other aspect of the NEOs’ compensation, to adjust for the below-expected performance of past equity awards.
Clawback Provisions. All equity awards are subject to a clawback provision included in our Flexible Stock Plan which allows the Committee to recover all income or other benefits received on the vesting, exercise, or payment of any award if the employee violates any confidentiality, non-solicitation or non-compete obligations or engages in activity adverse to the interests of the Company, including fraud or conduct contributing to any financial restatement.
Executive Stock Ownership Guidelines. The Committee believes executive officers should have a meaningful ownership stake in the Company to align their interests with those of shareholders. We expect executive officers to attain the following levels of stock ownership within five years of appointment and to maintain those levels throughout their employment.
Chief Executive Officer | 5X base salary | |||
Chief Operating Officer, Chief Financial Officer | 3X base salary | |||
All other Executive Officers | 2X base salary |
Shares of the Company’s stock owned outright, stock units and the net shares acquirable upon the exercise of deferred compensation stock options count toward satisfying the ownership totals. A decline in the stock price can cause an executive officer who previously met the threshold to fall below it temporarily. An executive officer who has not met the ownership requirement, or falls below it due to a decline in the stock price, must hold any net shares acquired upon the exercise of stock options or vesting of PSUs or RSUs until he meets the ownership threshold. As of December 31, 2010, all of our NEOs were in compliance with their stock ownership requirements, having holdings well in excess of these threshold levels.
Employment and Change in Control Agreements
On the Committee’s recommendation, the Board entered into new employment agreements with Messrs. Haffner, Glassman and Flanigan in May 2009. The Company had existing employment agreements with Mr. Haffner, Mr. Glassman and Mr. Glassman that expiredFlanigan in May 2009, but did not have an existing agreement with Mr. Flanigan.2009. These employment agreements expire on the date of our annual shareholder meeting in 2013. The material terms and conditions of these employment agreements are described on page 54.46.
The Committee determined that these agreements were in the best interests of the Company and our shareholders for the following reasons:
The Committee was aware that Mr. Haffner and Mr. Glassman were being pursued by other companies, at much higher compensation levels.
Effective chief financial officers are in high demand and are heavily recruited. Therecruited, and the Committee deemed the retention ofvalued Mr. Flanigan to be important.Flanigan’s retention.
These three executive officers have long tenures with the Company and extensive knowledge of our complex industries. They work extremely well together and thetheir potential loss of any one of them would pose a significant risk tohardship for the Company.
These key leaders werehave been instrumental in developing and executing the 2007 strategic plan. Theplan announced in 2007; accordingly, the Committee chose a four-year term for the agreements to ensure their continued commitment to the Company’s strategic objectives.
Given the significantly more lucrative compensation package offered by one of the suitors and the diminished retention value of the executives’ outstanding equity awards, the Committee discussed including a cash signing bonus in the agreements but decided in favor of an equity award instead of cash. To meet the objectives of both an immediate financial incentive and a retention hook, the Committee chose to grant RSU awards that would vest 25% on the date of the agreement and 25% on each of the next three anniversaries of the agreement. Accordingly, the agreements include RSU grants as follows: Haffner—140,000 shares; Glassman—110,000 shares; Flanigan—75,000 shares. The Committee set the award sizes at amounts it believed would retain these executive officers while maintaining a degree of internal equity among the three individuals. If an executive terminates his employment prior to vesting, he forfeits any unvested shares unless the termination is for “good reason” or the Company terminates him without cause. In a change-in-control scenario, the RSUs will vest only if the executive terminates employment for “good reason” within one year of the change in control (a “double trigger”). The RSUs do not earn dividends prior to vesting.
The Company also has severance benefit agreements with Mr. Haffner and Mr. Glassman, but does not offer severance benefits to any other NEOs. These agreements have been in place for several years and have no stated expiration date. They are designed to protect both the executive officers’ and the Company’s interests in the event of a change in control of the Company. The material terms and conditions of these agreements and the Company’s potential financial obligations arising from these agreements are described on page 56. The Committee amended these agreements in 2009, but only to the extent necessary to ensure compliance with Section 409A of the Internal Revenue Code and to conform to the employment agreements.
Severance payments provided under the agreements are equal to three times base salary and target bonus for Mr. Haffner and 2.5 times base salary and target bonus for Mr. Glassman. If benefits payable under the agreements exceed 10% of the limit imposed by Section 280G of the Internal Revenue Code, the Company will47.
make a gross-up payment of the amount equal to the excise taxes payable by the executive officer pursuant to Sections 208G and 4999 of the Internal Revenue Code, plus all income, employment and excise taxes incurred on the gross-up payment. If benefits payable under the agreement are less than 10% above the Section 280G limit, the benefits will be capped at $1 below the Section 280G limit.
Benefits only become payable under the agreements if the Company terminates the executive’s employment or if the executive terminates his employment for good reason following a change in control of the Company. This double trigger is intended to provide continuity for the business by encouraging the continued employment of the executive following the change in control. Our PSU awards also require a double trigger for accelerated vesting.
The Committee believes the severance agreements are appropriate for the following reasons:
The use of such agreements is considered a common takeover preparedness step.
The agreements benefit shareholders by keeping key management engaged both before and during an impending transaction, and often during the subsequent transition period. Shareholders receive higher premiums for desired management behaviors, and sales can be realized more quickly.
Severance agreements can help unlock value for shareholders, as they reduce executive bias against takeovers where there is a potential conflict of interest concerning job security.
Key strategic and operational decisions before a sale should be in the long-term best interests of the Company, so agreements should discourage actions that sacrifice post-transaction performance for a short-term stock price increase.
The benefits provided under thesethe severance benefit agreements do not impact the Committee’s decisions regarding other elements of the executive officers’ compensation. Because these agreements provide contingent compensation, not regular compensation, they are evaluated separately in view of their intended purpose.
The terms and conditions of the Company’s stock options also provide for immediate vesting in the event of a change in control of the Company. This “single trigger” provision is the same for all optionees. The acceleration of equity vesting in a change in control is a common practice, designed to ensure that ongoing employees receive the benefit of the transaction by having the opportunity to realize value from their equity awards at the time of the transaction. This provision recognizes that a change in control often causes significant disruption or change in employment relationships and thus treats all employees the same regardless of their employment status after the transaction.
Tax Considerations
Section 162(m) of the Internal Revenue Code generally disallows an income tax deduction to public companies for compensation over $1 million paid to certain executive officers. Our policy is to take reasonable and practical steps to minimize compensation that exceeds the $1 million cap, but in some circumstances the best form of compensation for the intended purpose may be one that is not tax-deductible under Section 162(m). For example,, such as the Committee granted service-based RSUs to our executive teaminclusion of IPGs in connection with their employment agreements because it considered RSUs the best equity vehicle for retention purposes, even though the compensation income resulting from these RSU awards will not be tax-deductible for 162(m) purposes.annual incentive program.
In 2009,2010, the Company paid amounts that were not deductible for federal income tax purposes and exceeded the $1 million threshold. The non-deductible compensation resulted from payouts of previously deferred compensation, the vesting of service-based RSUs, and the subjectiveIPG portion of the annual incentive awards.
Executive Stock Ownership
We believe executive officers should have a meaningful ownership stake in the Company to align their interests with those of shareholders. We expect executive officers to attain certain levels of stock ownership within five years of appointment and, subsequently, to maintain those levels. The stock ownership guidelines are as follows:
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Shares of the Company’s stock owned outright, stock units, and the net shares acquirable upon the exercise of deferred compensation stock options count towards satisfying the ownership totals. A decline in the stock price can cause an executive officer who previously met the threshold to fall below it temporarily. An executive officer who has not met the ownership requirement, or falls below it due to a decline in the stock price, must hold any net shares acquired upon the exercise of stock options or vesting of PSUs or RSUs until he meets the ownership threshold. As of December 31, 2009, all of our NEOs were in compliance with their stock ownership requirements.incentive.
The Compensation Committee has reviewed and discussed the Compensation Discussion & Analysis with management and, based on that review and discussion, the Committee has recommended to the Board of Directors that the Compensation Discussion & Analysis be included in this proxy statement.
R. Ted Enloe, III (Chair)
Robert E. Brunner
Richard T. Fisher
Joseph W. McClanathan
Judy C. Odom
Phoebe A. Wood
The following table reports the total 20092010 compensation of our Chief Executive Officer, David Haffner, Chief Financial Officer, Matthew Flanigan, and our three other most highly compensated executive officers as of December 31, 2009, Karl Glassman, Joseph Downes and Paul Hauser.2010. Collectively, we refer to these five executives as the“Named Executive OfficersOfficers” or“NEOs.” or “NEOs.”
Compensation reported in the table below includes amounts earned in various retirement and deferred compensation programs. The pension, and retirement programs are described on page 51 and the deferred compensation programs are described on page 52.pages 32 and 44. Familiarity with the operation of these programs will aid your understanding of the amounts reported in the Summary Compensation Table.
Name and Principal Position | Year | Salary ($)(1) | Stock Awards ($)(2)(3) | Option Awards ($)(4) | Non-Equity Incentive Plan Compensation ($)(1) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (5) | All Other Compensation ($) (1)(6) | Total ($) | |||||||||||||||
David S. Haffner, | 2009 | $ | 934,616 | $ | 4,609,563 | $ | 383,937 | $ | 1,019,995 | $ | 29,833 | $ | 299,972 | $ | 7,277,916 | ||||||||
President & Chief | 2008 | 875,769 | 2,423,972 | 406,385 | 390,600 | 12,574 | 220,604 | 4,329,904 | |||||||||||||||
Executive Officer | 2007 | 800,577 | — | 573,272 | 317,520 | 19,912 | 192,047 | 1,903,328 | |||||||||||||||
Matthew C. Flanigan, | 2009 | 410,192 | 1,708,941 | 140,409 | 339,702 | 10,021 | 111,957 | 2,721,222 | |||||||||||||||
Senior Vice President—Chief | 2008 | 376,558 | 585,613 | 136,502 | 121,660 | 11,813 | 74,522 | 1,306,668 | |||||||||||||||
Financial Officer | 2007 | 319,365 | 99,189 | 184,978 | 73,136 | 6,125 | 61,128 | 743,921 | |||||||||||||||
Karl G. Glassman, | 2009 | 700,962 | 2,632,611 | 287,953 | 685,125 | 28,954 | 209,727 | 4,545,332 | |||||||||||||||
Executive Vice President & | 2008 | 667,731 | 951,816 | 325,122 | 255,150 | 10,544 | 158,049 | 2,368,413 | |||||||||||||||
Chief Operating Officer | 2007 | 640,462 | — | 458,589 | 217,728 | 16,662 | 157,968 | 1,491,409 | |||||||||||||||
Joseph D. Downes, Jr., | 2009 | 303,023 | 465,600 | 103,732 | 155,821 | 5,560 | 65,697 | 1,099,433 | |||||||||||||||
Senior Vice President, | 2008 | 285,931 | 403,853 | 112,889 | 210,869 | 5,021 | 59,283 | 1,077,846 | |||||||||||||||
President—Industrial Materials Segment | 2007 | 264,615 | — | 154,124 | 72,765 | 2,638 | 43,968 | 538,110 | |||||||||||||||
Paul R. Hauser, | 2009 | 332,931 | 380,998 | 113,988 | 192,119 | 24,431 | 90,431 | 1,134,898 | |||||||||||||||
Senior Vice President, | 2008 | 318,096 | 371,115 | 130,191 | 124,393 | 7,385 | 79,186 | 1,030,366 | |||||||||||||||
President—Residential Furnishings Segment | 2007 | 308,258 | — | 184,978 | 97,250 | 24,171 | 75,904 | 690,561 |
Name and Principal Position | Year | Salary (1) | Stock Awards (2) | Option Awards (3) | Non-Equity Incentive Plan Compensation (1) | Change in Pension Value; Nonqualified Deferred Compensation Earnings (4) | All Other Compensation (1)(5) | Total | ||||||||||||||||||||||||
David S. Haffner, | 2010 | $917,308 | $2,826,252 | $605,517 | $1,100,081 | $77,667 | $394,251 | $5,921,076 | ||||||||||||||||||||||||
President & Chief Executive Officer | 2009 | 934,616 | (6) | 4,394,446 | 383,937 | 1,019,995 | 46,306 | 515,089 | 7,294,389 | |||||||||||||||||||||||
2008 | 875,769 | 2,264,900 | 406,385 | 390,600 | 12,574 | 379,676 | 4,329,904 | |||||||||||||||||||||||||
Karl G. Glassman, | 2010 | 688,077 | 1,233,054 | 454,138 | 688,194 | 54,857 | 246,751 | 3,365,071 | ||||||||||||||||||||||||
Executive Vice President & Chief Operating Officer | 2009 | 700,962 | (6) | 2,557,611 | 287,953 | 685,125 | 31,319 | 284,727 | 4,547,697 | |||||||||||||||||||||||
2008 | 667,731 | 951,816 | 325,122 | 255,150 | 10,544 | 158,049 | 2,368,412 | |||||||||||||||||||||||||
Matthew C. Flanigan, | 2010 | 402,692 | 676,368 | 221,462 | 348,806 | 27,654 | 233,256 | 1,910,238 | ||||||||||||||||||||||||
Senior Vice President—Chief Financial Officer | 2009 | 410,192 | (6) | 1,617,979 | 140,409 | 339,702 | 21,977 | 202,919 | 2,733,178 | |||||||||||||||||||||||
2008 | 376,558 | 461,354 | 136,502 | 121,660 | 20,358 | 198,781 | 1,315,213 | |||||||||||||||||||||||||
Paul R. Hauser, | 2010 | 326,754 | 439,200 | 179,736 | 183,688 | 43,094 | 92,717 | 1,265,189 | ||||||||||||||||||||||||
Senior Vice President, President— Residential Furnishings Segment | 2009 | 332,931 | (6) | 380,998 | 113,988 | 192,119 | 26,414 | 90,431 | 1,136,881 | |||||||||||||||||||||||
2008 | 318,096 | 346,115 | 130,191 | 124,393 | 8,211 | 104,184 | 1,031,190 | |||||||||||||||||||||||||
Joseph D. Downes, Jr., | 2010 | 307,415 | 499,590 | 163,563 | 135,920 | 9,327 | 64,353 | 1,180,168 | ||||||||||||||||||||||||
Senior Vice President, President— Industrial Materials Segment | 2009 | 303,023 | (6) | 453,100 | 103,732 | 155,821 | 7,509 | 78,197 | 1,101,382 | |||||||||||||||||||||||
2008 | 285,931 | 392,370 | 112,889 | 210,869 | 6,508 | 70,766 | 1,079,333 |
(1) |
Total Cash Compensation Deferred | Deferred Compensation Program Alternatives | |||||||||||||||||||||||||||||||||||
Name | Year | Type of Deferral | Year | ESU (#) | Cash Deferral ($) | Stock Options (#) | Stock Units (#) | |||||||||||||||||||||||||||||
Total Cash Compensation Deferred | Cash Arrangement ($) | Stock Options (#) | Stock Units (#) | |||||||||||||||||||||||||||||||||
David S. Haffner | 2009 | $ | 860,466 | 62,432 | 2010 | $399,066 | 10,596 | 10,903 | ||||||||||||||||||||||||||||
2009 | 1,053,198 | 13,057 | 62,432 | |||||||||||||||||||||||||||||||||
2008 | 760,261 | 9,861 | 57,184 | |||||||||||||||||||||||||||||||||
Karl G. Glassman | 2010 | 184,954 | 7,208 | 2,946 | ||||||||||||||||||||||||||||||||
2008 | 636,289 | 57,184 | 2009 | 435,880 | 9,246 | 23,623 | ||||||||||||||||||||||||||||||
2007 | 1,116,313 | $ | 1,116,313 | 2008 | 413,669 | 7,038 | 92,913 | |||||||||||||||||||||||||||||
Matthew C. Flanigan | 2009 | 363,847 | 24,503 | 2010 | 504,229 | 3,880 | 23,964 | |||||||||||||||||||||||||||||
2008 | 497,034 | 40,975 | 2009 | 436,108 | 4,947 | 24,503 | ||||||||||||||||||||||||||||||
2007 | 390,913 | 25,176 | 2008 | 509,200 | 1,252 | 40,975 | ||||||||||||||||||||||||||||||
Karl G. Glassman | 2009 | 300,000 | 23,623 | |||||||||||||||||||||||||||||||||
Paul R. Hauser | 2010 | 154,526 | 2,611 | $106,154 | ||||||||||||||||||||||||||||||||
2008 | 324,082 | 92,913 | 2009 | 149,854 | 3,466 | 100,000 | ||||||||||||||||||||||||||||||
2007 | 411,337 | 411,337 | 2008 | 141,500 | 3,278 | 7,506 | ||||||||||||||||||||||||||||||
Joseph D. Downes, Jr. | 2009 | 50,000 | 3,937 | 2010 | 106,661 | 2,257 | 65,000 | |||||||||||||||||||||||||||||
2008 | 45,931 | 3,343 | 2009 | 93,156 | 3,231 | 3,937 | ||||||||||||||||||||||||||||||
2007 | 50,000 | 50,000 | 2008 | 92,940 | 3,954 | 3,343 | ||||||||||||||||||||||||||||||
Paul R. Hauser | 2009 | 100,000 | 100,000 | |||||||||||||||||||||||||||||||||
2008 | 100,000 | 7,506 | ||||||||||||||||||||||||||||||||||
2007 | 100,000 | 100,000 |
See the Grants of Plan-Based Awards Table on page 4740 for further information on the equity awards received in lieu of cash compensation in 2009. Amounts deferred into a cash arrangement are included in the Non-Qualified Deferred Compensation Table on page 53.2010.
(2) | Amounts reported in this column reflect |
Name | Year | Discount on Deferred Stock Units (a) | PSU Awards (b) | Restricted Stock Unit Awards (c) | |||||||
David S. Haffner | 2009 | $ | 215,716 | $ | 2,487,716 | $ | 1,906,730 | ||||
2008 | 159,072 | 2,264,900 | — | ||||||||
Matthew C. Flanigan | 2009 | 90,062 | 596,516 | 1,021,463 | |||||||
2008 | 124,259 | 461,354 | — | ||||||||
Karl G. Glassman | 2009 | 75,000 | 1,059,466 | 1,498,145 | |||||||
2008 | — | 951,816 | — | ||||||||
Joseph D. Downes, Jr. | 2009 | 12,500 | 453,100 | — | |||||||
2008 | 11,483 | 392,370 | — | ||||||||
Paul R. Hauser | 2009 | — | 380,998 | — | |||||||
2008 | 25,000 | 346,115 | — |
Name | 2008 Award | 2009 Award | Year | PSU Awards: Grant Date Fair Value | PSU Awards: Potential Maximum Value at Grant Date | RSU Awards: Grant Date Fair Value | ||||||||||||||
David S. Haffner | $ | 3,963,575 | $ | 4,353,503 | 2010 | $2,826,252 | $4,945,941 | |||||||||||||
2009 | 2,487,716 | 4,353,503 | $1,906,730 | |||||||||||||||||
2008 | 2,264,900 | 3,963,575 | ||||||||||||||||||
Karl G. Glassman | 2010 | 1,233,054 | 2,157,845 | |||||||||||||||||
2009 | 1,059,466 | 1,854,066 | 1,498,145 | |||||||||||||||||
2008 | 951,816 | 1,665,678 | ||||||||||||||||||
Matthew C. Flanigan | 807,369 | 1,043,903 | 2010 | 676,368 | 1,183,644 | |||||||||||||||
Karl G. Glassman | 1,665,678 | 1,854,066 | ||||||||||||||||||
2009 | 596,516 | 1,043,903 | 1,021,463 | |||||||||||||||||
2008 | 461,354 | 807,369 | ||||||||||||||||||
Paul R. Hauser | 2010 | 439,200 | 768,600 | |||||||||||||||||
2009 | 380,998 | 666,747 | ||||||||||||||||||
2008 | 346,115 | 605,701 | ||||||||||||||||||
Joseph D. Downes, Jr. | 686,648 | 792,925 | 2010 | 499,590 | 874,283 | |||||||||||||||
Paul R. Hauser | 605,701 | 666,747 | ||||||||||||||||||
2009 | 453,100 | 792,925 | ||||||||||||||||||
2008 | 392,370 | 686,648 |
Amounts reported in this column represent the grant date fair value of the stock options calculated using the Black-Scholes option valuation model. For a description of the assumptions used in calculating the grant date fair value of these options, see |
Amounts reported in this column are set forth below. |
Haffner | Flanigan | Glassman | Downes | Hauser | |||||||||||
Change in Pension Value (a) | $ | 15,376 | $ | 5,635 | $ | 14,698 | — | $ | 18,654 | ||||||
ESU Program (b) | 10,899 | 4,063 | 11,887 | 4,983 | 5,761 | ||||||||||
Deferred Comp Program—stock unit deferrals (c) | 3,547 | 323 | 2,365 | 394 | — | ||||||||||
Deferred Comp Program—cash deferrals (d) | 11 | — | 4 | 183 | 16 | ||||||||||
Totals | $ | 29,833 | $ | 10,021 | $ | 28,954 | $ | 5,560 | $ | 24,431 |
Name | Change in Pension Value (a) | ESU Program (b) | Deferred Stock Units (c) | Cash Deferrals (d) | Total | |||||||||||||||
David S. Haffner | $29,749 | $16,210 | $31,708 | $77,667 | ||||||||||||||||
Karl G. Glassman | 32,044 | 16,112 | 6,701 | 54,857 | ||||||||||||||||
Matthew C. Flanigan | 13,013 | 6,053 | 8,588 | 27,654 | ||||||||||||||||
Paul R. Hauser | 34,981 | 7,573 | 540 | 43,094 | ||||||||||||||||
Joseph D. Downes, Jr. | 6,685 | 2,193 | $449 | 9,327 |
(a) | Change in the present value of the NEO’s accumulated benefits under the |
(b) | 15% discount on dividend equivalents acquired |
(c) | 20% discount on dividend equivalents acquired |
(d) | Above-market portion of the interest earned on cash deferrals under the |
Amounts reported in this column are set forth below: |
Haffner | Flanigan | Glassman | Downes | Hauser | |||||||||||
ESU Program matching contributions (a) | $ | 222,133 | $ | 84,130 | $ | 157,308 | $ | 61,236 | $ | 62,818 | |||||
Retirement K matching contributions (b) | 9,900 | 9,900 | 9,900 | — | 13,200 | ||||||||||
Retirement K Excess payments (b) | 60,466 | 17,096 | 39,399 | — | 12,002 | ||||||||||
Life and/or disability insurance benefits | 7,473 | 831 | 2,520 | 4,461 | 2,411 | ||||||||||
Perquisites (c) | — | — | — | — | — | ||||||||||
Totals | $ | 299,972 | $ | 111,957 | $ | 209,727 | $ | 65,697 | $ | 90,431 |
Name | ESU Program (a) | Deferred Stock Units (b) | Retirement K Matching Contributions (c) | Retirement K Excess Payments (c) | Life and Disability Insurance Benefits | Perquisites (d) | Total | |||||||||||||||||||||
David S. Haffner | $264,429 | $50,000 | $9,900 | $62,726 | $7,196 | $394,251 | ||||||||||||||||||||||
Karl G. Glassman | 182,278 | 12,500 | 9,900 | 39,646 | 2,427 | 246,751 | ||||||||||||||||||||||
Matthew C. Flanigan | 97,454 | 107,938 | 9,900 | 17,154 | 810 | 233,256 | ||||||||||||||||||||||
Paul R. Hauser | 65,894 | 13,200 | 11,301 | 2,322 | 92,717 | |||||||||||||||||||||||
Joseph D. Downes, Jr. | 57,495 | 6,858 | 64,353 |
(a) | This amount represents the Company’s matching contributions under the ESU Program and the 15% discount on |
(b) | This amount represents the 20% discount on stock units acquired with employee contributions to the Deferred Compensation Program. |
(c) | The Retirement K and Retirement K Excess |
None of the NEOs received perquisites or other personal benefits with a value of $10,000 or more in |
(6) | The 2009 NEO base salaries are reported as higher than their reported 2008 salaries (despite a salary freeze in 2009) and higher than the 2010 salaries (despite an increase in base salary in 2010) because there were 27 bi-weekly pay periods in 2009 instead of the customary 26 (as in 2008 and 2010). |
Grants of Plan-Based Awards in 20092010
The following table sets forth, for the year ended December 31, 2009,2010, information concerning each grant of an award made to the Named Executive Officers in 20092010 under any plan.
Name | Grant Date | Award Type (1) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#)(4) | All Other Option Awards: Number of Securities Underlying Options (#) (5) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Grant Date | Award Type (1) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (2) | Estimated Future Payouts Under Equity Incentive Plan Awards (3) | All Other Stock Awards: Shares of Stock or Units (#)(4) | All Other Option Awards: Securities Underlying Options (#)(5) | Exercise or Base Price of Option Awards ($/Sh) (6) | Grant Date Fair Value of Stock and Option Awards ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Award Type (1) | Threshold ($)(2) | Target ($)(2) | Maximum ($)(2) | Threshold (#)(3) | Target (#)(3) | Maximum (#)(3) | All Other Stock Awards: Number of Shares of Stock or Units (#)(4) | All Other Option Awards: Number of Securities Underlying Options (#) (5) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
$ | 373,846 | $ | 747,693 | $ | 1,121,539 | 3/26/10 | AI | $415,125 | $830,250 | td,245,375 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/2/09 | ASO | 172,200 | $ | 15.68 | $ | 383,937 | 1/04/10 | ASO | 140,400 | $20.51 | $605,517 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/2/09 | PSU | 39,463 | 118,388 | 276,238 | 2,487,716 | 1/04/10 | PSU | 32,175 | 96,525 | 225,225 | 2,826,252 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Awards Received in Lieu of Cash Compensation | Awards Received in Lieu of Cash Compensation |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | DSU | 10,903 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | ESU | 10,596 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Karl G. Glassman | 3/26/10 | AI | 259,500 | 519,000 | 778,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/04/10 | ASO | 105,300 | 20.51 | 454,138 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/04/10 | PSU | 14,038 | 42,113 | 98,263 | 1,233,054 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Awards Received in Lieu of Cash Compensation | Awards Received in Lieu of Cash Compensation |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | DSU | 62,432 | — | DSU | 2,946 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/7/09 | RSU | 140,000 | 1,906,730 | — | ESU | 7,208 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Matthew C. Flanigan | — | KOI | 123,058 | 246,115 | 369,173 | 3/26/10 | AI | 131,625 | 263,250 | 394,875 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/2/09 | ASO | 62,975 | 15.68 | 140,409 | 1/04/10 | ASO | 51,350 | 20.51 | 221,462 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/2/09 | PSU | 9,463 | 23,388 | 66,238 | 596,516 | 1/04/10 | PSU | 7,700 | 23,100 | 53,900 | 676,368 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | DSU | 24,503 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/7/09 | RSU | 75,000 | 1,021,463 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Karl G. Glassman | — | KOI | 245,337 | 490,673 | 736,010 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/2/09 | ASO | 129,150 | 15.68 | 287,953 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/2/09 | PSU | 16,806 | 50,419 | 117,644 | 1,059,466 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | DSU | 23,623 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/7/09 | RSU | 110,000 | 1,498,145 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Joseph D. Downes, Jr. | — | KOI | 90,907 | 151,512 | 227,267 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/2/09 | ASO | 46,525 | 15.68 | 103,732 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Awards Received in Lieu of Cash Compensation | Awards Received in Lieu of Cash Compensation |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/2/09 | PSU | 7,188 | 21,563 | 50,313 | 453,100 | — | DSU | 23,964 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | DSU | 3,937 | — | ESU | 3,880 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Paul R. Hauser | — | KOI | 99,879 | 166,466 | 249,698 | 3/26/10 | AI | 93,630 | 156,050 | 234,075 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/2/09 | ASO | 51,125 | 15.68 | 113,988 | 1/04/10 | ASO | 41,675 | 20.51 | 179,736 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/2/09 | PSU | 6,044 | 18,131 | 42,306 | 380,998 | 1/04/10 | PSU | 5,000 | 15,000 | 35,000 | 439,200 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Awards Received in Lieu of Cash Compensation | Awards Received in Lieu of Cash Compensation |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | ESU | 2,611 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Joseph D. Downes, Jr. | 3/26/10 | AI | 98,580 | 164,300 | 246,450 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/04/10 | ASO | 37,925 | 20.51 | 163,563 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/04/10 | PSU | 5,688 | 17,063 | 39,813 | 499,590 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Awards Received in Lieu of Cash Compensation | Awards Received in Lieu of Cash Compensation |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | ESU | 2,257 |
(1) | Award Type: |
AI = Annual Incentive ASO = Annual Stock Options
PSU = Performance Stock Units DSU = Deferred Stock Units
ESU = Executive Stock Units
(2) | The |
(3) | PSU awards vest at the end of a three-year performance period based on our TSR as measured relative to a peer group. The |
(4) | DSU amounts (from the Deferred Compensation Program described on page 32) and ESU amounts (from the ESU Program described on page 32) reported in this column represent stock units acquired in lieu of cash |
RSU amounts reported in this column represent special grants to our CEO, CFO and COO in connection with their new employment agreements. The terms of the RSUs are described on page 41.
(5) | Stock options (described on page 31) are granted on the first business day of the year, have a 10-year term, and vest in three annual increments beginning 18 months after grant. |
(6) | The exercise price is the closing market price of the Company’s common stock on the grant date. |
Outstanding Equity Awards at 20092010 Fiscal Year EndYear-End
The following table reports the outstanding stock options, performance stock units, and restricted stock units held by each NEO as of December 31, 2009.2010. The outstanding awards are separated into two categories:
General Awards and Deferred Compensation Options.
The General Awards section includesAwards: the annual PSU and stock option and PSU awards that comprise the equity component of our compensation package, as well as specialthe one-time RSU awards to Messrs.Mr. Haffner, Mr. Glassman and Mr. Flanigan and Glassmanin 2009 in connection with their new employment agreements. The value of the PSU awards are estimated at the maximum payout level, based on strong performance relative to our peer group during each of the last two fiscal years.
The Deferred Compensation Options section includesOptions: options that were granted in lieu of cash compensation under the Company’sour Deferred Compensation Program, as described on page 52.32.
Option Awards | Stock Awards | ||||||||||||||||||||||
Name | Option Grant Date (1) | Securities Underlying Unexercised Options Exercisable (#) | Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | Units of Stock That Have Not Vested (#)(2) | Market Value of Units of Stock That Have Not Vested ($)(3) | PSU Perfor- mance Period (4) | Equity Incentive Plan Awards: Unearned Shares, Units or Other Rights That Have Not Vested (#)(5) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) | |||||||||||||
David S. Haffner | |||||||||||||||||||||||
General Awards | |||||||||||||||||||||||
1/2/2001 | 40,000 | $ | 17.69 | 1/3/2011 | 105,000 | $ | 2,142,000 | 2008-2010 | 248,500 | $ | 5,069,400 | ||||||||||||
1/16/2002 | 56,000 | 22.30 | 1/15/2012 | 2009-2011 | 276,238 | 5,635,255 | |||||||||||||||||
1/22/2003 | 63,000 | 21.01 | 1/21/2013 | ||||||||||||||||||||
1/13/2004 | 70,000 | 21.35 | 1/12/2014 | ||||||||||||||||||||
2/9/2005 | 70,000 | 28.02 | 2/8/2015 | ||||||||||||||||||||
1/3/2006 | 93,400 | 22.96 | 1/4/2016 | ||||||||||||||||||||
5/10/2006 | 87,177 | 26.67 | 5/9/2016 | ||||||||||||||||||||
1/3/2007 | 65,650 | 32,825 | 23.61 | 1/4/2017 | |||||||||||||||||||
1/2/2008 | 47,758 | 95,517 | 16.96 | 1/2/2018 | |||||||||||||||||||
1/2/2009 | 172,200 | 15.68 | 1/2/2019 | ||||||||||||||||||||
Subtotals | 592,985 | 300,542 | 105,000 | $ | 2,142,000 | 524,738 | $ | 10,704,655 | |||||||||||||||
Deferred Compensation Options—granted in lieu of compensation | |||||||||||||||||||||||
12/21/2004 | 224,100 | $ | 27.09 | 12/20/2014 | |||||||||||||||||||
12/30/2005 | 266,290 | 22.96 | 12/29/2015 | ||||||||||||||||||||
Subtotals | 490,390 | ||||||||||||||||||||||
Totals | 1,083,375 | 300,542 | 105,000 | $ | 2,142,000 | 524,738 | $ | 10,704,655 |
Options Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||
Securities Underlying Unexercised Options: | Unvested Stock Units | Equity Incentive Plan Awards—Unearned Shares, Units or Other Unvested Rights | ||||||||||||||||||||||||||||||||||||||
Name | Grant Date (1) | Exercisable (#) | Unexercisable (#) | Exercise ($) | Expiration Date | Number of Units (#) (2) | Market ($) (3) | Performance (4) | Number of Units (#) (5) | Market or Payout Value ($) (3) | ||||||||||||||||||||||||||||||
David S. Haffner | ||||||||||||||||||||||||||||||||||||||||
General Awards |
| |||||||||||||||||||||||||||||||||||||||
1/16/2002 | 56,000 | $22.30 | 1/15/2012 | 70,000 | $1,593,200 | 2009-2011 | 118,388 | $2,694,511 | ||||||||||||||||||||||||||||||||
1/22/2003 | 63,000 | 21.01 | 1/21/2013 | 2010-2012 | 96,525 | 2.196.909 | ||||||||||||||||||||||||||||||||||
1/13/2004 | 70,000 | 21.35 | 1/12/2014 | |||||||||||||||||||||||||||||||||||||
2/9/2005 | 70,000 | 28.02 | 2/8/2015 | |||||||||||||||||||||||||||||||||||||
1/3/2006 | 93,400 | 22.96 | 1/4/2016 | |||||||||||||||||||||||||||||||||||||
5/10/2006 | 87,177 | 26.67 | 5/9/2016 | |||||||||||||||||||||||||||||||||||||
1/3/2007 | 98,475 | 23.61 | 1/4/2017 | |||||||||||||||||||||||||||||||||||||
1/2/2008 | 95,516 | 47,759 | 16.96 | 1/2/2018 | ||||||||||||||||||||||||||||||||||||
1/2/2009 | 57,400 | 114,800 | 15.68 | 1/2/2019 | ||||||||||||||||||||||||||||||||||||
1/4/2010 | 140,400 | 20.51 | 1/3/2020 | |||||||||||||||||||||||||||||||||||||
Subtotal |
| 690,968 | 302,959 | 70,000 | 1,593,200 | 214,913 | 4,891,420 | |||||||||||||||||||||||||||||||||
Deferred Compensation Options |
| |||||||||||||||||||||||||||||||||||||||
12/21/2004 | 224,100 | 27.09 | 12/20/2014 | |||||||||||||||||||||||||||||||||||||
12/30/2005 | 266,290 | 22.96 | 12/29/2015 | |||||||||||||||||||||||||||||||||||||
Subtotal | 490,390 | |||||||||||||||||||||||||||||||||||||||
Total | 1,181,358 | 302,959 | 70,000 | $1,593,200 | 214,913 | $4,891,420 | ||||||||||||||||||||||||||||||||||
Karl G. Glassman | ||||||||||||||||||||||||||||||||||||||||
General Awards |
| |||||||||||||||||||||||||||||||||||||||
1/16/2002 | 40,000 | 22.30 | 1/15/2012 | 55,000 | 1,251,800 | 2009-2011 | 50,419 | 1,147,536 | ||||||||||||||||||||||||||||||||
1/22/2003 | 47,250 | 21.01 | 1/21/2013 | 2010-2012 | 42,113 | 958,492 | ||||||||||||||||||||||||||||||||||
1/13/2004 | 52,500 | 21.35 | 1/12/2014 | |||||||||||||||||||||||||||||||||||||
2/9/2005 | 52,500 | 28.02 | 2/8/2015 | |||||||||||||||||||||||||||||||||||||
1/3/2006 | 74,725 | 22.96 | 1/4/2016 | |||||||||||||||||||||||||||||||||||||
1/3/2007 | 78,775 | 23.61 | 1/4/2017 | |||||||||||||||||||||||||||||||||||||
1/2/2008 | 76,416 | 38,209 | 16.96 | 1/2/2018 | ||||||||||||||||||||||||||||||||||||
1/2/2009 | 43,050 | 86,100 | 15.68 | 1/2/2019 | ||||||||||||||||||||||||||||||||||||
1/4/2010 | 105,300 | 20.51 | 1/3/2020 | |||||||||||||||||||||||||||||||||||||
Subtotal |
| 465,216 | 229,609 | 55,000 | 1,251,800 | 92,532 | 2,106,028 | |||||||||||||||||||||||||||||||||
Deferred Compensation Options |
| |||||||||||||||||||||||||||||||||||||||
12/21/2004 | 66,663 | 27.09 | 12/20/2014 | |||||||||||||||||||||||||||||||||||||
12/30/2005 | 81,664 | 22.96 | 12/29/2015 | |||||||||||||||||||||||||||||||||||||
12/31/2007 | 92,913 | 17.44 | 12/30/2017 | |||||||||||||||||||||||||||||||||||||
Subtotal | 241,240 | |||||||||||||||||||||||||||||||||||||||
Total | 706,456 | 229,609 | 55,000 | $1,251,800 | 92,532 | $2,106,028 |
Name Matthew C. Flanigan General Awards Subtotals Deferred Compensation Options—granted in lieu of compensation Subtotals Totals Karl G. Glassman General Awards Subtotals Deferred Compensation Options—granted in lieu of compensation Subtotals Totals Joseph D. Downes, Jr. General Awards Subtotals Deferred Compensation Options—granted in lieu of compensation Subtotals Totals Exercise ($) Market ($) (3) Performance (4) Market or ($) (3) Matthew C. Flanigan General Awards Subtotal Deferred Compensation Options Subtotal Total Paul R. Hauser General Awards Subtotal Deferred Compensation Options Subtotal Total Joseph D. Downes, Jr. General Awards Subtotal Deferred Compensation Options Subtotal Total Option Awards Stock Awards Option
Grant Date
(1) Securities
Underlying
Unexercised
Options
Exercisable
(#) Securities
Underlying
Unexercised
Options
Unexercisable
(#) Option
Exercise
Price
($) Option
Expiration
Date Units
of
Stock
That
Have
Not
Vested
(#)(2) Market
Value of
Units of
Stock
That
Have Not
Vested
($)(3) PSU
Perfor-
mance
Period (4) Equity
Incentive
Plan
Awards:
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)(5) Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)(3) 1/2/2001 8,500 $ 17.69 1/3/2011 56,250 $ 1,147,500 2008-2010 50,619 $ 1,032,628 1/16/2002 12,000 22.30 1/15/2012 2009-2011 66,238 1,351,255 3/11/2003 18,000 17.61 3/10/2013 1/13/2004 30,000 21.35 1/12/2014 2/9/2005 21,900 28.02 2/8/2015 1/3/2006 29,900 22.96 1/4/2016 1/3/2007 21,183 10,592 23.61 1/4/2017 1/2/2008 16,041 32,084 16.96 1/2/2018 1/2/2009 62,975 15.68 1/2/2019 157,524 105,651 56,250 $ 1,147,500 116,857 $ 2,383,883 12/21/2004 31,721 $ 27.09 12/20/2014 12/30/2005 86,634 22.96 12/29/2015 118,355 275,879 105,651 56,250 $ 1,147,500 116,857 $ 2,383,883 1/2/2001 25,000 $ 17.69 1/3/2011 82,500 $ 1,683,000 2008-2010 104,431 $ 2,130,392 1/16/2002 40,000 22.30 1/15/2012 2009-2011 117,644 2,399,938 3/11/2003 47,250 17.61 3/10/2013 1/13/2004 52,500 21.35 1/12/2014 2/9/2005 52,500 28.02 2/8/2015 1/3/2006 74,725 22.96 1/4/2016 1/3/2007 52,516 26,259 23.61 1/4/2017 1/2/2008 38,208 76,417 16.96 1/2/2018 1/2/2009 129,150 15.68 1/2/2019 382,699 231,826 82,500 $ 1,683,000 222,075 $ 4,530,330 12/21/2004 66,663 $ 27.09 12/20/2014 12/30/2005 81,664 22.96 12/29/2015 12/31/2007 92,913 17.44 12/30/2017 241,240 623,939 231,826 82,500 $ 1,683,000 222,075 $ 4,530,330 1/2/2001 9,000 $ 17.69 1/3/2011 2008-2010 43,050 $ 878,220 1/16/2002 12,000 22.30 1/15/2012 2009-2011 50,313 1,026,385 3/11/2003 15,000 17.61 3/10/2013 1/13/2004 18,000 21.35 1/12/2014 2/9/2005 20,200 28.02 2/8/2015 1/3/2006 25,550 22.96 1/4/2016 1/3/2007 17,650 8,825 23.61 1/4/2017 1/2/2008 13,266 26,534 16.96 1/2/2018 1/2/2009 46,525 15.68 1/2/2019 130,666 81,884 93,363 $ 1,904,605 12/21/2004 6,460 $ 27.09 12/20/2014 6,460 137,126 81,884 93,363 $ 1,904,605 Options Awards Stock Awards Securities Underlying
Unexercised Options: Unvested Stock
Units Equity Incentive Plan Awards—Unearned
Shares, Units or Other Unvested Rights Name Grant Date
(1) Exercisable
(#) Unexercisable
(#)
Price Expiration
Date Number
of Units
(#) (2)
Value
Period Number
of Units
(#) (5)
Payout Value 1/16/2002 12,000 $22.30 1/15/2012 37,500 $853,500 2009-2011 28,388 $646,111 3/11/2003 18,000 17.61 3/10/2013 2010-2012 23,100 525,756 1/13/2004 30,000 21.35 1/12/2014 2/9/2005 21,900 28.02 2/8/2015 1/3/2006 29,900 22.96 1/4/2016 1/3/2007 31,775 23.61 1/4/2017 1/2/2008 32,083 16,042 16.96 1/2/2018 1/2/2009 20,991 41,984 15.68 1/2/2019 1/4/2010 51,350 20.51 1/3/2020 196,649 109,376 37,500 853,500 51,488 1,171,867 12/21/2004 31,721 27.09 12/20/2014 12/30/2005 86,634 22.96 12/29/2015 118,355 315,004 109,376 37,500 $853,500 51,488 $1,171,867 1/16/2002 5,000 22.30 1/15/2012 2009-2011 18,131 412,662 3/11/2003 11,334 17.61 3/10/2013 2010-2012 15,000 341,400 1/13/2004 18,000 21.35 1/12/2014 2/9/2005 20,000 28.02 2/8/2015 1/3/2006 25,575 22.96 1/4/2016 1/3/2007 31,775 23.61 1/4/2017 1/2/2008 15,300 16.96 1/2/2018 1/2/2009 17,041 34,084 15.68 1/2/2019 1/4/2010 41,675 20.51 1/3/2020 128,725 91,059 33,131 754,062 12/21/2004 5,539 27.09 12/20/2014 5,539 134,264 91,059 33,131 $754,062 1/16/2002 12,000 22.30 1/15/2012 2009-2011 21,563 490,774 3/11/2003 15,000 17.61 3/10/2013 2010-2012 17,063 388,354 1/13/2004 18,000 21.35 1/12/2014 2/9/2005 20,200 28.02 2/8/2015 1/3/2006 25,550 22.96 1/4/2016 1/3/2007 26,475 23.61 1/4/2017 1/2/2008 26,533 13,267 16.96 1/2/2018 1/2/2009 15,508 31,017 15.68 1/2/2019 1/4/2010 37,925 20.51 1/3/2020 159,266 82,209 38,626 879,128 12/21/2004 6,460 27.09 12/20/2014 6,460 165,726 82,209 38,626 $879,128
Name Paul R. Hauser General Awards Subtotals Deferred Compensation Options—granted in lieu of compensation Subtotals Totals Option Awards Stock Awards Option
Grant Date
(1) Securities
Underlying
Unexercised
Options
Exercisable
(#) Securities
Underlying
Unexercised
Options
Unexercisable
(#) Option
Exercise
Price
($) Option
Expiration
Date Units
of
Stock
That
Have
Not
Vested
(#)(2) Market
Value of
Units of
Stock
That
Have Not
Vested
($)(3) PSU
Perfor-
mance
Period (4) Equity
Incentive
Plan
Awards:
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)(5) Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)(3) 1/16/2002 5,000 22.30 1/15/2012 2008-2010 37,975 $ 774,690 3/11/2003 11,334 17.61 3/10/2013 2009-2011 42,306 863,042 1/13/2004 18,000 21.35 1/12/2014 2/9/2005 20,000 28.02 2/8/2015 1/3/2006 25,575 22.96 1/4/2016 1/3/2007 21,183 10,592 23.61 1/4/2017 1/2/2008 15,300 30,600 16.96 1/2/2018 1/2/2009 51,125 15.68 1/2/2019 116,392 92,317 80,281 $ 1,637,732 12/21/2004 5,539 $ 27.09 12/20/2014 5,539 121,931 92,317 80,281 $ 1,637,732
(1) | General Awards—options were granted subject to our standard vesting terms, |
Deferred Compensation Options—options became exercisable on December 31st of the yearMarch 15, approximately 15 months following the grant date, except that options granted in 2005 became exercisable on March 15, 2007.and have a 10-year term.
(2) | Awards reported in this column are the unvested portion of the RSU awards granted in 2009 in connection with the employment |
(3) | Values shown in this column were calculated at a per share value of |
(4) | PSU awards are granted on the first business day of the year and have a three-year performance |
(5) | The amounts shown reflect the |
Option Exercises and Stock Vested in 20092010
The following table reports the number of stock options exercised and stock awards vested in 20092010 and the value realized by the Named Executive OfficersNEOs upon exercise or vesting of such awards. All of the options listed below were Deferred Compensation Options, granted in lieu of cash compensation. The stock award amounts represent the vesting of 25% immediate vesting of the RSUs granted in connection with the employment agreements as described on page 41.35, and the payout of the 2008 PSUs at the end of the performance period on December 31, 2010 described on page 31.
Option Awards | Stock Awards | Options Awards | Stock Awards (1) | |||||||||||||||||||||||
Name | Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (2) | ||||||||||||||||||
David S. Haffner | 443,783 | $ | 7,512,648 | 35,000 | $ | 528,150 | 40,000 | $141,600 | 283,500 | $6,433,560 | ||||||||||||||||
Karl G. Glassman | 25,000 | 88,500 | 131,931 | 2,987,900 | ||||||||||||||||||||||
Matthew C. Flanigan | — | — | 18,750 | 282,938 | 8,500 | 30,090 | 69,369 | 1,568,713 | ||||||||||||||||||
Karl G. Glassman | 23,307 | 368,970 | 27,500 | 414,975 | ||||||||||||||||||||||
Paul R. Hauser | 30,600 | 156,978 | 37,975 | 864,311 | ||||||||||||||||||||||
Joseph D. Downes, Jr. | 36,848 | 590,352 | — | — | 9,000 | 54,990 | 43,050 | 979,818 | ||||||||||||||||||
Paul R. Hauser | — | — | — | — |
(1) | Amounts reported in these columns consist of vested RSU and PSU awards, allocated as follows: |
RSU | PSU | |||||||||||||||
Name | Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||
David S. Haffner | 35,000 | $777,700 | 248,500 | $5,655,860 | ||||||||||||
Karl G. Glassman | 27,500 | 611,050 | 104,431 | 2,376,850 | ||||||||||||
Matthew C. Flanigan | 18,750 | 416,625 | 50,619 | 1,152,088 | ||||||||||||
Paul R. Hauser | 37,975 | 864,311 | ||||||||||||||
Joseph D. Downes, Jr. | 43,050 | 979,818 |
(2) | Amounts in this column are calculated based upon the closing price of the Company’s stock on the vesting date; however, as the PSUs and RSUs are distributed to the NEOs as shares of Company stock upon vesting, the NEOs may continue to hold the shares or sell them in accordance with our insider trading procedures. |
We had a voluntary, tax-qualified, defined benefit pension plan (the“Retirement Plan”), ), which was frozen effective December 31, 2006. Benefits accrued under the Retirement Plan were fixed as of that date and the Retirement Plan was closed to new participants. In 2007, employees who had previously participated in the Retirement Plan were offered a replacement benefit package consisting of the Retirement K and the Retirement K Excess Program discussed at page 32. Although participants are not accruing any additional benefit under the Retirement Plan, the present value of the benefit may increase or decrease each year based on the assumptions used to calculate the benefit for financial reporting purposes.
The Retirement Plan required a contribution from participating employees of 2% of base salary. Normal monthly retirement benefits are the sum of 1% of the employee’s average monthly earningssalary for each year of participation in the Retirement Plan. Earnings for purposes of the Retirement Plan include only salary or wages. Benefits are calculated based on actual years of participation in the Retirement Plan. Retirement Plan, and benefits become payable when a participant reaches age 65 (normal retirement age). Participants may retireMr. Haffner and Mr. Hauser are eligible for early retirement benefits under the Retirement Plan (minimum age 55 and at least 15 years of service), under which they would receive a monthly benefit reduced by 1/180th for the first 60 months and a monthly benefit reduced by 1/360th for any additional months before age 65, but benefits are reduced proportionate with the reduced service.reaching normal retirement age.
The following table lists the present value of accumulated benefits payable to the NEOs under the Retirement Plan, determined using interest rate and mortality rate assumptions consistent with those used in our financial reporting.Plan:
Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | |||||||||||||
David S. Haffner | 26 | $ | 163,866 | — | 27 | $193,615 | |||||||||||||
Karl G. Glassman | 29 | 169,522 | |||||||||||||||||
Matthew C. Flanigan | 13 | 49,650 | — | 14 | 62,663 | ||||||||||||||
Karl G. Glassman | 28 | 137,478 | — | ||||||||||||||||
Paul R. Hauser | 31 | 239,498 | |||||||||||||||||
Joseph D. Downes, Jr. | — | — | — | ||||||||||||||||
Paul R. Hauser | 30 | 204,517 | — |
To calculate the present value of the accumulated Retirement Plan benefit, we took the annual accrued benefit through December 31, 20092010 that would be payable at normal retirement age, assuming no future contributions. We converted that amount to a lump sum using an annuity factor from the RP2000 mortality table, and discounted that amount back to December 31, 20092010 using a 5.75%5.00% discount rate. The discount rate, measurement date and mortality assumptions are the same as those used for financial reporting purposes.
In 2007, employees who had previously participated in the Retirement Plan were offered a replacement benefit, a defined contribution matching Section 401(k) Plan called the “Retirement K.” The Retirement K includes an age-weighted matching contribution designed to replicate the future benefit pre-empted by the Retirement Plan freeze.
Certain highly compensated employees, including the NEOs, are unable to contribute enough in the Retirement K to receive our full matching contribution, due to limitations imposed by the Internal Revenue Code or the Employee Retirement Income Security Act. These employees participate in the “Retirement K Excess Program,” which allows them to receive the full matching benefit they would otherwise be entitled to under the Retirement K. Amounts earned in the Retirement K Excess Program are paid out in cash no later than March 15 of the year following the year in which the compensation was earned, except that employees in the Company’s Deferred Compensation Program may defer their Retirement K Excess payments under that program. Amounts paid to the NEOs through the Retirement K and the Retirement K Excess Program are reported in the All Other Compensation column of the Summary Compensation Table.
Non-Qualified Deferred Compensation in 20092010
Each of the Named Executive Officers has deferred compensation accounts for one or more of the following programs:
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Stock units with dividend equivalents, acquired at 80% of the fair market value of our common stock on the dates the compensation otherwise would have been paid.
At-market stock options with the underlying shares of common stock having an initial market value equal to five times the amount of compensation forgone, with an exercise price equal to the closing market price of our common stock on the last business day of the year. For example, if an executive deferred $100,000 of cash compensation into stock options and the closing market price of our common stock on the grant date was $20.00, he would be granted an option for 25,000 shares ($100,000 X 5 / $20.00) with an exercise price of $20.00 per share. The cost to exercise the option, then, is $500,000.
Cash deferrals with an interest rate intended to be slightly higher than otherwise available for comparable investments.
Stock option deferrals are not included in the table below, but are reported instead in the Outstanding Equity Awards At Fiscal Year End Table on page 48.
Participants who elect a cash or stock unit deferral may elect to receive distributions in a lump sum or in annual installments. Distribution payouts must begin no more than 10 years from the effective date of the deferral and all amounts subject to the deferral must be distributed within 10 years of the first distribution payout.
The 20% discount on stock units purchased with deferred cash is reported in the Stock Awards column of the Summary Compensation Table. The discount on the dividends is reported in the Non-Qualified Deferred Compensation Earnings column of the Summary Compensation Table.
|
The following table lists a summary ofprovides the aggregate 20092010 contributions, earnings, withdrawals, and ending balances for each Named Executive Officer’s deferred compensation account. Valuesaccounts. The year-end balances are calculated at $20.40, thebased on a $22.76 closing market price of our common stock on December 31, 2009.2010.
Name | Name of Deferral Type or Program (1) | Executive Contributions in Last FY ($)(2) | Company Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($)(3) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)(4) | Deferral Type or Program (1) | Executive Contributions in 2010 (2) | Company Contributions in 2010 (2) | Aggregate Earnings in 2010 (3) | Aggregate Withdrawals/ Distributions | Aggregate Balance at 12/31/10 (4) | |||||||||||||||||||||||||||||
David S. Haffner | ESU | $ | 189,374 | $ | 219,028 | $ | 72,823 | — | $ | 1,497,809 | ESU | $199,066 | $264,429 | $559,023 | $372,429 | $2,147,897 | |||||||||||||||||||||||||
DCC | — | — | 389 | — | — | DSU | 200,000 | 50,000 | 1,009,307 | 3,266,993 | |||||||||||||||||||||||||||||||
DSU | 860,466 | 215,117 | 17,734 | — | 2,007,686 | EDSP | 308,710 | 170,592 | 2,101,863 | ||||||||||||||||||||||||||||||||
EDSP | — | — | 99,858 | $ | 397,889 | 1,963,745 | |||||||||||||||||||||||||||||||||||
Total | $ | 1,049,840 | $ | 434,145 | $ | 190,804 | $ | 397,889 | $ | 5,469,240 | 399,066 | 314,429 | 1,877,040 | 543,021 | 7,516,754 | ||||||||||||||||||||||||||
Karl G. Glassman | ESU | 134,954 | 182,278 | 453,714 | 482,104 | 1,853,155 | |||||||||||||||||||||||||||||||||||
DSU | 50,000 | 12,500 | 96,905 | 655,329 | |||||||||||||||||||||||||||||||||||||
EDSP | 38,193 | 283,248 | |||||||||||||||||||||||||||||||||||||||
Total | 184,954 | 194,778 | 588,812 | 482,104 | 2,791,732 | ||||||||||||||||||||||||||||||||||||
Matthew C. Flanigan | ESU | $ | 70,844 | $ | 82,961 | $ | 27,149 | — | $ | 561,898 | ESU | 72,477 | 97,454 | 194,346 | 206,472 | 719,702 | |||||||||||||||||||||||||
DSU | 363,847 | 90,962 | 1,617 | $ | 386,238 | 982,423 | DSU | 431,752 | 107,938 | 555,059 | 963,389 | 1,113,783 | |||||||||||||||||||||||||||||
Total | $ | 434,692 | $ | 173,923 | $ | 28,765 | $ | 386,238 | $ | 1,544,321 | 504,229 | 205,392 | 749,405 | 1,169,861 | 1,833,486 | ||||||||||||||||||||||||||
Karl G. Glassman | ESU | $ | 133,387 | $ | 155,056 | $ | 79,427 | — | $ | 1,564,313 | |||||||||||||||||||||||||||||||
Paul R. Hauser | ESU | 48,372 | 65,894 | 182,925 | 265,727 | 785,999 | |||||||||||||||||||||||||||||||||||
DCC | — | — | 148 | — | — | DCC | 106,154 | 6,831 | 215,374 | ||||||||||||||||||||||||||||||||
DSU | 300,000 | 75,000 | 11,823 | — | 495.924 | DSU | 9,052 | 178,658 | |||||||||||||||||||||||||||||||||
EDSP | — | — | 11,541 | — | 245,055 | ||||||||||||||||||||||||||||||||||||
Total | $ | 433,387 | $ | 230,056 | $ | 102,939 | — | $ | 2,305,292 | 154,526 | 65,894 | 198,808 | 444,385 | 1,001,373 | |||||||||||||||||||||||||||
Joseph D. Downes, Jr. | ESU | $ | 42,136 | $ | 60,205 | $ | 33,295 | — | $ | 662,347 | ESU | 41,662 | 57,495 | 169,171 | 206,727 | 723,947 | |||||||||||||||||||||||||
DCC | — | — | 3,481 | — | 58,354 | DCC | 65,000 | 5,564 | 128,918 | ||||||||||||||||||||||||||||||||
DSU | 50,000 | 12,500 | 1,970 | $ | 43,236 | 197,288 | DSU | 31,146 | 41,120 | 187,315 | |||||||||||||||||||||||||||||||
EDSP | — | — | 4,617 | — | $ | 96,818 | EDSP | 1,766 | 98,584 | ||||||||||||||||||||||||||||||||
Total | $ | 92,136 | $ | 72,705 | $ | 43,363 | $ | 43,236 | $ | 1,014,808 | |||||||||||||||||||||||||||||||
Paul R. Hauser | ESU | $ | 48,645 | $ | 61,787 | $ | 38,495 | — | $ | 754,535 | |||||||||||||||||||||||||||||||
DCC | 100,000 | — | 2,950 | — | 102,389 | ||||||||||||||||||||||||||||||||||||
DSU | — | — | — | — | 169,606 | ||||||||||||||||||||||||||||||||||||
Total | $ | 148,645 | $ | 61,787 | $ | 41,445 | — | $ | 1,026,529 | 106,662 | 57,495 | 207,647 | 346,431 | 1,040,180 |
(1) |
ESU = Executive Stock Unit Program (see description at page 32).
DCC = Deferred Compensation Program—Cash Deferral (see description at page 32).
DSU = Deferred Compensation Program—Stock Units (see description at page 32).
EDSP = Executive Deferred Stock Program. This is a frozen program under which executives deferred the gain from their stock option exercises from 1 to 15 years. Upon deferral, the participant was credited with stock units representing the option shares deferred, and the units accumulate dividend equivalents during the deferral period.
(2) | Amounts reported in these columns are also included in the totals reported in the Summary Compensation Table. |
(3) | Aggregate earnings include interest, dividends and the appreciation (or depreciation) of the investments in which the accounts are held. The |
(4) | Of the |
Potential Payments upon Termination or Change in Control
This section describes the payments and benefits that may be received by our NEOs upon termination of employment, in excess of the amounts that are generally paid to our salaried employees upon termination of employment. We have employment agreements with Messrs.Mr. Haffner, Mr. Glassman and Mr. Flanigan which provide for specific payments and benefits upon certain termination events. Mr. Haffner and Mr. Glassman are also parties to severance benefit agreements with us which become effective upon a change in control of the Company. For more information about how we Company determined the terms of these agreements, see page 41.35. A termination of employment for an NEO not addressed under these agreements would be treated in the same manner as that of any salaried employee.
Employment Agreements.The material terms of the employment agreements with Messrs.Mr. Haffner, Mr. Glassman and Mr. Flanigan are set forth in the following table. These agreements expire on the date of our annual meeting of shareholders in 2013. In the event their employment terminates prior to the expiration of the employment agreement, the obligations of the Company and the executive are as set forth in the following table:
Termination Following Total Disability | ||||||||||
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| •During the non-compete period, | •Maintain confidentiality of Company information and trade secrets •Non-compete period through the end of the agreement’s term, or if later, for two years following termination | |||||||
Executive’s Option to Terminate | ||||||||||
Trigger | Company Obligations | Executive Obligations | ||||||||
•Executive does not receive a salary increase in any year, unless due to Company-wide salary freeze • • • Company is merged out of existence, sold or dissolved • Working control of Company is lost in a proxy contest or other tender offer | •
•During the non-compete period, | •
•Non-compete period through the end of the agreement’s term, or if later, for two years following termination |
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Termination by Company for Cause | ||||||||||
Trigger | Company Obligations | Executive Obligations | ||||||||
The Company may terminate the executive following: •Conviction of a felony crime •Willful breach of the Code of Conduct or Financial Code of Ethics that causes material injury to the Company •Willful act of fraud, misappropriation or dishonesty that causes material injury to the Company or results in material enrichment •Willful violation of specific written directions of the Board or CEO, as applicable, following notice of such violation •Continuing, repeated, willful failure to substantially perform duties after written notice from the Board | •
•During the non-compete period, | •Maintain confidentiality of Company information and trade secrets •Non-compete period through the end of the agreement’s term, or if later, for two years following termination | ||||||||
Termination by Company without Cause | ||||||||||
Trigger |
| Executive Obligations | ||||||||
The Company may terminate the executive at the Board’s discretion, at any time upon prior written notice | • The Company’s financial obligations continue •Equity awards continue to vest as if the executive were employed for the entire term • Continuation of •Executive given title to the | •Maintain confidentiality of Company information and trade secrets •Enter into a release and agreement not to sue |
In addition to the terms of these employment agreements, uponSeverance Benefit Agreements.Upon a change in control of the Company, the severance benefit agreements with Mr. Haffner and Mr. Glassman provide for severance payments and benefits during a specified period (the“Protected PeriodPeriod””) following the change in control. The Protected Period is 36 months for Mr. Haffner and 30 months for Mr. Glassman.
In general, a change in control is deemed to occur when: (i)(i) a shareholder acquires shares giving it ownership of 25% or more of our common stock, (ii)(ii) the current directors or their “successors” (as defined) no longer constitute a majority of the Board of Directors, (iii)(iii) after a merger or consolidation with another corporation, less than 75% of the voting securities of the surviving corporation are owned by our former shareholders, or (iv) we liquidate(iv) the Company is liquidated or sellsells substantially all of our assets to an unrelated third party.
The payments and benefits payable under these severance benefit agreements are subject to a “double trigger.” Thattrigger”; that is, they become payable only after both (i)(i) a change in control of the Company and (ii)(ii) the executive officer’s employment is terminated by the Company (except for cause or upon disability) or the executive officer terminates his employment for “good reason.” In general, the executive officer would have good reason to terminate his employment if he were required to relocate or experienced a reduction in job responsibilities, title, compensation or benefits, or if the
successor company did not assume the obligations of the severance benefit agreement. The Company may correct, reverse or cure the “good reason” for termination within 30 days of receiving notice of such from the executive.
Events considered grounds for termination by the Company for cause under the severance benefit agreements are the same as those in the executive officers’ employment agreements as described above. The payments and benefits provide for the following benefits uponUpon termination of employment by the Company (other than for disabilitycause or cause)upon disability) or by the executive for good reason following a change in control:control, the Company will provide the following payments and benefits:
Base salary through the date of termination.
Pro-rata annual incentive award at the maximum payout level for the year of termination. Monthly severance payments: Mr. Haffner—190% of base salary multiplied by 3, paid over 36 months; Mr. Glassman—175% of base salary multiplied by 2.5, paid over 30 months. Continuation of health insurance and fringe benefits for up to 36 months for Mr. Haffner (30 months for Mr. Glassman), as permitted by the Internal Revenue Code, or an equivalent lump sum payment. Lump sum additional retirement benefit based upon the actuarial equivalent of an additional 36 months of continuous service for Mr. Haffner (30 months for Mr. Glassman). Option to purchase company car at lower of book value or wholesale value. The severance benefit agreements further provide that, if within one year following a change in control that was opposed by a majority of the directors the executive officer terminates his employment, he will receive, in lieu of the payments and benefits described above, (i) base salary through the date of termination, (ii) pro-rata annual incentive award at the maximum payout level for the year of termination, (iii) a lump sum payment equal to 75% of his cash compensation preceding the year of termination, and (iv) continuation of health insurance and certain fringe benefits for one year. |
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If the severance payments and benefits provided to either Mr. Haffner or Mr. Glassman will exceed 10% of the limit imposed by Section 280G of the Internal Revenue Code, we will make a gross-uptax “gross-up” payment of the amount equal to the Section 280G excise taxes payable by the executive officer plus all income, employment, and excise taxes incurred on the gross-up payment. If the severance payments and benefits provided are less than 10% aboveexceed the Section 280G limit theyby less than 10%, the payments will be capped at $1 below the Section 280G limit.
All amounts received by either Mr. Haffner ofor Mr. Glassman as cash compensation from a new full-time job will reduce the cash severance payments dollar for dollar. The executive officer is not required to mitigate the amount of any termination payment or benefit provided under his severance benefit agreement, but any health insurance or fringe benefits he may receive from a new job will reduce any fringe benefits we are then providingprovided under the agreement.
Accelerated Vesting of PSUs and Options. The severance benefit agreements furtherterms and conditions of the PSU awards provide that, within one year following afor “double trigger” vesting (a change in control of the Company that was opposed byleads to a majoritytermination of employment), such that all outstanding PSUs will become vested with the payout percentage set at the 175% maximum. The Company’s stock option awards provide for immediate, “single trigger” vesting in the event of a change in control of the directors,Company. The acceleration of equity vesting upon a change in control is a common practice, designed to ensure that ongoing employees receive the executive officer may elect to terminate his employment for any reason and receive, in lieubenefit of the payments and benefits described above, a lump sum payment equaltransaction by having the opportunity to 75%realize value from their equity awards at the time of his cash compensation preceding the year of termination and certain fringe benefits for one year.transaction.
The tables below listprovide the estimated potential payments toand benefits that the executive officersNEOs would receive in the event of any termination of employment. We have used the following assumptions and methodology to calculate these amounts:
Each termination of employment is deemed to have occurred on December 31, 2009.2010. Potential payments reflect the benefits and arrangements in effect on that date.
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The present value of each potential payment was determined usingtables reflect only the additional payments and benefits the NEOs would be entitled to receive as a .83% discount rate for payments with a term of three years or less, and 3.14% for payments with a term greater than three years. These rates equal 120%result of the Applicable Federal Short-Termtermination of employment. Fully vested benefits described elsewhere in this proxy statement (such as deferred compensation accounts and Mid-Term Rates, respectively,pension benefits) and payments generally available to U.S. employees upon termination of employment (accrued vacation) are not included in December 2009.the tables.
To project the value of stock plan benefits, we used the December 31, 2010 closing market price of our common stock on December 31, 2009, which was $20.40of $22.76 per share and a 5.2% dividend rate.yield of 4.75%.
The potential payments and benefits presented in the following tabletables are only estimates provided solely for disclosure purposes and may vary from the amounts that are payableultimately paid in connection with an actual termination of employment.
Potential Payments Upon Termination—David S. Haffner
Total Disability | Executive’s Option to Terminate | Termination by Company for Cause | Termination by Company without Cause | Termination following Change in Control | ||||||||||||||||
Base Salary or Severance Payments | $ | 3,026,374 | (1) | $ | 4,860,000 | (2) | ||||||||||||||
Incentive Award | (3 | ) | (3 | ) | 1,942,416 | (1) | 1,080,000 | (4) | ||||||||||||
Vesting of PSU Awards | 3,299,870 | (5) | 10,704,645 | (6) | ||||||||||||||||
Vesting of 5/7/09 RSU Award | 2,142,000 | (5) | 2,142,000 | (7) | ||||||||||||||||
Vesting of Stock Options | $ | 1,141,362 | (8) | $ | 1,141,362 | (8) | 1,141,362 | (8) | 1,141,362 | (9) | ||||||||||
ESU Program (replacement benefit) | 1,046,918 | (10) | ||||||||||||||||||
Additional Retirement Benefit (401(k) and Excess Plan) | 143,123 | (1) | ||||||||||||||||||
Medical | 43,048 | (11) | 43,048 | (11) | $ | 43,048 | (11) | 43,048 | (11) | 36,216 | (10) | |||||||||
Life Insurance Premium | 2,880 | (10) | ||||||||||||||||||
Auto | 27,125 | (12) | ||||||||||||||||||
280G Tax Gross-Up | 8,465,821 | (13) | ||||||||||||||||||
Total | 1,184,410 | 1,184,410 | 43,048 | 11,622,195 | 29,622,966 | |||||||||||||||
Total Present Value | $ | 1,064,983 | $ | 1,064,983 | $ | 40,818 | $ | 11,228,112 | $ | 29,488,702 |
Base Salary or Severance Payments Annual Incentive Vesting of PSU Awards Vesting of 2009 RSU Award Vesting of Stock Options ESU Program Retirement Benefit (401(k) and Excess Plan) Health Benefits Life Insurance Premium Auto 280G Tax Gross-Up Total Total
Disability Executive’s
Option to
Terminate Termination
by Company
for Cause Termination
by Company
without Cause Termination
following
Change in
Control $2,176,999 (1) $5,258,250 (2) (3 ) (3 ) 1,852,398 (4) 1,245,375 (5) 1,674,116 (6) 11,413,287 (7) 1,593,200 (6) 1,593,200 (8) $1,405,686 (9) $1,405,686 (9) 1,405,686 (6) 1,405,686 (10) 1,179,974 (11) 218,439 (11) 30,540 (12) 30,540 (12) $30,540 (12) 30,540 (12) 44,294 (11) 2,880 (11) 24,800 (13) 8,008,822 (14) $1,436,226 $1,436,226 $30,540 $8,757,739 $30,370,207
Potential Payments Upon Termination—Karl G. Glassman
Total Disability | Executive’s Option to Terminate | Termination by Company for Cause | Termination by Company without Cause | Termination following Change in Control | Total Disability | Executive’s Option to Terminate | Termination by Company for Cause | Termination by Company without Cause | Termination following Change in Control | |||||||||||||||||||||||||||||||
Base Salary or Severance Payments | $ | 2,269,780 | (1) | $ | 2,868,750 | (2) | $1,633,044 | (1) | $3,027,500 | (2) | ||||||||||||||||||||||||||||||
Incentive Award | (3 | ) | (3 | ) | 1,277,325 | (1) | 708,750 | (4) | ||||||||||||||||||||||||||||||||
Annual Incentive | (3 | ) | (3 | ) | 1,158,200 | (4) | 778,500 | (5) | ||||||||||||||||||||||||||||||||
Vesting of PSU Awards | 1,395,828 | (5) | 4,530,330 | (6) | 723,539 | (6) | 4,914,026 | (7) | ||||||||||||||||||||||||||||||||
Vesting of 5/7/09 RSU Award | 1,683,000 | (5) | 1,683,000 | (7) | ||||||||||||||||||||||||||||||||||||
Vesting of 2009 RSU Award | 1,251,800 | (6) | 1,251,800 | (8) | ||||||||||||||||||||||||||||||||||||
Vesting of Stock Options | 872,462 | (5) | 1,141,362 | (9) | 1,068,125 | (6) | 1,068,125 | (10) | ||||||||||||||||||||||||||||||||
ESU Program (replacement benefit) | 836,208 | (10) | ||||||||||||||||||||||||||||||||||||||
Additional Retirement Benefit (401(k) and Excess Plan) | 148,169 | (10) | ||||||||||||||||||||||||||||||||||||||
Medical | $ | 53,571 | (11) | $ | 53,571 | (11) | $ | 53,571 | (11) | 53,571 | (11) | 48,202 | (10) | |||||||||||||||||||||||||||
ESU Program | 879,037 | (11) | ||||||||||||||||||||||||||||||||||||||
Retirement Benefit (401(k) and Excess Plan) | Retirement Benefit (401(k) and Excess Plan) |
| 149,005 | (11) | ||||||||||||||||||||||||||||||||||||
Health Benefits | $46,450 | (12) | $46,450 | (12) | $46,450 | (12) | 46,450 | (12) | 59,137 | (11) | ||||||||||||||||||||||||||||||
Life Insurance Premium | 2,880 | (10) | 2,880 | (11) | ||||||||||||||||||||||||||||||||||||
Auto | 47,443 | (12) | 31,975 | (13) | ||||||||||||||||||||||||||||||||||||
280G Tax Gross-Up | 4,303,721 | (13) | 4,330,912 | (14) | ||||||||||||||||||||||||||||||||||||
Total | 53,571 | 53,571 | 53,571 | 7,599,409 | 16,271,373 | $46,450 | $46,450 | $46,450 | $5,913,133 | $16,460,922 | ||||||||||||||||||||||||||||||
Total Present Value | $ | 50,796 | $ | 50,796 | $ | 50,796 | $ | 7,318,399 | $ | 16,176,001 |
Potential Payments Upon Termination—Matthew C. Flanigan
Total Disability | Executive’s Option to Terminate | Termination by Company for Cause | Termination by Company without Cause | Termination following Change in Control | Total Disability | Executive’s Option to Terminate | Termination by Company for Cause | Termination by Company without Cause | Termination following Change in Control | |||||||||||||||||||||||||||||||
Base Salary | $ | 1,328,242 | (1) | $955,755 | (1) | |||||||||||||||||||||||||||||||||||
Incentive Award | (3 | ) | (3 | ) | 642,001 | (1) | ||||||||||||||||||||||||||||||||||
Annual Incentive | (3 | ) | (3 | ) | 587,837 | (4) | ||||||||||||||||||||||||||||||||||
Vesting of PSU Awards | 1,395,828 | (5) | $ | 2,383,868 | (6) | 400,952 | (6) | $2,734,330 | (7) | |||||||||||||||||||||||||||||||
Vesting of 5/7/09 RSU Award | 1,147,500 | (5) | 1,147,500 | (7) | ||||||||||||||||||||||||||||||||||||
Vesting of 2009 RSU Award | 853,500 | (6) | 853,500 | (8) | ||||||||||||||||||||||||||||||||||||
Vesting of Stock Options | 872,462 | (5) | 407,611 | (9) | 505,828 | (6) | 505,828 | (10) | ||||||||||||||||||||||||||||||||
Medical | $ | 43,620 | (11) | $ | 43,620 | (11) | $ | 43,620 | (11) | 43,620 | (11) | |||||||||||||||||||||||||||||
Health Benefits | $32,166 | (12) | $32,166 | (12) | $32,166 | (12) | 32,166 | (12) | 32,166 | (12) | ||||||||||||||||||||||||||||||
Auto | 33,723 | (12) | 35,905 | (13) | ||||||||||||||||||||||||||||||||||||
280G Tax Gross-Up | ||||||||||||||||||||||||||||||||||||||||
Total | 43,620 | 43,620 | 43,620 | 5,463,376 | 3,938,978 | $32,166 | $32,166 | $32,166 | $3,371,943 | $4,125,824 | ||||||||||||||||||||||||||||||
Total Present Value | $ | 41,361 | $ | 41,361 | $ | 41,361 | $ | 5,320,028 | $ | 3,914,814 |
Potential Payments Upon Termination—Paul R. Hauser
Total Disability | Executive’s Retirement | Termination by Company for Cause | Termination by Company without Cause | Termination following Change in Control | ||||||||||||||||
Vesting of PSU Awards | $1,759,490 | (7) | ||||||||||||||||||
Vesting of Stock Options | $330,055 | (9) | $330,055 | (9) | $330,055 | (9) | 330,055 | (10) | ||||||||||||
Total | $330,055 | $330,055 | $330,055 | $2,089,545 |
Potential Payments Upon Termination—Joseph D. Downes, Jr.
Total Disability | Executive’s Option to Terminate | Termination by Company for Cause | Termination by Company without Cause | Termination following Change in Control | ||||||||||||||
Vesting of PSU Awards | $ | 1,904,595 | (6) | |||||||||||||||
Vesting of Stock Options | $ | 310,875 | (8) | $ | 310,875 | (8) | $ | 310,875 | (8) | 310,875 | (8) | |||||||
Total | $ | 310,875 | $ | 310,875 | $ | 310,875 | $ | 2,215,470 |
Potential Payments Upon Termination—Paul R. Hauser
Total Disability | Executive’s Retirement | Termination by Company for Cause | Termination by Company without Cause | Termination following Change in Control | ||||||||||||||||
Vesting of PSU Awards | $2,051,245 | (7) | ||||||||||||||||||
Vesting of Stock Options | $296,549 | (9) | $296,549 | (9) | $296,549 | (9) | 296,549 | (10) | ||||||||||||
Total | $296,549 | $296,549 | $296,549 | $2,347,794 |
Total Disability | Executive’s Option to Terminate | Termination by Company for Cause | Termination by Company without Cause | Termination following Change in Control | ||||||||||||||
Vesting of PSU Awards | $ | 1,637,738 | (6) | |||||||||||||||
Vesting of Stock Options | $ | 346,574 | (8) | $ | 346,574 | (8) | $ | 346,574 | (8) | 346,574 | (8) | |||||||
Total | $ | 346,574 | $ | 346,574 | $ | 346,574 | $ | 1,984,312 |
(1) | Salary |
(2) | Monthly severance payments through the Protected Period, under the |
(3) | The employment agreements guarantee a pro-rated annual incentive |
(4) | In the event of a termination without cause, the executive officer will receive annual incentive payments throughout the term of the employment agreement based upon the average annual incentive payout percentage for the prior five years. |
(5) | The severance benefit |
The |
The |
Because |
The severance benefit |
We |
The calculation of the Section 280G tax gross-up payment assumes the following tax rates: Section 280G excise tax—20%; effective federal income tax— |
NoThe only additional compensation is paid in connection with a termination of employment as the result of an executive officer’s death exceptis a life insurance benefit. The life insurance coverage for our executive officersNEOs is the same as that provided to other salaried employees. In the event ofemployees—a $500,000 death the life insurance benefit, payable to each of the NEOs is $500,000. Inwhich doubles in the event of death due to an accident, this amount would double for each executive officer.accident.
Security Ownership of Directors and Executive Officers
The table below sets forth the beneficial ownership of our common stock on March 5, 2010,1, 2011, by the Company’s Directors,directors, the Chief Executive Officer, the Chief Financial Officer and the other three most highly compensated executive officers, director nominees, and all directors and executive officers as a group.
Number of Shares or Units Beneficially Owned | |||||||||||
Directors and Executive Officers | Common Stock (1) | Stock Units (2) | Options Exercisable within 60 Days | Total | % of Class (3) | ||||||
Raymond F. Bentele, Director | 20,408 | — | 27,194 | 47,602 | |||||||
Robert E. Brunner, Director | 6,627 | — | — | 6,627 | |||||||
Ralph W. Clark, Director | 20,509 | 6,977 | 15,923 | 43,409 | |||||||
Joseph D. Downes, Jr., Senior Vice President and President—Industrial Materials Segment | 116,927 | 44,149 | 137,126 | 298,202 | .20 | % | |||||
Robert Ted Enloe, III, Director | 10,137 | 14,043 | 46,632 | 70,812 | |||||||
Richard T. Fisher, Board Chair | 155,321 | 1,684 | 10,482 | 167,487 | .11 | % | |||||
Matthew C. Flanigan, Senior Vice President and Chief Financial Officer and Director Nominee | 63,717 | 115,076 | 275,879 | 454,672 | .30 | % | |||||
Karl G. Glassman, Executive Vice President and Chief Operating Officer and Director | 64,571 | 207,653 | 623,939 | 896,163 | .59 | % | |||||
Ray A. Griffith, Director Nominee | — | — | — | — | |||||||
David S. Haffner, President and Chief Executive Officer and Director | 889,814 | 410,287 | 1,083,375 | 2,383,477 | 1.56 | % | |||||
Paul R. Hauser, Senior Vice President and President—Residential Furnishings Segment | 37,133 | 41,063 | 121,931 | 200,126 | .13 | % | |||||
Joseph W. McClanathan, Director | 18,568 | — | 1,454 | 20,022 | |||||||
Judy C. Odom, Director | 27,745 | 2,046 | 11,083 | 40,874 | |||||||
Maurice E. Purnell, Jr., Director | 31,007 | 7,066 | 26,833 | 64,906 | |||||||
Phoebe A. Wood, Director | 18,239 | 13,654 | 13,320 | 45,213 | |||||||
All executive officers and directors as a group (19 persons) | 1,840,490 | 1,068,175 | 3,371,103 | 6,279,768 | 4.11 | % |
Number of Shares or Units Beneficially Owned | ||||||||||||||||||||
Directors and Executive Officers | Common Stock (1) | Stock Units (2) | Options Exercisable within 60 Days | Total | % of Class (3) | |||||||||||||||
Robert E. Brunner, Director | 11,152 | 11,152 | ||||||||||||||||||
Ralph W. Clark, Director | 20,508 | 12,130 | 14,722 | 47,360 | ||||||||||||||||
Joseph D. Downes, Jr., Senior Vice President, | 145,850 | 40,903 | 165,726 | 352,479 | .24 | % | ||||||||||||||
R. Ted Enloe, III, Director | 10,314 | 19,623 | 45,431 | 75,368 | ||||||||||||||||
Richard T. Fisher, Board Chair | 162,971 | 1,156 | 9,281 | 173,408 | .12 | % | ||||||||||||||
Matthew C. Flanigan, Senior Vice President— | 147,753 | 56,546 | 315,004 | 519,303 | .35 | % | ||||||||||||||
Karl G. Glassman, Executive Vice President and Chief Operating Officer, Director | 200,368 | 125,846 | 706,456 | 1,032,670 | .69 | % | ||||||||||||||
Ray A. Griffith, Director | 5,525 | 808 | 6,333 | |||||||||||||||||
David S. Haffner, President and Chief Executive Officer, Director | 1,193,802 | 260,456 | 1,181,358 | 2,635,616 | 1.76 | % | ||||||||||||||
Paul R. Hauser, Senior Vice President , President—Residential Furnishings Segment | 76,665 | 36,247 | 134,264 | 247,176 | .16 | % | ||||||||||||||
Joseph W. McClanathan, Director | 23,093 | 1,454 | 24,547 | |||||||||||||||||
Judy C. Odom, Director | 32,270 | 2,445 | 11,083 | 45,798 | ||||||||||||||||
Maurice E. Purnell, Jr., Director | 33,532 | 7,494 | 25,632 | 66,658 | ||||||||||||||||
Phoebe A. Wood, Director | 22,764 | 16,893 | 13,320 | 52,977 | ||||||||||||||||
All executive officers and directors as a group (20 persons) | 2,417,775 | 740,837 | 3,471,434 | 6,620,056 | 4.42 | % |
(1) | Includes shares pledged as security for the following directors and officers: Fisher— |
(2) | Stock units are held on account under the Company’s Executive Deferred Stock Program, Executive Stock Unit Program, Deferred Compensation Program, and Director Restricted Stock Unit Grants. Participants have no voting rights with respect to stock units. In each program, stock units are converted to shares of common stock upon distribution (although the Company has the option to settle all or a portion of the distributions under the ESU Program and the Deferred Compensation Program in cash, in its discretion), which occurs at a specified date or upon termination of employment. None of the stock units listed are scheduled for distribution within 60 days. |
(3) | Beneficial ownership of less than .1% of the class is not shown. Stock units and options exercisable within 60 days are considered as stock outstanding for the purpose of calculating the ownership percentages. |
Security Ownership of Certain Beneficial Owners
The Company knows of no beneficial owner of more than 5% of its common stock as of February 16, 2010,15, 2011, except as set out below.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Common Stock Outstanding | Amount and Nature of Beneficial Ownership | Percent of Common Stock Outstanding | ||||||||||
State Street Corporation | 15,005,954 | (1) | 10.3 | % | ||||||||||
One Lincoln Street | ||||||||||||||
Boston, MA 02111 | ||||||||||||||
BlackRock, Inc. | 11,689,680 | (1) | 7.69 | % | 9,618,892 | (2) | 6.6 | % | ||||||
40 East 52nd Street | ||||||||||||||
New York, NY 10022 | ||||||||||||||
State Street Corporation | 9,304,584 | (2) | 6.1 | % | ||||||||||
400 Howard Street | ||||||||||||||
San Francisco, CA 94105 | ||||||||||||||
Capital World Investors | 9,222,709 | (3) | 6.3 | % | ||||||||||
333 South Hope Street | ||||||||||||||
Los Angeles, CA 90071 |
(1) | State Street Corporation (“SSC” ), acting in various fiduciary capacities, is deemed to have shared voting and shared dispositive power with respect to 15,005,954 shares. This information is based on Schedule 13G of SSC dated February 10, 2011, which reported beneficial ownership as of December 31, 2010. |
(2) | BlackRock, Inc. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s executive officers and directors to file reports of ownership and changes in ownership of common stock with the SEC and the NYSE. We must identify in this proxy statement those individuals for whom any of these reports was not filed inBased on our records, we believe our executive officers and directors made all filings on a timely manner. Due to an administrative error, we reported a February 19, 2009 acquisition of 341 shares under Richard Fisher’s deferred compensation account on March 5, 2009. A Form 4 for Karl Glassman reporting a sale of 615 shares to the Company by a family member on August 10, 2009 was filed on August 17, 2009.basis in 2010.
The following table shows the number of outstanding options and shares available for future issuance under all the Company’s equity compensation plans as of December 31, 2009.2010. All of our equity compensation plans have been approved by our shareholders.
Plan Category | Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights (b) | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) | |||||||||||||||
Equity compensation plans approved by shareholders | 18,821,055 | (1) | $ | 19.87 | 5,654,859 | (2) | 17,906,204 | (1) | $20.15 | 6,038,679 | (2)(3) | ||||||||||
Equity compensation plans not approved by shareholders | N/A | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Total | 18,821,055 | $ | 19.87 | 5,654,859 | 17,906,204 | $20.15 | 6,038,679 |
(1) | This number |
Director Stock Option Plan | ||||||||
Flexible Stock | 11,737,546 | |||||||
Flexible Stock Plan—Vested Stock Units | 3,562,900 | |||||||
Flexible Stock | 2,573,322 |
Director Stock Option Plan. This is a frozen plan, and no future awards will be granted under it; however, 32,436 options remain outstanding under the plan. All options under this plan were granted in lieu of cash compensation otherwise payable to non-employee directors. The options were granted at a 50% discount to the market value of the Company’s stock on the date of grant and have a 15-year term.
Flexible Stock Plan. Includes 11,737,546 options outstanding and 6,136,222 stock units convertible to common stock.
The stock units include grants of RSUs and PSUs covering 2,539,202 shares that are still subject to forfeiture if vesting conditions are not satisfied.
The remaining stock units represent amounts held on account in our ESU Program, Deferred Compensation Program and Executive Deferred Stock Program, which relate to compensation previously earned and vested. Only 34,120 stock units held in these programs remain subject to forfeiture. (See pages 32 and 45 for descriptions of these programs.)
(2) | Shares available for future issuance include: |
LEGGETT & PLATT, INCORPORATED
FLEXIBLE STOCK PLAN
Amended and Restated
Effective as of May 13, 2010
1.1Name. The name of the Plan is the “Leggett & Platt, Incorporated Flexible Stock Plan.”
1.2Purpose. The purpose of the Plan is to advance the Company’s long-term interests by providing awards that allow the Company to attract and retain valuable employees, align the interests of directors, employees and other key individuals with the interests of shareholders, and reward outstanding performance.
1.3Effective Date and Term. This amended and restated Plan (the “2010 Restatement”) is an amendment and restatement of the Plan that was effective May 8, 2008, and will become effective as of May 13, 2010, subject to approval by the Company’s shareholders, and shall continue in full force and effect until the tenth anniversary of the Effective Date.
2.1General Definitions. Unless otherwise specifically defined or unless the context clearly otherwise requires, the words and phrases used in the Plan are defined as set forth below. In addition to the definitions below, certain words and phrases used in the Plan and any agreement may be defined in other portions of the Plan or agreement.
3.1Number of Shares. The number of Shares available for grant as an Award under the Plan after the Effective Date of this 2010 Restatement shall be the sum of (a) all outstanding Awards previously granted under the Plan on the Effective Date, (b) all Shares authorized and available for issuance or grant as Awards immediately prior to the Effective Date and (c) 2,800,000 Shares. Shares may be authorized but unissued Shares, Shares held in the treasury, or both. Notwithstanding the preceding sentence, only Shares held in the treasury may be used to provide an Award to a Participant if the use of authorized but unissued Shares would violate any applicable law, rule or regulation.
3.2Share Usage. Awards settled in cash shall not reduce the Shares available for grant under the Plan. If an Award expires or is terminated, cancelled or forfeited, the Shares associated with the expired, terminated, cancelled or forfeited Awards shall again be available for grant under the Plan.
The following Shares shall not become available for issuance under the Plan:
3.3Adjustments.
3.4Tax Code Limits. The aggregate number of Shares subject to Options or Stock Appreciation Rights granted under this Plan during any calendar year to any one Participant shall not exceed 1,000,000. If, after grant, an Option is cancelled, the cancelled Option shall continue to be counted against the maximum number of Shares for which Options may be granted to Participant as described in this Section. The aggregate number of Shares subject to Restricted Stock, Performance Awards, Stock Unit Awards or Other Stock Based Awards, to the extent they are granted with the intent that they qualify as qualified performance-based compensation under Section 162(m) of the Code, that can be granted under this Plan during any calendar year to any one Participant shall not exceed 1,000,000. To the extent that Performance Awards, Stock Unit Awards or other Stock Based Awards are payable in cash, the Fair Market Value per Share at the date of grant shall count against the 1,000,000 Share limit in this Section, but shall not count against the Share limit in Section 3.1. Notwithstanding anything to the contrary in this Plan, the foregoing limitations shall be subject to adjustment under Section 3.3, but only to the extent that such adjustment will not affect the status of any Award intended to qualify as “performance-based compensation” under Section 162(m) of the Code. The aggregate dollar amount of Awards that are not denominated in Shares or determined by reference to a number of Shares, to the extent they are granted with the intent that they qualify as qualified performance-based compensation under Section 162(m) of the Code, that can be paid during any calendar year to any one Participant shall not exceed $4,000,000.
3.5Plan Limits. Of the Shares available for grant under the Plan after the Effective Date of this 2010 Restatement, no more than 3,300,000 shall be granted for Awards other than Options or Stock Appreciation Rights; provided, however, that the Committee may grant Awards other than Options or Stock Appreciation Rights in excess of this limit, in which case, the number of Shares available under Section 3.1 of the Plan shall be reduced by three (3) Shares with respect to the number of Shares subject to Awards in excess of this limit. The remainder of the Shares available under Section 3.1 of the Plan, after reduction by the Shares available for Awards under this Section, shall be available for grants of Options or Stock Appreciation Rights. Up to one hundred percent (100%) of the Shares available for Options and Stock Appreciation Rights under the Plan may be available for grants of ISOs.
4.1Participants. Awards may be granted to:
4.2Eligibility. The Participants and the Awards they receive under the Plan shall be determined by the Committee. In making its determinations, the Committee shall consider any factors it deems relevant in selecting
Participants and determining the amount and type of their respective Awards. Such factors shall include, but are not limited to, past, present and expected future contributions of Participants and potential Participants to the Employer. No Participant shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Participants under the Plan. The Committee’s grant of an Award to a Participant in any year shall not require the Committee to grant an Award to that Participant in any other year.
5.1Committee. The Plan shall be administered by the Committee. The Committee shall consist of two or more members of the Board who are “Non-Employee Directors” as defined in Rule 16b-3 of the Exchange Act and who are “outside directors” as defined in Code section 162(m)(4) and the applicable Treasury Regulations. The members of the Committee shall be appointed by and shall serve at the pleasure of the Board. The Committee may select one of its members as its Chairman and shall hold its meetings at such times and places as it may determine. A majority of its members shall constitute a quorum. At any meeting of the Committee at which a quorum is present, all questions and business shall be determined by the affirmative vote of a majority of the members present. Any action of the Committee may be taken without a meeting if a consent setting forth the action in writing is signed by all the members of the Committee. All determinations of the Committee shall be final and binding on all persons, including the Company, any Participant, any stockholder and any Employee of the Company or any Affiliate. No member of the Board or any of its Committees shall be liable for any action or determination made in good faith with respect to the Plan or any Award granted under it.
5.2Authority. Subject to the terms of the Plan and such resolutions as may from time to time be adopted by the Board, the Committee shall have full power and discretion to:
5.3Delegation. The Committee may delegate all or any part of its authority under the Plan to any Employee or committee, except that it may not delegate any action related to grants of Awards to individuals who are subject to Section 16 of the Exchange Act or who are “covered employees” as defined by Code section 162(m)(3).
6.1Description. An Option is a right to purchase a number of Shares at a price, at such times, and upon such other terms and conditions specified in the documents evidencing the Award. The Committee may grant Options
intended to qualify as incentive stock options (“ISOs”) pursuant to Section 422 of the Code, as well as non-qualified options (“NQSOs”) under the Plan. Except as otherwise provided in Sections 6.2 and 6.3, the terms and conditions of all Options shall be determined by the Committee.
6.2ISOs. ISOs can be granted only to Employees of the Company, a Parent, or an Affiliate. Each ISO must be granted to an Employee for a term not to exceed ten years from the date of grant. The purchase price for Shares under any ISO shall be no less than the Fair Market Value of the Shares on the date the Option is granted. The terms of an ISO shall meet all requirements of Section 422 of the Code.
6.3NQSOs. The purchase price for Shares under any NQSO shall be no less than the Fair Market Value of the Shares on the date the Option is granted. The term of any NQSO shall not exceed ten years from the date of grant.
A Stock Appreciation Right (“SAR”) gives a Participant the right to receive, for each SAR exercised, an amount equal to the excess of the Fair Market Value of a Share on the date the SAR is exercised and the Fair Market Value of a Share on the date the SAR was granted. The term of any SAR shall not exceed ten years from the date of grant. SARs may be settled in cash or in Stock, as determined by the Committee, and are subject to the terms and conditions expressed in the document evidencing the Award.
8.1Description. A Restricted Stock Award is an award of Shares, the grant, vesting, issuance, or retention of which is subject to certain conditions expressed in the document evidencing the Award. Restricted Stock may be issued in certificate form or held in book entry on the records of the Company’s transfer agent and registrar. If Restricted Stock is issued in certificate form, the Shares may be held by the Company (or other person designated by the Committee) as escrow agent until the restrictions on such Shares have lapsed or the Company may require the certificate to bear a legend stating that such Shares are non-transferable until all restrictions have been satisfied and the legend has been removed.
8.2Voting Rights. Recipients of Restricted Stock shall have full voting rights with respect to such Shares during the restriction period, unless otherwise determined by the Committee.
8.3Dividends. Recipients of Restricted Stock shall be entitled to receive dividends and other distributions with respect to such Shares during the restriction period, unless otherwise determined by the Committee. Dividends may be paid in cash or in stock, at the Committee’s discretion. If paid in stock, the dividend Shares shall be subject to the same restrictions as the Shares of Restricted Stock with respect to which they were paid.
8.4Price of Restricted Stock. As permitted under applicable law, the Committee shall determine the price, if any, at which Restricted Stock shall be sold or awarded to Participants.
8.5Non-Transferability. Shares of Restricted Stock shall not be transferable during the restriction period except for transfer by bequest or inheritance or as otherwise permitted by the Committee.
9.1Description. A Stock Unit Award is the award of a right to receive the market value of one Share, the grant, vesting, issuance, or retention of which is subject to certain conditions expressed in the document evidencing the Award. Stock Units may be settled in cash or in stock, as determined by the Committee. Stock Units represent an unfunded and unsecured obligation of the Company. Participants shall have no rights as a shareholder with respect to Stock Units until such Stock Units have been converted to Shares and delivered to the Participant.
9.2Dividend Equivalents. Stock Units may accrue dividend equivalents, as determined by the Committee.
9.3Price of Stock Units. As permitted under applicable law, the Committee shall determine the price, if any, at which Stock Units shall be sold or awarded to Participants.
A Performance Award entitles a Participant to receive a specified number of Shares or cash equal to the Fair Market Value of such Shares at the end of a performance period, as specified in the document evidencing the Award. The ultimate number of Shares distributed or cash paid depends upon the extent to which pre-established performance objectives are met during the applicable performance period.
11.1Other Stock Based Awards. The Committee shall have the right to grant Other Stock Based Awards which may include, without limitation, the grant of Shares and the grant of securities convertible into Shares. “Other Stock Based Award” means an Award (other than the types of Awards specified in Sections 6 through 10) that has a value that is derivative of the value of, determined by reference to a number of Shares, or determined by reference to dividends payable on, Stock, and may be settled in Stock or in cash.
11.2Other Awards. The Committee shall have the right to provide other types of Awards under the Plan (including cash) in addition to those specifically listed, if the Committee believes that such Awards would further the purposes for which the Plan was established.
12.1Grant Evidenced by Agreement. The grant of any Award under the Plan may be evidenced by an Agreement which shall describe the specific Award granted and the terms and conditions of the Award. If required by the Committee, the granting of any Award may be subject to, and conditioned upon, the recipient’s execution of any Agreement. Except as otherwise provided in an Agreement, all capitalized terms used in the Agreement shall have the same meaning as in the Plan, and the Agreement shall be subject to all of the terms of the Plan in effect on the date of the Award, unless otherwise specified in the Agreement or in any amendment to the Plan or the Agreement.
12.2Provisions of Agreement. Each Agreement shall contain such provisions as the Committee shall determine necessary or appropriate for the Award, which may include: description of the type of Award; the Award’s duration; if an Option, the exercise price, the exercise period and the person or persons who may exercise the Option; the effect upon such Award of the Participant’s death or termination of employment; the Award’s conditions; when, if, and how any Award may be forfeited, converted into another Award, modified, exchanged for another Award, or replaced; and the restrictions on any Shares purchased or granted under the Plan.
12.3Performance Conditions. The Committee may require the satisfaction of certain performance goals as a condition to the grant or vesting of any Award provided under the Plan.
12.4Payment. Upon the exercise of any Option or in the case of any Award that requires a payment to the Company, the amount due the Company is to be paid:
Notwithstanding the foregoing, any method of payment other than (a) may be used only with the consent of the Committee or to the extent so provided in an Agreement.
In addition, the Committee may, in its discretion, permit any other manner of exercise and methods by which the exercise may be paid as its determines, which may include broker-assisted cashless exercise arrangements or other cashless exercise arrangements.
The proceeds of the sale of Common Stock purchased pursuant to an Option and any payment to the Company for other Awards shall be added to the general funds of the Company or to the Shares held in treasury, as the case may be, and used for the corporate purposes of the Company as the Board shall determine.
12.5Deferral. Subject to the requirements of Code Section 409A, the right to receive any Award under the Plan may, at the request of the Participant but subject to approval of the Committee (which may be withheld for any reason), be deferred for such period and upon such terms as the Committee shall determine, which may include crediting of interest on deferrals of cash and crediting of dividends or dividend equivalents on deferrals denominated in Shares.
12.6Withholding. The Company may, at the time any distribution is made under the Plan, or at the time any Option is exercised, or at any time required by law, withhold from such distribution or Shares issuable upon the exercise of an Option, any amount (up to such maximum as necessary to avoid a charge to the Company for financial reporting purposes) necessary to satisfy tax withholding requirements with respect to such distribution or exercise of such Option. The Committee or the Company may, at any time, require a Participant to tender the Company cash in the amount necessary to comply with any such withholding requirements.
12.7Tandem Awards. Awards may be granted by the Committee in tandem. However, no Award may be granted in tandem with an ISO except a Stock Appreciation Right.
12.8Awards Not Transferable. Except to the extent that the Committee may provide otherwise as to any Awards other than ISOs, Awards are not transferable or assignable except by will or by the laws of descent and distribution, and are exercisable, during the Participant’s lifetime only by the Participant, or in the event of disability of the Participant, by the legal representative of the Participant, or in the event of death of the Participant by the legal representative of the Participant’s estate. Other than as provided herein, no benefit under the Plan may be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to do so shall be void.
12.9Awards to Non-U.S. Participants. The Committee shall have the power and authority to determine which Affiliates shall be covered by this Plan and which Participants residing outside the United States of America shall be eligible to participate in the Plan. The Committee may adopt, amend or rescind rules, procedures or sub-plans relating to the operation and administration of the Plan to accommodate the specific requirements of local laws, procedures and practices. Without limiting the generality of the foregoing, the Committee is specifically authorized to adopt rules, procedures and sub-plans with provisions that limit or modify rights on death, disability, retirement or termination of employment; available methods of exercise or settlement of an Award; payment of income, social insurance contributions and payroll taxes; and, the withholding procedures and handling of any Stock certificates or other indicia of ownership which vary with local requirements. The Committee may also adopt rules, procedures or sub-plans applicable to particular Affiliates or locations.
13.1Amendment and Termination. The Board shall have the sole right and power to amend or terminate the Plan at any time, except that the Board may not amend the Plan, without approval of the shareholders of the
Company, in a manner that would cause Options which are intended to qualify as ISOs to fail to qualify or in a manner which would violate applicable law, and the Board shall obtain stockholder approval for any amendment to the Plan that, except as provided in Section 3.3 of the Plan, increases the number of Shares available under the Plan, materially expands the classes of individuals eligible to receive Awards, or would otherwise require stockholder approval under the rules of the applicable exchange.
13.2Participants’ Right. The amendment or termination of the Plan shall not adversely affect a Participant’s right to any Award granted prior to such amendment or termination, without the consent of the Participant to whom such Award was granted.
14.1Committee’s Right. Any Award granted may be converted, modified, forfeited or cancelled, in whole or in part, by the Committee if and to the extent (a) not prohibited by the Plan or the applicable Agreement (except to the extent that such action would adversely affect the rights of the Participant in a manner not expressly contemplated by the Plan or Agreement), or (b) with the consent of the Participant to whom such Award was granted. The Committee shall have the right, in its discretion, to cancel all or any portion of an Award issued to a Participant (a) if the Participant violates any confidentiality, non-solicitation or non-compete obligations or terms in his or her employment agreement, confidentiality agreement, separation agreement, and/or any other similar agreement, or (b) if the Participant, during the period of employment of service, established a relationship with a competitor of the Company or engaged in activity that was in conflict with or adverse to the interests of the Company, including fraud or conduct contributing to any financial restatement.
14.2Clawbacks. Notwithstanding anything to the contrary contained in the Award Agreement, the Committee shall have the right to require a Participant to forfeit any or all of the income or other benefit received on the vesting, exercise, or payment of an Award (a) if, in its sole discretion, the Committee determines that the Participant engaged in any activity referred to in Section 14.1, or (b) to the extent required or permitted under any written policy of the Company dealing with recoupment of compensation, and to the extent permitted by applicable law.
14.3Replacement. The Committee may permit a Participant to elect to surrender an Award in exchange for a new Award to the extent such surrender and exchange would not result in adverse tax consequences under Code Section 409A. However, the Committee may not cancel an outstanding Option or SAR that is underwater in exchange for cash or for the purpose of reissuing the Option or SAR to the Participant at a lower exercise price or granting a replacement Award of a different type without shareholder approval.
14.4No Repricing. Other than as provided in Section 3.3, the exercise price of an Option or SAR may not be reduced without shareholder approval.
To the end of preserving the intended economic benefits of Awards to the extent feasible, in the event of a Change in Control or other event described in Section 3.3(b), the Committee may, in any Agreement evidencing an Award, or at any time prior to or simultaneously with or after such event, make such adjustments with respect to Awards as it deems necessary or appropriate, but only to the extent such action would not result in adverse tax consequences under Code Section 409A. Without in any way limiting the generality of the foregoing, the Committee may:
16.1Headings and Subheadings. The headings and subheadings contained in the Plan are included only for convenience and shall not be construed as a part of the Plan or in any respect affecting or modifying its provisions.
16.2Governing Law. This Plan shall be construed and administered in accordance with the laws of the State of Missouri.
16.3Purchase for Investment. The Committee may require each person purchasing Shares pursuant to an Option or other award under the Plan to represent to and agree with the Company in writing that such person is acquiring the Shares for investment and without a view to distribution or resale. All certificates for Shares delivered under the Plan shall be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under all applicable laws, rules and regulations, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate references to such restrictions.
16.4No Employment Contract. The adoption of the Plan or grant of an Award under the Plan shall not confer upon any Employee any right to continued employment nor shall it interfere in any way with the right of the Employer to terminate the employment of any of its Employees at any time.
16.5No Effect on Other Benefits. The receipt of Awards under the Plan shall have no effect on any benefits to which a Participant may be entitled from the Employer, under another plan or otherwise, or preclude a Participant from receiving any such benefits.
16.6Conflicts in Plan. In the case of any conflict in the terms of the Plan relating to an Award, the provisions in the Section of the Plan which specifically grants such Award shall control those in a different Section.
16.7Section 409A Compliance. Some of the Awards that may be granted pursuant to the Plan may be considered non-qualified deferred compensation subject to Section 409A of the Code. If an Award is subject to Section 409A, the Award Agreement and this Plan are intended to meet all of the requirements of Section 409A and any applicable guidance issued by the Internal Revenue Service and the Department of Treasury. To the extent necessary to comply with Section 409A, an Award may be modified, replaced or terminated in the discretion of the Committee. Notwithstanding any provision of this Plan or any Award Agreement to the contrary, in the event that the Committee determines that any Award is or may become subject to Section 409A, the Company may adopt such amendments to the Plan and the related Award Agreements, without the consent of the Participant, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effective dates), or take any other action that the Committee determines to be necessary or appropriate to either comply with Section 409A or to exclude or exempt the Plan or any Award from the requirements of Section 409A. Notwithstanding anything in the Plan or any Award to the contrary, to the extent necessary to avoid the adverse tax consequences under Code Section 409A, in the event that a Participant is determined to be a specified employee in accordance with Code Section 409A, for purposes of any payment upon separation from service hereunder, such payments shall be made or begin, as applicable, six months following the date of separation from service.
17.1Application to Covered Employee. Notwithstanding any other provision of the Plan, if the Committee determines at the time an Award is granted to a Participant that such Participant is, or is likely to be as of the end of the tax year in which the Company would claim a tax deduction in connection with such Award, a “covered employee” within the meaning of Section 162(m)(3) of the Code, then the Committee may provide that this Section 17 is applicable to such Award.
17.2Performance Goals. Awards may be made subject to the achievement of performance goals established by the Committee relating to one or more business criteria pursuant to Section 162(m) of the Code (the “Performance Criteria”). Performance Criteria may be applied to the Company, an Affiliate, a Subsidiary, division, business unit or individual, or any combination thereof, and may be measured in absolute levels or relative to another company or companies a peer group, an index or Company performance in a previous period. Performance may be measured annually or cumulatively over a longer period of time. Performance Criteria that may be used to establish performance goals are: revenue; operating income or net operating income; return on equity; return on assets or net assets; cash flow; share price performance; return on capital; earnings; earnings per share; total shareholder return; economic value added; economic profit; or ratio of operating earnings to capital spending. EBITDA; EBIT; costs; operating earnings; gains; product development; leadership; project progress or completion; increase in total revenues; net income; operating cash flow; net cash flow; retained earnings; budget achievement; return on capital employed; return on invested capital; cash available to the Company from a Subsidiary or subsidiaries; gross margin, net margin; market capitalization; financial return ratios; market share; operating profits; net profits, earnings per share growth; profit returns and margins; stock price; working capital; business trends; capacity utilization; quality; operating efficiency; compliance and safety. At the time an Award is granted, the Committee shall specify in the Award Agreement or other document evidencing the Award whether performance will be evaluated including or excluding the effect of any of the following events that occur during the applicable performance period: (i) extraordinary, unusual or non-recurring items, (ii) gains or losses on the disposition of a business, (iii) the effects of changes in tax or accounting regulations, (iv) the effects of mergers or acquisitions, or (v) asset write-downs. The inclusion or exclusion of these items shall be expressed in a form that satisfies the requirements of Section 162(m) of the code. The performance goals for each Participant and the amount payable if those goals are met shall be established in writing for each specified period of performance by the Committee no later than 90 days after the commencement of the period of service to which the performance goals relate and while the outcome of whether or not those goals will be achieved is substantially uncertain. However, in no event will such goals be established after 25% of the period of service to which the goals relate has elapsed. The performance goals shall be objective. Such goals and the amount payable for each performance period if the goals are achieved shall be set forth in the applicable Award Agreement. No amounts shall be payable to any Participant for any performance period unless and until the Committee certifies that the performance goals and any other material terms were in fact satisfied.
17.3Adjustment of Payment. Notwithstanding any provision of the Plan other than Section 15, with respect to any Award that is subject to this Section 17, the Committee may adjust downwards, but not upwards, the amount payable pursuant to such Award.
17.4Other Restrictions. The Committee shall have the power to impose such other restrictions on Awards subject to this Section 17 as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements for “performance-based compensation” within the meaning of Section 162(m)(4)(C) of the Code, or any successor provision thereto.
Driving Directions to the Wright Conference Center
ANNUAL MEETING OF SHAREHOLDERS
Thursday, May 13, 201012, 2011
10:00 a.m. Central Time
LEGGETT & PLATT, INCORPORATED
WRIGHT CONFERENCE CENTER
No. 1 Leggett Road
Carthage, Missouri 64836
LEGGETT & PLATT, INCORPORATED No. 1 Leggett Road Carthage, Missouri 64836 | proxy |
This proxy is solicited on behalf of the Board of Directors.
The undersigned shareholder of Leggett & Platt, Incorporated, a Missouri corporation (the “Company”), hereby acknowledges receipt of the Notice of 20102011 Annual Meeting of Shareholders, the accompanying Proxy Statement and the Annual Report for the fiscal year ended December 31, 2009,2010, and hereby appoints David S. Haffner and John G. Moore as proxies and attorneys-in-fact, with full power of substitution to represent the undersigned at the 20102011 Annual Meeting of Shareholders of the Company to be held on May 13, 201012, 2011 at 10:00 a.m. Central Time at the Company’s headquarters, located at No. 1 Leggett Road, Carthage, Missouri 64836, and at any adjournment thereof, and to vote all shares that the undersigned would be entitled to vote if personally present.
THIS PROXY WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF DIRECTION, THIS PROXY WILL BE VOTED FOR ALL NOMINEES TO THE BOARD OF DIRECTORS; FOR THE RATIFICATION OF PRICEWATERHOUSECOOPERSPRICEWATER-HOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM; FOR APPROVAL OF THE AMENDMENT AND RESTATEMENT OFCOMPANY’S EXECUTIVE COMPENSATION AS DESCRIBED IN THE COMPANY’S FLEXIBLE STOCK PLAN;PROXY STATEMENT; FOR A 3-YEAR FREQUENCY ON FUTURE VOTES ON EXECUTIVE COMPENSATION; AND AGAINST THE SHAREHOLDER PROPOSAL REQUESTING THE ADDITION OF SEXUAL ORIENTATION AND GENDER IDENTITY TO THE COMPANY’S WRITTEN NON-DISCRIMINATION POLICY.In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment thereof.
PLEASE VOTE BY INTERNETOR MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
See reverse for voting instructions.
Shareowner ServicesSM
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Address Change? Mark Box to the right and Indicate changes below: ¨ | COMPANY # | |||||||||||||||
Return Your Proxy by Mail or Vote by Internet 24 Hours a Day, 7 Days a Week | ||||||||||||||||
Your Internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card. | ||||||||||||||||
INTERNET– www.eproxy.com/leg | ||||||||||||||||
Use the Internet to vote your proxy until 5:00 p.m. (CT) on May 11, 2011. | ||||||||||||||||
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Mail– Mark, sign and date your proxy card and return it in the postage-paid envelope provided. | ||||||||||||||||
If you vote your proxy by Internet, you do NOT need to mail back your Voting Instruction Card. |
TO VOTE BY MAIL AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL ITEMS BELOW, SIMPLY SIGN, DATE, AND RETURN THIS PROXY CARD.
The Board of Directors Recommends a Vote FOR Proposals 1, 2 and 3 and AGAINST Proposal 4.
The Board of Directors Recommends a Vote FOR Proposals 1, 2 and 3, FOR a 3-Year Frequency on
Proposal 4, and AGAINST Proposal 5.
FOR | AGAINST | ABSTAIN | FOR | AGAINST | ABSTAIN | |||||||||||||||||||
a. Robert E. Brunner | ¨ | ¨ | ¨ | g. Ray A. Griffith | ¨ | ¨ | ¨ | |||||||||||||||||
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| ¨ | ¨ | ¨ | h. David S. Haffner | ¨ | ¨ | ¨ | ||||||||||||||||
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c. R. Ted Enloe, III | ¨ | ¨ | ¨ | i. Joseph W. McClanathan | ¨ | ¨ | ¨ | |||||||||||||||||
d. Richard T. Fisher | ¨ | ¨ | ¨ | j. Judy C. Odom | ¨ | ¨ | ¨ | |||||||||||||||||
e. Matthew C. Flanigan | ¨ | ¨ | ¨ | k. Maurice E. Purnell, Jr. | ¨ | ¨ | ¨ | |||||||||||||||||
f. Karl G. Glassman | ¨ | ¨ | ¨ | l. Phoebe A. Wood | ¨ | ¨ | ¨ |
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2. Ratification of the Audit Committee’s selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the year ending December 31, | ¨ For | ¨ Against | ¨ Abstain | |||||||||||||
3. | ¨ For | ¨ Against | ¨ Abstain | |||||||||||||
4. An advisory vote concerning the frequency of future votes on executive compensation to be held every: | ¨ 3 Years | ¨ 2 Years | ¨ 1 Year | ¨ Abstain | ||||||||||||
5. A shareholder proposal requesting the addition of sexual orientation and gender identity to the Company’s written non-discrimination policy. | ¨ For | ¨ Against | ¨ Abstain | |||||||||||||
IN THEIR DISCRETION, the proxy holders are authorized to vote upon such other business as may properly come before the meeting or any adjournments or postponements thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN,
WILL BE VOTEDFOR PROPOSALS 1, 2 AND 3,FOR A 3-YEAR FREQUENCY ON PROPOSAL 4, ANDAGAINST PROPOSAL 4.5.
Date
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Please sign exactly as your name appears on this card. If stock is jointly owned, all parties must sign. Attorneys-in-fact, executors, administrators, trustees, guardians or corporation officers should indicate the capacity in which they are signing. | ||||||
LEGGETT & PLATT, INCORPORATED ANNUAL MEETING FOR HOLDERS AS OF 3/7/11 TO BE HELD ON 5/12/11 |
Your vote is important. Thank you for voting. |
To vote by Internet 1) Read the Proxy Statement and have the voting instruction form below at hand. 2) Go to website www.proxyvote.com. 3) Follow the instructions provided on the website. To vote by Telephone 1) Read the Proxy Statement and have the voting instruction form below at hand. 2) Call 1-800-454-8683. 3) Follow the instructions. To vote by Mail 1) Read the Proxy Statement. 2) Check the appropriate boxes on the voting instruction form below. 3) Sign and date the voting instruction form. 4) Return the voting instruction form in the envelope provided. |
TO VOTE, MARK BELOW IN BLUE INK AS FOLLOWS: M32082-P05459
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting. The following material is available at www.proxyvote.com: Information Statement and Annual Report on Form 10-K | ||||||||||||||||||||||||
The Board of Directors recommends you vote FOR the following proposals: | PLEASE “X” HERE ONLY IF YOU PLAN TO ATTEND THE MEETING AND VOTE THESE SHARES IN PERSON | ¨ | ||||||||||||||||||||||
1. Election of Directors | ||||||||||||||||||||||||
Nominees: | For | Against | Abstain | For | Against | Abstain | ||||||||||||||||||
1a. Robert E. Brunner | ¨ | ¨ | ¨ | 2. | Ratification of the Audit Committee’s selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2011. | ¨ | ¨ | ¨ | ||||||||||||||||
1b. Ralph W. Clark | ¨ | ¨ | ¨ | |||||||||||||||||||||
1c. R. Ted Enloe, III | ¨ | ¨ | ¨ | |||||||||||||||||||||
1d. Richard T. Fisher | ¨ | ¨ | ¨ | 3. | An advisory vote to approve the Company’s executive compensation as described in the Company’s proxy statement. | ¨ | ¨ | ¨ | ||||||||||||||||
1e. Matthew C. Flanigan | ¨ | ¨ | ¨ | |||||||||||||||||||||
1f. Karl G. Glassman | ¨ | ¨ | ¨ | The Board of Directors recommends you vote 3 years on the following proposal: | 3 Years | 2 Years | 1 Year | Abstain | ||||||||||||||||
1g. Ray A. Griffith | ¨ | ¨ | ¨ | |||||||||||||||||||||
4. | An advisory vote concerning the frequency of future votes on executive compensation to be held every: | ¨ | ¨ | ¨ | ¨ | |||||||||||||||||||
1h. David S. Haffner | ¨ | ¨ | ¨ | |||||||||||||||||||||
1i. Joseph W. McClanathan | ¨ | ¨ | ¨ | The Board of Directors recommends you vote AGAINST the following proposal: | For | Against | Abstain | |||||||||||||||||
1j. Judy C. Odom | ¨ | ¨ | ¨ | |||||||||||||||||||||
5. | A shareholder proposal requesting the addition of sexual orientation and gender identity to the Company’s written non-discrimination policy. | ¨ | ¨ | ¨ | ||||||||||||||||||||
1k. Maurice E. Purnell, Jr. | ¨ | ¨ | ¨ | |||||||||||||||||||||
1l. Phoebe A. Wood | ¨ | ¨ | ¨ | |||||||||||||||||||||
NOTE: Such other business as may properly come before the meeting or any adjournment thereof. | ||||||||||||||||||||||||
Signature [PLEASE SIGN WITHIN BOX] | Date | |||||||||||||||||||||||
VOTING INSTRUCTIONS TO THE COMMITTEE ADMINISTERING
THE LEGGETT & PLATT, INCORPORATED
STOCK BONUS PLAN
I hereby instruct the Committee to vote all shares of Common Stock of Leggett & Platt, Incorporated credited to my account in the Leggett & Platt, Incorporated Stock Bonus Plan as of March 5, 2010,7, 2011, at the Annual Meeting of Common Shareholders to be held on May 13, 2010,12, 2011, and at any adjournment thereof, on the following matters, all as set forth in the Proxy Statement, and upon such other business as may properly come before the meeting or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSALS ONE, TWO, AND THREE, AND A VOTE “FOR” A 3-YEAR FREQUENCY ON PROPOSAL FOUR
(1) | Election of Directors |
AGAINST | ABSTAIN | FOR | AGAINST | ABSTAIN | ||||||||||
a. Robert E. Brunner | ¨ | ¨ | ¨ | g. Ray A. Griffith | ¨ | ¨ | ¨ | |||||||
b. Ralph W. Clark | ¨ | ¨ | ¨ | h. David S. Haffner | ¨ | ¨ | ¨ | |||||||
c. R. Ted Enloe, III | ¨ | ¨ | ¨ | i. Joseph W. McClanathan | ¨ | ¨ | ¨ | |||||||
d. Richard T. Fisher | ¨ | ¨ | ¨ | j. Judy C. Odom | ¨ | ¨ | ¨ | |||||||
e. Matthew C. Flanigan | ¨ | ¨ | ¨ | k. Maurice E. Purnell, Jr. | ¨ | ¨ | ¨ | |||||||
f. Karl G. Glassman | ¨ | ¨ | ¨ | l. Phoebe A. Wood | ¨ | ¨ | ¨ |
(2) Ratification of the Audit Committee’s selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the year ending December 31, | ¨ FOR | ¨ AGAINST | ¨ ABSTAIN | |||||||||
(3) | ¨ FOR | ¨ AGAINST | ¨ ABSTAIN | |||||||||
(4) An advisory vote concerning the frequency of future votes on executive compensation to be held every: | ¨ 3 YEARS | ¨ 2 YEARS | ¨ 1 YEAR | ¨ ABSTAIN | ||||||||
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “AGAINST” PROPOSAL | ||||||||||||
(5) Shareholder proposal requesting the addition of sexual orientation and gender identity to the Company’s written non-discrimination policy. | ¨ FOR | ¨ AGAINST | ¨ ABSTAIN | |||||||||
(6) IN THEIR DISCRETION, the proxyholders are authorized to vote on such other business as may properly come before the meeting or any adjournments or postponements thereof. |
Please sign EXACTLY as your name appears on the mailing label. The shares represented hereby will be voted as you specify.
IF YOU GIVE NO INSTRUCTIONS OR IF YOUR INSTRUCTIONS ARE NOT RECEIVED BY THE CORPORATE HUMAN RESOURCES DEPARTMENT ON OR BEFOREAPRIL 30, 2010MAY 2, 2011, THE COMMITTEE WILL DIRECT THE TRUSTEE TO VOTE THE SHARES CREDITED TO YOUR ACCOUNT ON ALL PROPOSALS LISTED ABOVE AND ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
Participant |
Date |
VOTING INSTRUCTIONS TO THE COMMITTEE ADMINISTERING
THE LEGGETT & PLATT, INCORPORATED
401(k) PLAN
I hereby instruct the Committee to vote all shares of Common Stock of Leggett & Platt, Incorporated credited to my account in the Leggett & Platt, Incorporated 401(k) Plan as of March 5, 2010, at the Annual Meeting of Common Shareholders to be held on May 13, 2010, and at any adjournment thereof, on the following matters, all as set forth in the Proxy Statement, and upon such other business as may properly come before the meeting or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSALS ONE, TWO, AND THREE
Please sign EXACTLY as your name appears on the mailing label. The shares represented hereby will be voted as you specify.
IF YOU GIVE NO INSTRUCTIONS OR IF YOUR INSTRUCTIONS ARE NOT RECEIVED BY THE CORPORATE HUMAN RESOURCES DEPARTMENT ON OR BEFOREAPRIL 30, 2010, THE COMMITTEE WILL DIRECT THE TRUSTEE TO VOTE THE SHARES CREDITED TO YOUR ACCOUNT ON ALL PROPOSALS LISTED ABOVE AND ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.