LEGGETT & PLATT, INCORPORATED Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
Director Retirement
On
Amendments to the Company's Key Officers Incentive Plan, the 2020 Form of Performance Stock Unit Award Agreement and the 2020 Form of Restricted Stock Unit Award Agreement
On
(i) limiting the definition of Competitive Activity to include only those
activities the executive engaged in during the last two years of
employment in the Restricted Territory;
(ii) defining the Restricted Territory as the geographic areas in which
(a) the executive contacted any customer, supplier or vendor; (b) any
customer, supplier or vendor the executive serviced or used was located;
(c) operations for which the executive had responsibility sold any
products; or (d) any products the executive designed were sold or
distributed; and
(iii) prohibiting activity that may require, or inevitably will require,
disclosure of trade secrets, proprietary information, or confidential
information.
In addition to the non-competition covenant, the Committee also made other changes to the KOIP which included:
(i) changing the definition of retirement from (a) on or after age 65, or on
or after age 55 with at least 20 years of service with the Company, to
(b) on or after age 65, or the date at which the combination of the
executive's age and years of service is greater than or equal to 70 years;
and
(ii) enhancing the "clawback" provision such that the Committee has the right
to require all or a portion of the applicable award issued to an
executive, including income or other benefit received upon vesting or
payment of the award, in the preceding two years, to be forfeited or
repaid to the Company under certain specified conditions if the executive
(a) violates certain confidentiality, non-solicitation or non-competition
obligations applicable to the executive; (b) engages in improper conduct
contributing to the need to restate external Company financial
statements; (c) commits an act of fraud or significant dishonesty; or
(d) commits a significant violation of the Company's written policies or
applicable laws. Prior to the amendment, the executive was required to
repay the entire award if, in the discretion of the Committee, the
executive was determined to be personally responsible for gross
misconduct or fraud that caused the need for the restatement of Company
financial results.
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The KOIP , the 2020 Form of PSU Award and the 2020 Form of RSU Award , each as amended, are attached hereto and incorporated herein by reference as Exhibit 10.1, Exhibit 10.2 and Exhibit 10.3, respectively.
Adoption of 2020 Award Formula under the Company's 2020 Key Officers Incentive Plan
Our executive officers earn an annual cash incentive paid under the KOIP based
on achieving certain performance objectives for the year. On
Relative
Participant Type Performance Objectives Weight
Corporate Participants Return on Capital Employed (ROCE) 60 %
(Glassman, Dolloff, Tate & Douglas) Cash Flow 40 %
Profit Center Participants ROCE 60 %
Free Cash Flow (FCF) 40 %
ROCE and Cash Flow shall be adjusted for all items of gain, loss, or expense for the fiscal year, as determined in accordance with the standards established under Generally Accepted Accounting Principles, (i) from non-cash impairments; (ii) related to loss contingencies identified in the footnotes to the financial statements in the Company's 2019 10-K; (iii) related to the impact of the coronavirus outbreak on the Company's operations; (iv) related to the disposal of a segment of a business; or (v) related to a change in accounting principle.
Below are the 2020 Corporate Targets and Payout Schedule. Payouts will be interpolated for achievement levels falling between those in the schedule. Financial results from acquisitions are excluded from the calculations in the year of acquisition. Financial results from divestitures will be included in the calculations; however, the ROCE and Cash Flow targets relating to the divested businesses will be prorated to reflect only that portion of the year prior to the divestiture. Financial results from businesses classified as discontinued operations will be included in the calculations. Financial results will exclude (i) certain currency and hedging-related gains and losses; (ii) gains and losses from asset disposals; and (iii) items that are outside the scope of the Company's core, on-going business activities.
2020 Corporate Targets and Payout Schedule
ROCE Cash Flow
Achievement Payout Achievement Payout
< 30% 0 % <$ 425M 0 %
30% 50 % Threshold $ 425M 50 %
37% 100 % Target $ 500M 100 %
44% 150 % Maximum $ 575M 150 %
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The definitions of ROCE and Cash Flow and a sample calculation are included in the attached 2020 KOIP Award Formula , which is attached and incorporated by reference as Exhibit 10.4. Also incorporated by reference as Exhibit 10.5, is the Company's Summary Sheet of Executive Cash Compensation which was previously reported and includes each named executive officer's 2020 base salary and Target Percentages.
Grant of Performance Stock Units under the Company's 2020 Form of PSU Award
Each year, since 2008, the Committee generally grants the named executive
officers, and a group of other executives, a base award of performance stock
units ("PSUs"). A percentage of the base award will vest at the end of the
three-year performance period (the "Performance Period") and will be paid out by
OnFebruary 18, 2020 , the Committee granted PSUs to our named executive officers in the amounts shown below. Base Award Threshold Target Maximum Payout Payout Payout (50% (100% (200% Named Executive Officer1 Payout)2 Payout) Payout) Karl G. Glassman, Chairman and CEO 40,788 81,576 163,152J. Mitchell Dolloff , President and COO, President - Bedding Products 15,267 30,534 61,068 Jeffrey L. Tate, EVP and CFO 10,360 20,719 41,438 Scott S. Douglas, SVP and General Counsel 5,725 11,450 22,900 1 Because of their respective retirements, neitherPerry E. Davis norMatthew C. Flanigan were granted PSUs. 2 If Relative TSR and EBIT CAGR are achieved at their respective thresholds, the weighted average payout would be 50%.
The 2020 Form of PSU Award provides that PSUs vest at the end of the Performance Period, based upon two performance objectives:
Relative TSR: Fifty percent (50%) of each PSU award will vest based upon the Company's Total Shareholder Return ("TSR") compared to a peer group consisting of all the companies in the Industrial, Consumer Discretionary and Materials sectors of the S&P 500 and S&P 400. TSR is calculated as:
(Ending Stock Price - Beginning Stock Price + Reinvested Dividends) / Beginning Stock Price
The "Beginning Stock Price" is the average closing share price of the Company's stock for the last 20 trading days prior to the Performance Period. The "Ending Stock Price" is the average closing share price of the Company's stock for the last 20 trading days within the Performance Period.
EBIT CAGR: Fifty percent (50%) of each PSU award will vest based upon the Company's (for Glassman, Dolloff, Tate, and Douglas) or applicable segments' (for segment participants) compound annual growth rate of Earnings Before Interest and Taxes ("EBIT") during the third fiscal year of the Performance Period compared to the Company's (or applicable segments') EBIT in the fiscal year immediately preceding the Performance Period. The calculation of EBIT CAGR will include results from businesses acquired during the Performance Period and will exclude results for any businesses divested during the Performance Period. EBIT CAGR will exclude (i) results from non-operating branches,
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(ii) certain currency and hedging-related gains and losses, (iii) gains and losses from asset disposals, (iv) items that are outside the scope of the Company's core, on-going business activities, and (v) with respect to segments, all amounts relating to corporate allocations. EBIT CAGR will be adjusted to eliminate gain, loss or expense, as determined in accordance with standards established under Generally Accepted Accounting Principles, (i) from non-cash impairments; (ii) related to loss contingencies identified in footnotes to the financial statements in the Company's Form 10-K relating to the fiscal year immediately preceding the Performance Period; (iii) related to the disposal of a segment of a business; or (iv) related to a change in accounting principle.
The PSU vesting schedules for Relative TSR and EBIT CAGR are as follows, with payouts interpolated for results falling between the levels shown:
Relative TSR Relative TSR EBIT CAGR EBIT CAGR
Percentile Vesting % % Vesting %
<25% 0%
25% 25%
30% 35%
35% 45%
40% 55%
45% 65% <2% 0%
50% 75% 2% 75%
55% 100% 4% 100%
60% 125% 6% 125%
65% 150% 8% 150%
70% 175% 10% 175%
75% 200% 12% 200%
>75% 200% >12% 200%
Notwithstanding the foregoing Relative TSR vesting schedule, in the event that the Company's TSR for the Performance Period is negative (Ending Stock Price plus Reinvested Dividends is less than Beginning Stock Price), the Relative TSR vesting percentage will be capped at 100%.
The PSUs normally vest on the last day of the Performance Period. Generally, if the executive has a separation from service, other than for retirement, death, or disability, before the PSUs vest, they are immediately forfeited. In the event of retirement, the award will vest at the end of the Performance Period and will be prorated for the number of days employed during the Performance Period prior to termination. However, in the case of termination due to death or disability, the award will vest immediately at 100% of the base award. Retirement is defined as age 65, or the combination of the executive's age and . . .
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