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.

Director Compensation

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.

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:

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

(2)

Amounts reported in this column reflect the grant date fair value of the annual restricted stock or RSU awards, which was $100,000$110,000 for every director except Mr. Fisher, whosewho received a restricted stock award has a $175,000 grant date fair valueof $260,000 for his additional service as the Board Chair. The amount reported for Mr. Fisher also includes $4,200, representingFor a description of the 20% discount on stock units acquiredassumptions used in lieucalculating the grant date fair value, see Note L of cash compensation under the Company’s Deferred Compensation Program.Annual Report on Form 10-K for the year ending December 31, 2010.

The

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.

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.

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.

PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING

1

PROPOSAL ONE

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.

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.

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.

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.

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.

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

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.

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.

Karl G. Glassman, age 51, 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. He holds a degree in business management and finance from California State University–Long Beach. With over two decades experience between leading the Company’s largest segment and 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 was first elected as a director of the Company in 2002. Ray A. Griffith, age 56, 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. Mr. Griffith holds a degree in marketing and finance from Southern Illinois University. Mr. Griffith’s leadership of Ace Hardware will add valuable retailing, consumer marketing and distribution experience to the Board. He is being nominated as a director for the first time. David S. Haffner, age 57, 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. Mr. Haffner serves as a director of Bemis Company, Inc., a manufacturer of flexible packaging and pressure sensitive materials. He holds a bachelor’s degree in engineering from the University of Missouri and a master’s degree in business administration from the University of Wisconsin. 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. Mr. Haffner was first elected as a director of the Company in 1995. Joseph W. McClanathan, age 57, 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. Mr. McClanathan holds a degree in management from Arizona State University. 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. He was first elected as a director of the Company in 2005. Judy C. Odom, age 57, served as Chairman of the Board and Chief Executive Officer of Software Spectrum, Inc., a computer software company, until 2002. She is a director of Harte Hanks Inc., a direct marketing company. Ms. Odom has been a Certified Public Accountant and holds a degree in business administration from Texas Tech University. Ms. Odom’s background in accounting, finance and as a board chair and CEO provide her with leadership and technical expertise to chair our Audit Committee. Her entrepreneurial and broad business experience in co-founding Software Spectrum and directing its growth into a global Fortune 1000 enterprise provides a valuable point of view. Ms. Odom was first elected as a director of the Company in 2002. Maurice E. Purnell, Jr., age 70, has been 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. Mr. Purnell holds a bachelor’s degree in history from Washington & Lee University, a master’s in business administration from the Wharton School of the University of Pennsylvania and a law degree from Southern Methodist University. With over forty 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. He was first elected as a director of the Company in 1988. Phoebe A. Wood, age 56, has been a principle 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. Ms. Wood is a director of Invesco, Ltd., an independent global investment manager, and Coca-Cola Enterprises, Inc. (term commencing April 22, 2010), the largest bottler and distributor of Coke products. She holds a bachelor’s degree from Smith College and a master’s in business administration from UCLA. From her career in business, culminating as the Vice Chairman and CFO of Brown-Forman, Ms. Wood provides the Board with a wealth of understanding on the strategic, financial, and accounting issues it faces in overseeing Leggett. Ms. Wood was first elected as a director of the Company in 2005. 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.

2

PROPOSAL TWO

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.

18

Audit and Non-Audit Fees

The fees billed or expected to be billed by PwC for professional services rendered in fiscal years 20092010 and 20082009 are shown below.

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:

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.

Audit Committee Report

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

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:

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:

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.

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:

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:

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:

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:

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:

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:

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.