EXHIBIT 10.27(1)
PACE INDUSTRIES, INC.
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REVISED AND RESTATED EMPLOYEE INCENTIVE COMPENSATION PLAN
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This Revised and Restated Employee Compensation Plan (the "Plan") is
adopted as of May 13, 1996 by Pace Industries, Inc., an Arkansas
corporation (the "Company"), a wholly-owned subsidiary of Leggett & Platt,
Incorporated, a Missouri corporation ("L&P").
RECITALS
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This Plan is a successor to and modified version of the Employee Incentive
Compensation Plan (the "Former Plan") adopted on December 10, 1993 by the
Company.
In consideration of good and valuable benefits received and to be received
by it, intending to be legally bound hereby and acknowledging that its Employees
(as defined below) will act in reliance upon the provisions hereof, the Company
and L&P agree as follows:
1. Bonus Pool; Operating Profit Targets. The Company shall pay as
additional annual compensation to its employees designated by the Designation
Committee. The "Designation Committee" shall consist of Bob L. Gaddy ("Gaddy"),
so long as he is employed by the Company or L&P or, if Gaddy is not employed by
the Company or L&P, a committee consisting of the then Chief Executive Officer
of the Company and two other persons designated by the Plan Executive who were
participants in the Plan for the immediately preceding Plan Year. For purposes
of this Plan, the "Plan Executive" means Felix E. Wright or, if he is no longer
employed by L&P, Mr. Wright's successor.
Subject to the terms and conditions set forth herein, an annual bonus
("Bonus Pool") shall be established in respect of each year (each, a "Plan
Year") during the six fiscal years ending on June 30, 1994 through June 30, 1999
(the Plan's "Term"), the amount of the Bonus Pool to be determined as provided
herein and paid as provided in Sections 3(B), (C) and (D). The Bonus Pool is to
be the amount by which Operating Profit (as defined herein) exceeds the "Target"
for each Plan Year as follows:
if Operating Profit exceeds
the following Target Bonus Pool is
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In the Plan Year 1994
Minimum Target: $21.5 million 5% of excess over 21.5 million
Mid-Range Target: 23.0 million 10% of excess above 21.5 million
Upper Range Target: 28.0 million 10% of excess between 21.5 million and 23.0
million plus 20% of excess above 23.0 million
In the Plan Year 1995
Minimum Target: $26.0 million 5% of excess over 26.0 million
Mid-Range Target: 28.0 million 10% of excess above 26.0 million
Upper Range Target: 32.3 million 10% of excess between 26.0 million and 28.0
million plus 20% of excess above 28.0 million
In the Plan Year 1996
Minimum Target: $30.0 million 5% of excess over 30.0 million
Mid-Range Target: 32.3 million 10% of excess above 30.0 million
Upper Range Target: 35.0 million 10% of excess between 30.0 million and 32.3
million plus 20% of excess above 32.3 million
In the Plan Year 1997
Minimum Target: $32.6 million 5% of excess over 32.6 million
Mid-Range Target: 35.0 million 10% of excess above 32.6 million
Upper Range Target: 37.0 million 10% of excess between 32.6 million and 35.0
million plus 20% of excess above 35.0 million
In the Plan Year 1998
Minimum Target: $34.4 million 5% of excess over 34.4 million
Mid-Range Target: 37.0 million 10% of excess above 34.4 million
Upper Range Target: 40.0 million 10% of excess between 34.4 million and 37.0
million plus 20% of excess above 37.0 million
In the Plan Year 1999
Target: $43.0 million 10% of excess over $43.0 million, but Bonus
Pool not to exceed $2.0 million
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For the Plan Year 1994, the Operating Profit shall be computed for the twelve
month period notwithstanding that this Plan was not in effect for all of such
period. If the amount of Operating Profit for such twelve month period exceeds
the Target amount set forth above, the Bonus Payment shall be computed and paid
as if this Plan had been in effect for the entire period.
2. Determination of Operating Profits.
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(A) Subject to Schedule A to this Plan, "Operating Profit" means the
earnings from the Company's operations before federal, state and local income
taxes ("Pre-Tax Earnings") but after adding back (deducting) the following:
(i) interest expense (except for any discounts granted to
customers for early payment of invoices which have been
accounted for as interest expense) and financing costs;
(ii) costs attributable to the amortization of the purchase price
premium resulting from the December 10, 1993 leveraged buy out
transaction involving the Predecessor Company (the "1993 LBO")
as well as all acquisition and closing costs incurred in the
consummation of the financing and acquisition of the 1993 LBO;
(iii) extraordinary losses (gains) under generally accepted
accounting principles;
(iv) losses (gains) on capital assets;
(v) management fees paid to any stockholder or designee of a
stockholder of the Company (except to employees of the
Company) or pursuant to the Consulting Agreement dated
December 10, 1993 between Peninsula Corporation and the
Company;
(vi) out of pocket costs pertaining to any merger or consolidation
before, on or after the date of this Plan involving the
Company;
(vii) any amounts of amortization made on account of the $10 million
of noncompetition payments made to certain stockholders of the
Company under agreements dated December 10, 1993;
(viii) costs related to any material disposition by the Company of
its assets or material acquisition of any entity or its assets
by the Company;
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(ix) the amounts required by Schedule A hereto to be added back or
deducted; and
(x) (a) the amounts earned and accrued as bonuses in Plan Years
1996 -1999 under the Patterson Mold and Tool Employee
Incentive Compensation Plan dated October 11, 1995, (b) the
amounts earned and accrued as bonuses in Plan Years 1997 -
1999 under the Pace Industries Puget Division, Inc. Employee
Incentive Compensation Plan adopted July 13, 1995 and (c) this
Bonus Pool.
(B) The Company agrees to maintain such separate books and accounting
records as shall be necessary to implement the foregoing. Promptly after the
Company receives its certified financial statements for each of the Company's
Plan Years, the Company shall cause its independent certified public accountants
to prepare a statement showing their calculation of the Operating Profit as
defined herein for such period, and furnish the same to Gaddy and to the Board
of Directors of the Company.
After the date hereof, L&P's independent certified public accountants
shall function as the Company's independent certified public accountants and
shall determine Operating Profits. L&P and Gaddy may from time to time agree
that the determination of Operating Profit may be based on such accounting
procedures less than an audit as L&P and Gaddy may agree. Accounting fees and
expenses shall be deducted on a cash basis when computing Pre-Tax Earnings. If
no audit of the Company is agreed upon under this Plan for 1997 or later Plan
Years, then the Pre-Tax Earnings for that year will be reduced by the amount
audit fees and expenses of the Company for its fiscal year ending June 30, 1995
exceed accounting fees and expenses for the Plan Year in question.
(C) The determination of the Company's Operating Profit in the manner
provided by this Plan shall be conclusive and binding upon the Company, Gaddy
and the Employees, in the absence of manifest error. In the event that, during
the term of this Plan, there is a change in accounting principles or practices
used in connection with the Former Plan (including any changes in the methods
for determining contingencies and other reserves) or a revaluation of assets,
Gaddy and the Company (or in the event of their inability to agree, the
Company's independent certified public accountants) shall make a determination
as to any
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adjustments in accordance with generally accepted accounting principles needed
in order to preserve the intent of this Plan from the effect of any such change
in accounting principles or practices or revaluation of assets; and their
determination shall be conclusive and binding upon the parties hereto, in the
absence of manifest error.
For purposes of determining Pre-tax Earnings for any Plan Year the
Company's accounting practices concerning fourth quarter special sales
arrangements with certain customers shall not be modified without the consent of
the Designation Committee and the Plan Executive.
(D) Any Target may be reduced by the vote in favor or consent of at
least 70% of the members of the Board of Directors at any time.
3. Participants in Bonus Pool; Payment of Bonuses.
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(A) "Employee" shall mean Gaddy, so long as he is employed by the
Company or L&P at the end of each Plan Year and such other officers and
managerial personnel employed by the Company or L&P as the Designation Committee
shall designate.
The Bonus Pool for each Plan Year shall be allocated among such
designees as the Designation Committee shall recommend after the conclusion of
each Plan Year; provided, however, the designation and allocation shall be
subject to the approval of the Plan Executive. After the determination by the
Company's independent certified public accountants of the Operating Profit for
the relevant Plan Year, the Company shall pay the Bonus Pool hereunder, if any
(less proper withholdings for federal and other taxes), to the Employees
designated for that Plan Year in the amount allocated to each Employee in the
manner set forth in Sections 3(B), (C) and (D).
(B) The Bonus Pool for all Plan Years through 1995 has been paid to
participating Employees.
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(C) 43% of the bonus allocated to each Employee for each of the Plan
Years 1996 through 1998 will become "vested" when allocated to the Employee and
will promptly thereafter be paid to the Employee. The remaining portions of the
bonus allocated to each Employee will not be paid until the same becomes vested.
Vesting and hence payment will occur as follows provided the Employee remains
continuously employed by the Company or L&P on a full time basis through each
vesting date:
Vesting Date/Payment Date Vesting Rate Cumulative Vesting
June 30, 1999 25% 25%
June 30, 2000 25% 50%
June 30, 2001 25% 75%
June 30, 2002 25% 100%
Notwithstanding the preceding paragraph, the unvested portions of the
bonuses allocated to each Employee will become 100% vested if the Employee's
employment with the Company is terminated by death or disability, but in such
instance payment of the remaining portions of the Employee's bonus will be as
per the payment dates set out above.
Those portions of an Executive's Bonus for any of Plan Years 1996
through 1999 which do not vest under this Plan shall cease to be a part of the
Bonus Pool.
Whenever a portion of a 1996 Plan Year, 1997 Plan Year or 1998 Plan
Year Bonus becomes vested and is paid, interest on such portion at 6.5% shall
then be accrued and paid.
(D) 25% of the bonus allocated to each Employee for Plan Year 1999
will become vested when allocated to the Employee and will promptly thereafter
be paid to the Employee. The remaining portions of the Bonus for each Employee
will, beginning on June 30, 2000, vest and be paid as provided in Section 3(C)
except that no interest will accrue on that portion of the Bonus which is
subject to vesting requirements.
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(E) If an employee under an employment contract on the date hereof has
his employment terminated by disability such employee shall be designated an
Employee for the Plan Year in which his employment terminates and each
succeeding Plan Year (collectively the "Disability Years"). The disabled
Employee's allocation of the Bonus Pool in each of the Disability Years shall
equal his average percentage allocation in the Plan Year(s) preceding
disability. All bonuses allocated to the disabled Employee for the Disability
Years shall be vested but shall be paid in accordance with Section 3(C).
4. No Right to Share in Bonus Pool. An employee of the Company shall
have no right to be designated an Employee as respects any Plan Year (except as
provided in 3(E) above) unless designated by the Designation Committee and
approved by the Plan Executive for a Plan Year; provided, however, the
Designation Committee may designate an employee to share in the Bonus Pool whose
employment has been terminated prior to such designation. Once designated an
Employee for a Plan Year the Employee shall have all the rights provided for in
this Plan as respects the portion of the Bonus Pool allocated to such Employee
for that particular Plan Year but no other.
5. No Assignment or Pledge of Rights. The rights and obligations under
this Plan may not be assigned, pledged or otherwise transferred by any Employee
at any time and shall not inure to the benefit of any Employee, his
representative or assign. The Plan shall be construed and enforced in
accordance with the laws of the State of Arkansas. Any assignment, pledge or
other transfer any right of any Employee hereunder shall be null and void and of
no effect and shall, at the Company's option, terminate the Employee's right
hereunder to any payment.
6. Plan Has Been Authorized. The Company represents and warrants that
this Plan has been duly approved and its execution and delivery duly authorized
by all necessary corporate action of its directors, and that it is a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms.
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7. Plan Amendments. The Company may amend the Plan in any respect;
provided, however, that (i) the Target for each Plan Year may not be increased
nor (ii) may the timing or other terms of payment be changed in a manner adverse
to Employees unless a change contemplated by (i) or (ii) is approved by: (a)
Gaddy, so long as Gaddy is an Employee; and (b) Employees (including Gaddy) to
whom not less than 75% of the Bonus Pool for the immediately preceding plan Year
has been allocated.
8. L&P's Guarantee. L&P joins in the execution of the Plan to guarantee
full performance by the Company with the terms of the Plan.
9. Revision of Plan to Include L&P Aluminum Operations. The Company and
L&P plan to work closely together to revise this Plan so that Operating Profit
Targets for Plan Year 1997 and later Plan Years will be based upon the Company's
current Plan targets and the projected consolidated Operating Profits of L&P's
EST, Assured and Culp operations. Schedule B sets out the initial thoughts of
the Company and L&P on this process. However, nothing in this Plan or in
Schedule B requires the Company or L&P to reach "agreement" on consolidated
Operating Profit Targets and related topics. In the absence of reaching
agreement, this Plan shall continue in full force in accordance with its terms.
PACE INDUSTRIES, INC. LEGGETT & PLATT, INCORPORATED
By: /s/ Bob L. Gaddy By: /s/ R. A. Jefferies, Jr.
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Name: Bob L. Gaddy Name: R. A. Jefferies, Jr.
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Title: Chairman & CEO Title: Senior Vice President
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