Link To Annual Report

March 27, 2008

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 8, 2008, at 10:00 a.m. local time, at the Company’s Wright Conference Center, No. 1 Leggett Road, Carthage, Missouri. Directions to the Wright Conference Center are included on the back inside cover of this proxy statement.

The proxy statement contains three proposals from our Board of Directors: (1) the election of 10 directors; (2) the ratification of the Audit Committee’s selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2008; and (3) the amendment and restatement of the Company’s Flexible Stock Plan. The Board encourages you to vote FOR each of these proposals.

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 vote AGAINST 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 at www.investorvote.com or 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.

Leggett & Platt, Incorporated

No. 1 Leggett Road

Carthage, Missouri 64836

NOTICE OF 2008 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 8, 2008, at 10:00 a.m. local time:

You are entitled to vote only if you were a Leggett & Platt shareholder at the close of business on March 5, 2008.

An Annual Report to Shareholders outlining the Company’s operations during 2007 accompanies this Notice of Annual Meeting and Proxy Statement.

Carthage, Missouri

March 27, 2008

IMPORTANT NOTICE: Regarding the Availability of Proxy Materials

for the Shareholder Meeting To Be Held on May 8, 2008.

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, Annual Report and other proxy materials are available at:

www.leggett.com/proxy/2008/default.asp

The Company’s Proxy Voting site can be found at:

www.investorvote.com

Leggett & Platt, Incorporated

ANNUAL MEETING—MAY 8, 2008

PROXY STATEMENT

TABLE OF CONTENTS

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QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING

Why am I receiving these materials?

The Board of Directors (the “Board”) of Leggett & Platt, Incorporated (the “Company” or “Leggett”) is providing these materials to you in connection with the Company’s annual meeting of shareholders on May 8, 2008. These materials were first sent to shareholders on March 27, 2008. As a Leggett shareholder, you are entitled and encouraged to vote on the items of business presented in these proxy materials. You are invited 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 and containing financial statements of the Company for the year ended December 31, 2007, is enclosed in the same mailing with this proxy statement. The Company’s Proxy Statement, Annual Report to Shareholders (including Form 10-K), and other proxy materials are also available at www.leggett.com/proxy/2008/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 business items at the annual meeting:

How does the Board recommend that I vote?

The Board recommends that you vote:

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, 2008 (the “Record Date”) is entitled to one vote on each matter submitted to a vote at the annual meeting. On the Record Date, we had 167,192,649 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) shares held directly in your name as the shareholder of record, (ii) shares held for you as the beneficial owner through a broker, trustee or other nominee, sometimes referred to as shares held in “street name,” and (iii) shares held for you in Company benefit plans.

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Shareholder of Record

If your shares are registered directly in your name with our transfer agent, Computershare, you are considered 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 Owner

If you hold shares in a brokerage account or through some other nominee, you are considered 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. You may vote your shares by any of the options listed on the voting instruction card.

Benefit Plans

If you hold Company stock in the Stock Bonus Plan and/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 (Internet voting is not available). The Company must receive your completed voting instruction form by April 28, 2008. If you do not provide instructions or your instructions are not received by April 28, 2008, the plan trustees will vote the shares credited to your account in accordance with the recommendation of their respective investment committees.

How do I submit my vote?

Generally, you may vote by Internet at www.investorvote.com, by signing and returning the proxy or voting instruction card, or in person at the meeting. If you vote by Internet, you do not need to return the proxy or voting instruction card. You will need to have your proxy or voting instruction card in hand if you vote by Internet. Specific voting instructions are found on the proxy card or voting instruction card included with this proxy statement.

Can I change my vote?

If you are a shareholder of record, you may change your vote or revoke your proxy any time before the annual meeting by (i) submitting a valid, later-dated proxy, (ii) submitting a valid, subsequent vote by the Internet, (iii) notifying the Company’s Secretary that you have revoked your proxy, or (iv) completing a written ballot at the annual meeting.

If you hold shares as the beneficial owner, you may change your vote by submitting new voting instructions to your broker, trustee or other nominee or, if you have obtained a legal proxy from your broker, trustee or nominee, by voting in person at the annual meeting.

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 in the following question) are counted for the purpose of determining a quorum. If a quorum is not present, the annual meeting will be adjourned for not more than 90 days to reach a quorum.

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How are votes counted?

In the election of directors, you may vote for all of the nominees or withhold your vote for one or more of the nominees. For the other proposals, you may vote for, against or abstain. An abstain vote has the same effect as a vote against the proposal. For a director to be elected or a proposal to be approved, our bylaws require the affirmative vote of a majority of those shares present and entitled to vote. For Proposal Three, the amendment and restatement of the Company’s Flexible Stock Plan, New York Stock Exchange (“NYSE”) rules require an additional level of shareholder approval—a majority of the votes cast must be in favor, and the total number of votes cast must be more than 50% of all shares entitled to vote on the proposal.

If you return a proxy card without marking one or more proposals, your proxy will be voted for those unmarked proposals in accordance with the Board’s recommendation: FOR the election of each nominee for director, FOR the ratification of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm, FOR the amendment and restatement of the Flexible Stock Plan, and AGAINST the proposal to add sexual orientation and gender identity to the Company’s written non-discrimination policy.

If you hold shares in street name through a broker or other nominee and do not vote your shares or provide voting instructions, your broker may vote on your behalf for those proposals that are considered routine. Proposals One and Two in this proxy statement are considered routine. For non-routine proposals, such as Proposals Three and Four, if you do not vote your shares or provide voting instructions to your broker or other nominee, the broker will not be permitted to vote your shares—this is a broker non-vote. Broker non-votes are not counted as shares present and entitled to be voted and, therefore, will not affect the outcome of the vote, except in the case of Proposal Three to the extent the total votes cast do not represent more than 50% of the shares entitled to vote.

If we do not receive voting instructions for shares held in the Stock Bonus Plan or 401(k) Plan, the plan trustees will vote those shares in accordance with the recommendation of their respective investment committees.

Who pays the cost of soliciting votes at the annual meeting?

Leggett is making this solicitation and will pay the entire cost of preparing, assembling, printing, and mailing these proxy materials to solicit votes for the annual meeting. 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 engaged Georgeson Inc. to assist in the solicitation of proxies by mail or telephone, in person, or otherwise. Georgeson’s fees are expected to be $17,500 plus expenses. If necessary to assure sufficient representation at the meeting, employees of the Company, 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 issue a press release immediately following the meeting. We will publish the final vote count in our quarterly report on Form 10-Q for the second quarter of 2008.

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.

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We have adopted a procedure known as “householding” which allows us, unless a shareholder withholds consent, to send one proxy statement and annual report to multiple shareholders of record sharing the same address. Each shareholder at a given address will receive a separate proxy card. If you are receiving multiple sets of proxy materials and wish to have your accounts householded, call Computershare at 800-884-4225 or send written instructions to Computershare, 250 Royall Street, Canton, MA 02021. If you no longer wish to participate in householding, you must provide written notification to Computershare to revoke your consent.

Many brokerage firms participate in 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 wish to receive another set this year, we will promptly send you an additional copy if you request one by calling us at 1-800-888-4569 or writing to Leggett & Platt, Incorporated, Attn: Investor Relations, No. 1 Leggett Road, Carthage, MO 64836.

In addition, you can access a complete set of proxy materials, which include the Notice of Meeting, Proxy Statement, and Annual Report to Shareholders (including Form 10-K) on the Internet at www.leggett.com/proxy/2008/default.asp.

To ensure that you receive multiple copies in the future, please contact Computershare at the number or address in the preceding question to withhold your consent for householding.

How do I elect to receive online proxy materials instead of paper copies?

Registered shareholders can save the Company the expense of mailing printed proxy materials by consenting to receive them in electronic format instead. You can choose this option by completing the required information at either www.computershare.com/investor or www.investorvote.com. Your choice will remain in effect until you revoke it.

By choosing to receive the annual meeting materials online, you are also agreeing that the online notice of the annual meeting is equivalent to the personal delivery of written notice. If you choose this option, you will receive an e-mail notice prior to the next annual meeting that will provide the links to the annual meeting materials online. This e-mail notice will also provide instructions to vote your proxy online.

You may later revoke your consent or specifically request that hard copy proxy materials be sent to you. To change or revoke your consent, follow the instructions on www.computershare.com/investor.

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 by either 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 the Corporate Governance section of our website at www.leggett.com. 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 Statement

If you intend to present a proposal at the 2009 annual meeting, SEC rules require that the Corporate Secretary receive the proposal at the address given above by November 27, 2008 for possible inclusion in the proxy statement. We will determine whether to include a proposal in the proxy statement in accordance with SEC rules governing the solicitation of proxies.

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Shareholder Proposal Not Included in Proxy Statement

If you intend to submit a proposal at the 2009 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 December 9, 2008 and no later than January 28, 2009. The notice must include a description of the proposed business, the name and address of the shareholder and number of shares held, any material interest of the shareholder in the business, 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 Statement

If you wish to recommend a director candidate to the Nominating & Corporate Governance Committee for possible inclusion in the proxy statement, please see the requirements described under “Consideration of Director Nominees” on page 11.

Director Nominee Not Included in Proxy Statement

If you intend to nominate a director candidate for election outside of the Company’s nomination process, our bylaws require the Company receive timely notice of the nomination—no earlier than December 9, 2008 and no later than January 28, 2009. The notice of nomination must include the information specified in Section 2.2 of the bylaws, including the name and address of the shareholder making the nomination, the number of shares held by the shareholder, the name, address and occupation of each proposed nominee, and certain other information.

CORPORATE GOVERNANCE AND BOARD MATTERS

Corporate Governance

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 also has 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 published on our website at www.leggett.com and are available in print form to any shareholder who requests them.

Director Independence and Presiding Director

The Company has adopted Categorical Standards for Director Independence (the “Categorical Standards”) that meet, and in some areas exceed, the NYSE listing standards. The Categorical Standards are attached to this proxy statement as Appendix A and are published on our website at www.leggett.com. The Categorical Standards assist the Board in determining director independence but are not the exclusive measure to assess a director’s independence. A director who meets all of the Categorical Standards will be presumed to be independent, but the Board reviews all relevant facts and circumstances of a relationship covered by the standards and, based upon such review, may determine that a director is not independent. The Board also determines the independence of any director with a relationship to the Company that is not covered by the Categorical Standards.

The Board reviews director independence annually and upon learning of any change in circumstances during the year that may affect a director’s independence. In connection with its annual review, the Board

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evaluates any transactions or relationships between directors and their immediate family members and the Company. In particular, for director McClanathan, the Board considered Company purchases from Mr. McClanathan’s employer and found the purchase amounts to be well below the threshold permitted in the Categorical Standards. Based on its review, the Board has affirmatively determined that all of its non-management directors, except former CEOs Harry M. Cornell, Jr. and Felix E. Wright, are independent. (See the table on page 9 for a complete list of the independent directors.) The Board found no business or other relationship involving an independent director and the Company that did not fit within the Categorical Standards or that presented any potential conflict to independence.

In accordance with the 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. The Board has chosen Richard T. Fisher as the Presiding Director for meetings of the independent non-management directors. As Presiding Director, Mr. Fisher also makes at least two additional visits to Company sites per year and is available to the Chairman of the Board and Chief Executive Officer for consultation as needed.

Communications with the Board

Shareholders and other interested parties may write to the Board by e-mail at presidingdirector@leggett.com, which communications are received directly by Mr. Fisher, the Board’s Presiding Director. Shareholder communications can also be addressed to: L&P Presiding Director, P.O. Box 637, Carthage, MO 64836. Correspondence to this address is reviewed by the Secretary’s office, which periodically forwards to Mr. Fisher all communications except items unrelated to the functions of the Board of Directors (for example, advertisements and junk mail). In his discretion, Mr. Fisher may forward communications to the full Board or to any or all of the independent directors for further consideration.

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Board and Committee Composition and Meetings

The Board held seven meetings in 2007, and its committees met the number of times listed in the table below. All directors attended at least 75% of their committee meetings in 2007. All directors attended at least 75% of the 2007 Board meetings, except Raymond Bentele who was absent from two Board meetings due to illness. Directors are expected to attend the Company’s annual meeting of shareholders, and all of them attended the 2007 annual meeting.

The Board has an Audit Committee, a Compensation Committee and a Nominating & Corporate Governance Committee. The membership and function of each of the committees are described below. The Board also has an Executive Committee composed of Richard Fisher (Chair), David Haffner and Maurice Purnell. With the exception of the Executive Committee, each committee is composed entirely of independent directors and operates under a written charter adopted by the Board. The committee charters are published in the Corporate Governance section of our website at www.leggett.com and are available in print form to any shareholder who requests them.

Audit Committee

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. Four members, Raymond Bentele, Richard Fisher, Judy Odom, and Phoebe Wood, possess the training, skills, and experience required to meet the SEC 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 report to the Audit Committee any questionable accounting, internal control, or auditing matters. The Vice President of Internal Audit has a direct reporting relationship 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.

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Compensation Committee

The Compensation Committee assists management and the Board in developing and maintaining the Company’s policies relating to (i) CEO, 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) support 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 officers of the Company as it deems appropriate, but may not delegate authority to non-members for any action involving executive officers.

The Committee conducts a comprehensive review of executive officer compensation each year in March, prior to approving any salary increases. Details of the Committee’s 2007 review are included in the Compensation Discussion & Analysis section on page 28.

The Committee determines the compensation paid to the Company’s executive officers. The Chief Executive Officer reviews each executive officer’s performance in consultation with the individual’s supervisor and recommends appropriate compensation adjustments to the Committee. The Committee determines the Chief Executive Officer’s compensation independent of management.

The Committee also periodically reviews cash and equity compensation for directors and recommends any director compensation changes to the full Board for approval.

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 2007.

The Company engaged Compensia to review the Compensation Discussion & Analysis (CD&A) and executive compensation disclosures contained in this proxy statement and incorporated by reference into the Company’s Form 10-K for 2007. The scope of Compensia’s engagement included the following:

Compensation Committee Interlocks and Insider Participation

No member of the Compensation Committee 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.

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Consideration of Director Nominees

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 Committee recommends to the full Board a slate of director candidates for inclusion in the Company’s proxy statement and proxy card.

In the case of incumbent directors, the 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. In the case of new director candidates, the Committee first determines whether the nominee must be independent under NYSE rules, then identifies any special needs of the current Board. The Committee will consider individuals recommended by Board members, Company management, shareholders and, if it deems appropriate, a professional search firm.

The Board of Directors may also consider candidates to fill a vacancy in the Board outside of the Annual Shareholder Meeting process. The 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 Committee will recommend one or more candidates for election and proxies will not be solicited.

The 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 Committee believes director candidates should have the following minimum qualifications:

In addition to the minimum qualifications described above, the Committee may also consider the following factors in evaluating candidates for recommendation to the Board:

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Following the Committee’s initial review of a candidate’s qualifications, one or more Committee members will interview the candidate. The Committee may arrange subsequent interviews with the Chairman of the Board, Presiding Director, and/or members of the Company’s management.

The 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 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 consideration at the following year’s annual meeting of shareholders. Recommendations must include the following:

The Corporate Secretary will promptly forward these materials to the Committee Chair and the Chairman of the Board. The 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 of this proxy statement on page 6.

Review of Related Person Transactions

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 is compensatory in nature, in which case the duty falls to the Compensation Committee.

A “Related Person” is: (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) a shareholder beneficially owning in excess of 5% of any class of the Company’s voting securities; (iii) an immediate family member of any person described in clause (i) or (ii); or (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, involving an amount that exceeds or is expected to exceed $120,000 in the aggregate, in which the Company or its subsidiaries was, is, or will be a participant and in which a Related Person had, has, or will have a direct or indirect material interest, and the transaction, arrangement or relationship is not specifically excluded from the disclosure requirements of Item 404(a) of Regulation S-K.

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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 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:

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Director Compensation

Employee directors receive an annual retainer of $3,000 which is included in the All Other Compensation column of the Summary Compensation Table on page 40. Compensation earned in 2007 by non-employee directors is set forth in the table below. Directors may elect to defer their cash compensation into stock options or stock units under the Company’s Deferred Compensation Program, described on page 49. The Company also pays for all travel expenses the directors incur to attend Board meetings.

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At December 31, 2007, Mr. Wright was also a non-employee director. However, because he served as an executive officer for part of the year, his compensation is disclosed in the Summary Compensation Table on page 40.

In addition to the elected directors, we have one Advisory Director, Duane W. Potter. In 2007, Mr. Potter received a $21,000 cash retainer for his services. He does not receive any equity compensation.

The standard compensation package for directors consists of a grant of restricted stock with a grant date market value of $70,000 on the date of each annual meeting of shareholders and the following cash compensation:

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PROPOSAL ONE

ELECTION OF DIRECTORS

At the annual meeting, 10 directors will be elected 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 Company shareholders. Brief biographies of this year’s slate of director nominees are provided below. 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.

If a nominated director fails to receive an affirmative majority of the votes cast in the director election, the director has agreed to submit a resignation to the Board. The Board, in its discretion, may accept the resignation. Our employment agreements with Mr. Haffner and Mr. Glassman provide that they may terminate the agreement if not elected as a director. (See page 50 for a description of the agreements.)

Raymond F. Bentele, age 71, served as President and Chief Executive Officer of Mallinckrodt, Inc., a manufacturer of medical and specialty chemical products, from 1981 until his retirement in 1992. He serves as a director of The Mosaic Company, a producer of crop nutrient minerals, and AMCON Distributing Company, a distributor of food and beverage products. He was first elected as a director of the Company in 1995.

Ralph W. Clark, age 67, was a Vice President of International Business Machines Corporation (IBM) from 1988 until 1994. He also served as Chairman of Frontec AMT Inc., a software company, until his retirement in 1998. Mr. Clark was first elected as a director of the Company in 2000.

Robert Ted Enloe, III, age 69, 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. He served as President and Interim CEO of Surgient Networks, Inc., a computer equipment and software company, during 2002. Mr. Enloe 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 was first elected as a director of the Company in 1969.

Richard T. Fisher, age 69, 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 was first elected as a director of the Company in 1972.

Karl G. Glassman, age 49, 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, and President of Bedding Components from 1996 through 1998. Mr. Glassman has served the Company in various capacities since 1982. He was first elected as a director of the Company in 2002.

David S. Haffner, age 55, 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 has served the Company in other capacities since 1983. Mr. Haffner serves as a director of Bemis Company, Inc., a manufacturer of flexible packaging and pressure sensitive materials. Mr. Haffner was first elected as a director of the Company in 1995.

Joseph W. McClanathan, age 55, has served as President and Chief Executive Officer of the Energizer Battery Division of Energizer Holdings, Inc., a manufacturer of dry cell batteries and flashlights, since January 2004. Prior to his current position, he served Energizer as President, North America, from 2002 to 2004, and as Vice President, North America, from 2000 to 2002. He was first elected as a director of the Company in 2005.

Judy C. Odom, age 55, 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 was first elected as a director of the Company in 2002.

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Maurice E. Purnell, Jr., age 68, has been Of Counsel to the law firm of Locke Lord Bissell & Liddell LLP, or its predecessor firm, since 2002. He was a partner of Locke Lord Bissell & Lidell’s predecessor firm from 1972 to 2002. Mr. Purnell was first elected as a director of the Company in 1988.

Phoebe A. Wood, age 54, currently is Vice Chairman and Chief Financial Officer of Brown-Forman Corporation, a diversified consumer products manufacturer, but she has announced her intention to retire on April 30, 2008. She was appointed Vice Chairman in 2007 and has served as Chief Financial Officer since 2001. She also served as Executive Vice President from 2001 to 2006. Ms. Wood’s previous experience includes various positions at Atlantic Richfield Company, an oil and gas company, from 1976 to 2000. Ms. Wood was first elected as a director of the Company in 2005.

The Board recommends that you vote FOR the election of each of the director nominees.

PROPOSAL TWO

RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has selected PricewaterhouseCoopers LLP (“PwC”) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2008. PwC (or its predecessor firm) has been engaged as 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. 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 would be 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. See “Independent Auditor Fees and Services” on page 60 for information regarding PwC’s services to the Company.

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PROPOSAL THREE

AMENDMENT AND RESTATEMENT OF THE FLEXIBLE STOCK PLAN

We are asking 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 2005. At its meeting on February 21, 2008, the Board of Directors recommended the approval of the amended and restated Plan (the “2008 Restatement”).

As of February 15, 2008, 18,599,534 shares were issuable under options and other awards previously granted under the Plan and 1,539,173 shares remained available for grant. If shareholders approve the 2008 Restatement, the current 1.5 million shares available for grant will increase by 6 million shares for a total of approximately 7.5 million shares available for grant under the Plan.

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. In spite of its broad design, we currently use shares almost exclusively for stock options and stock units. Most of the stock units and some of the stock options are “purchased” by employees through payroll contributions or in exchange for deferred cash compensation.

How We Use Stock Compensation

Employees

Leggett has encouraged and promoted employee stock ownership at all levels of the Company for many years. More than 6,000 employees contribute their own funds toward the purchase of Company stock under various stock purchase plans. While the Company has several qualified stock plans for employees generally, the Flexible Stock Plan is the Company’s only vehicle for granting non-qualified equity benefits.

We grant non-qualified stock options to a broad group of Company employees annually. Approximately 1,800 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 became 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 (“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 500 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 150 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 49, are a key component in our strategy to tie a significant portion of executive compensation to long-term shareholder return. Approximately 15% 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 (“PSU”) awards to a group of about 40 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. The Compensation Committee’s rationale for granting these awards is described in detail in the Compensation Discussion & Analysis section of this proxy statement on page 36.

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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 $70,000. The number of shares is determined by dividing $70,000 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 options outstanding 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, or “burns,” 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 1.2% 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 breaks down as follows:

Burn Rate Calculation

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.

Several factors influence our overhang percentage:

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As of February 15, 2008, our overhang calculation is as follows:

We are strongly committed to a culture of stock ownership. Accordingly, we believe the approval of this 2008 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 2008 Restatement:

The following description of the Plan is qualified in its entirety by the full text of the Plan attached to this proxy statement as Appendix C.

Description of Plan

If approved by the Company’s shareholders, the 2008 Restatement will become effective as of May 8, 2008 (the “Effective Date”) and will continue in effect until the tenth anniversary of the Effective Date.

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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 (described below) and therefore cannot be determined in advance.

Of the shares available for grant under the Plan after the Effective Date of this 2008 Restatement, no more than 4,500,000 may be granted for awards other than options and SARs.

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. From and after the Effective Date, the following shares will not become available for issuance under the Plan:

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 Plan is administered by a committee (“Committee”) consisting 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 incentive stock options 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.

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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 incentive stock options (“ISOs”) pursuant to Section 422 of the Code, as well as non-qualified options (“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. The number of shares for which ISOs may be granted on or after the Effective Date cannot exceed 6,000,000 Shares. We currently do not grant 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. We currently only grant restricted stock to non-employee directors.

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 49.

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. The Company granted its first performance stock unit (“PSU”) awards to about 40 executive officers on January 2, 2008. These awards will vest three years following the grant date based on the Company’s total shareholder return as compared to that of a group of peer companies. See page 36 for additional information regarding these PSU awards.

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.

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Agreements and Provisions of Awards

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.

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:

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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:

The Committee may allow the exercise price of an option or payment price of an award to be paid (a) in cash; (b) by the tender to the Company of shares owned by the participant; or (c) 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 cancel a participant’s award if the participant violates any confidentiality, non-solicitation or non-compete obligations or terms in his or her individual employment agreement, confidentiality agreement, separation agreement, and/or any other similar agreement; or, if during the period of employment or service, the participant establishes a relationship with a competitor of the Company or engages in activity that is in conflict with or adverse to the interest of the Company, as determined by the Company in its sole discretion.

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 that is underwater for the purpose of reissuing the option to the participant at a lower exercise price or granting a replacement award of a different type. 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 Internal Revenue 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, such payments 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.

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.

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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. 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 of the proxy statement. 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 on the proposal represents more than 50% of all shares entitled to vote on the proposal. (See “How are votes counted?” on page 5.)

The Board recommends a vote FOR approval of the amended and restated Flexible Stock Plan.

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PROPOSAL FOUR

Walden Asset Management and certain other Company shareholders have notified us that they intend to present the following proposal for consideration at the annual meeting. The names, addresses and number of shares held by such shareholders are available from the Company upon request to the Secretary of the Company. 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 does not explicitly prohibit discrimination based on sexual orientation or gender identity in its written employment policy;

National polls consistently find more than three-quarters of Americans support equal rights in the workplace for gay men, lesbians and bisexuals. In a Gallup poll conducted in May 2007, approximately 89 percent of respondents favored equal opportunity in employment for gays and lesbians;

According to a June, 2007, survey conducted by Harris Interactive, twenty-eight percent of gay and lesbian employees believe they have experienced discrimination or unfair treatment in the workplace, and forty percent of employees are uncomfortable being open about their sexual orientation with their colleagues;

A 2005 survey by Harris Interactive and Witeck-Combs, showed that 88 percent of gay and lesbian adults considered it extremely or very important that a company have a written non-discrimination policy that includes sexual orientation;

Nineteen states, and the District of Columbia, have laws prohibiting employment discrimination based on sexual orientation; By January 2008, 13 states will have laws in place prohibiting discrimination on the basis of gender identity; Our company has operations in, and makes sales to, institutions in states and cities that prohibit discrimination on the basis of sexual orientation and gender identity;

Leggett & Platt is increasingly an outlier given its lack of an inclusive policy. As tracked by the Human Rights Campaign Foundation’s Corporate Equality Index, many companies in the Fortune 500 Index have implemented best practices and policies to support discrimination free workplaces, including:

Manufacturing companies, such as Baldor Electric, Deere, Diebold, Donaldson, Dover, Caterpillar, Herman Miller, Illinois Tool Works, Teleflex and United Technologies explicitly prohibit gender identity and sexual orientation discrimination in their written policies;

Other major corporate employers based in Missouri including Anheuser-Busch, Emerson Electric, Enterprise Rent-A-Car, O’Reilly Automotive, Monsanto, Peabody Energy and Sigma-Aldrich also explicitly prohibit this form of discrimination in their written policies;

RESOLVED: The Shareholders request that Leggett & Platt amend its written equal employment opportunity policy to explicitly prohibit discrimination based on sexual orientation and gender identity. Programs and policies developed to implement this policy should be based on identified best practices.

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STATEMENT: Employment discrimination on the basis of sexual orientation diminishes employee morale and productivity. Because state and local laws differ with respect to employment discrimination, our company would benefit from a consistent, corporate-wide policy to enhance efforts to prevent discrimination, resolve complaints internally to avoid costly litigation or damage to its reputation, access employees from the broadest possible talent pool, and ensure a respectful and supportive atmosphere for all employees.

COMPANY’S STATEMENT IN OPPOSITION:

The Board of Directors unanimously recommends a vote AGAINST this shareholder proposal.

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EXECUTIVE COMPENSATION AND RELATED MATTERS

Compensation Discussion  & Analysis

This section discusses our executive compensation program and the rationale for decisions in 2007 affecting the compensation of our Chief Executive Officer, David Haffner; our Chief Operating Officer, Karl Glassman; our Chief Financial Officer, Matt Flanigan; and two Senior Vice Presidents, Paul Hauser and Joseph Downes. The total compensation of these executives in 2007 is reported in the Summary Compensation Table on page 40. We refer to these executives as the “named executive officers” or “NEOs.” Unless otherwise noted, information is presented from the viewpoint of the Company, which is referred to as “we,” “our,” or “us.”

The Summary Compensation Table also includes our Chairman of the Board, Felix Wright. Mr. Wright ceased to be an executive officer of the Company in May 2007 when he began a 2-year consulting term, as provided under the terms of his employment agreement. Decisions regarding Mr. Wright’s compensation, as applicable, will be discussed separately from the other NEOs.

Our Compensation Committee (the “Committee”) works with management and the Board of Directors (the “Board”) to ensure that our executive compensation program:

With those objectives in mind, the Committee conducts a comprehensive review of executive officer compensation each year in March, before approving any salary increases. (The scope of this review is described later.) This review provides the foundation for compensation decisions made throughout the year. The Committee evaluates the total compensation package, as well as each component, in light of the following guiding principles:

The Board and management spent much of 2007 assessing the Company’s business strategy and, with the help of a management consulting firm, developed a new long-term strategic plan. We announced the new strategic plan in November 2007. Actions taken under the plan, including a major restructuring that should reduce our total revenue by about 20%, are intended to improve Total Shareholder Return (TSR). TSR combines share price appreciation and dividends paid to show the total return to the shareholder over a specified period. In connection with this strategic shift, the Committee evaluated the objectives and design of our executive compensation program throughout 2007 and ultimately made two critical changes that became effective in 2008—it revised the annual incentive plan and increased compensation tied to performance. We will explain those changes in the following discussion.

The Role of Management, the Board of Directors and Outside Advisors in Compensation Decisions

The Committee determines the overall structure and design of our executives’ total compensation package and decides the individual amounts paid and awarded to each executive officer. However, the approval of the full Board is required for employment agreements and severance benefit agreements for executive officers. The Committee reports its actions to the Board at each Board meeting.

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From time to time, the Committee will engage an outside compensation consultant to assist it in carrying out its responsibilities. However, it did not do so in 2007. The Committee often invites the Chief Executive Officer, Chairman of the Board, Chairman Emeritus of the Board, Corporate Secretary and Vice President of Corporate Affairs & Human Resources to attend Committee meetings. While these individuals participate in discussions about executive compensation matters, they have no vote on specific pay decisions. Committee members frequently meet in executive session. Mr. Haffner makes recommendations to the Committee regarding the level of compensation for the other named executive officers, with input from Mr. Glassman on those executives who report to him. Mr. Haffner is excluded from meetings in which his own compensation is being discussed and decided.

The Annual Review and Use of Compensation Data

Compensation decisions are made at various times during the year. Each year in March, at the same time the Company is evaluating performance and considering salary increases for employees, the Committee reviews the total compensation package for executive officers. Because the review coincides with salary increases, it is most likely to influence base salary decisions. However, in the same way that an investor might annually review her investment portfolio to make sure her asset allocation mix still reflects her financial goals, the Committee’s review serves as a check to make sure the total package still reflects its overall compensation objectives. Just as changing life circumstances require periodic adjustment to an investment portfolio, internal and external changes affecting our business require periodic adjustment to our executive compensation package.

In connection with its 2007 annual compensation review, the Committee evaluated the following data assembled and prepared by Company personnel:

In general, the Committee uses this information to develop a complete picture of each executive’s total compensation package in the context of past decisions, internal pay relationships and the external market. These analytic tools serve to inform and guide the Committee in its deliberations but, unless specifically noted elsewhere in this discussion, do not directly impact specific compensation decisions.

In 2007, the Committee reviewed compensation survey data published by Watson Wyatt and Towers Perrin (collectively, the “2007 Survey Data”). From each firm’s survey, we compiled and evaluated the data of manufacturing companies that most closely match our revenues and the individual executive’s job description. The Watson Wyatt survey consisted of 276 companies at the CEO level and the Towers Perrin survey consisted of 70 companies at the CEO level. The survey size decreased for positions below the CEO level because not all companies in the survey have the same positions. Accordingly, the number of companies in the comparison pool varied by position.

We have not compared our compensation to a smaller, custom-selected peer group of companies. Given the complexity of our markets and the diversity of our product lines, we have been unable to identify a large enough group of companies that are enough like us to make such a comparison meaningful and accurate.

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The Committee used the 2007 Survey Data to get a general sense of the competitive market. Because survey results vary due to differences in methodologies and survey populations, the Committee did not target any compensation element to a specific percentile of the 2007 Survey Data. Instead, the Committee compared our executives’ compensation, calculated using each survey’s specific methodology, to that of the 2007 Survey Data to get a general idea of how much other companies pay for executive positions similar to ours. The Committee considers this market analysis important to its objective to attract and retain high quality executives while keeping the total cost of management reasonable.

As a result of its annual review, the Committee concluded that our executive officers’ long-term incentive compensation opportunity and annual cash incentive opportunity were both too low, relative to the external market data. In addition, they determined that the base salary for the CFO was too low. Based on this assessment, the Committee took the following actions:

Total Compensation Package

Our executive compensation program is designed to deliver a mix of fixed and variable compensation paid in cash and equity. In 2007, the primary components of the program were:

The percentage of each component relative to the total is not determined by any specific formula. In keeping with our overall objective to link compensation to Company performance, the Committee makes sure that a significant percentage of the total compensation package is structured as variable, or “at risk,” compensation. The decision about how much of the variable compensation should be delivered in cash or options or other equity is likewise not reduced to a formula. Each component measures a different aspect of Company performance over a different time span, and the allocation between components is subject to the Committee’s subjective judgment.

The fixed component, base salary, represents the Company’s basic agreement with its executives for compensation in exchange for services and is intended to be reasonably competitive with other companies with whom we may compete for executive talent. The Committee currently intends to keep base salaries below the $1 million threshold set by Section 162(m) of the Internal Revenue Code to maximize the Company’s tax deduction.

The variable components are intended to tie our executives’ wealth creation potential to that of shareholders and to motivate executives to perform to their highest potential. The better the Company performs, the greater the executives’ reward and vice versa. The variable components are designed to reward different measures of Company performance. The annual incentive is linked to internal financial measures (specifically, return on net assets and business unit budget targets), while stock options reward an increase in our stock price.

We also offer executives two equity-based programs, the Executive Stock Unit Program (the “ESU Program”) and the Deferred Compensation Program. These programs are intended to encourage executives to

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convert their cash compensation into equity. The ESU Program is our primary retirement plan for executives, and is payable entirely in Company stock. Executive officers also have a long history of voluntarily deferring cash compensation into equity under the Deferred Compensation Program. These programs are described in more detail on page 49. The Committee considers these programs a highly effective means of ensuring that executives have a significant stake in the Company’s success.

As previously mentioned, the Committee decided to increase the percentage of the executives’ variable compensation in 2008 by introducing a new equity component, performance stock unit (“PSU”) awards, into our executive compensation program. (Because they were granted in 2008, these awards are not reflected in the Summary Compensation Table on page 40.) See page 36 for a discussion of these awards and the Committee’s rationale for making this change.

As a result of the PSU awards, the primary components of our executive compensation program for 2008 reflect a pronounced shift toward variable compensation in the form of equity:

The effect of the change is further shown below. The first two charts compare the ratio of fixed-to-variable compensation for the NEOs in 2007 to the current 2008 package, and the second set compares the ratio of cash-to-equity compensation.

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The addition of PSU awards will increase the variable and equity components of the NEOs’ total compensation package by about 25%. (These illustrations include only the four primary compensation components listed in the chart above and assume the value of equity awards to be equal to the grant date fair value of the awards. Due to the use of different valuation methodologies, these illustrations are not comparable to the compensation amounts reported in the Summary Compensation Table on page 40.)

Compensation Differences Among Executives and the Role of Individual Performance

Several factors impact the amounts we pay to our executives. The Committee considers 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 tenure and experience in the position, the executive’s individual contributions, and the need to retain the executive.

We have not established individual performance objectives for our executive officers. Any decisions to adjust compensation in recognition of individual excellence or weakness are subjective and are most likely to be reflected in base salary.

The Committee makes a distinction between the top two executive positions (the Chief Executive Officer and the Chief Operating Officer) and the remaining executive officer positions. Base salaries, as well as annual incentive targets and stock option multiples, are higher for the CEO and COO in recognition of their greater scope of authority and level of responsibility. The Committee also uses a different schedule for calculating the annual incentive award payout for these two positions. The payout schedule for the CEO and COO requires a higher level of performance before any award becomes payable, and it provides a higher percentage payout for exceptionally high performance (see page 34). This is consistent with the Committee’s philosophy that executive officer compensation should provide greater rewards for superior performance and accountability for poor performance.

With respect to relationships between individual positions, the Committee does not establish the compensation level for any position as an absolute percentage of any other position. Instead, compensation decisions involve a high degree of discretion and are influenced by the factors previously mentioned. The one exception has been the pay relationship between the CEO and COO. Historically, the Committee has determined that our COO’s base salary should be approximately 80% of the CEO’s base salary to reflect the relative responsibilities of these two positions. While the Committee maintained that relationship in setting 2007 base salary, it chose not to maintain that ratio in determining the number of PSU awards to grant in 2008. Instead, the Committee exercised discretion and granted a higher percentage of PSUs to Mr. Haffner in recognition of (i) his critical responsibilities, including execution of the strategic plan, and (ii) the degree to which his long-term incentive compensation lagged behind that of other CEOs in the 2007 Survey Data.

Compensation Elements

Base Salary. Base salary is the key driver of our executives’ total compensation package, because incentive compensation is typically established as a percentage of base salary. The Committee believes it is important to evaluate base salaries relative to the market in order to protect the Company’s ability to retain its executives and attract new executives when necessary. Accordingly, the Committee reviewed the 2007 Survey Data to determine how our NEO salaries compared to the competitive market for similar positions. The Committee expects our NEO base salaries, collectively, to be at about 75% of the market median. At the time of the Committee’s review, the base salaries of our NEOs ranged from 65% to 100% of the market median in the Watson Wyatt survey and from 58% to 95% of the market median of the Towers Perrin survey. The Committee considers this range appropriate because: (i) Leggett is a conservative company headquartered in an area with a low cost of living; (ii) we have traditionally “grown our own” managers, building a solid management team with a shared vision and strong ties to the Company; and (iii) we are committed to remaining competitive in a global market.

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Each year, the Company sets a merit increase budget for salaried U.S. employees based on Consumer Price Index (CPI) data, other national economic data and our own business climate. For 2007, this merit increase budget was 3.5%. The Committee considers this merit increase figure as one factor in determining salary increases for executive officers.

Mr. Haffner and Mr. 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.

Based on its evaluation, the Committee increased the base salaries of the NEOs in 2007 as follows: Haffner—4.5%; Glassman—4.5%; Flanigan—8.8%; Hauser—3.8% and Downes—8.0%. As previously mentioned, the larger increase for Mr. Flanigan was driven by the external market data. Mr. Flanigan is relatively new to his position as CFO, and the Committee has been gradually increasing his compensation relative to the market as his skills, experience and contributions increase. The larger increase for Mr. Downes was an acknowledgement of his particularly outstanding management of the business units under his supervision and his pay relative to the other executive officers.

Annual Incentive Awards. We make annual incentive awards to our executive officers under our 2004 Key Officers Incentive Plan (the “Plan”) based on the Company’s operating results for the year. The Committee did not target annual incentive compensation to any particular percentage of the 2007 Survey Data.

There are two award formulas under the Plan, one for Corporate Participants and one for Profit Center Participants. Messrs. Haffner, Glassman, Flanigan and Wright are Corporate Participants, while Messrs. Hauser and Downes are Profit Center Participants. The formula differences tie the award payouts to that portion of the Company’s performance most directly related to the participant. Under the Corporate Award Formula, the award is determined entirely by the Company’s performance on a consolidated basis. Mr. Wright’s incentive award was prorated to reflect five months of service as an executive officer. Under the Profit Center Formula, 75% of the award is determined by operating unit performance and 25% by corporate performance.

A participant’s award payout is determined by applying the appropriate award formula to a percentage of his salary (the “Target Percentage”), as shown in the example below.

Target Percentages are generally based on the executive’s position in the Company. The higher the position, the higher the Target Percentage. For 2007, the NEOs’ Target Percentages were:

The Corporate Formula is based on the Company’s return on net assets (RONA). To determine RONA, we start with two items reported in the Company’s consolidated financial statements: earnings before interest and

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taxes (EBIT) and total assets. To determine the “return” aspect of RONA, we adjust EBIT by adding back annual incentive award payments and any Company matching contributions under our equity plans. To determine the “net assets” aspect of RONA, we: (i) deduct cash and current liabilities, (ii) adjust for accumulated other comprehensive income (deduct if positive, add back if negative) as reported in the shareholders’ equity section of our balance sheet, and (iii) average all quarterly calculations. Acquisitions are excluded from the award calculations during the first two years after the acquisition date. Except for the effect of excluded acquisitions, RONA, and its relationship to the annual incentive award payouts, can be calculated from the Company’s published financial statements. We internally track the impact of recent acquisitions.

When the Committee approved the Corporate Formula in March, it did not anticipate that we would incur significant restructuring charges in 2007. However, in connection with the launch of our new strategic plan, we recorded significant restructuring charges in the fourth quarter of 2007. As a result, our 2007 RONA was projected to fall below the threshold level for any award payout to Corporate Participants. However, Profit Center Participants (as well as a large number of non-executive managers participating in a different incentive plan) were still on track to receive a payout under their respective award formulas. The Committee believed this disparity created an internal equity and fairness problem among our executives. Consequently, the Committee modified the Corporate Formula under the Plan to exclude restructuring-related charges. As a result, payouts under the Plan to our named executive officers are no longer considered to be “performance-based compensation” for purposes of Section 162(m). To the degree that these payouts cause certain of our NEOs to receive more than $1 million in non-performance-based compensation in 2008, the Company will not receive a tax deduction for the portion of this compensation that exceeds $1 million. The Committee expects only Mr. Haffner to exceed the $1 million cap. Accordingly, the Committee determined that the internal equity and fairness concerns outweighed this relatively small lost tax deduction.

In 2007, RONA was 13.1%, resulting in a Corporate Participant payout of 56% as determined under both the general participant and Senior Executive payout schedules. (The Senior Executive payout schedule applies to the Chairman of the Board, CEO and COO.) Individual payouts to the named executive officers are reported in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table on page 40.

2007

RONA PAYOUT SCHEDULES

The Plan gives the Committee discretion to reduce an executive officer’s award by up to 10% based on its evaluation of the individual’s performance during the year. The Committee generally does not exercise this discretion and did not do so in 2007.

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In setting the payout schedule, the Committee evaluated several possible payout scenarios and chose one it thought struck an appropriate balance between accountability to shareholders and incentive for participants. If the threshold is too low, employees don’t have enough incentive to strive for higher returns, but if it’s too high, employees perceive it as unattainable. The Committee recognizes that either extreme demonstrates an improper alignment of executive compensation and shareholder interests and determined that this payout schedule struck the proper balance.

Under the Profit Center Formula, the payout schedule begins at 25% when the Profit Center’s operating income is 62.5% of budgeted operating income and ends at 100% when operating income is equal to 100% of budgeted operating income, as illustrated below.

2007

PROFIT CENTER PAYOUT TABLE

To illustrate how an award payout is calculated for a Profit Center participant, assume the participant has a $120,000 potential award. Further assume the participant’s Profit Center achieves 90% of budgeted operating income and the Company achieves 12% RONA. The award payout would be calculated as follows:

Mr. Hauser’s Profit Center payout for 2007 was 76% and Mr. Downes’ was 63%.

Incentive Plan Changes in 2008. In connection with the launch of the Company’s new strategic plan, the Profit Center Award has been revised to more closely tie each executive’s incentives to the business, assets and employees under his control. In 2008, the Profit Center Formula will be based 50% on budget achievement and 50% on return on capital employed (ROCE). The Committee believes this revised formula will provide greater rewards, greater accountability and greater control as follows:

The Committee chose the ROCE metric because it rewards executives for actions that make efficient use of the assets under their supervision, such as reducing inventory, increasing production, and managing working capital. The efficient use of assets permits the Company to maximize its returns with the least amount of investment.

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Equity Awards. Stock options represent a significant portion of the total compensation package for our executive officers. We continue to believe options are an excellent means of aligning shareholder and executive wealth, since an option’s value is contingent on and directly proportional to increases in the Company’s stock price. Stock options have the potential to deliver significant returns if the Company performs well. The risk/reward ratio of options is consistent with our philosophy that executive compensation should provide greater rewards for superior performance, as well as accountability for underperformance.

We grant options to a broad group of key employees and carefully manage the use of shares authorized for issuance under our Flexible Stock Plan. This Stock Plan is administered by four independent directors, who currently are the same directors comprising the Compensation Committee. Option grants are not timed to correspond to the release of material information. In keeping with our option grant policy, the Committee holds a telephone meeting on the first business day of the year to approve the annual grant. 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 size of the option awards granted to our executive officers is determined as a multiple of base salary divided by the fair market value per share of the Company’s common stock on the option grant date. Currently, this multiple is 3x base salary for the CEO and COO and 2.5x base salary for the other NEOs. Without targeting any specific percentage, the Committee sets these multiples to achieve what it considers an appropriate percentage of variable pay relative to the total compensation package.

The Committee reviewed the value of outstanding stock options held by the executive officers and the grant date fair value of their annual grants over the past five years as part of its annual review. The Committee monitors this information to gain an overall assessment of how current compensation decisions fit with past practices and to determine the executives’ accumulated variable compensation. It does not, however, reduce or increase current year awards based on the value of outstanding awards. In the Committee’s view, to do so would undermine the purpose of these incentive awards. For example, the NEOs’ outstanding options have little or no value at the Company’s current stock price. This is an appropriate linkage of performance and compensation. If the Committee were to increase the current year’s award because the previous awards had not yet yielded any gains, this action would eliminate accountability for the performance that resulted in the lack of value in the outstanding awards. This would be inconsistent with the Committee’s philosophy that compensation should provide greater rewards for superior performance and accountability for underperformance.

Executive officers also have the opportunity to defer their cash compensation into stock options under our Deferred Compensation Program. The size, timing and conditions of those awards are established by the terms of the Program. As noted in the Outstanding Equity Awards at 2007 Year End Table on page 44, Deferred Compensation options represent a significant percentage of each named executive officer’s outstanding stock options.

Equity Changes in 2008. In connection with the launch of the Company’s new strategic plan, the Committee added a new equity component, performance stock unit awards, to our executives’ total compensation package in 2008 to increase their equity compensation and to align more closely executive compensation with the Company’s strategic focus on total shareholder return (TSR). The Committee decided to increase equity compensation because the 2007 Survey Data indicated the long-term incentive (LTI) component of our executives’ compensation was in the bottom quartile compared to companies of similar revenue size. The 2007 Survey Data indicated our total compensation was also well below median, a position that may well jeopardize the retention of key executives and prevent us from attracting new executive talent.

The Committee chose to grant PSUs to achieve its equity objectives because they:

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The Committee believes these PSU awards will provide a critical incentive for executives to successfully execute the Company’s new strategic plan and ensure successful completion of the announced major restructuring.

PSU awards are to be paid out in shares of the Company’s common stock at the end of a three-year performance period, based on the Company’s TSR relative to the TSR of a group of peer companies (the “Peer Group”). The Peer Group consists of all the companies in the Industrial, Materials and Consumer Products sectors of the S&P 900 (approximately 330 companies). These businesses were selected as the Peer Group because nearly all of our business units fall into these sectors.

The Committee chose the TSR metric because TSR is the key driver for our new strategic plan. TSR will be calculated as the change in the Company’s stock price over the performance period plus accumulated dividends divided by the Company’s stock price at the beginning of the period. This calculation will assume dividends are reinvested on the dividend payment date.

As illustrated below, a percentage of each executive’s base award becomes payable at the end of the three-year performance period, based on how our TSR ranks relative to the Peer Group TSR:

To determine the size of the PSU awards, the Committee calculated the additional value that would be required to bring the LTI component of our total compensation package to approximately 75% of the survey median of comparable companies in the 2007 Survey Data. For our CEO and COO, the Committee considered their individual LTI relative to the 2007 Survey Data for their respective positions. For the remaining named executive officers, the Committee considered the aggregate LTI value for similar positions in the survey to determine the shortfall on an aggregate basis. Although it considered the degree to which we fell short of the 75% of median mark, the Committee did not target the awards to this point. Instead, it sets the awards generally within that range, considering each executive’s contributions, level of responsibility and importance to the strategic plan. The awards to the CEO and COO are significantly larger than those of the other executive officers in recognition of the responsibility and demands of their positions, in addition to consideration of their compensation relative to the external market.

The addition of the PSU awards to our executive compensation program did not influence the Committee’s decision regarding any other compensation component for our named executive officers. In particular, the PSU awards did not replace or reduce stock option grants. The Committee’s objective in introducing the PSU awards was to increase the equity component of our total compensation package. By adding a different type of equity to the package instead of just increasing stock options, the Committee has adopted a “portfolio” approach to equity. This approach links compensation to multiple financial measures and mitigates the limitations inherent in using any single vehicle.

Other Compensation Programs. As previously mentioned, the NEOs can choose to participate in the Company’s Deferred Compensation Program and Executive Stock Unit Program. These Programs, described on page 49, encourage executive officers to build a long-term stake in the Company.

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The Company previously offered a defined benefit Retirement Plan that was frozen on December 31, 2006. Employees who had previously participated in the Retirement Plan were offered a replacement benefit. The replacement plan is 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 future benefit pre-empted by the Retirement Plan freeze.

NEOs 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 “Excess Retirement K Plan” which permits affected executives to receive the full matching benefit they would otherwise have been entitled to under the Retirement K.

Perquisites and Personal Benefits. The Company’s philosophy is that perquisites should not be a significant part of our total compensation package. In 2007, the aggregate value of perquisites averaged less than 1% of each NEO’s total compensation, the bulk of which is attributable to the use of a Company car. Accordingly, we believe these benefits are appropriate when viewed in the overall context of our total compensation package.

Employment and Change in Control Agreements

In connection with the CEO succession plan implemented in May 2006, the Committee negotiated three-year employment agreements with Mr. Haffner and Mr. Glassman to secure the mutual commitment between these executives and the Company necessary to ensure a smooth and successful management transition. The material terms of these employment agreements are described on page 50.

The Company also has severance benefit agreements with Mr. Haffner and Mr. Glassman. These agreements, which have no stated expiration date, are designed to protect both the executives’ and the Company’s interests in the event of a change in control of the Company. The material terms of these agreements and the Company’s potential financial liability arising from these agreements are described on page 56.

The severance benefit agreements provide for certain benefits if the Company terminates the executive’s employment or if the executive quits for good reason following a change in control of the Company. This “double trigger” arrangement, which requires both a change in control of the Company and a termination of employment must occur before benefits are triggered, is intended to provide continuity for the business by encouraging the continued employment of the executive following the change in control. The new PSU awards granted in 2008 also require a double trigger for accelerated vesting.

The Committee believes the severance benefit agreements protect shareholder interests by reducing the distraction and uncertainty of key executives during a rumored or actual change in control of the Company. The agreements reinforce and encourage the executives’ continued attention and dedication to their duties and provide incentives for them to remain with the Company during the transition. Continuation of the management team is often a crucial factor for the acquiring company. Severance benefits that encourage the executives to continue in their positions, therefore, may result in shareholders receiving a higher value from the deal.

The Committee considers the potential amounts payable under these agreements as part of its annual compensation review, but it did not review the agreements in 2007. The Committee last reviewed and amended these agreements in 2006, in connection with the CEO succession. At that time, the Committee modified the agreements to provide that, if benefits payable under the agreements are less than 10% above the Section 280G limit, the benefits will be capped at $1 below the Section 280G limit. This change protected the Company from incurring costs that would be disproportionate to the benefit delivered to the executive. Otherwise, the Committee found the benefits appropriate and in line with market practices.

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The benefits provided under these agreements do not impact the Committee’s decisions regarding other elements of the executives’ 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 the immediate vesting in the event of a change in control. This “single trigger” provision is the same for all optionees. The acceleration of equity vesting in a change in control is a common market 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 deal.

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 avoid or minimize compensation that exceeds the $1 million cap. All compensation paid to the NEOs in 2007 was deductible for federal income tax purposes.

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 within five years, and maintain thereafter, certain levels of stock ownership. The stock ownership guidelines are as follows:

Shares of the Company’s stock owned outright, stock units, and the net shares acquirable upon the exercise of deferred compensation stock options are included in the ownership totals. A drop in the stock price can cause an executive who previously met the threshold to fall below it temporarily. An executive who has not met the ownership requirement, or falls below it due to a drop in the stock price, must hold any net shares acquired upon the exercise of stock options or vesting of performance stock units until he meets the ownership threshold.

Compensation Committee Report

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)

Richard T. Fisher

Judy C. Odom

Phoebe A. Wood

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SUMMARY COMPENSATION TABLE

The following table reports the total 2007 compensation of our Chief Executive Officer, David Haffner, Chief Financial Officer, Matthew Flanigan, and the three other most highly compensated executive officers, Karl Glassman, Paul Hauser and Joseph Downes. It also includes the total 2007 compensation of our Chairman of the Board, Felix Wright, who ceased to be an executive officer of the Company in May 2007. Collectively, we refer to these six executives as the “Named Executive Officers” or “NEOs.”

Our executives frequently defer a portion of their cash compensation under the Company’s Deferred Compensation Program. This Program is described on page 49. To encourage executives to defer cash compensation into Company equity, the value of the equity received in lieu of the foregone cash compensation is greater than the value of foregone cash. In the table below, compensation is presented in the appropriate columns for which it was earned, without regard to the deferral, except that the portion of an equity award attributable to the discount is reflected in either the Stock Awards or Option Awards column, depending on whether the executive deferred cash into stock units or stock options. The full grant date fair value of the equity awards granted in lieu of the cash compensation is reflected in the Grants of Plan-Based Awards Table on page 43.

2007 Cash Deferrals: Haffner—$1,116,313; Glassman—$411,337; Hauser—$100,000; Downes—$50,000

2007 Stock Unit Deferrals: Flanigan—$390,913; Wright—$922,112

2006 Stock Unit Deferrals: Hauser—$75,196; Wright—$1,242,378

2006 Option Deferrals: Haffner—$1,222,806; Flanigan—$397,825; Glassman—$375,000

See the Grants of Plan-Based Awards Table on page 43 for further information on the equity awards received in lieu of cash compensation in 2007. Amounts deferred into cash deferrals are included in the aggregate numbers reported in the Non-Qualified Deferred Compensation Table on page 50.

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Grants of Plan-Based Awards in 2007

The following table sets forth, for the year ended December 31, 2007, information concerning each grant of an award made to the Company’s Named Executive Officers in 2007 under any plan.