<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 20, 1995.
FILE NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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INTERFACE, INC.
(Exact name of issuer as specified in its charter)
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GEORGIA 2822 58-1451243
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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2859 PACES FERRY ROAD, SUITE 2000, ATLANTA, GEORGIA 30339
(770) 437-6800
(Address, including zip code, and telephone number, including area code, of
issuer's principal executive offices)
DAVID W. PORTER, ESQUIRE
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
INTERFACE, INC.
2859 PACES FERRY ROAD, SUITE 2000, ATLANTA, GEORGIA 30339
(770) 437-6800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
W. RANDY EADDY, ESQUIRE
KILPATRICK & CODY
1100 PEACHTREE STREET, ATLANTA, GEORGIA 30309-4530
TELEPHONE: (404) 815-6500
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT OFFERING PRICE AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED UNIT(1) PRICE FEE
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9 1/2% Senior Subordinated Notes Due 2005,
Series B.................................. $125,000,000 100% $125,000,000 $25,000
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Subsidiary Guarantees(2).................... (3) (3) (3) (3)
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
(2) The Company's principal wholly-owned domestic subsidiaries, Guilford
(Delaware), Inc., Guilford of Maine, Inc., Interface Asia-Pacific, Inc.,
Interface Europe, Inc., Interface Flooring Systems, Inc., Interface
Research Corporation, Pandel, Inc., Rockland React-Rite, Inc., Bentley
Mills, Inc., and Prince Street Technologies, Ltd. (collectively, the
"Guarantors"), have guaranteed on an unsecured, senior subordinated basis,
jointly and severally, the payment of the principal of, premium, if any,
and interest on the 9 1/2% Senior Subordinated Notes, Series B, being
registered hereby (the "Subsidiary Guarantees"). The Guarantors are
registering the Subsidiary Guarantees. Pursuant to Rule 457(n), no
registration fee is required with respect to the Subsidiary Guarantees.
(3) Not applicable.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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INTERFACE, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K, SHOWING THE LOCATION IN THE
PROSPECTUS
OF THE INFORMATION REQUIRED BY PART I OF FORM S-4.
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ITEM NUMBER AND CAPTION IN FORM S-4 LOCATION OR CAPTION IN PROSPECTUS
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A. INFORMATION ABOUT THE TRANSACTION.
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus..... Cover Page of Registration Statement; Cross
Reference Sheet; Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus................................. Inside Front Cover Page; Outside Back Cover
Page
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.............. Prospectus Summary; Risk Factors; Business;
Selected Consolidated Financial Data
4. Terms of the Transaction..................... Prospectus Summary; The Exchange Offer;
Description of the Exchange Notes; Certain
U.S. Federal Income Tax Consequences
5. Pro Forma Financial Information.............. Prospectus Summary; Selected Consolidated
Financial Data
6. Material Contacts with the Company being
Acquired................................... Not Applicable
7. Additional Information Required for
Reoffering by Persons and Parties Deemed to
be Underwriters............................ Not Applicable
8. Interests of Named Experts and Counsel....... Legal Matters
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Not Applicable
B. INFORMATION ABOUT THE REGISTRANT.
10. Information With Respect to S-3
Registrants................................ Prospectus Summary; Risk Factors;
Capitalization; Management's Discussion and
Analysis of Financial Condition and Results
of Operations; Selected Consolidated
Financial Data; Business; Management;
Security Ownership of Management and
Principal Holders; Description of the
Exchange Notes; Financial Statements
11. Incorporation of Certain Information
by Reference............................... Incorporation of Certain Information by
Reference
12. Information With Respect to S-2 or
S-3 Registrants............................ Not Applicable
13. Incorporation of Certain Information
by Reference............................... Not Applicable
14. Information With Respect to Registrants Other
Than S-2 or S-3 Registrants................ Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED.
15. Information With Respect to S-3 Companies.... Not Applicable
16. Information With Respect to S-2 or
S-3 Companies.............................. Not Applicable
17. Information With Respect to Companies Other
Than S-2 or S-3 Companies.................. Not Applicable
D. VOTING AND MANAGEMENT INFORMATION.
18. Information if Proxies, Consents or Other
Authorizations are to be Solicited......... Not Applicable
19. Information if Proxies, Consents or Other
Authorizations are not to be Solicited or
in an Exchange Offer....................... Management
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PROSPECTUS
[INTERFACE LOGO]
OFFER TO EXCHANGE
9 1/2% SENIOR SUBORDINATED NOTES DUE 2005, SERIES B
FOR
ALL OUTSTANDING 9 1/2% SENIOR SUBORDINATED NOTES DUE 2005, SERIES A
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., ATLANTA, GEORGIA, TIME
ON , 1996, UNLESS EXTENDED.
Interface, Inc., a Georgia corporation (the "Company"), hereby offers, upon
the terms and subject to conditions set forth in this Prospectus (the
"Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal"; together with the Prospectus, the "Exchange Offer"), to exchange
up to an aggregate principal amount of $125,000,000 of its 9 1/2% Senior
Subordinated Notes Due 2005, Series B (the "Exchange Notes") for up to an
aggregate principal amount of $125,000,000 of its outstanding 9 1/2% Senior
Subordinated Notes Due 2005, Series A (the "Outstanding Notes"). The terms of
the Exchange Notes are identical in all material respects to those of the
Outstanding Notes, except for certain transfer restrictions and registration
rights relating to the Outstanding Notes and except for certain interest
provisions related to such registration rights. The Exchange Notes will be
issued pursuant to, and entitled to the benefits of, the Indenture (as defined
herein) governing the Outstanding Notes. The Exchange Notes and the Outstanding
Notes are sometimes referred to collectively as the "Notes".
The Exchange Notes will be unsecured obligations of the Company and
subordinated to all existing and future Senior Indebtedness (as defined herein)
of the Company. The Exchange Notes will be guaranteed (the "Guarantees"),
jointly and severally, on an unsecured, senior subordinated basis, by the
Company's principal domestic subsidiaries (the "Guarantors"). The Guarantees
will be subordinated to all existing and future Guarantor Senior Indebtedness
(as defined herein). As of October 1, 1995, on an adjusted basis after giving
effect to the sale of the Outstanding Notes and the application of the net
proceeds therefrom and to the redemption (the "Redemption") of the Company's
outstanding 8% Convertible Subordinated Debentures due 2013 (the "Convertible
Debentures"), the aggregate outstanding principal amount of Senior Indebtedness
of the Company and Guarantor Senior Indebtedness of the Guarantors was
approximately $192.7 million. In addition, the Notes will be effectively
subordinated in right of payment to all existing and future liabilities,
including trade payables, of the Company's subsidiaries which are not
Guarantors, which, as of October 1, 1995, totaled approximately $52.4 million
(excluding intercompany liabilities and Senior Indebtedness).
The Company will accept for exchange any and all Outstanding Notes which
are properly tendered in the Exchange Offer prior to 5:00 p.m., Atlanta, Georgia
time, on , 1996, unless extended by the Company in its sole
discretion (the "Expiration Date"). Tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 p.m., Atlanta, Georgia time, on the
Expiration Date. If the Company terminates the Exchange Offer and does not
accept for exchange any Outstanding Notes with respect to the Exchange Offer,
the Company will promptly return the Outstanding Notes to the holders thereof.
The Exchange Offer is not conditioned upon any minimum principal amount of
Outstanding Notes being tendered for exchange, but is otherwise subject to
certain customary conditions. The Outstanding Notes may be tendered only in
integral multiples of $1,000.
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE> 4
(cover page continued)
Interest on the Exchange Notes will accrue from the date of issuance
thereof and will be payable semi-annually on May 15 and November 15 of each
year, commencing on May 15, 1996. Holders of the Exchange Notes will receive
interest on May 15, 1996 from the date of initial issuance of the Exchange
Notes, plus an amount equal to the accrued interest on the Outstanding Notes
from the later of (i) the most recent date to which interest has been paid
thereon and (ii) the date of issuance of the Outstanding Notes, to the date of
exchange thereof. Interest on the Outstanding Notes accepted for exchange will
cease to accrue upon issuance of the Exchange Notes. The Exchange Notes will
mature on November 15, 2005 and may be redeemed at the option of the Company on
or after November 15, 2000, in whole or in part, at the redemption prices set
forth herein, plus accrued interest to the date of redemption. In the event of a
Change of Control (as defined herein), the Company will be obligated to make an
offer to purchase all of the Notes then outstanding at a redemption price equal
to 101% of the principal amount thereof plus accrued interest to the repurchase
date. In addition, the Company will be obligated to make an offer to repurchase
Notes in the event of certain asset sales. See "Description of the Exchange
Notes".
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement dated
November 21, 1995 (the "Registration Rights Agreement") by and among the
Company, the Guarantors and Smith Barney, Inc., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, The Robinson-Humphrey Company, Inc., Wheat, First
Securities, Inc. and First Chicago Capital Markets, Inc., as the initial
purchasers (the "Initial Purchasers"), with respect to the initial sale of the
Outstanding Notes. Based on interpretations by the staff of the Securities and
Exchange Commission (the "Commission"), the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Outstanding Notes may be offered for resale,
resold and otherwise transferred by respective holders thereof (other than any
such holder which is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act of 1933, as amended (the
"Securities Act"), provided that the Exchange Notes are acquired in the ordinary
course of such holder's business and such holder has no arrangement with any
person to participate in the distribution of such Exchange Notes and is not
engaged in and does not intend to engage in a distribution of the Exchange
Notes. Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of the Exchange Notes received in exchange for Outstanding Notes if
such Exchange Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution".
Prior to the Exchange Offer, there has been no public market for the
Exchange Notes. There can be no assurance as to the liquidity of any markets
that may develop for the Exchange Notes, the ability of holders to sell the
Exchange Notes, or the price at which holders would be able to sell the Exchange
Notes. Future trading prices of the Exchange Notes will depend on many factors,
including among other things, prevailing interest rates, the Company's operating
results and the market for similar securities. Historically, the market for
securities similar to the Exchange Notes, including non-investment grade debt,
has been subject to disruptions that have caused substantial volatility in the
prices of such securities. There can be no assurance that any market for the
Exchange Notes, if such market develops, will not be subject to similar
disruptions. Certain of the Initial Purchasers have advised the Company that
they currently intend to make a market in the Exchange Notes offered hereby.
However, the Initial Purchasers are not obligated to do so and any market making
may be discontinued at any time without notice.
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to pay the expenses incident to the Exchange Offer.
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER, OR A SOLICITATION
IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS, NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
2
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TABLE OF CONTENTS
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PAGE
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Available Information...................................................................... 3
Incorporation of Certain Information by Reference.......................................... 3
Prospectus Summary......................................................................... 4
Risk Factors............................................................................... 12
Use of Proceeds............................................................................ 15
Capitalization............................................................................. 16
The Exchange Offer......................................................................... 17
Selected Consolidated Financial Data....................................................... 25
Management's Discussion and Analysis of Financial Condition and Results of Operations...... 26
Business................................................................................... 31
Management................................................................................. 42
Security Ownership of Management and Principal Holders..................................... 46
Description of Certain Indebtedness and Other Obligations.................................. 48
Description of the Exchange Notes.......................................................... 51
Certain U.S. Federal Income Tax Consequences............................................... 80
Plan of Distribution....................................................................... 82
Legal Matters.............................................................................. 83
Experts.................................................................................... 83
Index to Financial Statements.............................................................. F-1
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AVAILABLE INFORMATION
The Company and the Guarantors have filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement on Form S-4 (the
"Registration Statement", which term shall include all amendments, exhibits,
annexes and schedules thereto) pursuant to the Securities Act, and the rules and
regulations promulgated thereunder, covering the Exchange Notes being offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. Statements made in this Prospectus
as to the contents of any contract, agreement or other document referred to in
the Registration Statement are not necessarily complete. With respect to each
such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. The Company is subject to the
periodic reporting and other informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Periodic reports, proxy
statements and other information filed by the Company with the Commission may be
inspected at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, or at its regional
offices located at the Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York
10007. Copies of such material can be obtained from the Company upon request.
The Company has agreed to file with the Commission, to the extent permitted,
and distribute to holders of the Exchange Notes reports, information and
documents specified in Sections 13 and 15(d) of the Exchange Act, so long as the
Exchange Notes are outstanding, whether or not the Company is subject to such
informational requirements of the Exchange Act. While any Exchange Notes remain
outstanding, the Company will make available, upon request, to any holder of the
Exchange Notes, the information required pursuant to Rule 144A(d)(4) under the
Securities Act during any period in which the Company is not subject to Section
13 or 15(d) of the Exchange Act. Any such request should be directed to the
Assistant Secretary of the Company at 2859 Paces Ferry Road, Suite 2000,
Atlanta, Georgia 30339, telephone number (770) 437-6800.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents heretofore filed by the Company with the Commission
are hereby incorporated herein by reference: (i) the Company's Annual Report on
Form 10-K for the fiscal year ended January 1, 1995; and (ii) all reports filed
by the Registrant pursuant to Section 13(a) or 15(d) of the Exchange Act since
the end of the fiscal year covered by the Registrant's Annual Report on Form
10-K for its fiscal year ended January 1, 1995. All documents filed by the
Company pursuant to Section 13(a), 13(c), 14, or 15(d) of the Exchange Act after
the date of this Prospectus and prior to the date which is 180 days after the
termination of the Exchange Offer shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated or deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
3
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus. As used herein, all
references to "adjusted for redemption" mean that the amount involved has been
adjusted to give effect to the series of transactions that resulted in the
conversion of an aggregate of approximately $2.5 million in principal amount of
Convertible Debentures, the use by the Company of approximately $106.0 million
of net proceeds from the sale of the Outstanding Notes to pay the redemption
price for the remaining Convertible Debentures, and the use of approximately
$15.0 million of such net proceeds to repay indebtedness under the Credit
Agreement. The definitions of certain capitalized terms used herein are set
forth in "Description of the Notes -- Certain Definitions".
THE COMPANY
Interface, Inc. ("Interface" or the "Company") pioneered the introduction
of the carpet tile concept in the United States in 1973, and is now a global
manufacturer and marketer of products for the commercial and institutional
interiors market. The Company is the leader in the modular carpet segment (which
includes six foot roll goods as well as carpet tile) with a 40% worldwide market
share. Through its strategic acquisitions of Bentley Mills, Inc. ("Bentley
Mills") in 1993 and Prince Street Technologies, Ltd. ("Prince Street") in 1994,
the Company entered the broadloom carpet segment with leading product lines for
the high quality, designer-oriented sector of that market. The Company, through
its Guilford of Maine, Inc. ("Guilford") subsidiary, is also the leading U.S.
manufacturer of panel fabrics for use in open plan office furniture systems,
with a market share of approximately 50%. In fiscal 1994, the Company had sales
of $725 million, with carpet sales of $595 million (82% of the total), and
fabric sales of $110 million (15% of the total). The balance of the Company's
sales are from its chemicals and specialty products group.
The Company markets products in over 100 countries around the world under
such well-known brand names as Interface and Heuga in modular carpet; Bentley
Mills and Prince Street in broadloom carpets; Guilford of Maine, Stevens Linen
and Toltec in interior fabrics; and Intersept in chemicals. The Company's
principal geographic markets are North America (57% of 1994 sales), the United
Kingdom and Western Europe (31% of 1994 sales), and Japan and Australia (5% of
1994 sales). The Company is aggressively developing opportunities in Greater
China and Southeast Asia, South America, and Central and Eastern Europe, which
represent significant growth markets for the Company. The Company's worldwide
marketing efforts are facilitated by having 22 manufacturing facilities at
varied locations in North America, Europe, and Australia. Worldwide
manufacturing locations enable the Company to compete effectively with local
producers in its international markets, while also providing advantages (such as
affording international customers more favorable delivery times and freight
costs) over competitors who must import their products into such markets. These
capabilities are an important competitive advantage to Interface in serving the
needs of multinational corporate customers who require uniform products and
services at their various locations around the world.
The Company utilizes an internal marketing and sales force of over 700
experienced personnel (the largest in the commercial floorcovering industry),
stationed at 83 locations in 42 countries, to market the Company's carpet
products and services in person to its customers. Guilford has its own
specialized marketing and sales force (approximately 44 persons) for marketing
the Company's principal interior fabrics products. The Company also utilizes
independent dealers to achieve additional marketing coverage for all its
products. The Company focuses its sales efforts at the design phase of
commercial projects. Interface personnel cultivate relationships both with the
owners and users of the facilities involved in the projects and with specifiers
such as architects, interior designers, engineers and contracting firms who are
directly involved in specifying products and who often make or significantly
influence purchase decisions. The Company emphasizes its product design and
styling capabilities and its ability to provide creative, high value solutions
to its customers' needs. Interface marketing and sales personnel also serve as a
primary technical resource for the Company's customers, both with respect to
product maintenance and service as well as design matters.
4
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INDUSTRY TRENDS AND COMPANY STRENGTHS
In recent years, the Company's revenue has been derived primarily from the
renovation market. The Company believes that the commercial and institutional
market for floorcovering products, which experienced a significant decline in
demand during the early 1990's, has begun to rebound significantly in the United
States primarily due to renovation projects and, to a lesser extent, new
construction. In international markets, overall demand for commercial
floorcovering products is also beginning to increase, especially in certain
countries in the Asia-Pacific region where new construction projects are
increasing, and also in more developed markets where products are being used for
an increasing number of remodeling or refurbishing projects. The Company also
believes that, within the floorcovering market, the demand for modular carpet is
increasing worldwide as more customers recognize its advantages in terms of
greater design options and flexibility, longer average life, and ease of access
to sub-floor wiring.
Management believes that the Company benefits from several significant
competitive advantages, which will assist it in sustaining and enhancing its
position as a market leader. The Company's principal strengths include: (i) an
excellent reputation for quality, service and reliability; (ii) strong,
well-known brand names; (iii) efficient and low-cost manufacturing operations in
several locations around the world; (iv) strong customer and architectural and
design community relationships; (v) award-winning and innovative product design
and development capabilities; and (vi) state-of-the-art production equipment and
technologically advanced systems. These strengths coupled with the Company's
broad and diversified mix of product lines enable Interface to take a "total
interior solution" approach to serving the needs of its customers around the
world and position the Company to benefit from the recent industry developments.
BUSINESS STRATEGY AND PRINCIPAL INITIATIVES
Interface's long-standing corporate strategy has been to diversify and
integrate worldwide. The Company seeks to diversify by developing internally or
acquiring related product lines and businesses in the commercial interiors
field; and to integrate by identifying and developing synergies and operating
efficiencies among the Company's diverse products and global businesses. In
continuing that strategy, the Company is pursuing the following principal
initiatives:
Enhancement of Design Capabilities. In January 1994, the Company engaged
the leading design firm Roman Oakey, Inc. (under an exclusive consulting
contract) to augment the Company's internal research, development and design
staff. The Company introduced 57 new carpet designs in the U.S. in 1994 (the
largest number in one year in the Company's history), and received eight (out of
a possible 12) U.S. carpet industry design awards bestowed by the International
Interior Design Association, including all five awards in the carpet tile
division. Roman Oakey's design services are being extended to the Company's
international carpet operations and an affiliate of that firm has been engaged
to provide similar design services to the Company's interior fabrics business
(which already has significant capabilities in this area).
Globalization of "Mass Customization" Production Strategy. The goal of
"mass customization" is to be able to respond to customers' requirements for
custom or highly styled products by quickly and efficiently producing both
custom samples and the ultimate products, and to determine proven "winners" that
can be manufactured for inventory for broader distribution. Mass customization
was introduced to the Company's U.S. carpet tile business in 1994, and its
principal components included (i) developing a simplified but versatile yarn
utilization system, (ii) investing in highly efficient, state-of-the-art tufting
and custom sampling equipment, and (iii) utilizing innovative design and styling
to create products. The initiative has resulted in substantial operating
improvements in the U.S. carpet tile business in 1995, including improved
margins and reduced inventory levels of both raw materials and standard
products. The Company is extending the mass customization production initiative
to its floorcovering operations in Europe and Australia.
Diversification, Expansion and Increased Efficiency in the Interior Fabrics
Business. In response to a shift in demand towards lighter weight, less
expensive fabrics by OEM panel fabric customers, the Company initiated a
significant capital investment program at Guilford to consolidate and modernize
its yarn manufacturing operations. This program should result in significant
efficiencies and cost savings, which are expected to permit recovery of that
capital investment in approximately two years, as well as new product
5
<PAGE> 8
capability. Interface's strategic acquisition of Toltec Fabrics in June 1995,
and expected acquisition of the Intek division of Springs Industries, provide
further diversification into upholstery and seating fabrics; penetrate certain
niche markets where Guilford has not previously been active; and provide
operating efficiencies as a number of manufacturing processes currently
outsourced by these businesses are brought in-house. Interface will also
continue to devote resources to Guilford's growing export business.
War-on-Waste and EcoSense Programs. In January 1995, the Company initiated
a worldwide "war-on-waste" program. Applying a zero-based definition of waste
(broadly defined as any measurable cost that goes into manufacturing a product
but does not result in identifiable value to the customer), the Company has
identified $70 million of such waste. While a major part of such waste cannot be
eliminated using currently available technologies and production systems,
management believes the Company can eliminate approximately $35 million of such
waste over time. The Company has realized approximately $6 million in savings
(through eliminating such waste) during the first nine months of fiscal 1995.
The war-on-waste program represents a first step in the Company's broader
EcoSense(TM) initiative to achieve greater resource efficiency.
Increased Integration of Marketing Efforts and Operational
Consolidations -- "Total Interior Solutions". The Company's objective is to use
the complementary nature of its product lines to implement a "total interior
solution" approach to serving the diverse needs of customers worldwide.
Marketing and sales personnel are being trained in cross-marketing techniques,
and the Company is implementing a marketing communications network to link its
worldwide marketing and sales force. As a related initiative, the Company has
consolidated management responsibility for certain key operational areas, which
has increased global cooperation and coordination in product planning and
production as well as marketing activities.
Geographic Expansion of Manufacturing in Developing Markets. A key element
of the Company's worldwide focus is having manufacturing (as well as marketing
and service) capabilities in important locations around the world. The Company
is presently constructing a carpet tile manufacturing facility in Thailand,
which is expected to be operational in early 1996, and it is exploring
establishment of manufacturing operations in Greater China. The Company will
consider additional locations for manufacturing operations in other parts of the
world as necessary to meet the needs of its existing and future customers.
------------------
Interface was incorporated in 1973 as a Georgia corporation. The Company's
principal executive offices are located at 2859 Paces Ferry Road, Suite 2000,
Atlanta, Georgia 30339, where its telephone number is (770) 437-6800.
6
<PAGE> 9
THE EXCHANGE OFFER
The Exchange Notes......... The form and terms of the Exchange Notes are
identical in all material respects to the terms of
the Outstanding Notes for which they may be
exchanged pursuant to the Exchange Offer, except
for certain transfer restrictions and registration
rights relating to the Outstanding Notes and except
for certain interest provisions relating to such
registration rights described below under
"Description of the Exchange Notes".
The Exchange Offer......... The Company is offering to exchange up to
$125,000,000 aggregate principal amount of 9 1/2%
Senior Subordinated Notes due 2005, Series B (the
"Exchange Notes") for up to $125,000,000 aggregate
principal amount of its outstanding 9 1/2% Senior
Subordinated Notes due 2005, Series A (the
"Outstanding Notes"). Outstanding Notes may be
exchanged only in integral multiples of $1,000.
Expiration Date; Withdrawal
of Tender................ The Exchange Offer will expire at 5:00 p.m.,
Atlanta, Georgia time, on, , 1996,
or such later date and time to which it is extended
by the Company. The tender of Outstanding Notes
pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date. Any
Outstanding Notes not accepted for exchange for any
reason will be returned without expense to the
tendering holder thereof as promptly as practicable
after the expiration or termination of the Exchange
Offer.
Certain Conditions to the
Exchange Offer........... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. See
"The Exchange Offer -- Certain Conditions to the
Exchange Offer".
Procedures for Tendering
Outstanding Notes........ Each holder of Outstanding Notes wishing to accept
the Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with such Outstanding Notes and any other required
documentation to the Exchange Agent (as defined) at
the address set forth herein. By executing the
Letter of Transmittal, each holder will represent
to the Company that, among other things, (i) any
Exchange Notes to be received by it will be
acquired in the ordinary course of its business,
(ii) it has no arrangement with any person to
participate in the distribution of the Exchange
Notes and (iii) it is not an "affiliate", as
defined in Rule 405 of the Securities Act, of the
Company or, if it is an affiliate, it will comply
with the registration and prospectus delivery
requirements of the Securities Act to the extent
applicable.
Interest on the Exchange
Notes.................... The Exchange Notes will bear interest at the rate
of 9 1/2% per annum, payable semi-annually on May
15 and November 15, commencing May 15, 1996, to
holders of record on the immediately preceding May
1 and November 1, respectively. Holders of the
Exchange Notes will receive interest on May 15,
1996 from the date of initial issuance of the
Exchange Notes, plus an amount equal to the accrued
interest on the Outstanding Notes from the later of
(i) the most recent date to which interest has been
paid thereon and (ii) the date of initial issuance
of the
7
<PAGE> 10
Outstanding Notes, to the date of exchange thereof.
Interest on the Outstanding Notes accepted for
exchange will cease to accrue upon issuance of the
Exchange Notes.
Special Procedures for
Beneficial Owners........ Any beneficial owner whose Outstanding Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender such Outstanding Notes in the
Exchange Offer should contact such registered
holder promptly and instruct such registered holder
to tender on such beneficial owner's behalf. If
such beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to
completing and executing the Letter of Transmittal
and delivering its Outstanding Notes, either make
appropriate arrangements to register ownership of
the Outstanding Notes in such owner's name or
obtain a properly completed bond power from the
registered holder. The transfer of registered
ownership may take considerable time and may not be
able to be completed prior to the Expiration Date.
Guaranteed Delivery
Procedures............... Holders of Notes who wish to tender their
Outstanding Notes and whose Outstanding Notes are
not immediately available or who cannot deliver
their Outstanding Notes, the Letter of Transmittal
or any other documents required by the Letter of
Transmittal to the Exchange Agent, prior to the
Expiration Date, must tender their Outstanding
Notes according to the guaranteed delivery
procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures".
Registration
Requirements............. The Company has agreed to use its best efforts to
consummate the Exchange Offer to offer holders of
the Outstanding Notes an opportunity to exchange
their Outstanding Notes for the Exchange Notes
which will be issued without legends restricting
the transfer thereof. If applicable interpretations
of the staff of the Commission do not permit the
Company to effect the Exchange Offer, or in certain
other circumstances, the Company has agreed to file
a shelf registration statement (the "Shelf
Registration Statement") covering resales of the
Outstanding Notes and to use its best efforts to
cause the Shelf Registration Statement to be
declared effective under the Securities Act and,
subject to certain exceptions, keep the Shelf
Registration Statement effective until three years
after the effective date thereof.
Certain Federal Income Tax
Considerations........... For a discussion of certain federal income tax
considerations relating to the Exchange Notes, see
"Certain Federal Income Tax Consequences".
Use of Proceeds............ There will be no proceeds to the Company from the
exchange of Notes pursuant to the Exchange Offer.
Exchange Agent............. First Union National Bank of Georgia is the
Exchange Agent. The address and telephone number of
the Exchange Agent are set forth in "The Exchange
Offer -- Exchange Agent".
8
<PAGE> 11
SUMMARY DESCRIPTION OF THE EXCHANGE NOTES
Securities................. $125,000,000 principal amount of 9 1/2% Senior
Subordinated Notes due 2005, Series B.
Maturity Date.............. November 15, 2005.
Interest Payment Dates..... May 15 and November 15, commencing May 15, 1996.
Ranking.................... The Notes are unsecured senior subordinated
obligations of the Company, and subordinate to all
existing and future Senior Indebtedness of the
Company, including Indebtedness pursuant to the
Company's principal bank credit facility (the
"Credit Agreement") or any replacement bank credit
facility. As of October 1, 1995, the aggregate
amount of Senior Indebtedness of the Company that
would have ranked senior to the Notes was
approximately $192.7 million, adjusted for
redemption. The Notes are also effectively
subordinated to all existing and future
liabilities, including trade payables, of the
Company's subsidiaries which are not Guarantors,
which, as of October 1, 1995, totaled approximately
$52.4 million (excluding intercompany indebtedness
and Senior Indebtedness).
Subordinated Guarantees.... The Notes are guaranteed on a joint and several and
senior subordinated basis by the Company's
principal domestic subsidiaries. The Guarantees are
subordinate to all existing and future Guarantor
Senior Indebtedness, including indebtedness
pursuant to the Credit Agreement, which is also
guaranteed by the Guarantors. As of October 1, the
aggregate amount of Guarantor Senior Indebtedness
that would have ranked senior to the Guarantees
(including the Credit Agreement) was approximately
$192.7 million, adjusted for redemption.
Optional Redemption........ The Notes are redeemable for cash at any time on
and after November 15, 2000 at the Company's
option, in whole or in part, initially at a
redemption price equal to 104.750% of the principal
amount, declining to 100% of the principal amount
on November 15, 2003, plus accrued interest thereon
to the date fixed for redemption.
Change of Control.......... In the event of a Change of Control (as defined
herein), the Company will make an offer to
repurchase the Notes at a purchase price equal to
101% of the principal amount thereof, plus accrued
interest to the repurchase date. The Company's
ability to repurchase the Notes following a Change
of Control is dependent upon the Company having
sufficient funds and may be limited by the terms of
the Company's Senior Indebtedness or the
subordination provisions of the indenture governing
the Notes (the "Indenture"). There is no assurance
that the Company will be able to repurchase the
Notes upon the occurrence of a Change of Control.
The term "Change of Control" is limited to certain
specified transactions and may not include other
events that might adversely affect the financial
condition of the Company or result in a downgrade
of the credit rating of the Notes.
Certain Covenants.......... The Indenture will contain covenants, including,
but not limited to, covenants with respect to
limitations on the following matters: (i) the
incurrence of additional indebtedness, (ii)
restricted payments, (iii) the creation of liens,
(iv) sales of assets and subsidiary stock, (v)
transactions with affiliates, (vi) payment
restrictions affecting sub-
9
<PAGE> 12
sidiaries, (vii) the issuance of other senior
subordinated indebtedness, (viii) guarantees by
subsidiaries and (ix) mergers and consolidations.
During any time that the ratings assigned to the
Notes are no less than BBB- and Baa3, the covenants
described under (i), (ii), (iv), (vi) and (vii)
above will be suspended. See "Description of the
Exchange Notes -- Certain Covenants".
RISK FACTORS
See "Risk Factors", below, for a discussion of certain factors that should
be considered by holders of Outstanding Notes prior to tendering Outstanding
Notes in the Exchange Offer.
10
<PAGE> 13
SUMMARY CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following summary consolidated financial data of the Company for the
fiscal years ended January 3, 1993, January 2, 1994 and January 1, 1995 are
derived from the consolidated financial statements of the Company that have been
audited by the Company's independent certified public accountants. The following
summary consolidated financial data of the Company as of October 1, 1995 and for
the nine months ended October 2, 1994 and October 1, 1995 are derived from the
unaudited consolidated financial statements of the Company, which, in the
opinion of the Company's management, reflect all adjustments necessary for a
fair presentation of the results for the unaudited periods. The summary
consolidated financial data should be read in conjunction with the consolidated
financial statements and other financial information included in this
Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
------------------------------------ -----------------------
JANUARY 3, JANUARY 2, JANUARY 1, OCTOBER 2, OCTOBER 1,
1993 1994 1995 1994 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................................... $594,078 $625,067 $725,283 $527,343 $597,414
Gross profit........................................ 189,948 197,746 221,185 159,702 184,778
Selling, general and administrative expenses........ 149,509 151,576 170,375 123,559 139,613
Operating income.................................... 40,439 46,170 50,810 36,143 45,165
Interest expense.................................... 21,894 22,840 24,094 17,888 21,194
Preferred dividends................................. - 913 1,750 1,313 1,312
Net income to common shareholders................... 12,250 12,936 14,706 9,457 13,106
OTHER DATA:
EBITDA(1)........................................... $ 62,712 $ 68,656 $ 77,987 $ 56,762 $ 65,735
Depreciation and amortization....................... 22,257 24,512 28,180 22,047 21,285
Capital expenditures................................ 14,476 20,639 21,315 14,071 26,186
Ratio of EBITDA to interest expense................. 2.86x 3.01x 3.24x 3.17x 3.10x
Ratio of earnings to fixed charges(2)............... 1.73x 1.75x 1.80x 1.71x 1.86x
ADJUSTED FOR REDEMPTION(3):
Interest expense.................................... - - $ 26,307 - $ 22,854
Ratio of EBITDA to interest expense................. - - 2.96x - 2.88x
Ratio of earnings to fixed charges.................. - - 1.75x - 1.81x
</TABLE>
<TABLE>
<CAPTION>
AS OF OCTOBER 1, 1995
---------------------------
ADJUSTED FOR
ACTUAL REDEMPTION(3)
-------- ----------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital..................................................... $167,818 $170,176
Total assets........................................................ 705,752 706,652
Total long-term debt................................................ 311,904 316,132
Redeemable preferred stock.......................................... 25,000 25,000
Total common shareholders' equity................................... 237,098 236,128
Total capitalization................................................ 574,002 577,260
</TABLE>
- ---------------
(1) EBITDA means earnings before interest, income taxes, depreciation and
amortization (excluding certain non-recurring charges and extraordinary
items). EBITDA has been included solely to facilitate the consideration of
the covenants in the Indenture that are based, in part, on EBITDA. In
addition, the Company understands that it is used by certain investors as
one measure of the Company's historical ability to service its debt. EBITDA
is not intended to represent cash flow from operations as defined by
generally accepted accounting principles.
(2) The ratio of earnings to fixed charges is determined by dividing the sum of
earnings before extraordinary items, interest expense, taxes on income, and
a portion of rent expense representative of the interest component by the
sum of interest expense and the portion of rent expense representative of
the interest component.
(3) See the definition of adjusted for redemption on page 4.
11
<PAGE> 14
RISK FACTORS
In addition to the other information in this Prospectus, holders of
Outstanding Notes should carefully consider the following factors prior to
tendering Outstanding Notes in the Exchange Offer.
SUBSTANTIAL INDEBTEDNESS
The Company's indebtedness is substantial in relation to its shareholders'
equity. As of October 1, 1995, the Company's total long-term debt, net of
current portion, totaled $311.9 million or 54.3% of its total capitalization. As
of October 1, 1995, the Company's total long-term debt, net of current portion,
would have accounted for 54.8% of its total capitalization, as adjusted for
redemption. In addition, subject to certain covenants and financial tests set
forth in the Credit Agreement and the Indenture, the Company may incur debt in
the future which may rank senior to or pari passu with the Notes. See
"Description of Certain Indebtedness and Other Obligations", "Description of the
Exchange Notes" and "Capitalization".
The Company's indebtedness will have several important consequences for the
holders of the Notes, including but not limited to the following: (i) a
substantial portion of the Company's cash flow from operations must be dedicated
to debt service requirements on its indebtedness and will not be available for
other purposes; (ii) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions, or to refinance
the Notes or for general corporate purposes may be impaired; (iii) the Company's
leverage may increase the effects of economic downturns on it and limit its
ability to withstand competitive pressures; and (iv) the Company's ability to
capitalize on significant business opportunities may be limited.
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Credit Agreement and the Indenture restrict the ability of the Company
and its subsidiaries to, among other things, incur additional indebtedness, pay
dividends or make certain other restricted payments or investments, consummate
certain asset sales, enter into certain transactions with affiliates, incur
liens, or merge or consolidate with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of their assets.
The Credit Agreement also requires the Company to meet certain financial tests
and comply with certain other reporting, affirmative and negative covenants. In
an event of default under the Indenture or the Credit Agreement, the lenders
thereunder could elect to declare all amounts borrowed, together with accrued
interest, to be immediately due and payable and the lenders under the Credit
Agreement could terminate all commitments thereunder. If any such indebtedness
were to be accelerated, there can be no assurance that the assets of the Company
would be sufficient to repay in full such indebtedness and the other
indebtedness of the Company. The indebtedness under the Credit Agreement is
Senior Indebtedness and upon any such acceleration would be entitled to
repayment before any repayment of the Notes. See "Description of the Exchange
Notes -- Certain Covenants" and "Description of Certain Indebtedness and Other
Obligations".
SUBORDINATION OF THE NOTES; HOLDING COMPANY STRUCTURE
The Notes are subordinated to all existing and future Senior Indebtedness
of the Company. As of October 1, 1995, the Company's Senior Indebtedness,
adjusted for redemption, was approximately $192.7 million. The Guarantees are
subordinated to Senior Indebtedness of the Guarantors, which as of October 1,
1995, adjusted for redemption, was approximately $192.7 million. In addition,
the operations of the Company are conducted through its subsidiaries and,
therefore, the Notes are also effectively subordinated to all Indebtedness and
other liabilities and commitments of the Company's subsidiaries, other than
subsidiaries which are Guarantors. As of October 1, 1995, the aggregate amount
of Indebtedness and obligations of the Company's non-Guarantor subsidiaries
(excluding intercompany indebtedness and Senior Indebtedness) that would have
effectively ranked senior to the Notes was approximately $52.4 million.
Any right of the holders of the Notes to participate in the assets of a
subsidiary of the Company upon any liquidation or reorganization of such
subsidiary will be subject, in the case of a non-Guarantor Subsidiary, to the
prior claims of all such subsidiary's creditors, and, in the case of a
Guarantor, to the prior claim of such Subsidiary's senior creditors, including
the lenders under the Credit Agreement. In addition, 100% of the
12
<PAGE> 15
capital stock of the Guarantors and up to 66% of the capital stock of the
Company's principal foreign subsidiaries are pledged as collateral to the
lenders under the Credit Agreement. See "Description of Certain Indebtedness and
Other Obligations". Accordingly, upon any liquidation or reorganization of the
Company, the holders of the Notes will have no claim against such capital stock
until the lenders under the Credit Agreement are paid in full.
COMPETITION
The commercial floorcoverings industry is highly competitive. The Company
competes, on a global basis, in the sale of its modular and broadloom carpet
with other carpet manufacturers and manufacturers of vinyl and other types of
floorcovering. Although the industry recently has experienced significant
consolidation, a large number of manufacturers remain. A number of domestic and
foreign competitors manufacture modular carpet as one segment of their business,
and certain of these competitors have financial resources in excess of
the Company's. See "Business -- Modular and Broadloom Carpet -- Competition".
The Company competes in the interior panel fabrics market on the basis of
product design, quality, service, reliability and price. The Company's products
for the contract fabric markets also include a variety of non-panel fabrics,
including upholstery, cubicle curtains, wall coverings, seat coverings, ceiling
fabrics and window treatments. The competition in these markets is highly
fragmented and includes both large, diversified textile companies (several of
which have greater financial resources than the Company), as well as smaller,
non-integrated specialty manufacturers that may have competitive strengths in
certain niche market areas. See "Business -- Interior Fabrics -- Competition".
CYCLICAL NATURE OF INDUSTRY
Sales of the Company's principal products are related to the construction
and renovation of commercial and institutional buildings. Such activity is
cyclical and can be affected by the strength of a country's general economy,
prevailing interest rates and other factors that lead to cost control measures
by businesses and other users of commercial or institutional space. The effects
of such cyclicality upon the new construction sector of the market tends to be
more pronounced than its effects upon the renovation sector. Although the
predominant portion of the Company's sales are generated from the renovation
sector, any such adverse cycle, in either sector of the market, would lessen the
overall demand for commercial interiors products, which could adversely affect
the Company's growth.
RELIANCE ON KEY PERSONNEL
The Company believes that its continued success will depend to a
significant extent upon the efforts and abilities of its senior management
executives, particularly Ray C. Anderson, Chairman of the Board, President and
Chief Executive Officer; Charles R. Eitel, Executive Vice President of the
Company and President and Chief Executive Officer of the Company's
Floorcoverings Group; and Brian L. DeMoura, Senior Vice President of the Company
and President and Chief Executive Officer of the Company's Interior Fabrics
Group. In addition, the Company relies significantly on the leadership of its
design staff by David Oakey of the design firm Roman Oakey, Inc., which provides
product design/production engineering services to the Company under a consulting
contract which expires at the end of 1998. The loss of all or some of such
personnel could have an adverse impact on the Company.
RISKS OF FOREIGN OPERATIONS
The Company has substantial international operations. In fiscal 1994,
approximately 45% of the Company's revenues and 40% of the Company's production
were outside the United States, primarily in Europe, and the Company's corporate
strategy includes the expansion of its international business on a worldwide
basis. As a result, the Company's operations are subject to various political,
economic and other uncertainties, including risks of restrictive taxation
policies, foreign exchange restrictions, changing political conditions and
governmental regulations. The Company also receives a substantial portion of its
revenues in currencies other than U.S. Dollars, which makes it subject to the
risks inherent in currency translations. Although the Company's ability to
manufacture and ship products from facilities in several foreign countries
reduces the risks of foreign currency fluctuations it might otherwise
experience, and the Company also
13
<PAGE> 16
engages from time to time in hedging programs intended to further reduce those
risks, the Company's financial results remain subject to foreign currency
translation risks. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources".
RELIANCE ON PETROLEUM-BASED RAW MATERIALS; RELIANCE ON PRINCIPAL SUPPLIER
Petroleum-based products comprise the predominant portion of the cost of
raw materials used by the Company in manufacturing. While the Company generally
attempts to match cost increases with corresponding price increases, large
increases in the cost of such petroleum-based raw materials could adversely
affect the Company if the Company were unable to pass through to customers
increases in raw material costs. E. I. DuPont de Nemours and Company ("DuPont")
currently supplies a significant percentage of the Company's requirements for
synthetic fiber, the principal raw material used in the Company's carpet
products. While the Company believes that there are adequate alternative sources
of supply from which it could fulfill its synthetic fiber requirements, the
unanticipated termination of the supply arrangement with DuPont or a prolonged
interruption in shipments from DuPont could have a material adverse effect on
the Company because of the cost and delay associated with shifting more business
to another supplier or with waiting for the end of the interruption.
CONTROL OF ELECTION OF MAJORITY OF BOARD
The Company's Chairman and Chief Executive Officer, Ray C. Anderson,
beneficially owns approximately 54% of the Company's outstanding Class B Common
Stock, and has entered into a voting agreement with certain other holders of
Class B Common Stock pursuant to which such other holders have irrevocably
appointed Mr. Anderson their proxy and attorney-in-fact to vote their shares.
The holders of the Class B Common Stock are entitled, as a class, to elect a
majority of the Board of Directors of the Company, which means that Mr. Anderson
has sufficient voting power to elect a majority of the Board of Directors. The
holders of Class B Common Stock generally vote together as a single class with
the holders of the Class A Common Stock on all other matters submitted to the
shareholders for a vote, however, and Mr. Anderson's beneficial ownership of the
outstanding Class A and Class B Common Stock combined is less than 10%. See
"Security Ownership of Management and Principal Holders".
FRAUDULENT CONVEYANCE CONSIDERATIONS
Under applicable provisions of the federal bankruptcy law or comparable
provisions of state fraudulent transfer laws, if any Guarantor, at the time it
incurs a Guarantee, (a)(i) was or is insolvent or rendered insolvent by reason
of such incurrence, (ii) was or is engaged in a business or transaction for
which the assets remaining with such Guarantor constituted unreasonably small
capital or (iii) intended or intends to incur, or believed or believes that it
would incur, debts beyond its ability to pay such debts as they mature and (b)
received or receives less than reasonably equivalent value or fair
consideration, the obligations of such Guarantor under its Guarantee could be
avoided, or claims in respect of such Guarantee could be subordinated to all
other debts of such Guarantor. Among other things, a legal challenge of a
Guarantee on fraudulent conveyance grounds may focus on the benefits, if any,
realized by such Guarantor as a result of the issuance by the Company of the
Notes. To the extent that any Guarantee were a fraudulent conveyance or held
unenforceable for any other reason, the holders of the Notes would cease to have
any claim in respect of a Guarantor and would be solely creditors of the Company
and any other Guarantors whose Guarantees were not avoided or held
unenforceable.
Each Guarantor will agree, jointly and severally with the other Guarantors,
to contribute to the obligations of any Guarantor under a Guarantee of the
Notes. Further, the Guarantee of each Guarantor will provide that it is limited
to an amount that would not render the Guarantor thereunder insolvent. The
Company believes that the Guarantors will receive equivalent value at the time
the indebtedness is incurred under the Guarantees. In addition, the Company
believes that none of the Guarantors will be, at the time of or as a result of
the issuance of the Guarantees, insolvent, that none of the Guarantors is or
will be engaged in a business or transaction for which its remaining assets
constitute unreasonably small capital and that none of the Guarantors will have
intended or will intend to incur debts beyond its ability to pay such debts as
they mature. Since each of the components of the question of whether a Guarantee
is a fraudulent conveyance is
14
<PAGE> 17
inherently fact based and fact specific, however, there can be no assurance that
a court passing on such questions would agree with the Company.
CONSEQUENCES OF FAILURE TO EXCHANGE; POSSIBLE ADVERSE EFFECT ON TRADING MARKET
FOR OUTSTANDING NOTES
Holders of Outstanding Notes who do not exchange their Outstanding Notes
for Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such Notes as set forth in the legend thereon as
a consequence of the issuance of the Outstanding Notes pursuant to exemptions
from, or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Outstanding
Notes may not be offered or sold unless registered under the Securities Act and
applicable state laws, or pursuant to an exemption therefrom. Subject to the
obligation by the Company to file a Shelf Registration Statement covering
resales of Outstanding Notes in certain circumstances, the Company does not
intend to register the Outstanding Notes under the Securities Act and, after
consummation of the Exchange Offer, will not be obligated to do so. In addition,
any holders of Outstanding Notes who tender in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes may be deemed
to have received restricted securities and, if so, will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Additionally, as a result of the
Exchange Offer, it is expected that a substantial decrease in the aggregate
principal amount of Outstanding Notes outstanding will occur. As a result, it is
unlikely that a liquid trading market will exist for the Outstanding Notes at
any time. This lack of liquidity will make transactions more difficult and may
reduce the trading price of the Outstanding Notes. See "The Exchange Offer" and
"Description of the Exchange Notes -- Registration Rights Agreement; Penalty
Interest".
ABSENCE OF PUBLIC MARKET
There is no existing market for the Notes and there can be no assurance as
to the liquidity of any market that may develop for the Notes, the ability of
holders to sell the Notes, or the price at which holders would be able to sell
the Notes. Future trading prices of the Notes will depend on many factors,
including, among other things, prevailing interest rates, the Company's
operating results and the market for similar securities. Historically, the
market for securities similar to the Notes has been subject to disruptions that
have caused substantial volatility in the prices of such securities. There can
be no assurance that any market for the Notes, if such market develops, will not
be subject to similar disruptions. Certain of the Initial Purchasers have
advised the Company that they currently intend to make a market in the Notes
offered hereby; however, the Initial Purchasers are not obligated to do so and
any market making may be discontinued at any time without notice. The
Outstanding Notes are eligible for trading in the Private Offerings, Resale and
Trading through Automated Linkages (PORTAL) market. The Exchange Notes will
constitute a new issue of securities with no established trading market. The
Company does not intend to list the Exchange Notes on any national securities
exchange or to seek approval for quotation through any automated quotation
system. Accordingly, no assurance can be given that an active public or other
market will develop for the Exchange Notes or as to the liquidity of the trading
market for the Exchange Notes. If a trading market does not develop, holders of
the Exchange Notes may experience difficulty in reselling the Exchange Notes or
may be unable to sell them.
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain obligations of the
Company under the Registration Rights Agreement. The Company will not receive
any proceeds from the issuance of the Exchange Notes offered hereby. In
consideration for issuing the Exchange Notes as contemplated in this Prospectus,
the Company will receive, in exchange, Outstanding Notes in like principal
amount. The form and terms of the Exchange Notes are identical in all material
respects to the form and terms of the Outstanding Notes, except as otherwise
described herein under "The Exchange Offer -- Terms of the Exchange Offer". The
Outstanding Notes surrendered in exchange for the Exchange Notes will be retired
and cancelled and cannot be reissued. Accordingly, issuance of the Exchange
Notes will not result in any increase in the outstanding debt of the Company.
15
<PAGE> 18
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
October 1, 1995 as reported in the unaudited consolidated financial statements
of the Company, as adjusted for redemption (defined on page 4). This table
should be read in conjunction with the Company's consolidated financial
statements, related notes and other financial information included in this
Prospectus.
<TABLE>
<CAPTION>
AS OF OCTOBER 1, 1995
---------------------------
ADJUSTED FOR
ACTUAL REDEMPTION
-------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents........................................... $ 3,034 $ 3,034
Escrowed and restricted funds....................................... 2,413 2,413
-------- ------------
$ 5,447 $ 5,447
======== =========
Short-term debt:
Current maturities of long-term debt.............................. $ 1,550 $ 1,550
======== =========
Long-term debt:
Senior revolving credit agreements................................ $156,379 $139,532
Senior term loans................................................. 50,000 50,000
Convertible subordinated debentures............................... 103,925 0
Senior subordinated notes......................................... 0 125,000
Other long-term debt.............................................. 1,600 1,600
-------- ------------
Total long-term debt...................................... 311,904 316,132
-------- ------------
Redeemable preferred stock.......................................... 25,000 25,000
Common shareholders' equity:
Class A Common Stock: $.10 par value; 40,000,000 shares
authorized; 18,874,659 shares issued(1) actual and 19,019,693
shares issued as adjusted for redemption....................... 1,887(2) 1,902(2)
Class B Common Stock: $.10 par value; 40,000,000 shares
authorized; 2,994,694 shares outstanding....................... 300 300
Additional paid-in capital........................................ 94,186(2) 96,553(2)
Retained earnings................................................. 146,160(3) 142,808(3)
Foreign currency translation...................................... 12,311 12,311
Treasury stock, 3,600,000 Class A shares, at cost................. (17,746) (17,746)
-------- ------------
Total common shareholders' equity......................... 237,098 236,128
-------- ------------
Total capitalization................................................ $574,002 $577,260
======== =========
</TABLE>
- ---------------
(1) Includes 3,600,000 Class A shares, deemed to be treasury stock.
(2) The increase in Class A Common Stock reflects the conversion of a portion of
the Convertible Debentures into 145,034 shares of Class A Common Stock. The
increase in additional paid-in capital reflects the recording of the
effects of such conversion net of approximately $70,000 of deferred
financing costs related to the Convertible Debentures.
(3) Reflects the write-off of deferred financing costs of approximately $3.0
million and the redemption premium costs of approximately $2.4 million
related to the redemption of the Convertible Debentures. These amounts will
be reported as an extraordinary loss net of the effects of income taxes.
16
<PAGE> 19
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Outstanding Notes were sold by the Company on November 21, 1995 to the
Initial Purchasers, who sold the Outstanding Notes to certain institutional
investors in reliance on Rule 144A and Regulation D promulgated by the
Commission under the Securities Act. In connection with the sale of the
Outstanding Notes, the Company, the Guarantors and the Initial Purchasers
entered into the Registration Rights Agreement, pursuant to which the Company
agreed (i) to file a registration statement with respect to an offer to exchange
the Outstanding Notes for senior subordinated debt securities of the Company
with terms substantially identical to the Outstanding Notes (except that the
Exchange Notes will not contain terms with respect to transfer restrictions)
within 30 days after the date of original issuance of the Outstanding Notes and
(ii) to use best efforts to cause such registration statement to become
effective under the Securities Act within 75 days after such issue date. If
applicable law or interpretations of the staff of the Commission do not permit
the Company to file the registration statement containing this Prospectus or to
effect the Exchange Offer, or if certain holders of the Outstanding Notes notify
the Company that they are not permitted to participate in, or would not receive
freely tradable Exchange Notes pursuant to, the Exchange Offer, the Company will
use its best efforts to cause to become effective the Shelf Registration
Statement with respect to the resale of the Outstanding Notes and to keep the
Shelf Registration Statement effective until three years after the effective
date thereof. The interest rate on the Outstanding Notes is subject to increase
under certain circumstances if the Company is not in compliance with its
obligations under the Registration Rights Agreement. See "Description of the
Exchange Notes -- Registration Rights Agreement; Penalty Interest". Unless the
context requires otherwise, the term "holder" with respect to the Exchange Offer
means the registered holder of the Outstanding Notes or any other person who has
obtained a properly completed bond power from the registered holder.
Each holder of the Outstanding Notes who wishes to exchange such
Outstanding Notes for Exchange Notes in the Exchange Offer will be required to
make certain representations, including representations that (i) any Exchange
Notes to be received by it will be acquired in the ordinary course of its
business, (ii) it has no arrangement with any person to participate in the
distribution of the Exchange Notes and (iii) it is not an "affiliate", as
defined in Rule 405 of the Securities Act, of the Company or, if it is an
affiliate, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. See "Description of
the Exchange Notes -- Registration Rights Agreement; Penalty Interest".
RESALE OF EXCHANGE NOTES
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third-parties, the Company believes that, except as
described below, Exchange Notes issued pursuant to the Exchange Offer in
exchange for Outstanding Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than a holder which is an "affiliate"
of the Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holder's business and such holder does not intend to participate
and has no arrangement or understanding with any person to participate in the
distribution of such Exchange Notes. Any holder who tenders in the Exchange
Offer with the intention or for the purpose of participating in a distribution
of the Exchange Notes cannot rely on such interpretation by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. Unless an exemption from registration is otherwise available, any
such resale transaction should be covered by an effective registration statement
containing the selling security holders information required by Item 507 of
Regulation S-K under the Securities Act.
This Prospectus may be used for an offer to resell, resale or other
retransfer of Exchange Notes only as specifically set forth herein. Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Outstanding Notes, where such Outstanding Notes were acquired by such
broker-dealer as a result of
17
<PAGE> 20
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept for exchange any and
all Outstanding Notes properly tendered and not withdrawn prior to 5:00 p.m.,
Atlanta, Georgia time, on the Expiration Date. The Company will issue $1,000
principal amount of Exchange Notes in exchange for each $1,000 principal amount
of Outstanding Notes surrendered pursuant to the Exchange Offer. Outstanding
Notes may be tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes will be the same as the form and
terms of the Outstanding Notes, except that the Exchange Notes will be
registered under the Securities Act and hence will not bear legends restricting
the transfer thereof. The Exchange Notes will evidence the same debt as the
Outstanding Notes. The Exchange Notes will be issued under and entitled to the
benefits of the Indenture, which also authorized the issuance of the Outstanding
Notes, such that both series will be treated as a single class of debt
securities under the Indenture.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Outstanding Notes being tendered for exchange. Holders of Outstanding
Notes do not have any appraisal or dissenters' rights in connection with the
Exchange Offer.
As of the date of this Prospectus, $125,000,000 aggregate principal amount
of the Outstanding Notes are outstanding. This Prospectus, together with the
Letter of Transmittal, is being sent to all registered holders of Outstanding
Notes. There will be no fixed record date for determining registered holders of
Outstanding Notes entitled to participate in the Exchange Offer.
The Company intends to conduct the Exchange Offer in accordance with the
provisions of the Registration Rights Agreement and the applicable requirements
of the Exchange Act, and the rules and regulations of the Commission thereunder.
Outstanding Notes which are not tendered for exchange in the Exchange Offer will
remain outstanding and continue to accrue interest and will be entitled to the
rights and benefits such holders have under the Indenture and the Registration
Rights Agreement.
The Company shall be deemed to have accepted for exchange properly tendered
Notes when, as and if the Company shall have given oral or written notice
thereof to the Exchange Agent and complied with the applicable provisions of the
Registration Rights Agreement. The Exchange Agent will act as agent for the
tendering holders for the purposes of receiving the Exchange Notes from the
Company. The Company expressly reserves the right to amend or terminate the
Exchange Offer, and not to accept for exchange any Outstanding Notes not
theretofore accepted for exchange, upon the occurrence of any of the conditions
specified below under "-- Certain Conditions to the Exchange Offer".
Holders who tender Outstanding Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of
Outstanding Notes pursuant to the Exchange Offer. The Company will pay all
charges and expenses, other than certain applicable taxes described below, in
connection with the Exchange Offer. See "The Exchange Offer -- Fees and
Expenses".
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., Atlanta, Georgia time on
, 1996, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders of Outstanding Notes an announcement thereof, each prior to 9:00 a.m.,
Atlanta, Georgia time, on the next business day after the then Expiration Date.
18
<PAGE> 21
The Company reserves the right, in its sole discretion, (i) to delay
accepting for exchange any Notes, to extend the Exchange Offer or to terminate
the Exchange Offer if any of the conditions set forth below under "-- Certain
Conditions to the Exchange Offer" shall not have been satisfied, by giving oral
or written notice of such delay, extension or termination to the Exchange Agent
or (ii) to amend the terms of the Exchange Offer in any manner. Any such delay
in acceptance, extension, termination or amendment will be followed as promptly
as practicable by oral or written notice thereof to the registered holders of
Outstanding Notes. If the Exchange Offer is amended in a manner determined by
the Company to constitute a material change, the Company will promptly disclose
such amendment by means of a prospectus supplement that will be distributed to
the registered holders, and the Company will extend the Exchange Offer,
depending upon the significance of the amendment and the manner of disclosure to
the registered holders, if the Exchange Offer would otherwise expire during such
period.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest at a rate of 9 1/2% per annum,
payable semi-annually, on each May 15 and November 15, commencing May 15, 1996.
Holders of Exchange Notes will receive interest on May 15, 1996 from the date of
initial issuance of the Exchange Notes, plus an amount equal to the accrued and
unpaid interest on the Outstanding Notes from the date of initial issuance to
the date of exchange thereof for Exchange Notes. Interest on the Outstanding
Notes accepted for exchange will cease to accrue upon issuance of the Exchange
Notes.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange any Exchange Notes for, any
Outstanding Notes, and may terminate the Exchange Offer as provided herein
before the acceptance of any Outstanding Notes for exchange, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the Company's sole judgment, might materially impair the ability
of the Company to proceed with the Exchange Offer; or
(b) any law, statute, rule or regulation is proposed, adopted or
enacted, or any existing law, statute, rule or regulation is interpreted by
the staff of the Commission, which, in the Company's sole judgment, might
materially impair the ability of the Company to proceed with the Exchange
Offer; or
(c) any governmental approval has not been obtained, which approval
the Company shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Outstanding Notes, by giving oral
or written notice of such extension to the holders thereof. During any such
extensions, all Outstanding Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Company. Any Outstanding
Notes not accepted for exchange for any reason will be returned without expense
to the tendering holder thereof as promptly as practicable after the expiration
or termination of the Exchange Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Outstanding Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions of the
Exchange Offer specified above. The Company will give oral or written notice of
any extension, amendment, non-acceptance or termination to the holders of the
Outstanding Notes as promptly as practicable, such notice in the case of any
extension to be issued no later than 9:00 a.m., Atlanta, Georgia time, on the
next business day after the previously scheduled Expiration Date.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to
19
<PAGE> 22
exercise any of the foregoing rights shall not be deemed a waiver of any such
right, and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Outstanding Notes
tendered, and no Exchange Notes will be issued in exchange for any such
Outstanding Notes, if at such time any stop order shall be threatened or in
effect with respect to the Registration Statement of which this Prospectus
constitutes a part or the qualification of the Indenture under the Trust
Indenture Act of 1939.
PROCEDURES FOR TENDERING
Only a holder of Outstanding Notes may tender such Outstanding Notes in the
Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign
and date the Letter of Transmittal, or facsimile thereof, have the signature
thereon guaranteed if required by the Letter of Transmittal, and mail or
otherwise deliver such Letter of Transmittal or such facsimile to the Exchange
Agent prior to 5:00 p.m., Atlanta, Georgia time, on the Expiration Date. In
addition, either (i) Outstanding Notes must be received by the Exchange Agent
along with the Letter of Transmittal, or (ii) a timely confirmation of
book-entry transfer (a "Book-Entry Confirmation") of such Outstanding Notes, if
such procedure is available, into the Exchange Agent's account at the Depository
Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedure for
book-entry transfer described below must be received by the Exchange Agent prior
to the Expiration Date, or (iii) the holder must comply with the guaranteed
delivery procedures described below. To be tendered effectively, the Letter of
Transmittal and other required documents must be received by the Exchange Agent
at the address set forth below under "The Exchange Offer -- Exchange Agent"
prior to 5:00 p.m., Atlanta, Georgia time, on the Expiration Date.
The tender by a holder which is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Outstanding Notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder of Outstanding Notes to tender on such beneficial owner's
behalf. If such beneficial owner wishes to tender on such owner's own behalf,
such owner must, prior to completing and executing the Letter of Transmittal and
delivering such owner's Outstanding Notes, either make appropriate arrangements
to register ownership of the Outstanding Notes in such owner's name or obtain a
properly completed bond power from the registered holder of Outstanding Notes.
The transfer of registered ownership may take considerable time and may not be
able to be completed prior to the Expiration Date.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below, as the case may be, must be guaranteed by an Eligible Institution (as
defined below) unless the Outstanding Notes tendered pursuant thereto are
tendered (i) by a registered holder who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on the Letter
of Transmittal or (ii) for the account of an Eligible Institution. If signatures
on a Letter Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantor must be a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of
20
<PAGE> 23
Rule 17Ad-15 under the Exchange Act which is a member of one of the recognized
signature guarantee programs identified in the Letter of Transmittal (an
"Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Outstanding Notes listed therein, such Outstanding
Notes must be endorsed or accompanied by a properly completed bond power, signed
by such registered holder as such registered holder's name appears on such
Outstanding Notes with the signature thereon guaranteed by an Eligible
Institution.
If the Letter of Transmittal or any Outstanding Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Outstanding Notes and withdrawal of tendered
Outstanding Notes will be determined by the Company in its sole discretion,
which determination will be final and binding. The Company reserves the absolute
right to reject any and all Outstanding Notes not properly tendered or any
Outstanding Notes the Company's acceptance of which would, in the opinion of
counsel for the Company, be unlawful. The Company also reserves the right to
waive any defects, irregularities or conditions of tender as to particular
Outstanding Notes. The Company's interpretation of the terms and conditions of
the Exchange Offer (including the instructions in the Letter of Transmittal)
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Outstanding Notes must be cured
within such time as the Company shall determine. Although the Company intends to
notify holders of defects or irregularities with respect to tenders of
Outstanding Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Outstanding Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Outstanding Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
In all cases, issuance of Exchange Notes for Outstanding Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of Outstanding Notes or a timely Book-Entry
Confirmation of such Outstanding Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Outstanding Notes
are not accepted for exchange for any reason set forth in the terms and
conditions of the Exchange Offer or if Outstanding Notes are submitted for a
greater principal amount than the holder desires to exchange, such unaccepted or
non-exchanged Outstanding Notes will be returned without expense to the
tendering holder thereof (or, in the case of Outstanding Notes tendered by
book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility pursuant to the book-entry transfer procedures described below, such
non-exchanged Notes will be credited to an account maintained with such
Book-Entry Transfer Facility) as promptly as practicable after the expiration or
termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Outstanding Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Outstanding Notes by causing
the Book-Entry Transfer Facility to transfer such Outstanding Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Notes may be effected through book-entry transfer at the Book-Entry
Transfer Facility, the Letter of Transmittal or facsimile thereof, with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the Exchange Agent at the address set
forth below under
21
<PAGE> 24
"The Exchange Offer -- Exchange Agent" on or prior to the Expiration Date or, if
the guaranteed delivery procedures described below are to be complied with,
within the time period provided under such procedures. Delivery of documents to
the Book-Entry Transfer Facility does not constitute delivery to the Exchange
Agent.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Outstanding Notes and (i) whose
Outstanding Notes are not immediately available or (ii) who cannot deliver their
Outstanding Notes, the Letter of Transmittal or any other required documents to
the Exchange Agent prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the registered number(s)
of such Outstanding Notes and the principal amount of Outstanding Notes
tendered, stating that the tender is being made thereby and guaranteeing
that, within three (3) New York Stock Exchange trading days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof) together
with the Outstanding Notes or a Book-Entry Confirmation, as the case may
be, and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as all tendered Notes in proper form for
transfer or a Book-Entry Confirmation, as the case may be, and all other
documents required by the Letter of Transmittal, are received by the
Exchange Agent within three (3) New York Stock Exchange trading days after
the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Outstanding Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 p.m., Atlanta, Georgia time, on the
Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent". Any such notice of withdrawal must specify the name of the
person having tendered the Outstanding Notes to be withdrawn, identify the
Outstanding Notes to be withdrawn (including the principal amount of such
Outstanding Notes), and (where certificates for Outstanding Notes have been
transmitted) specify the name in which such Outstanding Notes were registered,
if different from that of the withdrawing holder. If certificates for
Outstanding Notes have been delivered or otherwise identified to the Exchange
Agent, then, prior to the release of such certificates, the withdrawing holder
must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such holder is an Eligible Institution. If
Outstanding Notes have been tendered pursuant to the procedure for book-entry
transfer described above, any notice of withdrawal must specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Outstanding Notes and otherwise comply with the procedures of such
facility. All questions as to the validity, form and eligibility (including time
of receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Outstanding Notes
so withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Outstanding Notes which have been tendered
for exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder (or, in the case of Outstanding Notes
tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described above, such Outstanding Notes will be credited to an account
maintained with such Book-Entry Transfer Facility for the Outstanding Notes) as
soon as practicable after withdrawal, rejection of tender or termination of the
22
<PAGE> 25
Exchange Offer. Properly withdrawn Outstanding Notes may be retendered by
following one of the procedures described under "-- Procedures for Tendering"
above at any time on or prior to the Expiration Date.
EXCHANGE AGENT
First Union National Bank of Georgia has been appointed as Exchange Agent
of the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
<TABLE>
<S> <C>
By Overnight Courier or Hand Delivery: By Registered or Certified Mail:
First Union National Bank of Georgia First Union National Bank of Georgia
Suite 1100, First Union Plaza Suite 1100, First Union Plaza
999 Peachtree Street, N.E. 999 Peachtree Street, N.E.
Atlanta, Georgia 30339 Atlanta, Georgia 30339
Attn: Corporate Trust Department Attn: Corporate Trust Department
</TABLE>
By Facsimile:
(404) 827-7305
(For Eligible Institutions Only)
Confirm by Telephone:
(404) 827-7349
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to broker-dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$ . Such expenses include registration fees, fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, and
related fees and expenses.
TRANSFER TAXES
The Company will pay all transfer taxes, if any, applicable to the exchange
of Notes pursuant to the Exchange Offer. If, however, certificates representing
Outstanding Notes for principal amounts not tendered or accepted for exchange
are to be delivered to, or are to be issued in the name of, any person other
than the registered holder of Notes tendered, or if tendered Notes are
registered in the name of any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Notes pursuant to the Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Outstanding Notes who do not exchange their Outstanding Notes
for Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such Outstanding Notes, as set forth in the
legend thereon, as a consequence of the issuance of the Outstanding Notes
pursuant
23
<PAGE> 26
to the exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Outstanding Notes may not be offered or sold, unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws. The Company does not currently anticipate that it will register the
Outstanding Notes under the Securities Act.
24
<PAGE> 27
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
The following selected consolidated financial data as of and for each of
the five years in the period ended January 1, 1995 are derived from the
consolidated financial statements of the Company that have been audited by the
Company's independent certified public accountants. The selected consolidated
financial data of the Company as of and for the nine months ended October 2,
1994 and October 1, 1995 are derived from the unaudited consolidated financial
statements of the Company, which, in the opinion of the Company's management,
reflect all adjustments necessary for a fair presentation of the results for the
unaudited periods. The selected consolidated financial data should be read in
conjunction with the consolidated financial statements and other financial
information included in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
------------------------------------------------------------------ -----------------------
DECEMBER 30, DECEMBER 29, JANUARY 3, JANUARY 2, JANUARY 1, OCTOBER 2, OCTOBER 1,
1990 1991 1993 1994 1995 1994 1995
------------ ------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales...................... $623,467 $581,786 $594,078 $625,067 $725,283 $527,343 $597,414
Gross profit................... 212,815 188,053 189,948 197,746 221,185 159,702 184,778
Selling, general and
administrative expenses...... 153,317 150,100 149,509 151,576 170,375 123,559 139,613
Operating income............... 59,498 37,953 40,439 46,170 50,810 36,143 45,165
Interest expense............... 25,192 23,253 21,894 22,840 24,094 17,888 21,194
Preferred dividends............ -- -- -- 913 1,750 1,313 1,312
Net income to common
shareholders................. 23,602 8,921 12,250 12,936 14,706 9,457 13,106
Primary earnings per common
share(1)..................... 1.37 0.52 0.71 0.75 0.82 0.53 0.72
Cash dividends per common
share........................ 0.24 0.24 0.24 0.24 0.24 0.18 0.18
OTHER DATA:
EBITDA(2)...................... $ 84,442 $ 57,306 $ 62,712 $ 68,656 $ 77,987 $ 56,762 $ 65,735
Depreciation and
amortization................. 21,570 19,723 22,257 24,512 28,180 22,047 21,285
Capital expenditures........... 23,705 15,375 14,476 20,639 21,315 14,071 26,186
Ratio of EBITDA to interest
expenses..................... 3.35x 2.46x 2.86x 3.01x 3.24x 3.17x 3.10x
Ratio of earnings to fixed
charges(3)................... 2.39x 1.54x 1.73x 1.75x 1.80x 1.71x 1.86x
</TABLE>
<TABLE>
<CAPTION>
AS OF
--------------------------------------------------------------------------------------------
DECEMBER 30, DECEMBER 29, JANUARY 3, JANUARY 2, JANUARY 1, OCTOBER 2, OCTOBER 1,
1990 1991 1993 1994 1995 1994 1995
------------ ------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................ $156,638 $150,541 $138,834 $140,575 $174,620 $176,870 $167,818
Total assets................... 528,371 569,438 534,120 642,319 687,934 685,059 705,752
Total long-term debt........... 254,578 240,137 235,488 291,637 314,441 307,950 311,904
Redeemable preferred stock..... -- -- -- 25,000 25,000 25,000 25,000
Total common shareholders'
equity....................... 198,409 198,977 186,349 181,884 214,090 214,757 237,098
Total capitalization........... 452,987 439,114 421,837 498,521 553,531 547,707 574,002
</TABLE>
- ---------------
(1) For the fiscal year ended December 30, 1990 and the nine months ended
October 1, 1995, fully diluted earnings per share was $1.24 and $.71,
respectively. For all other periods presented, fully diluted earnings per
share were anti-dilutive; therefore, primary earnings per common share is
presented.
(2) EBITDA means earnings before interest, income taxes, depreciation and
amortization (excluding certain non-recurring charges and extraordinary
items). EBITDA has been included solely to facilitate the consideration of
the covenants in the Indenture that are based, in part, on EBITDA. In
addition, the Company understands that it is used by certain investors as
one measure of the Company's historical ability to service its debt. EBITDA
is not intended to represent cash flow from operations as defined by
generally accepted accounting principles.
(3) The ratio of earnings to fixed charges is determined by dividing the sum of
earnings before extraordinary items, interest expense, taxes on income, and
a portion of rent expense representative of the interest component by the
sum of interest expense and the portion of rent expense representative of
the interest component.
25
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company's revenues are derived from sales of commercial carpet (modular
and broadloom), interior fabrics, and chemicals and specialty products. Sales of
commercial carpet and interior fabrics accounted for approximately 82% and 15%,
respectively, of total net sales for 1994 and approximately the same for the
nine months ended October 1, 1995. The Company's revenues and EBITDA were $725
million and $78 million, respectively, in fiscal 1994. For the nine months ended
October 1, 1995, revenues increased 13.3% compared with the same period in 1994;
EBITDA increased at an even higher rate, 15.8%, during this same period. These
improvements are primarily the result of certain programs discussed below.
Historical Operating Trends
The Company pioneered the introduction of the carpet tile concept in the
United States in 1973. Following its initial public offering in 1983, the
Company's sales grew at an annual compound rate of 34.1% from 1983 to 1990, with
sales increasing from $80 million to $623 million. The Company's growth during
this period was fueled by diversification from the new construction market into
the renovation market and other market segments, global expansion into the
United Kingdom and Western Europe (including the 1988 strategic acquisition of
Heuga Holding B.V.), and diversification into interior fabrics with the
acquisition of Guilford in December 1986.
The period from 1991 to 1994, however, was characterized by (i) weak demand
for all floorcovering products in domestic and international commercial markets,
(ii) poor worldwide economic conditions highlighted by an economic recession in
Europe, (iii) increased competition and (iv) a shift in demand away from the
Company's fusion bonded products. During this period, the Company's operating
results initially declined from peak levels that had been achieved in fiscal
1990.
The adverse conditions of the 1991 to 1994 period tested the Company's
resiliency, and the Company responded with initiatives that enabled it to
achieve (after the 1991 decline in sales of 6.7%) sales and operating income
increases totaling 24.7% and 33.9%, respectively, for the three-year period. The
Company implemented strict cost control measures and diversified and expanded
its product offerings to include (through internal production changes) tufted
modular carpet products that had increased in popularity and (through the
strategic acquisitions of Bentley Mills in June 1993 and Prince Street in March
1994) high style, designer-oriented broadloom carpet products. The Company also
made strategic acquisitions to diversify and strengthen its position in other
commercial interiors markets, including the acquisition of the Stevens Linens
fabrics product line in 1993. With the addition of Charles Eitel to its
management team in late 1993, the Company began implementation of the product
design and development process and reengineering program for its U.S. modular
floorcovering business that led to the Company's mass customization and
war-on-waste initiatives. See "Business -- Business Strategy and Principal
Initiatives". These initiatives have assisted the Company in achieving
substantial growth in sales and even greater increases in operating income.
During fiscal 1994, the Company derived approximately 45% of its sales from
operations outside the United States. The Company believes that the geographic
diversity of its sales reduces its dependence on any particular region and
represents a significant competitive advantage. To better support its global
marketing operations, the Company has manufacturing facilities in strategic
locations around the world. An additional result of this strategy is that the
Company's foreign currency risk is reduced because certain revenues are derived
from products manufactured at facilities which incur their operating costs in
the same foreign currency.
26
<PAGE> 29
RESULTS OF OPERATIONS
Nine Months Ended October 1, 1995 Compared With Nine Months Ended October 2,
1994
For the nine months ended October 1, 1995, the Company's net sales
increased $70 million or 13.3% compared with the same period in 1994. The
increase was primarily attributable to (i) increased sales volume in the
Company's floorcoverings operations in the United States, Southeast Asia and
Greater China, (ii) continued improvement in unit volume in the Company's
interior fabrics and chemical operations, (iii) sales generated by Toltec
Fabrics, Inc., which was acquired in June 1995, and (iv) the strengthening of
certain key currencies (particularly the British pound sterling, Dutch guilder
and Japanese yen) against the U.S. dollar, the Company's reporting currency.
These increases were offset somewhat by a decrease in floorcoverings sales
volume in Australia and certain other markets within Continental Europe.
Cost of sales decreased as a percentage of sales for the nine month period
ended October 1, 1995 (69.1%) compared with the same period in 1994 (69.7%). The
decrease was due primarily to (i) a reduction of manufacturing costs in the
Company's carpet tile operations (particularly the U.S. manufacturing facility)
as the Company implemented its mass customization program and war-on-waste
initiative, (ii) the weakening of the U.S. dollar against certain key
currencies, which lowered the cost of U.S. produced goods sold in export
markets, and (iii) decreased manufacturing costs in the Company's interior
fabrics business as a result of improved manufacturing efficiencies. These
benefits were somewhat offset by raw material price increases in the interior
fabrics and chemical operations, and the acquisitions of Prince Street and
Toltec Fabrics, which, historically, had higher cost of sales than the Company.
Selling, general and administrative expenses as a percentage of sales was
consistent at 23.4% for the nine months ended October 1, 1995 and October 2,
1994. Selling, general and administrative expenses did not decrease with the
increase in volume due primarily to the increase in design and sampling cost
associated with the mass customization initiative for which the full impact of
the increased sales has not been realized.
For the nine months ended October 1, 1995, the Company's interest expense
increased by $3.3 million compared to the same period in 1994, primarily due to
an increase in bank debt and increased interest rates.
The effective income tax rate was 38% for the nine months ended October 1,
1995 compared to 36% for the same period of fiscal 1994. The increase in the
effective income tax rate is due to (i) the lack of benefits from foreign net
operating losses and tax credits which existed in previous years and (ii) a
higher percentage of the Company's earnings in the current period being derived
from its U.S. operations, which are generally subject to higher income tax rates
than its earnings from international operations.
Net income increased 33.9% to $14.4 million for the nine months ended
October 1, 1995, compared to $10.8 million for the same period in 1994 due to
the factors discussed above.
Fiscal 1994 Compared With Fiscal 1993
In fiscal 1994, the Company's net sales increased $100 million (16.0%)
compared with fiscal 1993. The increase was due in substantial part to the June
1993 acquisition of Bentley Mills, which had sales of $127 million for fiscal
1993, and the March 1994 acquisition of Prince Street Technologies, which had
sales of $31 million for fiscal 1993. The Company achieved a price increase in
floorcoverings of approximately 4%. The Company also achieved unit volume
increases of approximately 4% and 6%, respectively, in its interior fabrics and
chemical and specialty products operations. Despite adverse economic conditions
in Japan and Europe, the Company generated an overall increase in net sales for
the floorcoverings operations due to the strengthening of the major currencies
of its foreign markets compared to the U.S. dollar, the Company's reporting
currency, which caused net sales to be 1.0% higher than otherwise would have
been the case.
Cost of sales as a percentage of net sales increased slightly to 69.5% in
1994, compared with 68.4% in 1993, primarily because of margin decline in the
interior fabrics area due to competitive pressures and a shift in product mix to
lower weight, less expensive products which resulted in reduced efficiency. In
addition, the acquisition of Bentley Mills also contributed to the increased
cost of sales due to Bentley's historical cost of sales having been 7.0% higher
than the Company's.
27
<PAGE> 30
Selling, general, and administrative expenses as a percentage of sales
decreased to 23.5% in 1994 from 24.2% in 1993 primarily as a result of continued
strict cost control efforts, particularly in Europe, in the area of
discretionary marketing cost and fixed overhead expenditures. In addition, the
acquisition of Bentley Mills also contributed to reduced selling, general, and
administrative costs, due to Bentley's historical costs as a percentage of sales
having been 10% less than the Company's. These factors combined to more than
offset the increase in costs associated with the Company's reorganization of its
U.S. modular carpet operations and development and introduction of new products.
Other expense increased $231,000 in 1994, due to the impact of higher
interest rates and a slight increase in bank debt, offset by other non-operating
income items.
During fiscal 1994, the Company's effective tax rate increased to 36.0%
from 35.0% in 1993, primarily because in 1994 there was no utilization of excess
foreign tax credit carryovers as compared with $1.5 million utilized in 1993.
The lack of excess foreign tax credit usage was partially offset by the
utilization of subsidiary net operating loss carryforwards.
As a result of the aforementioned factors, the Company's net income
increased 18.8% to $16.5 million in 1994 compared to $13.8 million in 1993.
Fiscal 1993 Compared With Fiscal 1992
In fiscal 1993, the Company's net sales increased $31 million (5.2%)
compared with fiscal 1992. The increase was due in substantial part to the June
1993 acquisition of Bentley Mills, which had sales of $112 million for fiscal
1992. The Company also achieved a unit volume increase of approximately 6% in
its interior fabrics and chemical operations. The increase in net sales was
offset somewhat by a strengthening U.S. dollar, the Company's reporting
currency, against the major currencies of its European operation, which caused
net sales to be 5.1% lower than otherwise would have been the case.
Cost of sales as a percentage of net sales increased slightly to 68.4%,
compared with 68.0% in 1992, primarily because of reduced efficiencies in the
carpet tile manufacturing operations as a result of a 1.2 million square yard
decline in unit volume. In addition, the acquisition of Bentley Mills also
contributed to the increased cost of sales due to Bentley's historical cost of
sales having been 75.0% in 1992, compared with 68.0% in 1992 for the Company.
Selling, general, and administrative expenses as a percentage of sales
decreased to 24.2% in 1993 from 25.2% in 1992 primarily as a result of the
acquisition of Bentley Mills in 1993. Bentley's selling, general, and
administrative costs as a percentage of sales were 15.7%, compared with 25.2%
for the Company in 1992. The decline was also the result of cost controls
initiated in 1991 which reduced discretionary marketing cost and fixed overhead
expenditures.
Other expense increased $2.9 million in 1993, primarily because of
increased bank debt of $60.0 million related to the acquisition of Bentley Mills
in June 1993.
During fiscal 1993, the Company's effective income tax rate increased to
35.0% from 33.9% in 1992, primarily because of an increase in the U.S. statutory
rate to 35.0%. In 1993, there was no utilization of net operating loss
carryforwards as compared with $2.6 million utilized in 1992. The rate increase
was offset somewhat by the utilization of excess foreign tax credit carryovers
of $1.5 million in 1993.
As a result of the aforementioned factors, the Company's net income
increased 13.1% to $13.8 million in 1993 from $12.3 million in 1992.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of cash over the last three fiscal years have
been funds provided by operating activities and proceeds from additional
long-term debt. In 1994, operating activities generated $33.4 million of cash
compared with $40.6 million and $41.7 million in 1993 and 1992, respectively.
The reduction in 1994 operating cash flows compared with 1993 was caused
primarily by inventory increases to improve service not offset by accounts
payable increases. The inventory increases at the end of 1994 are a
28
<PAGE> 31
result of the increased orders (see "Backlog") and the first stages of the
Company's mass customization and other initiatives. The primary uses of cash
during the three years ended January 1, 1995 have been (i) additions to property
and equipment at the Company's manufacturing facilities, (ii) acquisitions of
businesses, and (iii) cash dividends. The additions to property and equipment
required cash outlays of $56.4 million, while the acquisitions of businesses
required $16.6 million and dividends required $15.3 million. Management believes
these capital investments will result in an expanded market presence and
improved efficiency in the Company's production and distribution. During the
nine months ended October 1, 1995, the primary uses of cash have been (i) $26.2
million for additions to property and equipment in the Company's manufacturing
facilities to implement the mass customization program, the yarn modernization
project for the interior fabrics business, the Thailand joint venture and the
new facility for Prince Street, (ii) $13.3 million associated with the
acquisition of Toltec Fabrics, (iii) $9.1 million reduction of long-term debt
and (iv) $4.6 million for dividends paid. These uses were funded by $55.8
million in operating activities which includes $37.9 million from the sale of
domestic receivables.
The Company estimates capital expenditure requirements of approximately
$35.0 million for fiscal 1995, and has purchase commitments of $8.8 million. The
Company estimates that the normal and recurring capital expenditures would be
approximately $20.0 million; $15.0 million are non-recurring expenditures for
the (i) Guilford yarn modernization, (ii) new facility for Prince Street and
(iii) Thailand joint venture. Except for funding the redemption of the
Convertible Debentures (primarily for which purpose the Outstanding Notes were
sold), management believes that the cash provided by operations and long-term
borrowing arrangements will provide adequate funds for current commitments and
other requirements in the foreseeable future.
In January 1995, the Company amended and restated its existing revolving
credit and term loan facilities. The amendment, among other things, (i)
increased the revolving credit facilities by $75.0 million (including a letter
of credit facility of $40.0 million), (ii) reduced the secured term loans by
approximately $85.0 million, and (iii) provided for a new accounts receivable
securitization facility of up to $100.0 million. Additionally, the term on the
revolving credit agreement was extended to June 30, 1999 and the term loans to
December 31, 2001. In July 1995, the Company again amended and restated its
revolving credit and term loan facilities, this time to provide for a swing line
and certain pricing elements which are advantageous to the Company. As of
October 1, 1995, the Company had long-term debt of $311.9 million consisting of
$156.4 million in senior revolving lines of credit, $50 million of term debt,
$103.9 million of convertible subordinated debt and $1.6 million of other
facilities.
At October 1, 1995, interest rate and currency swap agreements related to
certain foreign currency denominated promissory notes effectively converted
approximately $29 million of variable rate debt to fixed rate debt. At October
1, 1995, the weighted average fixed rate on the Dutch guilder and Japanese yen
borrowings was 7.43%. The interest rate and currency swap agreements have
maturity dates ranging from nine to twelve months.
BACKLOG
The Company's backlog of unshipped orders was approximately $87 million at
October 1, 1995, compared to approximately $90 million at October 2, 1994.
Historically, backlog is subject to significant fluctuations due to the timing
of orders for individual large projects and currency fluctuations. The unshipped
orders were down at October 1, 1995 compared to October 2, 1994 primarily due to
the acceleration of shipments under the Company's mass customization program.
Lead times for customer orders have been reduced from approximately eight weeks
in October 1994 to approximately four weeks in October 1995 in the principal
U.S. carpet tile operations. Additionally, orders were higher at October 2, 1994
due to the introduction of several successful product designs in June 1994. At
that time, however, the Company did not have the capital equipment
(manufacturing machinery) necessary to accomplish the "make-to-order" concept
under the mass customization initiative. All of the backlog of orders at October
1, 1995 is expected to be shipped during the succeeding six to nine months.
29
<PAGE> 32
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards (SFAS) No. 112, "Employer's Accounting for
Post-employment Benefits". This new statement establishes accounting standards
for employers who provide benefits to former or inactive employees after
employment but before retirement. The Company currently has no obligation to
provide post-employment benefits, as contemplated under this standard.
The FASB has issued SFAS Nos. 114 and 118 related to accounting by
creditors for the impairment of a loan. These statements, adopted in January
1995, did not have a material impact on the Company.
The FASB has issued SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". This statement did not have a material impact on
the Company when it was adopted in 1994.
The FASB has issued SFAS No. 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments", which requires enhanced
disclosures about the amounts, nature, and terms of derivative financial
instruments. This statement was adopted by the Company in 1994, and the related
disclosures are included in Note 12 to the accompanying consolidated financial
statements.
The FASB has issued SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets Being Disposed of " which provides
guidance on how and when impairment losses are recognized on long-lived assets.
This statement, when adopted, is not expected to have a material impact on the
Company.
The FASB has issued SFAS No. 123 "Accounting for Stock-Based Compensation"
which establishes financial accounting and reporting standards for stock-based
employee compensation plans. This statement was issued by the FASB during
October 1995 and is effective for transactions entered into in fiscal years that
begin after December 15, 1995. The Company has not yet determined the impact of
this statement.
30
<PAGE> 33
BUSINESS
GENERAL
Interface was founded in 1973 to pioneer the introduction of the carpet
tile concept in the United States. The Company is now a global manufacturer and
marketer of products for the commercial and institutional interiors market, and
is the worldwide leader in the modular carpet segment (which includes both
carpet tile and six-foot roll goods) with a 40% market share. Through its
strategic acquisitions of Bentley Mills in 1993 and Prince Street in 1994, the
Company entered the broadloom carpet segment with leading product lines for the
high quality, designer-oriented sector of the broadloom segment. The Company,
through its Guilford subsidiary, is the leading U.S. manufacturer of panel
fabrics for use in open plan office furniture systems, with a market share of
approximately 50%. The Company's chemicals and specialty products operations
produce a variety of products, including chemical compounds and additives for
use in various rubber and plastic products, and a proprietary antimicrobial
additive that is used in the Company's carpet and fabrics products and licensed
to others for use in interior finishing products that do not compete with the
Company's products. In fiscal 1994, the Company had sales of $725 million, with
carpet sales of $595 million, fabric sales of $110 million, and chemicals and
specialty products sales of $20 million accounting for 82%, 15% and 3% of total
sales, respectively.
The Company markets products in over 100 countries around the world under
such well-known brand names as Interface and Heuga in modular carpet; Bentley
Mills and Prince Street in broadloom carpets; Guilford of Maine, Stevens Linen
and Toltec in interior fabrics; and Intersept in chemicals. The Company's
principal geographic markets are North America (57% of 1994 sales), the United
Kingdom and Western Europe (31% of 1994 sales), and Japan and Australia (5% of
1994 sales). The Company is aggressively developing opportunities in Greater
China and Southeast Asia, South America, and Central and Eastern Europe, which
represent significant growth markets for the Company. The Company's worldwide
marketing efforts are facilitated by having 22 manufacturing facilities at
varied locations in North America, Europe, and Australia. Worldwide
manufacturing locations enable the Company to compete effectively with local
producers in its international markets, while also providing advantages (such as
affording international customers more favorable delivery times and freight
costs) over competitors who must import their products into such markets. These
capabilities are an important competitive advantage to Interface in serving the
needs of multinational corporate customers who require uniform products and
services at their various locations around the world.
The Company utilizes an internal marketing and sales force of over 700
experienced personnel (the largest in the commercial floorcovering industry),
stationed at 83 locations in 42 countries, to market the Company's carpet
products and services in person to its customers. Guilford has its own
specialized marketing and sales force (approximately 44 persons) for marketing
the Company's principal interior fabrics products. The Company also utilizes
independent dealers to achieve additional marketing coverage for all its
products. The Company focuses its sales efforts at the design phase of
commercial projects. Interface personnel cultivate relationships both with the
owners and users of the facilities involved in the projects and with specifiers
such as architects, interior designers, engineers and contracting firms who are
directly involved in specifying products and who often make or significantly
influence purchase decisions. The Company emphasizes its product design and
styling capabilities and its ability to provide creative, high value solutions
to its customers' needs. Interface marketing and sales personnel also serve as a
primary technical resource for the Company's customers, both with respect to
product maintenance and service as well as design matters.
The Company has recently enhanced its management, both by adding
experienced industry executives in key management positions and by consolidating
responsibilities for certain operational areas. Charles Eitel, who was hired in
November 1993, was promoted to the newly created position of President and Chief
Executive Officer of the Company's worldwide Floorcoverings Group in October
1994; Brian DeMoura was hired as President and Chief Executive Officer of the
worldwide Interior Fabrics Group in March 1994; and Roman Oakey, Inc. and its
affiliates have been engaged to consult on product design matters for all
floorcovering and fabric operations.
31
<PAGE> 34
INDUSTRY TRENDS
In recent years, the Company's revenue has been derived primarily from the
renovation market. The Company believes that the commercial and institutional
market for floorcovering products, which experienced a significant decline in
demand during the early 1990's, has begun to rebound significantly in the United
States primarily due to renovation projects and, to a lesser extent, new
construction. Excess office space from the 1980's is being absorbed, businesses
are beginning to experience growth, and carpeting installed during the 1980's
construction boom is beginning to be updated or replaced as part of remodeling
projects. In international markets, overall demand for commercial floorcovering
products is also beginning to increase, especially in certain countries in the
Asia-Pacific region where new construction projects are increasing, and also in
more developed markets where products are being used for an increasing number of
remodeling or refurbishing projects. The Company also believes that, within the
overall floorcovering market, the demand for modular carpet is increasing
worldwide as more customers recognize its advantages in terms of greater design
options and flexibility, longer average life, and ease of access to sub-floor
wiring.
BUSINESS STRATEGY AND PRINCIPAL INITIATIVES
Interface's long-standing corporate strategy has been to diversify and
integrate worldwide. The Company seeks to diversify by developing internally or
acquiring related product lines and businesses in the commercial interiors
field; and to integrate by identifying and developing synergies and operating
efficiencies among the Company's diverse products and global businesses. In
continuing that strategy, the Company is pursuing the following principal
strategic initiatives:
Enhancement of Design Capabilities. In January 1994, the Company engaged
the leading design firm Roman Oakey, Inc. (under an exclusive consulting
contract) to augment the Company's internal research, development and design
staff. The Company introduced 57 new carpet designs in the U.S. in 1994 (the
largest number in one year in the Company's history), and received eight (out of
a possible 12) U.S. carpet industry design awards bestowed by the International
Interior Design Association, including all five awards in the carpet tile
division. Roman Oakey's design services are being extended to the Company's
international carpet operations and an affiliate of that firm has been engaged
to provide similar design services to the Company's interior fabrics business
(which already has significant capabilities in this area).
Globalization of the "Mass Customization" Production Strategy. The goal of
mass customization is to be able to respond to customers' requirements for
custom or highly styled products by quickly and efficiently producing both
custom samples and the ultimate products, and to determine proven "winners" that
can be manufactured for inventory for broader distribution. Mass customization
was introduced to the Company's U.S. carpet tile business in 1994, and its
principal components included (i) developing a simplified but versatile yarn
utilization system, (ii) investing in highly efficient, state-of-the-art tufting
and custom sampling equipment, and (iii) utilizing innovative design and styling
to create products. The initiative has resulted in substantial operating
improvements in the U.S. carpet tile business in 1995, including increased
margins and reduced inventory levels of both raw materials and standard
products. The Company is extending the mass customization production initiative
to its floorcovering operations in Europe and Australia.
Diversification, Expansion and Increased Efficiency in the Interior Fabrics
Business. In response to a shift in demand towards lighter weight, less
expensive fabrics by OEM panel fabric customers, the Company initiated a
significant capital investment program at Guilford to consolidate and modernize
its yarn manufacturing operations. This program should result in significant
efficiencies and cost savings, which are expected to permit recovery of that
capital investment in approximately two years, as well as new product
capability. Interface's strategic acquisition of Toltec Fabrics in June 1995,
[and expected acquisition of the Intek division of Springs Industries], provide
further diversification into upholstery and seating fabrics; penetrate certain
niche markets where Guilford has not previously been active; and provide
operating efficiencies as a number of manufacturing processes currently
outsourced by these businesses are brought in-house. Interface will also
continue to devote resources to Guilford's growing export business.
War-on-Waste and EcoSense Programs. In January 1995, the Company initiated
a worldwide war-on-waste program. Applying a zero-based definition of waste
(broadly defined as any measurable cost that goes
32
<PAGE> 35
into manufacturing a product but does not result in identifiable value to the
customer), the Company has identified $70 million of such waste. While a major
part of such waste cannot be eliminated using currently available technologies
and production systems, management believes the Company can eliminate
approximately $35 million of such waste over time. The Company has realized
approximately $6 million in savings (through eliminating such waste) during the
first nine months of fiscal 1995. The war-on-waste program represents a first
step in the Company's broader EcoSense initiative, which is inspired in major
part by the interest of important customers who are concerned about the
environmental implications of how they and their suppliers do business. EcoSense
is the Company's long-range program to achieve greater resource efficiency and,
ultimately, ecological "sustainability" -- that is, the point at which Interface
is no longer a net "taker" from the earth. Its key elements are closed loop
recycling to obtain all principal raw materials; tapping benign sources of
energy (other than fossil fuels) to drive production processes; and, most
immediately, eliminating waste of raw materials and energy from all operations.
The Company believes that its pursuit of these initiatives provides a
competitive advantage in marketing its products to an increasing number of
important customers.
Increased Integration of Marketing Efforts and Operational
Consolidations -- "Total Interior Solutions". The Company's objective is to use
the complementary nature of its product lines to implement a "total interior
solution" approach to serving the diverse needs of customers worldwide.
Marketing and sales personnel are being trained in cross-marketing techniques,
and the Company is implementing a marketing communications network to link its
worldwide marketing and sales force. As a related initiative, the Company has
consolidated management responsibility for certain key operational areas, which
has increased global cooperation and coordination in product planning and
production as well as marketing activities.
Geographic Expansion of Manufacturing in Developing Markets. A key element
of the Company's worldwide focus is having manufacturing (as well as marketing
and service) capabilities in important locations around the world. The Company
is presently constructing a carpet tile manufacturing facility in Thailand,
which is expected to be operational in early 1996, and it is exploring
establishment of manufacturing operations in Greater China. The Company will
consider additional locations for manufacturing operations in other parts of the
world as necessary to meet the needs of its existing and future customers.
MODULAR AND BROADLOOM CARPET
Products
The Company's traditional business has centered on the development,
manufacture, marketing and servicing of modular carpet, which includes carpet
tile and six-foot roll goods. The Company is the world's largest manufacturer
and marketer of modular carpet, with a 40% worldwide market share. Broadloom
carpet generally consists of tufted carpet sold primarily in twelve-foot rolls.
The Company's broadloom carpet operations are conducted through Bentley Mills
and Prince Street, acquired in 1993 and 1994, respectively, both of which focus
on the high quality, designer-oriented sector of the broadloom carpet market.
Modular Carpet. The Company's free-lay modular carpet system utilizes
carpet tiles cut in precise, dimensionally stable squares (usually 18 inches or
50 centimeters square) to produce a floorcovering which combines the appearance
and texture of broadloom carpet with the advantages of a modular carpet system.
The growing use of open plan interiors and modern office arrangements utilizing
demountable, movable partitions and modular furniture systems has encouraged the
use of carpet tile, as compared to other soft surface flooring products. The
Company's patented GlasBac(R) technology employs a unique, fiberglass-reinforced
polymeric composite backing that allows the tile to be installed and remain flat
on the floor without the need for general application of adhesives or use of
fasteners. Carpet tile thus may be easily removed and replaced, permitting
rearrangement of office partitions and modular furniture systems without the
inconvenience and expense associated with removing, replacing or repairing other
soft surface flooring products, including broadloom carpeting. Carpet tile
facilitates access to sub-floor telephone, electrical, computer and other wiring
by lessening disruption of operations, and also eliminates the cumulative damage
and unsightly appearance commonly associated with frequent cutting of
conventional carpet as utility connections and disconnections are made. Because
a relatively small portion of a carpet installation often receives the bulk of
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<PAGE> 36
traffic and wear, the ability to rotate carpet tiles between high traffic and
low traffic areas and to selectively replace worn tiles can significantly
increase the average life and cost efficiency of the floorcovering.
The Company uses a number of conventional and technologically advanced
methods of carpet construction to produce carpet tiles in a wide variety of
colors, patterns, textures, pile heights and densities designed to meet both the
practical and aesthetic needs of a broad spectrum of commercial
interiors -- particularly offices, health care facilities, airports, educational
and other institutions, and retail facilities. The Company's carpet tile systems
permit distinctive styling and patterning that can be used to complement
interior designs, to set off areas for particular purposes and to convey graphic
information. While the Company continues to manufacture and sell the major
portion of its carpet tile in standard styles, an increasing volume of the
Company's modular carpet sales are custom or made-to-order products designed to
meet particular customer specifications.
The Company produces and sells carpet tile specially adapted for the health
care facilities market. The Company's carpet tile possesses characteristics
(such as the use of the Intersept(R) antimicrobial, static-controlling nylon
yarns, and thermally pigmented, colorfast yarns) making it suitable for use in
such facilities in lieu of hard surface flooring.
The Company also manufactures and sells fusion-bonded, tufted and
needle-punched six-foot roll goods under the System Six(R) mark. Six-foot roll
goods are structure-backed and offer many of the advantages of both carpet tiles
and broadloom carpet. They are often used in conjunction with carpet tiles to
create special design effects. The Company's current principal customers for
System Six products are in the educational, health care and governmental
institutions sectors. The Company believes, however, that the demand for six-
foot roll goods is increasing generally within the commercial and institutional
interiors market, and expects six-foot roll goods to account for a growing
percentage of its U.S. modular carpet sales in the future.
Broadloom Carpet. The Company has obtained a significant share of the
high-end, designer-oriented broadloom carpet segment by combining innovative
product design and styling capabilities and short production and delivery times
with a marketing strategy geared toward serving and working closely with
interior designers, architects and other specifiers. Prince Street's
design-sensitive broadloom products center around unique, multidimensional
textured carpets with a hand-tufted look, while Bentley Mills' designs emphasize
the dramatic use of color. In fiscal 1994, Bentley Mills and Prince Street each
had the best year -- in terms of both sales and profits -- in their respective
histories. Collectively, they won three APEX (a product of excellence) awards in
1994 from the International Interior Design Association, and the Bentley Mills
and Prince Street brands were recently rated the number one and two brands,
respectively, for carpet design in the U.S. according to a 1995 survey of
interior designers published in the Floor Focus industry publication. (The
Company's Interface brand was rated number three.)
Marketing and Sales
The Company traditionally has focused its carpet marketing strategy on
major accounts, seeking to build lasting relationships with national and
multinational end-users, and on specifiers, such as architects, interior
designers, engineers and contracting firms who often make or significantly
influence the purchase decision. The acquisitions of Bentley Mills and Prince
Street significantly strengthened the Company's relationships with interior
designers and architects and has enhanced the Company's ability to target those
and other specifiers at the critical design stage of commercial projects. The
Company emphasizes sales to the commercial office sector, both new construction
and renovation, as well as to health care facilities, governmental institutions
and public facilities, including libraries, museums, convention and hospitality
centers, airports, schools and hotels. The Company's marketing efforts are
enhanced by the well-known brand names of its carpet products, including
Interface and Heuga in modular carpet, and Bentley Mills and Prince Street in
broadloom carpet.
An important part of the Company's marketing and sales efforts involves the
preparation of custom made samples of requested carpet designs, in conjunction
with the development of innovative product designs and styles that meet the
customer's particular needs. See "-- Business Strategy and Principal
Initiatives", above, and "-- Product Design and Development", below. The
Company's mass customization initiative, imple-
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<PAGE> 37
mented for its U.S. modular carpet operations in 1994, included the
simplification of the Company's carpet manufacturing operations and the purchase
of five custom sample production machines, which significantly improved its
ability to respond quickly and efficiently to requests for samples. The
turnaround time for the Company to produce made-to-order carpet samples to
customer specifications has been reduced from an average of 30 days in 1993 to
four days in 1995, and the average number of carpet samples produced per month
has increased from 90 per month in 1993 to over 1,000 per month in 1995. This
ability has significantly enhanced the Company's marketing and sales efforts,
and has increased the Company's volume of higher margin custom or made-to-order
sales.
The Company primarily uses its internal marketing and sales force of over
700 persons to market its carpet products, and it also uses independent dealers
to broaden its sales efforts. The Company maintains a Creative Services staff
that works directly with clients on major design projects. The efforts of these
personnel in helping with product selection, customer specifications and unique
approaches to design and styling issues are an important component of the
marketing aspect of the Company's mass customization approach. In order to
implement its global marketing efforts, the Company has product and design
studios in the United States, England, France, Germany, Spain, Norway, the
Netherlands, Australia, Japan and Singapore. The Company expects to continue to
open such offices in other locations around the world as necessary to capitalize
on emerging marketing opportunities.
As part of its full service approach to marketing, the Company maintains a
Field Services staff to provide on-site customer service for both in-progress
and completed installations. (Actual installation services are generally
performed by independent dealers.) In Europe, the Company has licensed selected
independent service contractors to provide carpet maintenance services under the
mark, IMAGESM (Interface Maintenance Advisory Group of Europe).
Manufacturing
The Company manufactures carpet in the United States, the Netherlands, the
United Kingdom, Canada and Australia. In addition to enhancing the Company's
ability to develop a strong local presence in foreign markets, having foreign
manufacturing operations enables the Company to supply its customers with carpet
from the location offering the most advantageous terms for delivery times,
exchange rates, duties and tariffs and freight expense. The Company believes
that the ability to offer consistent products and services on a worldwide basis
at attractive prices is an important competitive advantage in servicing
multinational customers seeking global supply relationships. Consistent with
this strategy, the Company in 1994 entered into a joint venture (owned 70% by
the Company) with Modernform Group Public Co., Ltd., a large Thailand-based
diversified building products company, to build a carpet tile manufacturing
facility in Thailand, which the Company expects to become operational in early
1996. The Company will consider additional locations for manufacturing
operations in other parts of the world as necessary to meet the demands of
customers in growing international markets. The Company is already exploring
establishment of manufacturing operations in Greater China.
The Company utilizes both conventional and technologically advanced methods
of carpet construction. The use of multiple manufacturing processes enables the
Company to manufacture carpet of a variety of designs and styles which can be
sold over a broad range of prices to different sectors of its markets.
Management believes that the Company is the only company with the current
ability to manufacture carpet utilizing any of three different fusion-bonding
processes, a tufting process and a needle-punching process. Tufted products
currently account for the substantial majority of the Company's carpet sales. In
1994, the Company made a major capital investment in high speed tufting
technology to improve its tufting operations.
Operations commenced at the Company's new Prince Street facility in
Cartersville, Georgia in November 1995. The design of the new facility is a
manifestation of the Company's EcoSense initiative. The state-of-the-art
facility will introduce new systems for energy efficiency, increased human
productivity, waste reduction and water purification, and will incorporate the
use of both recycled and non-toxic building materials. See "-- Environmental
Initiatives".
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<PAGE> 38
The Company has entered into arrangements with DuPont pursuant to which the
Company currently obtains a significant percentage of its requirements for
synthetic fiber (the principal raw material used in the Company's carpet
products). The Company believes that these arrangements, which reflect the
Company's effort to consolidate purchasing, permit the Company to obtain
favorable terms. However, there are adequate alternative sources of supply from
which the Company could fulfill its synthetic fiber requirements if its
arrangements with DuPont should change. Other raw materials used by the Company
are also readily available from a number of sources.
Competition
The commercial floorcovering industry is highly competitive. The Company
competes, on a global basis, in the sale of its modular and broadloom carpet
with other carpet manufacturers and manufacturers of vinyl and other types of
floorcovering. Although the industry recently has experienced significant
consolidation, a large number of manufacturers remain in the industry.
Management believes that the Company is the largest manufacturer of modular
carpet in the world, possessing a global market share that is more than two
times that of its nearest competitor. However, a number of domestic and foreign
competitors manufacture modular carpet as one segment of their business, and
certain of these competitors have financial resources in excess of the
Company's.
The Company believes the principal competitive factors in its primary
floorcovering markets are quality, design, service, broad product lines, product
life, marketing strategy, and pricing. In the commercial office market, modular
carpet competes with various floorcoverings, of which broadloom carpet is the
most common. The quality, service, design, longer average life, flexibility
(design options, selective rotation or replacement, use in combination with roll
goods) and convenience of the Company's modular carpet are its principal
competitive advantages, which are offset in part by its higher initial cost for
comparable grades of broadloom carpet. The acquisitions of Bentley Mills and
Prince Street, with their broadloom carpet product lines, have enhanced the
Company's competitive position by enabling the Company to offer one-stop
shopping to commercial carpet customers and thus to capture some sales that
would have gone to competitors.
In the health care facilities market, the Company's products compete
primarily with resilient tile. The Company believes that treatment of its
modular carpet with the Intersept antimicrobial chemical agent is a material
factor in its ability to compete successfully in the health care market and,
increasingly, in other commercial markets.
INTERIOR FABRICS
Products
The Company, through Guilford, designs, manufactures and markets specialty
fabrics for open plan office furniture systems and commercial interiors. Sales
of panel fabrics to original equipment manufacturers (OEMs) of movable office
furniture systems constitute the principal portion of the Company's interior
fabric operations (approximately 62% of total fabrics sales in fiscal 1994 and
55% in the first nine months of fiscal 1995). In addition, the Company produces
woven and knitted seating fabrics, wall covering fabrics that are paper-backed
for vertical wall surfaces or acrylic-backed for panel-wall application, ceiling
fabrics used to cover tiles or for stretch ceiling construction, and fabrics
used for vertical blinds in office interiors.
Open plan office furniture systems are typically panel-enclosed work
stations customized to particular work environments. The open plan concept
offers a number of advantages over conventional office designs, including more
efficient floor space utilization, reduced energy consumption and greater
flexibility to redesign existing space. Since carpet and fabrics are used in the
same types of commercial interiors, the Company's carpet and interior fabrics
operations are able to coordinate the color, design and marketing of both
product lines to their respective customers as part of the Company's "total
interior solution" approach.
The Company recently diversified and expanded significantly both its
product offerings and markets for interior fabrics. The Company's 1993
acquisition of the Stevens LinenTM lines added decorative, upscale upholstery
fabrics and specialty textile products to Guilford's traditional product
offerings. The Company's June 1995 acquisition of Toltec Fabrics, a manufacturer
and marketer of fabric for the contract and home
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<PAGE> 39
furnishings upholstery markets, enhanced the Company's presence in the contract
jobber market. In addition, the expected acquisition of the Intek division of
Springs Industries, a manufacturer experienced in the production of
lighter-weight panel fabrics, is expected to strengthen Guilford's capabilities
in that market. All of these developments complement Guilford's dominant
position with OEMs of movable office furniture systems.
The Company manufactures fabrics made of 100% polyester, as well as
wool-polyester blends and numerous other natural and man-made blends, which are
either woven or knitted. Its products feature a high degree of color
consistency, natural dimensional stability and fire retardancy, in addition to
their overall aesthetic appeal. All of the Company's product lines are color and
texture coordinated. The Company seeks continuously to enhance product
performance and attractiveness through experimentation with different fibers,
dyes, chemicals and manufacturing processes. Product innovation in the interior
fabrics market (similar to the floorcoverings market) is important to achieving
and maintaining market share. See "-- Business Strategy and Principal
Initiatives", above, and "-- Product Design and Development", below. In 1994,
the number of new products introduced by the Company nearly doubled the number
introduced in 1993.
The Company anticipates that future growth opportunities will arise from
the growing market for retrofitting services, where fabrics are used to re-cover
existing panels, and from the increased importance being placed on the aesthetic
design of office space, with upholstery fabric being the segment of its
non-panel fabric business with the greatest anticipated growth potential.
Management also believes that significant growth opportunities exist in
international sales, in domestic health care markets, in contract wall-coverings
and in the provision of ancillary textile processing services such as the
lamination of fabrics onto substrates for pre-formed panels.
Marketing and Sales
The Company's principal interior fabrics customers are OEMs of movable
office furniture systems. Guilford sells to essentially all of the major office
furniture manufacturers, with the majority of its sales being made to a small
number of companies located in the Grand Rapids, Michigan area (where domestic
office furniture manufacturing is concentrated). Guilford also sells to
manufacturers and distributors of wallcoverings, vertical blinds, cubicle
curtains, acoustical wallboards, ceiling tiles and residential furniture, and,
since the acquisition of Toltec Fabrics, to contract jobbers. The Guilford of
Maine, Stevens Linens and Toltec brand names are well-known in the industry and
enhance the Company's fabric marketing efforts.
The Company's sales to OEM customers are made through Guilford's own sales
force. Guilford's sales force also markets open line products for the
retrofitting and refurbishing segment of the industry directly to specifiers
under the trade name Guilford of Maine Textile Resources. In addition, the
Company uses independent dealers to assist with sales of its non-panel fabric
products.
Guilford's sales force also works closely with designers, architects,
facility planners and other specifiers who influence the purchasing decisions of
buyers in the interior fabrics segment. In addition to facilitating sales, the
resulting relationships also provide the Company with market and design ideas
that are incorporated into its development of product offerings. Guilford
maintains a design studio in Dudley, Massachusetts which facilitates
coordination between its in-house designers and the design staffs of major
customers. Guilford's design capabilities are expected to benefit from the
recent expansion of the scope of David Oakey's product design services to the
Company's fabrics business. See "-- Business Strategy and Principal
Initiatives", above, and "-- Product Design and Development", below.
The Company's U.S. sales offices are located in Saddle Brook, New Jersey
and Grand Rapids, Michigan. Guilford also has marketing and distribution
facilities in Canada and the United Kingdom, and sales representatives in Japan,
Hong Kong, Singapore, Korea and South Africa. The Company has sought
increasingly, over the past several years, to expand its export business and
international operations in the fabrics segment, both to accommodate the demand
of principal OEM customers that are expanding their overseas businesses, and to
facilitate additional coordinated marketing to multinational customers of the
Company's carpet business as part of the Company's "total interior solution"
approach.
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Manufacturing
The Company's fabrics manufacturing facilities are located in Maine,
Massachusetts, Michigan and North Carolina. The production of synthetic and wool
blended fabrics is relatively intricate and requires many steps. Raw fiber is
placed in pressurized vats, and dyes and flame retardants are then forced into
the fiber. Particular attention is devoted to the dyeing process, which requires
a high degree of expertise in order to achieve color consistency. Following
dyeing, the fiber is blended and proceeds through multiple steps, including
carding, spinning, cone winding, twisting, dressing, weaving and finishing. All
raw materials used by the Company are readily available from a number of
sources.
In response to a shift in Guilford's traditional panel fabric market toward
lighter weight, less expensive products, the Company implemented a major capital
investment program in 1994 (which included the construction of a new facility
and the acquisition of equipment) to enhance the efficiency and breadth of
Guilford's yarn manufacturing processes. The program, which is nearing
completion, is designed to improve Guilford's cost effectiveness in producing
such lighter weight fabrics, reduce manufacturing cycle time, and enable
Guilford to reinforce its product leadership position with its OEM customers.
The Company anticipates that the program will allow Guilford to achieve
significant cost savings in the production of its traditional fabric product
line.
The Company offers textile processing services through Guilford's Component
Technologies division in Grand Rapids, Michigan. Such services include the
lamination of fabrics onto substrates for pre-formed office furniture system
panels, facilitating easier and more cost effective assembly of the system
components by Guilford's OEM customers.
Competition
The Company competes in the interior fabrics market on the basis of product
design, quality, reliability, price and service. By electing to concentrate on
the open plan office furniture systems segment, Guilford has been able to
specialize its manufacturing capabilities, product offerings and service
functions, resulting in a leading market position. Through Guilford, the Company
is the largest U.S. manufacturer of panel fabric for use in open plan office
furniture systems.
Drawing on Guilford's dominant position in the panel fabric segment and
through its strategic acquisitions, the Company has been successfully
diversifying its product offerings for the commercial interiors market to
include a variety of non-panel fabrics, including upholstery, cubicle curtains,
wallcoverings, ceiling fabrics and window treatments. The competition in these
segments of the market is highly fragmented and includes both large, diversified
textile companies, several of which have greater financial resources than the
Company, as well as smaller, non-integrated specialty manufacturers. However,
the Company's capabilities and strong brand names in these segments should
enable it to continue to compete successfully.
CHEMICALS AND SPECIALTY PRODUCTS
The Company's Chemicals and Specialty Products Group is composed of three
subsidiaries: Interface Research Corporation and Rockland React-Rite, Inc.,
which are involved in the research, development, manufacture, marketing and
licensing of specialty chemical products, and Pandel, Inc., which produces vinyl
carpet tile backing and specialty mat and foam products. While the Chemicals and
Specialty Products Group's revenues represent a relatively small portion of
total Company revenues (approximately 3% in fiscal 1994), the group
traditionally has had the highest profit margins of any division. These
subsidiaries also serve as the research and development arm of the Company.
The Company's leading chemical product, in terms of applicability for the
commercial and institutional interiors market, is its proprietary antimicrobial
chemical compound, sold under the registered trademark Intersept(R). The Company
uses Intersept in many of its carpet and fabric products and has licensed
Intersept to other companies for use in a number of products that are
noncompetitive with the Company's products, such as paint, vinyl wallcoverings,
ceiling tiles and air filters. The licensing arrangements are a component of the
Company's Envirosense(R) program. See "Environmental Initiatives".
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The Company also produces and markets Protekt(2)(TM), a proprietary soil
and stain retardant treatment; water-proofing sheathing for the fiber optic
cable industry and other applications; acrylic monomers, for use in golf balls
and other industrial products; accelerators, used to speed the curing process
for rubber used in tires, hoses and other products; and Fatigue Fighter(R), an
impact-absorbing modular flooring system typically used where people stand for
extended periods.
The Company also recently began to market cable management access flooring
systems, a specialty product which it markets through its Interface
Architectural Resources business unit. The initial product offering, marketed
under the name Intercell(R), is a low-profile (total height of less than three
inches) cable management flooring system, particularly well suited for use in
the renovation of existing buildings. In early 1995, the Company acquired the
rights to the Interstitial Systems(TM) access flooring product, a patented,
multiple plenum system that serves to separate pressurized, climate-controlled
air flow from the electrical and telecommunications cables included within the
same access flooring system.
PRODUCT DESIGN AND DEVELOPMENT
Innovation and increased customization in product design and styling are
the principal focus of the Company's product development efforts. The Company
maintains an active research, development and design staff of approximately 100
persons, and also draws on the research and development efforts of its
suppliers, particularly in the areas of fibers, yarns and modular carpet backing
materials.
The Company's carpet design and development team is recognized as the
industry leader in carpet design and product engineering. Under the leadership
of David Oakey since January 1994 (pursuant to the Company's exclusive
consulting contract with Mr. Oakey's design firm Roman Oakey, Inc.), the
Company's U.S. modular carpet subsidiary created 26 new modular carpet designs
in 1994, the largest number in one year in the Company's history. The new
modular carpet designs, as well as broadloom designs introduced by Bentley Mills
and Prince Street, were well-received by the targeted specifier market, and
resulted in the Company receiving eight (out of a possible 12) U.S. carpet
industry design awards bestowed by the International Interior Design Association
in 1994, including all five awards in the carpet tile division. Mr. Oakey was
also instrumental in the Company's implementation of a new product development
concept -- "simple inputs for pretty outputs" -- resulting in the ability to
efficiently produce many products from a single yarn system. The Company's mass
customization production approach evolved, in major part, from this concept. In
addition to increasing the number and variety of product designs (which enables
the Company to increase high margin custom sales), the mass customization
approach increases inventory turns and reduces inventory levels (for both raw
materials and standard products) and its related costs because of the Company's
more rapid and flexible production capabilities.
For most of 1994, the Company's focus for Roman Oakey's product
design/production engineering services was principally on the Company's carpet
tile products for the U.S. market. Roman Oakey's design services are being
extended to the Company's international carpet operations and an affiliate of
that firm has been engaged to provide similar design services to the Company's
interior fabrics business (which already has significant capabilities in the
design area). The Company expects increased levels of innovation in product
design and development for those divisions to be achieved in the future.
ENVIRONMENTAL INITIATIVES
An important initiative of the Company over the past several years has been
the development of the Envirosense Consortium, an organization of companies
concerned with addressing workplace environmental issues, particularly poor
indoor air quality. The Consortium now totals 24 member organizations, including
interior products manufacturers (a number of which are licensees of the
Company's Intersept antimicrobial agent), professional service organizations and
design professionals.
In the latter part of 1994, the Company commenced a new industrial ecology
initiative called EcoSense, inspired in major part by the interest of important
customers concerned about the environmental implications of how they and their
suppliers do business. EcoSense is directed towards the elimination of energy
and raw materials waste in the Company's businesses, and, on a broader and more
long-term scale, the practical
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reclamation -- and ultimate restoration -- of shared environmental resources.
The initiative involves a commitment by the Company to learn to meet its raw
material and energy needs through recycling carpet and other petrochemical
products and harnessing benign energy sources, and to pursue the creation of new
processes to help sustain the earth's non-renewable natural resources.
The Company believes that its environmental initiatives are valued by its
employees and an increasing number of its important customers and provide a
competitive advantage in marketing products to such customers. The Company also
believes that the resulting long-term resource efficiency (reduction of wasted
environmental resources) will ultimately produce cost savings to the Company.
PATENTS AND TRADEMARKS
The Company owns numerous patents in the United States and abroad on its
modular carpet and manufacturing processes and on the use of its Intersept
antimicrobial chemical agent in various products. The duration of United States
patents is between 14 and 20 years from the dates of filing of a patent
application or issuance of the patent; the duration of patents issued in other
countries varies from country to country. The Company considers its know-how and
technology more important to its current business than patents and, accordingly,
believes that expiration of existing patents or nonissuance of patents under
pending applications would not have a material adverse effect on its operations.
However, the Company maintains an active patent and trade secret program in
order to protect its proprietary technology, know-how and trade secrets.
The Company also owns numerous trademarks in the United States and abroad.
Some of the more prominent registered trademarks of the Company include:
Interface, Heuga, Intersept, GlasBac, System Six, Guilford of Maine, Bentley and
Prince St. Technologies. Trademark registrations in the United States are valid
for a period of 10 years and are renewable for additional 10-year periods as
long as the mark remains in actual use. The duration of trademarks registered in
other countries varies from country to country.
PROPERTIES
The Company maintains its corporate headquarters in Atlanta, Georgia in
approximately 11,465 square feet of leased space. The following table lists the
Company's principal manufacturing facilities:
<TABLE>
<CAPTION>
LOCATION PRIMARY PRODUCTS FLOOR SPACE (SQ. FT.)
- ------------------------------------------------------ --------------------- ---------------------
<S> <C> <C>
Cartersville, Georgia................................. Broadloom carpet 210,000
City of Industry, California.......................... Broadloom carpet 539,641
LaGrange, Georgia..................................... Modular carpet 326,666
West Point, Georgia................................... Modular carpet 108,380
Athens, Tennessee..................................... Modular carpet 71,577
Scherpenzeel, the Netherlands......................... Modular carpet 292,142
Shelf, England........................................ Modular carpet 223,342
Sanquhar, Scotland.................................... Modular carpet 43,594
Craigavon, N. Ireland................................. Modular carpet 125,060
Ontario (Belleville), Canada.......................... Modular carpet 77,000
Picton, Australia..................................... Modular carpet 89,560
Bangkok, Thailand(1).................................. Modular carpet 66,072
Guilford, Maine(2).................................... Interior fabrics 511,441
Eastport, Maine....................................... Interior fabrics 78,135
Newport, Maine........................................ Interior fabrics 208,932
Dudley, Massachusetts................................. Interior fabrics 300,000
East Douglas, Massachusetts........................... Interior fabrics 301,772
Grand Rapids, Michigan................................ Interior fabrics 55,800
Greensboro, North Carolina............................ Interior fabrics 63,700
Cartersville, Georgia................................. Specialty products 124,500
Rockmart, Georgia..................................... Chemicals 37,500
Chatom, Alabama....................................... Chemicals 7,500
</TABLE>
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- ---------------
(1) Under construction, expected to be operational in early 1996.
(2) Includes new facility under construction, expected to be operational in
fourth quarter of fiscal 1995.
The Company owns all of its manufacturing facilities, except Guilford's
facility in Grand Rapids, Michigan; Pandel's facility in Cartersville, Georgia;
Bentley Mills' facilities in City of Industry, California, and Athens,
Tennessee; and Toltec's facility in Greensboro, North Carolina, which are
leased. The Bangkok, Thailand facility is owned by a joint venture in which the
Company has a 70% interest.
The Company maintains marketing offices in 83 locations in 42 countries and
distribution facilities in 17 locations in nine countries. Most of the marketing
locations and many of the distribution facilities are leased.
The Company believes that its manufacturing and distribution facilities,
and its marketing offices, are sufficient for its present operations. The
Company will continue, however, to consider the desirability of establishing
additional facilities and offices in other locations around the world as part of
its business strategy to meet expanding global market demands.
EMPLOYEES
At October 1, 1995, the Company employed a total of approximately 4,850
employees worldwide. Of such employees, approximately 2,100 were clerical,
sales, supervisory and management personnel and the balance were manufacturing
personnel.
Certain of the Company's production employees in Australia and the United
Kingdom are represented by unions. As required by the laws of the Netherlands, a
Works Council, the members of which are Company employees, is required to be
consulted by management with respect to certain matters relating to the
Company's operations in that country, such as any change in control of Interface
Europe B.V. (the Company's modular carpet facility based in the Netherlands),
and the approval of such Council is required for certain actions, including
changes in compensation scales or employee benefits. Management believes that
its relations with the Works Council, the unions and all of its employees are
good.
LEGAL PROCEEDINGS
The Company is not aware of any material pending legal proceedings
involving it or any of its property.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the executive
officers and directors of the Company as of October 1, 1995:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL POSITION(S)
- ---------------------------- --- ---------------------------------------------------
<S> <C> <C>
Ray C. Anderson............. 61 Chairman of the Board, President and Chief
Executive Officer
Charles R. Eitel............ 46 Executive Vice President (President and CEO,
Floorcoverings Group) and Director
Brian L. DeMoura............ 50 Senior Vice President and Director
David Milton................ 60 Senior Vice President and Director
Don E. Russell.............. 58 Senior Vice President and Director
C. Edward Terry............. 61 Senior Vice President and Director
John H. Walker.............. 51 Senior Vice President
Gordon D. Whitener.......... 32 Senior Vice President and Director
Daniel T. Hendrix........... 40 Senior Vice President-Finance, Chief Financial
Officer and Treasurer
David W. Porter............. 49 Senior Vice President, General Counsel and
Secretary
F. Colville Harrell......... 60 Vice President-Planning & Analysis
Alan S. Kabus............... 38 Vice President
John R. Wells............... 34 Vice President
Carl I. Gable............... 56 Director
Dr. June M. Henton.......... 55 Director
J. Smith Lanier, II......... 68 Director
Leonard G. Saulter.......... 69 Director
David G. Thomas............. 70 Director
Clarinus C. Th. van Andel... 65 Director
</TABLE>
Mr. Anderson founded the Company in 1973, and has served as the Company's
Chairman and Chief Executive Officer since its founding.
Mr. Eitel joined the Company in November 1993 as a Senior Vice President of
the Company and as President of Interface Americas, Inc. (a wholly-owned U.S.
holding company), with responsibility for the Company's modular carpet
operations throughout the Americas. In October 1994, Mr. Eitel was promoted to
Executive Vice President of the Company and appointed to the newly created
position of President and Chief Executive Officer of the Floorcoverings Group,
thereby assuming overall responsibility for the Company's worldwide carpet
business. From July 1987 until joining the Company, Mr. Eitel served as
President of the Floorcoverings Division (based in Dalton, Georgia) of Collins &
Aikman Corporation. Collins & Aikman is a diversified textile producer,
headquartered in North Carolina.
Mr. DeMoura became a Senior Vice President of the Company and President and
Chief Executive Officer of Guilford in March 1994. From August 1990 until
joining the Company, Mr. DeMoura served as President and CEO of Fashion Fabrics
of America, Inc., an Orangeburg, South Carolina based producer of fabrics for
the upscale men's and women's apparel markets. From December 1988 until January
1990, he served as Vice President and General Manager of the Yarn Sales Division
of Doran Textiles, Inc., a Shelby, North Carolina based producer of novelty
yarns for the apparel and home furnishing markets.
Mr. Milton joined the Company in January 1992 as a Senior Vice President.
Upon joining the Company, he also became President and Chief Executive Officer
of Interface Asia-Pacific, Inc. (a wholly-owned U.S. holding company) and
assumed responsibility for the Company's operations in Japan, China, Southeast
Asia, Australia, New Zealand and the Pacific Islands. Prior to joining the
Company, Mr. Milton was an independent management consultant.
42
<PAGE> 45
Mr. Russell, a co-founder of the Company, has served in various executive
capacities since 1973. He became a Senior Vice President in 1986. He currently
serves as President and Chief Executive Officer of the Company's Architectural
Resources business unit. Mr. Russell served as President and CEO of Interface
Europe, Inc. (the Company's U.S. holding company for its subsidiaries in Europe)
and Interface Europe B.V. from 1991 to August 1995, and as Managing Director of
Interface Europe Ltd. (the Company's U.K. modular carpet subsidiary) from 1989
to August 1995.
Mr. Terry has been a Senior Vice President since joining the Company in
1987. He has served as President and Chief Executive Officer of Rockland
React-Rite, Interface Research Corporation and Pandel since 1987, 1988 and 1990,
respectively. He served as President and CEO of Interface Flooring Systems,
Inc., the Company's principal U.S. modular carpet subsidiary based in LaGrange,
Georgia ("IFS"), and Interface Americas from February 1991 until November 1993.
Mr. Walker joined the Company in 1988 as a result of the Company's
acquisition of Heuga Holding B.V. (now Interface Europe B.V.), for which he had
worked since 1972. At the time of the acquisition, Mr. Walker was serving as
Vice President-Sales and Marketing of Heuga Holding, and he continued in that
position with Interface Europe until becoming Senior Vice President-Sales and
Marketing in February 1995. Mr. Walker was promoted in August 1995 to Senior
Vice President of the Company and President and Chief Executive Officer of
Interface Europe.
Mr. Whitener joined the Company in November 1993 as Senior Vice
President-Sales & Marketing of IFS. In October 1994, he became a Senior Vice
President of the Company and the President and Chief Executive Officer of
Interface Americas, assuming responsibility for Prince Street and the Company's
modular carpet operations throughout the Americas. In July 1995, Mr. Whitener
also assumed corporate responsibility for Bentley Mills. From April 1988 until
joining the Company, Mr. Whitener served in various sales management capacities
with Collins & Aikman (Floorcoverings Division), including Vice President-
Marketing from March 1993.
Mr. Hendrix joined the Company as Financial Manager in 1983. He became
Treasurer of the Company in 1984, Chief Financial Officer in 1985, Vice
President-Finance in 1986, and Senior Vice President-Finance in 1995.
Mr. Porter has served as Vice President and General Counsel since joining
the Company in 1986, and as Secretary since 1987. He became a Senior Vice
President in 1995.
Mr. Harrell joined the Company as a planning analyst in 1984, and became
Vice President-Planning & Analysis in 1986. He served as Senior Vice
President-Operations of IFS from September 1992 until October 1994, at which
time he resumed his current position with the parent Company.
Mr. Kabus joined the Company in 1993 as a result of the Company's
acquisition of Bentley Mills, which he had joined as a salesman in 1984. At the
time of the acquisition, Mr. Kabus was serving as Regional Sales
Manager-Northeast Region of Bentley Mills. He was promoted to Vice President of
the Company and President and Chief Executive Officer of Bentley Mills in July
1995.
Mr. Wells joined the Company in February 1994 as Vice President-Sales of
IFS and was promoted to Senior Vice President-Sales and Marketing of IFS in
October 1994. He was promoted to Vice President of the Company and President and
Chief Executive Officer of IFS in July 1995. Prior to joining the Company, Mr.
Wells worked with the commercial division of Shaw Industries for 13 years, where
he was a key member of the management team that started the Networx Modular
Carpet Division of that company and where he also held various sales management
responsibilities for the Shaw Commercial and Stratton Commercial Divisions.
Mr. Gable, a director since March 1984, is an attorney-at-law in the
Atlanta law firm of Booth, Owens & Jospin. Mr. Gable was a private investor and
business consultant from January 1991 until joining Booth, Owens & Jospin in
September 1992. From June 1985 to December 1990 he served as Vice Chairman of
Intermet Corporation, a multinational iron castings manufacturer.
43
<PAGE> 46
Dr. Henton was elected as a director in February 1995. Since 1985, Dr.
Henton has served as Dean of the School of Human Sciences at Auburn University,
which includes a program in interior environments. Dr. Henton, who received her
Ph.D. from the University of Minnesota, is an accomplished author and lecturer
on child and family issues. She has provided leadership for a wide variety of
professional, policy and civic organizations. As a charter member of the
Operating Board of the National Textile Center, Dr. Henton has significant
expertise in the integration of academic and research programs spanning the
textile industrial complex.
Mr. Lanier has been a director since 1973. He is Chairman and Chief
Executive Officer of J. Smith Lanier & Co., a general insurance agency based in
West Point, Georgia. Mr. Lanier also serves as a director of Intercel, Inc., a
cellular telephone company based in West Point, and National Vision Associates,
Ltd., a Lawrenceville, Georgia based operator of retail optical centers. He also
serves on the Boards of numerous nonprofit organizations.
Mr. Saulter has been a director since July 1987. He served as a Senior Vice
President of the Company from October 1987 until June 1991. He served as
President of Guilford until January 1990, and as Guilford's Chairman from
January 1990 until his retirement in June 1991. In October 1993, Mr. Saulter
resumed the position of President of Guilford on an interim basis, serving until
March 1994.
Mr. Thomas, a director since February 1991, is Chairman of The Fleming
Enterprise Investment Trust PLC, an investment company located in the United
Kingdom. Mr. Thomas has served as a director of Interface Europe Ltd. since
October 1985. Mr. Thomas also serves as a director of Dover Corporation and
Carlisle Companies, Inc., two U.S. based companies involved in the industrial
equipment business.
Mr. van Andel, who has been a director since October 1988, is a partner in
the law firm of Schut & Grosheide, Amsterdam. He has served as Chairman of the
supervisory board of Interface Europe B.V. since 1984.
The Board of Directors of the Company currently consists of 13 directors.
The holders of the Company's Class B Common Stock are entitled to elect a
majority (seven) of the Board members, as long as the outstanding shares of
Class B Common Stock equal at least ten percent (10%) of the combined number of
issued and outstanding shares of Class A and Class B Common Stock, and the
holders of the Company's Class A Common Stock are entitled to elect the
remaining (six) directors. As a result of a voting agreement among Mr. Anderson
and several other holders of Class B Common Stock, Mr. Anderson has the ability
to elect a majority of the Board members. See "Security Ownership of Management
and Principal Holders -- Class B Stock Voting Agreement". The term of office for
each director continues until the next annual meeting of shareholders and until
his or her successor, if there is to be one, has been elected and has qualified.
Executive officers serve at the pleasure of the Board of Directors.
44
<PAGE> 47
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
paid by the Company and its subsidiaries to the Company's Chief Executive
Officer and each of the four other most highly compensated executive officers of
the Company (based on salary and bonus earned in fiscal 1994) for each of the
last three fiscal years of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------ ------------
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) OPTIONS (#) ($)
- --------------------------------- ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Ray C. Anderson,................. 1994 $315,000 $250,000 N/A(1) 20,000 $1,848(5)
Chairman, President and Chief 1993 250,000 149,015 N/A(1) -0- 1,799(5)
Executive Officer 1992 242,500 110,144 N/A(1) -0- 1,746(5)
Charles R. Eitel,................ 1994 299,167 240,000 N/A(1) -0- -0-
Executive Vice President 1993 42,364(2) 175,000(2) N/A(1) 100,000 -0-
(President & CEO, 1992 N/A(2) N/A(2) N/A(1) N/A(2) N/A(2)
Floorcoverings Group)
Royce R. Renfroe,................ 1994 225,000 225,000 N/A(1) -0- 15,595(5)
Senior Vice President 1993 131,250(3) 153,563(3) N/A(1) 40,000 -0-
1992 N/A(3) N/A(3) N/A(1) N/A(3) N/A(3)
Don E. Russell,.................. 1994 250,000 200,000 N/A(1) 40,000 1,848(5)
Senior Vice President 1993 200,000 50,490 N/A(1) -0- 1,799(5)
1992 195,000 50,000 N/A(1) -0- 1,746(5)
David Milton,.................... 1994 373,061(4) 30,000 N/A(1) -0- 1,848(5)
Senior Vice President 1993 289,319(4) 67,548 N/A(1) -0- 1,799(5)
1992 270,609(4) 30,000 N/A(1) 100,000 -0-
</TABLE>
- ---------------
(1) Amount does not exceed 10% of the salary and bonus paid to such individual.
(2) Mr. Eitel joined the Company in November 1993. The bonus paid to Mr. Eitel
in 1993 was paid pursuant to the terms of Mr. Eitel's employment agreement.
(3) Mr. Renfroe joined the Company in June 1993 in connection with the Bentley
Mills acquisition. (He resigned from the Company in July 1995.)
(4) Includes $173,061 (1994), $139,319 (1993) and $120,609 (1992) in
extraordinary remuneration related to assignment in Hong Kong.
(5) Represents the Company's matching contribution (made in the form of Class A
Common Stock) under the Company's 401(k) Savings and Investment Plans. Mr.
Renfroe's figure also includes a $1,500 profit sharing contribution under
the 401(k) Plan in effect for Bentley Mills, and $12,595 paid for the
premium on a whole life insurance policy (a portion of which will be repaid
to the Company under the terms of the policy).
45
<PAGE> 48
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL HOLDERS
The following table sets forth, as of October 1, 1995 (unless otherwise
indicated), beneficial ownership of each class of the Company's Common Stock by:
(i) each person known by the Company to be the beneficial owner of more than 5%
of any such class of the Company's voting securities, (ii) the Company's Chief
Executive Officer and four other most highly compensated executive officers
(based on fiscal 1994 compensation), and (iii) all executive officers and
directors of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
TITLE NATURE OF PERCENT CLASS A
BENEFICIAL OWNER(1) OF BENEFICIAL OF AFTER
(AND BUSINESS ADDRESS OF 5% OWNERS) CLASS OWNERSHIP(2) CLASS(2) CONVERSION(3)
- ----------------------------------------------- ------- ------------ -------- -------------
<S> <C> <C> <C> <C>
Ray C. Anderson................................ Class A 15,826(4) * 9.7%
2859 Paces Ferry Road, Suite 2000 Class B 1,616,463(5) 53.9%
Atlanta, Georgia 30339
Ariel Capital Management, Inc.................. Class A 3,029,089(6)(7) 19.8
307 N. Michigan Avenue
Chicago, Illinois 60601
David L. Babson & Company, Inc................. Class A 1,260,100(6)(8) 8.2
One Memorial Drive
Cambridge, Massachusetts 02142
FMR Corp....................................... Class A 1,127,634(6)(9) 7.3
82 Devonshire Street
Boston, Massachusetts 02109
Brian L. DeMoura............................... Class B 8,000(10) * *
Charles R. Eitel............................... Class A 7,956(11) * *
Class B 75,000(11) 2.4
David Milton................................... Class A 8,913(12) * *
Class B 80,000(12) 2.6
Don E. Russell................................. Class A 9,692(13) * *
Class B 84,732 2.8
All executive officers and directors as a group Class A 263,840(14) 1.7 13.3
(17 persons)................................. Class B 2,074,641(15) 65.1
</TABLE>
- ---------------
* Less than 1%.
(1) Does not include First Capital Corporation of Chicago which owns 167,500
shares of the Company's Series A Cumulative Convertible Preferred Stock,
which are convertible into 1,132,713 shares of the Company's Class A Common
Stock.
(2) Shares of Class B Common Stock are convertible, on a share-for-share basis,
into shares of Class A Common Stock. The number of Class A shares indicated
as beneficially owned by each person or group does not include Class A
shares such person or group could acquire upon conversion of Class B
shares. The Percent of Class is calculated assuming that the beneficial
owner has exercised any conversion rights, options or other rights to
subscribe held by such beneficial owner that are exercisable within 60 days
(not including Class A shares that could be acquired upon conversion of
Class B shares), and that no other conversion rights, options or rights to
subscribe have been exercised by anyone else.
(3) Represents the percent of Class A shares the named person or group would
beneficially own if such person or group, and only such person or group,
converted all Class B shares he or they own into Class A shares.
(4) Includes 4,000 shares held by Mr. Anderson's wife and 11,826 shares
issuable upon conversion of Convertible Debentures held by The Ray C.
Anderson Foundation, Inc. (a nonprofit corporation of
46
<PAGE> 49
which Mr. Anderson is a director). Mr. Anderson disclaims beneficial
ownership of the shares owned by his wife.
(5) Includes 4,000 shares that Mr. Anderson has the right to acquire pursuant
to exercisable stock options. Does not include shares of Class B Common
Stock subject to the Voting Agreement described below that are not owned of
record by Mr. Anderson.
(6) Based upon information included in statements provided to the Company by
such beneficial owners. Information is as of December 31, 1994 for David L.
Babson & Company, Inc. ("Babson") and FMR Corp. ("FMR"), and as of
September 30, 1995 for Ariel Capital Management, Inc. ("Ariel").
(7) All such shares are held by Ariel for the accounts of clients, and Ariel
disclaims beneficial ownership of such shares. Ariel, in its capacity as
investment advisor, has sole voting power with respect to 2,698,839 shares
and shared voting power with respect to 33,800 shares. Ariel has sole
investment power with respect to all such shares. (John W. Rogers, Jr.,
President and a controlling person of Ariel, may be deemed to beneficially
own all such shares, but he disclaims such beneficial ownership.)
(8) Babson, in its capacity as investment advisor, has sole voting power with
respect to 722,200 shares and shared voting power with respect to 537,900
shares. Babson has sole investment power with respect to all such shares.
(9) Includes 171,584 shares issuable upon conversion of Convertible Debentures.
Fidelity Management & Research Company and Fidelity Management Trust
Company, wholly-owned subsidiaries of FMR, beneficially own such shares in
their respective capacities as investment advisor and investment manager to
several investment companies and institutional investors. FMR has sole
voting power with respect to 252,369 shares. FMR has sole investment power
with respect to all such shares. (Edward C. Johnson, III, Chairman and a
controlling person of FMR, may be deemed to have sole voting power with
respect to 252,369 shares and sole investment power with respect to all
such shares, as well. Mr. Johnson, together with various Johnson family
members and trusts for the benefit of Johnson family members, form a
controlling group with respect to FMR.)
(10) All such shares may be acquired by Mr. DeMoura pursuant to exercisable
stock options.
(11) Mr. Eitel has the right to acquire 2,956 of such Class A shares upon
conversion of Convertible Debentures and all such Class B shares pursuant
to exercisable stock options.
(12) Mr. Milton has the right to acquire 5,913 of such Class A shares upon
conversion of Convertible Debentures and all such Class B shares pursuant
to exercisable stock options.
(13) Includes 8,000 shares that Mr. Russell has the right to acquire pursuant to
exercisable stock options.
(14) Includes an aggregate of 172,782 shares that all executive officers and
directors as a group have the right to acquire pursuant to exercisable
stock options (158,000 shares) and upon conversion of Convertible
Debentures (14,782 shares).
(15) Includes 194,000 shares that all executive officers and directors as a
group have the right to acquire pursuant to exercisable stock options.
CLASS B STOCK VOTING AGREEMENT
Certain holders of Class B Common Stock of the Company have entered into a
voting agreement (the "Voting Agreement") providing for certain of their Class B
shares to be voted as a block in the manner determined by the record owners of a
majority of the shares subject to the agreement. The Voting Agreement expires on
April 13, 1998. The shares of Class B Common Stock subject to the agreement
exceed a majority of the outstanding shares of Class B Common Stock. Ray C.
Anderson owns a majority of the shares subject to the agreement, and thus can
direct the voting of the entire block. (The Voting Agreement also gives Mr.
Anderson the right of first refusal to purchase any shares subject to the
agreement that are proposed to be sold in the public market or in a private
transaction.) Under the terms of the Class B Common Stock, its special voting
rights to elect a majority of the Board members would terminate irrevocably if
the total outstanding shares of Class B Common Stock ever comprises less than
ten percent (10%) of the Company's total issued and outstanding shares of Class
A and Class B Common Stock. On October 1, 1995, the outstanding Class B shares
constituted 16.4% of the total outstanding Class A and Class B shares.
47
<PAGE> 50
DESCRIPTION OF CERTAIN INDEBTEDNESS AND OTHER OBLIGATIONS
The following summarizes the material long-term indebtedness and certain
other material obligations of the Company and its subsidiaries. The Company's
indebtedness is substantial in relation to its shareholders' equity. See
"Capitalization". The summary is not a complete description of such indebtedness
or obligations. Copies of the material agreements relating to such indebtedness
have been filed with the Commission and the description set forth below is
qualified in its entirety by reference to such agreements, each of which will be
furnished to a prospective investor upon its request.
REVOLVING CREDIT AND TERM LOAN FACILITY
On June 30, 1995 the Company amended and restated its existing credit
facilities pursuant to an Amended and Restated Credit Agreement (the "Credit
Agreement"), by and among the Company, Interface Europe Ltd. (a wholly-owned
English subsidiary of the Company), and Interface Scherpenzeel B.V. (a
wholly-owned Dutch subsidiary of the Company), each as a "Borrower"; Trust
Company Bank (now SunTrust Bank, Atlanta) and The First National Bank of
Chicago, as Co-Agents; and the other lenders signatory thereto. The Credit
Agreement provides for a $140 million domestic revolving credit facility, a $60
million multicurrency revolving credit facility, and term loans aggregating $50
million. The maturity date for all loans made pursuant to the domestic revolving
credit facility and the multicurrency revolving credit facility is June 30,
1999. The final maturity date for the term loans is December 31, 2001, with a
mandatory prepayment of $25 million being due and payable on December 29, 2000.
The domestic revolving credit facility also includes two subfacilities -- a
letter of credit facility in the amount of $40 million and a domestic swing line
credit facility in the amount of $5 million. The multicurrency credit facility
also provides for a multicurrency swing line subfacility in the amount of $5
million.
The credit facilities evidenced by the Credit Agreement are secured (i) by
a pledge of all of the outstanding capital stock of each of the Company's
principal domestic operating subsidiaries, and (ii) by a pledge of up to 66% of
the outstanding capital stock of the Company's operating subsidiaries organized
and incorporated in jurisdictions outside of the United States. In addition, the
principal domestic subsidiaries of the Company have guaranteed all of the
Company's and the other Borrowers' obligations under the Credit Agreement. At
the election of a Borrower, the Borrower may select a number of different rate
options and interest periods for each borrowing, most of which are tied to
market indices and some of which are determined by a bid process. The applicable
non-bid interest rates are adjusted quarterly based on the Company's "leverage
ratio" (the ratio of funded debt to total capitalization) and the Company's
"interest coverage ratio" (the ratio of EBITA to interest expense). At October
1, 1995, approximately $206.4 million was outstanding under the Credit
Agreement, such amounts bearing interest at a blended rate of 6.9%.
The Credit Agreement limits the Company's ability to, among other things,
incur indebtedness or contingent obligations, to make acquisitions of or invest
in businesses (in excess of a specified amount), to create or incur liens on
assets, to pay dividends, and purchase or redeem any of the Company's stock
(other than as permitted in the Credit Agreement). The Credit Agreement requires
that the Company meet certain financial tests, as well as comply with certain
other reporting, affirmative and negative covenants. If the Company or any other
Borrower fails to perform or breaches any of its affirmative or negative
covenants under the Credit Agreement, or if other limited, specified events
occur (such as a bankruptcy or similar event), after giving effect to any
applicable notice and right to cure provisions, an event of default will exist
under the Credit Agreement. If an event of default exists and is continuing, the
Co-Agents may, and upon the written request of a specified percentage of the
lenders under the Credit Agreement shall, (i) declare all commitments of the
lenders under the Credit Agreement terminated and (ii) declare the principal of
and any accrued interest on the loans made under the Credit Agreement, as well
as any other amounts owing thereunder, immediately due and payable. The Credit
Agreement also provides that should certain events resulting in a change of
control of the Company occur, the lenders shall be entitled to require
prepayment of all of the loans outstanding under the Credit Agreement, as well
as any and all other obligations thereunder.
The Credit Agreement was amended to permit the offering of the Outstanding
Notes and the redemption of the Convertible Debentures, and generally to conform
the principal covenants of the Credit Agreement to those contained in the
Indenture.
48
<PAGE> 51
CERTAIN OTHER LINES OF CREDIT OBLIGATIONS
The Company maintains approximately $27.0 million (denominated in U.S.
dollars and other currencies) in revolving lines of credit through several of
its subsidiaries (both domestic and foreign), some of which are uncommitted,
demand lines of credit. In general, interest is charged at the prime lending
rate of the lenders extending such credit. At October 1, 1995, the equivalent of
approximately $1.6 million was outstanding under these lines of credit.
SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
The Company issued 250,000 shares of its Series A Cumulative Convertible
Preferred Stock, $1.00 par value, with a face value of $100.00 per share (the
"Series A Preferred Stock") in conjunction with the Company's acquisition of
Bentley Mills in June 1993. As of October 1, 1995, all of such shares of Series
A Preferred Stock were outstanding. The holders of the Series A Preferred Stock
are entitled to a preferred cash dividend of 7% per annum on the sum of (i) the
face value of each share of Series A Preferred Stock and (ii) the amount, if
any, of previously accrued and due but unpaid dividends. Dividends are payable
quarterly whether or not declared. Shares of the Series A Preferred Stock are
non-voting, except as required by law or in limited circumstances to protect
their preferential rights.
Shares of the Series A Preferred Stock are convertible into shares of the
Company's Class A Common Stock at the rate of one share of Class A Common Stock
for each $14.7875 of face value and accrued but unpaid dividends with respect to
Series A Preferred Stock. The Series A Preferred Stock became redeemable in
whole or in part at the option of the Company on June 1, 1995, at a redemption
price equal to face value plus accrued dividends; however, through May 31, 1996,
the Series A Preferred Stock may be redeemed only if the market price (defined
as the average price over the preceding 10 trading days) on the date notice of
redemption is sent by the Company exceeds 120% of the effective conversion price
per whole share of Series A Preferred Stock on such date. Commencing May 31,
2003, each record holder of a share of Series A Preferred Stock will have the
right to require the Company to redeem at the redemption price some or all of
such holder's Series A Preferred Stock, subject to certain limitations.
ACCOUNTS RECEIVABLE SECURITIZATION PROGRAM
In August 1995, the Company commenced an accounts receivable securitization
program (the "Securitization Program") that provides the Company up to $65.0
million of funding from the sale of trade accounts receivable generated by
certain of its operating subsidiaries. As of October 1, 1995, Interface Flooring
Systems, Inc., Guilford and Bentley Mills (collectively, the "Originators") were
the only subsidiaries participating in the Securitization Program. In connection
with the Securitization Program, the Company formed a single-purpose,
wholly-owned subsidiary, Interface Securitization Corporation ("ISC"), to serve
as the purchaser of accounts receivable of the Originators. ISC, in turn,
entered into (i) a receivables purchase agreement (the "Primary Purchase
Agreement") with Special Purpose Accounts Receivable Cooperative Corporation
(the "Primary Purchaser") and Canadian Imperial Bank of Commerce as servicing
agent for the Primary Purchaser, both unaffiliated with the Company, and (ii) a
separate receivables purchase agreement (the "Back-Stop Purchase Agreement")
with a group of financial institutions (collectively, the "Back-Stop
Purchasers") and the Company. The Back-Stop Purchasers are substantially the
same as the lenders under the Company's Credit Agreement. (The Primary Purchaser
and the Back-Stop Purchasers are sometimes referred to collectively as the
"Purchasers".)
Under the Securitization Program, ISC purchases and pools, on a daily
basis, accounts receivable and related rights (the "Pool") from the Originators
for a cash purchase price equal to the outstanding balance of the receivables at
the time of sale (net of reserves for doubtful accounts). The Primary Purchaser,
in turn, acquires from ISC an undivided percentage ownership interest in the
Pool by investing cash in ISC, up to a maximum investment of $65.0 million,
which entitles it to an agreed upon investment yield and to the repayment of its
investment if it ceases participating in the Securitization Program. Daily
collections on the receivables in the Pool are controlled and administered by
the Company acting as collection agent for ISC and the Primary Purchaser, and
after reservation of the Primary Purchaser's accrued investment yield, are
automatically reinvested and used to purchase new receivables from the
Originators. The Primary Purchaser's
49
<PAGE> 52
ownership interest in the Pool is recalculated to reflect the effect of each
day's collections and reinvestment. In the absence of unanticipated events (such
as a cessation of reinvestments as discussed below), the Primary Purchaser's
percentage ownership interest in the Pool will generally be equal to 100%, even
though the aggregate balance of the receivables in the Pool will be
significantly greater than the amount invested by the Primary Purchaser.
As of October 1, 1995, the Primary Purchaser's investment in the Pool was
$37.9 million; the aggregate balance of the receivables in the Pool on that date
was $67.6 million; and the percentage amount of the Primary Purchaser's
undivided ownership interest in the Pool was 100%.
The Primary Purchase Agreement specifies several events of termination that
would permit the Primary Purchaser to take control of collections on the
receivables in the Pool. Moreover, the Primary Purchaser has the right, on three
business days' prior written notice, to cease reinvestment of its share of daily
collections and to receive such collections until its investment is fully
recovered.
If the Primary Purchaser ceases making reinvestments in the Pool, so that
its outstanding investment becomes owing, ISC could seek to refinance the
Primary Purchaser's investment by selling comparable undivided ownership
interests in the Pool to the Back-Stop Purchasers pursuant to the Back-Stop
Purchase Agreement. The Back-Stop Purchase Agreement would operate in
substantially the same manner as the Primary Purchase Agreement, except that the
Back-Stop Purchasers have committed to invest only $47.5 million in the Pool
(which may be less than the investment made and owing to the Primary Purchaser).
If an event of termination does occur, the Back-Stop Purchasers would be
entitled to cease reinvestments and to receive all daily collections until their
investment in the Pool has been fully recovered. As of October 1, 1995, the
Back-Stop Purchasers had no investment in the Pool.
If an event of termination existed under the Back-Stop Purchase Agreement
at the time ISC sought to refinance the Primary Purchaser's investment by
selling ownership interests in the Pool to the Back-Stop Purchasers, they would
not be obligated thereunder to purchase interests in the Pool. In that event (or
if the Back-Stop Purchasers were to commence investments and then cease
reinvestments because of an event of termination), the Company expects that it
would seek to borrow a sufficient sum under its Credit Agreement to permit ISC
to repay all amounts owing to the Purchasers with respect to their respective
ownership interests in the Pool. However, the occurrence of certain events of
termination under the Primary Purchase Agreement or the Back-Stop Purchase
Agreement may also constitute events of default under the Credit Agreement,
which would permit the lenders thereunder to withhold future loans to the
Company. If the Company were not able to borrow sufficient sums under the Credit
Agreement (or otherwise obtain the funding necessary) to refinance the
Purchasers' respective investments in the Pool, then control of collections on
the receivables in the Pool would remain with the Purchasers until they recover
their investments in the Pool. Moreover, the Originators would be obligated to
continue to sell their receivables to ISC for at least an additional 90 days
following an event of termination if any investment by the Purchasers has not
been repaid, even though ISC may not have the cash flow to pay for the
receivables because of a cessation of the reinvestment of collections proceeds.
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DESCRIPTION OF THE EXCHANGE NOTES
The Outstanding Notes were issued under an indenture dated as of November
15, 1995 (the "Indenture") among the Company, the Guarantors (as defined herein)
and First Union National Bank of Georgia, as trustee (the "Trustee"). The
Exchange Notes will also be issued under the Indenture, and the Indenture will
be qualified under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), upon the effectiveness of the Registration Statement of which
this Prospectus is a part. The form and terms of the Exchange Notes will be the
same as the Outstanding Notes, except that the issuance of the Exchange Notes
has been registered under the Securities Act and thus the Exchange Notes will
not bear legends restricting their transferability. The Exchange Notes will
evidence the same indebtedness as the Outstanding Notes, will be entitled to the
benefits of the Indenture, and will be treated as a single class under the
Indenture with any Outstanding Notes that remain outstanding after the Exchange
Offer.
The following summary of the material provisions of the Indenture does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the provisions of the Indenture (a copy of which has been filed
with the Commission as an exhibit to the Registration Statement), including the
definitions of certain terms contained therein and those terms made part of the
Indenture by reference to the Trust Indenture Act. The definitions of certain
capitalized terms used in the following summary are set forth below under
"-- Certain Definitions".
GENERAL
The Notes are unsecured senior subordinated guaranteed obligations of the
Company limited to $125,000,000 aggregate principal amount. The Notes are
guaranteed on a joint and several and senior subordinated basis by each of the
Guarantors pursuant to the Guarantees described below. The Outstanding Notes
were, and the Exchange Notes will be, issued only in registered form without
coupons, in denominations of $1,000 and integral multiples thereof. Principal
of, premium, if any, and interest on the Notes are payable, and the Notes may be
transferable, at the office of the Company's agent in Atlanta, Georgia located
at the corporate trust office of the Trustee. In addition, interest may be paid,
at the option of the Company, by check mailed to the person entitled thereto as
shown on the security register. No service charge will be made for any transfer,
exchange or redemption of Notes, except in certain circumstances for any tax or
other governmental charge that may be imposed in connection therewith.
Substantially all of the operations of the Company are conducted by
Subsidiaries of the Company. Accordingly, the Company is dependent upon the
distribution of the earnings of its Subsidiaries, whether in the form of
dividends, advances or payments on account of intercompany obligations, to
service its debt obligations. The Subsidiaries of the Company that are not
Material U.S. Subsidiaries will not guarantee the Notes. Therefore, the
Indebtedness represented by the Notes is effectively subordinate in right of
payment to all obligations of such Subsidiaries. In addition, the claims of the
Noteholders are subject to the prior payment of all liabilities for Guarantor
Senior Indebtedness (whether or not for borrowed money) of Subsidiaries which
are Guarantors and are effectively subordinate in right of payment to all
existing and future secured Indebtedness of the Company and its Subsidiaries.
There can be no assurance that, after providing for all prior claims, there
would be sufficient assets available from the Company and its Subsidiaries to
satisfy the claims of the Noteholders. See "Risk Factors -- Subordination of the
Notes; Holding Company Structure".
MATURITY, INTEREST AND PRINCIPAL
The Notes will mature on November 15, 2005. The Outstanding Notes bear
interest at the rate of 9 1/2% per annum from November 21, 1995, the date of
initial issuance. The Exchange Notes will bear interest at the rate of 9 1/2%
per annum from their date of issuance, except that Holders of Exchange Notes
will also receive interest on May 15, 1996 from the date of initial issuance of
the Outstanding Notes to the date of surrender of such Outstanding Notes in
exchange for Exchange Notes. Subject to the preceding sentence, interest on the
Notes will be payable semi-annually on each May 15 and November 15, commencing
May 15, 1996, to the holders of record of Notes at the close of business on the
May 1 and November 1 immediately preceding such interest payment dates. Interest
on the Notes will accrue from the most recent date to which interest has been
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<PAGE> 54
paid or, if no interest has been paid, from the original date of issuance (the
"Issue Date"). Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
The Notes are not entitled to the benefit of any mandatory sinking fund.
REDEMPTION AND OFFER TO PURCHASE
Optional Redemption. The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after November 15, 2000 on not
less than 30 nor more than 60 days' prior notice, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest, if any, to the redemption date, if redeemed during the 12-month
period beginning November 15 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
-------------------------------------------------------------------------- ----------
<S> <C>
2000...................................................................... 104.750%
2001...................................................................... 103.167%
2002...................................................................... 101.583%
2003 and thereafter....................................................... 100.000%
</TABLE>
Offer to Purchase upon a Change of Control and Certain Asset Sales. In
addition, as described below, the Company (a) is obligated upon the occurrence
of a Change of Control, to make an offer to purchase all outstanding Notes at a
purchase price of 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of purchase, and (b) may be obligated to make an
offer to purchase Notes with a portion of the net cash proceeds of certain sales
or other dispositions of assets at a purchase price of 100% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
purchase. See "-- Certain Covenants -- Change of Control" and "-- Disposition of
Proceeds of Asset Sales".
Selection and Notice. In the event that less than all of the Notes are to
be redeemed at any time, selection of such Notes for redemption will be made by
the Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed or, if the Notes are
not then listed on a national securities exchange, on a pro rata basis, by lot
or by such method as the Trustee shall deem fair and appropriate; provided,
however, that no Notes of a principal amount of $1,000 or less shall be redeemed
in part. Notice of redemption shall be mailed by first-class mail at least 30
but not more than 60 days before the redemption date to each holder of Notes to
be redeemed at its registered address. If any Note is to be redeemed in part
only, the notice of redemption that relates to such Note shall state the portion
of the principal amount thereof to be redeemed. A new Note in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the holder
thereof upon surrender for cancellation of the original Note. On and after the
redemption date, interest will cease to accrue on Notes or portions thereof
called for redemption, unless the Company defaults in the payment of the
redemption price therefor.
SUBORDINATION
The indebtedness evidenced by the Notes is subordinated in right of payment
to the prior payment in full in cash or Cash Equivalents of all existing and
future Senior Indebtedness of the Company.
The Indenture provides that in the event of any insolvency or bankruptcy
case or proceeding, or any receivership, liquidation, reorganization or other
similar case or proceeding in connection therewith, relating to the Company or
its assets, or any liquidation, dissolution or other winding-up of the Company,
whether voluntary or involuntary, and whether or not involving insolvency or
bankruptcy, or any assignment for the benefit of creditors or marshalling of
assets or liabilities of the Company, all Senior Indebtedness must be paid in
full in cash or Cash Equivalents before any direct or indirect payment or
distribution (excluding distributions of certain permitted equity or
subordinated securities) is made on account of the principal of, premium, if
any, or interest on the Notes or on account of the purchase, redemption,
defeasance or other acquisition of, or in respect of, the Notes (other than
payments previously made pursuant to the provisions described below under
"-- Defeasance or Covenant Defeasance of Indenture"). In the event of the
acceleration of the maturity of any of the Notes, the holders of all Senior
Indebtedness will first be entitled to receive payment in full of all amounts
due thereon before the holders of the Notes will be entitled to receive any
payment on the principal of, premium, if any, or interest on, the Notes (other
than payments previously made pursuant to the provisions described below under
"-- Defeasance or Covenant Defeasance of Indenture").
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<PAGE> 55
Upon the occurrence and during the continuance of any default in the
payment of principal, premium, if any, or interest on any Senior Indebtedness,
when the same becomes due (whether due to lapse of time or at maturity, whether
by acceleration or otherwise), and after receipt by the Trustee and the Company
from representatives of holders of such Senior Indebtedness of written notice of
such default, no direct or indirect payment (other than payments previously made
pursuant to the provisions described under "-- Defeasance or Covenant Defeasance
of Indenture") by or on behalf of the Company of any kind or character
(excluding distributions of certain permitted equity or subordinated securities)
may be made on account of the principal of, premium, if any, or interest on, or
the purchase, redemption, defeasance or other acquisition of, the Notes unless
and until such default has been cured or waived or has ceased to exist or such
Senior Indebtedness shall have been discharged or paid in full in cash or Cash
Equivalents.
In addition, upon the occurrence and during the continuance of any other
default in respect of any Designated Senior Indebtedness pursuant to which the
maturity thereof may be accelerated (a "Non-payment Default") and upon the
earlier to occur of (a) the receipt by the Trustee from the representatives of
holders of such Designated Senior Indebtedness of a written notice of such
Non-payment Default or (b) if such Non-payment Default results from the
acceleration of the Notes, the date of such acceleration, no payment (other than
payments previously made pursuant to the provisions described under
"-- Defeasance or Covenant Defeasance of Indenture") or distribution of any
assets of the Company of any kind or character (excluding distributions of
certain permitted equity or subordinated securities) may be made by the Company
on account of the principal of, premium, if any, or interest on, or the
purchase, redemption, defeasance or other acquisition of, the Notes for the
period specified below (the "Payment Blockage Period").
The Payment Blockage Period shall commence upon the receipt of notice of a
Non-payment Default by the Trustee from the representatives of holders of
Designated Senior Indebtedness or the date of the acceleration referred to in
clause (b) of the preceding paragraph, as the case may be, and shall end on the
earliest to occur of the following events: (i) 179 days has elapsed since the
receipt of such notice or the date of such acceleration (provided such
Designated Senior Indebtedness shall not theretofore have been accelerated),
(ii) such default is cured or waived or ceases to exist or such Designated
Senior Indebtedness is discharged or paid in full in cash or Cash Equivalents
(provided that no other Non-payment Default has occurred and is then continuing
after giving effect to such cure or waiver), or (iii) such Payment Blockage
Period shall have been terminated by written notice to the Company or the
Trustee from the representatives of holders of Designated Senior Indebtedness
initiating such Payment Blockage Period, after which the Company shall promptly
resume making any and all required payments in respect of the Notes, including
any missed payments (except where the provisions of the third paragraph under
"-- Subordination" are then applicable in respect of any Senior Indebtedness or
where payment is otherwise not permitted under the terms of the Indenture). No
Non-payment Default with respect to Designated Senior Indebtedness that existed
or was continuing on the date of the commencement of any Payment Blockage Period
with respect to the Designated Senior Indebtedness initiating such Payment
Blockage Period will be, or can be, made the basis for the commencement of a
second Payment Blockage Period, whether or not within a period of 365
consecutive days, unless such default has been cured or waived for a period of
not less than 90 consecutive days. In no event will a Payment Blockage Period
extend beyond 179 days from the receipt by the Trustee of the notice or the date
of the acceleration initiating such Payment Blockage Period and there must be a
186 consecutive day period in any 365 day period during which no Payment
Blockage Period is in effect.
If the Company fails to make any payment on the Notes when due or within
any applicable grace period, whether or not on account of the payment blockage
provisions referred to above, such failure would constitute an Event of Default
under the Indenture and would enable the holders of the Notes to accelerate the
maturity thereof. See "-- Events of Default".
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Notes and funds which would be otherwise
payable to the holders of the Notes will be paid to the holders of the Senior
Indebtedness to the extent necessary to pay the Senior Indebtedness in full, and
the Company may be unable to meet its obligations fully with respect to the
Notes.
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<PAGE> 56
As adjusted for redemption of the Convertible Debentures, the Company had
approximately $192.7 million of Senior Indebtedness outstanding as of October 1,
1995 and had approximately $43.6 million available to be borrowed under the
Credit Agreement. The Indenture limits, but does not prohibit, the incurrence by
the Company of additional Indebtedness which is senior to the Notes and
prohibits the incurrence by the Company of Indebtedness which is subordinated in
right of payment to any other Indebtedness of the Company and senior in right of
payment to the Notes.
THE GUARANTEES
Each of the Guarantors has (for so long as they remain Subsidiaries of the
Company) unconditionally guaranteed on a senior subordinated and joint and
several basis all of the Company's obligations under the Notes, including its
obligations to pay principal, premium, if any, and interest with respect to the
Notes. The obligations evidenced by the Guarantees are subordinated in right of
payment to the prior payment in full in cash or Cash Equivalents of all existing
and future Guarantor Senior Indebtedness to the same extent as the Notes are
subordinated to Senior Indebtedness. Without limiting the generality of the
foregoing, during any period when payment on the Notes is prohibited pursuant to
the provisions described above under "-- Subordination", payment on the
Guarantees will be similarly prohibited. Except as provided in "-- Certain
Covenants" below, the Company is not restricted from selling or otherwise
disposing of any of the Guarantors.
The Indenture provides that each of the Material Subsidiaries of the
Company incorporated in the United States or any State thereof will be a
Guarantor for so long as such company remains a Subsidiary of the Company.
The Indenture provides that if all or substantially all of the assets of
any Guarantor or all of the Capital Stock of any Guarantor is sold (including by
issuance or otherwise) by the Company or any of its Subsidiaries and, in the
case of the sale of a Guarantor which is a Significant Subsidiary of the Company
in a transaction constituting an Asset Sale, if the Net Cash Proceeds from such
Asset Sale are used in accordance with the covenant, "Disposition of Proceeds of
Asset Sales", then such Guarantor (in the event of a sale or other disposition
of all of the Capital Stock of such Guarantor) or the corporation or other
entity acquiring such assets (in the event of a sale or other disposition of all
or substantially all of the assets of such Guarantor) shall be released and
discharged of its Guarantee obligations.
CERTAIN COVENANTS
The Indenture contains the following covenants, among others:
Limitation on Indebtedness. The Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or in any manner become directly or indirectly liable, contingently or
otherwise, for the payment of (in each case, to "incur") any Indebtedness
(including, without limitation, any Acquired Indebtedness); provided, however,
that the Company or any of its Subsidiaries will be permitted to incur
Indebtedness (including, without limitation, Acquired Indebtedness) if at the
time of such incurrence, and after giving pro forma effect thereto, the
Consolidated Fixed Charge Coverage Ratio of the Company is at least equal to 2.0
to 1.
Notwithstanding the foregoing, the Company and its Subsidiaries may, to the
extent specifically set forth below, incur each and all of the following (each
and all of the following, "Permitted Indebtedness"):
(a) Indebtedness of the Company evidenced by the Notes and
Indebtedness of any Guarantor evidenced by its Guarantee;
(b) Indebtedness of the Company and its Subsidiaries outstanding on
the Issue Date;
(c) Indebtedness of the Company and its Subsidiaries in respect of the
Credit Agreements in an aggregate principal amount at any one time
outstanding not to exceed $300,000,000;
(d) (i) Interest Rate Protection Obligations of the Company covering
Indebtedness of the Company or a Subsidiary of the Company and (ii)
Interest Rate Protection Obligations of any Subsidiary
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<PAGE> 57
of the Company covering Indebtedness of such Subsidiary; provided, however,
that, in the case of either clause (i) or (ii), (x) any Indebtedness to
which any such Interest Rate Protection Obligations relate bears interest
at fluctuating interest rates and is otherwise not incurred in violation of
this covenant and (y) the notional principal amount of any such Interest
Rate Protection Obligations does not exceed the principal amount of the
Indebtedness to which such Interest Rate Protection Obligations relate;
(e) Indebtedness of a Wholly Owned Subsidiary owed to and held by the
Company or another Wholly Owned Subsidiary, provided that each loan or
other extension of credit (i) made by a Guarantor to another Subsidiary
that is not a Guarantor shall not be subordinated to other obligations of
such Subsidiary and (ii) made to a Guarantor by another Subsidiary that is
not a Guarantor shall be made on a subordinated basis; except that (i) any
transfer (which shall not include a pledge or assignment as collateral to
or for the benefit of any holders of Senior Indebtedness) of such
Indebtedness by the Company or a Wholly Owned Subsidiary (other than to the
Company or to a Wholly Owned Subsidiary) and (ii) the sale, transfer or
other disposition by the Company or any Subsidiary of the Company of
Capital Stock of a Wholly Owned Subsidiary which is owed Indebtedness of
another Wholly Owned Subsidiary such that it ceases to be a Wholly Owned
Subsidiary of the Company shall, in each case, be an incurrence of
Indebtedness by such Subsidiary subject to the other provisions of this
covenant;
(f) Indebtedness of the Company owed to and held by a Wholly Owned
Subsidiary of the Company which is unsecured and subordinated in right of
payment to the payment and performance of the Company's obligations under
the Indenture and the Notes except that (i) any transfer (which shall not
include a pledge or assignment as collateral to or for the benefit of any
holders of Senior Indebtedness) of such Indebtedness by a Wholly Owned
Subsidiary of the Company (other than to another Wholly Owned Subsidiary of
the Company) and (ii) the sale, transfer or other disposition by the
Company or any Subsidiary of the Company of Capital Stock of a Wholly Owned
Subsidiary which holds Indebtedness of the Company such that it ceases to
be a Wholly Owned Subsidiary shall, in each case, be an incurrence of
Indebtedness by the Company, subject to the other provisions of this
covenant;
(g) Indebtedness in respect of Currency Agreements; provided that, in
the case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(h) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within five business days of incurrence;
(i) Indebtedness of the Company or any of its Subsidiaries evidenced
by guarantees of any Permitted Indebtedness subject, in the case of any
Subsidiary, to compliance with the requirements set forth below under
"-- Limitation on Guarantees by Subsidiaries";
(j) Indebtedness of the Company or any of its Subsidiaries represented
by letters of credit for the account of the Company or such Subsidiary, as
the case may be, in order to provide security for workers' compensation
claims, payment obligations in connection with self-insurance or similar
requirements in the ordinary course of business;
(k) Indebtedness incurred with respect to (i) letters of credit issued
for the account of the Company or any Subsidiary of the Company pursuant to
the Credit Agreements, and (ii) unsecured letters of credit in addition to
those described in (j) above, issued for the account of the Company or any
Subsidiary of the Company in the ordinary course of business in aggregate
outstanding stated amounts not to exceed $5,000,000;
(l) Indebtedness, if any, owing by the Company or any Subsidiary under
receivables sale agreements in connection with sales of receivables of the
Company or any Subsidiary pursuant to the Receivables Purchase Agreement or
the Bank Receivables Agreement;
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(m) Indebtedness, if any, arising under the Guilford Equipment Lease;
(n) Indebtedness of the Company or any Subsidiary of the Company in
addition to that described in clauses (a) through (m) above, in an
aggregate principal amount outstanding at any time not exceeding
$30,000,000; and
(o) (i) Indebtedness of the Company the proceeds of which are used to
refinance (whether by amendment, renewal, extension, substitution,
refinancing, refunding or replacement, whether with the same or any other
person(s) as lender(s), including successive refinancings thereof)
Indebtedness of the Company or any of its Subsidiaries and (ii)
Indebtedness of any Subsidiary of the Company the proceeds of which are
used to refinance (whether by amendment, renewal, extension, substitution,
refinancing, refunding or replacement, whether with the same or any other
person(s) as lender(s), including successive refinancings thereof)
Indebtedness of such Subsidiary, in each case to the extent such
Indebtedness is described in clause (a) or (b) of this covenant (other than
the Indebtedness refinanced, redeemed or retired as described under "Use of
Proceeds" herein) or is originally incurred pursuant to the proviso in the
first paragraph of this covenant (other than Permitted Indebtedness);
provided, however, that (x) the principal amount of Indebtedness incurred
pursuant to this clause (o) (or, if such Indebtedness provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof, the original issue
price of such Indebtedness) shall not exceed the sum of the principal
amount of Indebtedness so refinanced (except where the amount of any excess
is permitted pursuant to another clause of this covenant), plus the amount
of any premium or other amount required to be paid in connection with such
refinancing pursuant to the terms of such Indebtedness or the amount of any
premium or other amount reasonably determined by the Board of Directors of
the Company as necessary to accomplish such refinancing by means of a
tender offer or privately negotiated purchase, plus the amount of expenses
in connection therewith and (y) in the case of Indebtedness incurred by the
Company pursuant to this clause (o) to refinance Subordinated Indebtedness,
such Indebtedness (A) has no scheduled principal payment prior to the 91st
day after the final maturity date of the Indebtedness refinanced, (B) has
an Average Life to Stated Maturity greater than the remaining Average Life
to Stated Maturity of the Indebtedness refinanced and (C) is subordinated
to the Notes in the same manner and to the same extent that the
Subordinated Indebtedness being refinanced is subordinated to the Notes and
(z) in the case of Indebtedness incurred by the Company pursuant to this
clause (o) to refinance Pari Passu Indebtedness, such Indebtedness (A) has
no scheduled principal payment date prior to the 91st day after the final
maturity date of the Indebtedness refinanced, (B) has an Average Life to
Stated Maturity greater than the remaining Average Life to Stated Maturity
of the Indebtedness refinanced and (C) constitutes Pari Passu Indebtedness
or Subordinated Indebtedness.
Limitation on Restricted Payments. The Company will not, and will not
permit any of its Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend or make any other distribution or
payment on or in respect of Capital Stock of the Company or any of its
Subsidiaries or any payment made to the direct or indirect holders (in
their capacities as such) of Capital Stock of the Company or any of its
Subsidiaries (other than (x) dividends or distributions payable solely in
Capital Stock of the Company (other than Redeemable Capital Stock) or in
options, warrants or other rights to purchase Capital Stock of the Company
(other than Redeemable Capital Stock), (y) the declaration or payment of
dividends or other distributions to the extent declared or paid to the
Company or any Subsidiary of the Company and (z) the declaration or payment
of dividends or other distributions by any Subsidiary of the Company to all
holders of Common Stock of such Subsidiary on a pro rata basis),
(b) purchase, redeem, defease or otherwise acquire or retire for value
any Capital Stock of the Company or any of its Subsidiaries (other than (x)
any such Capital Stock owned by a Wholly Owned Subsidiary of the Company
and (y) the Company's Series A Cumulative Convertible Preferred Stock),
(c) make any principal payment on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund
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payment or other Stated Maturity, any Subordinated Indebtedness or Pari
Passu Indebtedness (other than the Convertible Debentures or any other such
Indebtedness owned by the Company or a Wholly Owned Subsidiary of the
Company), or
(d) make any Investment (other than any Permitted Investment) in any
person
(such payments or Investments described in the preceding clauses (a), (b), (c)
and (d) are collectively referred to as "Restricted Payments"), unless, at the
time of and after giving effect to the proposed Restricted Payment (the amount
of any such Restricted Payment, if other than cash, shall be the Fair Market
Value on the date of such Restricted Payment of the asset(s) proposed to be
transferred by the Company or such Subsidiary, as the case may be, pursuant to
such Restricted Payment), (A) no Default or Event of Default shall have occurred
and be continuing, (B) immediately prior to and after giving effect to such
Restricted Payment, the Company would be able to incur $1.00 of additional
Indebtedness pursuant to the proviso of the first paragraph of the covenant
described under "-- Limitation on Indebtedness" above (assuming a market rate of
interest with respect to such additional Indebtedness) and (C) the aggregate
amount of all Restricted Payments declared or made from and after the Issue Date
would not exceed the sum of (1) 50% of the aggregate Consolidated Net Income of
the Company accrued on a cumulative basis during the period beginning on the
first day of the fiscal quarter of the Company during which the Issue Date
occurs and ending on the last day of the fiscal quarter of the Company
immediately preceding the date of such proposed Restricted Payment, which period
shall be treated as a single accounting period (or, if such aggregate cumulative
Consolidated Net Income of the Company for such period shall be a deficit, minus
100% of such deficit) plus (2) the aggregate net cash proceeds and the Fair
Market Value of any property other than cash received by the Company either (x)
as capital contributions to the Company after the Issue Date from any person
(other than a Subsidiary of the Company) or (y) from the issuance or sale of
Capital Stock (excluding Redeemable Capital Stock, but including Capital Stock
issued upon the conversion of convertible Indebtedness (other than the first
$50,000,000 of proceeds attributable to the conversion of the Convertible
Debentures) or from the exercise of options, warrants or rights to purchase
Capital Stock (other than Redeemable Capital Stock)) of the Company to any
person (other than to a Subsidiary of the Company) after the Issue Date plus (3)
in the case of the disposition or repayment of any Investment constituting a
Restricted Payment made after the Issue Date (excluding any Investment described
in clause (v) of the following paragraph), an amount equal to the lesser of the
return of capital with respect to such Investment and the cost of such
Investment, in either case, less the cost of the disposition of such Investment
plus (4) $30,000,000. For purposes of the preceding clause (C)(2), the value of
the aggregate net proceeds received by the Company upon the issuance of Capital
Stock upon the conversion of convertible Indebtedness or upon the exercise of
options, warrants or rights will be the net cash proceeds received upon the
issuance of such Indebtedness, options, warrants or rights plus the incremental
cash amount received by the Company upon the conversion or exercise thereof.
None of the foregoing provisions prohibit (i) the payment of any dividend
within 60 days after the date of its declaration, if at the date of declaration
such payment would be permitted by the foregoing paragraph; (ii) so long as no
Default or Event of Default shall have occurred and be continuing, the
redemption, repurchase or other acquisition or retirement of any shares of any
class of Capital Stock of the Company or any Subsidiary of the Company in
exchange for, or out of the net cash proceeds of, a substantially concurrent (x)
capital contribution to the Company from any person (other than a Subsidiary of
the Company) or (y) issue and sale of other shares of Capital Stock (other than
Redeemable Capital Stock) of the Company to any person (other than to a
Subsidiary of the Company); provided, however, that the amount of any such net
cash proceeds that are used for any such redemption, repurchase or other
acquisition or retirement shall be excluded from clause (C)(2) of the preceding
paragraph; (iii) so long as no Default or Event of Default shall have occurred
and be continuing, any redemption, repurchase or other acquisition or retirement
of Subordinated Indebtedness by exchange for, or out of the net cash proceeds
of, a substantially concurrent (x) capital contribution to the Company from any
person (other than a Subsidiary of the Company) or (y) issue and sale of (1)
Capital Stock (other than Redeemable Capital Stock) of the Company to any person
(other than to a Subsidiary of the Company); provided, however, that the amount
of any such net cash proceeds that are used for any such redemption, repurchase
or other acquisition or retirement shall be excluded from clause (C)(2)
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of the preceding paragraph; or (2) Indebtedness of the Company issued to any
person (other than a Subsidiary of the Company), so long as such Indebtedness is
Subordinated Indebtedness which (x) has no Stated Maturity earlier than the 91st
day after the final maturity date of the Indebtedness refinanced, (y) has an
Average Life to Stated Maturity equal to or greater than the remaining Average
Life to Stated Maturity of the Indebtedness refinanced and (z) is subordinated
to the Notes in the same manner and at least to the same extent as the
Subordinated Indebtedness so purchased, exchanged, redeemed, acquired or
retired; (iv) so long as no Default or Event of Default shall have occurred and
be continuing, any redemption, repurchase or other acquisition or retirement of
Pari Passu Indebtedness by exchange for, or out of the net cash proceeds of, a
substantially concurrent (x) capital contribution to the Company from any person
(other than a Subsidiary of the Company) or (y) issue and sale of (1) Capital
Stock (other than Redeemable Capital Stock) of the Company to any person (other
than to a Subsidiary of the Company); provided, however, that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase or
other acquisition or retirement is excluded from clause (C)(2) of the preceding
paragraph; or (2) Indebtedness of the Company issued to any person (other than a
Subsidiary of the Company), so long as such Indebtedness is Subordinated
Indebtedness or Pari Passu Indebtedness which (x) has no Stated Maturity earlier
than the 91st day after the final maturity date of the Indebtedness refinanced
and (y) has an Average Life to Stated Maturity equal to or greater than the
remaining Average Life to Stated Maturity of the Indebtedness refinanced; (v)
Investments constituting Restricted Payments made as a result of the receipt of
non-cash consideration from any Asset Sale made pursuant to and in compliance
with the covenant described under "-- Disposition of Proceeds of Asset Sales"
below; and (vi) so long as no Default or Event of Default has occurred and is
continuing, repurchases by the Company of Common Stock of the Company from
employees of the Company or any of its Subsidiaries or their authorized
representatives upon the death, disability or termination of employment of such
employees, in an aggregate amount not exceeding $1,000,000 in any calendar year.
In computing the amount of Restricted Payments previously made for purposes of
clause (C) of the preceding paragraph, Restricted Payments made under the
preceding clauses (v) and (vi) shall be included and clauses (i), (ii), (iii)
and (iv) shall not be so included.
Limitation on Liens. The Company will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Liens of any kind
against or upon any of its property or assets, or any proceeds therefrom, unless
(x) in the case of Liens securing Subordinated Indebtedness, the Notes are
secured by a Lien on such property, assets or proceeds that is senior in
priority to such Liens and (y) in all other cases, the Notes are equally and
ratably secured, except for (a) Liens existing as of the Issue Date, (b) Liens
on assets of the Company and its Subsidiaries securing Indebtedness under the
Credit Agreements (including guarantees by any Subsidiary in respect of such
Indebtedness); (c) Liens securing the Notes or any Guarantee; (d) Liens on
assets of the Company securing Senior Indebtedness and Liens on assets of a
Guarantor securing Guarantor Senior Indebtedness; (e) Liens in favor of the
Company; (f) Liens in addition to those described in clauses (a) through (e)
securing Indebtedness which is incurred to refinance Indebtedness which has been
secured by a Lien permitted under the Indenture and which has been incurred in
accordance with the provisions of the Indenture; provided, however, that such
Liens do not extend to or cover any property or assets of the Company or any of
its Subsidiaries not securing the Indebtedness so refinanced; (g) Liens on
Indebtedness of a Subsidiary of the Company owed to and held by the Company,
which Indebtedness (x) represents advances by the Company of proceeds of
borrowings by the Company under the Credit Agreement and (y) is incurred in
accordance with the provisions of the Indenture; and (h) Permitted Liens.
Change of Control. Upon the occurrence of a Change of Control, the Company
shall be obligated to make an offer to purchase (a "Change of Control Offer"),
and shall purchase, on a business day (the "Change of Control Purchase Date")
not more than 45 nor less than 30 days following the mailing of the notice
described in the second paragraph below to holders of the Notes, all of the then
outstanding Notes at a purchase price (the "Change of Control Purchase Price")
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the Change of Control Purchase Date. The Company shall be required to
purchase all Notes properly tendered into the Change of Control Offer and not
withdrawn. The Change of Control Offer is required to remain open for at least
15 days and until the close of business on the Change of Control Purchase Date.
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Within 30 days following a Change of Control and prior to the mailing of
the notice to the holders of the Notes provided for in the next paragraph, the
Company covenants to either (i) repay in full all Indebtedness under the Credit
Agreements and terminate the commitments of the lenders thereunder, or (ii)
obtain the requisite consent under the Credit Agreements to permit the
repurchase of the Notes as provided herein. The Company shall first comply with
the provisions of this paragraph before it shall be required to repurchase the
Notes, but any failure to comply with its obligation to offer to repurchase the
Notes upon a Change of Control shall constitute an Event of Default under the
Indenture.
In order to effect the Change of Control Offer, the Company shall, not
later than the 30th day after the occurrence of the Change of Control, mail to
each holder of Notes notice of the Change of Control Offer, which notice shall
govern the terms of the Change of Control Offer and shall state, among other
things, the procedures that holders of Notes must follow to accept the Change of
Control Offer.
The occurrence of the events constituting a Change of Control under the
Indenture will result in an event of default under the Credit Agreements and,
thereafter, the lenders will have the right to require repayment of the
borrowings thereunder in full. The Company's obligations under the Credit
Agreements will constitute Designated Senior Indebtedness and will represent
obligations senior in right of payment to the Notes. Consequently, the
subordination provisions of the Indenture will have the effect of precluding the
purchase of the Notes by the Company in the event of a Change of Control, absent
consent of the lenders under the Credit Agreements or repayment of all amounts
outstanding thereunder (although the failure by the Company to comply with its
obligations in the event of a Change of Control will constitute a default under
the Notes). There can be no assurance that the Company will have adequate
resources to repay or refinance all Indebtedness owing under the Credit
Agreements or to fund the purchase of the Notes upon a Change of Control.
The Company shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by the Company and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that a Change of Control occurs and the
Company is required to purchase Notes as described above.
Disposition of Proceeds of Asset Sales. The Company will not, and will not
permit any of its Subsidiaries to, make any Asset Sale unless (a) the Company or
such Subsidiary, as the case may be, receives consideration at the time of such
Asset Sale at least equal to the Fair Market Value of the shares or assets sold
or otherwise disposed of and (b) at least 70% of such consideration consists of
cash or Cash Equivalents. To the extent the Net Cash Proceeds of any Asset Sale
are not applied to repay (including by way of cash collateralization of
outstanding letters of credit), and permanently reduce the commitments under,
the Credit Agreements as then in effect or other Senior Indebtedness or
Guarantor Senior Indebtedness, the Company or such Subsidiary, as the case may
be, may, within fifteen months of such Asset Sale, apply such Net Cash Proceeds
to an investment in properties and assets that replace the properties and assets
that were the subject of such Asset Sale or in properties and assets that will
be used in the business of the Company and its Subsidiaries existing on the
Issue Date or in businesses reasonably related thereto ("Replacement Assets").
Any Net Cash Proceeds from any Asset Sale that are neither used to repay, and
permanently reduce the commitments under, the Credit Agreements or other Senior
Indebtedness or Guarantor Senior Indebtedness nor invested in Replacement Assets
within the fifteen month period described above constitute "Excess Proceeds"
subject to disposition as provided below.
When the aggregate amount of Excess Proceeds equals or exceeds $15,000,000,
the Company shall make an offer to purchase (an "Asset Sale Offer"), from all
holders of the Notes, not more than 40 Business Days thereafter, an aggregate
principal amount of Notes equal to such Excess Proceeds, at a price in cash
equal to 100% of the outstanding principal amount thereof plus accrued and
unpaid interest, if any, to the purchase date. To the extent that the aggregate
principal amount of Notes tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds, the Company may use such deficiency for general corporate
purposes. If the
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aggregate principal amount of Notes validly tendered and not withdrawn by
holders thereof exceeds the Excess Proceeds, Notes to be purchased will be
selected on a pro rata basis. Upon completion of such Asset Sale Offer, the
amount of Excess Proceeds shall be reset to zero.
The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that an Asset Sale occurs and the
Company is required to purchase Notes as described above.
Limitation on Transactions with Interested Persons. The Company will not,
and will not permit any of its Subsidiaries to, directly or indirectly, enter
into or suffer to exist any transaction or series of related transactions
(including, without limitation, the sale, transfer, disposition, purchase,
exchange or lease of assets, property or services) with, or for the benefit of,
any Affiliate of the Company or any beneficial owner (determined in accordance
with the Indenture) of 5% or more of the Company's Common Stock at any time
outstanding ("Interested Persons"), unless (a) such transaction or series of
related transactions is on terms that are no less favorable to the Company or
such Subsidiary, as the case may be, than those which could have been obtained
in a comparable transaction at such time from persons who are not Affiliates of
the Company or Interested Persons, (b) with respect to a transaction or series
of transactions involving aggregate payments or value equal to or greater than
$1,000,000 and less than $10,000,000, the Company has delivered an officer's
certificate to the Trustee certifying that such transaction or series of
transactions complies with the preceding clause (a), (c) with respect to a
transaction or series of transactions involving aggregate payments or value
equal to or greater than $10,000,000 and less than $25,000,000, the Company has
delivered to the Trustee a board resolution approved by a majority of
disinterested members of the Board of Directors ratifying such transaction or
series of transactions, along with an officer's certificate attesting to such
resolution and (d) with respect to a transaction or series of transactions
involving aggregate payments or value equal to or greater than $25,000,000, the
Company has delivered to the Trustee a written opinion from an Independent
Financial Advisor stating that the terms of such transaction or series of
transactions are fair to the Company or its Subsidiary, as the case may be, from
a financial point of view; provided, however, that this covenant will not
restrict the Company from (i) paying dividends in respect of its Capital Stock
permitted under the covenant described under "-- Limitation on Restricted
Payments" above, (ii) paying reasonable and customary fees to directors of the
Company who are not employees of the Company or (iii) making loans or advances
to officers, employees or consultants of the Company and its Subsidiaries
(including travel and moving expenses) in the ordinary course of business for
bona fide business purposes of the Company or such Subsidiary not in excess of
$1,000,000 in the aggregate at any one time outstanding.
Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any Subsidiary
of the Company to (a) pay dividends, in cash or otherwise, or make any other
distributions on or in respect of its Capital Stock or any other interest or
participation in, or measured by, its profits, (b) pay any Indebtedness owed to
the Company or any other Subsidiary of the Company, (c) make loans or advances
to, or any investment in, the Company or any other Subsidiary of the Company,
(d) transfer any of its properties or assets to the Company or any other
Subsidiary of the Company or (e) guarantee any Indebtedness of the Company or
any other Subsidiary of the Company, except for such encumbrances or
restrictions existing under or by reason of (i) applicable law, (ii) customary
non-assignment provisions of any contract or any lease governing a leasehold
interest of the Company or any Subsidiary of the Company, (iii) customary
restrictions on transfers of property subject to a Lien permitted under the
Indenture which could not materially adversely affect the Company's ability to
satisfy its obligations under the Indenture and the Notes, (iv) any agreement or
other instrument of a person acquired by the Company or any Subsidiary of the
Company (or a Subsidiary of such person) in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance or
restriction is not applicable to any person, or the properties or assets of any
person, other than the person, or the properties or assets of the person, so
acquired, (v) provisions contained in agreements or instruments relating to
Indebtedness which prohibit the transfer of all or substantially all of the
assets of the obligor thereunder unless the transferee shall assume the
obligations of the obligor under such agreement or instrument and (vi)
encumbrances and restrictions under the Credit Agreements and other Senior
Indebtedness and
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Guarantor Senior Indebtedness in effect on the Issue Date and encumbrances and
restrictions in permitted refinancings or replacements thereof which are no less
favorable to the holders of the Notes than those contained in the Senior
Indebtedness and Guarantor Senior Indebtedness so refinanced or replaced.
Limitation on the Issuance of Other Senior Subordinated Indebtedness. The
Company will not, directly or indirectly, incur any Indebtedness (including
Acquired Indebtedness) that is subordinate in right of payment to any
Indebtedness of the Company, unless such Indebtedness (x) is pari passu with the
Notes or (y) is subordinate in right of payment to the Notes in the same manner
and at least to the same extent as the Notes are subordinated to Senior
Indebtedness.
Limitation on Guarantees by Subsidiaries. The Company will not permit any
Subsidiary, directly or indirectly, to assume, guarantee or in any other manner
become liable with respect to any Indebtedness of the Company or any Guarantor
unless such Subsidiary is a Guarantor or simultaneously executes and delivers a
supplemental indenture providing for the guarantee of payment of the Notes by
such Subsidiary and such guarantee shall be subordinated to Guarantor Senior
Indebtedness of such Subsidiary in substantially the same manner and to the same
extent as the Notes are subordinated to Senior Indebtedness of the Company under
the terms of the Indenture.
If the Company or any of its Subsidiaries acquire or form a Material U.S.
Subsidiary, the Company will cause any such Subsidiary to (i) execute and
deliver to the Trustee a supplemental indenture in form and substance reasonably
satisfactory to such Trustee pursuant to which such Subsidiary shall guarantee
all of the obligations of the Company with respect to the Notes issued under
such Indenture on a senior subordinated basis and (ii) deliver to such Trustee
an opinion of counsel reasonably satisfactory to such Trustee to the effect that
a supplemental indenture has been duly executed and delivered by such Subsidiary
and such Subsidiary is in compliance with the terms of the Indenture.
Notwithstanding the foregoing, upon any sale or disposition (by merger or
otherwise) of any Guarantor by the Company or a Subsidiary of the Company to any
person that is not an Affiliate of the Company or any of its Subsidiaries, such
Guarantor will be deemed to be released from all obligations under its
Guarantee; provided, however, that each such Guarantor which is a Significant
Subsidiary of the Company is sold or disposed of in accordance with the
Indenture; and provided further that the foregoing proviso shall not apply to
the sale or disposition of such a Guarantor pursuant to, or in lieu of, the
exercise by one or more holders of Senior Indebtedness of rights and remedies in
respect of the capital stock of such Guarantor previously pledged or assigned to
such holder or holders to secure such Indebtedness or other sale or disposition
the proceeds of which are used to repay Senior Indebtedness secured by such
capital stock.
Limitation on Applicability of Certain Covenants. During any period of
time that (i) the ratings assigned to the Notes by each of S&P and Moody's
(collectively, the "Rating Agencies") are no less than BBB- and Baa3,
respectively (the "Investment Grade Ratings"), and (ii) no Default or Event of
Default has occurred and is continuing, the Company and its Restricted
Subsidiaries will not be subject to the covenants entitled "Limitation on
Indebtedness", "Limitation on Restricted Payments", "Disposition of Proceeds of
Asset Sales", "Limitation on Transactions with Interested Persons", "Limitation
on Dividends and Other Payment Restrictions Affecting Subsidiaries", and
"Limitation on Guarantees by Subsidiaries" (collectively, the "Suspended
Covenants"). If one or both Rating Agencies withdraws its rating or downgrades
its Investment Grade Rating, then thereafter the Company and its Subsidiaries
will be subject to the Suspended Covenants (until the Rating Agencies have again
assigned Investment Grade Ratings to the Notes) and compliance with the
Suspended Covenants with respect to Restricted Payments made after the time of
such withdrawal or downgrade will be calculated in accordance with the covenant
entitled "Limitation on Restricted Payments" as if such covenant had been in
effect at all times after the date of the Indenture.
Reporting Requirements. The Company will file with the Commission the
annual reports, quarterly reports and other documents required to be filed with
the Commission pursuant to Sections 13 and 15 of the Exchange Act, whether or
not the Company has a class of securities registered under the Exchange Act. The
Company will file with the Trustee and provide to each Noteholder within 15 days
after it files them with the Commission (or if any such filing is not permitted
under the Exchange Act, 15 days after the Company would have been required to
make such filing) copies of such reports and documents.
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Rule 144A Information Requirement. If at any time the Company is no longer
subject to the reporting requirements of the Exchange Act, it will furnish to
the Holders or beneficial holders of the Notes and prospective purchasers of the
Notes designated by the holders of the Notes, upon their request, any
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
MERGER, SALE OF ASSETS, ETC.
The Company will not, in any transaction or series of transactions, merge
or consolidate with or into, or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets as an
entirety to, any person or persons, and the Company will not permit any of its
Subsidiaries to enter into any such transaction or series of transactions if
such transaction or series of transactions, in the aggregate, would result in a
sale, assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of the Company or the Company and
its Subsidiaries, taken as a whole, to any other person or persons, unless at
the time of and after giving effect thereto (a) either (i) if the transaction or
series of transactions is a merger or consolidation, the Company shall be the
surviving person of such merger or consolidation, or (ii) the person formed by
such consolidation or into which the Company or such Subsidiary is merged or to
which the properties and assets of the Company or such Subsidiary, as the case
may be, are transferred (any such surviving person or transferee person being
the "Surviving Entity") shall be a corporation organized and existing under the
laws of the United States of America, any state thereof or the District of
Columbia and shall expressly assume by a supplemental indenture executed and
delivered to the Trustee, in form reasonably satisfactory to the Trustee, all
the obligations of the Company under the Notes and the Indenture, and in each
case, the Indenture shall remain in full force and effect; (b) immediately
before and immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), no Default or Event of
Default shall have occurred and be continuing and the Company or the Surviving
Entity, as the case may be, after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), could incur $1.00 of
additional Indebtedness pursuant to the proviso in the first paragraph of the
covenant described under "-- Certain Covenants -- Limitation on Indebtedness"
above (assuming a market rate of interest with respect to such additional
Indebtedness); and (c) immediately after giving effect to such transaction or
series of transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), the Consolidated Net
Worth of the Company or the Surviving Entity, as the case may be, is at least
equal to the Consolidated Net Worth of the Company immediately before such
transaction or series of transactions.
In connection with any consolidation, merger, transfer, lease, assignment
or other disposition contemplated hereby, the Company shall deliver, or cause to
be delivered, to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an officer's certificate and an opinion of counsel, each stating
that such consolidation, merger, transfer, lease, assignment or other
disposition and the supplemental indenture in respect thereof comply with the
requirements under the Indenture; provided, however, that, solely for purposes
of computing amounts described in subclause (C) of the covenant described under
"-- Certain Covenants -- Limitation on Restricted Payments" above, any such
Surviving Entity shall only be deemed to have succeeded to and be substituted
for the Company with respect to periods subsequent to the effective time of such
merger, consolidation or transfer of assets.
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of the Company in accordance with the foregoing, in which the
Company is not the continuing corporation, the successor corporation formed by
such a consolidation or into which the Company is merged or to which such
transfer is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Indenture with the same effect
as if such successor corporation had been named as the Company therein.
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EVENTS OF DEFAULT
The following are "Events of Default" under the Indenture:
(i) default in the payment of the principal of or premium, if any, on
any of the Notes when the same becomes due and payable (upon Stated
Maturity, acceleration, optional redemption, required purchase, scheduled
principal payment or otherwise); or
(ii) default in the payment of an installment of interest on any of
the Notes, when the same becomes due and payable, which default continues
for a period of 30 days; or
(iii) failure to perform or observe any other term, covenant or
agreement contained in the Notes, the Indenture or any Guarantee (other
than a default specified in clause (i) or (ii) above) and such default
continues for a period of 60 days after written notice of such default
requiring the Company to remedy the same shall have been given (x) to the
Company by the Trustee or (y) to the Company and the Trustee by holders of
25% in aggregate principal amount of the Notes then outstanding; or
(iv) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under which
the Company or any Significant Subsidiary of the Company then has
outstanding Indebtedness in excess of $20,000,000, individually or in the
aggregate, and either (a) such Indebtedness is already due and payable in
full or (b) such default or defaults have resulted in the acceleration of
the maturity of such Indebtedness; or
(v) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money in excess of $20,000,000, either individually or in the
aggregate, shall be entered against the Company or any Significant
Subsidiary of the Company or any of their respective properties and shall
not be discharged or fully bonded and there shall have been a period of 60
days after the date on which any period for appeal has expired and during
which a stay of enforcement of such judgment, order or decree shall not be
in effect; or
(vi) either (i) the collateral agent under the Credit Agreements or
(ii) any holder of at least $20,000,000 in aggregate principal amount of
Indebtedness of the Company or any of its Significant Subsidiaries shall
commence judicial proceedings to foreclose upon assets of the Company or
any of its Significant Subsidiaries having an aggregate Fair Market Value,
individually or in the aggregate, in excess of $20,000,000 or shall have
exercised any right under applicable law or applicable security documents
to take ownership of any such assets in lieu of foreclosure; or
(vii) any Guarantee issued by a Guarantor which is a Significant
Subsidiary of the Company ceases to be in full force and effect or is
declared null and void, or any such Guarantor denies that it has any
further liability under any such Guarantee or gives notice to such effect
(other than by reason of the termination of the Indenture or the release of
any such Guarantee in accordance with the Indenture) and such condition
shall have continued for a period of 60 days after written notice of such
failure (which notice shall specify the Default, demand that it be remedied
and state that it is a "Notice of Default") requiring such Guarantor and
the Company to remedy the same shall have been given (x) to the Company by
the Trustee or (y) to the Company and the Trustee by holders of at least
25% in aggregate principal amount of the Notes then outstanding; or
(viii) certain events of bankruptcy, insolvency or reorganization with
respect to the Company or any Significant Subsidiary of the Company shall
have occurred.
If an Event of Default (other than as specified in clause (viii) above)
shall occur and be continuing, the Trustee, by notice to the Company, or the
holders of at least 25% in aggregate principal amount of the Notes then
outstanding, by notice to the Trustee and the Company, may declare the principal
of, premium, if any, and accrued and unpaid interest, if any, on all of the
outstanding Notes due and payable immediately, upon which declaration, all
amounts payable in respect of the Notes shall be immediately due and payable;
provided, however, that, for so long as the Credit Agreements are in effect,
such declaration shall not become effective until the earlier of (i) ten
business days following delivery of written notice to the Co-Agents thereunder
of the intention to accelerate the maturity of the Notes, or (ii) the
acceleration of the maturity of
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the Indebtedness under the Credit Agreements. If an Event of Default specified
in clause (viii) above occurs and is continuing, then the principal of, premium,
if any, and accrued and unpaid interest, if any, on all of the outstanding Notes
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any holder of Notes.
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may rescind
such declaration if (a) the Company has paid or deposited with the Trustee a sum
sufficient to pay (i) all sums paid or advanced by the Trustee under the
Indenture and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, (ii) all overdue interest on all Notes,
(iii) the principal of and premium, if any, on any Notes which have become due
otherwise than by such declaration of acceleration and interest thereon at the
rate borne by the Notes, and (iv) to the extent that payment of such interest is
lawful, interest upon overdue interest and overdue principal at the rate borne
by the Notes which has become due otherwise than by such declaration of
acceleration; (b) the rescission would not conflict with any judgment or decree
of a court of competent jurisdiction; and (c) all Events of Default, other than
the nonpayment of principal of, premium, if any, and interest on the Notes that
have become due solely by such declaration of acceleration, have been cured or
waived.
The holders of not less than a majority in aggregate principal amount of
the outstanding Notes may on behalf of the holders of all the Notes waive any
past defaults under the Indenture, except a default in the payment of the
principal of, premium, if any, or interest on any Note, or in respect of a
covenant or provision which under the Indenture cannot be modified or amended
without the consent of the holder of each Note outstanding.
No holder of any of the Notes has any right to institute any proceeding
with respect to the Indenture or the Notes or any remedy thereunder, unless the
holders of at least 25% in aggregate principal amount of the outstanding Notes
have made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as Trustee under the Notes and the Indenture, the
Trustee has failed to institute such proceeding within 30 days after receipt of
such notice and the Trustee, within such 30-day period, has not received
directions inconsistent with such written request by holders of a majority in
aggregate principal amount of the outstanding Notes. Such limitations do not
apply, however, to a suit instituted by a holder of a Note for the enforcement
of the payment of the principal of, premium, if any, or interest on such Note on
or after the respective due dates expressed in such Note.
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, whether or not an Event of Default shall occur and be continuing, the
Trustee under the Indenture is not under any obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
holders unless such holders shall have offered to the Trustee reasonable
security or indemnity. Subject to certain provisions concerning the rights of
the Trustee, the holders of not less than a majority in aggregate principal
amount of the outstanding Notes have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee under the Indenture.
If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee shall mail to each holder of the Notes notice of the
Default or Event of Default within 30 days after obtaining knowledge thereof.
Except in the case of a Default or an Event of Default in payment of principal
of, premium, if any, or interest on any Notes, the Trustee may withhold the
notice to the holders of such Notes if a committee of its trust officers in good
faith determines that withholding the notice is in the interest of the holders
of the Notes.
The Company is required to furnish to the Trustee annual and quarterly
statements as to the performance by the Company of its obligations under the
Indenture and as to any default in such performance. The
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Company is also required to notify the Trustee within 30 days of any event which
is, or after notice or lapse of time or both would become, an Event of Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the obligations
of the Company with respect to the outstanding Notes ("defeasance"). Such
defeasance means that the Company shall be deemed to have paid and discharged
the entire Indebtedness represented by the outstanding Notes, except for (i) the
rights of holders of outstanding Notes to receive payment in respect of the
principal of, premium, if any, and interest on such Notes when such payments are
due, (ii) the Company's obligations to issue temporary Notes, register the
transfer or exchange of any Notes, replace mutilated, destroyed, lost or stolen
Notes and maintain an office or agency for payments in respect of the Notes,
(iii) the rights, powers, trusts, duties and immunities of the Trustee, and (iv)
the defeasance provisions of the Indenture. In addition, the Company may, at its
option and at any time, elect to terminate the obligations of the Company with
respect to certain covenants that are set forth in the Indenture, some of which
are described under "-- Certain Covenants" above (including the covenant
described under "-- Certain Covenants -- Change of Control" above) and any
subsequent failure to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Notes ("covenant defeasance").
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the holders of the Notes, cash in United States dollars, U.S. Government
Obligations (as defined in the Indenture), or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest on the outstanding Notes to redemption or maturity (except lost, stolen
or destroyed Notes which have been replaced or paid); (ii) the Company shall
have delivered to the Trustee an opinion of counsel to the effect that the
holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such defeasance
or covenant defeasance had not occurred (in the case of defeasance, such opinion
must refer to and be based upon a ruling of the Internal Revenue Service or a
change in applicable federal income tax laws); (iii) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit; (iv)
such defeasance or covenant defeasance shall not cause the Trustee to have a
conflicting interest with respect to any securities of the Company; (v) such
defeasance or covenant defeasance shall not result in a breach or violation of,
or constitute a default under, any material agreement or instrument to which the
Company is a party or by which it is bound; (vi) the Company shall have
delivered to the Trustee an opinion of counsel to the effect that (A) after the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally and (B) the trust funds will not be
subject to the rights of holders of Senior Indebtedness, including, without
limitation, those rights arising under the Indenture; and (vii) the Company
shall have delivered to the Trustee an officers' certificate and an opinion of
counsel, each stating that all conditions precedent under the Indenture to
either defeasance or covenant defeasance, as the case may be, have been complied
with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or repaid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation (except lost, stolen or destroyed Notes which have been replaced or
paid) have been called for redemption pursuant to the terms of the Notes or have
otherwise become due and payable and the Company has irrevocably deposited or
caused to be deposited with the Trustee funds in an amount sufficient to pay and
discharge the entire Indebtedness on the Notes not
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theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (ii)
the Company has paid all other sums payable under the Indenture by the Company;
(iii) there exists no Default or Event of Default under the Indenture; and (iv)
the Company has delivered to the Trustee an officers' certificate and an opinion
of counsel stating that (x) all conditions precedent under the Indenture
relating to the satisfaction and discharge of the Indenture have been complied
with and (y) such satisfaction and discharge will not result in a breach or
violation of, or constitute a default under, the Indenture or any material
agreement or instrument to which the Company is a party or by which the Company
is bound.
AMENDMENTS AND WAIVERS
From time to time, the Company, when authorized by a resolution of its
Board of Directors, and the Trustee may, without the consent of the holders of
any outstanding Notes, amend, waive or supplement the Indenture or the Notes for
certain specified purposes, including, among other things, curing ambiguities,
defects or inconsistencies, qualifying, or maintaining the qualification of, the
Indenture under the Trust Indenture Act of 1939, as amended, or making any other
change that does not adversely affect the rights of any holder of Notes;
provided, however, that the Company has delivered to the Trustee an opinion of
counsel stating that such change does not adversely affect the rights of any
holder of Notes. Other amendments and modifications of the Indenture, the Notes
or the Guarantees may be made by the Company and the Trustee with the consent of
the holders of not less than a majority of the aggregate principal amount of the
outstanding Notes; provided, however, that no such modification or amendment
may, without the consent of the holder of each outstanding Note affected
thereby, (i) reduce the principal amount of, extend the fixed maturity of or
alter the redemption provisions of, the Notes, (ii) change the currency in which
any Note or any premium or the interest thereon is payable or make the principal
of, premium, if any, or interest on any Note payable in money other than that
stated in the Note, (iii) reduce the percentage in principal amount of
outstanding Notes that must consent to an amendment, supplement or waiver or
consent to take any action under the Indenture, any Guarantee or the Notes, (iv)
impair the right to institute suit for the enforcement of any payment on or with
respect to the Notes, (v) waive a default in payment with respect to the Notes,
(vi) amend, change or modify the obligations of the Company to make and
consummate the offer with respect to any Asset Sale or modify any of the
provisions or definitions with respect thereto, (vii) reduce or change the rate
or time for payment of interest on the Notes, (viii) modify or change any
provision of the Indenture affecting the subordination or ranking of the Notes
or any Guarantee in a manner adverse to the holders of the Notes, or (ix)
release any Guarantor from any of its obligations under its Guarantee or the
Indenture other than in compliance with the Indenture.
REGISTRATION RIGHTS AGREEMENT; PENALTY INTEREST
If (i) due to a change in current interpretations by the Commission, the
Company is not permitted to effect the Exchange Offer, (ii) the Exchange Offer
is not for any other reason consummated within 105 days after the date on which
the Company delivered the Notes to the Initial Purchasers (the "Closing Date")
or (iii) any holder of Notes shall, within 30 days after consummation of the
Exchange Offer, notify the Company that such holder (x) is prohibited by
applicable law or Commission policy from participating in the Exchange Offer,
(y) may not resell Exchange Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and that the prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such holder or (z) is a broker-dealer and holds Notes acquired
directly from the Company or an "affiliate" of the Company, it is contemplated
that the Company will file a registration statement (a "Shelf Registration
Statement") covering resales (a) by the holders of the Notes in the event the
Company is not permitted to effect the Exchange Offer pursuant to the foregoing
clause (i) or the Exchange Offer is not consummated within 105 days after the
Closing Date pursuant to the foregoing clause (ii) or (b) by the holders of
Notes with respect to which the Company receives notice pursuant to the
foregoing clause (iii), and will use its best efforts to cause any such Shelf
Registration Statement to become effective and to keep such Shelf Registration
Statement effective for three years from the effective date thereof. The Company
shall, if it files a Shelf Registration Statement, provide to each holder of the
Notes
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copies of the prospectus and notify each such holder when the Shelf Registration
Statement has become effective. A holder that sells Notes pursuant to a Shelf
Registration Statement generally will be required to be named as a selling
securityholder in the related prospectus and to deliver a current prospectus to
purchasers, and will be subject to certain of the civil liability provisions
under the Securities Act in connection with such sales.
Under the Registration Rights Agreement, the Company has agreed to use its
best efforts to: (i) file the Registration Statement or a Shelf Registration
Statement with the Commission as soon as practicable after the Closing Date,
(ii) have such Registration Statement or Shelf Registration Statement declared
effective by the Commission, and (iii) commence the Exchange Offer and issue the
Exchange Notes in exchange for all Notes validly tendered in accordance with the
terms of the Exchange Offer prior to the close of the Exchange Offer, or, in the
alternative, cause such Shelf Registration Statement to remain effective for
three years from the effective date thereof. Although the Company intends to
file a Shelf Registration Statement as described above if required, there can be
no assurance that any such registration statement will be filed or, if filed,
that it will become effective. Each holder of Notes, by virtue of becoming so,
will be bound by the provisions of the Registration Rights Agreement that may
require the holder to furnish notice or other information to the Company as a
condition to certain obligations of the Company to file a Shelf Registration
Statement by a particular date or to maintain its effectiveness for the
prescribed three-year period.
If the Company fails to comply with the above provisions, additional
interest (the "Penalty Interest") shall be assessed on the Notes as follows:
(i) (A) if the Registration Statement or, in the event that due to
current interpretations by the Commission the Company is not permitted to
effect the Exchange Offer, a Shelf Registration Statement is not filed
within 30 days following the Closing Date or (B) in the event that within
the prescribed time period, any holder of Notes shall notify the Company
that such holder (x) is prohibited by applicable law or Commission policy
from participating in the Exchange Offer, (y) may not resell Exchange Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and that the prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by
such holder or (z) is a broker-dealer and holds Notes acquired directly
from the Company or an "affiliate" of the Company, a Shelf Registration
Statement is not filed within 30 days after expiration of the prescribed
time period, then commencing on the 31st day after either the Closing Date
or the expiration of the prescribed time period, as the case may be,
Penalty Interest shall be accrued on the Notes over and above the accrued
interest at a rate of .50% per annum for the first 90 days immediately
following the 31st day after either the Closing Date or the expiration of
the prescribed time period, as the case may be, such Penalty Interest rate
increasing by an additional .25% per annum at the beginning of each
subsequent 90-day period;
(ii) if the Registration Statement or a Shelf Registration Statement
is filed pursuant to clause (i) of the preceding full paragraph and is not
declared effective within 75 days following either the Closing Date or the
expiration of the prescribed time period, as the case may be, then
commencing on the 76th day after either the Closing Date or the expiration
of the prescribed time period, as the case may be, Penalty Interest shall
be accrued on the Notes over and above the accrued interest at a rate of
.50% per annum for the first 90 days immediately following the 76th day
after either the Closing Date or the expiration of the prescribed time
period, as the case may be, such Penalty Interest rate increasing by an
additional .25% per annum at the beginning of each subsequent 90-day
period; and
(iii) if either (A) the Company has not exchanged Exchange Notes for
all Notes validly tendered in accordance with the terms of the Exchange
Offer on or prior to 30 days after the date on which the Exchange Offer
Registration Statement was declared effective, or (B) if applicable, a
Shelf Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective prior to three years from its
original effective date, then, subject to certain exceptions, Penalty
Interest shall be accrued on the Notes over and above the accrued interest
at a rate of .50% per annum for the first 60 days immediately following the
(x) 31st day after such effective date, in the case of (A) above, or (y)
the day
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such Shelf Registration Statement ceases to be effective in the case of (B)
above, such Penalty Interest rate increasing by an additional .25% per
annum at the beginning of each subsequent 60-day period;
provided, however, that the Penalty Interest rate on the Notes may not exceed
1.5% per annum; and provided further that (1) upon the filing of the Exchange
Offer Registration Statement or a Shelf Registration Statement (in the case of
(i) above), (2) upon the effectiveness of the Exchange Offer Registration
Statement or a Shelf Registration Statement (in the case of (ii) above), or (3)
upon the exchange of Exchange Notes for all Notes tendered in the Exchange Offer
or upon the effectiveness of the Shelf Registration Statement which had ceased
to remain effective prior to three years from its original effective date (in
the case of (iii) above), Penalty Interest on the Notes as a result of such
clause (i), (ii) or (iii) shall cease to accrue.
Any amounts of Penalty Interest due pursuant to clause (i), (ii) or (iii)
above will be payable in cash on the interest payment dates of the Notes. The
amount of Penalty Interest will be determined by multiplying the applicable
Penalty Interest rate by the principal amount of the Notes, multiplied by a
fraction, the numerator of which is the number of days such Penalty Interest
rate was applicable during such period, and the denominator of which is 360.
The foregoing summary of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the provisions of the Registration Rights
Agreement. A copy of the Registration Rights Agreement has been filed with the
Commission as an exhibit to the Registration Statement.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee thereunder will perform only such duties as are
specifically set forth in the Indenture. If an Event of Default has occurred and
is continuing, the Trustee will exercise such rights and powers vested in it
under the Indenture and use the same degree of care and skill in its exercise as
a prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee thereunder,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of any
such claims, as security or otherwise. The Trustee is permitted to engage in
other transactions; provided, however, that if it acquires any conflicting
interest (as defined in such Act) it must eliminate such conflict or resign.
GOVERNING LAW
The Indenture, the Notes and the Guarantees are governed by the laws of the
State of New York.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a person (a) assumed in
connection with an Asset Acquisition from such person or (b) existing at the
time such person becomes a Subsidiary of any other person.
"Affiliate" means, with respect to any specified person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person.
"Asset Acquisition" means (a) an Investment by the Company or any
Subsidiary of the Company in any other person pursuant to which such person
shall become a Subsidiary of the Company, or shall be merged with or into the
Company or any Subsidiary of the Company, (b) the acquisition by the Company or
any Subsidiary of the Company of the assets of any person (other than a
Subsidiary of the Company) which constitute all or substantially all of the
assets of such person or (c) the acquisition by the Company or any Subsidiary of
the Company of any division or line of business of any person (other than a
Subsidiary of the Company).
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"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease or other disposition to any person other than the Company or a
Wholly Owned Subsidiary of the Company, in one or a series of related
transactions, of (a) any Capital Stock of any Subsidiary of the Company (other
than in respect of director's qualifying shares or investments by foreign
nationals mandated by applicable law); (b) all or substantially all of the
properties and assets of any division or line of business of the Company or any
Subsidiary of the Company; or (c) any other properties or assets of the Company
or any Subsidiary of the Company other than in the ordinary course of business.
For the purposes of this definition, the term "Asset Sale" shall not include (i)
any sale, transfer or other disposition of equipment, tools or other assets by
the Company or any of its Subsidiaries in one or a series of related
transactions in respect of which the Company or such Subsidiary receives cash or
property with an aggregate Fair Market Value of $1,000,000 or less (ii) sales of
accounts receivable or interests in accounts receivable of the Company or any
Subsidiaries pursuant to the Receivables Purchase Agreement or the Bank
Receivables Agreement; and (iii) any sale, issuance, conveyance, transfer, lease
or other disposition of properties or assets that is governed by the provisions
described under "-- Merger, Sale of Assets, Etc." above.
"Average Life to Stated Maturity" means, with respect to any Indebtedness,
as at any date of determination, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years (or any fraction thereof) from such
date to the date or dates of each successive scheduled principal payment
(including, without limitation, any sinking fund requirements) of such
Indebtedness multiplied by (b) the amount of each such principal payment by (ii)
the sum of all such principal payments.
"Bank Receivables Agreement" means the Receivables Sale Agreement dated as
of July 31, 1995 (the "1995 Bank Receivables Agreement"), among Interface
Securitization Corporation, the Company, certain financial institutions parties
thereto, Trust Company Bank (now SunTrust Bank, Atlanta), as Co-Agent and
Administrative Agent, and The First National Bank of Chicago, as Co-Agent and
Documentation and Collateral Agent, as such agreement, in whole or in part, may
from time to time be amended, renewed, extended, substituted, refinanced,
restructured, replaced, supplemented or otherwise modified, whether with the
same or any other person(s) as purchaser(s), lender(s) or agent(s) (including,
without limitation, any successive renewals, extensions, substitutions,
refinancings, restructurings, replacements, supplements or other modifications
of the foregoing, whether with the same or any other person) provided that the
sales of receivables pursuant to any such Bank Receivables Agreement are on
non-recourse terms not materially less favorable to the Company and its
Subsidiaries as provided for in the 1995 Bank Receivables Agreement and that the
aggregate amount of sales under such Bank Receivables Agreement and the
Receivables Sales Agreement at any one time outstanding shall not exceed a total
of $100,000,000.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real, personal
or mixed) that is required to be classified and accounted for as a capital lease
obligation under GAAP, and, for the purpose of the Indenture, the amount of such
obligation at any date shall be the capitalized amount thereof at such date,
determined in accordance with GAAP.
"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness
with a maturity of 180 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or acceptances with a
maturity of 180 days or less of any financial institution that is a member of
the Federal Reserve System having combined capital and surplus and undivided
profits of not less than $500,000,000; (iii) certificates of deposit with a
maturity of 180 days or less of any financial institution that is not organized
under the laws of the United States, any state thereof or the District of
Columbia that are rated at least A-1 by S&P or at least P-1 by Moody's or at
least an equivalent rating category of another nationally recognized securities
rating agency; (iv) repurchase agreements and reverse repurchase agreements
relating to marketable direct obligations issued or unconditionally guaranteed
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by the government of the United States of America or issued by any agency
thereof and backed by the full faith and credit of the United States of America,
in each case maturing within 180 days from the date of acquisition; provided
that the terms of such agreements comply with the guidelines set forth in the
Federal Financial Agreements of Depository Institutions With Securities Dealers
and Others, as adopted by the Comptroller of the Currency on October 31, 1985.
"Change of Control" means the occurrence of any of the following events:
(a) so long as the holders of the Company's Class B common stock are entitled to
elect a majority of the Company's board of directors, the Permitted Holders
shall at any time fail to be the "beneficial owners" (as defined in Rule 13d-3
and 13d-5 under the Exchange Act) of a majority of the issued and outstanding
shares of the Company's Class B common stock; or (b) at any time during which
the holders of the Company's Class B common stock have ceased to be entitled to
elect a majority of the Company's board of directors (i) any "person" or "group"
(as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other
than the Permitted Holders, shall become the "beneficial owner(s)" (as defined
in said Rule 13d-3) of more than 35% of the total Voting Stock of the Company,
provided, however, that the Permitted Holders (A) "beneficially own" (as so
defined) a lower percentage of the Voting Stock than such other person or
"group" and (B) do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the Board of
Directors of the Company, or (ii) the Company consolidates with, or merges with
or into, another person or sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to any person, or
any person consolidates with, or merges with or into, the Company, in any such
event pursuant to a transaction in which the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where (A) the outstanding Voting Stock of the
Company is converted into or exchanged for (1) Voting Stock (other than
Redeemable Capital Stock) of the surviving or transferee corporation or (2)
cash, securities and other property in an amount which could then be paid by the
Company as a Restricted Payment under the Indenture, or a combination thereof,
and (B) immediately after such transaction no "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act), excluding Permitted
Holders, is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time, upon
the happening of an event or otherwise), directly or indirectly, of more than
50% of the total Voting Stock of the surviving or transferee corporation; (c) at
any time during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the stockholders of the Company was approved by
a vote of 66 2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office; or (d) the
Company is liquidated or dissolved or adopts a plan of liquidation.
"Class B Shareholders' Agreement" shall mean that certain Voting Agreement
for Interface, Inc. Class B Common Stock Shareholders dated as of April 13,
1993, by and among Ray C. Anderson and approximately 38 other holders of Class B
common stock of Interface, pursuant to which Ray C. Anderson is entitled to
direct the voting of the shares of Class B common stock subject thereto.
"Common Stock" means, with respect to any person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or nonvoting) of, such person's common stock, whether
outstanding at the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Consolidated Cash Flow Available for Fixed Charges" means, with respect to
any person for any period, the sum of, without duplication, the amounts for such
period, taken as a single accounting period, of (a) Consolidated Net Income, (b)
Consolidated Non-cash Charges, (c) Consolidated Interest Expense, (d)
Consolidated Income Tax Expense and (e) one third of Consolidated Rental
Payments less any non-cash items increasing Consolidated Net Income for such
period.
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"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
person, the ratio of the aggregate amount of Consolidated Cash Flow Available
for Fixed Charges of such person for the four full fiscal quarters immediately
preceding the date of the transaction (the "Transaction Date") giving rise to
the need to calculate the Consolidated Fixed Charge Coverage Ratio (such four
full fiscal quarter period being referred to herein as the "Four Quarter
Period") to the aggregate amount of Consolidated Fixed Charges of such person
for the Four Quarter Period. In addition to and without limitation of the
foregoing, for purposes of this definition, "Consolidated Cash Flow Available
for Fixed Charges" and "Consolidated Fixed Charges" shall be calculated after
giving effect on a pro forma basis for the period of such calculation to,
without duplication, (a) the incurrence of any Indebtedness of such person or
any of its Subsidiaries (and the application of the net proceeds thereof) during
the period commencing on the first day of the Four Quarter Period to and
including the Transaction Date (the "Reference Period"), including, without
limitation, the incurrence of the Indebtedness giving rise to the need to make
such calculation (and the application of the net proceeds thereof), as if such
incurrence (and application) occurred on the first day of the Reference Period,
and (b) any Asset Sales or Asset Acquisitions (including, without limitation,
any Asset Acquisition giving rise to the need to make such calculation as a
result of such person or one of its Subsidiaries (including any person who
becomes a Subsidiary as a result of the Asset Acquisition) incurring, assuming
or otherwise being liable for Acquired Indebtedness) occurring during the
Reference Period, as if such Asset Sale or Asset Acquisition occurred on the
first day of the Reference Period. Furthermore, in calculating "Consolidated
Fixed Charges" for purposes of determining the denominator (but not the
numerator) of this "Consolidated Fixed Charge Coverage Ratio", (i) interest on
outstanding Indebtedness determined on a fluctuating basis as of the Transaction
Date and which will continue to be so determined thereafter shall be deemed to
have accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; and (ii) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Reference Period. If such person or any of its Subsidiaries directly or
indirectly guarantees Indebtedness of a third person, the above clause shall
give effect to the incurrence of such guaranteed Indebtedness as if such person
or such Subsidiary had directly incurred or otherwise assumed such guaranteed
Indebtedness.
"Consolidated Fixed Charges" means, with respect to any person for any
period, the sum of, without duplication, the amounts for such period of (i)
Consolidated Interest Expense, (ii) the product of (a) the aggregate amount of
dividends and other distributions paid or accrued during such period in respect
of Preferred Stock and Redeemable Capital Stock of such person and its
Subsidiaries on a consolidated basis and (b) a fraction, the numerator of which
is one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such person, expressed as a
decimal and (iii) one-third of Consolidated Rental Payments.
"Consolidated Income Tax Expense" means, with respect to any person for any
period, the provision for federal, state, local and foreign income taxes of such
person and its Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any person for any
period, without duplication, the sum of (i) the interest expense of such person
and its Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP, including, without limitation, (a) any amortization of
debt discount, (b) the net cost under Interest Rate Protection Obligations, (c)
the interest portion of any deferred payment obligation, (d) all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing and (e) all accrued interest and (ii) the interest
component of Capitalized Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by such person and its Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any person, for any
period, the consolidated net income (or loss) of such person and its
Subsidiaries for such period as determined in accordance with GAAP, adjusted, to
the extent included in calculating such net income, by excluding, without
duplication, (i) all extraordinary gains or losses, (ii) the portion of net
income (but not losses) of such person and its Subsidiaries allocable to
minority interests in unconsolidated persons to the extent that cash dividends
or distributions have
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not actually been received by such person or one of its Subsidiaries, (iii) net
income (or loss) of any person combined with such person or one of its
Subsidiaries on a "pooling of interests" basis attributable to any period prior
to the date of combination, (iv) any gain or loss realized upon the termination
of any employee pension benefit plan, on an after-tax basis, (v) gains or losses
in respect of any Asset Sales by such person or one of its Subsidiaries and (vi)
the net income of any Subsidiary of such person to the extent that the
declaration of dividends or similar distributions by that Subsidiary of that
income is not at the time permitted, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary or its
stockholders.
"Consolidated Net Worth" means, with respect to any person at any date, the
consolidated stockholders' equity of such person less the amount of such
stockholders' equity attributable to Redeemable Capital Stock of such person and
its Subsidiaries, as determined in accordance with GAAP.
"Consolidated Non-cash Charges" means, with respect to any person for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such person and its Subsidiaries reducing Consolidated Net Income of such person
and its Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP (excluding any such charges constituting an extraordinary
item or loss or any such charge which required an accrual of or a reserve for
cash charges for any future period).
"Consolidated Rental Payments" of any person means, for any period, the
aggregate rental obligations of such person and its consolidated Subsidiaries
(not including taxes, insurance, maintenance and similar expenses that the
lessee is obligated to pay under the terms of the relevant leases), determined
on a consolidated basis in accordance with GAAP, payable in respect of such
period (net of income from subleases thereof, not including taxes, insurance,
maintenance and similar expenses that the sublessee is obligated to pay under
the terms of such sublease), whether or not such obligations are reflected as
liabilities or commitments on a consolidated balance sheet of such person and
its Subsidiaries or in the notes thereto, excluding, however, in any event, (i)
that portion of Consolidated Interest Expense of such person representing
payments by such person or any of its consolidated Subsidiaries in respect of
Capitalized Lease Obligations (net of payments to such person or any of its
consolidated Subsidiaries under subleases qualifying as capitalized lease
subleases to the extent that such payments would be deducted in determining
Consolidated Interest Expense) and (ii) the aggregate amount of amortization of
obligations of such person and its consolidated Subsidiaries in respect of such
Capitalized Lease Obligations for such period (net of payments to such person or
any of its consolidated Subsidiaries and subleases qualifying as capitalized
lease subleases to the extent that such payments could be deducted in
determining such amortization amount).
"Consolidated Tangible Assets" means the sum of the Tangible Assets of the
Company and its Subsidiaries after eliminating inter-company items, all
determined in accordance with GAAP, including appropriate deductions for
minority interest in Net Tangible Assets of such Subsidiaries.
"Credit Agreements" means, collectively, (i) the Amended and Restated
Credit Agreement dated as of June 30, 1995, among the Company, certain
Subsidiaries of the Company, the banks and other lending institution parties
thereto, Trust Company Bank (now SunTrust Bank, Atlanta), as Co-Agent and
Collateral Agent, and The First National Bank of Chicago, as Co-Agent, as
amended by the First Amendment to Amended and Restated Credit Agreement dated as
of July 31, 1995, and (ii) the Letter of Credit Agreement dated as of January 9,
1995, among the Company, certain Subsidiaries of the Company, the banks and
other lending institutions parties thereto, and Trust Company Bank (now SunTrust
Bank, Atlanta), as Domestic Agent and Collateral Agent, as amended by the Master
Amendment to Credit Documents dated as of June 30, 1995, in each case as such
agreement, in whole or in part, may from time to time be amended, renewed,
extended, substituted, refinanced, restructured, replaced, supplemented or
otherwise modified (including, without limitation, any successive renewals,
extensions, substitutions, refinancings, restructurings, replacements,
supplementations or other modifications of the foregoing), and whether with the
present lenders or any other lenders.
"Currency Agreement" means, with respect to any person, any foreign
exchange contract, currency swap agreement or other similar agreement or
arrangement designed to protect such person or any of its Subsidiaries against
fluctuations in currency values.
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"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness under
the Credit Agreements and (ii) any other Senior Indebtedness which (a) at the
time of the determination exceeds $25,000,000 in aggregate principal amount and
(b) is specifically designated in the instrument evidencing such Senior
Indebtedness as "Designated Senior Indebtedness" by the Company.
"Event of Default" has the meaning set forth under "Events of Default"
herein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any assets, the price, as
determined by the Board of Directors of the Company, acting in good faith which
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of which is under pressure
or compulsion to complete the transaction; provided, however, that, with respect
to any transaction which involves an asset or assets in excess of $5,000,000,
such determination shall be evidenced by a certificate of an officer of the
Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America, which are applicable from time to
time and are consistently applied.
"Guarantee" means each guarantee of the Notes by each Guarantor.
"guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantor" means (i) each of Guilford (Delaware), Inc., Guilford of Maine,
Inc., Interface Asia-Pacific, Inc., Interface Europe, Inc., Interface Flooring
Systems, Inc., Interface Research Corporation, Pandel, Inc., Rockland
React-Rite, Inc., Bentley Mills, Inc., Prince Street Technologies, Ltd. and each
other Material U.S. Subsidiary and (ii) each person who delivers a Guarantee
pursuant to the covenant described under "-- Certain Covenants -- Limitations on
Guarantees by Subsidiaries" above and shall include any successor replacing it
pursuant to the Indenture, and thereafter means such successor.
"Guarantor Senior Indebtedness" means the principal of, premium, if any,
and interest on any Indebtedness of a Guarantor, whether outstanding on the
Issue Date or thereafter created, incurred or assumed, and whether at any time
owing, actually or contingently, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Guarantee of such Guarantor. Without
limiting the generality of the foregoing, "Guarantor Senior Indebtedness" shall
include the principal of, premium, if any, and interest (including interest
accruing after the filing of a petition initiating any proceeding under any
state, federal or foreign bankruptcy or insolvency laws, whether or not
allowable as a claim in such proceeding) and shall also include reimbursement
payments, fees, expenses, indemnities, gross-up payments, and other obligations
of every nature from time to time owing, actually or contingently by the
Guarantor in respect of any such amounts owing by the Company or any of its
Subsidiaries under the Credit Agreements, the Receivables Purchase Agreement,
the Bank Receivables Agreement, the Guilford Equipment Lease, Interest Rate
Protection Agreements, Currency Agreements or other extensions of credit to the
Company or any of its Subsidiaries from banks or other lending institutions.
Notwithstanding the foregoing, "Guarantor Senior Indebtedness" shall not include
(a) Indebtedness evidenced by the Guarantee of such Guarantor, (b) Indebtedness
that is expressly subordinate or junior in right of payment to any
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Indebtedness of such Guarantor, (c) Indebtedness which, when incurred and
without respect to any election under Section 1111(b) of Title 11, United States
Code, is without recourse to such Guarantor, (d) Indebtedness which is
represented by Redeemable Capital Stock, (e) Indebtedness for goods, materials
or services purchased in the ordinary course of business or Indebtedness
consisting of trade payables or other current liabilities (other than
Indebtedness in respect of any services rendered by or purchased from, or
current liabilities owing to, banks or financial institutions, or the current
portion of any long-term Indebtedness which would constitute Guarantor Senior
Indebtedness but for the operation of this clause (e)), (f) Indebtedness of or
amounts owed by such Guarantor for compensation to employees or for services
rendered to such Guarantor, (g) any liability for foreign, federal, state, local
or other taxes owed or owing by such Guarantor, (h) Indebtedness of such
Guarantor to a Subsidiary of such Guarantor or any other Affiliate of such
Guarantor (other than the Company) or any of such Affiliate's Subsidiaries, (i)
Indebtedness evidenced by any guarantee of any Subordinated Indebtedness, (j)
that portion of any Indebtedness which, at the time of the incurrence, is
incurred by such Guarantor in violation of this Indenture and (k) amounts owing
under leases (other than Capitalized Lease Obligations and the Guilford
Equipment Lease).
"Guilford Equipment Lease" means the Master Equipment Lease Agreement dated
as of June 30, 1995, between Fleet Credit Corporation and Guilford of Maine,
Inc., relating to the leasing of various textile manufacturing equipment in
aggregate amount (acquisition costs) of not more than $19,000,000, as such
agreement, in whole or in part, may from time to time be amended, renewed,
extended, substituted, refinanced, restructured, replaced, supplemented or
otherwise modified, whether with the same or any other person(s) as lessor(s) or
lender(s) (including, without limitation, any successive renewals, extensions,
substitutions, refinancings, restructurings, replacements, supplements or other
modifications of the foregoing).
"Indebtedness" means, with respect to any person, without duplication, (a)
all liabilities of such person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities incurred in the ordinary course of business and which are
not overdue by more than 90 days, but including, without limitation, all
obligations, contingent or otherwise, of such person in connection with any
letters of credit, banker's acceptance or other similar credit transaction, (b)
all obligations of such person evidenced by bonds, notes, debentures or other
similar instruments, (c) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such person (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property), but excluding trade accounts payable arising in the ordinary
course of business, (d) all obligations of such person arising under Capitalized
Lease Obligations (including those arising under the Guilford Equipment Lease),
(e) all Indebtedness referred to in the preceding clauses of other persons and
all dividends of other persons, the payment of which is secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien upon property (including, without limitation,
accounts and contract rights) owned by such person, even though such person has
not assumed or become liable for the payment of such Indebtedness (the amount of
such obligation being deemed to be the lesser of the value of such property or
asset or the amount of the obligation so secured), (f) all guarantees of
Indebtedness referred to in this definition by such person, (g) all Redeemable
Capital Stock of such person valued at the greater of its voluntary or
involuntary maximum fixed repurchase price plus accrued dividends, (h) all
obligations under or in respect of Currency Agreements and Interest Rate
Protection Obligations of such person, and (i) any amendment, supplement,
modification, deferral, renewal, extension or refunding of any liability of the
types referred to in clauses (a) through (h) above. For purposes hereof, the
"maximum fixed repurchase price" of any Redeemable Capital Stock which does not
have a fixed repurchase price shall be calculated in accordance with the terms
of such Redeemable Capital Stock as if such Redeemable Capital Stock were
purchased on any date on which Indebtedness shall be required to be determined
pursuant to this Indenture, and if such price is based upon, or measured by, the
fair market value of such Redeemable Capital Stock, such fair market value shall
be determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in
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the judgment of the Board of Directors of the Company, is otherwise independent
and qualified to perform the task for which it is to be engaged.
"Interest Rate Protection Agreement" means, with respect to the Company or
any of its Subsidiaries, any arrangement with any other person whereby, directly
or indirectly, such person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include without limitation, interest rate swaps, caps,
floors, collars and similar agreements.
"Interest Rate Protection Obligations" means the obligations of any person
pursuant to an Interest Rate Protection Agreement.
"Investment" means, with respect to any person, any direct or indirect loan
or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, any other person. In addition, the Fair
Market Value of the assets of any Subsidiary of the Company at the time that
such Subsidiary is designated as an Unrestricted Subsidiary shall be deemed to
be an Investment made by the Company in such Unrestricted Subsidiary at such
time. "Investments" shall exclude extensions of trade credit by the Company and
its Subsidiaries in the ordinary course of business in accordance with normal
trade practices of the Company or such Subsidiary, as the case may be.
"Investments" does not include payments made as the purchase consideration in an
Asset Acquisition.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or preference
or priority or other encumbrance upon or with respect to any property of any
kind. A person shall be deemed to own subject to a Lien any property which such
person has acquired or holds subject to the interest of a vendor or lessor under
any conditional sale agreement, capital lease or other title retention
agreement.
"Material Subsidiary" means each Subsidiary, now existing or hereinafter
established or acquired, that has or acquires total assets in excess of
$10,000,000, or that holds any fixed assets material to the operations or
business of another Material Subsidiary.
"Material U.S. Subsidiary" means each Material Subsidiary of the Company
that is incorporated in the United States or any State thereof.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any Subsidiary of the Company) net of (i)
brokerage commissions and other fees and expenses (including, without
limitation, fees and expenses of legal counsel and investment bankers) related
to such Asset Sale, (ii) provisions for all taxes payable as a result of such
Asset Sale, (iii) amounts required to be paid to any person (other than the
Company or any Subsidiary of the Company) owning a beneficial interest in the
assets subject to the Asset Sale and (iv) appropriate amounts to be provided by
the Company or any Subsidiary of the Company, as the case may be, as a reserve
required in accordance with GAAP against any liabilities associated with such
Asset Sale and retained by the Company or any Subsidiary of the Company, as the
case may be, after such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as reflected in an officers' certificate delivered to the
Trustee.
"Pari Passu Indebtedness" means Indebtedness of the Company or any
Guarantor which ranks pari passu in right of payment with the Notes or the
Guarantee or such Guarantor, as the case may be.
"Permitted Holder" means (i) for so long as Ray C. Anderson shall be living
and is performing the duties of chairman and chief executive officer of
Interface, Ray C. Anderson and each other party to the Class B
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Shareholders' Agreement, David Milton, Daniel T. Hendrix, Charles R. Eitel,
Brian L. DeMoura, and David W. Porter, and (ii) at all times thereafter, the
individuals listed on Schedule 10.11 to the Amended and Restated Credit
Agreement dated June 30, 1995; provided that in the case of each individual
referred to in the preceding clauses (i) and (ii), for the purposes of this
definition the reference to such individual shall be deemed to include the
members of such individual's immediate family, such individual's estate, and any
trusts established by such individual (whether inter vivos or testamentary) for
the benefit of members of such individual's immediate family.
"Permitted Investments" means any of the following: (i) Investments in any
Subsidiary of the Company (including any person that pursuant to such Investment
becomes a Subsidiary of the Company) and in any person that is merged or
consolidated with or into, or transfers or conveys all or substantially all of
its assets to, the Company or any Subsidiary of the Company at the time such
Investment is made; (ii) Investments in Cash Equivalents; (iii) Investments in
deposits with respect to leases or utilities provided to third parties in the
ordinary course of business; (iv) Investments in the Notes; (v) Investments in
Currency Agreements on commercially reasonable terms entered into by the Company
or any of its Subsidiaries in the ordinary course of business in connection with
the operations of the business of the Company or its Subsidiaries to hedge
against fluctuations in foreign exchange rates; (vi) loans or advances to
officers, employees or consultants of the Company and its Subsidiaries in the
ordinary course of business for bona fide business purposes of the Company and
its Subsidiaries (including travel and moving expenses) not in excess of
$1,000,000 in the aggregate at any one time outstanding; (vii) Investments in
evidences of Indebtedness, securities or other property received from another
person by the Company or any of its Subsidiaries in connection with any
bankruptcy proceeding or by reason of a composition or readjustment of debt or a
reorganization of such person or as a result of foreclosure, perfection or
enforcement of any Lien in exchange for evidences of Indebtedness, securities or
other property of such person held by the Company or any of its Subsidiaries, or
for other liabilities or obligations of such other person to the Company or any
of its Subsidiaries that were created, in accordance with the terms of the
Indenture; (viii) Investments in Interest Rate Protection Agreements on
commercially reasonable terms entered into by the Company or any of its
Subsidiaries in the ordinary course of business in connection with the
operations of the business of the Company or its Subsidiaries to hedge against
fluctuations in interest rates; and (ix) Investments, in addition to those
described in clauses (i) through (viii) above, in an aggregate amount at any
time outstanding not to exceed 15% of the Company's Consolidated Net Worth.
"Permitted Liens" means the following types of Liens:
(a) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or any of its Subsidiaries shall
have set aside on its books such reserves as may be required pursuant to
GAAP;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(c) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, governmental
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(d) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(e) Easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Subsidiaries;
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(f) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease;
(g) purchase money Liens to finance the acquisition or construction of
property or assets of the Company or any Subsidiary of the Company acquired
in the ordinary course of business; provided, however, that (i) the related
purchase money Indebtedness shall not be secured by any property or assets
of the Company or any Subsidiary of the Company other than the property and
assets so acquired or constructed and (ii) the Lien securing such
Indebtedness either (x) exists at the time of such acquisition or
construction or (y) shall be created within 90 days of such acquisition or
construction;
(h) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(i) Liens on any property securing the obligations of the Company or
any Subsidiary in respect of letters of credit issued by the lenders under
the Credit Agreements and as permitted under the Credit Agreements in
support of industrial development revenue bonds;
(j) Liens, if any, that may be deemed to have been granted in
connection with accounts receivable or interests in accounts receivable of
the Company or any Subsidiary as a result of the assignment thereof
pursuant to the Receivables Purchase Agreement or the Bank Receivables
Agreement;
(k) Liens, if any, arising under the Guilford Equipment Lease; and
(l) Liens, in addition to those described in clauses (a) through (k)
above, securing Indebtedness in an amount not to exceed 10% of the
Consolidated Tangible Assets of the Company.
"person" means any individual, corporation, limited liability company
partnership, joint venture, association, joint-stock company, trust, charitable
foundation, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Preferred Stock" means, with respect to any person, any and all shares,
interests, participations or other equivalents (however designated) of such
person's preferred or preference stock whether now outstanding or issued after
the date of the Indenture, and includes, without limitation, all classes and
series of preferred or preference stock.
"Receivables Purchase Agreement" means the Receivables Purchase Agreement
dated as of July 31, 1995 (the "1995 Receivables Purchase Agreement") among the
Company, Interface Securitization Corporation, Special Purpose Accounts
Receivables Cooperative Corporation, and Canadian Imperial Bank of Commerce as
servicing agent, as such agreement, in whole or in part, may from time to time
be amended, renewed, extended, substituted, refinanced, restructured, replaced,
supplemented or otherwise modified, whether with the same or any other person(s)
as purchaser(s), lender(s) or agent(s) (including, without limitation, any
successive renewals, extensions, substitutions, refinancings, restructurings,
replacements, supplements or other modifications of the foregoing) provided that
the sales of receivables pursuant to any such Receivables Purchase Agreement are
on non-recourse terms not materially less favorable to the Company and its
Subsidiaries as provided for in the 1995 Receivables Purchase Agreement and that
the aggregate amount of sales under such Receivables Sales Agreement and the
Bank Receivables Agreement at any one time outstanding shall not exceed a total
of $100,000,000.
"Redeemable Capital Stock" means any shares of any class or series of
Capital Stock, that, either by the terms thereof, by the terms of any security
into which it is convertible or exchangeable or by contract or otherwise, is or
upon the happening of an event or passage of time would be, required to be
redeemed prior to the Stated Maturity with respect to the principal of any Note
or is redeemable at the option of the holder thereof at any time prior to any
such Stated Maturity, or is convertible into or exchangeable for debt securities
at any time prior to any such Stated Maturity.
"Senior Indebtedness" means the principal of, premium, if any, and interest
on any Indebtedness of the Company, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, and whether at any time owing, actually
or contingently, unless, in the case of any particular Indebtedness, the
instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness shall not be senior in
right of payment to the Notes. Without limiting the generality of the foregoing,
"Senior Indebtedness" shall include the principal of, premium, if any, and
interest (including
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interest accruing after the filing of a petition initiating any proceeding under
any state, federal or foreign bankruptcy or insolvency laws, whether or not
allowable as a claim in such proceeding) and shall also include reimbursement
payments, fees, expenses, indemnities, gross-up payments, and other obligations
of every nature from time to time owing, actually or contingently by the Company
in respect of any such amounts owing by the Company or any of its Subsidiaries
under the Credit Agreements, the Receivables Purchase Agreement, the Bank
Receivables Agreement, the Guilford Equipment Lease, Interest Rate Protection
Agreements, Currency Agreements or other extensions of credit to the Company or
any of its Subsidiaries from banks or other lending institutions.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include (a)
Indebtedness evidenced by the Notes, (b) Indebtedness that is expressly
subordinate or junior in right of payment to any Indebtedness of the Company,
(c) Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is without recourse to the
Company, (d) Indebtedness which is represented by Redeemable Capital Stock, (e)
Indebtedness for goods, materials or services purchased in the ordinary course
of business or Indebtedness consisting of trade payables or other current
liabilities (other than Indebtedness in respect of any services rendered by or
purchased from, or current liabilities owing to, banks or financial institutions
or the current portion of any long-term Indebtedness which would constitute
Senior Indebtedness but for the operation of this clause (e)), (f) Indebtedness
of or amounts owed by the Company for compensation to employees or for services
rendered to the Company, (g) any liability for foreign, federal, state, local or
other taxes owed or owing by the Company, (h) Indebtedness of the Company to a
Subsidiary of the Company or any other Affiliate of the Company or any of such
Affiliate's Subsidiaries, (i) that portion of any Indebtedness which, at the
time of the incurrence, is incurred by the Company in violation of the Indenture
and (j) amounts owing under leases (other than Capitalized Lease Obligations and
the Guilford Equipment Lease).
"Significant Subsidiary" shall have the same meaning as in Rule 1.02(v) of
Regulation S-X under the Securities Act.
"S&P" means Standard & Poor's Corporation, and its successors.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable, and when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Guarantor which is expressly subordinated in right of payment to the Notes or
the Guarantee of such Guarantor, as the case may be.
"Subsidiary" means, with respect to any person, (i) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such person, by one or more Subsidiaries of such person or by such person and
one or more Subsidiaries thereof and (ii) any other person (other than a
corporation), including, without limitation, a joint venture, in which such
person, one or more Subsidiaries thereof or such person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, has at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other person performing
similar functions). For purposes of this definition, any directors' qualifying
shares or investments by foreign nationals mandated by applicable law shall be
disregarded in determining the ownership of a Subsidiary. Notwithstanding the
foregoing, an Unrestricted Subsidiary shall not be deemed a Subsidiary of the
Company under the Indenture, other than for purposes of the definition of an
Unrestricted Subsidiary, unless the Company shall have designated an
Unrestricted Subsidiary as a "Subsidiary" by written notice to the Trustee under
the Indenture, accompanied by an Officers' Certificate as to compliance with the
Indenture; provided, however, that the Company shall not be permitted to
designate any Unrestricted Subsidiary as a Subsidiary unless, after giving pro
forma effect to such designation, (i) the Company would be permitted to incur
$1.00 of additional Indebtedness under the proviso in the first paragraph of the
covenant described under "-- Certain Covenants -- Limitation on Indebtedness"
above (assuming a market rate of interest with respect to such Indebtedness) and
(ii) all Indebtedness and Liens of such Unrestricted
78
<PAGE> 81
Subsidiary would be permitted to be incurred by a Subsidiary of the Company
under the Indenture. A designation of an Unrestricted Subsidiary as a Subsidiary
may not thereafter be rescinded.
"Tangible Assets" means, at any date, the gross book value, as shown by the
accounting books and records of the Company and its Subsidiaries, of all the
property both real and personal of the Company and its Subsidiaries, less (i)
the net book value of all licenses, patents, patent applications, copyrights,
trademarks, trade names, goodwill, noncompete agreements or organizational
expenses and other like intangibles, (ii) unamortized debt discount expense,
(iii) all reserves for depreciation, obsolescence, depletion and amortization of
properties and (iv) all other proper reserves which in accordance with GAAP
should be provided in connection with the business conducted by the Company.
"Unrestricted Subsidiary" means a Subsidiary of the Company other than a
Guarantor (i) none of whose properties or assets were owned by the Company or
any of its Subsidiaries prior to the Issue Date, other than any such assets as
are transferred to such Unrestricted Subsidiary in accordance with the covenant
described under "-- Certain Covenants -- Limitation on Restricted Payments"
above, (ii) whose properties and assets, to the extent that they secure
Indebtedness, secure only Non-Recourse Indebtedness and (iii) which has no
Indebtedness other than Non-Recourse Indebtedness. As used above, "Non-Recourse
Indebtedness" means Indebtedness as to which (i) neither the Company nor any of
its Subsidiaries (other than the relevant Unrestricted Subsidiary or another
Unrestricted Subsidiary) (1) provides credit support (including any undertaking,
agreement or instrument which would constitute Indebtedness), (2) guarantees or
is otherwise directly or indirectly liable or (3) constitutes the lender (in
each case, other than pursuant to and in compliance with the covenant described
under "-- Certain Covenants -- Limitation on Restricted Payments") and (ii) no
default with respect to such Indebtedness (including any rights which the
holders thereof may have to take enforcement action against the relevant
Unrestricted Subsidiary or its assets) would permit (upon notice, lapse of time
or both) any holder of any other Indebtedness of the Company or its Subsidiaries
(other than Unrestricted Subsidiaries) to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any person (irrespective of whether or not, at the time, Capital
Stock of any other class or classes shall have, or might have, voting power by
reason of the happening of any contingency).
"Wholly Owned Subsidiary" means any Subsidiary of the Company of which 100%
of the outstanding Capital Stock is owned by the Company or by one or more
Wholly Owned Subsidiaries of the Company or by the Company and one or more
Wholly Owned Subsidiaries of the Company. For purposes of this definition, any
directors' qualifying shares or investments by foreign nationals mandated by
applicable law shall be disregarded in determining the ownership of a
Subsidiary.
79
<PAGE> 82
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summary of certain federal income tax consequences of the
acquisition, ownership and disposition of Notes is based on the opinion of
Kilpatrick & Cody, counsel to the Company, which opinion has been filed as an
exhibit to the Registration Statement. Such opinion is based upon the provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), the final,
temporary and proposed regulations promulgated thereunder, and administrative
rulings and judicial decisions in effect as of the date hereof, all of which are
subject to change (possibly with retroactive effect) or different
interpretations. The following summary is not binding on the Internal Revenue
Service ("IRS") and there can be no assurance that the IRS will take a similar
view with respect to the tax consequences described below. No ruling has been or
will be requested by the Company from the IRS on any tax matters relating to the
Notes or the Exchange Offer. This discussion is for general information only and
does not purport to address all of the possible federal income tax consequences
or any state, local or foreign tax consequences of the acquisition, ownership
and disposition of the Notes, the Exchange Notes or the Exchange Offer. It is
limited to investors who will hold the Notes and the Exchange Notes as capital
assets and does not address the federal income tax consequences that may be
relevant to particular investors in light of their unique circumstances or to
certain types of investors (such as dealers in securities, insurance companies,
financial institutions and tax-exempt entities) who might be subject to special
treatment under federal income tax laws.
As used in the discussion which follows, the term "U.S. Holder" means a
beneficial owner of the Notes or the Exchange Notes that, for United States
federal income tax purposes, is (i) a citizen or resident of the United States,
(ii) a corporation, partnership or other entity created or organized in or under
the laws of the United States or of any political subdivision thereof, or (iii)
an estate or trust the income of which is subject to United States federal
income taxation regardless of its source. The term "Non-U.S. Holder" means a
beneficial owner of the Notes or the Exchange Notes that, for United States
federal income tax purposes, is not a U.S. Holder.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES TO THEM OF PURCHASING, HOLDING AND DISPOSING OF THE NOTES OR THE
EXCHANGE NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR
FOREIGN TAX LAWS.
TAX CONSEQUENCES TO U.S. HOLDERS
Exchange Offer
The exchange of the Outstanding Notes for Exchange Notes pursuant to the
Exchange Offer should not be treated as an "exchange" because the Exchange Notes
should not be considered to differ materially in kind or extent from the
Outstanding Notes. Rather, the Exchange Notes received by a holder of the
Outstanding Notes should be treated as a continuation of the Outstanding Notes
in the hands of such holder. As a result, there should be no federal income tax
consequences to holders exchanging the Outstanding Notes for the Exchange Notes
pursuant to the Exchange Offer.
Interest
Except as provided below in respect of certain Additional Interest (as
described below), a holder of a Note will be required to report stated interest
on the Note as interest income in accordance with the holder's method of
accounting for tax purposes.
The Treasury Regulations relating to original issue discount ("OID") permit
the accrual of OID to be determined, in the case of a debt instrument with
alternative payment schedules, based upon the payment schedule most likely to
occur, as determined by the issuer of the debt, so long as the timing and
amounts of each payment schedule are known as of the issue date. Under the OID
rules, holders may be required to recognize income prior to receipt of cash.
Under certain circumstances, including failure of the Company to register the
Notes pursuant to an effective registration statement, additional interest (the
"Additional Interest") will accrue on the Notes in the manner described in
"Description of the Exchange Notes -- Registration Rights Agreement; Penalty
Interest". The Company does not intend to treat the possibility of Additional
Interest as affecting the computation of OID or the yield to maturity. If a
holder of a Note
80
<PAGE> 83
becomes entitled to Additional Interest, then, solely for purposes of
determining the accrual of OID, the yield to maturity on the Notes will be
determined by treating the Notes as reissued on the date that it is determined
that such Additional Interest will be required to be paid, for an amount equal
to its adjusted issue price on such date. The foregoing position taken by the
Company will be binding on all holders, unless a holder explicitly discloses
that its determination of the yield to maturity is different from the Company's
determination on a statement attached to the holder's timely filed federal
income tax return for the year that includes the acquisition date of the Notes.
Tax Basis in Outstanding Notes and Exchange Notes
A holder's tax basis in a Note will be the holder's purchase price for the
Note, increased for OID, if any, previously included in income by the holder
with respect to the Notes and not yet paid. If a holder of an Outstanding Note
exchanges the Outstanding Note for an Exchange Note pursuant to the Exchange
Offer, the tax basis of the Exchange Note immediately after such exchange should
equal the holder's tax basis in the Outstanding Note immediately prior to the
Exchange.
Disposition of Outstanding Notes or Exchange Notes
The sale, exchange, redemption or other disposition of a Note, except in
the case of an exchange pursuant to the Exchange Offer (see the above
discussion), generally will be a taxable event. A holder generally will
recognize gain or loss equal to the difference between (i) the amount of cash
(plus the fair market value of any property) received upon such sale, exchange,
redemption or other taxable disposition of the Outstanding Note or the Exchange
Note (except to the extent attributable to accrued interest) and (ii) the
holder's adjusted tax basis in such Outstanding Note or Exchange Note. Such gain
or loss will be capital gain or loss, and will be long term if the Note has been
held for more than one year at the time of the sale or other disposition.
Purchasers of Notes at Other than Original Issuance Price
The foregoing does not discuss special rules that may affect the treatment
of purchasers that acquire Notes other than at par, including those provisions
of the Internal Revenue Code relating to the treatment of "market discount",
"bond premium" and "amortizable bond premium". Any such purchaser should consult
its tax advisor as to the consequences to it of the acquisition, ownership, and
disposition of Notes.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
In the case of a Non-U.S. Holder, such Non-U.S. Holder generally will not
be subject to U.S. federal income tax, including U.S. withholding tax, on
interest paid or OID (if any) on the Notes under the "portfolio interest"
exception, provided that (i) the Non-U.S. Holder does not actually or
constructively own 10% or more of the total combined voting power of all classes
of stock of the Company entitled to vote, (ii) the Non-U.S. Holder is not (a) a
bank receiving interest or OID pursuant to a loan agreement entered into in the
ordinary course of its trade or business or (b) a controlled foreign corporation
that is related to the Company through stock ownership, (iii) such interest or
OID is not effectively connected with a United States trade or business, and
(iv) either (a) the beneficial owner of the Notes certifies to the Company or
its agent, under penalties of perjury, that the beneficial owner is a foreign
person and provides a completed IRS Form W-8 ("Certificate of Foreign Status")
or (b) a securities clearing organization, bank or other financial institution
which holds customers' securities in the ordinary course of its trade or
business (a "financial institution") and holds the Notes, certifies to the
Company or its agency, under penalties of perjury, that it has received Form W-8
from the beneficial owner or that it has received from another financial
institution a Form W-8 and furnishes the payor with a copy thereof. If any of
the situations described in proviso (i), (ii) or (iv) of the preceding sentence
do not exist, then, except as described below for effectively connected income,
interest paid and OID, if any, on the Notes would be subject to U.S. withholding
tax at a 30% rate (or lower tax treaty rate as evidenced by an IRS Form 1001
(Ownership Exemption or Reduced Rate Certificate)). If the income on the Notes
is effectively connected with a Non-U.S. Holder's conduct of a trade or business
within the United States, then, absent tax treaty protection, the Non-U.S.
Holder will be subject to U.S. federal income tax on
81
<PAGE> 84
such income in essentially the same manner as a United States person and, in the
case of a foreign corporation, may also be subject to the U.S. branch profits
tax.
BACKUP WITHHOLDING
Unless a holder provides its correct taxpayer identification number
(employer identification number or social security number) to the Company and
certifies that such number is correct, generally under the federal income tax
backup withholding rules, 31% of (i) the interest paid on the Notes, and (ii)
proceeds of sale of the Notes, must be withheld and remitted to the United
States Treasury. However, certain holders (including, among others, certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. For a foreign individual to qualify as an exempt foreign
recipient, that holder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt foreign status.
Backup withholding is not an additional federal income tax. Rather, the
federal income tax liability of a person subject to withholding will be reduced
by the amount of tax withheld. If withholding results in an overpayment of
taxes, a refund may be obtained from the IRS.
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer in exchange for Outstanding Notes
may be offered for resale, resold and otherwise transferred by holders thereof
(other than any holder which is (i) an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act, (ii) a broker-dealer who acquired
Notes directly from the Company or (iii) broker-dealers who acquired Notes as a
result of market-making or other trading activities) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business, and such holders are not engaged in, and do not intend to engage in,
and have no arrangement or understanding with any person to participate in, a
distribution of such Exchange Notes; provided that broker-dealers
("Participating Broker-Dealers") receiving Exchange Notes in the Exchange Offer
will be subject to a prospectus delivery requirement with respect to resales of
such Exchange Notes. To date, the staff of the Commission has taken the position
that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to transactions involving an exchange of securities
such as the exchange pursuant to the Exchange Offer (other than a resale of an
unsold allotment from the sale of the Outstanding Notes to the Initial
Purchasers) with the Prospectus contained in the Exchange Offer Registration
Statement. Pursuant to the Registration Rights Agreement, the Company has agreed
to permit Participating Broker-Dealers and other persons, if any, subject to
similar prospectus delivery requirements to use this Prospectus in connection
with the resale of such Exchange Notes. The Company and the Guarantors have
agreed that, for a period of 180 days after the Expiration Date, they will make
this Prospectus, and any amendment or supplement to this Prospectus, available
to any broker-dealer that requests such documents in the Letter of Transmittal.
Each holder of Outstanding Notes who wishes to exchange its Outstanding
Notes for Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company as set forth in "The Exchange Offer -- Terms and
Conditions of the Letter of Transmittal". In addition, each holder who is a
broker-dealer and who receives Exchange Notes for its own account in exchange
for Outstanding Notes that were acquired by it as a result of market-making
activities or other trading activities, will be required to acknowledge that it
will deliver a prospectus in connection with any resale by it of such Exchange
Notes.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers
82
<PAGE> 85
of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that
were received by it for its own account pursuant to the Exchange Offer and any
broker or dealer that participates in a distribution of such Exchange Notes may
be deemed to be an "underwriter" within the meaning of the Securities Act and
any profit on any such resale of Exchange Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
The Company has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Outstanding Notes (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act, as
set forth in the Registration Rights Agreement.
LEGAL MATTERS
Certain legal matters regarding the validity of the Exchange Notes offered
hereby will be passed upon for the Company by Kilpatrick & Cody, Atlanta,
Georgia. As of October 1, 1995, attorneys at Kilpatrick & Cody who worked on the
preparation of this Prospectus beneficially owned in the aggregate 5,000 shares
of the Company's outstanding Class A and Class B Common Stock.
EXPERTS
The Consolidated Financial Statements of the Company and its subsidiaries
included in this Prospectus have been audited by BDO Seidman, LLP, independent
certified public accountants, to the extent and for the periods set forth in
their report appearing elsewhere in this Prospectus, and have been so included
in reliance upon such report given upon the authority of said firm as experts in
accounting and auditing.
83
<PAGE> 86
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants.................................... F-2
Consolidated Statements of Income -- years ended January 1, 1995, January 2, 1994 and
January 3, 1993..................................................................... F-3
Consolidated Balance Sheets -- January 1, 1995 and January 2, 1994.................... F-4
Consolidated Statements of Cash Flows -- years ended January 1, 1995, January 2, 1994
and
January 3, 1993..................................................................... F-5
Notes to Consolidated Financial Statements............................................ F-6
Condensed Consolidated Statements of Income -- nine months ended October 1, 1995 and
October 2, 1994 (unaudited)......................................................... F-28
Condensed Consolidated Balance Sheets -- October 1, 1995 (unaudited) and January 1,
1995................................................................................ F-29
Condensed Consolidated Statements of Cash Flows -- nine months ended October 1, 1995
and October 2, 1994 (unaudited)..................................................... F-30
Notes to Condensed Consolidated Financial Statements (unaudited)...................... F-31
</TABLE>
F-1
<PAGE> 87
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders of Interface, Inc.
Atlanta, Georgia
We have audited the accompanying consolidated balance sheets of Interface,
Inc. and subsidiaries as of January 1, 1995 and January 2, 1994, and the related
consolidated statements of income and cash flows for each of the three years in
the period ended January 1, 1995. The financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Interface, Inc.
and its subsidiaries as of January 1, 1995 and January 2, 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended January 1, 1995, in conformity with generally
accepted accounting principles.
BDO SEIDMAN, LLP
Atlanta, Georgia
February 22, 1995 (except for Note 17, which is
as of October 27, 1995)
F-2
<PAGE> 88
INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------
JANUARY 1, JANUARY 2, JANUARY 3,
1995 1994 1993
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
NET SALES...................................................... $ 725,283 $ 625,067 $ 594,078
COST OF SALES.................................................. 504,098 427,321 404,130
-------- -------- --------
Gross profit on sales................................ 221,185 197,746 189,948
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES.................. 170,375 151,576 149,509
-------- -------- --------
Operating income..................................... 50,810 46,170 40,439
-------- -------- --------
OTHER EXPENSE:
Interest expense............................................. 24,094 22,840 21,894
Other (income)............................................... 1,003 2,026 (16)
-------- -------- --------
Total other expense.................................. 25,097 24,866 21,878
-------- -------- --------
Net income before taxes on income.................... 25,713 21,304 18,561
TAXES ON INCOME................................................ 9,257 7,455 6,311
-------- -------- --------
Net income........................................... 16,456 13,849 12,250
PREFERRED STOCK DIVIDENDS...................................... 1,750 913 --
-------- -------- --------
Income applicable to common shareholders............. $ 14,706 $ 12,936 $ 12,250
======== ======== ========
Primary earnings per common share.............................. $ 0.82 $ 0.75 $ 0.71
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 89
INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 1, JANUARY 2,
1995 1994
---------- ----------
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents............................................ $ 4,389 $ 4,674
Escrowed and restricted funds........................................ 2,663 4,015
Accounts receivable.................................................. 133,536 124,170
Inventories.......................................................... 132,650 116,041
Prepaid expenses..................................................... 15,110 15,078
Deferred income taxes................................................ 3,767 2,539
---------- ----------
TOTAL CURRENT ASSETS......................................... 292,115 266,517
Property and equipment, less accumulated depreciation.................. 152,874 145,125
Miscellaneous.......................................................... 31,895 35,534
Deferred income taxes.................................................. 8,198 5,976
Excess of cost over net assets acquired................................ 202,852 189,167
---------- ----------
$ 687,934 $ 642,319
======== ========
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
CURRENT
Accounts payable..................................................... $ 59,702 $ 56,043
Accrued expenses..................................................... 56,940 52,744
Current maturities of long term debt................................. 853 17,155
---------- ----------
TOTAL CURRENT LIABILITIES.................................... 117,495 125,942
Long term debt, less current maturities................................ 209,663 187,712
Convertible subordinated debentures.................................... 103,925 103,925
Deferred income taxes.................................................. 17,761 17,856
---------- ----------
TOTAL LIABILITIES............................................ 448,844 435,435
Redeemable preferred stock............................................. 25,000 25,000
Common stock........................................................... 2,179 2,104
Additional paid-in-capital............................................. 93,450 83,989
Retained earnings...................................................... 136,343 125,960
Foreign currency translation adjustment................................ (136) (12,423)
Treasury stock, 3,600,000 Class A shares, at cost...................... (17,746) (17,746)
---------- ----------
$ 687,934 $ 642,319
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 90
INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------
JANUARY 1, JANUARY 2, JANUARY 3,
1995 1994 1993
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income................................................... $ 16,456 $ 13,849 $ 12,250
Adjustments to reconcile net income to cash provided by
operating activities
Depreciation and amortization............................. 28,180 24,512 22,257
Deferred income taxes..................................... (2,650) (8,465) (9,059)
Other..................................................... -- -- (2,315)
Cash provided by (used for)
Accounts receivable..................................... (2,788) (1,569) 8,324
Inventories............................................. (6,849) 3,147 8,976
Prepaid expenses and other.............................. (1,015) (3,762) (848)
Accounts payable and accrued expenses................... 2,061 12,870 2,111
---------- ---------- ----------
33,395 40,582 41,696
---------- ---------- ----------
INVESTING ACTIVITIES:
Capital expenditures......................................... (21,315) (20,639) (14,476)
Acquisitions of businesses................................... (1,409) (15,209) --
Changes in escrowed and restricted funds..................... 1,352 404 (560)
Other........................................................ (5,030) (7,039) (2,980)
---------- ---------- ----------
(26,402) (42,483) (18,016)
---------- ---------- ----------
FINANCING ACTIVITIES:
Principal payments on long term debt......................... 75,011 (11,500) (12,438)
Net borrowing (repayments) under lines-of-credit............. (75,233) 15,572 (6,171)
Proceeds from issuance of common stock....................... 678 1,898 344
Dividends paid............................................... (6,073) (5,063) (4,142)
Other........................................................ (2,026) -- (1,562)
---------- ---------- ----------
(7,643) 907 (23,969)
---------- ---------- ----------
NET CASH USED FOR OPERATING, INVESTING, AND FINANCING
ACTIVITIES................................................... (650) (994) (289)
Effect of exchange rate changes on cash........................ 365 (156) (404)
---------- ---------- ----------
CASH AND CASH EQUIVALENTS:
Net decrease................................................. (285) (1,150) (693)
Balance, beginning of year................................... 4,674 5,824 6,517
---------- ---------- ----------
Balance, end of year......................................... $ 4,389 $ 4,674 $ 5,824
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 91
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Interface,
Inc. ("the Company") and its subsidiaries. All material intercompany accounts
and transactions are eliminated.
Inventories
Inventories are valued at the lower of cost (standards which approximate
actual cost on a first-in, first-out basis) or market. Maintenance, operating,
and office supplies are generally not inventoried.
Property and Equipment
Property and equipment are carried at cost. Depreciation is computed using
the straight-line method over the following estimated useful lives: buildings
and improvements -- ten to fifty years; furniture and equipment -- three to
twelve years.
Excess of Cost Over Net Assets Acquired
The excess of purchase price over fair value of net assets of acquired
businesses arises in connection with business combinations accounted for as
purchases and is amortized on a straight-line basis generally over forty years.
Accumulated amortization amounted to approximately $27,101,000 and $20,302,000
at January 1, 1995 and January 2, 1994, respectively.
The Company's operational policy for the assessment and measurement of any
impairment in the value of excess of cost over net assets acquired which is
other than temporary is to evaluate the recoverability and remaining life of its
goodwill and determine whether the goodwill should be completely or partially
written off or the amortization period accelerated. The Company will recognize
an impairment of goodwill if undiscounted estimated future operating cash flows
of the acquired business are determined to be less than the carrying amount of
goodwill. If the Company determines that goodwill has been impaired, the
measurement of the impairment will be equal to the excess of the carrying amount
of the goodwill over the amount of the undiscounted estimated operating cash
flows. If an impairment of goodwill were to occur, the Company would reflect the
impairment through a reduction in the carrying value of goodwill.
Taxes on Income
Income taxes are calculated using the liability method specified by
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."
Earnings Per Common Share and Dividends
Earnings per common share are computed by dividing net income applicable to
common shareholders by the combined weighted average number of shares of Class A
and Class B Common Stock outstanding during each year. The computation does not
include a negligible dilutive effect of common stock options. Neither the
Convertible Debentures nor the Preferred Stock were determined to be common
stock equivalents. In computing primary earnings per share, the preferred stock
dividend reduces income applicable to common shareholders. Primary earnings per
share are based upon 18,012,722 shares, 17,302,000 shares, and 17,253,000 shares
for the years ended January 1, 1995, January 2, 1994, and January 3, 1993,
respectively. For fiscal 1994, 1993, and 1992 fully diluted earnings per common
share were antidilutive. For the purposes of computing earnings per common share
and dividends paid per common share, the Company is treating as treasury stock
(and therefore not outstanding) the shares that are owned by a wholly owned
subsidiary (3,600,000 Class A shares, recorded at cost).
F-6
<PAGE> 92
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Translation of Foreign Currencies
The financial position and results of operations of the Company's foreign
subsidiaries are measured generally using local currencies as the functional
currency. Assets and liabilities of these subsidiaries are translated into U.S.
dollars at the exchange rate in effect at each year end. Income statement items
are translated at the average rate of exchange prevailing during the year. The
resulting translation adjustments are recorded in the foreign currency
translation adjustment account. In the event of a divestiture of a foreign net
investment or an investment being no longer considered long term in nature, the
related foreign currency translation results are reversed from equity to income.
Other foreign currency transaction gains and losses are also included in income.
Exchange gains and losses are not material in amount in any year.
Derivatives
Gains and losses on hedges of existing assets or liabilities are included
in the carrying amounts of those assets or liabilities and are ultimately
recognized in income as part of those carrying amounts. Gains or losses related
to qualifying hedges of firm commitments or anticipated transactions also are
deferred and are recognized in income or as adjustments of carrying amounts when
the hedged transaction occurs.
Fiscal Year
The Company's fiscal year ends on the Sunday nearest December 31. The
fiscal years ended January 1, 1995 and January 2, 1994 comprised 52 weeks, and
the fiscal year ended January 3, 1993 comprised 53 weeks.
NOTE 2 -- BUSINESS ACQUISITIONS
In March 1994, the Company acquired 100% of the outstanding capital stock
of Prince Street Technologies, Ltd. ("Prince Street"), a broadloom carpet
producer located in Atlanta, Georgia. As consideration the Company issued
674,953 shares of Class A common stock valued at approximately $8.9 million. The
transaction was accounted for as a purchase. At the acquisition date, the fair
value of the net liabilities of Prince Street exceeded the fair value of the net
assets by approximately $0.6 million. Accordingly, the excess of the purchase
price ($9.3 million) over the fair value of the net liabilities was
approximately $9.9 million and is being amortized over 40 years. The results of
the operations of Prince Street have been included within the consolidated
financial statements since the acquisition date.
The Company, through a series of stock purchases in June 1993, acquired
100% of the outstanding capital stock of Bentley Mills, Inc. ("Bentley"), a U.S.
company engaged in the manufacturing and distribution of broadloom and modular
carpet, for the aggregate consideration of approximately $34.0 million, which
was comprised of $9.0 million in cash and $25.0 million of newly issued Series A
Cumulative Convertible Preferred Stock. The results of the operations of Bentley
have been included within the consolidated financial statements since the
acquisition date.
In February 1993, the Company acquired the assets of the fabric division of
Stevens Linen Associates, Inc., based in Dudley, Massachusetts, for
approximately $4.9 million.
F-7
<PAGE> 93
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- CASH AND CASH EQUIVALENTS
Cash and cash equivalents consisted of the following:
<TABLE>
<CAPTION>
JANUARY 1, JANUARY 2,
1995 1994
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Cash............................................................. $3,496 $4,045
Cash equivalents................................................. 893 629
---------- ----------
$4,389 $4,674
======= =======
</TABLE>
Cash equivalents, carried at costs which approximate market, consist of
short term, highly liquid investments which are readily convertible into cash
and have initial maturities of three months or less. The Company does not
believe it is exposed to any significant credit risk on cash and cash
equivalents. Under the Company's cash management program, checks in transit are
not considered reductions of cash or accounts payable until presented to the
bank for payment. At January 1, 1995 and January 2, 1994, checks not yet
presented to the bank totaled approximately $6.3 million and $9.7 million,
respectively. In accordance with a Workers' Compensation self-insurance
arrangement in the State of Maine, the Company is required by state law to
maintain a trust account to pay Workers' Compensation claims. At January 1, 1995
and January 2, 1994, the trust account had balances of approximately $2.4
million and $4.0 million, respectively, and was segregated from cash and cash
equivalents and reflected as escrowed and restricted funds. Cash payments for
interest amounted to approximately $24.0 million, $23.4 million, and $21.1
million for the years ended January 1, 1995, January 2, 1994, and January 3,
1993, respectively. Income tax payments amounted to approximately $6.5 million,
$16.3 million, and $8.9 million for the years ended January 1, 1995, January 2,
1994, and January 3, 1993, respectively.
NOTE 4 -- INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
JANUARY 1, JANUARY 2,
1995 1994
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Finished goods................................................... $ 74,542 $ 64,497
Work-in-process.................................................. 20,250 20,010
Raw materials.................................................... 37,858 31,534
---------- ----------
$ 132,650 $ 116,041
======== ========
</TABLE>
NOTE 5 -- PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
JANUARY 1, JANUARY 2,
1995 1994
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Land............................................................ $ 8,623 $ 7,917
Buildings....................................................... 71,752 66,182
Equipment....................................................... 200,937 162,985
Construction-in-process......................................... 6,283 4,717
---------- ----------
287,595 241,801
Accumulated depreciation........................................ (134,721) (96,676)
---------- ----------
$ 152,874 $ 145,125
========= ========
</TABLE>
F-8
<PAGE> 94
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
JANUARY 1, JANUARY 2,
1995 1994
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Taxes......................................................... $ 17,989 $ 9,846
Compensation.................................................. 12,312 14,209
Interest...................................................... 3,200 3,437
Other......................................................... 23,439 25,252
---------- ----------
$ 56,940 $ 52,744
========= =========
</TABLE>
NOTE 7 -- LONG TERM DEBT
Long term debt consisted of the following:
<TABLE>
<CAPTION>
JANUARY 1, JANUARY 2,
1995 1994
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Secured term loans............................................ $ 50,000 $ 121,500
Revolving credit agreements................................... 156,165 79,260
Other......................................................... 4,351 4,107
---------- ----------
Total long term debt........................................ 210,516 204,867
Less current maturities..................................... (853) (17,155)
---------- ----------
$ 209,663 $ 187,712
========= =========
</TABLE>
During January 1995, the Company entered into an agreement to amend and
restate its revolving credit and term loan facilities. The amendment provides
for, among other things, (i) an increase in the revolving credit facilities from
$125 million to $200 million (including a letter of credit facility of up to $40
million), (ii) a decrease in the secured term loans from approximately $135
million to $50 million, and (iii) a new accounts receivable securitization
facility of up to $100 million. Additionally, the agreement, which originally
was to expire during 1996, has been extended to June 30, 1999 for the revolving
credit facilities and December 31, 2001 for the term loans. The current and
future maturities of long term debt, as disclosed herein, reflect the payment
terms established by the amendment.
The amended and restated revolving credit and secured term loans are
collateralized by substantially all of the outstanding stock of the Company's
operating subsidiaries (except certain foreign subsidiaries, for which only 66%
of the outstanding stock was pledged). The secured term loans are payable in two
equal installments of $25 million at December 29, 2000 and December 31, 2001,
plus accrued interest. Interest is charged, at the Company's option, at a rate
based on either the bank's certificate of deposit rate or LIBOR, plus an
applicable margin of 3/8% to 1 1/4%, depending upon the Company's ability to
meet certain performance criteria; or the bank's prime lending rate (8.5% at
January 1, 1995). The Company is also required to pay a commitment fee of 3/8%
per annum on the unused portion of the revolving credit loans depending upon the
Company's ability to meet certain performance criteria. The agreements require
prepayment from specified excess cash flows or proceeds from certain asset sales
and provide for restrictions which, among other things, require maintenance of
certain financial ratios, restrict encumbrance of assets, limit the payment of
dividends, and prohibit the retirement of its Convertible Subordinated
Debentures. At January 1, 1995, approximately $16.0 million of the Company's
retained earnings were unrestricted and available for payment of dividends under
the most restrictive terms of the agreement.
F-9
<PAGE> 95
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7 -- LONG TERM DEBT -- (CONTINUED)
Future maturities of long term debt based on fixed payments (amounts could
be higher if excess cash flows or asset sales require prepayment of debt under
the credit agreements) are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR (IN THOUSANDS)
-----------------------------------------------------------------------
<S> <C>
1995................................................................. $ 853
1996................................................................. 400
1997................................................................. 400
1998................................................................. 400
1999................................................................. 156,565
Thereafter........................................................... 51,898
--------------
$210,516
--------------
</TABLE>
Additionally, the Company maintains approximately $38 million in revolving
lines of credit through several of its subsidiaries. Interest is generally
charged at the prime lending rate. Approximately $7.7 million was outstanding
under these lines and is included within accounts payable in the consolidated
balance sheets at January 1, 1995 and January 2, 1994, respectively.
NOTE 8 -- CONVERTIBLE SUBORDINATED DEBENTURES
The Company has $103,925,000 aggregate principal amount of Convertible
Subordinated Debentures ("Convertible Debentures") maturing in 2013 which were
sold in a public offering. The Convertible Debentures are unsecured obligations
of the Company and bear interest, payable semi-annually, at 8%. They are
convertible into shares of the Company's Class A Common Stock at a conversion
price of approximately $16.92 per share. The Convertible Debentures are
redeemable, at the option of the Company, at a price of 102.4% during fiscal
1995, and are redeemable at decreasing prices thereafter. Sinking fund payments
starting in 1999 are required to retire 70% of the Convertible Debentures prior
to maturity. Since issuance, no Convertible Debentures have been converted or
redeemed.
NOTE 9 -- REDEEMABLE PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of $1.00 par value
Preferred Stock. In conjunction with the Bentley acquisition, the Company issued
250,000 shares of Series A Cumulative Convertible Preferred Stock with a face
value of $100 per share. The Series A Preferred Stock is entitled to a 7% annual
cumulative cash dividend ($7.00 per preferred share) that is payable quarterly.
Series A Preferred Stock is non-voting, except as required by law or in limited
circumstances to protect its preferential rights. The Series A Preferred Stock
is convertible into shares of the Company's Class A Common Stock at the rate of
one share of Class A Common Stock for each $14.79 face value thereof plus the
amount of any accrued but unpaid dividends. At January 1, 1995, the Series A
Preferred Stock was convertible into 1,720,204 shares of Class A Common Stock.
The Company, at its sole option, may redeem any of the then outstanding
Series A Preferred Stock by paying in cash for each share redeemed the face
value thereof, plus all accrued but unpaid dividends. No such redemption is
permitted before June 1, 1995. Between June 1, 1995 and May 31, 1996, such
redemption is allowable if the market price of Class A Common Stock exceeds
approximately $17.75. No limitations exist as to redemption subsequent to May
31, 1996.
Upon any liquidation, dissolution, or winding up of the Company, record
holders of Series A Preferred Stock are entitled to receive out of the assets of
the Company, an amount in cash equal to the face value per
F-10
<PAGE> 96
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9 -- REDEEMABLE PREFERRED STOCK -- (CONTINUED)
share of outstanding Series A Preferred Stock plus the amount of accrued but
unpaid dividends accumulated thereon, if any, to the date of payment of such
liquidating distribution.
Preferred shareholders have the right to redeem after May 31, 2003, the
then outstanding shares of Series A Preferred Stock at face value plus all
accrued but unpaid dividends. The Company is not required to establish any
sinking or retirement fund with respect to the shares of Series A Preferred
Stock. During the year ended January 1, 1995, the Company paid cash dividends of
approximately $7.00 per preferred share.
NOTE 10 -- COMMON STOCK AND STOCK OPTIONS
The Company is authorized to issue 40,000,000 shares of $.10 par value
Class A Common Stock and 40,000,000 shares of $.10 par value Class B Common
Stock. Class A and Class B Common Stock have identical voting rights except for
the election or removal of directors. Holders of Class B Common Stock are
entitled as a class to elect a majority of the Board of Directors. The Company's
Class A Common Stock is traded in the over-the-counter market under the symbol
IFSIA and is quoted on the NASDAQ National Market System. The Company's Class B
Common Stock and Series A Cumulative Convertible Preferred Stock are not
publicly traded. Class B Common Stock is convertible into Class A Common Stock
on a one-for-one basis. Both classes of Common Stock share in dividends
available to common shareholders and the Series A Preferred Stock carries a 7%
dividend rate (see Note 7 for discussion of restrictions on the payment of
dividends). Cash dividends on Common Stock were $.24 per share for the years
ended January 1, 1995, January 2, 1994, and January 3, 1993.
Changes in common shareholders' equity were:
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------------- FOREIGN
CLASS A CLASS B ADDITIONAL CURRENCY
--------------- --------------- PAID-IN RETAINED TRANSLATION
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT
------ ------ ------ ------ ---------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 29, 1991........... 17,355 $1,736 3,466 $346 $ 81,769 $ 109,066 $ 23,805
Net income........................ -- -- -- -- -- 12,250 --
Conversion of common stock........ 172 17 (172) (17)
Issuance of common stock.......... 33 3 -- -- 341 -- --
Cash dividends paid............... -- -- -- -- -- (4,142) --
Foreign currency translation
adjustment...................... -- -- -- -- -- -- (21,080)
------ ------ ------ ------ ---------- --------- -----------
Balance January 3, 1993............. 17,560 1,756 3,294 329 82,110 117,174 2,725
Net income........................ -- -- -- -- -- 13,849 --
Conversion of common stock........ 173 17 (173) (17) -- -- --
Issuance of common stock.......... 185 19 -- -- 1,879 -- --
Cash dividends paid............... -- -- -- -- -- (5,063) --
Foreign currency translation
adjustment...................... -- -- -- -- -- -- (15,148)
------ ------ ------ ------ ---------- --------- -----------
Balance January 2, 1994............. 17,918 1,792 3,121 312 83,989 125,960 (12,423)
Net income........................ -- -- -- -- -- 16,456 --
Conversion of common stock........ 44 4 (44) (4) -- --
Issuance of common stock.......... 753 75 -- -- 9,461 -- --
Cash dividends paid............... -- -- -- -- -- (6,073) --
Foreign currency translation
adjustment...................... -- -- -- -- -- -- 12,287
------ ------ ------ ------ ---------- --------- -----------
Balance January 1, 1995............. 18,715 $1,871 3,077 $308 $ 93,450 $ 136,343 $ (136)
====== ====== ====== ====== ======== ========= =========
</TABLE>
F-11
<PAGE> 97
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10 -- COMMON STOCK AND STOCK OPTIONS -- (CONTINUED)
The Company has Key Employee Stock Option Plans ("the 1983 Plan" and "the
1993 Plan") and an Offshore Stock Option Plan ("Offshore Plan"), under which a
committee of the Board of Directors is authorized to grant key employees,
including officers, options to purchase the Company's Common Stock. Options
granted pursuant to the 1993 Plan are exercisable for shares of Class A or Class
B Common Stock at a price not less than 100% of the fair market value on the
date of grant. The options are generally exercisable 20% per year for five years
from the date of the grant and the options generally expire ten years from the
date of the grant. An aggregate of 1,050,000 shares of Common Stock (Class A or
Class B) have been reserved for issuance under the 1993 Plan. No options are
available to be granted under the 1983 Plan. An aggregate of 830,674 shares of
Class A Common Stock have been reserved for issuance under the 1983 Plan.
Options are granted pursuant to the Offshore Plan to key employees and the
directors of the Company's foreign subsidiaries. These options may be exercised
for shares of Class A or Class B Common Stock as determined by the Compensation
Committee of the Board of Directors. An aggregate of 1,000,000 shares of Common
Stock (Class A or Class B) have been reserved for issuance under this Plan. As
of January 1, 1995, the following stock options were outstanding under these
Plans:
<TABLE>
<CAPTION>
NUMBER
YEAR OF GRANT OF SHARES OPTION PRICE
--------------------------------------------------------- --------- -------------------
<S> <C> <C> <C> <C>
1985.................................................. 30,000 $ 6.50
1987.................................................. 80,000 10.50
1988.................................................. 337,500 $ 9.00 - 16.25
1990.................................................. 15,000 18.63
1991.................................................. 165,000 11.88 - 13.00
1992.................................................. 261,000 11.50 - 13.75
1993.................................................. 297,143 11.00 - 14.75
1994.................................................. 622,500 10.31 - 16.63
---------
1,808,143
========
</TABLE>
During the year ended January 1, 1995, 4,000, 7,500, 20,000, and 46,666
options were exercised at option prices of $12.625, $9.00, $10.50, and $7.50,
respectively. Additionally, approximately 83,000 options were forfeited or
cancelled. At January 1, 1995 and January 2, 1994, respectively, approximately
731,000 and 679,000 options were exercisable at amounts ranging from $6.50 to
$18.63.
The FASB has issued SFAS No. 123 "Accounting for Stock-Based Compensation"
which establishes financial accounting and reporting standards for stock-based
employee compensation plans. This statement was issued by the FASB during
October 1995 and is effective for transactions entered into in fiscal years that
begin after December 15, 1995. The Company has not yet determined the impact of
this statement.
F-12
<PAGE> 98
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11 -- TAXES ON INCOME
Provisions for federal, foreign, and state income taxes in the consolidated
statements of income consisted of the following components:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------
JANUARY 1, JANUARY 2, JANUARY 3,
1995 1994 1993
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal............................................... $ 4,878 $ 6,115 $ 4,880
Foreign............................................... 4,660 6,028 3,196
State................................................. 1,713 1,165 1,352
---------- ---------- ----------
11,251 13,308 9,428
---------- ---------- ----------
Deferred (reduction):
Federal............................................... (445) (1,271) (2,606)
Foreign............................................... (674) (4,340) (15)
State................................................. (875) (242) (496)
---------- ---------- ----------
(1,994) (5,853) (3,117)
---------- ---------- ----------
$ 9,257 $ 7,455 $ 6,311
======= ======= =======
</TABLE>
Income before taxes on income consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------
JANUARY 1, JANUARY 2, JANUARY 3,
1995 1994 1993
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
U. S. Operations........................................ $ 18,072 $ 17,714 $ 8,793
Foreign Operations...................................... 7,641 3,587 9,768
---------- ---------- ----------
$ 25,713 $ 21,301 $ 18,561
======= ======= =======
</TABLE>
Deferred income taxes for the years ended January 1, 1995, and January 2,
1994, reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes.
The sources of the temporary differences and their effect on the net
deferred tax liability at January 1, 1995 and January 2, 1994, are as follows:
<TABLE>
<CAPTION>
JANUARY 1, 1995 JANUARY 2, 1994
--------------------- ---------------------
ASSETS LIABILITIES ASSETS LIABILITIES
------- ----------- ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Basis difference of property and equipment....... $ -- $17,761 $ -- $17,553
Net operating loss carryforwards................. 12,720 -- 9,135 --
Other differences in bases of assets and
liabilities.................................... 4,252 -- 2,539 303
Valuation allowance.............................. (5,007) -- (3,159) --
------- ----------- ------- -----------
$11,965 $17,761 $ 8,515 $17,856
======= ======= ======= =======
</TABLE>
During the year ended January 1, 1995, the valuation allowance increased
approximately $1.8 million. For the year ended January 2, 1994, the valuation
allowance increased approximately $417,000. At January 1, 1995, the Company had
approximately $30.1 million in net operating losses within foreign subsidiaries
available for carryforward. Of this amount, $21.6 million is available for an
unlimited period while $8.5 million
F-13
<PAGE> 99
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11 -- TAXES ON INCOME -- (CONTINUED)
expires at various times through 1999. Additionally, the Company had
approximately $28.8 million in state net operating losses expiring at various
times through 2009.
The effective tax rate on income before taxes differs from the United
States statutory rate. The following summary reconciles taxes at the United
States statutory rate with the effective rates:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------
JANUARY 1, JANUARY 2, JANUARY 3,
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Taxes on income at U.S. statutory rate.................. 35.0% 35.0% 34.0%
Increase (reduction) in taxes resulting from:
State income taxes, net of federal benefit............ 2.2 2.8 3.0
Amortization of excess of cost over net assets
acquired and related purchase accounting
adjustments........................................ 4.5 3.9 2.5
Foreign and U.S. tax effects attributable to foreign
operations......................................... (4.7) (5.2) (4.6)
Other................................................. (1.0) (1.5) (1.0)
----- ----- -----
Taxes on income at effective rates...................... 36.0% 35.0% 33.9%
======= ======= =======
</TABLE>
Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $58.7 million at January 1, 1995. Those earnings are considered to
be indefinitely reinvested and, accordingly, no provision for United States
federal and state income taxes has been provided thereon. Upon distribution of
those earnings in the form of dividends or otherwise, the Company would be
subject to both United States income taxes (subject to an adjustment for foreign
tax credits) and withholding taxes payable to the various foreign countries.
Determination of the amount of unrecognized deferred United States income tax
liability is not practicable because of the complexities associated with its
hypothetical calculation. Withholding taxes of approximately $2.9 million would
be payable upon remittance of all previously unremitted earnings at January 1,
1995.
NOTE 12 -- HEDGING TRANSACTIONS AND DERIVATIVE FINANCIAL INSTRUMENTS
The Company employs the use of derivative financial instruments for the
purpose of reducing its exposure to adverse fluctuations in interest and foreign
currency exchange rates. While these hedging instruments are subject to
fluctuations in value, such fluctuations are generally offset by the value of
the underlying exposures being hedged. The Company does not hold or issue
derivative financial instruments for trading purposes. The Company effectively
monitors the use of these derivative financial instruments through the use of
objective measurable systems, well-defined market and credit risk limits, and
timely reports to senior management according to prescribed guidelines. The
Company has established strict counterparty credit guidelines and only enters
into transactions with financial institutions of investment grade or better. As
a result, the Company considers the risk of counterparty default to be minimal.
Interest Rate Management
Management of the Company has developed and implemented a policy to
maintain the percentage of fixed and variable rate debt within certain
parameters. The Company enters into interest rate swap agreements, which
maintain the fixed/variable mix within these defined parameters. In these swaps,
the Company agrees to exchange, at specified intervals, the difference between
fixed and variable interest amounts calculated by reference to an agreed-upon
notional principal linked to LIBOR (London Interbank Offered Rate). Any
differences paid or received on interest rate swap agreements are recognized as
adjustments to interest expense over the life of each swap, thereby adjusting
the effective interest rate on the underlying obligation.
F-14
<PAGE> 100
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12 -- HEDGING TRANSACTIONS AND DERIVATIVE FINANCIAL
INSTRUMENTS -- (CONTINUED)
Foreign Currency Exchange Rate Management
The purpose of the Company's foreign currency hedging activities is to
reduce the risk that the eventual net dollar inflows resulting from sales to
foreign customers will be adversely affected by changes in exchange rates.
The Company enters into forward exchange contracts and currency swap
contracts to hedge certain firm sales commitments denominated in foreign
currencies (principally European currencies and Japanese yen). Net deferred
realized gains and losses are recognized in income, along with unrealized gains
and losses, in the same period as the hedged transaction. Net deferred
gains/losses from hedging anticipated but not yet firmly committed transactions
were not material at January 1, 1995 or January 2, 1994.
The estimated fair values of derivatives used to hedge or modify the
Company's risks will fluctuate over time. These fair value amounts should not be
viewed in isolation, but rather in relation to the fair values of the underlying
hedged transactions and investments and the overall reduction in the Company's
exposure to adverse fluctuations in interest and foreign exchange rates.
The notional amounts of the derivative financial instruments do not
necessarily represent amounts exchanged by the parties and, therefore, are not a
direct measure of the exposure of the Company through its use of derivatives.
The amounts exchanged are calculated on the basis of the notional amounts and
the other terms of the derivatives, which relate to interest rates or other
financial indices.
The following table represents the aggregate notional amounts, fair values,
and maturities of the Company's derivative financial instruments outstanding at
January 1, 1995:
<TABLE>
<CAPTION>
NOTIONAL FAIR
AMOUNTS VALUES MATURITY
-------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest Rate Management
Swap agreement:
Liabilities........................................... $ 23,000 $ (17) 1996
Foreign Currency Management
Forward contracts:
Assets................................................ 6,499 (367) 1995
Liabilities........................................... 23,423 (29) 1995
Swap agreement:
Liabilities........................................... 35,000 (5,504) 1996
</TABLE>
At January 2, 1994 interest rate and currency swap agreements related to
certain foreign currency denominated promissory notes effectively converted
approximately $29 million of variable rate debt to fixed rate debt. At January
2, 1994, the weighted average fixed rate on the Dutch guilder and Japanese yen
borrowings was 7.43%. The interest rate and currency swaps have maturity dates
ranging from six months to two years.
At January 2, 1994, the Company had approximately $43 million (notional
amount) of foreign currency hedge contracts outstanding, consisting principally
of forward exchange contracts and call options. The contracts and options served
to hedge firmly committed Dutch guilder, German mark, Japanese yen, French
franc, British pound sterling, and other foreign currency revenues. The contract
and options generally have maturity dates of six to nine months.
F-15
<PAGE> 101
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13 -- COMMITMENTS AND CONTINGENCIES
The Company leases certain marketing locations, distribution facilities,
and equipment. At January 1, 1995 aggregate minimum rent commitments under
operating leases with initial or remaining terms of one year or more consisted
of the following:
<TABLE>
<CAPTION>
FISCAL YEAR (IN THOUSANDS)
----------------------------------------------------------------------- --------------
<S> <C>
1995................................................................. $ 6,851
1996................................................................. 4,849
1997................................................................. 3,709
1998................................................................. 1,784
1999................................................................. 747
Thereafter........................................................... 458
--------------
$ 18,398
===========
</TABLE>
Rental expense amounted to approximately $11.8 million, $10.2 million, and
$10.3 million for the fiscal years ended January 1, 1995, January 2, 1994, and
January 3, 1993, respectively.
Bentley Mills' City of Industry, California plant is located in the San
Gabriel Valley, which has been generally designated as a Superfund site. Neither
the Environmental Protection Agency nor the potentially responsible party
("PRP") group has asserted that Bentley is a PRP in connection with such
Superfund site.
NOTE 14 -- EMPLOYEE BENEFIT PLANS
The Company and its subsidiaries have trusteed defined benefit retirement
plans ("Plans") which cover substantially all of their employees except those of
Guilford, which has its own 401(k) retirement investment plan. The benefits are
generally based on years of service and the employee's average monthly
compensation. Pension expense was $0.8 million, $1.5 million, and $1.7 million
for the years ended January 1, 1995, January 2, 1994, and January 3, 1993,
respectively. Assets exceeded accumulated benefits in certain plans and
accumulated benefits exceeded assets in others during the years ended January 1,
1995 and January 2, 1994.
The ranges of assumptions used for the actuarial determinations reflect the
different economic environments within the various countries where the Plans
exist. In fiscal 1994, the assumed rates of return on plan assets ranged from 5%
to 10%, the measurement of the projected benefit obligation was based on assumed
discount rates ranging from 7% to 10% and assumed long term rates of
compensation increases ranging from 4% to 8%. During the year, assets and
obligations related to a contributory profit sharing plan were combined with the
trusteed defined benefit retirement plans in Interface Europe B.V. The impact
upon the accumulated benefit obligation and the projected benefit obligation was
immaterial, however, the plan assets increased $10.0 million. In fiscal 1993,
the assumed rates of return on plan assets ranged from 6% to 8.5%, the
measurement of the projected benefit obligation was based on assumed discount
rates ranging from 6% to 7.5% and assumed long term rates of compensation
increases ranging from 4% to 5.5%.
The Company has 401(k) retirement investment plans ("401(k) Plans"), which
are open to all its U.S. employees with one or more years of service. The 401(k)
Plans call for Company contributions on a sliding scale based on the level of
the employee's contribution. Approximately 70% of eligible employees are
enrolled in the 401(k) Plans. The Company's contributions are funded monthly by
payment to the 401(k) Plan administrators. Company contributions totalled
$557,000, $492,000, and $474,000 for the years ended January 1, 1995, January 2,
1994, and January 3, 1993, respectively.
F-16
<PAGE> 102
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14 -- EMPLOYEE BENEFIT PLANS -- (CONTINUED)
The table presented below sets forth the funded status of the Company's
defined benefit plans and amounts recognized in the consolidated financial
statements. All of the Company's significant domestic and foreign plans are
reflected in the table for each year presented.
<TABLE>
<CAPTION>
JANUARY 1, 1995 JANUARY 2, 1994
----------------------------- -----------------------------
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS
------------- ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Plan assets at fair value, primarily
insurance contracts........................ $49,741 $ 4,097 $35,537 $ 5,401
------------- ------------- ------------- -------------
Actuarial present value of benefit
obligations:
Vested benefits............................ 34,536 3,145 31,920 5,085
Nonvested benefits......................... 836 151 1,137 828
------------- ------------- ------------- -------------
Accumulated benefit obligation............... 35,372 3,296 33,057 5,913
Effect of projected future salary
increases............................... 2,644 1,169 105 3,082
------------- ------------- ------------- -------------
Projected benefit obligation................. 38,016 4,465 33,162 8,995
------------- ------------- ------------- -------------
Plan assets in excess of (lesser than)
projected benefit obligation............... 11,725 (368) 2,375 (3,594)
Unrecognized net gain from past experience
different from that assumed................ (11,112) 518 (2,880) 314
Unrecognized prior service cost.............. 421 6 437 172
Unrecognized net asset existing at the date
of initial application of SFAS 87.......... 1,670 0 (344) 1,887
------------- ------------- ------------- -------------
Prepaid (accrued) pension cost............... $ 2,704 $ 156 $ (412) $(1,221)
========== ========== ========== ==========
Net pension cost included the following
components:
Service cost -- benefits earned during
the period.............................. $ 1,022 $ 502 $ 716 $ 739
Interest cost on projected benefit
obligation.............................. 3,401 420 2,540 613
Actual return on plan assets............... 1,703 184 (8,196) (389)
Net amortization and deferral.............. (5,824) (611) 5,316 145
------------- ------------- ------------- -------------
Net pension cost (credit).................... $ 302 $ 495 $ 376 $ 1,108
========== ========== ========== ==========
</TABLE>
F-17
<PAGE> 103
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15 -- BUSINESS AND FOREIGN OPERATIONS
The Company and its subsidiaries are engaged predominantly in the
manufacture and sale of commercial and institutional interior finishings.
Financial information by geographic area for the years ended January 1, 1995,
January 2, 1994, and January 3, 1993 were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------
JANUARY 1, JANUARY 2, JANUARY 3,
1995 1994 1993
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Sales to Unaffiliated Customers (by source operation)
United States........................................ $ 426,179 $ 336,470 $ 255,476
Americas, excluding the United States................ 14,504 13,054 17,268
Europe............................................... 250,102 232,385 273,665
Asia-Pacific......................................... 34,498 43,158 47,669
---------- ---------- ----------
Total........................................ $ 725,283 $ 625,067 $ 594,078
======== ======== ========
Operating Income
United States........................................ $ 37,456 $ 41,052 $ 29,016
Americas, excluding the United States................ 240 (322) 572
Europe............................................... 25,131 16,866 20,099
Asia-Pacific......................................... (3,425) (2,929) (1,579)
Corporate overhead................................... (8,592) (8,497) (7,669)
---------- ---------- ----------
Total........................................ $ 50,810 $ 46,170 $ 40,439
======== ======== ========
Identifiable Assets
United States........................................ $ 337,179 $ 322,379 $ 240,799
Americas, excluding the United States................ 7,951 9,262 13,141
Europe............................................... 304,894 274,928 242,020
Asia-Pacific......................................... 37,910 35,750 38,160
---------- ---------- ----------
Total........................................ $ 687,934 $ 642,319 $ 534,120
======== ======== ========
</TABLE>
F-18
<PAGE> 104
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 16 -- QUARTERLY DATA AND SHARE INFORMATION (UNAUDITED)
The following table sets forth, for the fiscal periods indicated, selected
consolidated financial data and information regarding the market price per share
of the Company's Class A Common Stock. The prices represent the reported high
and low closing sale prices.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Fiscal Year Ended January 1, 1995
Net sales........................................... $160,219 $181,665 $184,959 $196,940
Gross profit........................................ 48,344 55,548 55,810 61,483
Net income.......................................... 2,812 3,711 4,247 5,686
Net income applicable to common shareholders........ 2,374 3,274 3,809 5,249
Primary earnings per common share*.................. 0.14 0.18 0.21 0.29
Share prices:
High................................................ 16 1/8 14 13 5/8 13 3/8
Low................................................. 12 1/2 11 1/4 11 1/8 9 3/4
Dividends per common share............................ 0.06 0.06 0.06 0.06
Fiscal Year Ended January 2, 1994
Net sales........................................... $135,041 $150,045 $167,586 $172,395
Gross profit........................................ 41,236 47,443 54,556 54,511
Net income.......................................... 2,204 2,797 3,870 4,978
Net income applicable to common shareholders........ 2,204 2,744 3,447 4,541
Primary earnings per common share*.................... 0.13 0.16 0.20 0.26
Share prices:
High................................................ 14 1/4 13 12 15 1/2
Low................................................. 11 1/2 9 7/8 9 3/4 10 5/8
Dividends per common share............................ 0.06 0.06 0.06 0.06
</TABLE>
- ---------------
* For the years ended January 1, 1995 and January 2, 1994, earnings per share on
a fully diluted basis were antidilutive.
F-19
<PAGE> 105
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17 -- SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1, 1995
---------------------------------------------------------------
INTERFACE,
INC. AND CONSOLIDATION AND
GUARANTOR NON-GUARANTOR ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTALS
------------ ------------- ----------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales.................................. $434,580 $ 389,823 $ (99,120) $725,283
Cost of sales.............................. 310,493 292,725 (99,120) 504,098
------------ ------------- ----------------- ------------
Gross profit on sales................. 124,087 97,098 -- 221,185
Selling, general and administrative
expenses................................. 93,410 76,965 -- 170,375
------------ ------------- ----------------- ------------
Operating income...................... 30,677 20,133 -- 50,810
Other expense (income)
Interest expense......................... 14,807 9,287 -- 24,094
Other.................................... (2,202) 3,205 -- 1,003
------------ ------------- ----------------- ------------
Total other expenses.................. 12,605 12,492 -- 25,097
------------ ------------- ----------------- ------------
Income before taxes on income and
equity in income of subsidiaries.... 18,072 7,641 -- 25,713
Taxes on income............................ 5,271 3,986 -- 9,257
Equity in income of subsidiaries........... (3,655) -- 3,655 --
------------ ------------- ----------------- ------------
Net income............................ 16,456 3,655 (3,655) 16,456
Preferred stock dividends.................. 1,750 -- -- 1,750
------------ ------------- ----------------- ------------
Income applicable to common shareholders... $ 14,706 $ 3,655 $ (3,655) $ 14,706
========= =========== ============= =========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 2, 1994
---------------------------------------------------------------
INTERFACE,
INC. AND CONSOLIDATION AND
GUARANTOR NON-GUARANTOR ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTALS
------------ ------------- ----------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales.................................. $345,157 $ 364,857 $ (84,947) $625,067
Cost of sales.............................. 244,603 267,665 (84,947) 427,321
------------ ------------- ----------------- ------------
Gross profit on sales................. 100,554 97,192 -- 197,746
Selling, general and administrative
expenses................................. 71,075 80,501 -- 151,576
------------ ------------- ----------------- ------------
Operating income...................... 29,479 16,691 -- 46,170
Other expense (income)
Interest expense......................... 11,762 11,078 -- 22,840
Other.................................... -- 2,026 -- 2,026
------------ ------------- ----------------- ------------
Total other expenses.................. 11,762 13,104 -- 24,866
------------ ------------- ----------------- ------------
Income before taxes on income and
equity in income of subsidiaries.... 17,717 3,587 -- 21,304
Taxes on income............................ 5,767 1,688 -- 7,455
Equity in income of subsidiaries........... (1,899) -- 1,899 --
------------ ------------- ----------------- ------------
Net income............................ 13,849 1,899 (1,899) 13,849
Preferred stock dividends.................. 913 -- -- 913
------------ ------------- ----------------- ------------
Income applicable to common shareholders... $ 12,936 $ 1,899 $ (1,899) $ 12,936
========= =========== ============= =========
</TABLE>
F-20
<PAGE> 106
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17 -- SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL
STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 3, 1993
---------------------------------------------------------------
INTERFACE,
INC. AND CONSOLIDATION AND
GUARANTOR NON-GUARANTOR ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTALS
------------ ------------- ----------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales.................................. $270,526 $ 407,849 $ (84,297) $594,078
Cost of sales.............................. 188,619 299,808 (84,297) 404,130
------------ ------------- ----------------- ------------
Gross profit on sales................. 81,907 108,041 -- 189,948
Selling, general and administrative
expenses................................. 59,517 89,992 -- 149,509
------------ ------------- ----------------- ------------
Operating income...................... 22,390 18,049 -- 40,439
Other expense (income)
Interest expense......................... 13,613 8,281 -- 21,894
Other.................................... (16) -- -- (16)
------------ ------------- ----------------- ------------
Total other expenses.................. 13,597 8,281 -- 21,878
------------ ------------- ----------------- ------------
Income before taxes on income and
equity in income of subsidiaries.... 8,793 9,768 -- 18,561
Taxes on income............................ 3,130 3,181 -- 6,311
Equity in income of subsidiaries........... (6,587) -- 6,587 --
------------ ------------- ----------------- ------------
Net income............................ $ 12,250 $ 6,587 $ (6,587) $ 12,250
========= =========== ============= =========
</TABLE>
F-21
<PAGE> 107
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17 -- SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL
STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
JANUARY 1, 1995
---------------------------------------------------------------
INTERFACE,
INC. AND CONSOLIDATION AND
GUARANTOR NON-GUARANTOR ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTALS
------------ ------------- ----------------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
ASSETS
Current
Cash and cash equivalents................ $ 417 $ 3,972 $ -- $ 4,389
Escrowed and restricted funds............ 2,663 -- -- 2,663
Accounts receivable...................... 68,344 68,820 (3,628) 133,536
Inventories.............................. 72,455 60,195 -- 132,650
Miscellaneous............................ 7,072 11,805 -- 18,877
------------ ------------- ----------------- ------------
Total current assets............. 150,951 144,792 (3,628) 292,115
Property and equipment, less accumulated
depreciation............................. 104,502 48,372 -- 152,874
Investments in subsidiaries................ 151,182 17,746 (168,928) --
Miscellaneous.............................. 82,910 4,149 (46,966) 40,093
Excess of cost over net assets acquired.... 129,354 73,498 -- 202,852
------------ ------------- ----------------- ------------
$618,899 $ 288,557 $(219,522) $687,934
========= =========== ============= =========
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
Current
Accounts payable......................... $ 35,176 $ 28,154 $ (3,628) $ 59,702
Accrued expenses......................... 32,959 23,981 -- 56,940
Current maturities of long-term debt..... 853 -- -- 853
------------ ------------- ----------------- ------------
Total current liabilities........ 68,988 52,135 (3,628) 117,495
Long-term debt, less current maturities.... 179,929 76,700 (46,966) 209,663
Convertible subordinated debentures........ 103,925 -- -- 103,925
Deferred income taxes...................... 8,803 8,958 -- 17,761
------------ ------------- ----------------- ------------
Total liabilities................ 361,645 137,793 (50,594) 448,844
Redeemable preferred stock................. 25,000 -- -- 25,000
Common stock............................... 2,179 88,791 (88,791) 2,179
Additional paid-in capital................. 93,450 11,030 (11,030) 93,450
Retained earnings.......................... 136,343 51,361 (51,361) 136,343
Foreign currency translation adjustment.... 282 (418) -- (136)
Treasury stock, 3,600,000 Class A shares,
at cost.................................. -- -- (17,746) (17,746)
------------ ------------- ----------------- ------------
$618,899 $ 288,557 $(219,522) $687,934
========= =========== ============= =========
</TABLE>
F-22
<PAGE> 108
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17 -- SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL
STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
JANUARY 2, 1994
---------------------------------------------------------------
INTERFACE,
INC. AND CONSOLIDATION AND
GUARANTOR NON- GUARANTOR ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTALS
------------ ------------- ----------------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
ASSETS
Current
Cash and cash equivalents................. $ (95) $ 4,769 $ -- $ 4,674
Escrowed and restricted funds............. 4,015 -- -- 4,015
Accounts receivable....................... 64,035 64,591 (4,456) 124,170
Inventories............................... 64,596 51,445 -- 116,041
Miscellaneous............................. 7,748 9,869 -- 17,617
------------ ------------- ----------------- ------------
Total current assets.............. 140,299 130,674 (4,456) 266,517
Property and equipment, less accumulated
depreciation.............................. 98,828 46,297 -- 145,125
Investments in subsidiaries................. 147,527 17,746 (165,273) --
Miscellaneous............................... 93,908 9,304 (61,702) 41,510
Excess of cost over net assets acquired..... 121,837 67,330 -- 189,167
------------ ------------- ----------------- ------------
$602,399 $ 271,351 $(231,431) $642,319
========= ========== ============= =========
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
Current
Accounts payable.......................... $ 33,461 $ 27,038 $ (4,456) $ 56,043
Accrued expenses.......................... 30,244 22,500 -- 52,744
Current maturities of long-term debt...... 17,155 -- -- 17,155
------------ ------------- ----------------- ------------
Total current liabilities......... 80,860 49,538 (4,456) 125,942
Long-term debt, less current maturities..... 171,392 78,022 (61,702) 187,712
Convertible subordinated debentures......... 103,925 -- -- 103,925
Deferred income taxes....................... 9,236 8,620 -- 17,856
------------ ------------- ----------------- ------------
Total liabilities................. 365,413 136,180 (66,158) 435,435
Redeemable preferred stock.................. 25,000 -- -- 25,000
Common stock................................ 2,104 88,791 (88,791) 2,104
Additional paid-in capital.................. 83,989 11,030 (11,030) 83,989
Retained earnings........................... 125,960 47,706 (47,706) 125,960
Foreign currency translation adjustment..... (67) (12,356) -- (12,423)
Treasury stock, 3,600,000 Class A shares, at
cost...................................... -- -- (17,746) (17,746)
------------ ------------- ----------------- ------------
$602,399 $ 271,351 $(231,431) $642,319
========= ========== ============= =========
</TABLE>
F-23
<PAGE> 109
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17 -- SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL
STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
JANUARY 3, 1993
---------------------------------------------------------------
INTERFACE,
INC. AND CONSOLIDATION AND
GUARANTOR NON- GUARANTOR ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTALS
------------ ------------- ----------------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
ASSETS
Current
Cash and cash equivalents................. $ 1,645 $ 4,179 $ -- $ 5,824
Escrowed and restricted funds............. 4,419 -- -- 4,419
Accounts receivable....................... 54,852 63,871 (9,380) 109,343
Inventories............................... 40,537 60,853 -- 101,390
Miscellaneous............................. 2,494 8,961 -- 11,455
------------ ------------- ----------------- ------------
Total current assets.............. 103,947 137,864 (9,380) 232,431
Property and equipment, less accumulated
depreciation.............................. 85,220 52,385 -- 137,605
Investments in subsidiaries................. 166,831 17,746 (184,577) --
Miscellaneous............................... 68,003 4,638 (41,878) 30,763
Excess of cost over net assets acquired..... 57,962 75,359 -- 133,321
------------ ------------- ----------------- ------------
$481,963 $ 287,992 $(235,835) $534,120
========= ========== ============= =========
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
Current
Accounts payable.......................... $ 22,495 $ 30,415 $ (9,380) $ 43,530
Accrued expenses.......................... 14,989 23,653 -- 38,642
Current maturities of long-term debt...... 11,425 -- -- 11,425
------------ ------------- ----------------- ------------
Total current liabilities......... 48,909 54,068 (9,380) 93,597
Long-term debt, less current maturities..... 111,403 62,038 (41,878) 131,563
Convertible subordinated debentures......... 103,925 -- -- 103,925
Deferred income taxes....................... 10,222 8,464 18,686
------------ ------------- ----------------- ------------
Total liabilities................. 274,459 124,570 (51,258) 347,771
Redeemable preferred stock.................. -- -- -- --
Common stock................................ 2,086 88,791 (88,791) 2,086
Additional paid-in capital.................. 82,110 11,030 (11,030) 82,110
Retained earnings........................... 117,174 67,010 (67,010) 117,174
Foreign currency translation adjustment..... 6,134 (3,409) -- 2,725
Treasury stock, 3,600,000 Class A shares, at
cost...................................... -- -- (17,746) (17,746)
------------ ------------- ----------------- ------------
$481,963 $ 287,992 $(235,835) $534,120
========= ========== ============= =========
</TABLE>
F-24
<PAGE> 110
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17 -- SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL
STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1, 1995
---------------------------------------------------------------
INTERFACE,
INC. AND CONSOLIDATION AND
GUARANTOR NON-GUARANTOR ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTALS
------------ ------------- ----------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES....... $ 21,117 $12,278 $ -- $ 33,395
========= =========== ============= =========
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment.......... (15,689) (5,626) -- (21,315)
Acquisitions, net of cash acquired....... (1,409) -- -- (1,409)
Other.................................... (3,678) -- -- (3,678)
------------ ------------- ----------------- ------------
Net cash provided by (used in) investing
activities............................... (20,776) (5,626) -- (26,402)
------------ ------------- ----------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments).............. 7,592 (7,814) -- (222)
Proceeds from issuance of common stock... 678 -- -- 678
Cash dividends paid...................... (6,073) -- -- (6,073)
Other.................................... (2,026) -- -- (2,026)
------------ ------------- ----------------- ------------
Net cash provided by (used in) financing
activities............................... 171 (7,814) -- (7,643)
------------ ------------- ----------------- ------------
Effect of exchange rate changes on cash.... -- 365 -- 365
------------ ------------- ----------------- ------------
NET INCREASE (DECREASE) IN CASH............ 512 (797) -- (285)
Cash at beginning of year.................. (95) 4,769 -- 4,674
------------ ------------- ----------------- ------------
Cash at end of year........................ $ 417 $ 3,972 $ -- $ 4,389
========= =========== ============= =========
</TABLE>
F-25
<PAGE> 111
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17 -- SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL
STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 2, 1994
---------------------------------------------------------------
INTERFACE,
INC. AND CONSOLIDATION AND
GUARANTOR NON-GUARANTOR ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTALS
------------ ------------- ----------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES.......... $ 10,447 $ 30,135 $ -- $ 40,582
========= =========== ============= =========
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment............. (13,053) (7,586) -- (20,639)
Acquisitions, net of cash acquired.......... (15,209) -- -- (15,209)
Other....................................... (6,635) -- -- (6,635)
------------ ------------- ----------------- ------------
Net cash provided by (used in) investing
activities.................................. (34,897) (7,586) -- (42,483)
------------ ------------- ----------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments)................. 25,875 (21,803) -- 4,072
Proceeds from issuance of common stock...... 1,898 -- -- 1,898
Cash dividends paid......................... (5,063) -- -- (5,063)
------------ ------------- ----------------- ------------
Net cash provided by (used in) financing
activities.................................. 22,710 (21,803) -- 907
------------ ------------- ----------------- ------------
Effect of exchange rate changes on cash....... -- (156) -- (156)
------------ ------------- ----------------- ------------
NET INCREASE (DECREASE) IN CASH............... (1,740) 590 -- (1,150)
Cash at beginning of year..................... 1,645 4,179 -- 5,824
------------ ------------- ----------------- ------------
Cash at end of year........................... $ (95) $ 4,769 $ -- $ 4,674
========= =========== ============= =========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 3, 1993
------------------------------------------------------------
INTERFACE,
INC. AND CONSOLIDATION AND
GUARANTOR NON-GUARANTOR ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTAL
------------ ------------- ----------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES............ $ 18,256 $ 23,440 $ -- $ 41,696
========= =========== ============= =========
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment............... (8,970) (5,506) -- (14,476)
Acquisitions, net of cash acquired............ -- -- -- --
Other......................................... (3,540) -- -- (3,540)
------------ ------------- ----------------- ------------
Net cash provided by (used in) investing
activities.................................... (12,510) (5,506) -- (18,016)
------------ ------------- ----------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments)................... 466 (19,075) -- (18,609)
Proceeds from issuance of common stock........ 344 -- -- 344
Cash dividends paid........................... (4,142) -- -- (4,142)
Other......................................... (1,562) -- -- (1,562)
------------ ------------- ----------------- ------------
Net cash provided by (used in) financing
activities.................................... (4,894) (19,075) -- (23,969)
------------ ------------- ----------------- ------------
Effect of exchange rate changes on cash......... -- (404) -- (404)
------------ ------------- ----------------- ------------
NET INCREASE (DECREASE) IN CASH................. 852 (1,545) -- (693)
Cash at beginning of year....................... 793 5,724 -- 6,517
------------ ------------- ----------------- ------------
Cash at end of year............................. $ 1,645 $ 4,179 $ -- $ 5,824
========= =========== ============= =========
</TABLE>
F-26
<PAGE> 112
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17 -- SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL
STATEMENTS -- (CONTINUED)
BASIS OF PRESENTATION
The Company is offering $125,000,000 in aggregate principal amount of
Senior Subordinated Notes due 2005 (the "Notes"). The Notes will be guaranteed,
jointly and severally, on an unsecured senior subordinated basis, by each of the
Company's principal domestic subsidiaries (the "Guarantors"). The Guarantors
include Interface Flooring Systems, Inc., Bentley Mills, Inc., Guilford of
Maine, Inc., Prince Street Technologies, Inc. and several other smaller domestic
subsidiaries. The condensed consolidating financial statements of the Company (a
holding company) and the Guarantors are presented on page F-20 through F-27 and
should be read in connection with the consolidated financial statements of the
Company. Separate financial statements of the Guarantors are not presented
because the Guarantors are jointly, severally and unconditionally liable under
the guarantees, and the Company believes the condensed consolidating financial
statements presented are more meaningful in understanding the financial position
of the Guarantors.
DISTRIBUTIONS
There are no significant restrictions on the ability of the Guarantors to
make distributions to Interface, Inc.
F-27
<PAGE> 113
INTERFACE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------
OCTOBER 1, OCTOBER 2,
1995 1994
---------- ----------
(IN THOUSANDS EXCEPT SHARE
DATA)
<S> <C> <C>
NET SALES.......................................................... $ 597,414 $ 527,343
COST OF SALES...................................................... 412,636 367,641
---------- ----------
Gross profit on sales............................................ 184,778 159,702
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES....................... 139,613 123,559
---------- ----------
Operating income................................................. 45,165 36,143
OTHER EXPENSE -- NET............................................... 21,909 19,316
---------- ----------
Income before taxes on income.................................... 23,256 16,827
TAXES ON INCOME.................................................... 8,838 6,057
---------- ----------
Net income......................................................... 14,418 10,770
PREFERRED STOCK DIVIDENDS.......................................... 1,312 1,313
---------- ----------
Net income applicable to common shareholders....................... $ 13,106 $ 9,457
======== ========
Earnings per share
Primary.......................................................... $ 0.72 $ 0.53
======== ========
Fully diluted*................................................... $ 0.71 $ 0.53*
======== ========
Weighted average common shares outstanding
Primary.......................................................... 18,237 17,953
======== ========
Fully Diluted.................................................... 26,072 25,786
======== ========
</TABLE>
- ---------------
* For the nine month period ended October 2, 1994, earnings per share on a fully
dilutive basis were antidilutive.
See accompanying notes to condensed consolidated financial statements.
F-28
<PAGE> 114
INTERFACE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 1, JANUARY 1,
1995 1995
----------- ----------
(UNAUDITED)
(IN THOUSANDS
EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents.......................................... $ 3,034 $ 4,389
Escrowed and restricted funds...................................... 2,413 2,663
Accounts receivable................................................ 113,145 133,536
Inventories........................................................ 138,801 132,650
Miscellaneous...................................................... 22,540 18,877
----------- ----------
TOTAL CURRENT ASSETS....................................... 279,933 292,115
PROPERTY AND EQUIPMENT, less accumulated depreciation................ 170,218 152,874
EXCESS OF COST OVER NET ASSETS ACQUIRED.............................. 212,446 202,852
OTHER ASSETS......................................................... 43,155 40,093
----------- ----------
$ 705,752 $ 687,934
========= ========
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
CURRENT
Accounts payable................................................... $ 54,673 $ 59,702
Accrued expenses................................................... 55,892 56,940
Current maturities of long-term debt............................... 1,550 853
----------- ----------
TOTAL CURRENT LIABILITIES.................................. 112,115 117,495
LONG-TERM DEBT, less current maturities.............................. 207,979 209,663
CONVERTIBLE SUBORDINATED DEBENTURES.................................. 103,925 103,925
DEFERRED INCOME TAXES................................................ 19,635 17,761
----------- ----------
TOTAL LIABILITIES.......................................... 443,654 448,844
----------- ----------
Redeemable preferred stock........................................... 25,000 25,000
Common Stock:
Class A............................................................ 1,887 1,871
Class B............................................................ 300 308
Additional paid-in capital........................................... 94,186 93,450
Retained earnings.................................................... 146,160 136,343
Foreign currency translation adjustment.............................. 12,311 (136)
Treasury stock, 3,600,000 Class A Shares, at cost.................... (17,746) (17,746)
----------- ----------
$ 705,752 $ 687,934
========= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-29
<PAGE> 115
INTERFACE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
OCTOBER 1, OCTOBER 2,
1995 1994
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES................................... $ 55,818 $ 6,745
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................................. (26,186) (14,071)
Acquisitions of businesses........................................... (15,203) (643)
Other................................................................ (2,798) 1,547
---------- ----------
Net cash provided by (used in) investing activities.................. (44,187) (13,167)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing (reduction) of long-term debt.......................... (9,114) 9,490
Issuance of common stock............................................. 744 453
Dividends paid....................................................... (4,597) (4,544)
---------- ----------
Net cash provided by (used in) financing activities.................. (12,967) 5,399
---------- ----------
Effect of exchange rate changes on cash................................ (19) 406
---------- ----------
NET INCREASE (DECREASE) DURING THE PERIOD.............................. (1,355) (617)
---------- ----------
Cash at beginning of period............................................ 4,389 4,674
---------- ----------
Cash at end of period.................................................. $ 3,034 $ 4,057
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-30
<PAGE> 116
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company and, in the opinion of management, contain all
adjustments (all of which are normal and recurring) necessary for a fair
presentation of the results for the interim periods. Nevertheless, the results
shown for interim periods are not necessarily indicative of results to be
expected for the full year.
As contemplated by Rule 10-01 of Regulation S-X, the following footnotes
have been condensed and, therefore, do not contain all disclosures required in
connection with annual financial statements. Reference should be made to the
notes to the Company's year-end financial statements contained elsewhere herein.
NOTE 2 -- RECEIVABLES
During August 1995, the Company entered into an agreement with a financial
institution to sell up to $65 million of certain domestic accounts receivable
under a continuous sale program. Under this agreement, undivided interests in
designated receivable pools are sold to the purchaser with recourse limited to
the receivables purchased. Fees paid by the Company under this agreement are
based on certain variable rate indices and are recorded as other expense. As of
October 1, 1995 the Company had sold accounts receivable under this agreement
for which net proceeds of approximately $38 million were received.
NOTE 3 -- INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
OCTOBER 1, JANUARY 1,
1995 1995
---------- ----------
<S> <C> <C>
Finished Goods................................................. $ 72,746 $ 74,542
Work-in-Process................................................ 28,561 20,250
Raw Materials.................................................. 37,494 37,858
---------- ----------
$ 138,801 $ 132,650
======== ========
</TABLE>
NOTE 4 -- BUSINESS ACQUISITIONS
In June 1995, the Company acquired substantially all of the assets of
Toltec Fabrics, Inc., a North Carolina based company, for approximately
$13,280,000 (comprised of $7,530,000 in cash and $5,750,000 in notes). The
acquisition was accounted for as a purchase and, accordingly, the results of
operations are included in the Company's consolidated financial statements from
the date of acquisition.
NOTE 5 -- EARNINGS PER SHARE AND DIVIDENDS
Earnings per share are computed by dividing net income applicable to common
shareholders by the combined weighted average number of shares of Class A and
Class B Common Stock outstanding during the particular reporting period. The
computation does not include a negligible dilutive effect of outstanding stock
options. Neither the Convertible Subordinated Debentures issued in September
1988 nor the Series A Cumulative Convertible Preferred Stock issued during June
1993 were determined to be common stock equivalents. In computing primary
earnings per share, the preferred stock dividend reduces income applicable to
common shareholders. For the purposes of computing earnings per share and
dividends paid per share, the Company is treating as treasury stock (and
therefore not outstanding) the shares that are owned by a wholly-owned
subsidiary (3,600,000 Class A shares, recorded at cost).
F-31
<PAGE> 117
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NINE MONTHS ENDED OCTOBER 1, 1995
---------------------------------------------------------------------
INTERFACE,
INC. AND CONSOLIDATION AND
GUARANTOR NON-GUARANTOR ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTALS
------------ ------------- ----------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales............................ $368,225 $ 273,316 $ (44,127) $597,414
Cost of sales........................ 259,202 197,561 (44,127) 412,636
------------ ------------- ----------------- ------------
Gross profit on sales........... 109,023 75,755 -- 184,778
Selling, general and administrative
expenses........................... 80,580 59,033 -- 139,613
------------ ------------- ----------------- ------------
Operating income................ 28,443 16,722 -- 45,165
Other expense (income)
Interest expense................... 13,909 7,285 -- 21,194
Other.............................. (1,570) 2,285 -- 715
------------ ------------- ----------------- ------------
Total other expenses............ 12,339 9,570 -- 21,909
------------ ------------- ----------------- ------------
Income before taxes on income
and equity in income of
subsidiaries.................. 16,104 7,152 -- 23,256
Taxes on income...................... 5,207 3,631 -- 8,838
Equity in income of subsidiaries..... (3,521) -- 3,521 --
------------ ------------- ----------------- ------------
Net income...................... 14,418 3,521 (3,521) 14,418
Preferred stock dividends............ 1,312 -- -- 1,312
------------ ------------- ----------------- ------------
Income applicable to common
shareholders....................... $ 13,106 $ 3,521 $ (3,521) $ 13,106
========= =========== ============= =========
</TABLE>
F-32
<PAGE> 118
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL
STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
OCTOBER 1, 1995
---------------------------------------------------------------------
INTERFACE,
INC. AND CONSOLIDATION AND
GUARANTOR NON-GUARANTOR ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTALS
------------ ------------- ----------------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
ASSETS
Current
Cash and cash equivalents.......... $ (271) $ 3,305 $ -- $ 3,034
Escrowed and restricted funds...... 2,413 -- -- 2,413
Accounts receivable................ 46,616 72,723 (6,194) 113,145
Inventories........................ 78,524 60,277 -- 138,801
Miscellaneous...................... 7,555 14,985 -- 22,540
------------ ------------- ----------------- ------------
Total current assets....... 134,119 151,290 (6,194) 279,933
Property and equipment, less
accumulated depreciation........... 121,274 48,944 -- 170,218
Investments in subsidiaries.......... 157,936 17,746 (175,682) --
Miscellaneous........................ 72,911 11,085 (40,841) 43,155
Excess of cost over net assets
acquired........................... 133,677 78,769 -- 212,446
------------ ------------- ----------------- ------------
$620,635 $ 307,834 $(222,717) $705,752
========= =========== ============= =========
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
Current
Accounts payable................... $ 36,484 $ 24,383 $ (6,194) $ 54,673
Accrued expenses................... 36,634 19,258 -- 55,892
Current maturities of long-term
debt............................ 1,550 -- -- 1,550
------------ ------------- ----------------- ------------
Total current
liabilities.............. 73,950 43,641 (6,194) 112,115
Long-term debt, less current
maturities......................... 165,657 83,163 (40,841) 207,979
Convertible subordinated
debentures......................... 103,925 -- -- 103,925
Deferred income taxes................ 10,869 8,766 -- 19,635
------------ ------------- ----------------- ------------
Total liabilities.......... 354,401 135,570 (47,035) 443,654
Redeemable preferred stock........... 25,000 -- -- 25,000
Common stock......................... 2,187 92,634 (92,634) 2,187
Additional paid-in capital........... 94,186 11,030 (11,030) 94,186
Retained earnings.................... 146,160 54,272 (54,272) 146,160
Foreign currency translation
adjustment......................... (2,017) 14,328 -- 12,311
Treasury stock, 3,600,000 Class A
shares, at cost.................... -- -- (17,746) (17,746)
------------ ------------- ----------------- ------------
$620,635 $ 307,834 $(222,717) $705,752
========= =========== ============= =========
</TABLE>
F-33
<PAGE> 119
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL
STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED OCTOBER 1, 1995
------------------------------------------------------------------------
INTERFACE, INC. CONSOLIDATION AND
AND GUARANTOR NON-GUARANTOR ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTALS
--------------- ------------- ----------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES........................ $ 46,109 $ 9,709 $ -- $ 55,818
========== =========== ============= =========
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of plant and equipment... (22,240) (3,946) -- (26,186)
Acquisitions, net of cash
acquired....................... (15,203) -- -- (15,203)
Other............................. (2,798) -- -- (2,798)
--------------- ------------- ----------------- ------------
Net cash provided by (used in)
investing activities........... (40,241) (3,946) -- (44,187)
--------------- ------------- ----------------- ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net borrowings (repayments)....... (2,703) (6,411) -- (9,114)
Proceeds from issuance of common
stock.......................... 744 -- -- 744
Cash dividends paid............... (4,597) -- -- (4,597)
Other............................. -- -- -- --
--------------- ------------- ----------------- ------------
Net cash provided by (used in)
financing activities........... (6,556) (6,411) -- (12,967)
--------------- ------------- ----------------- ------------
Effect of exchange rate changes on
cash.............................. -- (19) -- (19)
--------------- ------------- ----------------- ------------
NET INCREASE (DECREASE) IN CASH..... (688) (667) -- (1,355)
Cash at beginning of year........... 417 3,972 -- 4,389
--------------- ------------- ----------------- ------------
Cash at end of period............... $ (271) $ 3,305 $ -- $ 3,034
========== =========== ============= =========
</TABLE>
BASIS OF PRESENTATION
The Company is offering $125,000,000 in aggregate principal amount of
Senior Subordinated Notes due 2005 (the "Notes"). The Notes will be guaranteed,
jointly and severally, on an unsecured senior subordinated basis, by each of the
Company's principal domestic subsidiaries (the "Guarantors"). The Guarantors
include Interface Flooring Systems, Inc., Bentley Mills, Inc., Guilford of
Maine, Inc., Prince Street Technologies, Inc. and several other smaller domestic
subsidiaries. The condensed consolidating financial statements of the Company (a
holding company) and the Guarantors are presented on page F-32 through F-34 and
should be read in connection with the condensed consolidated financial
statements of the Company. Separate financial statements of the Guarantors are
not presented because the Guarantors are jointly, severally and unconditionally
liable under the guarantees, and the Company believes the condensed
consolidating financial statements presented are more meaningful in
understanding the financial position of the Guarantors.
DISTRIBUTIONS
There are no significant restrictions on the ability of the Guarantors to
make distributions to Interface, Inc.
F-34
<PAGE> 120
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Articles of Incorporation provide that a director shall
not be personally liable to the Registrant or its shareholders for monetary
damages for breach of duty of care or any other duty owed to the Registrant as a
director, except that such provision shall not eliminate or limit the liability
of a director (a) for any appropriation, in violation of his duties, of any
business opportunity of the Registrant, (b) for acts or omissions which involve
intentional misconduct or a knowing violation of law, (c) for unlawful corporate
distributions or (d) for any transaction from which the director received an
improper benefit.
Article VII of the Bylaws of the Registrant authorizes indemnification of
the Registrant's officers and directors for any liability and expense incurred
by them in connection with or resulting from any threatened, pending or
completed legal action or other proceeding or investigation by reason of his
being or having been an officer or director. An officer or director may only be
indemnified if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Registrant, and, with
respect to a criminal matter, he did not have reasonable cause to believe that
his conduct was unlawful. No officer or director who has been adjudged liable to
the Registrant or adjudged liable for the improper receipt of a personal benefit
is entitled to indemnification.
Any officer or director who has been wholly successful on the merits or
otherwise in an action or proceeding in his official capacity is entitled to
indemnification as to expenses by the Registrant as of right. All other
determinations in respect of indemnification shall be made by either: (i) a
majority vote of a quorum of disinterested directors; (ii) independent legal
counsel selected in accordance with the Bylaws and at the request of the Board;
or (iii) the holders of a majority of the Registrant's stock who at such time
are entitled to vote for the election of directors.
The Registrant's directors and officers are insured against losses arising
from any claim against them as such for wrongful acts or omissions, subject to
certain limitations. In addition, the Registration Rights Agreement filed as
Exhibit 4.3 hereto contains certain provisions pursuant to which certain
officers, directors and controlling persons of the Company may be entitled to be
indemnified by the Initial Purchasers and other holders of Notes.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ ----------------------------------------------------------------------------------
<C> <C> <S>
3.1 -- Articles of Incorporation (composite as of September 8, 1988) (included as Exhibit
3.1 to the Company's annual report on Form 10-K for the year ended January 3,
1993, previously filed with the Commission and incorporated herein by reference).
3.2 -- Bylaws, as amended (included as Exhibit 3.2 to the Company's quarterly report on
Form 10-Q for the quarter ended April 1, 1990, previously filed with the
Commission and incorporated herein by reference).
4.1 -- Indenture dated as of November 15, 1995, among the Company, the Guarantors and
First Union National Bank of Georgia, as Trustee (including form of Exchange
Note).
4.2 -- Purchase Agreement dated as of November 16, 1995 among the Company, the Guarantors
and the Initial Purchasers.
4.3 -- Registration Rights Agreement dated as of November 21, 1995 among the Company, the
Guarantors and the Initial Purchasers.
4.4 -- Form of Exchange Note (included in Exhibit 4.1).
</TABLE>
II-1
<PAGE> 121
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ ----------------------------------------------------------------------------------
<C> <C> <S>
5. -- Opinion of Kilpatrick & Cody.*
8. -- Tax Opinion of Kilpatrick & Cody.
12.1 -- Computation of Ratio of Earnings to Fixed Charges.
23.1 -- Consent of BDO Seidman, LLP (included in Part II).
23.2 -- Consent of Kilpatrick & Cody (included as part of Exhibits 5 and 8).
24. -- Powers of Attorney (see signature pages).
25. -- Statement of Eligibility of Trustee under the Trust Indenture Act on Form T-1
99.1 -- Form of Transmittal Letter.
99.2 -- Form of Notice of Guaranteed Delivery
</TABLE>
- ---------------
* To be filed by amendment.
(b) Financial Statement Schedules
None.
(c) Reports, Opinions or Appraisals
Not Applicable.
ITEM 22. UNDERTAKINGS.
(a) (i) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(ii) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
<PAGE> 122
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Interface, Inc.
Atlanta, Georgia
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our reports dated February
22, 1995, relating to the consolidated financial statements and financial
statement schedule II (Valuation and Qualifying Accounts and Reserves) of
Interface, Inc., appearing in the Company's Annual Report on Form 10-K for the
year ended January 1, 1995.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO SEIDMAN, LLP
Atlanta, Georgia
December 20, 1995
II-3
<PAGE> 123
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia, on December 19, 1995.
INTERFACE, INC.
By: /s/ RAY C. ANDERSON
------------------------------------
Ray C. Anderson
Chairman, President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ray C. Anderson his attorney-in-fact, with power
of substitution for him in any and all capacities, to sign any amendments to
this Registration Statement, and to file the same, with the exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission hereby ratifying and confirming all that each of said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on the 19th day of December, 1995.
<TABLE>
<C> <S>
/s/ RAY C. ANDERSON Chairman of the Board, President and Chief
- --------------------------------------------- Executive Officer (Principal Executive
Ray C. Anderson Officer)
/s/ DANIEL T. HENDRIX Senior Vice President, Chief Financial Officer
- --------------------------------------------- and Treasurer (Principal Financial and
Daniel T. Hendrix Accounting Officer)
/s/ CHARLES R. EITEL Director
- ---------------------------------------------
Charles R. Eitel
/s/ BRIAN L. DEMOURA Director
- ---------------------------------------------
Brian L. DeMoura
Director
- ---------------------------------------------
David Milton
/s/ DON E. RUSSELL Director
- ---------------------------------------------
Don E. Russell
/s/ C. EDWARD TERRY Director
- ---------------------------------------------
C. Edward Terry
/s/ GORDON D. WHITENER Director
- ---------------------------------------------
Gordon D. Whitener
/s/ CARL I. GABLE Director
- ---------------------------------------------
Carl I. Gable
</TABLE>
II-4
<PAGE> 124
<TABLE>
<C> <S>
/s/ DR. JUNE M. HENTON Director
- ---------------------------------------------
Dr. June M. Henton
/s/ J. SMITH LANIER, II Director
- ---------------------------------------------
J. Smith Lanier, II
/s/ LEONARD G. SAULTER Director
- ---------------------------------------------
Leonard G. Saulter
Director
- ---------------------------------------------
David G. Thomas
Director
- ---------------------------------------------
Clarinus C. Th. van Andel
</TABLE>
II-5
<PAGE> 125
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
undersigned has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia, on December 19, 1995.
BENTLEY MILLS, INC.
By: /s/ DAVID W. PORTER
------------------------------------
David W. Porter
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David W. Porter his attorney-in-fact, with power
of substitution for him in any and all capacities, to sign any amendments to
this Registration Statement, and to file the same, with the exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission hereby ratifying and confirming all that each of said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on the 19th day of December, 1995.
<TABLE>
<C> <S>
/s/ ALAN S. KABUS President, Chief Executive Officer and
- --------------------------------------------- Director (Principal Executive Officer)
Alan S. Kabus
/s/ DAVID W. MUNRO Vice President, Chief Financial Officer and
- --------------------------------------------- Director (Principal Financial and Accounting
David W. Munro Officer)
/s/ CHARLES R. EITEL Director
- ---------------------------------------------
Charles R. Eitel
/s/ DANIEL T. HENDRIX Director
- ---------------------------------------------
Daniel T. Hendrix
/s/ DAVID W. PORTER Director
- ---------------------------------------------
David W. Porter
</TABLE>
II-6
<PAGE> 126
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
undersigned has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia, on December 19, 1995.
GUILFORD (DELAWARE), INC.
By: /s/ DAVID W. PORTER
------------------------------------
David W. Porter
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David W. Porter his attorney-in-fact, with power
of substitution for him in any and all capacities, to sign any amendments to
this Registration Statement, and to file the same, with the exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission hereby ratifying and confirming all that each of said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on the 19th day of December, 1995.
<TABLE>
<C> <S>
/s/ BRIAN L. DEMOURA President and Director
- --------------------------------------------- (Principal Executive Officer)
Brian L. DeMoura
/s/ DANIEL T. HENDRIX Vice President and Assistant Treasurer
- --------------------------------------------- (Principal Financial and Accounting Officer)
Daniel T. Hendrix
/s/ RAY C. ANDERSON Director
- ---------------------------------------------
Ray C. Anderson
</TABLE>
II-7
<PAGE> 127
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
undersigned has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia, on December 19, 1995.
GUILFORD OF MAINE, INC.
By: /s/ DAVID W. PORTER
------------------------------------
David W. Porter
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David W. Porter his attorney-in-fact, with power
of substitution for him in any and all capacities, to sign any amendments to
this Registration Statement, and to file the same, with the exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission hereby ratifying and confirming all that each of said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on the 19th day of December, 1995.
<TABLE>
<C> <S>
/s/ BRIAN L. DEMOURA President, Chief Executive Officer and
- --------------------------------------------- Director
Brian L. DeMoura (Principal Executive Officer)
/s/ DANIEL T. HENDRIX Vice President and Director
- --------------------------------------------- (Principal Financial and Accounting Officer)
Daniel T. Hendrix
/s/ RAY C. ANDERSON Director
- ---------------------------------------------
Ray C. Anderson
</TABLE>
II-8
<PAGE> 128
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
undersigned has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia, on December 19, 1995.
INTERFACE ASIA-PACIFIC, INC.
By: /s/ DAVID W. PORTER
------------------------------------
David W. Porter
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David W. Porter his attorney-in-fact, with power
of substitution for him in any and all capacities, to sign any amendments to
this Registration Statement, and to file the same, with the exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission hereby ratifying and confirming all that each of said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on the 19th day of December, 1995.
<TABLE>
<C> <S>
/s/ DAVID MILTON President, Chief Executive Officer and
- --------------------------------------------- Director (Principal Executive Officer)
David Milton
/s/ DANIEL T. HENDRIX Vice President, Treasurer and Director
- --------------------------------------------- (Principal Financial and Accounting Officer)
Daniel T. Hendrix
/s/ CHARLES R. EITEL Director
- ---------------------------------------------
Charles R. Eitel
</TABLE>
II-9
<PAGE> 129
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
undersigned has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia, on December 19, 1995.
INTERFACE EUROPE, INC.
By: /s/ DAVID W. PORTER
------------------------------------
David W. Porter
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David W. Porter his attorney-in-fact, with power
of substitution for him in any and all capacities, to sign any amendments to
this Registration Statement, and to file the same, with the exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission hereby ratifying and confirming all that each of said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on the 19th day of December, 1995.
<TABLE>
<C> <S>
/s/ JOHN H. WALKER President and Chief Executive Officer
- --------------------------------------------- (Principal Executive Officer)
John H. Walker
/s/ DANIEL T. HENDRIX Vice President and Treasurer
- --------------------------------------------- (Principal Financial and Accounting Officer)
Daniel T. Hendrix
/s/ RAY C. ANDERSON Director
- ---------------------------------------------
Ray C. Anderson
</TABLE>
II-10
<PAGE> 130
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
undersigned has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia, on December 19, 1995.
INTERFACE FLOORING SYSTEMS, INC.
By: /s/ DAVID W. PORTER
------------------------------------
David W. Porter
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David W. Porter his attorney-in-fact, with power
of substitution for him in any and all capacities, to sign any amendments to
this Registration Statement, and to file the same, with the exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission hereby ratifying and confirming all that each of said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on the 19th day of December, 1995.
<TABLE>
<C> <S>
/s/ JOHN R. WELLS President and Chief Executive Officer
- --------------------------------------------- (Principal Executive Officer)
John R. Wells
/s/ DANIEL T. HENDRIX Vice President and Treasurer
- --------------------------------------------- (Principal Financial and Accounting Officer)
Daniel T. Hendrix
/s/ RAY C. ANDERSON Director
- ---------------------------------------------
Ray C. Anderson
</TABLE>
II-11
<PAGE> 131
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
undersigned has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia, on December 19, 1995.
INTERFACE RESEARCH CORPORATION
By: /s/ DAVID W. PORTER
------------------------------------
David W. Porter
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David W. Porter his attorney-in-fact, with power
of substitution for him in any and all capacities, to sign any amendments to
this Registration Statement, and to file the same, with the exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission hereby ratifying and confirming all that each of said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on the 19th day of December, 1995.
<TABLE>
<C> <S>
/s/ C. EDWARD TERRY President and Chief Executive Officer
- --------------------------------------------- (Principal Executive Officer)
C. Edward Terry
/s/ DANIEL T. HENDRIX Vice President and Treasurer
- --------------------------------------------- (Principal Financial and Accounting Officer)
Daniel T. Hendrix
/s/ RAY C. ANDERSON Director
- ---------------------------------------------
Ray C. Anderson
</TABLE>
II-12
<PAGE> 132
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
undersigned has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia, on December 19, 1995.
PANDEL, INC.
By: /s/ DAVID W. PORTER
------------------------------------
David W. Porter
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David W. Porter his attorney-in-fact, with power
of substitution for him in any and all capacities, to sign any amendments to
this Registration Statement, and to file the same, with the exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission hereby ratifying and confirming all that each of said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on the 19th day of December, 1995.
<TABLE>
<C> <S>
/s/ C. EDWARD TERRY President
- --------------------------------------------- (Principal Executive Officer)
C. Edward Terry
/s/ DANIEL T. HENDRIX Vice President and Treasurer
- --------------------------------------------- (Principal Financial and Accounting Officer)
Daniel T. Hendrix
/s/ RAY C. ANDERSON Director
- ---------------------------------------------
Ray C. Anderson
</TABLE>
II-13
<PAGE> 133
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
undersigned has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia, on December 19, 1995.
PRINCE STREET TECHNOLOGIES, INC.
By: /s/ DAVID W. PORTER
------------------------------------
David W. Porter
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David W. Porter his attorney-in-fact, with power
of substitution for him in any and all capacities, to sign any amendments to
this Registration Statement, and to file the same, with the exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission hereby ratifying and confirming all that each of said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on the 19th day of December, 1995.
<TABLE>
<C> <S>
/s/ GORDON D. WHITENER President and Chief Executive Officer
- --------------------------------------------- (Principal Executive Officer)
Gordon D. Whitener
/s/ DANIEL T. HENDRIX Vice President and Treasurer
- --------------------------------------------- (Principal Financial and Accounting Officer)
Daniel T. Hendrix
/s/ RAY C. ANDERSON Director
- ---------------------------------------------
Ray C. Anderson
</TABLE>
II-14
<PAGE> 134
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
undersigned has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia, on December 19, 1995.
ROCKLAND REACT-RITE, INC.
By: /s/ DAVID W. PORTER
------------------------------------
David W. Porter
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David W. Porter his attorney-in-fact, with power
of substitution for him in any and all capacities, to sign any amendments to
this Registration Statement, and to file the same, with the exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission hereby ratifying and confirming all that each of said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on the 19th day of December, 1995.
<TABLE>
<C> <S>
/s/ C. EDWARD TERRY President
- --------------------------------------------- (Principal Executive Officer)
C. Edward Terry
/s/ DANIEL T. HENDRIX Vice President and Treasurer
- --------------------------------------------- (Principal Financial and Accounting Officer)
Daniel T. Hendrix
/s/ RAY C. ANDERSON Director
- ---------------------------------------------
Ray C. Anderson
</TABLE>
II-15
<PAGE> 135
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF EXHIBITS PAGE NO.
- ------ ------------------------------------------------------------------------- ----------
<C> <C> <S> <C>
3.1 -- Articles of Incorporation (composite as of September 8, 1988) (included
as Exhibit 3.1 to the Company's annual report on Form 10-K for the year
ended January 3, 1993, previously filed with the Commission and
incorporated herein by reference).
3.2 -- Bylaws, as amended (included as Exhibit 3.2 to the Company's quarterly
report on Form 10-Q for the quarter ended April 1, 1990, previously filed
with the Commission and incorporated herein by reference).
4.1 -- Indenture dated as of November 15, 1995, among the Company, the
Guarantors and First Union National Bank of Georgia, as Trustee
(including form of Exchange Note).
4.2 -- Purchase Agreement dated as of November 16, 1995 among the Company, the
Guarantors and the Initial Purchasers.
4.3 -- Registration Rights Agreement dated as of November 21, 1995 among the
Company, the Guarantors and the Initial Purchasers.
4.4 -- Form of Exchange Note (included in Exhibit 4.1).
5. -- Opinion of Kilpatrick & Cody.
8. -- Tax Opinion of Kilpatrick & Cody.
12.1 -- Computation of Ratio of Earnings to Fixed Charges.
23.1 -- Consent of BDO Seidman, LLP (included in Part II).
23.2 -- Consent of Kilpatrick & Cody (included as part of Exhibits 5 and 8).
24. -- Powers of Attorney (see signature pages).
25. -- Statement of Eligibility of Trustee under the Trust Indenture Act on Form
T-1
99.1 -- Form of Transmittal Letter.
99.2 -- Form of Notice of Guaranteed Delivery
</TABLE>
<PAGE> 1
EXHIBIT 4.1
================================================================================
---------------
INTERFACE, INC., as Issuer
BENTLEY MILLS, INC.
GUILFORD (DELAWARE), INC.
GUILFORD OF MAINE, INC.
INTERFACE ASIA-PACIFIC, INC.
INTERFACE EUROPE, INC.
INTERFACE FLOORING SYSTEMS, INC.
INTERFACE RESEARCH CORPORATION
PANDEL, INC.
PRINCE STREET TECHNOLOGIES, LTD.
ROCKLAND REACT-RITE, INC.
as Guarantors
and
FIRST UNION NATIONAL BANK OF GEORGIA, as Trustee
---------------
INDENTURE
Dated as of November 15, 1995
---------------
$125,000,000
9 1/2% Senior Subordinated Notes due 2005
================================================================================
<PAGE> 2
Reconciliation and tie between Trust Indenture Act of 1939
and Indenture, dated as of November 15, 1995
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C>
Section 310 (a)(1) ................................................. 7.11
(a)(2) ................................................. 7.11
(a)(3) ................................................. N.A.
(a)(4) ................................................. N.A.
(a)(5) ................................................. 7.11
(b) ................................................. 7.09; 7.11; 11.02
(c) ................................................. N.A.
Section 311 (a) ................................................. 7.12
(b) ................................................. 7.12
(c) ................................................. N.A.
Section 312 (a) ................................................. 2.06
(b) ................................................. 11.03
(c) ................................................. 11.03
Section 313 (a) ................................................. 7.07
(b) ................................................. 7.07
(c) ................................................. 7.07; 11.02
(d) ................................................. 7.07
Section 314 (a) ................................................. 4.07; 11.02
(b) ................................................. N.A.
(c)(1) ................................................. 11.04
(c)(2) ................................................. 11.04
(c)(3) ................................................. N.A.
(d) ................................................. N.A.
(e) ................................................. 11.05
Section 315 (a) ................................................. 7.01(b)
(b) ................................................. 7.05; 11.02
(c) ................................................. 7.01(a)
(d) ................................................. 7.01(c)
(e) ................................................. 6.11
Section 316 (a) (last
sentence)................................................. 2.13
(a)(1)(A)................................................. 6.05
(a)(1)(B)................................................. 6.04
(a)(2) ................................................. N.A.
(b) ................................................. 6.07
Section 317 (a)(1) ................................................. 6.08
(a)(2) ................................................. 6.09
(b) ................................................. 2.05
Section 318 (a) ................................................. 11.01
(c) ................................................. 11.01
</TABLE>
_______________
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Indenture
<PAGE> 3
TABLE OF CONTENTS(1)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01. Definitions................................................. 1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act........... 27
SECTION 1.03. Rules of Construction....................................... 27
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Forms and Dating............................................ 28
SECTION 2.02. Restrictive Legends......................................... 29
SECTION 2.03. Execution and Authentication................................ 30
SECTION 2.04. Registrar and Paying Agent.................................. 31
SECTION 2.05. Paying Agent to Hold Money in Trust......................... 31
SECTION 2.06. Securityholder Lists........................................ 32
SECTION 2.07. Transfer and Exchange....................................... 32
SECTION 2.08. Replacement Securities...................................... 33
SECTION 2.09. Book-Entry Provisions for Global Security................... 33
SECTION 2.10. Special Transfer Provisions................................. 34
SECTION 2.11. Form of Certificates to Be Delivered........................ 37
SECTION 2.12. Outstanding Securities...................................... 41
SECTION 2.13. Treasury Securities......................................... 41
SECTION 2.14. Temporary Securities........................................ 41
SECTION 2.15. Cancellation................................................ 42
SECTION 2.16. Defaulted Interest.......................................... 42
SECTION 2.17. CUSIP Number................................................ 42
SECTION 2.18. Deposit of Moneys........................................... 42
</TABLE>
- -----------------
(1) Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
i
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE THREE
REDEMPTION OF SECURITIES
SECTION 3.01. Notices to the Trustee...................................... 43
SECTION 3.02. Selection of Securities to Be Redeemed...................... 43
SECTION 3.03. Notice of Redemption........................................ 43
SECTION 3.04. Effect of Notice of Redemption.............................. 44
SECTION 3.05. Deposit of Redemption Price................................. 44
SECTION 3.06. Securities Redeemed or Purchased in Part.................... 45
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities....................................... 45
SECTION 4.02. Maintenance of Office or Agency............................. 45
SECTION 4.03. Corporate Existence......................................... 46
SECTION 4.04. Payment of Taxes and Other Claims........................... 46
SECTION 4.05. Maintenance of Properties; Insurance; Books and Records;
Compliance with Law.............................................. 47
SECTION 4.06. Compliance Certificate...................................... 47
SECTION 4.07. SEC Reports................................................. 48
SECTION 4.08. Limitation on Indebtedness.................................. 49
SECTION 4.09. Limitation on Restricted Payments........................... 49
SECTION 4.10. Limitation on Liens......................................... 52
SECTION 4.11. Change of Control........................................... 52
SECTION 4.12. Disposition of Proceeds of Asset Sales...................... 54
SECTION 4.13. Limitation on Transactions with Interested Persons.......... 57
SECTION 4.14. Limitation on Dividends and Other Payment Restrictions
Affecting Subsidiaries........................................... 58
SECTION 4.15. Limitation on the Issuance of Other Senior Subordinated
Indebtedness..................................................... 58
SECTION 4.16. Limitation on Guarantees by Subsidiaries.................... 59
SECTION 4.17. Waiver of Stay, Extension or Usury Laws..................... 59
SECTION 4.18. Limitation on Applicability of Certain Covenants............ 59
SECTION 4.19. Rule 144A Information Requirement........................... 60
</TABLE>
ii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, etc................................. 60
SECTION 5.02. Successor Substituted....................................... 61
ARTICLE SIX
REMEDIES
SECTION 6.01. Events of Default........................................... 61
SECTION 6.02. Acceleration................................................ 64
SECTION 6.03. Other Remedies.............................................. 65
SECTION 6.04. Waiver of Past Defaults..................................... 65
SECTION 6.05. Control by Majority......................................... 65
SECTION 6.06. Limitation on Suits......................................... 65
SECTION 6.07. Right of Holders to Receive Payment......................... 66
SECTION 6.08. Collection Suit by Trustee.................................. 66
SECTION 6.09. Trustee May File Proofs of Claims........................... 66
SECTION 6.10. Priorities.................................................. 67
SECTION 6.11. Undertaking for Costs....................................... 67
SECTION 6.12. Restoration of Rights and Remedies.......................... 68
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties...................................................... 68
SECTION 7.02. Rights of Trustee........................................... 69
SECTION 7.03. Individual Rights of Trustee................................ 70
SECTION 7.04. Trustee's Disclaimer........................................ 70
SECTION 7.05. Notice of Default........................................... 70
SECTION 7.06. Money Held in Trust......................................... 70
SECTION 7.07. Reports by Trustee to Holders............................... 71
SECTION 7.08. Compensation and Indemnity.................................. 71
SECTION 7.09. Replacement of Trustee...................................... 72
SECTION 7.10. Successor Trustee by Merger, etc............................ 73
SECTION 7.11. Eligibility; Disqualification............................... 73
</TABLE>
iii
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 7.12. Preferential Collection of Claims Against Company........... 73
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. Termination of the Company's Obligations.................... 74
SECTION 8.02. Legal Defeasance and Covenant Defeasance.................... 75
SECTION 8.03. Application of Trust Money.................................. 79
SECTION 8.04. Repayment to Company or Guarantors.......................... 79
SECTION 8.05. Reinstatement............................................... 79
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.................................. 80
SECTION 9.02. With Consent of Holders..................................... 80
SECTION 9.03. Compliance with Trust Indenture Act......................... 82
SECTION 9.04. Revocation and Effect of Consents........................... 82
SECTION 9.05. Notation on or Exchange of Securities....................... 82
SECTION 9.06. Trustee May Sign Amendments, etc............................ 83
ARTICLE TEN
SUBORDINATION OF SECURITIES
SECTION 10.01. Securities Subordinate to Senior Indebtedness............... 83
SECTION 10.02. Payment Over of Proceeds upon Dissolution, etc.............. 83
SECTION 10.03. Suspension of Payment When Senior Indebtedness in
Default........................................................... 85
SECTION 10.04. Trustee's Relation to Senior Indebtedness................... 86
SECTION 10.05. Subrogation to Rights of Holders of Senior Indebtedness..... 86
SECTION 10.06. Provisions Solely to Define Relative Rights................. 87
SECTION 10.07. Trustee to Effectuate Subordination......................... 87
SECTION 10.08. No Waiver of Subordination Provisions....................... 88
SECTION 10.09. Notice to Trustee........................................... 89
SECTION 10.10. Reliance on Judicial Order or Certificate of Liquidating
Agent............................................................. 89
SECTION 10.11. Rights of Trustee as a Holder of Senior Indebtedness;
Preservation of Trustee's Rights.................................. 90
SECTION 10.12. Article Applicable to Paying Agents......................... 90
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SECTION 10.13. No Suspension of Remedies................................... 90
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act of 1939................................. 90
SECTION 11.02. Notices..................................................... 91
SECTION 11.03. Communication by Holders with Other Holders................. 92
SECTION 11.04. Certificate and Opinion as to Conditions Precedent.......... 92
SECTION 11.05. Statements Required in Certificate or Opinion............... 92
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar................... 92
SECTION 11.07. Governing Law............................................... 93
SECTION 11.08. No Interpretation of Other Agreements....................... 93
SECTION 11.09. No Recourse Against Others.................................. 93
SECTION 11.10. Successors.................................................. 93
SECTION 11.11. Duplicate Originals......................................... 93
SECTION 11.12. Separability................................................ 93
SECTION 11.13. Table of Contents, Headings, etc............................ 93
SECTION 11.14. Benefits of Indenture....................................... 93
ARTICLE TWELVE
GUARANTEE OF SECURITIES
SECTION 12.01. Guarantee................................................... 94
SECTION 12.02. Execution and Delivery of Guarantee......................... 96
SECTION 12.03. Additional Guarantors....................................... 96
SECTION 12.04. Guarantee Obligations Subordinated to Guarantor Senior
Indebtedness...................................................... 97
SECTION 12.05. Payment Over of Proceeds upon Dissolution, etc., of a
Guarantor......................................................... 97
SECTION 12.06. Suspension of Payment When Guarantor Senior
Indebtedness in Default........................................... 98
SECTION 12.07. Release of a Guarantor...................................... 99
SECTION 12.08. Waiver of Subrogation....................................... 100
SECTION 12.09. Guarantee Provisions Solely to Define Relative Rights....... 101
SECTION 12.10. Trustee To Effectuate Subordination of Guarantee
Obligations....................................................... 101
SECTION 12.11. No Waiver of Guarantee Subordination Provisions............. 101
SECTION 12.12. Guarantors to Give Notice to Trustee........................ 103
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SECTION 12.13. Reliance on Judicial Order or Certificate of Liquidating
Agent Regarding Dissolution, etc., of Guarantors.................. 103
SECTION 12.14. Rights of Trustee as a Holder of Guarantor Senior
Indebtedness; Preservation of Trustee's Rights.................... 104
SECTION 12.15. Article Twelve Applicable to Paying Agents.................. 104
SECTION 12.16. No Suspension of Remedies................................... 104
SECTION 12.17. Trustee's Relation to Guarantor Senior Indebtedness......... 104
SECTION 12.18. Subrogation................................................. 105
SIGNATURES................................................................. 106
EXHIBIT A Form of Security
EXHIBIT B Form of Senior Subordinated Guarantee
</TABLE>
vi
<PAGE> 9
INDENTURE, dated as of November 15, 1995, among Interface, Inc., a
corporation incorporated under the laws of the State of Georgia (the
"Company"), Bentley Mills, Inc., a Delaware corporation, Guilford (Delaware),
Inc., a Delaware corporation, Guilford of Maine, Inc., a Delaware corporation,
Interface Asia-Pacific, Inc., a Georgia corporation, Interface Europe, Inc., a
Delaware corporation, Interface Flooring Systems, Inc., a Georgia corporation,
Interface Research Corporation, a Delaware corporation, Pandel, Inc., a Georgia
corporation, Prince Street Technologies, Ltd., a Georgia corporation and
Rockland React-Rite, Inc., a Georgia corporation (collectively, the
"Guarantors"), and First Union National Bank of Georgia, a national banking
association, as trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of each other party
and for the equal and ratable benefit of the Holders of the Company's 9 1/2%
Senior Subordinated Notes due 2005 (the "Initial Securities"), and 9 1/2%
Series B Senior Subordinated Notes due 2005 (the "Exchange Securities" and,
together with the Initial Securities, the "Securities") of substantially the
tenor and amount hereinafter set forth.
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a person (a) assumed in
connection with an Asset Acquisition from such person or (b) existing at the
time such person becomes a Subsidiary of any other person.
"Affiliate" means, with respect to any specified person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person.
"Agent" means any Registrar or Paying Agent of the Securities.
"Agent Members" shall have the meaning set forth in Section 2.09.
"Asset Acquisition" means (a) an Investment by the Company or any
Subsidiary of the Company in any other person pursuant to which such person
shall become a Subsidiary of the Company, or shall be merged with or into the
Company or any Subsidiary of the Company, (b) the acquisition by the Company or
any Subsidiary of the Company of the assets of any person (other than a
Subsidiary of the Company) which constitute all or substantially all of the
assets of such person or (c) the acquisition by the Company or any Subsidiary
of the Company of any division or line of business of any person (other than a
Subsidiary of the Company).
<PAGE> 10
2
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease or other disposition to any person other than the Company or a
Wholly Owned Subsidiary of the Company, in one or a series of related
transactions, of (a) any Capital Stock of any Subsidiary of the Company (other
than in respect of directors' qualifying shares or investments by foreign
nationals mandated by applicable law); (b) all or substantially all of the
properties and assets of any division or line of business of the Company or any
Subsidiary of the Company; or (c) any other properties or assets of the Company
or any Subsidiary of the Company other than in the ordinary course of business.
For the purposes of this definition, the term "Asset Sale" shall not include
(i) any sale, transfer or other disposition of equipment, tools or other assets
by the Company or any of its Subsidiaries in one or a series of related
transactions in respect of which the Company or such Subsidiary receives cash
or property with an aggregate Fair Market Value of $1,000,000 or less; (ii)
sales of accounts receivable or interests in accounts receivable of the Company
or any Subsidiaries pursuant to the Receivables Purchase Agreement or the Bank
Receivables Agreement; and (iii) any sale, issuance, conveyance, transfer,
lease or other disposition of properties or assets that is governed by the
provisions described in Section 5.01.
"Asset Sale Offer" shall have the meaning set forth in Section 4.12.
"Asset Sale Offer Price" shall have the meaning set forth in Section 4.12.
"Asset Sale Purchase Date" shall have the meaning set forth in Section
4.12.
"Average Life to Stated Maturity" means, with respect to any Indebtedness,
as at any date of determination, the quotient obtained by dividing (a) the sum
of the products of (i) the number of years (or any fraction thereof) from such
date to the date or dates of each successive scheduled principal payment
(including, without limitation, any sinking fund requirements) of such
Indebtedness multiplied by (ii) the amount of each such principal payment by
(b) the sum of all such principal payments.
"Bank Receivables Agreement" means the Receivables Sale Agreement dated as
of July 31, 1995 (the "1995 Bank Receivables Agreement"), among Interface
Securitization Corporation, the Company, certain financial institutions parties
thereto, Trust Company Bank (now SunTrust Bank, Atlanta), as Co-Agent and
Administrative Agent, and The First National Bank of Chicago, as Co-Agent and
Documentation and Collateral Agent, as such agreement, in whole or in part, may
from time to time be amended, renewed, extended, substituted, refinanced,
restructured, replaced, supplemented or otherwise modified, whether with the
same or any other person(s) as purchaser(s), lender(s) or agent(s) (including,
without limitation, any successive renewals, extensions, substitutions,
refinancings, restructurings, replacements, supplements or other modifications
of the foregoing, whether with the same or any other person), provided that the
sales of receivables pursuant to any such Bank Receivables Agreement are on
non-recourse terms not materially
<PAGE> 11
3
less favorable to the Company and its Subsidiaries as provided for in the 1995
Bank Receivables Agreement and that the aggregate amount of sales under such
Bank Receivables Agreement and the Receivables Sales Agreement at any one time
outstanding shall not exceed a total of $100,000,000.
"Bankruptcy Law" means Title 11 United States Code or any similar law for
the relief of debtors.
"Board of Directors" means the board of directors of the Company or any
Guarantor, as the case may be, or any duly authorized committee of such board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company or any Guarantor, as the case may be,
to have been duly adopted by the Board of Directors of the Company or such
Guarantor, as the case may be, and to be in full force and effect on the date
of such certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in The City of New York, State
of New York or Atlanta, Georgia are authorized or obligated by law, regulation
or executive order to close.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and the amount of any such obligation at
any date shall be the capitalized amount thereof at such date, determined in
accordance with GAAP.
"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness
with a maturity of 180 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of
America is pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500,000,000; (iii) certificates
of deposit with a maturity of 180 days or less of any financial institution that
is not organized under the laws of the United States, any state thereof or the
District of Columbia that are rated at least A-1
<PAGE> 12
4
by S&P or at least P-1 by Moody's or at least an equivalent rating category of
another nationally recognized securities rating agency; and (iv) repurchase
agreements and reverse repurchase agreements relating to marketable direct
obligations issued or unconditionally guaranteed by the government of the United
States of America or issued by any agency thereof and backed by the full faith
and credit of the United States of America, in each case maturing within 180
days from the date of acquisition; provided that the terms of such agreements
comply with the guidelines set forth in the Federal Financial Agreements of
Depository Institutions With Securities Dealers and Others, as adopted by the
Comptroller of the Currency on October 31, 1985.
"Change of Control" means the occurrence of any of the following events:
(a) so long as the holders of the Company's Class B common stock are entitled
to elect a majority of the Company's board of directors, the Permitted Holders
shall at any time fail to be the "beneficial owners" (as defined in Rule 13d-3
and 13d-5 under the Exchange Act) of a majority of the issued and outstanding
shares of the Company's Class B common stock; (b) at any time during which the
holders of the Company's Class B common stock have ceased to be entitled to
elect a majority of the Company's board of directors (i) any "person" or
"group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act), other than the Permitted Holders, shall become the "beneficial owner" (as
defined in Rules 13d-3), of more than 35% of the total Voting Stock of the
Company provided, however, that the Permitted Holders (A) "beneficially own"
(as so defined) a lower percentage of the Voting Stock than such other person
or "group" and (B) do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the Board of
Directors of the Company, or (ii) the Company consolidates with, or merges with
or into, another person or sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to any person, or
any person consolidates with, or merges with or into, the Company, in any such
event pursuant to a transaction in which the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where (A) the outstanding Voting Stock of the
Company is converted into or exchanged for (1) Voting Stock (other than
Redeemable Capital Stock) of the surviving or transferee corporation or (2)
cash, securities and other property in an amount which could then be paid by
the Company as a Restricted Payment under the Indenture, or a combination
thereof, and (B) immediately after such transaction no "person" or "group" (as
such terms are used in Sections 13(d) and 14(d) of the Exchange Act), excluding
Permitted Holders, is the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time, upon the happening of an event or otherwise), directly or
indirectly, of more than 50% of the total Voting Stock of the surviving or
transferee corporation; (c) at any time during any consecutive two-year period,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by such
Board of Directors or
<PAGE> 13
5
whose nomination for election by the stockholders of the Company was approved by
a vote of 66-2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office; or (d) the
Company is liquidated or dissolved or adopts a plan of liquidation.
"Change of Control Date" shall have the meaning set forth in Section 4.11.
"Change of Control Offer" shall have the meaning set forth in Section
4.11.
"Change of Control Purchase Date" shall have the meaning set forth in
Section 4.11.
"Class B Shareholders' Agreement" shall mean that certain Voting Agreement
for Interface, Inc. Class B Common Stock Shareholders dated as of April 13,
1993 by and among Ray C. Anderson and approximately 38 other holders of Class B
common stock of the Company, pursuant to which Ray C. Anderson is entitled to
direct the voting of the shares of Class B common stock subject thereto.
"Common Stock" means, with respect to any person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or nonvoting) of, such person's common stock, whether
outstanding at the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Company" means the party named as such in this Indenture until a
successor replaces it (or any previous successor) pursuant to this Indenture,
and thereafter means such successor.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its President,
an Executive Vice President, Senior Vice President or a Vice President, and by
any one of its Treasurer, an Assistant Treasurer, its Secretary or an Assistant
Secretary, and delivered to the Trustee.
"Consolidated Cash Flow Available for Fixed Charges" means, with respect
to any person for any period, (A) the sum of, without duplication, the amounts
for such period, taken as a single accounting period, of (a) Consolidated Net
Income, (b) Consolidated Non-cash Charges, (c) Consolidated Interest Expense,
(d) Consolidated Income Tax Expense and (e) one-third of Consolidated Rental
Payments less (B) any non-cash items increasing Consolidated Net Income for such
period.
<PAGE> 14
6
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
person, the ratio of the aggregate amount of Consolidated Cash Flow Available
for Fixed Charges of such person for the four full fiscal quarters immediately
preceding the date of the transaction (the "Transaction Date") giving rise to
the need to calculate the Consolidated Fixed Charge Coverage Ratio (such four
full fiscal quarter period being referred to herein as the "Four Quarter
Period") to the aggregate amount of Consolidated Fixed Charges of such person
for the Four Quarter Period. In addition to and without limitation of the
foregoing, for purposes of this definition, "Consolidated Cash Flow Available
for Fixed Charges" and "Consolidated Fixed Charges" shall be calculated after
giving effect on a pro forma basis for the period of such calculation to,
without duplication, (a) the incurrence of any Indebtedness of such person or
any of its Subsidiaries (and the application of the net proceeds thereof)
during the period commencing on the first day of the Four Quarter Period to and
including the Transaction Date (the "Reference Period"), including, without
limitation, the incurrence of the Indebtedness giving rise to the need to make
such calculation (and the application of the net proceeds thereof), as if such
incurrence (and application) occurred on the first day of the Reference Period,
and (b) any Asset Sales or Asset Acquisitions (including, without limitation,
any Asset Acquisition giving rise to the need to make such calculation as a
result of such person or one of its Subsidiaries (including any person who
becomes a Subsidiary as a result of the Asset Acquisition) incurring, assuming
or otherwise being liable for Acquired Indebtedness) occurring during the
Reference Period, as if such Asset Sale or Asset Acquisition occurred on the
first day of the Reference Period. Furthermore, in calculating "Consolidated
Fixed Charges" for purposes of determining the denominator (but not the
numerator) of this "Consolidated Fixed Charge Coverage Ratio," (i) interest on
outstanding Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall
be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date; and (ii) if
interest on any Indebtedness actually incurred on the Transaction Date may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the Transaction Date will be deemed to have been in
effect during the Reference Period. If such person or any of its Subsidiaries
directly or indirectly guarantees Indebtedness of a third person, the above
clause shall give effect to the incurrence of such guaranteed Indebtedness as
if such person or such Subsidiary had directly incurred or otherwise assumed
such guaranteed Indebtedness.
"Consolidated Fixed Charges" means, with respect to any person for any
period, the sum of, without duplication, the amounts for such period of (i)
Consolidated Interest Expense, (ii) the product of (a) the aggregate amount of
dividends and other distributions paid or accrued during such period in respect
of Preferred Stock and Redeemable Capital Stock of such person and its
Subsidiaries on a consolidated basis and (b) a fraction, the numerator of which
is one and the denominator of which is one minus the
<PAGE> 15
7
then current combined federal, state and local statutory tax rate of such
person, expressed as a decimal and (iii) one-third of Consolidated Rental
Payments.
"Consolidated Income Tax Expense" means, with respect to any person for
any period, the provision for federal, state, local and foreign income taxes of
such person and its Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any person for any
period, without duplication, the sum of (i) the interest expense of such person
and its Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP, including, without limitation, (a) any amortization of
debt discount, (b) the net cost under Interest Rate Protection Obligations, (c)
the interest portion of any deferred payment obligation, (d) all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing and (e) all accrued interest and (ii) the
interest component of Capitalized Lease Obligations paid, accrued and/or
scheduled to be paid or accrued by such person and its Subsidiaries during such
period as determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any person, for any
period, the consolidated net income (or loss) of such person and its
Subsidiaries for such period as determined in accordance with GAAP, adjusted,
to the extent included in calculating such net income, by excluding, without
duplication, (i) all extraordinary gains or losses, (ii) the portion of net
income (but not losses) of such person and its Subsidiaries allocable to
minority interests in unconsolidated persons to the extent that cash dividends
or distributions have not actually been received by such person or one of its
Subsidiaries, (iii) net income (or loss) of any person combined with such
person or one of its Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination, (iv) any gain or
loss realized upon the termination of any employee pension benefit plan on an
after-tax basis, (v) gains or losses in respect of any Asset Sales by such
person or one of its Subsidiaries, and (vi) the net income of any Subsidiary of
such person to the extent that the declaration of dividends or similar
distributions by that Subsidiary of that income is not at the time permitted,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Worth" means, with respect to any person at any date,
the consolidated stockholders' equity of such person less the amount of such
stockholders' equity attributable to Redeemable Capital Stock of such person
and its Subsidiaries, as determined in accordance with GAAP.
<PAGE> 16
8
"Consolidated Non-cash Charges" means, with respect to any person for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such person and its Subsidiaries reducing Consolidated Net Income of such
person and its Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP (excluding any such charges constituting an
extraordinary item or loss or any such charge which required an accrual of or a
reserve for cash charges for any future period).
"Consolidated Rental Payments" of any person means, for any period, the
aggregate rental obligations of such person and its consolidated Subsidiaries
(not including taxes, insurance, maintenance and similar expenses that the
lessee is obligated to pay under the terms of the relevant leases), determined
on a consolidated basis in accordance with GAAP, payable in respect of such
period (net of income from subleases thereof, not including taxes, insurance,
maintenance and similar expenses that the sublessee is obligated to pay under
the terms of such sublease), whether or not such obligations are reflected as
liabilities or commitments on a consolidated balance sheet of such person and
its Subsidiaries or in the notes thereto, excluding, however, in any event, (i)
that portion of Consolidated Interest Expense of such person representing
payments by such person or any of its consolidated Subsidiaries in respect of
Capitalized Lease Obligations (net of payments to such person or any of its
consolidated Subsidiaries under subleases qualifying as capitalized lease
subleases to the extent that such payments would be deducted in determining
Consolidated Interest Expense) and (ii) the aggregate amount of amortization of
obligations of such person and its consolidated Subsidiaries in respect of such
Capitalized Lease Obligations for such period (net of payments to such person
or any of its consolidated Subsidiaries and subleases qualifying as capitalized
lease subleases to the extent that such payments could be deducted in
determining such amortization amount).
"Consolidated Tangible Assets" means the sum of the Tangible Assets of
the Company and its Subsidiaries after eliminating inter-company items, all
determined in accordance with GAAP, including appropriate deductions for
minority interest in Net Tangible Assets of such Subsidiaries.
"control" means, with respect to any specified person, the power to direct
the management and policies of such person, directly or indirectly, whether
through the ownership of Voting Stock, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Convertible Debentures" means the Company's 8% Convertible Subordinated
Debentures due 2013.
"Corporate Trust Office" means the corporate trust office of the Trustee
at which at any particular time its corporate trust business shall be
principally administered, which on the date hereof is located in Atlanta,
Georgia.
<PAGE> 17
9
"covenant defeasance" shall have the meaning set forth in Section 8.02.
"Credit Agreements" means, collectively, (i) the Amended and Restated
Credit Agreement dated as of June 30, 1995, among the Company, certain
Subsidiaries of the Company, the banks and other lending institution parties
thereto, Trust Company Bank (now SunTrust Bank, Atlanta), as Co-Agent and
Collateral Agent, and The First National Bank of Chicago, as Co-Agent, as
amended by the First Amendment to Amended and Restated Credit Agreement dated
as of July 31, 1995 and the Second Amendment to Amended and Restated Credit
Agreement dated as of the Issue Date, and (ii) the Letter of Credit Agreement
dated as of January 9, 1995, among the Company, certain Subsidiaries of the
Company, the banks and other lending institutions parties thereto, and Trust
Company Bank (now SunTrust Bank, Atlanta), as Domestic Agent and Collateral
Agent, as amended by the Master Amendment to Credit Documents dated as of June
30, 1995, in each case as such agreement, in whole or in part, may from time to
time be amended, renewed, extended, substituted, refinanced, restructured,
replaced, supplemented or otherwise modified (including, without limitation,
any successive renewals, extensions, substitutions, refinancings,
restructurings, replacements, supplementations or other modifications of the
foregoing), and whether with the present lenders or any other lenders.
"Currency Agreement" means, with respect to any person, any foreign
exchange contract, currency swap agreement or other similar agreement or
arrangement designed to protect such person or any of its Subsidiaries against
fluctuations in currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees and their
respective successors.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness under
the Credit Agreements and (ii) any other Senior Indebtedness which (a) at the
time of the determination exceeds $25,000,000 in aggregate principal amount and
(b) is specifically designated in the instrument evidencing such Senior
Indebtedness as "Designated Senior Indebtedness" by the Company.
"Event of Default" has the meaning set forth under Section 6.01 herein.
"Excess Proceeds" shall have the meaning set forth in Section 4.12.
<PAGE> 18
10
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer by the Company to the Holders of the
Initial Securities to exchange all of the Initial Securities for Exchange
Securities, as provided for in the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange Offer
Registration Statement as defined in the Registration Rights Agreement.
"Exchange Securities" has the meaning stated in the second paragraph of
this Indenture and refers to any Exchange Securities containing terms
substantially identical to the Initial Securities (except that (i) such
Exchange Securities shall not contain terms with respect to transfer
restrictions and shall be registered under the Securities Act, and (ii) certain
provisions relating to an increase in the stated rate of interest thereon shall
be eliminated) that are issued and exchanged for the Initial Securities in
accordance with the Exchange Offer, as provided for in the Registration Rights
Agreement and this Indenture.
"Fair Market Value" means, with respect to any assets the price, as
determined by the Board of Directors of the Company, acting in good faith,
which could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of which is under
pressure or compulsion to complete the transaction; provided, however, that
with respect to any transaction which involves an asset or assets in excess of
$5,000,000, such determination shall be evidenced by a certificate of an
officer of the Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America, which are applicable from time to
time and are consistently applied.
"Global Securities" shall have the meaning set forth in Section 2.01.
"Guarantee" shall mean each guarantee of the Securities by each Guarantor
created pursuant to Article Twelve.
"guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance)
<PAGE> 19
11
of all or any part of such obligation, including, without limiting the
foregoing, the payment of amounts drawn down by letters of credit.
"Guarantor" means (i) each of Guilford (Delaware), Inc., Guilford of
Maine, Inc., Interface Asia-Pacific, Inc., Interface Europe, Inc., Interface
Flooring Systems, Inc., Interface Research Corporation, Pandel, Inc., Rockland
React-Rite, Inc., Bentley Mills, Inc., Prince Street Technologies, Ltd. and
each other Material U.S. Subsidiary and (ii) each person who delivers a
Guarantee pursuant to the covenant described in Section 4.16 and shall include
any successor replacing it pursuant to this Indenture, and thereafter means
such successor.
"Guarantor Senior Indebtedness" means the principal of, premium, if any,
and interest on any Indebtedness of a Guarantor, whether outstanding on the
Issue Date or thereafter created, incurred or assumed, and whether at any time
owing, actually or contingently, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Guarantees of such Guarantor. Without
limiting the generality of the foregoing, "Guarantor Senior Indebtedness" shall
also include the principal of, premium, if any, and interest (including
interest accruing after the filing of a petition initiating any proceeding
under any state, federal or foreign bankruptcy or insolvency laws, whether or
not allowable as a claim in such proceeding) and shall also include
reimbursement payments, fees, expenses, indemnities, gross-up payments, and
other obligations of every nature from time to time owing, actually or
contingently by the Guarantor in respect of any such amounts owing by the
Company or any of its Subsidiaries under the Credit Agreements, the Receivables
Purchase Agreement, the Bank Receivables Agreement, the Guilford Equipment
Lease, Interest Rate Protection Agreements, Currency Agreements or other
extensions of credit to the Company or any of its Subsidiaries from banks or
other lending institutions. Notwithstanding the foregoing, "Guarantor Senior
Indebtedness" shall not include (a) Indebtedness evidenced by the Guarantee of
such Guarantor, (b) Indebtedness that is expressly subordinate or junior in
right of payment to any Indebtedness of such Guarantor, (c) Indebtedness which,
when incurred and without respect to any election under Section 1111(b) of
Title 11, United States Code, is without recourse to such Guarantor, (d)
Indebtedness which is represented by Redeemable Capital Stock, (e) Indebtedness
for goods, materials or services purchased in the ordinary course of business
or Indebtedness consisting of trade payables or other current liabilities (other
than Indebtedness in respect of any services rendered by or purchased from, or
current liabilities owing to, banks or financial institutions, or the current
portion of any long-term Indebtedness which would constitute Guarantor Senior
Indebtedness but for the operation of this clause (e)), (f) Indebtedness of or
amounts owed by such Guarantor for compensation to employees or for services
rendered to such Guarantor, (g) any liability for foreign, federal, state, local
or other taxes owed or owing by such Guarantor, (h) Indebtedness of such
Guarantor to a Subsidiary of such Guarantor or any other Affiliate of such
Guarantor (other
<PAGE> 20
12
than the Company) or any of such Affiliate's Subsidiaries, (i) Indebtedness
evidenced by any guarantee of any Subordinated Indebtedness, (j) that portion of
any Indebtedness which, at the time of the incurrence, is incurred by such
Guarantor in violation of this Indenture and (k) amounts owing under leases
(other than Capitalized Lease Obligations and the Guilford Equipment Lease).
"Guilford Equipment Lease" means the Master Equipment Lease Agreement
dated as of June 30, 1995, between Fleet Credit Corporation and Guilford of
Maine, Inc., relating to the leasing of various textile manufacturing equipment
in aggregate amount (acquisition costs) of not more than $19,000,000, as such
agreement, in whole or in part, may from time to time be amended, renewed,
extended, substituted, refinanced, restructured, replaced, supplemented or
otherwise modified, whether with the same or any other person(s) as lessor(s)
or lender(s) (including, without limitation, any successive renewals,
extensions, substitutions, refinancings, restructurings, replacements,
supplements or other modifications of the foregoing).
"Holder" or "Securityholder" means the person in whose name a Security is
registered on the Registrar's books.
"Indebtedness" means, with respect to any person, without duplication, (a)
all liabilities of such person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities incurred in the ordinary course of business and which are
not overdue by more than 90 days, but including, without limitation, all
obligations, contingent or otherwise, of such person in connection with any
letters of credit, banker's acceptance or other similar credit transaction, (b)
all obligations of such person evidenced by bonds, notes, debentures or other
similar instruments, (c) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such person (even if the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), but excluding trade accounts payable arising in the
ordinary course of business, (d) all obligations of such person arising under
Capitalized Lease Obligations (including those arising under the Guilford
Equipment Lease) of such person, (e) all Indebtedness referred to in the
preceding clauses of other persons and all dividends of other persons, the
payment of which is secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien upon
property (including, without limitation, accounts and contract rights) owned by
such person, even though such person has not assumed or become liable for the
payment of such Indebtedness (the amount of such obligation being deemed to be
the lesser of the value of such property or asset or the amount of the
obligation so secured), (f) all guarantees of Indebtedness referred to in this
definition by such person, (g) all Redeemable Capital Stock of such person
valued at the greater of its voluntary or involuntary maximum fixed repurchase
price plus accrued dividends, (h) all obligations under or in respect of
Currency
<PAGE> 21
13
Agreements and Interest Rate Protection Obligations of such person, and (i) any
amendment, supplement, modification, deferral, renewal, extension or refunding
of any liability of the types referred to in clauses (a) through (h) above. For
purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital
Stock which does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Redeemable Capital Stock as if such Redeemable
Capital Stock were purchased on any date on which Indebtedness shall be required
to be determined pursuant to this Indenture, and if such price is based upon, or
measured by, the fair market value of such Redeemable Capital Stock, such fair
market value shall be determined in good faith by the board of directors of the
issuer of such Redeemable Capital Stock.
"Indenture" means this Indenture, as amended, modified or supplemented
from time to time.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified
to perform the task for which it is to be engaged.
"Initial Purchasers" means Smith Barney, Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, The Robinson-Humphrey Company, Inc., Wheat, First
Securities, Inc., and First Chicago Capital Markets, Inc.
"Initial Securities" has the meaning stated in the second paragraph of
this Indenture.
"interest" means, with respect to any Security, the amount of all interest
accruing on such Security, including all interest accruing subsequent to the
occurrence of any events specified in Sections 6.01(f) and (g) or which would
have accrued but for any such event, whether or not such claims are allowable
under applicable law.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities, as set forth therein.
"Interest Rate Protection Agreement" means, with respect to the Company or
any of its Subsidiaries, any arrangement with any other person whereby,
directly or indirectly, such person is entitled to receive from time to time
periodic payments calculated by applying either a floating or a fixed rate of
interest on a stated notional amount in exchange for periodic payments made by
such person calculated by applying a fixed or a floating rate of interest on
the same notional amount and shall include without limitation, interest rate
swaps, caps, floors, collars and similar agreements.
<PAGE> 22
14
"Interest Rate Protection Obligations" means the obligations of any person
pursuant to an Interest Rate Protection Agreement.
"Investment" means, with respect to any person, any direct or indirect
loan or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, any other person. In addition, the
Fair Market Value of the assets of any Subsidiary of the Company at the time
that such Subsidiary is designated as an Unrestricted Subsidiary shall be
deemed to be an Investment made by the Company in such Unrestricted Subsidiary
at such time. "Investments" shall exclude extensions of trade credit by the
Company and its Subsidiaries in the ordinary course of business in accordance
with normal trade practices of the Company or such Subsidiary, as the case may
be. "Investments" do not include payments made as the purchase consideration
in an Asset Acquisition.
"Issue Date" means November 21, 1995.
"legal defeasance" shall have the meaning set forth in Section 8.02.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or preference
or priority or other encumbrance upon or with respect to any property of any
kind. A person shall be deemed to own subject to a Lien any property which
such person has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement.
"Material Subsidiary" means each Subsidiary, now existing or hereinafter
established or acquired, that has or acquires total assets in excess of
$10,000,000, or that holds any fixed assets material to the operations or
business of another Material Subsidiary.
"Material U.S. Subsidiary" means each Material Subsidiary that is
incorporated in the United States or any State thereof.
"Maturity Date" means, with respect to any Security, the date on which any
principal of such Security becomes due and payable as therein or herein
provided, whether at the Stated Maturity with respect to such principal or by
declaration of acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
<PAGE> 23
15
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any Subsidiary of the Company) net of (i)
brokerage commissions and other fees and expenses (including, without
limitation, fees and expenses of legal counsel and investment bankers) related
to such Asset Sale, (ii) provisions for all taxes payable as a result of such
Asset Sale, (iii) amounts required to be paid to any person (other than the
Company or any Subsidiary of the Company) owning a beneficial interest in the
assets subject to the Asset Sale and (iv) appropriate amounts to be provided by
the Company or any Subsidiary of the Company, as the case may be, as a reserve
required in accordance with GAAP against any liabilities associated with such
Asset Sale and retained by the Company or any Subsidiary of the Company, as the
case may be, after such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as reflected in an Officers' Certificate delivered to the
Trustee.
"Non-payment Default" shall have the meaning set forth in Section
10.03(b).
"Non-U.S. Person" means a Person that is not a "U.S. person", as defined
in Regulation S.
"Officer" means the Chairman of the Board, the President, any Executive
Vice President, any Senior Vice President, any Vice President, the Chief
Financial Officer, the Treasurer, the Secretary or the Controller of the
Company or a Guarantor, as the case may be.
"Officers' Certificate" means a certificate signed by two Officers or by
an Officer and an Assistant Treasurer or Assistant Secretary of the Company or
a Guarantor, as the case may be, and delivered to the Trustee.
"Offshore Global Security" shall have the meaning set forth in Section
2.01.
"Offshore Physical Securities" shall have the meaning set forth in Section
2.01.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company.
<PAGE> 24
16
"Pari Passu Indebtedness" means Indebtedness of the Company or any
Guarantor which ranks pari passu in right of payment with the Securities or the
Guarantee of such Guarantor, as the case may be.
"Paying Agent" has the meaning set forth in Section 2.04 except that, for
the purposes of Section 4.11 and Section 4.12 and Articles Three and Eight, the
Paying Agent shall not be the Company or a Subsidiary of the Company or any of
their respective Affiliates.
"Payment Blockage Period" shall have the meaning set forth in Section
10.03.
"Payment Default" shall have the meaning set forth in Section 10.03(a).
"Permitted Holder" means (i) for so long as Ray C. Anderson shall be
living and is performing the duties of chairman and chief executive officer of
the Company, Ray C. Anderson and each other party to the Class B Shareholders'
Agreement, David Milton, Daniel T. Hendrix, Charles R. Eitel, Brian L. DeMoura,
and David W. Porter, and (ii) at all times thereafter, the individuals listed
on Schedule 10.11 to the Amended and Restated Credit Agreement dated June 30,
1995; provided that in the case of each individual referred to in the preceding
clauses (i) and (ii), for the purposes of this definition the reference to such
individual shall be deemed to include the members of such individual's
immediate family, such individual's estate, and any trusts established by such
individual (whether inter vivos or testamentary) for the benefit of members of
such individual's immediate family.
"Permitted Indebtedness" means the following Indebtedness (each of which
shall be given independent effect):
(a) Indebtedness of the Company evidenced by the Securities and
Indebtedness of any Guarantor evidenced by its Guarantee;
(b) Indebtedness of the Company and its Subsidiaries outstanding on
the Issue Date;
(c) Indebtedness of the Company and its Subsidiaries in respect of
the Credit Agreements in an aggregate principal amount at any one time
outstanding not to exceed $300,000,000;
(d) (i) Interest Rate Protection Obligations of the Company covering
Indebtedness of the Company or a Subsidiary of the Company and (ii)
Interest Rate Protection Obligations of any Subsidiary of the Company
covering Indebtedness of such Subsidiary; provided, however, that, in the
case of either clause (i) or (ii), (x) any Indebtedness to which any such
Interest Rate Protection Obligations relate
<PAGE> 25
17
bears interest at fluctuating interest rates and is otherwise permitted to
be incurred under the provisions of Section 4.08 and (y) the notional
principal amount of any such Interest Rate Protection Obligations does not
exceed the principal amount of the Indebtedness to which such Interest
Rate Protection Obligations relate;
(e) Indebtedness of a Wholly Owned Subsidiary owed to and held by
the Company or another Wholly Owned Subsidiary, provided that each loan
or other extension of credit (i) made by a Guarantor to another
Subsidiary that is not a Guarantor shall not be subordinated to other
obligations of such Subsidiary and (ii) made to a Guarantor by another
Subsidiary that is not a Guarantor shall be made on a subordinated basis,
except that (i) any transfer (which shall not include a pledge or
assignment as collateral to or for the benefit of any holders of Senior
Indebtedness) of such Indebtedness by the Company or a Wholly Owned
Subsidiary (other than to the Company or to a Wholly Owned Subsidiary)
and (ii) the sale, transfer or other disposition by the Company or any
Subsidiary of the Company of Capital Stock of a Wholly Owned Subsidiary
which is owed Indebtedness of another Wholly Owned Subsidiary such that
it ceases to be a Wholly Owned Subsidiary of the Company shall, in each
case, be an incurrence of Indebtedness by such Subsidiary subject to the
other provisions of Section 4.08;
(f) Indebtedness of the Company owed to and held by a Wholly Owned
Subsidiary of the Company which is unsecured and subordinated in right of
payment to the payment and performance of the Company's obligations under
this Indenture and the Securities except that (i) any transfer (which
shall not include a pledge or assignment as collateral to or for the
benefit of any holders of Senior Indebtedness) of such Indebtedness by a
Wholly Owned Subsidiary of the Company (other than to another Wholly
Owned Subsidiary of the Company) and (ii) the sale, transfer or other
disposition by the Company or any Subsidiary of the Company of Capital
Stock of a Wholly Owned Subsidiary which holds Indebtedness of the
Company such that it ceases to be a Wholly Owned Subsidiary shall, in
each case, be an incurrence of Indebtedness by the Company, subject to
the other provisions of Section 4.08;
(g) Indebtedness in respect of Currency Agreements; provided that in
the case of Currency Agreements which relate to Indebtedness, such
Currency Agreements do not increase the Indebtedness of the Company and
its Subsidiaries outstanding other than as a result of fluctuations in
foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(h) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of
<PAGE> 26
18
business; provided, however, that such Indebtedness is extinguished within
five Business Days of incurrence;
(i) Indebtedness of the Company or any of its Subsidiaries evidenced
by guarantees of any Permitted Indebtedness subject, in the case of any
Subsidiary, to compliance with the requirements set forth in Section
4.16;
(j) Indebtedness of the Company or any of its Subsidiaries
represented by letters of credit for the account of the Company or such
Subsidiary, as the case may be, in order to provide security for workers'
compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of
business;
(k) Indebtedness incurred with respect to (i) letters of credit
issued for the account of the Company or any Subsidiary of the Company
pursuant to the Credit Agreements, and (ii) unsecured letters of credit
in addition to those described in (j) above, issued for the account of
the Company or any Subsidiary of the Company in the ordinary course of
business in aggregate outstanding stated amounts not to exceed
$5,000,000;
(l) Indebtedness, if any, owing by the Company or any Subsidiary
under receivables sales agreements in connection with sales of
receivables of the Company or any Subsidiary pursuant to the Receivables
Purchase Agreement or the Bank Receivables Agreement;
(m) Indebtedness, if any, arising under the Guilford Equipment
Lease;
(n) Indebtedness of the Company or any Subsidiary of the Company in
addition to that described in clauses (a) through (m) above, in an
aggregate principal amount outstanding at any time not exceeding
$30,000,000; and
(o) (i) Indebtedness of the Company the proceeds of which are used
to refinance (whether by amendment, renewal, extension, substitution,
refinancing, refunding or replacement, whether with the same or any other
person(s) as lender(s), including successive financings thereof)
Indebtedness of the Company or any of its Subsidiaries and (ii)
Indebtedness of any Subsidiary of the Company the proceeds of which are
used solely to refinance (whether by amendment, renewal, extension,
substitution, refinancing, refunding or replacement, whether with the
same or any other person(s) as lender(s), including successive financings
thereof) Indebtedness of such Subsidiary, in each case to the extent such
Indebtedness is described in clause (a) or (b) of this definition (other
than the Indebtedness refinanced, redeemed or retired on the Issue Date)
or is originally incurred pursuant to the proviso in Section
<PAGE> 27
19
4.08; provided, however, that (x) the principal amount of Indebtedness
incurred pursuant to this clause (o) (or, if such Indebtedness provides
for an amount less than the principal amount thereof to be due and payable
upon a declaration of acceleration of the maturity thereof, the original
issue price of such Indebtedness) shall not exceed the sum of the
principal amount of Indebtedness so refinanced (except where the amount of
any excess is permitted pursuant to another clause of this definition),
plus the amount of any premium or other amount required to be paid in
connection with such refinancing pursuant to the terms of such
Indebtedness or the amount of any premium or other amount reasonably
determined by the Board of Directors of the Company as necessary to
accomplish such refinancing by means of a tender offer or privately
negotiated purchase, plus the amount of expenses in connection therewith,
and (y) in the case of Indebtedness incurred by the Company pursuant to
this clause (o) to refinance Subordinated Indebtedness, such Indebtedness
(A) has no scheduled principal payment prior to the 91st day after the
final maturity date of the Indebtedness refinanced, (B) has an Average
Life to Stated Maturity greater than the remaining Average Life to Stated
Maturity of the Securities and (C) is subordinated to the Securities in
the same manner and to the same extent that the Subordinated Indebtedness
being refinanced is subordinated to the Securities and (z) in the case of
Indebtedness incurred by the Company pursuant to this clause (o) to
refinance Pari Passu Indebtedness, such Indebtedness (A) has no scheduled
principal payment prior to the 91st day after the final maturity date of
the Indebtedness refinanced, (B) has an Average Life to Stated Maturity
greater than the remaining Average Life to Stated Maturity of the
Securities and (C) constitutes Pari Passu Indebtedness or Subordinated
Indebtedness.
"Permitted Investments" means any of the following: (i) Investments
in any Subsidiary of the Company (including any person that pursuant to such
Investment becomes a Subsidiary of the Company) and any person that is merged
or consolidated with or into, or transfers or conveys all or substantially all
of its assets to, the Company or any Subsidiary of the Company at the time such
Investment is made; (ii) Investments in Cash Equivalents; (iii) Investments in
deposits with respect to leases or utilities provided to third parties in the
ordinary course of business; (iv) Investments in the Securities; (v)
Investments in Currency Agreements on commercially reasonable terms entered
into by the Company or any of its Subsidiaries in the ordinary course of
business in connection with the operations of the business of the Company or
its Subsidiaries to hedge against fluctuations in foreign exchange rates; (vi)
loans or advances to officers, employees or consultants of the Company and its
Subsidiaries in the ordinary course of business for bona fide business purposes
of the Company and its Subsidiaries (including travel and moving expenses) not
in excess of $1,000,000 in the aggregate at any one time outstanding; (vii)
Investments in evidences of Indebtedness, securities or other property received
from another person by the Company or any of its Subsidiaries in connection
with any bankruptcy proceeding or by reason of a composition or readjustment of
debt or a reorganization of such person or as a result of
<PAGE> 28
20
foreclosure, perfection or enforcement of any Lien in exchange for evidences of
Indebtedness, securities or other property of such person held by the Company or
any of its Subsidiaries, or for other liabilities or obligations of such other
person to the Company or any of its Subsidiaries that were created, in
accordance with the terms of the Indenture; (viii) Investments in Interest Rate
Protection Agreements on commercially reasonable terms entered into by the
Company or any of its Subsidiaries in the ordinary course of business in
connection with the operations of the business of the Company or its
Subsidiaries to hedge against fluctuations in interest rates; or (ix)
Investments, in addition to those described in clauses (i) through (viii) above,
in an aggregate amount at any time outstanding not to exceed 15% of the
Company's Consolidated Net Worth.
"Permitted Junior Securities" shall have the meaning set forth in Section
10.02.
"Permitted Liens" means the following types of Liens:
(a) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or any of its Subsidiaries shall
have set aside on its books such reserves as may be required pursuant to
GAAP;
(b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other
Liens imposed by law incurred in the ordinary course of business for sums
not yet delinquent or being contested in good faith, if such reserve or
other appropriate provision, if any, as shall be required by GAAP shall
have been made in respect thereof;
(c) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money);
(d) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings
which may have been duly initiated for the review of such judgment shall
not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired;
<PAGE> 29
21
(e) Easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in
any material respect with the ordinary conduct of the business of the
Company of any of its Subsidiaries;
(f) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease;
(g) purchase money Liens to finance the acquisition or construction
of property or assets of the Company or any Subsidiary of the Company
acquired or constructed in the ordinary course of business; provided,
however, that (i) the related purchase money Indebtedness shall not be
secured by any property or assets of the Company or any Subsidiary of the
Company other than the property and assets so acquired or constructed and
(ii) the Lien securing such Indebtedness either (x) exists at the time of
such acquisition or construction or (y) shall be created within 90 days
of such acquisition or construction;
(h) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(i) Liens on any property securing the obligations of the Company or
any Subsidiaries in respect of letters of credit issued by the lenders
under the Credit Agreements and as permitted under the Credit Agreements
in support of industrial development revenue bonds;
(j) Liens, if any, that may be deemed to have been granted in
connection with accounts receivable or interests in accounts receivable
of the Company or any Subsidiary as a result of the assignment thereof
pursuant to the Receivables Purchase Agreement or the Bank Receivables
Agreement;
(k) Liens, if any, arising under the Guilford Equipment Lease; and
(l) Liens, in addition to those described in clauses (a) through (k)
above, securing Indebtedness in an amount not to exceed 10% of the
Consolidated Tangible Assets of the Company.
"person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust, charitable
foundation, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Physical Securities" shall have the meaning set forth in Section 2.01.
<PAGE> 30
22
"Predecessor Security" means, with respect to any particular Security,
every previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 2.07 hereof
in exchange for a mutilated Security or in lieu of a lost, destroyed or stolen
Security shall be deemed to evidence the same debt as the mutilated, lost,
destroyed or stolen Security.
"Preferred Stock" means, with respect to any person, any and all shares,
interests, participations or other equivalents (however designated) of such
person's preferred or preference stock whether now outstanding or issued after
the date of this Indenture, and includes, without limitation, all classes and
series of preferred or preference stock.
"principal" means, with respect to any debt security, the principal of the
security plus, when appropriate, the premium, if any, on the security and any
interest on overdue principal.
"Private Placement Legend" shall have the meaning set forth in Section
2.02.
"QIB" means a "Qualified Institutional Buyer" under Rule 144A.
"Receivables Purchase Agreement" means the Receivables Purchase Agreement
dated as of July 31, 1995 (the "1995 Receivables Purchase Agreement") among the
Company, Interface Securitization Corporation, Special Purpose Accounts
Receivables Cooperative Corporation, and Canadian Imperial Bank of Commerce as
servicing agent, as such agreement, in whole or in part, may from time to time
be amended, renewed, extended, substituted, refinanced, restructured, replaced,
supplemented or otherwise modified, whether with the same or any other
person(s) as purchaser(s), lender(s) or agent(s) (including, without
limitation, any successive renewals, extensions, substitutions, refinancings,
restructurings, replacements, supplements or other modifications of the
foregoing) provided that the sales of receivables pursuant to any such
Receivables Purchase Agreement are on non-recourse terms not materially less
favorable to the Company and its Subsidiaries as provided for in the 1995
Receivables Purchase Agreement and that the aggregate amount of sales under such
Receivables Sales Agreement and the Bank Receivables Agreement at any one time
outstanding shall not exceed a total of $100,000,000.
"Redeemable Capital Stock" means any shares of any class or series of
Capital Stock that, either by the terms thereof, by the terms of any security
into which it is convertible or exchangeable or by contract or otherwise, is or
upon the happening of an event or passage of time would be, required to be
redeemed prior to the Stated Maturity with respect to the principal of any
Security or is redeemable at the option of the holder thereof at any time prior
to any such Stated Maturity, or is convertible into or exchangeable for debt
securities at any time prior to any such Stated Maturity.
<PAGE> 31
23
"Redemption Date" means, with respect to any Security to be redeemed, the
date fixed by the Company for such redemption pursuant to this Indenture and
the Securities.
"Redemption Price" means, with respect to any Security to be redeemed, the
price fixed for such redemption pursuant to the terms of this Indenture and the
Securities.
"Registrar" has the meaning set forth in Section 2.04.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of November 21, 1995, among the Company, the Guarantors and the
Initial Purchasers.
"Registration Statement" means the Registration Statement as defined in
the Registration Rights Agreement.
"Regulation S" means Regulation S under the Securities Act.
"Restricted Payment" has the meaning set forth in Section 4.09.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the Securities and Exchange Commission, as from time to time
constituted, or if at any time after the execution of the Indenture such
Commission is not existing and performing the applicable duties now assigned to
it, then the body or bodies performing such duties at such time.
"Securities" means the securities that are issued under this Indenture, as
amended or supplemented from time to time pursuant to this Indenture.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Senior Indebtedness" means the principal of, premium, if any, and
interest on any Indebtedness of the Company, whether outstanding on the Issue
Date or thereafter created, incurred or assumed, and whether at any time owing,
actually or contingently, unless, in the case of any particular Indebtedness,
the instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness shall not be senior in
right of payment to the Securities. Without limiting the generality of the
foregoing, "Senior Indebtedness" shall include the principal of, premium, if
any, and interest (including interest accruing after the filing of a petition
initiating any proceeding under any state, federal or foreign bankruptcy or
insolvency laws, whether or not allowable as a claim in such proceeding) and
shall also include reimbursement payments, fees,
<PAGE> 32
24
expenses, indemnities, gross-up payments, and other obligations of every nature
from time to time owing, actually or contingently, by the Company in respect of
any such amounts owing by the Company or any of its Subsidiaries under the
Credit Agreements, the Receivables Purchase Agreement, the Bank Receivables
Agreement, the Guilford Equipment Lease, Interest Rate Protection Agreements,
Currency Agreements or other extensions of credit to the Company or any of its
Subsidiaries from banks or other lending institutions. Notwithstanding the
foregoing, "Senior Indebtedness" shall not include (a) Indebtedness evidenced by
the Securities, (b) Indebtedness that is expressly subordinate or junior in
right of payment to any Indebtedness of the Company, (c) Indebtedness which,
when incurred and without respect to any election under Section 1111(b) of Title
11, United States Code, is without recourse to the Company, (d) Indebtedness
which is represented by Redeemable Capital Stock, (e) Indebtedness for goods,
materials or services purchased in the ordinary course of business or
Indebtedness consisting of trade payables or other current liabilities (other
than Indebtedness in respect of any services rendered by or purchased from, or
current liabilities owing to, banks or financial institutions or the current
portion of any long-term Indebtedness which would constitute Senior Indebtedness
but for the operation of this clause (e)), (f) Indebtedness of or amounts owed
by the Company for compensation to employees or for services rendered to the
Company, (g) any liability for federal, state, local or other taxes owed or
owing by the Company, (h) Indebtedness of the Company to a Subsidiary of the
Company or any other Affiliate of the Company or any of such Affiliate's
Subsidiaries, (i) that portion of any Indebtedness which, at the time of the
incurrence, is incurred by the Company in violation of the Indenture and (j)
amounts owing under leases (other than Capitalized Lease Obligations and the
Guilford Equipment Lease).
"Senior Representative" means (i) with respect to the Credit Agreements,
SunTrust Bank, Atlanta or any successor agent under the terms of the Credit
Agreements and (ii) with respect to any other Designated Senior Indebtedness,
any other representatives designated in writing to the Trustee of the holders of
any other class or issue of Designated Senior Indebtedness.
"Shelf Registration Statement" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"Significant Subsidiary" shall have the same meaning as in Rule 1.02(v) of
Regulation S-X under the Securities Act.
"S&P" means Standard & Poor's Corporation, and its successors.
"Stated Maturity" means, when used with respect to any Security or any
installment of interest thereon, the date specified in such Security as the
fixed date on which the principal of such Security or such installment of
interest is due and payable, and when used with respect to any other
Indebtedness, means the date specified in the instrument
<PAGE> 33
25
governing such Indebtedness as the fixed date on which the principal of such
Indebtedness, or any installment of interest thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Guarantor which is expressly subordinated in right of payment to the Securities
or the Guarantee of such Guarantor, as the case may be.
"Subsidiary" means, with respect to any person, (i) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such person, by one or more Subsidiaries of such person or by such person and
one or more Subsidiaries thereof and (ii) any other person (other than a
corporation), including, without limitation, a joint venture, in which such
person, one or more Subsidiaries thereof or such person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, has at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other person performing
similar functions). For purposes of this definition, any directors'
qualifying shares or investments by foreign nationals mandated by applicable
law shall be disregarded in determining the ownership of a Subsidiary.
Notwithstanding the foregoing, an Unrestricted Subsidiary shall not be deemed a
Subsidiary of the Company under this Indenture, other than for purposes of the
definition of an Unrestricted Subsidiary, unless the Company shall have
designated an Unrestricted Subsidiary as a "Subsidiary" by written notice to
the Trustee under this Indenture, accompanied by an Officers' Certificate as to
compliance with the Indenture; provided, however, that the Company shall not be
permitted to designate any Unrestricted Subsidiary as a Subsidiary unless,
after giving pro forma effect to such designation, (i) the Company would be
permitted to incur $1.00 of additional Indebtedness under the proviso in
Section 4.08 (assuming a market rate of interest with respect to such
Indebtedness) and (ii) all Indebtedness and Liens of such Unrestricted
Subsidiary would be permitted to be incurred by a Subsidiary of the Company
under this Indenture. A designation of an Unrestricted Subsidiary as a
Subsidiary may not thereafter be rescinded.
"Surviving Entity" shall have the meaning set forth in Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Section Section
77aaa-77bbbb) as in effect on the Issue Date.
"Tangible Assets" means, at any date, the gross book value, as shown by
the accounting books and records of the Company and its Subsidiaries, of all
the property both real and personal of the Company and its Subsidiaries, less
(i) the net book value of all licenses, patents, patent applications,
copyrights, trademarks, trade names, goodwill, noncompete agreements or
organizational expenses and other like intangibles, (ii) unamortized debt
discount expense, (iii) all reserves for depreciation, obsolescence, depletion
and amortization of properties and (iv) all other proper reserves which in
<PAGE> 34
26
accordance with GAAP should be provided in connection with the business
conducted by the Company.
"Trust Officer" means any officer in the Corporate Trust Department of the
Trustee or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above-designated officers and also
means, with respect to a particular corporate trust matter, any other officer
to whom such matter is referred because of his knowledge of and familiarity
with the particular subject.
"Trustee" means the party named as such in this Indenture until a
successor replaces such party (or any previous successor) in accordance with
the provisions of this Indenture, and thereafter means such successor.
"Unrestricted Subsidiary" means a Subsidiary of the Company other than a
Guarantor (i) none of whose properties or assets were owned by the Company or
any of its Subsidiaries prior to the Issue Date, other than any such assets as
are transferred to such Unrestricted Subsidiary in accordance with Section 4.09
hereof, (ii) whose properties and assets, to the extent that they secure
Indebtedness, secure only Non-Recourse Indebtedness and (iii) which has no
Indebtedness other than Non-Recourse Indebtedness. As used above,
"Non-Recourse Indebtedness" means Indebtedness as to which (i) neither the
Company nor any of its Subsidiaries (other than the relevant Unrestricted
Subsidiary or another Unrestricted Subsidiary) (1) provides credit support
(including any undertaking, agreement or instrument which would constitute
Indebtedness), (2) guarantees or is otherwise directly or indirectly liable or
(3) constitutes the lender (in each case, other than pursuant to and in
compliance with Section 4.09) and (ii) no default with respect to such
Indebtedness (including any rights which the holders thereof may have to take
enforcement action against the relevant Unrestricted Subsidiary or its assets)
would permit (upon notice, lapse of time or both) any holder of any other
Indebtedness of the Company or its Subsidiaries (other than Unrestricted
Subsidiaries) to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity.
"U.S. Global Security" shall have the meaning set forth in Section 2.01.
"U.S. Government Obligations" shall have the meaning set forth in Section
8.02.
"U.S. Physical Securities" shall have the meaning set forth in Section
2.01.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any person (irrespective of
<PAGE> 35
27
whether or not, at the time, Capital Stock of any other class or classes shall
have, or might have, voting power by reason of the happening of any
contingency).
"Wholly Owned Subsidiary" means any Subsidiary of the Company of which
100% of the outstanding Capital Stock is owned by the Company or by one or more
Wholly Owned Subsidiaries of the Company or by the Company and one or more
Wholly Owned Subsidiaries of the Company. For purposes of this definition, any
directors' qualifying shares or investments by foreign nationals mandated by
applicable law shall be disregarded in determining the ownership of a
Subsidiary.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act. Upon
the issuance of the Exchange Securities, if any, or the effectiveness of the
Shelf Registration Statement (as defined herein), this Indenture will be
subject to, and shall be governed by, the provisions of the TIA that are
required or deemed to be part of and to govern indentures qualified under the
TIA. Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC;
"indenture securities" means the Securities and any Guarantees;
"indenture security holder" means a Securityholder or Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company, any Guarantor or
any other obligor on the Securities or the Guarantees.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction. For all purposes of this Indenture,
except as otherwise expressly provided or unless the context otherwise
requires:
(a) a term has the meaning assigned to it;
(b) words in the singular include the plural, and words in the
plural include the singular;
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28
(c) "or" is not exclusive;
(d) provisions apply to successive events and transactions;
(e) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(f) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision; and
(g) all references to $ or dollars shall refer to the lawful
currency of the United States of America.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Forms and Dating. The Securities and the Trustee's
certificate of authentication thereon shall be in substantially the form of
Exhibit A hereto, with such appropriate insertions, omissions, substitutions
and other variations as are required or permitted by this Indenture and may
have such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with any applicable
law or with the rules of any securities exchange or as may, consistently
herewith, be determined by the Officers executing such Securities, as evidenced
by their execution thereof. The Securities shall be issuable only in
registered form without coupons and only in denominations of $1,000 and
integral multiples thereof.
The definitive Securities shall be printed, typewritten, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Securities may be listed, all as determined by the officers executing such
Securities, as evidenced by their execution of such Securities. Each Security
shall be dated the date of its authentication.
Initial Securities offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent global Securities
substantially in the form set forth in Exhibit A hereto (the "U.S. Global
Security") deposited with, or on behalf of, the Depositary or with the Trustee,
as custodian for the Depositary, duly executed by the Company and authenticated
by the Trustee as hereinafter provided. The aggregate principal amount of the
U.S. Global Security may from time to time be increased or decreased by
<PAGE> 37
29
adjustments made on the records of the Depositary or its nominee, or of the
Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
Initial Securities offered and sold in offshore transactions in reliance
on Regulation S shall be issued in the form of a single permanent global
Security in registered form substantially in the form set forth in Exhibit A
(the "Offshore Global Security") deposited with the Trustee, as custodian for
the Depositary, duly executed by the Company and authenticated by the Trustee
as hereinafter provided. The aggregate principal amount of the Offshore Global
Securities may from time to time be increased or decreased by adjustments made
in the records of the Depository or its nominee, or of the Trustee, as
custodian for the Depositary or its nominee, as hereinafter provided.
Initial Securities offered and sold other than as described in the
preceding paragraph shall be issued in the form of permanent certificated
Securities in registered form in substantially the form set forth in Exhibit A
hereto (the "U.S. Physical Securities"). Securities issued pursuant to Section
2.09 in exchange for interests in the U.S. Global Security or the Offshore
Global Security shall be in the form of U.S. Physical Securities or in the form
of permanent certificated Securities in registered form substantially in the
form set forth in Exhibit A (the "Offshore Physical Securities"), respectively.
The Offshore Physical Securities and U.S. Physical Securities are
sometimes collectively herein referred to as the "Physical Securities." The
U.S. Global Security and the Offshore Global Security are sometimes referred to
as the "Global Securities."
The terms and provisions contained in the form of the Securities, annexed
hereto as Exhibit A shall constitute, and are hereby expressly made, a part of
this Indenture and, to the extent applicable, the Company and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
SECTION 2.02. Restrictive Legends. Unless and until (i) an Initial
Security is sold under an effective Registration Statement or (ii) an Initial
Security is exchanged for an Exchange Security in connection with an effective
Registration Statement, in each case as provided for in the Registration Rights
Agreement, then (A) the U.S. Global Security and each U.S. Physical Security
shall bear the legend set forth below (the "Private Placement Legend") on the
face thereof and (B) the Offshore Physical Securities and the Offshore Global
Security shall bear the Private Placement Legend on the face thereof until at
least 41 days after the Issue Date and receipt by the Company and the Trustee
of a certificate substantially in the form set forth in Section 2.11(c):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR
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30
(B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT
IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION,
(2) AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE
ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D)
OUTSIDE THE UNITED STATES TO PERSONS OTHER THAN U.S. PERSONS IN OFFSHORE
TRANSACTIONS MEETING THE REQUIREMENTS OF RULE 904 UNDER REGULATION S UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
Each Global Security, whether or not an Initial Security, shall also bear
the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTIONS 2.09 AND 2.10 OF THE INDENTURE.
SECTION 2.03. Execution and Authentication. Two Officers shall execute
the Securities on behalf of the Company by either manual or facsimile
signature. The Company's seal shall be impressed, affixed, imprinted or
reproduced on the Securities.
If an Officer whose signature is on a Security no longer holds that office
at the time the Trustee authenticates the Security or at any time thereafter,
the Security shall be valid nevertheless.
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A Security shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Security. Such
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate Securities for original issue in an
aggregate principal amount not to exceed $125,000,000 upon receipt of an
Officers' Certificate signed by two Officers of the Company directing the
Trustee to authenticate the Securities and certifying that all conditions
precedent to the issuance of the Securities contained herein have been complied
with. The aggregate principal amount of Securities outstanding at any time may
not exceed $125,000,000, except as provided in Section 2.08.
With the prior written approval of the Company, the Trustee may appoint an
authenticating agent acceptable to the Company to authenticate Securities.
Unless limited by the terms of such appointment, an authenticating agent may
authenticate Securities whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. Such authenticating agent shall have the same rights as the Trustee in
any dealings hereunder with the Company or with any of the Company's Affiliates.
SECTION 2.04. Registrar and Paying Agent. The Company shall maintain an
office or agency where Securities may be presented for registration of transfer
or for exchange (the "Registrar") and an office or agency where Securities may
be presented for payment of principal, premium, if any, and interest (the
"Paying Agent"). The Registrar shall keep a register of the Securities and of
their transfer and exchange. The Company may have one or more co-Registrars
and one or more additional paying agents. The term "Paying Agent" includes any
additional paying agent. Except as otherwise expressly provided in this
Indenture, the Company or any Affiliate thereof may act as Paying Agent.
The Company shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture, which shall
incorporate the provisions of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such Registrar or Paying Agent.
The Company shall notify the Trustee of the name and address of any such
Registrar or Paying Agent. If the Company fails to maintain a Registrar,
Paying Agent or agent for service of notices and demands, or fails to give the
foregoing notice, the Trustee shall act as such and shall be entitled to
appropriate compensation in accordance with Section 7.08.
The Company initially appoints the Trustee as Registrar, Paying Agent and
agent for service of notices and demands in connection with the Securities.
SECTION 2.05. Paying Agent to Hold Money in Trust. Each Paying Agent
shall hold in trust for the benefit of Holders or the Trustee all money held by
the Paying
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32
Agent for the payment of principal of, or interest on, the Securities (whether
such money has been distributed to it by the Company or any other obligor on the
Securities), and the Company (or any other obligor on the Securities) and the
Paying Agent shall notify the Trustee of any default by the Company (or any
other obligor on the Securities) in making any such payment. If the Company or
an Affiliate of the Company acts as Paying Agent, it shall segregate the money
and hold it as a separate trust fund. The Company at any time may require a
Paying Agent to distribute all money held by it to the Trustee and account for
any funds disbursed and the Trustee may at any time during the continuance of
any Payment Default with respect to the Securities, upon written request to a
Paying Agent, require such Paying Agent to pay all money held by it to the
Trustee and to account for any funds distributed. Upon doing so, the Paying
Agent (other than an obligor on the Securities or any Guarantees) shall have no
further liability for the money so paid over to the Trustee.
SECTION 2.06. Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to
it of the names and addresses of Holders and shall otherwise comply with TIA
Section 312(a). If the Trustee is not the Registrar, the Company shall
furnish to the Trustee at least ten Business Days before each Interest Payment
Date and at such other times as the Trustee may request in writing a list in
such form and as of such date as the Trustee may reasonably require of the
names and addresses of Holders, which list may be conclusively relied upon by
the Trustee.
SECTION 2.07. Transfer and Exchange. When Securities are presented to
the Registrar or a co-Registrar with a request to register the transfer of such
Securities or to exchange such Securities for an equal principal amount of
Securities of other authorized denominations, the Registrar or co-Registrar
shall register the transfer or make the exchange as requested if its
requirements for such transaction are met; provided, however, that the
Securities surrendered for transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Registrar or co-Registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing. To permit registrations of
transfers and exchanges, the Company shall execute and the Trustee shall
authenticate Securities at the Registrar's or co-Registrar's request. No
service charge shall be made for any transfer, exchange or redemption, but the
Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than any
such transfer taxes or similar governmental charge payable upon exchanges or
transfers pursuant to Section 2.08, 2.14, 3.06, 4.11, 4.12 or 9.05). The
Registrar or co-Registrar shall not be required to register the transfer of or
exchange of any Security (i) during a period beginning at the opening of
business 15 days before the mailing of a notice of redemption of Securities and
ending at the close of business on the day of such mailing and (ii) selected
for redemption in whole or in part pursuant to Article Three, except the
unredeemed portion of any Security being redeemed in part.
<PAGE> 41
33
Any Holder of the Global Security shall, by acceptance of such Global
Security, agree that transfers of beneficial interests in such Global Security
may be effected only through a book-entry system maintained by the Holder of
such Global Security (or its agent), and that ownership of a beneficial
interest in the Security shall be required to be reflected in a book entry.
SECTION 2.08. Replacement Securities. If a mutilated Security is
surrendered to the Trustee or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the Trustee's
requirements are met. If required by the Trustee or the Company, such Holder
must provide an indemnity bond or other indemnity, sufficient in the judgment
of both the Company and the Trustee, to protect the Company, the Trustee or any
Paying Agent or Registrar from any loss which any of them may suffer if a
Security is replaced. The Company may charge such Holder for its reasonable,
out-of-pocket expenses in replacing a Security, including reasonable fees and
expenses of counsel. Every replacement Security is an additional obligation of
the Company.
SECTION 2.09. Book-Entry Provisions for Global Security. (a) The U.S.
Global Security and the Offshore Global Security initially shall (i) be
registered in the name of the Depositary for such Global Security or the
nominee of such Depositary, (ii) be deposited with, or on behalf of, the
Depositary or with the Trustee, as custodian for such Depositary, and (iii)
bear legends as set forth in Section 2.02. Members of, or participants in, the
Depositary ("Agent Members") shall have no rights under this Indenture with
respect to any Global Security held on their behalf by the Depositary, or the
Trustee as its custodian, or under the Global Security, and the Depositary may
be treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of such Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or shall impair, as between the Depositary and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a Holder of any Security.
(b) Transfers of the Global Security shall be limited to transfers of such
Global Security in whole, but not in part, to the Depositary, its successors or
their respective nominees. Interests of beneficial owners in the Global
Security may be transferred in accordance with the rules and procedures of the
Depositary and the provisions of Section 2.10. In addition, U.S. Physical
Securities and Offshore Physical Securities shall be issued to all beneficial
owners in exchange for their beneficial interests in the U.S. Global Security
or the Offshore Global Security, respectively if (i) the Depositary notifies
the Company that it is unwilling or unable to continue as Depositary for the
U.S. Global Security or the Offshore Global Security and a successor depositary
is not appointed by the
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Company within 90 days of such notice or (ii) an Event of Default has occurred
and is continuing and the Registrar has received a request from the Depositary.
(c) In connection with any transfer of a portion of the beneficial
interest in the U.S. Global Security pursuant to Section 2.09(b) to beneficial
owners who are required to hold U.S. Physical Securities, the Registrar shall
reflect on its books and records the date and a decrease in the principal
amount of the U.S. Global Security in an amount equal to the principal amount
of the beneficial interest in the U.S. Global Security to be transferred, and
the Company shall execute, and the Trustee shall authenticate and deliver, one
or more U.S. Physical Securities of like tenor and amount.
(d) In connection with the transfer of the entire U.S. Global Security or
Offshore Global Security to beneficial owners pursuant to Section 2.09(b), the
U.S. Global Security or Offshore Global Security, as the case may be, shall be
deemed to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depositary in exchange for its beneficial interest in
the U.S. Global Security or Offshore Global Security, as the case may be, an
equal aggregate principal amount of U.S. Physical Securities or Offshore
Physical Securities, as the case may be, of authorized denominations.
(e) Any U.S. Physical Security delivered in exchange for an interest in
the Global Security pursuant to subsection (c) or subsection (d) of this
Section shall, except as otherwise provided by paragraph (d) of Section 2.10,
bear the applicable legend regarding transfer restrictions applicable to the
U.S. Physical Securities set forth in Section 2.02.
(f) The Holder of the Global Security may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.
(g) QIBs that are beneficial owners of interests in a Global Security may
receive Physical Securities (which shall bear the Private Placement Legend if
required by Section 2.02) in accordance with the procedures of the Depositary.
In connection with the execution, authentication and delivery of such Physical
Securities, the Registrar shall reflect on its books and records a decrease in
the principal amount of the relevant Global Security equal to the principal
amount of such Physical Securities and the Company shall execute and the
Trustee shall authenticate and deliver one or more Physical Securities having
an equal aggregate principal amount.
SECTION 2.10. Special Transfer Provisions. Unless and until (i) an
Initial Security is sold under an effective Registration Statement, or (ii) an
Initial Security is
<PAGE> 43
35
exchanged for an Exchange Security in connection with the Exchange Offer, in
each case pursuant to the Registration Rights Agreement, the following
provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited Investors. The
following provisions shall apply with respect to the registration of any
proposed transfer of an Initial Security to any institutional "accredited
investor" (as defined in subparagraph (a)(1), (2), (3) or (7) of Rule 501 under
the Securities Act) that is not a QIB (excluding Non-U.S. Persons):
(i) The Registrar shall register the transfer of any Initial
Security, whether or not such Initial Security bears the Private
Placement Legend, if (x) the requested transfer is at least three years
after the original issue date of the Initial Securities or (y) the
proposed transferee has delivered to the Registrar a certificate
substantially in the form set forth in Section 2.11(a); and
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Security, upon receipt by the
Registrar of (x) the certificate and opinion, if any, required by
paragraph (i) and (y) instructions given in accordance with the
Depositary's and the Registrar's procedures therefor, the Registrar shall
reflect on its books and records the date and a decrease in the principal
amount of the U.S. Global Security in an amount equal to the principal
amount of the beneficial interest in the U.S. Global Security to be
transferred, and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more U.S. Physical Securities of like
tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with respect
to the registration of any proposed transfer of a U.S. Physical Security or an
interest in the U.S. Global Security to a QIB (excluding Non-U.S. Persons):
(i) If the Security to be transferred consists of (A) U.S. Physical
Securities, the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has checked the box provided for
on the form of Initial Security stating, or has otherwise advised the
Company and the Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of Security stating, or
has otherwise advised the Company and the Registrar in writing, that it
is purchasing the Security for its own account or an account with respect
to which it exercises sole investment discretion and that it and any such
account is a QIB within the meaning of Rule 144A, and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that
it has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from
registration provided by
<PAGE> 44
36
Rule 144A or (B) an interest in the U.S. Global Security, the transfer of
such interest may be effected only through the book entry system
maintained by the Depositary.
(ii) If the proposed transferor is an Agent Member, and the Initial
Security to be transferred consists of U.S. Physical Securities, upon
receipt by the Registrar of the documents referred to in clause (i) and
instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount at maturity of
the U.S. Global Security in an amount equal to the principal amount at
maturity of the U.S. Physical Securities to be transferred, and the
Trustee shall cancel the Physical Security so transferred.
(c) Transfers to Non-U.S. Persons. The following provisions shall apply
with respect to any registration of transfer of an Initial Security to a
Non-U.S. Person:
(i) The Registrar shall register any proposed transfer to any
Non-U.S. Person if the Initial Security to be transferred is a U.S.
Physical Security or an interest in the U.S. Global Security only upon
receipt of a certificate substantially in the form set forth in Section
2.11(c) from the proposed transferor.
(ii) (A) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Security, upon receipt by the
Registrar of (x) the documents required by paragraph (i) and (y)
instructions in accordance with the Depositary's and the Registrar's
procedures therefor, the Registrar shall reflect on its books and records
the date and a decrease in the principal amount at maturity of the U.S.
Global Security in an amount equal to the principal amount of the
beneficial interest in the U.S. Global Security to be transferred, and
(B) if the proposed transferee is an Agent Member, upon receipt by the
Registrar of instructions given in accordance with the Depositary's and
the Registrar's procedures therefor, the Registrar shall reflect on its
books and records the date and an increase in the principal amount of the
Offshore Global Security in an amount equal to the principal amount at
maturity of the U.S. Physical Securities or the U.S. Global Security, as
the case may be, to be transferred, and the Trustee shall cancel the
Physical Security, if any, so transferred or decrease the amount of the
U.S. Global Security.
(d) Private Placement Legend. Upon the registration of transfer, exchange
or replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the registration of transfer, exchange or replacement of
Securities bearing the Private Placement Legend, the Registrar shall deliver
only Securities that bear the Private Placement Legend unless the condition of
paragraph (a)(i)(x) of this Section 2.10 exist or (ii) there is delivered to
the Registrar an Opinion of Counsel reasonably satisfactory to the Company and
the Trustee to
<PAGE> 45
37
the effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act.
(e) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as
provided in this Indenture.
The Registrar shall retain until such time as no Securities remain
Outstanding copies of all letters, notices and other written communications
received pursuant to Section 2.09 or this Section 2.10. The Company shall have
the right to inspect and make copies of all such letters, notices or other
written communications at any reasonable time upon the giving of reasonable
written notice to the Registrar.
SECTION 2.11. Form of Certificates to Be Delivered.
(a) Form of Certificate to be Delivered in Connection with Transfers to
Non-QIB Institutional Accredited Investors.
Interface, Inc.
2859 Paces Ferry Road
Suite 2000
Atlanta, Georgia 30339
Ladies and Gentlemen:
We are delivering this letter in connection with our proposed purchase of
9 1/2% Senior Subordinated Notes due 2005 (the "Notes") of Interface, Inc., a
Georgia corporation (the "Company"). We hereby confirm that:
(i) we are an institutional "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended (the "Securities Act") (an "Accredited Investor");
(ii) any purchase of Notes by us will be for our own account or for
the account of one or more other Accredited Investors as to which we
exercise sole investment discretion;
(iii) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of
purchasing Notes and we and any accounts for which we are acting are able
to bear the economic risks of and an entire loss of our or their
investment in the Notes;
<PAGE> 46
38
(iv) we are not acquiring Notes with a view to any distribution
thereof in a transaction that would violate the Securities Act or the
securities laws of any state of the United States or any other applicable
jurisdiction; provided that the disposition of our property and the
property of any accounts for which we are acting as fiduciary shall remain
at all times within our and their control; and
(v) we acknowledge that the Notes have not been registered under
the Securities Act and that none of the Notes may be offered or sold
within the United States or to, or for the benefit of, U.S. persons except
as set forth below.
We agree, on our own behalf and on behalf of each account for which we
acquire any Notes, that, for a period of three years after the original
issuance of the Notes, such Notes may be offered, resold, pledged or otherwise
transferred only (i) to the Company or any of its subsidiaries, (ii) inside the
United States to a person whom we reasonably believe to be a qualified
institutional buyer (as defined in Rule 144A under the Securities Act) in
compliance with Rule 144A under the Securities Act, (iii) inside the United
States to a person we reasonably believe to be an Accredited Investor that,
prior to such transfer, furnished to the trustee under the Indenture relating
to the Notes (the "Trustee") a signed letter containing certain representations
and agreements (a form of which can be obtained from the Trustee), (iv) outside
the United States to persons other than U.S. persons in offshore transactions
meeting the requirements of Rule 904 under Regulation S under the Securities
Act, (v) pursuant to the exemption from registration provided by Rule 144 under
the Securities Act (if available), or (vi) pursuant to an effective
registration statement under the Securities Act, and, in each case, in
accordance with any applicable securities laws of any state of the United
States or any other applicable jurisdiction.
We understand that the Trustee will not be required to accept for
registration of transfer any Notes acquired by us, except upon presentation of
evidence satisfactory to the Company and the Trustee that the foregoing
restrictions on transfer have been complied with. We further understand that
the Notes purchased by us will be in the form of definitive physical
certificates and that such certificates will bear a legend reflecting the
substance of this paragraph. We further agree to provide to any person
acquiring any of the Notes from us a notice advising such person that resales
of the Notes are restricted as stated herein and that certificates representing
the Notes will bear a legend to that effect.
We acknowledge that you, the Company, the Trustee and others will rely
upon our acknowledgments, representations and agreements set forth herein, and
we agree to notify you promptly in writing if any of our acknowledgments,
representations or agreements herein cease to be accurate and complete.
<PAGE> 47
39
We represent to you that we have full power to make the foregoing
acknowledgments, representations and agreements on our own behalf and on behalf
of any investor account for which we are acting as a fiduciary or agent.
As used herein, the terms "offshore transaction," "United States" and
"U.S. person" have the respective meanings given to them in Regulation S under
the Securities Act.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
_____________________________
(Name of Purchaser)
By: _________________________
Name:
Title:
Address:
(b) Form of Certificate to Be Delivered in Connection with Transfers
Pursuant to Regulation S.
[date]
First Union National Bank of Georgia
Suite 1100, First Union Plaza
999 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attn: Corporate Trust Department, as Trustee
Re: Interface, Inc. (the "Company") 9 1/2% Senior
Subordinated Notes due 2005 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $________ aggregate principal
amount of the Notes, we confirm that such sale has been effected pursuant to
and in accordance with Regulation S under the United States Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market
<PAGE> 48
40
and neither we nor any person acting on our behalf knows that the
transaction has been pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate
have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:_______________________
Authorized Signature
(c) Form of Certificate to Be Delivered upon Termination of Restricted
Period.
[On or after January 1, 1996]
First Union National Bank of Georgia
Suite 1100, First Union Plaza
999 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attn: Corporate Trust Department, as Trustee
Re: Interface, Inc. (the "Company") 9 1/2% Senior
Subordinated Notes due 2005 (the "Notes")
Ladies and Gentlemen:
This letter relates to $_________________ principal amount of Notes
represented by the Offshore Global Note (the "Note"). Pursuant to Section 201
of the Indenture dated as of November 15, 1995 relating to the Notes (the
"Indenture"), we hereby certify that (1) we are the beneficial owner of such
principal amount of Notes represented by the Note and (2) we are a person
outside the United States to whom the Notes could be transferred in accordance
with Rule 904 of Regulation S promulgated under the Securities Act of 1933, as
amended. Accordingly, you are hereby requested to issue a certificated Note
representing the
<PAGE> 49
41
undersigned's interest in the principal amount of Notes represented by the Note,
all in the manner provided by the Indenture.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate
have the meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By: ______________________________
Authorized Signature
SECTION 2.12. Outstanding Securities. Securities outstanding at any time
are all the Securities that have been authenticated by the Trustee except those
cancelled by it, those delivered to it for cancellation and those described in
this Section as not outstanding. A Security does not cease to be outstanding
because the Company or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.08 (other than a mutilated
Security surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Security is held by
a bona fide purchaser. A mutilated Security ceases to be outstanding upon
surrender of such Security and replacement thereof pursuant to Section 2.08.
If on a Redemption Date or a Maturity Date the Paying Agent (other than
the Company or an Affiliate of the Company) holds cash or U.S. Government
Obligations sufficient to pay all of the principal and interest due on the
Securities payable on that date, and is not prohibited from paying such cash or
U.S. Government Obligations to the Holders of such Securities pursuant to the
terms of this Indenture, then on and after that date such Securities cease to
be outstanding and interest on them shall cease to accrue.
SECTION 2.13. Treasury Securities. In determining whether the Holders of
the required principal amount of Securities have concurred in any direction,
waiver or consent, Securities owned by the Company or any of its Affiliates
shall be disregarded, except that, for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Securities that the Trustee knows or has reason to know are so owned shall
be disregarded.
SECTION 2.14. Temporary Securities. Until definitive Securities are
prepared and ready for delivery, the Company may prepare and the Trustee shall
authenticate temporary Securities. Temporary Securities shall be substantially
in the form of definitive
<PAGE> 50
42
Securities but may have variations that the Company considers appropriate for
temporary Securities. Without unreasonable delay, the Company shall prepare and
the Trustee shall authenticate definitive Securities in exchange for temporary
Securities. Until such exchange, temporary Securities shall be entitled to the
same rights, benefits and privileges as definitive Securities.
SECTION 2.15. Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for transfer,
exchange or payment. The Trustee, or at the direction of the Trustee, the
Registrar or the Paying Agent (other than the Company or an Affiliate of the
Company), and no one else, shall promptly cancel and, at the written direction
of the Company, shall dispose of all Securities surrendered for transfer,
exchange, payment or cancellation. Subject to Section 2.08, the Company may
not issue new Securities to replace Securities that it has paid or delivered to
the Trustee for cancellation. If the Company shall acquire any of the
Securities, such acquisition shall not operate as a redemption or satisfaction
of the Indebtedness represented by such Securities unless and until the same
are surrendered to the Trustee for cancellation pursuant to this Section 2.15.
SECTION 2.16. Defaulted Interest. If the Company defaults on a payment
of interest on the Securities, it shall pay the defaulted interest, plus (to
the extent permitted by law) any interest payable on the defaulted interest, in
accordance with the terms hereof, to the persons who are Holders on a
subsequent special record date, which date shall be at least five Business Days
prior to the payment date. The Company shall fix such special record date and
payment date in a manner satisfactory to the Trustee. At least 15 days before
such special record date, the Company shall mail to each Holder a notice that
states the special record date, the payment date and the amount of defaulted
interest, and interest payable on such defaulted interest, if any, to be paid.
SECTION 2.17. CUSIP Number. The Company in issuing the Securities may
use a "CUSIP" number (if then generally in use), and if so, the Trustee may use
the CUSIP numbers in notices of redemption or exchange as a convenience to
Holders; provided, however, that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Securities, and that reliance may be placed
only on the other identification numbers printed on the Securities. The
Company will promptly notify the Trustee of any change in the CUSIP number.
SECTION 2.18. Deposit of Moneys. On or before each Interest Payment Date
and Maturity Date, the Company shall deposit with the Trustee or Paying Agent
in immediately available funds money sufficient to make cash payments, if any,
due on such Interest Payment Date or Maturity Date, as the case may be, in a
timely manner which
<PAGE> 51
43
permits the Paying Agent to remit payment to the Holders on such Interest
Payment Date or Maturity Date, as the case may be.
ARTICLE THREE
REDEMPTION OF SECURITIES
SECTION 3.01. Notices to the Trustee. If the Company elects to redeem
Securities pursuant to Paragraph 3(a) or 3(b) of the Securities, it shall
notify the Trustee of the Redemption Date and principal amount of Securities to
be redeemed.
The Company shall notify the Trustee by an Officers' Certificate, stating
that such redemption will comply with the provisions hereof and of the
Securities, of any redemption at least 45 days before the Redemption Date.
SECTION 3.02. Selection of Securities to Be Redeemed. If less than all
the Securities are to be redeemed, the particular Securities or portions
thereof to be redeemed shall be selected by the Trustee from the outstanding
Securities not previously called for redemption either (x) pro rata, by lot or
by such other method as the Trustee considers to be fair and appropriate or (y)
in such manner as complies with the requirements of the principal national
securities exchange, if any, on which the Securities being redeemed are listed.
The amounts to be redeemed shall be equal to $1,000 or any integral multiple
thereof.
The Trustee shall promptly notify the Company and the Registrar in writing
of the Securities selected for redemption and, in the case of any Securities
selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to redemption of Securities shall relate, in the case
of any Security redeemed or to be redeemed only in part, to the portion of the
principal amount of such Security which has been or is to be redeemed.
SECTION 3.03. Notice of Redemption. Notice of redemption shall be given
by first-class mail, postage prepaid, mailed not less than 30 nor more than 60
days prior to the Redemption Date, to each Holder of Securities to be redeemed,
at the address of such Holder appearing in the Security register maintained by
the Registrar.
All notices of redemption shall identify the Securities to be redeemed and
shall state:
(a) the Redemption Date;
<PAGE> 52
44
(b) the Redemption Price and the amount of accrued interest, if any,
to be paid;
(c) that, unless the Company defaults in making the redemption
payment, interest on Securities or portions thereof called for redemption
ceases to accrue on and after the Redemption Date, and the only remaining
right of the Holders of such Securities is to receive payment of the
Redemption Price upon surrender to the Paying Agent of the Securities
redeemed;
(d) if any Security is to be redeemed in part, the portion of the
principal amount (equal to $1,000 or any integral multiple thereof) of such
Security to be redeemed and that on and after the Redemption Date, upon
surrender for cancellation of such original Security to the Paying Agent, a
new Security or Securities in the aggregate principal amount equal to the
unredeemed portion thereof will be issued without charge to the Holder;
(d) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price and the name and address of
the Paying Agent;
(e) the CUSIP number, if any, relating to such Securities, but no
representation is made as to the correctness or accuracy of any such CUSIP
numbers; and
(f) the paragraph of the Securities pursuant to which the Securities
are being redeemed.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's written request, by
the Trustee in the name and at the expense of the Company.
SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption
is mailed, Securities called for redemption become due and payable on the
Redemption Date and at the Redemption Price. Upon surrender to the Paying
Agent, such Securities called for redemption shall be paid at the Redemption
Price plus accrued interest to the Redemption Date, but interest installments
whose maturity is on or prior to such Redemption Date will be payable on the
relevant Interest Payment Dates to the Holders of record at the close of
business on the relevant record dates referred to in the Securities.
SECTION 3.05. Deposit of Redemption Price. On or prior to any Redemption
Date, the Company shall deposit with the Paying Agent an amount of money in
same day funds sufficient to pay the Redemption Price of, and accrued interest
on, all the Securities or portions thereof which are to be redeemed on that
date, other than Securities or portions
<PAGE> 53
45
thereof which are to be redeemed on that date, other than Securities or portions
Company to the Trustee for cancellation.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price, interest on the
Securities to be redeemed will cease to accrue on and after the applicable
Redemption Date, whether or not such Securities are presented for payment. If
any Security called for redemption shall not be so paid upon surrender thereof
for redemption, the principal, premium, if any, and, to the extent lawful,
accrued interest thereon shall, until paid, bear interest from the Redemption
Date at the rate provided in the Securities.
SECTION 3.06. Securities Redeemed or Purchased in Part. Upon surrender
to the Paying Agent of a Security which is to be redeemed in part, the Company
shall execute, any Guarantor shall Guarantee and the Trustee shall authenticate
and deliver to the Holder of such Security without service charge, a new
Security or Securities (accompanied by a notation of Guarantee duly endorsed by
any Guarantor), of any authorized denomination as requested by such Holder in
aggregate principal amount equal to, and in exchange for, the unredeemed
portion of the principal of the Security so surrendered that is not redeemed.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities. The Company will pay, or cause to
be paid, the principal of and interest on the Securities on the dates and in
the manner provided in the Securities and this Indenture. An installment of
principal or interest shall be considered paid on the date due if the Trustee
or Paying Agent (other than the Company, a Subsidiary of the Company or any
Affiliate thereof) holds on that date money designated and set aside for and
sufficient to pay the installment in a timely manner and is not prohibited from
paying such money to the Holders of the Securities pursuant to the terms of
this Indenture.
The Company will pay interest on overdue principal at the rate and in the
manner provided in the Securities; it shall pay interest on overdue
installments of interest at the same rate and in the same manner, to the extent
lawful.
SECTION 4.02. Maintenance of Office or Agency. The Company will maintain
an office or agency where Securities may be surrendered for registration of
transfer or exchange or for presentation for payment and where notices and
demands to or upon the
<PAGE> 54
46
Company in respect of the Securities and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the address of the Trustee as set
forth in Section 11.02.
The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations. The Company
will give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or
agency.
The Company hereby initially designates the office of the Trustee located
at the address set forth in Section 11.02 as such office of the Company in
accordance with this Section 4.02.
SECTION 4.03. Corporate Existence. Subject to Article Five, the Company
shall do or cause to be done all things necessary to and will cause each of its
Subsidiaries to, preserve and keep in full force and effect the corporate or
partnership existence and rights (charter and statutory), licenses and/or
franchises of the Company and each of its Subsidiaries; provided, however, that
the Company or any of its Subsidiaries shall not be required to preserve any
such existence, rights, licenses or franchises if the Board of Directors of the
Company shall reasonably determine that (x) the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries taken as a whole and (y) the loss thereof is not materially
adverse to either the Company and its Subsidiaries taken as a whole or to the
ability of the Company to otherwise satisfy its obligations hereunder.
SECTION 4.04. Payment of Taxes and Other Claims. The Company will pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (a) all taxes, assessments and governmental charges levied or
imposed upon the Company or any of its Subsidiaries or upon the income, profits
or property of the Company or any of its Subsidiaries, and (b) all lawful
claims for labor, materials and supplies which, if unpaid, might by law become
a Lien upon the property of the Company or any Subsidiary of the Company;
provided, however, that the Company shall not be required to pay or discharge
or cause to be paid or discharged any such tax, assessment, charge or claim the
amount, applicability or validity of which is being contested in good faith by
appropriate proceedings and for which adequate provision has been made or where
the failure to effect such payment or discharge is not adverse in any material
respect to the Company.
<PAGE> 55
47
SECTION 4.05. Maintenance of Properties; Insurance; Books and Records;
Compliance with Law. (a) The Company shall, and shall cause each of its
Subsidiaries to, cause all properties and assets to be maintained and kept in
good condition, repair and working order (reasonable wear and tear excepted)
and supplied with all necessary equipment, and shall cause to be made all
necessary repairs, renewals, replacements, additions, betterments and
improvements thereto, as shall be reasonably necessary for the proper conduct
of its business; provided, however, that nothing in this Section 4.05(a) shall
prevent the Company or any of its Subsidiaries from discontinuing the operation
and maintenance of any of its properties or assets if such discontinuance is,
in the judgment of the Board of Directors of the Company or such Subsidiary,
desirable in the conduct of its business and if such discontinuance is not
materially adverse to either the Company and its Subsidiaries taken as a whole
or the ability of the Company to otherwise satisfy its obligations hereunder.
(b) The Company shall, and shall cause each of its Subsidiaries to,
maintain with financially sound and reputable insurers such insurance as may be
required by law (other than with respect to any environmental impairment
liability insurance not commercially available) and such other insurance to
such extent and against such hazards and liabilities, as is customarily
maintained by companies similarly situated (which may include self-insurance in
the same form as is customarily maintained by companies similarly situated).
(c) The Company shall, and shall cause each of its Subsidiaries to, keep
proper books of record and account, in which full and correct entries shall be
made of all business and financial transactions of the Company and each
Subsidiary of the Company and reflect on its financial statements adequate
accruals and appropriations to reserves, all in accordance with GAAP
consistently applied to the Company and its Subsidiaries taken as a whole.
(d) The Company shall and shall cause each of its Subsidiaries to comply
with all statutes, laws, ordinances, or government rules and regulations to
which it is subject, non-compliance with which would materially adversely
affect the business, earnings, properties, assets or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole.
SECTION 4.06. Compliance Certificate. (a) The Company will deliver to
the Trustee within 60 days after the end of each of the Company's first three
fiscal quarters and within 120 days after the end of the Company's fiscal year
an Officers' Certificate stating whether or not the signers know of any Default
or Event of Default under this Indenture by the Company or an event which, with
notice or lapse of time or both, would constitute a default by the Company
under any Senior Indebtedness that occurred during such fiscal period. If they
do know of such a Default, Event of Default or default, the certificate shall
<PAGE> 56
48
describe any such Default, Event of Default or default and its status. The
first certificate to be delivered pursuant to this Section 4.06(a) shall be for
the first fiscal quarter of the Company beginning after the Issue Date. The
Company shall also deliver a certificate to the Trustee at least annually from
its principal executive, financial or accounting officer as to his or her
knowledge of the Company's compliance with all conditions and covenants under
this Indenture and the Company's Senior Indebtedness, such compliance to be
determined without regard to any period of grace or requirement of notice
provided herein or therein.
(b) The Company shall deliver to the Trustee within 120 days after the end
of each fiscal year a written statement by the Company's independent certified
public accountants stating (A) that their audit examination has included a
review of the terms of this Indenture, the Securities and the Credit Agreements
as they relate to accounting matters, and (B) whether, in connection with their
audit examination, any Default or Event of Default under this Indenture or an
event which, with notice or lapse of time or both, would constitute a default
under any Senior Indebtedness has come to their attention and, if such a
Default, Event of Default or a default under any Senior Indebtedness has come
to their attention, specifying the nature and period of existence thereof;
provided, however, that, without any restriction as to the scope of the audit
examination, such independent certified public accountants shall not be liable
by reason of any failure to obtain knowledge of any such Default, Event of
Default or a default under any Senior Indebtedness that would not be disclosed
in the course of an audit examination conducted in accordance with GAAP.
(c) The Company will deliver to the Trustee as soon as possible, and in
any event within 30 days after the Company becomes aware or should reasonably
have become aware of the occurrence of any Default, Event of Default or an
event which, with notice or lapse of time or both, would constitute a default
by the Company under any Senior Indebtedness, an Officers' Certificate
specifying such Default, Event of Default or default and what action the
Company is taking or proposes to take with respect thereto.
SECTION 4.07. SEC Reports. The Company shall file with the SEC the
annual reports, quarterly reports and the information, documents and other
reports required to be filed with the SEC pursuant to Sections 13 and 15 of the
Exchange Act, whether or not the Company has a class of securities registered
under the Exchange Act. In accordance with the provisions of TIA Section
314(a), the Company shall file with the Trustee and provide to each Holder,
within 15 days after it files them with the SEC (or if such filing is not
permitted under the Exchange Act, 15 days after the Company would have been
required to make such filing), copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) which the
Company is required to file with the SEC pursuant to Section 13 or 15 of the
Exchange Act. The Company also shall comply with the other provisions of TIA
Section 314(a). In addition, the Company shall cause its annual reports to
stockholders and any quarterly or other financial reports furnished by it to
stockholders
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49
generally to be filed with the Trustee and mailed no later than the date such
materials are mailed or made available to the Company's stockholders, to the
Holders at their addresses as set forth in the register of securities maintained
by the Registrar.
SECTION 4.08. Limitation on Indebtedness. The Company will not, and will
not permit any of its Subsidiaries to, directly or indirectly, create, incur,
issue, assume, guarantee or in any manner become directly or indirectly liable,
contingently or otherwise with respect to, (collectively, to "incur") any
Indebtedness (including, without limitation, any Acquired Indebtedness) other
than Permitted Indebtedness; provided, however, that the Company or any of its
Subsidiaries will be permitted to incur Indebtedness (including, without
limitation, Acquired Indebtedness) if at the time of such incurrence, and after
giving pro forma effect thereto, the Consolidated Fixed Charge Coverage Ratio
of the Company is at least equal to 2.0 to 1.
SECTION 4.09. Limitation on Restricted Payments. The Company will not,
and will not permit any of its Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend or make any other distribution or
payment on or in respect of Capital Stock of the Company or any of its
Subsidiaries or any payment made to the direct or indirect holders (in
their capacities as such) of Capital Stock of the Company or any of its
Subsidiaries (other than (x) dividends or distributions payable solely in
Capital Stock of the Company (other than Redeemable Capital Stock) or in
options, warrants or other rights to purchase Capital Stock of the Company
(other than Redeemable Capital Stock), (y) the declaration or payment of
dividends or other distributions to the extent declared or paid to the
Company or any Subsidiary of the Company and (z) the declaration or payment
of dividends or other distributions by any Subsidiary of the Company to all
holders of Common Stock of such Subsidiary on a pro rata basis),
(b) purchase, redeem, defease or otherwise acquire or retire for value
any Capital Stock of the Company or any of its Subsidiaries (other than (x)
any such Capital Stock owned by a Wholly Owned Subsidiary of the Company and
(y) the Company's Series A Cumulative Convertible Preferred Stock),
(c) make any principal payment on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other
Stated Maturity, any Subordinated Indebtedness or Pari Passu Indebtedness
(other than the Convertible Debentures or any other such Indebtedness owed
by the Company or a Wholly Owned Subsidiary of the Company), or
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50
(d) make any Investment (other than any Permitted Investment) in any
person
(such payments or Investments described in the preceding clauses (a), (b), (c)
and (d) are collectively referred to as "Restricted Payments"), unless, at the
time of and after giving effect to the proposed Restricted Payment (the amount
of any such Restricted Payment, if other than cash, shall be the Fair Market
Value on the date of such Restricted Payment of the asset(s) proposed to be
transferred by the Company or such Subsidiary, as the case may be, pursuant to
such Restricted Payment), (A) no Default or Event of Default shall have
occurred and be continuing, (B) immediately prior to and after giving effect to
such Restricted Payment, the Company would be able to incur $1.00 of additional
Indebtedness pursuant to the proviso in Section 4.08 (assuming a market rate
of interest with respect to such additional Indebtedness) and (C) the aggregate
amount of all Restricted Payments declared or made from and after the Issue
Date would not exceed the sum of (1) 50% of the aggregate Consolidated Net
Income of the Company accrued on a cumulative basis during the period beginning
on the first day of the fiscal quarter of the Company during which the Issue
Date occurs and ending on the last day of the fiscal quarter of the Company
immediately preceding the date of such proposed Restricted Payment, which
period shall be treated as a single accounting period (or, if such aggregate
cumulative Consolidated Net Income of the Company for such period shall be a
deficit, minus 100% of such deficit) plus (2) the aggregate net cash proceeds
and the Fair Market Value of any property other than cash received by the
Company either (x) as capital contributions to the Company after the Issue Date
from any person (other than a Subsidiary of the Company) or (y) from the
issuance or sale of Capital Stock (excluding Redeemable Capital Stock, but
including Capital Stock issued upon the conversion of convertible Indebtedness
(other than the first $50,000,000 of proceeds attributable to the conversion of
the Convertible Debentures) or from the exercise of options, warrants or rights
to purchase Capital Stock (other than Redeemable Capital Stock)) of the Company
to any person (other than to a Subsidiary of the Company) after the Issue Date
plus (3) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment made after the Issue Date (excluding any
Investment described in clause (v) of the following paragraph), an amount equal
to the lesser of the return of capital with respect to such Investment and the
cost of such Investment, in either case, less the cost of the disposition of
such Investment plus (4) $30,000,000. For purposes of the preceding clause
(C)(2), the value of the aggregate net proceeds received by the Company upon the
issuance of Capital Stock upon the conversion of convertible Indebtedness or
upon the exercise of options, warrants or rights will be the net cash proceeds
received upon the issuance of such Indebtedness, options, warrants or rights
plus the incremental cash amount received by the Company upon the conversion or
exercise thereof.
None of the foregoing provisions will prohibit (i) the payment of any
dividend within 60 days after the date of its declaration, if at the date of
declaration such payment would be permitted by the foregoing paragraph; (ii) so
long as no Default or Event of
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51
Default shall have occurred and be continuing, the redemption, repurchase or
other acquisition or retirement of any shares of any class of Capital Stock of
the Company or any Subsidiary of the Company in exchange for, or out of the net
cash proceeds of, a substantially concurrent (x) capital contribution to the
Company from any person (other than a Subsidiary of the Company) or (y) issue
and sale of other shares of Capital Stock (other than Redeemable Capital Stock)
of the Company to any person (other than to a Subsidiary of the Company);
provided, however, that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase or other acquisition or retirement
are excluded from clause (C)(2) of the preceding paragraph; (iii) so long as no
Default or Event of Default shall have occurred and be continuing, any
redemption, repurchase or other acquisition or retirement of Subordinated
Indebtedness by exchange for, or out of the net cash proceeds of, a
substantially concurrent (x) capital contribution to the Company from any person
(other than a Subsidiary of the Company) or (y) issue and sale of (1) Capital
Stock (other than Redeemable Capital Stock ) of the Company to any person (other
than to a Subsidiary of the Company); provided, however, that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase or
other acquisition or retirement are excluded from clause (C)(2) of the preceding
paragraph; or (2) Indebtedness of the Company issued to any person (other than
to a Subsidiary of the Company) so long as such Indebtedness is Subordinated
Indebtedness which (x) has no Stated Maturity earlier than the 91st day after
the final maturity date of the Indebtedness refinanced, (y) has an Average Life
to Stated Maturity equal to or greater than the remaining Average Life to Stated
Maturity of the Indebtedness refinanced and (z) is subordinated to the
Securities in the same manner and at least to the same extent as the
Subordinated Indebtedness so purchased, exchanged, redeemed, acquired or
retired; (iv) so long as no Default or Event of Default shall have occurred and
be continuing, any redemption, repurchase or other acquisition or retirement of
Pari Passu Indebtedness by exchange for, or out of the net cash proceeds of, a
substantially concurrent (x) capital contribution to the Company from any person
(other than a Subsidiary of the Company) or (y) issue and sale of (1) Capital
Stock (other than Redeemable Capital Stock) of the Company to any person (other
than to a Subsidiary of the Company); provided, however, that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase or
other acquisition or retirement is excluded from clause (C)(2) of the preceding
paragraph; or (2) Indebtedness of the Company issued to any person (other than a
Subsidiary of the Company) so long as such Indebtedness is Subordinated
Indebtedness or Pari Passu Indebtedness which (x) has no Stated Maturity earlier
than the 91st day after the final maturity date of the Indebtedness Refinanced
and (y) has an Average Life to Stated Maturity equal to or greater than the
remaining Average Life to Stated Maturity of the Indebtedness Refinanced; (v)
Investments constituting Restricted Payments made as a result of the receipt of
non-cash consideration from any Asset Sale made pursuant to and in compliance
with Section 4.12; and (vi) so long as no Default or Event of Default has
occurred and is continuing, repurchases by the Company of Common Stock of the
Company from employees of the Company or any of its Subsidiaries or their
authorized representatives upon the death, disability or termination of
employment of such employees, in an aggregate
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amount not exceeding $1,000,000 in any calendar year. In computing the amount
of Restricted Payments previously made for purposes of clause (C) of the
preceding paragraph, Restricted Payments made under the preceding clauses (v)
and (vi) shall be included and clauses (i), (ii), (iii) and (iv) shall not be so
included.
SECTION 4.10. Limitation on Liens. The Company will not, and will not
permit any of its Subsidiaries to, create, incur, assume or suffer to exist any
Liens of any kind against or upon any of its property or assets, or any
proceeds therefrom, unless (x) in the case of Liens securing Subordinated
Indebtedness, the Securities are secured by a Lien on such property, assets or
proceeds that is senior in priority to such Liens and (y) in all other cases,
the Securities are equally and ratably secured, except for (a) Liens existing
as of the Issue Date; (b) Liens securing the Securities or any Guarantee; (c)
Liens on assets of the Company and its Subsidiaries securing Indebtedness under
the Credit Agreements (including guarantees by any Subsidiary in respect of
such Indebtedness); (d) Liens on assets of the Company securing Senior
Indebtedness and Liens on assets of a Guarantor securing Guarantor Senior
Indebtedness; (e) Liens in favor of the Company; (f) Liens securing
Indebtedness which is incurred to refinance Indebtedness which has been secured
by a Lien permitted under this Indenture and which has been incurred in
accordance with the provisions of this Indenture; provided, however, that such
Liens do not extend to or cover any property or assets of the Company or any of
its Subsidiaries not securing the Indebtedness so refinanced; (g) Liens on
Indebtedness of a Subsidiary of the Company owed to and held by the Company,
which Indebtedness (x) represents advances by the Company of proceeds of
borrowings by the Company under the Credit Agreements and (y) is incurred in
accordance with the provisions of this Indenture; and (h) Permitted Liens.
SECTION 4.11. Change of Control. Upon the occurrence of a Change of
Control (the date of such occurrence, the "Change of Control Date"), the
Company shall make an offer to purchase (the "Change of Control Offer") on a
Business Day (the "Change of Control Purchase Date") not more than 45 nor less
than 30 days following the mailing of the notice described below to holders of
the Securities, all Securities then outstanding at a purchase price equal to
101% of the principal amount thereof plus accrued and unpaid interest, if any,
to the Change of Control Purchase Date.
Within 30 days following a Change of Control and prior to the mailing of
the notice to the holders of the Securities provided for in the next paragraph,
the Company covenants to either (i) repay in full all Indebtedness under the
Credit Agreements and terminate the commitments of the lenders thereunder, or
(ii) obtain the requisite consent under the Credit Agreements to permit the
repurchase of the Securities as provided herein. The Company shall first
comply with the provisions of this paragraph before it shall be required to
repurchase the Securities, but any failure to comply with its obligation to
offer to repurchase the Securities upon a Change of Control shall constitute an
Event of Default under this Indenture.
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53
Notice of a Change of Control Offer shall be mailed by the Company not
later than the 30th day after the Change of Control Date to the Holders of
Securities at their last registered addresses with a copy to the Trustee and
the Paying Agent. The Change of Control Offer shall remain open from the time
of mailing for at least 15 days and until 5:00 p.m., New York City time, on the
Change of Control Purchase Date. The notice, which shall govern the terms of
the Change of Control Offer, shall include such disclosures as are required by
law and shall state:
(a) that the Change of Control Offer is being made pursuant to this
Section 4.11 and that all Securities validly tendered into the Change of
Control Offer and not withdrawn will be accepted for payment;
(b) the purchase price (including the amount of accrued interest, if
any) for each Security, the Change of Control Purchase Date and the date on
which the Change of Control Offer expires;
(c) that any Security not tendered for payment will continue to accrue
interest in accordance with the terms thereof;
(d) that, unless the Company shall default in the payment of the
purchase price, any Security accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control
Purchase Date;
(e) that Holders electing to have Securities purchased pursuant to a
Change of Control Offer will be required to surrender their Securities to
the Paying Agent at the address specified in the notice prior to 5:00 p.m.,
New York City time, on the Change of Control Purchase Date and must
complete any form of letter of transmittal proposed by the Company and
reasonably acceptable to the Trustee and the Paying Agent;
(f) that Holders of Securities will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New York
City time, on the Change of Control Purchase Date, a tested telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of Securities the Holder delivered for purchase, the
Security certificate number (if any) and a statement that such Holder is
withdrawing its election to have such Securities purchased;
(g) that Holders whose Securities are purchased only in part will be
issued Securities equal in principal amount to the unpurchased portion of
the Securities surrendered;
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54
(h) the instructions that Holders must follow in order to tender their
Securities; and
(i) information concerning the business of the Company, the most
recent annual and quarterly reports of the Company filed with the SEC
pursuant to the Exchange Act (or, if the Company is not then permitted to
file any such reports with the SEC, the comparable reports prepared
pursuant to Section 4.07), a description of material developments in the
Company's business, information with respect to pro forma historical
financial information after giving effect to such Change of Control and
such other information concerning the circumstances and relevant facts
regarding such Change of Control Offer as would be material to a Holder of
Securities in connection with the decision of such Holder as to whether or
not it should tender Securities pursuant to the Change of Control Offer.
On the Change of Control Purchase Date, the Company shall (i) accept for
payment Securities or portions thereof validly tendered pursuant to the Change
of Control Offer and not withdrawn, (ii) deposit with the Paying Agent money,
in immediately available funds, sufficient to pay the purchase price of all
Securities or portions thereof so tendered and accepted and (iii) deliver to
the Trustee the Securities so accepted together with an Officers' Certificate
setting forth the Securities or portions thereof tendered to and accepted for
payment by the Company. The Paying Agent shall promptly mail or deliver to the
Holders of Securities so accepted payment in an amount equal to the purchase
price, and the Trustee shall promptly authenticate and mail or deliver to such
Holders a new Security equal in principal amount to any unpurchased portion of
the Security surrendered. Any Securities not so accepted shall be promptly
mailed or delivered by the Company to the Holder thereof. The Company will
publicly announce the results of the Change of Control Offer not later than the
first Business Day following the Change of Control Purchase Date.
The Company shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in a
manner, at the times and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by the Company and purchases all
Securities validly tendered and not withdrawn under such Change of Control
Offer.
The Company shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act, and any other securities laws or
regulations in connection with the repurchase of Securities pursuant to a
Change of Control Offer.
SECTION 4.12. Disposition of Proceeds of Asset Sales. (a) The Company
will not, and will not permit any of its Subsidiaries to, make any Asset Sale
unless (a) the Company or such Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the shares or assets sold or otherwise
<PAGE> 63
55
disposed of and (b) at least 70% of such consideration consists of cash or Cash
Equivalents. To the extent the Net Cash Proceeds of any Asset Sale are not
applied to repay (including by way of cash collateralization of outstanding
letters of credit), and permanently reduce the commitments under, the Credit
Agreements as then in effect or other Senior Indebtedness or Guarantor Senior
Indebtedness, the Company or such Subsidiary, as the case may be, may, within
fifteen months of such Asset Sale, apply the Net Cash Proceeds from such Asset
Sale to an investment in properties and assets that replace the properties and
assets that were the subject of such Asset Sale or in properties and assets that
will be used in the business of the Company and its Subsidiaries existing on the
Issue Date or in businesses reasonably related thereto ("Replacement Assets").
Any Net Cash Proceeds from any Asset Sale that are neither used to repay, and
permanently reduce the commitments under, the Credit Agreements or other Senior
Indebtedness or Guarantor Senior Indebtedness, nor invested in Replacement
Assets within the fifteen month period described above constitute "Excess
Proceeds" subject to disposition as provided below.
(b) When the aggregate amount of Excess Proceeds equals or exceeds
$15,000,000, the Company shall make an offer to purchase (an "Asset Sale
Offer") from all Holders, on a day not more than 40 Business Days thereafter
(the "Asset Sale Purchase Date"), an aggregate principal amount of Securities
equal to such Excess Proceeds, at a price in cash equal to 100% of the
outstanding principal amount thereof plus accrued and unpaid interest, if any,
to the purchase date (the "Asset Sale Offer Price").
(c) Notice of an Asset Sale Offer shall be mailed by the Company to all
Holders of Securities not less than 20 Business Days nor more than 40 Business
Days before the Asset Sale Purchase Date at their last registered address with
a copy to the Trustee and the Paying Agent. The Asset Sale Offer shall remain
open from the time of mailing for at least 20 Business Days and until at least
5:00 p.m., New York City time, on the Asset Sale Purchase Date. The notice,
which shall govern the terms of the Asset Sale Offer, shall include such
disclosures as are required by law and shall state:
(1) that the Asset Sale Offer is being made pursuant to this Section
4.12;
(2) the Asset Sale Offer Price (including the amount of accrued
interest, if any) for each Security, the Asset Sale Purchase Date and the
date on which the Asset Sale Offer expires;
(3) that any Security not tendered or accepted for payment will
continue to accrue interest in accordance with the terms thereof;
(4) that, unless the Company shall default in the payment of the Asset
Sale Offer Price, any Security accepted for payment pursuant to the Asset
Sale Offer shall cease to accrue interest after the Asset Sale Purchase
Date;
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(5) that Holders electing to have Securities purchased pursuant to an
Asset Sale Offer will be required to surrender their Securities to the
Paying Agent at the address specified in the notice prior to 5:00 p.m., New
York City time, on the Asset Sale Purchase Date and must complete any form
of letter of transmittal proposed by the Company and reasonably acceptable
to the Trustee and the Paying Agent;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than 5:00 p.m., New York City time, on the
Asset Sale Purchase Date, a tested telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of Securities
the Holder delivered for purchase, the Security certificate number (if any)
and a statement that such Holder is withdrawing its election to have such
Securities purchased;
(7) that if Securities in a principal amount in excess of the Holder's
pro rata share of the amount of Excess Proceeds are tendered pursuant to
the Asset Sale Offer, the Company shall purchase Securities on a pro rata
basis among the Securities tendered (with such adjustments as may be deemed
appropriate by the Company so that only Securities in denominations of
$1,000 or integral multiples of $1,000 shall be acquired);
(8) that Holders whose Securities are purchased only in part will be
issued new Securities equal in principal amount to the unpurchased portion
of the Securities surrendered;
(9) the instructions that Holders must follow in order to tender their
Securities; and
(10) information concerning the business of the Company, the most
recent annual and quarterly reports of the Company filed with the SEC
pursuant to the Exchange Act (or, if the Company is not permitted to file
any such reports with the Commission, the comparable reports prepared
pursuant to Section 4.07), a description of material developments in the
Company's business, information with respect to pro forma historical
financial information after giving effect to such Asset Sale and Asset Sale
Offer and such other information concerning the circumstances and relevant
facts regarding such Asset Sale Offer as would be material to a Holder of
Securities in connection with the decision of such Holder as to whether or
not it should tender Securities pursuant to the Asset Sale Offer.
(d) On the Asset Sale Purchase Date, the Company shall (i) accept for
payment, on a pro rata basis, Securities or portions thereof tendered pursuant
to the Asset Sale Offer, (ii) deposit with the Paying Agent money, in
immediately available funds, in an amount sufficient to pay the Asset Sale
Offer Price of all Securities or portions thereof so
<PAGE> 65
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tendered and accepted and (iii) deliver to the Trustee the Securities so
accepted together with an Officers' Certificate setting forth the Securities or
portions thereof tendered to and accepted for payment by the Company. The
Paying Agent shall promptly mail or deliver to Holders of Securities so accepted
payment in an amount equal to the Asset Sale Offer Price, and the Trustee shall
promptly authenticate and mail or deliver to such Holders a new Security equal
in principal amount to any unpurchased portion of the Security surrendered. Any
Securities not so accepted shall be promptly mailed or delivered by the Company
to the Holder thereof. The Company will publicly announce the results of the
Asset Sale Offer not later than the first Business Day following the Asset Sale
Purchase Date. To the extent that the aggregate principal amount of Securities
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use such deficiency for general corporate purposes. Upon completion
of such Asset Sale Offer, the amount of Excess Proceeds shall be reset to zero.
For purposes of this Section 4.12, the Company shall not act as Paying Agent.
(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to the
Asset Sale Offer.
SECTION 4.13. Limitation on Transactions with Interested Persons. The
Company will not, and will not permit any of its Subsidiaries to, directly or
indirectly, enter into or suffer to exist any transaction or series of related
transactions (including, without limitation, the sale, transfer, disposition,
purchase, exchange or lease of assets, property or services) with, or for the
benefit of, any Affiliate of the Company or any beneficial owner (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person has
the right to acquire, whether such right is exercisable immediately, after the
passage of time or upon the happening of an event) of 5% or more of the
Company's Common Stock at any time outstanding ("Interested Persons"), unless
(a) such transactions or series of related transactions is on terms that are no
less favorable to the Company, or such Subsidiary, as the case may be, than
those which could have been obtained in a comparable transaction at such time
from persons who are not Affiliates of the Company or Interested Persons, (b)
with respect to a transaction or series of transactions involving aggregate
payments or value equal to or greater than $1,000,000 and less than $10,000,000,
the Company has delivered an Officer's Certificate to the Trustee certifying
that such transaction or series of transactions complies with the preceding
clause (a), (c) with respect to a transaction or series of transactions
involving aggregate payments or value equal to or greater than $10,000,000 and
less than $25,000,000, the Company has delivered to the Trustee a board
resolution approved by a majority of disinterested members of the Board of
Directors ratifying such transaction or series of transactions, along with an
Officer's Certificate attesting to such resolution, and (d) with respect to a
transaction or series of transactions involving aggregate payments or value
equal to or greater than $25,000,000, the Company has delivered to the Trustee a
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written opinion from an Independent Financial Advisor stating that the terms of
such transaction or series of transactions are fair to the Company or its
Subsidiary, as the case may be, from a financial point of view; provided,
however, that this covenant will not restrict the Company from (i) paying
dividends in respect of its Capital Stock permitted under Section 4.09, (ii)
paying reasonable and customary fees to directors of the Company who are not
employees of the Company or (iii) making loans or advances to officers,
employees or consultants of the Company and its Subsidiaries (including travel
and moving expenses) in the ordinary course of business for bona fide business
purposes of the Company or such Subsidiary not in excess of $1,000,000 in the
aggregate at any one time outstanding.
SECTION 4.14. Limitation on Dividends and Other Payment Restrictions
Affecting Subsidiaries. The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Subsidiary of the Company to (a) pay dividends, in cash or otherwise, or make
any other distributions on or in respect of its Capital Stock or any other
interest or participation in, or measured by, its profits, (b) pay any
Indebtedness owed to the Company or any other Subsidiary of the Company, (c)
make loans or advances to, or any other Investment in, the Company or any other
Subsidiary of the Company, (d) transfer any of its properties or assets to the
Company or any other Subsidiary of the Company or (e) guarantee any
Indebtedness of the Company or any other Subsidiary of the Company, except for
such encumbrances or restrictions existing under or by reason of (i) applicable
law, (ii) customary non-assignment provisions of any contract or any lease
governing a leasehold interest of the Company or any Subsidiary of the Company,
(iii) customary restrictions on transfers of property subject to a Lien
permitted under this Indenture which could not materially adversely affect the
Company's ability to satisfy its obligations under this Indenture and the
Securities, (iv) any agreement or other instrument of a person acquired by the
Company or any Subsidiary of the Company (or a Subsidiary of such person) in
existence at the time of such acquisition (but not created in contemplation
thereof), which encumbrance or restriction is not applicable to any person, or
the properties or assets of any person, other than the person, or the properties
or assets of the person, so acquired, (v) provisions contained in agreements or
instruments relating to Indebtedness which prohibit the transfer of all or
substantially all of the assets of the obligor thereunder unless the transferee
shall assume the obligations of the obligor under such agreement or instrument
and (vi) encumbrances and restrictions under the Credit Agreements and other
Senior Indebtedness and Guarantor Senior Indebtedness in effect on the Issue
Date and encumbrances and restrictions in permitted refinancings or replacements
thereof which are no less favorable to the Holders of the Securities than those
contained in the Senior Indebtedness and Guarantor Senior Indebtedness so
refinanced or replaced.
SECTION 4.15. Limitation on the Issuance of Other Senior Subordinated
Indebtedness. The Company will not, directly or indirectly, incur any
Indebtedness (including Acquired Indebtedness) that is subordinate in right of
payment to any Indebtedness
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of the Company, unless such Indebtedness is (x) pari passu with the Securities
or (y) subordinate in right of payment to the Securities in the same manner and
at least to the same extent as the Securities are subordinated to Senior
Indebtedness.
SECTION 4.16. Limitation on Guarantees by Subsidiaries. The Company will
not permit any Subsidiary, directly or indirectly, to assume, guarantee or in
any manner become liable with respect to any Indebtedness of the Company or any
Guarantor unless such Subsidiary is a Guarantor or simultaneously executes and
delivers a supplemental indenture to this Indenture providing for the guarantee
of payment of the Securities by such Subsidiary pursuant to the terms of
Article Twelve hereto and such guarantee shall be subordinated to Guarantor
Senior Indebtedness of such Subsidiary in substantially the same manner and to
the same extent set forth in Article Twelve. In connection with the execution
and delivery of the supplemental indenture, such Subsidiary shall execute and
deliver a Guarantee substantially in the form of Exhibit B hereto.
SECTION 4.17. Waiver of Stay, Extension or Usury Laws. The Company and
each Guarantor covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law or any usury law
or other law which would prohibit or forgive the Company or such Guarantor, as
the case may be, from paying all or any portion of the principal of, premium,
if any, or interest on the Securities as contemplated herein, wherever enacted,
now or at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
the Company and each Guarantor hereby expressly waives all benefit or advantage
of any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
SECTION 4.18. Limitation on Applicability of Certain Covenants. During
any period of time that (i) the ratings assigned to the Securities by each of
S&P and Moody's (collectively, the "Rating Agencies") are no less than BBB- and
Baa3, respectively (the "Investment Grade Ratings"), and (ii) no Default or
Event of Default has occurred and is continuing, the Company and its Restricted
Subsidiaries will not be subject to the covenants described in Sections 4.08,
4.09, 4.12, 4.13, 4.14 and 4.16 (collectively, the "Suspended Covenants"). If
one or both Rating Agencies withdraws its rating or downgrades its Investment
Grade Rating, then thereafter the Company and its Subsidiaries will be subject
to the Suspended Covenants (until the Rating Agencies have again assigned
Investment Grade Ratings to the Securities) and compliance with the Suspended
Covenants with respect to Restricted Payments made after the time of such
withdrawal or downgrade will be calculated in accordance with the covenant
described in Section 4.09 as if such covenant had been in effect at all times
after the date of this Indenture.
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SECTION 4.19. Rule 144A Information Requirement. If at any time the
Company is no longer subject to the reporting requirements of the Exchange Act,
it will furnish to the Holders or beneficial holders of the Securities and
prospective purchasers of the Securities designated by the holders of the
Securities, upon their request, any information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act.
SECTION 4.20. Redemption of Convertible Debentures. The Company will
mail, no later than on the fifth Business Day following the Issue Date, a
notice of redemption covering all outstanding Convertible Debentures providing
for a redemption date no later than the 30th day following the date of such
notice.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, etc. (a) The Company will not, in
any transaction or series of transactions, merge or consolidate with or into,
or sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets as an entirety to, any person or
persons, and the Company will not permit any of its Subsidiaries to enter into
any such transaction or series of transactions if such transaction or series of
transactions, in the aggregate, would result in a sale, assignment, conveyance,
transfer, lease or other disposition of all or substantially all of the
properties and assets of the Company or the Company and its Subsidiaries, taken
as a whole, to any other person or persons, unless at the time of and after
giving effect thereto (i) either (x) if the transaction or series of
transactions is a merger or consolidation, the Company shall be the surviving
person of such merger or consolidation, or (y) the person formed by such
consolidation or into which the Company or such Subsidiary is merged or to which
the properties and assets of the Company or such Subsidiary, as the case may be,
are transferred (any such surviving person or transferee person being the
"Surviving Entity") shall be a corporation organized and existing under the laws
of the United States of America, any state thereof or the District of Columbia
and shall expressly assume by a supplemental indenture executed and delivered to
the Trustee, in form reasonably satisfactory to the Trustee, the due and
punctual payment of the principal of, premium, if any, and interest on all the
Securities and the performance and observance of every covenant and obligation
of this Indenture and the Securities on the part of the Company to be performed
or observed and, in each case, the Indenture shall remain in full force and
effect; (ii) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including,
without limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions), no
Default or Event of Default shall have occurred and be continuing and the
Company, or the Surviving Entity, as the case may be, after giving effect to
such transaction or series of transactions on a pro forma basis (including,
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without limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions),
could incur $1.00 of additional Indebtedness pursuant to the proviso in Section
4.08 (assuming a market rate of interest with respect to such additional
Indebtedness); (iii) immediately after giving effect to such transaction or
series of transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), the Consolidated Net
Worth of the Company or the Surviving Entity, as the case may be, is at least
equal to the Consolidated Net Worth of the Company immediately before such
transaction or series of transactions, and (iv) the Company or the Surviving
Entity, as the case may be, shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each in form and substance reasonably
satisfactory to the Trustee, each stating that such consolidation, merger, sale,
assignment, conveyance, transfer, lease or other disposition and, if a
supplemental indenture is required in connection with such transaction or series
of transactions, such supplemental indenture, complies with this Indenture and
that all conditions precedent herein provided for relating to such transaction
or series of transactions have been complied with; provided, however, that,
solely for purposes of computing amounts described in subclause (C) of the
covenant described in Section 4.09, any such Surviving Entity shall only be
deemed to have succeeded to and be substituted for the Company with respect to
periods subsequent to the effective time of such merger, consolidation or
transfer of assets.
SECTION 5.02. Successor Substituted. Upon any consolidation or merger,
or any sale, assignment, conveyance, transfer, lease or disposition of all or
substantially all of the properties and assets of the Company in accordance with
Section 5.01 hereof, in which the Company is not the continuing corporation, the
successor person or persons formed by such consolidation or into which the
Company is merged or the successor person to which such sale, assignment,
conveyance, transfer, lease or other disposition is made, shall succeed to, and
be substituted for, and may exercise every right and power of, the Company under
this Indenture and the Securities with the same effect as if such successor had
been named as the Company herein; provided, however, that solely for purposes of
computing amounts described in subclause (C) of Section 4.09, any such successor
person shall only be deemed to have succeeded to and be substituted for the
Company with respect to periods subsequent to the effective time of such merger,
consolidation or transfer of assets.
ARTICLE SIX
REMEDIES
SECTION 6.01. Events of Default. An "Event of Default" means any of the
following events:
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(a) default in the payment of the principal of or premium, if any, on
any Security when the same becomes due and payable (upon Stated Maturity,
acceleration, optional redemption, required purchase, scheduled principal
payment or otherwise); or
(b) default in the payment of an installment of interest on any of the
Securities, when the same becomes due and payable, and any such Default
continues for a period of 30 days; or
(c) failure to perform or observe any other term, covenant or
agreement contained in the Securities, the Indenture or any Guarantee
(other than Defaults specified in clause (a) or (b) above) and such Default
continues for a period of 60 days after written notice of such Default
requiring the Company to remedy the same shall have been given (i) to the
Company by the Trustee or (ii) to the Company and the Trustee by Holders of
at least 25% in aggregate principal amount of the Securities then
outstanding; or
(d) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under which
the Company or any Significant Subsidiary of the Company then has
outstanding Indebtedness in excess of $20,000,000, individually or in the
aggregate, and either (i) such Indebtedness is already due and payable in
full or (ii) such default or defaults have resulted in the acceleration of
the maturity of such Indebtedness; or
(e) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money in excess of $20,000,000, either individually or in the
aggregate, shall be entered against the Company or any Significant
Subsidiary of the Company or any of their respective properties and shall
not be discharged or fully bonded and there shall have been a period of 60
days after the date on which any period for appeal has expired and during
which a stay of enforcement of such judgment, order or decree, shall not be
in effect; or
(f) either (i) the collateral agent under the Credit Agreement or (ii)
any holder of at least $20,000,000 in aggregate principal amount of
Indebtedness of the Company or any of its Significant Subsidiaries shall
commence judicial proceedings to foreclose upon assets of the Company or
any of its Significant Subsidiaries having an aggregate Fair Market Value,
individually or in the aggregate, in excess of $20,000,000 or shall have
exercised any right under applicable law or applicable security documents
to take ownership of any such assets in lieu of foreclosure; or
(g) the Company or any Significant Subsidiary of the Company pursuant
to or under or within the meaning of any Bankruptcy Law:
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(i) commences a voluntary case or proceeding;
(ii) consents to the entry of an order for relief against it in an
involuntary case or proceeding;
(iii) consents to the appointment of a Custodian of it or for all
or substantially all of its property;
(iv) makes a general assignment for the benefit of its creditors;
or
(v) shall generally not pay its debts when such debts become
due or shall admit in writing its inability to pay its debts
generally; or
(h) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any Significant
Subsidiary of the Company in an involuntary case or proceeding,
(ii) appoints a Custodian of the Company or any Significant
Subsidiary of the Company for all or substantially all of its
properties, or
(iii) orders the liquidation of the Company or any Significant
Subsidiary of the Company,
and in each case the order or decree remains unstayed and in effect for 60
days; or
(i) any Guarantee issued by a Guarantor which is a Significant
Subsidiary of the Company ceases to be in full force and effect or is
declared null and void, or any such Guarantor denies that it has any
further liability under any such Guarantee, or gives notice to such effect
(other than by reason of the termination of the Indenture or the release of
any such Guarantee in accordance with Section 12.07) and such condition
shall have continued for a period of 60 days after written notice of such
failure (which notice shall specify the Default, demand that it be remedied
and state that it is a "Notice of Default") requiring such Guarantor and
the Company to remedy the same shall have been given (x) to the Company by
the Trustee or (y) to the Company and the Trustee by Holders of at least
25% in aggregate principal amount of the Securities then outstanding.
Subject to the provisions of Sections 7.01 and 7.02, the Trustee shall
not be charged with knowledge of any Default or Event of Default unless written
notice thereof shall have been given to a Trust Officer at the Corporate Trust
Office of the Trustee by the
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Company, the Paying Agent, any Holder, any holder of Senior Indebtedness or
Guarantor Senior Indebtedness or any of their respective agents.
SECTION 6.02. Acceleration. If an Event of Default (other than as
specified in Section 6.01(g) or (h)) occurs and is continuing, the Trustee, by
written notice to the Company, or the Holders of at least 25% in aggregate
principal amount of the Securities then outstanding, by written notice to the
Trustee and the Company, may declare the principal of, premium, if any, and
accrued and unpaid interest, if any, on all of the outstanding Securities to be
due and payable immediately, upon which declaration, all amounts payable in
respect of the Securities shall be immediately due and payable; provided,
however, that so long as the Credit Agreements shall be in force and effect, if
an Event of Default shall have occurred and be continuing (other than an Event
of Default specified in Section 6.01(g) or (h)), any such acceleration shall
not be effective until the earlier to occur of (a) ten Business Days following
delivery of a written notice of such acceleration to the Co-Agents under the
Credit Agreements of the intention to accelerate the maturity of the Securities
and (b) the acceleration of the maturity of the Indebtedness under the Credit
Agreements. If an Event of Default specified in Section 6.01(g) or 6.01(h)
occurs and is continuing, then the principal of, premium, if any, and accrued
and unpaid interest, if any, on all of the outstanding Securities shall ipso
facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder of Securities.
After a declaration of acceleration under this Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the Holders of a majority in aggregate principal amount of the
outstanding Securities, by written notice to the Company and the Trustee, may
rescind such declaration if (a) the Company has paid or deposited with the
Trustee a sum sufficient to pay (i) all amounts due the Trustee under Section
7.08 and the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, (ii) all overdue interest on all
Securities, (iii) the principal of and premium, if any, on any Securities which
have become due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Securities, and (iv) to the extent that
payment of such interest is lawful, interest upon overdue interest and overdue
principal which has become due otherwise than by such declaration of
acceleration at the rate borne by the Securities; (b) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction; and
(c) all Events of Default, other than the non-payment of principal of, premium,
if any, and interest on the Securities that has become due solely by such
declaration of acceleration, have been cured or waived as provided in Section
6.04.
No such rescission shall affect any subsequent Default or Event of Default
or impair any right subsequent therein.
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SECTION 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal of, premium, if any, or interest
on the Securities or to enforce the performance of any provision of the
Securities or this Indenture.
All rights of action and claims under this Indenture or the Securities may
be enforced by the Trustee even if it does not possess any of the Securities or
does not produce any of them in the proceeding. A delay or omission by the
Trustee or any Holder in exercising any right or remedy accruing upon an Event
of Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative to the extent permitted by law.
SECTION 6.04. Waiver of Past Defaults. Subject to the provisions of
Section 6.07 and 9.02, the Holders of not less than a majority in aggregate
principal amount of the outstanding Securities by notice to the Trustee may, on
behalf of the Holders of all the Securities, waive any past Default or Event of
Default and its consequences, except a Default or Event of Default specified in
Section 6.01(a) or (b) or in respect of any covenant or provision hereof which
cannot be modified or amended without the consent of the Holder so affected
pursuant to Section 9.02. When a Default or Event of Default is so waived, it
shall be deemed cured and shall cease to exist.
SECTION 6.05. Control by Majority. The Holders of not less than a
majority in aggregate principal amount of the outstanding Securities shall have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or power conferred
on the Trustee, provided, however, that the Trustee may refuse to follow any
direction (a) that conflicts with any rule of law or this Indenture, (b) that
the Trustee determines may be unduly prejudicial to the rights of another
Securityholder, or (c) that may expose the Trustee to personal liability unless
the Trustee has been provided reasonable indemnity against any loss or expense
caused by its following such direction; and provided further that the Trustee
may take any other action deemed proper by the Trustee that is not inconsistent
with such direction.
SECTION 6.06. Limitation on Suits. No Holder of any Securities shall
have any right to institute any proceeding or pursue any remedy with respect to
this Indenture or the Securities unless:
(a) the Holder gives written notice to the Trustee of a continuing
Event of Default;
(b) the Holders of at least 25% in aggregate principal amount of the
outstanding Securities make a written request to the Trustee to pursue the
remedy;
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(c) such Holder or Holders offer and, if requested, provide to the
Trustee reasonable indemnity against any loss, liability or expense;
(d) the Trustee does not comply with the request within 30 days after
receipt of the request and the offer and, if requested, provision of
indemnity; and
(e) during such 30-day period the Holders of a majority in aggregate
principal amount of the outstanding Securities do not give the Trustee a
direction which is inconsistent with the request.
The foregoing limitations shall not apply to a suit instituted by a Holder
for the enforcement of the payment of principal of, premium, if any, or accrued
interest on, such Security on or after the respective due dates set forth in
such Security.
A Holder may not use this Indenture to prejudice the rights of any other
Holders or to obtain priority or preference over such other Holders.
SECTION 6.07. Right of Holders to Receive Payment. Notwithstanding any
other provision in this Indenture, other than the subordination provisions of
Article Ten and Sections 12.04 to 12.06, the right of any Holder of a Security
to receive payment of the principal of, premium, if any, and interest on such
Security, on or after the respective Stated Maturities expressed in such
Security, or to bring suit for the enforcement of any such payment on or after
the respective Stated Maturities, is absolute and unconditional and shall not be
impaired or affected without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default
specified in clause (a) or (b) of Section 6.01 occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company, any Guarantor or any other obligor on the Securities for
the whole amount of principal of, premium, if any, and accrued interest
remaining unpaid, together with interest on overdue principal and, to the
extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum borne by the
Securities and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claims. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and the Holders allowed in any judicial
proceedings relative to the Company or the Subsidiaries of the Company (or any
other obligor upon the Securities), their creditors or their property and shall
be entitled and empowered to collect and receive any monies or other property
payable
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or deliverable on any such claims and to distribute the same, and any Custodian
in any such judicial proceedings is hereby authorized by each Holder to make
such payments to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agent and counsel, and any other amounts due the
Trustee under Section 7.08. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf of
any Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. Priorities. If the Trustee collects any money pursuant to
this Article Six, it shall pay out such money in the following order:
First: to the Trustee for amounts due under Section 7.08;
Second: subject to Article Ten, to Holders for interest accrued on
the Securities, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for interest;
Third: subject to Article Ten, to Holders for principal amounts
(including any premium) owing under the Securities, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Securities for principal (including any premium); and
Fourth: the balance, if any, to the Company or to the extent the
Trustee collects any amount from any Guarantor, to such Guarantor.
The Trustee, upon prior written notice to the Company, may fix a record
date and payment date for any payment to Securityholders pursuant to this
Section 6.10.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court may in its discretion
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to any suit by
the Trustee, any suit by a Holder pursuant to Section 6.07, or a suit by
Holders of more than 10% in aggregate principal amount of the outstanding
Securities.
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SECTION 6.12. Restoration of Rights and Remedies. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture, any Security or any Guarantee and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the Company, each
Guarantor, if any, the Trustee and the Holders shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties. (a) In case an Event of Default has occurred and
is continuing, the Trustee shall exercise such of the rights and powers vested
in it by this Indenture, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default,
(i) the Trustee need perform only such duties as are specifically set
forth in this Indenture, and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that
(i) this paragraph does not limit the effect of paragraph (b) of this
Section 7.01;
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(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
SECTION 7.02. Rights of Trustee. Subject to Section 7.01 hereof and the
provisions of TIA Section 315:
(a) The Trustee may rely on any document reasonably believed by it to
be genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 11.04 and 11.05. The Trustee
shall not be liable for any action it takes or omits to take in good faith
in reliance on such certificate or opinion.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action taken or omitted by
it in good faith and reasonably believed by it to be authorized or within
the discretion, rights or powers conferred upon it by this Indenture other
than any liabilities arising out of its own negligence.
(e) The Trustee may consult with counsel of its own choosing and the
advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection in respect of any action taken,
omitted or suffered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
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(f) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit.
(g) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may
be incurred therein or thereby.
Subject to the above provisions, the holders of not less than a majority
in aggregate principal amount of the outstanding Securities have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee under this Indenture.
SECTION 7.03. Individual Rights of Trustee. The Trustee, any Paying
Agent, Registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and, subject to
Sections 7.11 and 7.12 and TIA Section Section 310 and 311, may otherwise deal
with the Company and its Subsidiaries with the same rights it would have if it
were not the Trustee, Paying Agent, Registrar or such other agent.
SECTION 7.04. Trustee's Disclaimer. The Trustee makes no representations
as to the validity or sufficiency of this Indenture, the Securities or any
Guarantee, it shall not be accountable for the Company's use or application of
the proceeds from the Securities, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee
and it shall not be responsible for any statement in the Securities other than
the Trustee's certificate of authentication.
SECTION 7.05. Notice of Default. If a Default or an Event of Default
occurs and is continuing and if it is known to the Trustee, the Trustee shall
mail to each Holder notice of the Default or Event of Default within 30 days
after obtaining knowledge thereof; provided, however, that, except in the case
of a Default or an Event of Default in the payment of the principal of,
premium, if any, or interest on any Security, the Trustee shall be protected in
withholding such notice if and so long as a committee of its Trust Officers in
good faith determines that the withholding of such notice is in the interest of
the Holders.
SECTION 7.06. Money Held in Trust. All moneys received by the Trustee
shall, until used or applied as herein provided, be held in trust for the
purposes for which they were received, but need not be segregated from other
funds except to the extent required
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herein or by law. The Trustee shall not be under any liability for interest on
any moneys received by it hereunder, except as the Trustee may agree with the
Company.
SECTION 7.07. Reports by Trustee to Holders. Within 60 days after each
May 15 beginning with the May 15 following the date of this Indenture, the
Trustee shall, to the extent that any of the events described in TIA Section
313(a) shall have occurred within the previous twelve months, but not
otherwise, mail to each Holder a brief report dated as of such May 15 that
complies with TIA Section 313(a). The Trustee also shall comply with TIA
Section Section 313(b) and 313(c).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the SEC and each securities exchange, if
any, on which the Securities are listed.
The Company shall notify the Trustee in writing if the Securities become
listed on any securities exchange.
SECTION 7.08. Compensation and Indemnity. The Company covenants and
agrees to pay the Trustee from time to time reasonable compensation for its
services. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
incurred or made by it. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold it harmless against,
any loss or liability incurred by it arising out of or in connection with the
administration of this trust and its rights or duties hereunder, including the
costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. The Trustee shall notify the Company promptly of any claim asserted
against the Trustee for which it may seek indemnity. The Company shall be
entitled to assume the defense of the claim, with counsel reasonably
satisfactory to the Trustee; provided, however, that if such claim is made
against both the Company and the Trustee and the Trustee shall have reasonably
concluded that there may be one or more legal defenses available to it which
are different from or additional to those available to the Company, the
Trustee shall have the right to select separate counsel to defend such claim on
behalf of the Trustee. In the event that the Company assumes the defense of
the claim, the Company shall have no obligation to pay the fees and expenses of
separate counsel for the Trustee (except where the Trustee is entitled to
select separate counsel for the reason provided in the preceding sentence) and
the Trustee shall cooperate in the defense of such claim. The Company need not
pay for any settlement made without its prior written consent. The
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Company need not reimburse any expense or indemnify against any loss or
liability to the extent incurred by the Trustee through its gross negligence,
bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 7.08, the
Trustee shall have a Lien prior to the Securities on all assets held or
collected by the Trustee, in its capacity as Trustee, except assets held in
trust to pay principal of, premium, if any, or interest on particular
Securities.
When the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 6.01(g) or (h), the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's obligations under this Section 7.08 and any Lien arising
hereunder shall survive the resignation or removal of any trustee, the
discharge of the Company's obligations pursuant to Article Eight and/or the
termination of this Indenture.
SECTION 7.09. Replacement of Trustee. The Trustee may resign by so
notifying the Company. The Holders of a majority in principal amount of the
outstanding Securities may remove the Trustee by so notifying the Company and
the Trustee and may appoint a successor trustee with the Company's prior written
consent. The Company may remove the Trustee if:
1. the Trustee fails to comply with Section 7.11;
2. the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
3. a receiver or other public officer takes charge of the Trustee or
its property; or
4. the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall notify each Holder of such event
and shall promptly appoint a successor Trustee. The Trustee shall be entitled
to payment of its fees and reimbursement of its expenses while acting as
Trustee, and to the extent such amounts remain unpaid, the Trustee that has
resigned or has been removed shall retain the Lien afforded by Section 7.08.
Within one year after the successor Trustee takes office, the Holders of a
majority in principal amount of the outstanding Securities may, with the
Company's prior written consent, appoint a successor Trustee to replace the
successor Trustee appointed by the Company.
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A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Immediately after that, the
retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the Lien provided in Section 7.08, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. A successor Trustee shall mail notice of its succession
to each Securityholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in principal amount of the outstanding Securities
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.11, any Holder may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section 7.09,
the Company's obligations under Section 7.08 shall continue for the benefit of
the retiring Trustee.
SECTION 7.10. Successor Trustee by Merger, etc. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act shall, if such resulting, surviving
or transferee corporation or national banking association is otherwise eligible
hereunder, be the successor Trustee.
SECTION 7.11. Eligibility; Disqualification. There shall at all times be
a Trustee hereunder which shall be eligible to act as Trustee under TIA Section
Section 310(a)(1) and 310(a)(5) and which shall have a combined capital and
surplus of at least $50,000,000. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of federal,
state, territorial or District of Columbia supervising or examining authority,
then for the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Trustee shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
SECTION 7.12. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA
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Section 311(b). If the present or any future Trustee shall resign or be
removed, it shall be subject to TIA Section 311(a) to the extent provided
therein.
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. Termination of the Company's Obligations. The Company and
each Guarantor may terminate its obligations under the Securities and this
Indenture, except those obligations referred to in the penultimate paragraph of
this Section 8.01, if
(a) either (i) all Securities previously authenticated and delivered
(other than destroyed, lost or stolen Securities which have been replaced
or paid or Securities for whose payment money has theretofore been
deposited with the Trustee or the Paying Agent in trust or segregated and
held in trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 8.04) have been
delivered to the Trustee for cancellation and the Company has paid all sums
payable by it hereunder, or (ii) either (A) pursuant to Article Three, the
Company shall have given notice to the Trustee and mailed a notice of
redemption to each Holder of the redemption of all of the Securities under
arrangements satisfactory to the Trustee for the giving of such notice or
(B) all Securities have otherwise become due and payable hereunder and the
Company shall have irrevocably deposited or caused to be deposited with the
Trustee or a trustee reasonably satisfactory to the Trustee, under the terms
of an irrevocable trust agreement in form and substance satisfactory to the
Trustee, as trust funds in trust solely for the benefit of the Holders for
that purpose, money in such amount as is sufficient without consideration of
reinvestment of such interest, to pay principal of, premium, if any, and
interest on the outstanding Securities to maturity or redemption, as
certified in a certificate of a nationally recognized firm of independent
public accountants; provided that the Trustee shall have been irrevocably
instructed to apply such money to the payment of said principal, premium, if
any, and interest with respect to the Securities and, provided further that
from and after the time of deposit, the money deposited shall not be subject
to the rights of holders of Senior Indebtedness pursuant to the provisions
of Article Ten;
(b) no Default or Event of Default with respect to this Indenture or
the Securities shall have occurred and be continuing on the date of such
deposit or shall occur as a result of such deposit and such deposit will
not result in a breach or violation of, or constitute a default under, any
other instrument to which the Company is a party or by which it is bound;
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(c) the Company shall have paid all other sums payable by it
hereunder; and
(d) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that (x) all conditions
precedent providing for the termination of the Company's and any
Guarantor's obligation under the Securities, this Indenture and any
Guarantee have been complied with and (y) such satisfaction and discharge
will not result in a breach or violation of, or constitute a default under,
this Indenture or any material agreement or instrument to which the Company
or a Guarantor is a party or by which the Company or a Guarantor is bound.
Notwithstanding the foregoing paragraph, the Company's obligations in
Sections 2.06, 2.07, 2.08, 2.12, 4.01, 4.02 and 7.08 and any Guarantor's
obligations in respect thereof shall survive until the Securities are no longer
outstanding pursuant to the last paragraph of Section 2.12. After the
Securities are no longer outstanding, the Company's obligations in Sections
7.08, 8.04 and 8.05 and any Guarantor's obligations in respect thereof shall
survive.
After such delivery or irrevocable deposit the Trustee upon request shall
acknowledge in writing the discharge of the Company's and any Guarantor's
obligations under the Securities and this Indenture except for those surviving
obligations specified above.
SECTION 8.02. Legal Defeasance and Covenant Defeasance. (a) The Company
may, at its option by Board Resolution of the Board of Directors of the
Company, at any time, with respect to the Securities, elect to have either
paragraph (b) or paragraph (c) below be applied to the outstanding Securities
upon compliance with the conditions set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (b), the Company and any Guarantor shall be deemed
to have been released and discharged from its obligations with respect to the
outstanding Securities on the date the conditions set forth below are satisfied
(hereinafter, "legal defeasance"). For this purpose, such legal defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Securities, which shall thereafter
be deemed to be "outstanding" only for the purposes of paragraph (e) below and
the other Sections of and matters under this Indenture referred to in (i) and
(ii) below, and to have satisfied all its other obligations under such
Securities and this Indenture insofar as such Securities are concerned (and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same), and Holders of the Securities and any amounts
deposited under paragraph (d) below shall cease to be subject to any
obligations to, or the rights of, any holder of Senior Indebtedness or
Guarantor Senior Indebtedness under Article Ten or Article Twelve or otherwise,
except for the following which shall survive until otherwise terminated or
discharged hereunder: (i) the rights of Holders of outstanding
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Securities to receive solely from the trust fund described in paragraph (d)
below and as more fully set forth in such paragraph, payments in respect of the
principal of, premium, if any, and interest on such Securities when such
payments are due, (ii) the Company's obligations with respect to such Securities
under Sections 2.07, 2.08 and 4.02, and, with respect to the Trustee, under
Section 7.08 and any Guarantor's obligations in respect thereof, (iii) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and (iv)
this Article Eight. Subject to compliance with this Section 8.02, the Company
may exercise its option under this paragraph (b) notwithstanding the prior
exercise of its option under paragraph (c) below with respect to the Securities.
(c) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (c), the Company shall be released and discharged
from its obligations under any covenant contained in Articles Five and Ten and
in Sections 4.07 through 4.16 and Section 4.19 with respect to the outstanding
Securities on and after the date the conditions set forth below are satisfied
(hereinafter, "covenant defeasance"), and the Securities shall thereafter be
deemed to be not "outstanding" for the purpose of any direction, waiver,
consent or declaration or act of Holders (and the consequences of any thereof)
in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder and Holders of the Securities
and any amounts deposited under paragraph (d) below shall cease to be subject
to any obligations to, or the rights of, any holder of Senior Indebtedness or
Guarantor Senior Indebtedness under Article Ten, Article Twelve or
otherwise. For this purpose, such covenant defeasance means that, with respect
to the outstanding Securities, the Company and any Guarantor may omit to comply
with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any
other document and such omission to comply shall not constitute a Default or an
Event of Default under Section 6.01(c), but, except as specified above, the
remainder of this Indenture and such Securities shall be unaffected thereby.
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Securities:
(i) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 7.11 who shall agree to comply with the provisions of this
Section 8.02 applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (x)
cash, in United States dollars, in an amount or (y) direct non-callable
obligations of, or non-callable obligations guaranteed by, the United
States of America for the payment of which guarantee or obligation the full
faith and credit of the United States is pledged ("U.S. Government
Obligations") maturing as to principal, premium, if any, and interest in
such amounts of cash, in United States dollars, and at such times as are
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sufficient without consideration of any reinvestment of such interest, to
pay principal of, premium, if any, and interest on the outstanding
Securities not later than one day before the due date of any payment, or
(z) a combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge and
which shall be applied by the Trustee (or other qualifying trustee) to pay
and discharge principal of, premium, if any, and interest on the
outstanding Securities (except lost, stolen or destroyed Securities which
have been replaced or repaid) on the Final Maturity Date or otherwise in
accordance with the terms of this Indenture and of such Securities;
provided, however, that the Trustee (or other qualifying trustee) shall
have received an irrevocable written order from the Company instructing the
Trustee (or other qualifying trustee) to apply such money or the proceeds
of such U.S. Government Obligations to said payments with respect to the
Securities;
(ii) no Default or Event of Default or event which with notice or
lapse of time or both would become a Default or an Event of Default with
respect to the Securities shall have occurred and be continuing on the date
of such deposit or, insofar as Section 6.01(a) is concerned, at any time
during the period ending on the 91st day after the date of such deposit (it
being understood that this condition shall not be deemed satisfied until
the expiration of such period);
(iii) such legal defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest with respect to any securities of
the Company or any Guarantor;
(iv) such legal defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a Default or Event of Default
under, this Indenture or any other material agreement or instrument to
which the Company or any Guarantor is a party or by which it is bound;
(v) in the case of an election under paragraph (b) above, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that (x)
the Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (y) since the date of this Indenture, there has
been a change in the applicable Federal income tax law, in either case to
the effect that, and based thereon such opinion shall confirm that, the
Holders of the outstanding Securities will not recognize income, gain or
loss for Federal income tax purposes as a result of such legal defeasance
and will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such legal
defeasance had not occurred;
(vi) in the case of an election under paragraph (c) above, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of
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the outstanding Securities will not recognize income, gain or loss for
Federal income tax purposes as a result of such covenant defeasance and
will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such covenant
defeasance had not occurred;
(vii) in the case of an election under either paragraph (b) or (c)
above, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that, (x) the trust funds will not be subject to any
rights of holders of Senior Indebtedness of the Company, including, without
limitation, the rights arising under this Indenture, and (y) after the 91st
day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights; provided, however, that if a court were
to rule under any such law in any case or proceeding that the trust funds
remained property of the Company, no opinion needs to be given as to the
effect of such laws on the trust funds except the following: (A) assuming
such trust funds remained in the Trustee's possession prior to such court
ruling to the extent not paid to Holders of Securities, the Trustee will
hold, for the benefit of the Holders of Securities, a valid and enforceable
security interest in such trust funds that is not avoidable in bankruptcy
or otherwise, subject only to principles of equitable subordination, (B)
the Holders of Securities will be entitled to receive adequate protection
of their interests in such trust funds if such trust funds are used, and
(C) no property, rights in property or other interests granted to the
Trustee or the Holders of Securities in exchange for or with respect to any
of such funds will be subject to any prior rights of any other person,
subject only to prior Liens granted under Section 364 of Title 11 of the
U.S. Bankruptcy Code (or any section of any other Bankruptcy Law having the
same effect), but still subject to the foregoing clause (B); and
(viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that (x) all conditions
precedent provided for relating to either the legal defeasance under
paragraph (b) above or the covenant defeasance under paragraph (c) above,
as the case may be, have been complied with and (y) if any other
Indebtedness of the Company shall then be outstanding or committed, such
legal defeasance or covenant defeasance will not violate the provisions of
the agreements or instruments evidencing such Indebtedness.
(e) All money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee, collectively
for purposes of this paragraph (e), the "Trustee") pursuant to paragraph (d)
above in respect of the outstanding Securities shall be held in trust and
applied by the Trustee, in accordance with the provisions of such Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(other than the Company or any Affiliate of the Company) as the Trustee may
determine, to the Holders of such Securities of all sums due and to become due
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thereon in respect of principal, premium and interest, but such money need not
be segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to paragraph (d) above or the principal, premium, if any,
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding
Securities.
Anything in this Section 8.02 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request, in
writing, by the Company any money or U.S. Government Obligations held by it as
provided in paragraph (d) above which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof which would then be required to be deposited to effect an equivalent
legal defeasance or covenant defeasance.
SECTION 8.03. Application of Trust Money. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to
Sections 8.01 and 8.02, and shall apply the deposited money and the money from
U.S. Government Obligations in accordance with this Indenture to the payment of
principal of, premium, if any, and interest on the Securities.
SECTION 8.04. Repayment to Company or Guarantors. Subject to Sections
7.08, 8.01 and 8.02, the Trustee shall promptly pay to the Company or if
deposited with the Trustee by any Guarantor, to such Guarantor, upon receipt by
the Trustee of an Officers' Certificate, any excess money, determined in
accordance with Section 8.02, held by it at any time. The Trustee and the
Paying Agent shall pay to the Company or any Guarantor, upon receipt by the
Trustee or the Paying Agent, as the case may be, of an Officers' Certificate,
any money held by it for the payment of principal, premium, if any, or interest
that remains unclaimed for two years after payment to the Holders is required;
provided, however, that the Trustee and the Paying Agent before being required
to make any payment may, but need not, at the expense of the Company cause to
be published once in a newspaper of general circulation in The City of New York
or mail to each Holder entitled to such money notice that such money remains
unclaimed and that after a date specified therein, which shall be at least 30
days from the date of such publication or mailing, any unclaimed balance of
such money then remaining will be repaid to the Company. After payment to the
Company or any Guarantor, Holders entitled to money must look solely to the
Company for payment as general creditors unless an applicable abandoned
property law designates another person, and all liability of the Trustee or
Paying Agent with respect to such money shall thereupon cease.
SECTION 8.05. Reinstatement. If the Trustee or Paying Agent is unable to
apply any money or U.S. Government Obligations in accordance with this
Indenture by
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reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then and only then the Company's and each Guarantor's
obligations under this Indenture and the Securities shall be revived and
reinstated as though no deposit had been made pursuant to this Indenture until
such time as the Trustee is permitted to apply all such money or U.S. Government
Obligations in accordance with this Indenture; provided, however, that if the
Company or a Guarantor has made any payment of principal of, premium, if any, or
interest on any Securities because of the reinstatement of its obligations, the
Company or such Guarantor, as the case may be, shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. The Company, when authorized
by a Board Resolution of its Board of Directors, and the Trustee may amend,
waive or supplement this Indenture or the Securities without notice to or
consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Article Five or Section 12.01;
(c) to provide for uncertificated Securities in addition to
certificated Securities;
(d) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA; and
(e) to make any change that would provide any additional benefit or
rights to the Holders or that does not adversely affect the rights of any
Holder.
Notwithstanding the above, the Trustee and the Company may not make any
change that adversely affects the rights of any Holders hereunder. The Company
shall be required to deliver to the Trustee an Opinion of Counsel stating that
any such change made pursuant to this Section 9.01 does not adversely affect
the rights of any Holder.
SECTION 9.02. With Consent of Holders. Subject to Section 6.04, the
Company, when authorized by a Board Resolution of its Board of Directors, and
the Trustee may amend this Indenture or the Securities with the written consent
of the
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Holders of not less than a majority in aggregate principal amount of the
Securities then outstanding, and the Holders of not less than a majority in
aggregate principal amount of the Securities then outstanding by written notice
to the Trustee may waive future compliance by the Company or any Guarantor with
any provision of this Indenture, the Guarantees or the Securities.
Notwithstanding the provisions of this Section 9.02, without the consent
of each Holder affected, an amendment or waiver, including a waiver pursuant to
Section 6.04, may not:
(a) reduce the percentage in outstanding aggregate principal amount of
Securities the Holders of which must consent to an amendment, supplement or
waiver, or consent to take any action under this Indenture, any Guarantee
or the Securities;
(b) reduce or change the rate or time for payment of interest on any
Security;
(c) change the currency in which any Security, or any premium or
interest thereon, is payable;
(d) reduce the principal amount outstanding of or extend the fixed
maturity of any Security or alter the redemption provisions with respect
thereto;
(e) waive a default in the payment of the principal of, premium, if
any, or interest on, or redemption or an offer to purchase required
hereunder with respect to, any Security;
(f) make the principal of, premium, if any, or interest on any
Security payable in money other than that stated in the Security;
(g) modify this Section 9.02 or Section 6.04 or Section 6.07;
(h) amend, change or modify the obligations of the Company to make and
consummate the offer with respect to any Asset Sale or modify any of the
provisions or definitions with respect thereto;
(i) modify or change any provision of this Indenture affecting the
subordination or ranking of the Securities or any Guarantee in a manner
adverse to the Holders; or
(j) impair the right to institute suit for the enforcement of any
payment on or with respect to the Securities; or
(k) release any Guarantor from any of its obligations under its
Guarantee or this Indenture other than in compliance with Section 12.07.
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It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holder of each Security affected
thereby, with a copy to the Trustee, a notice briefly describing the amendment,
supplement or waiver. Any failure of the Company to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any amendment, supplement or waiver.
SECTION 9.03. Compliance with Trust Indenture Act. Every amendment of or
supplement to this Indenture, any Guarantee or the Securities shall comply with
the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents. Until an amendment,
supplement or waiver becomes effective, a consent to it by a Holder is a
continuing consent by such Holder and every subsequent Holder of that Security
or portion of that Security that evidences the same debt as the consenting
Holder's Security, even if notation of the consent is not made on any Security.
However, any such Holder or subsequent Holder may revoke the consent as to his
Security or portion of a Security prior to such amendment, supplement or waiver
becoming effective. Such revocation shall be effective only if the Trustee
receives the notice of revocation before the date the amendment, supplement or
waiver becomes effective. Notwithstanding the above, nothing in this paragraph
shall impair the right of any Holder under Section 316(b) of the TIA.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the
second and third sentences of the immediately preceding paragraph, those
persons who were Holders at such record date (or their duly designated
proxies), and only those persons, shall be entitled to consent to such
amendment, supplement or waiver or to revoke any consent previously given,
whether or not such persons continue to be Holders after such record date.
Such consent shall be effective only for actions taken within 90 days after
such record date.
After an amendment, supplement or waiver becomes effective, it shall bind
every Holder; unless it makes a change described in any of clauses (a) through
(k) of Section 9.02; if it makes such a change, the amendment, supplement or
waiver shall bind every subsequent Holder of a Security or portion of a
Security that evidences the same debt as the consenting Holder's Security.
SECTION 9.05. Notation on or Exchange of Securities. If an amendment,
supplement or waiver changes the terms of a Security, the Trustee shall (in
accordance with the specific direction of the Company) request the Holder of
the Security to deliver it to the
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Trustee. The Trustee shall (in accordance with the specific direction of the
Company) place an appropriate notation on the Security about the changed terms
and return it to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Security shall issue and the Trustee
shall authenticate a new Security that reflects the changed terms. Failure to
make the appropriate notation or issue a new Security shall not affect the
validity and effect of such amendment, supplement or waiver.
SECTION 9.06. Trustee May Sign Amendments, etc. The Trustee shall sign
any amendment, supplement or waiver authorized pursuant to this Article Nine if
the amendment, supplement or waiver does not adversely affect the rights,
duties, liabilities or immunities of the Trustee. If it does, the Trustee may,
but need not, sign it. In signing or refusing to sign such amendment,
supplement or waiver, the Trustee shall be entitled to receive, and shall be
fully protected in relying upon, an Officers' Certificate and an Opinion of
Counsel stating that the execution of any amendment, supplement or waiver is
authorized or permitted by this Indenture, that it is not inconsistent herewith
and that it will be valid and binding upon the Company in accordance with its
terms.
ARTICLE TEN
SUBORDINATION OF SECURITIES
SECTION 10.01. Securities Subordinate to Senior Indebtedness. The
Company covenants and agrees, and each Holder of a Security, by his acceptance
thereof, likewise covenants and agrees, that, to the extent and in the manner
hereinafter set forth in this Article Ten, the Indebtedness represented by the
Securities is hereby expressly made subordinate and subject in right of payment
as provided in this Article to the prior payment in full in cash or Cash
Equivalents of all amounts payable under all existing and future Senior
Indebtedness of the Company.
This Article Ten shall constitute a continuing offer to all persons who,
in reliance upon such provisions, become holders of, or continue to hold Senior
Indebtedness; and such provisions are made for the benefit of the holders of
Senior Indebtedness; and such holders are made obligees hereunder and they or
each of them may enforce such provisions.
SECTION 10.02. Payment Over of Proceeds upon Dissolution, etc. In the
event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding
in connection therewith, relating to the Company or to its assets, or (b) any
liquidation, dissolution or other winding-up of the Company, whether voluntary
or involuntary and whether or not involving insolvency or bankruptcy, or (c)
any assignment for the benefit of creditors or any marshalling of assets or
liabilities of the Company, then and in any such event:
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(1) all Senior Indebtedness must be paid in full in cash or Cash
Equivalents before any direct or indirect payment or distribution
(excluding securities of the Company or any other person that are equity
securities or are subordinated in right of payment to all Senior
Indebtedness that may at the time be outstanding, to substantially the same
extent as, or to a greater extent than, the Securities as provided in this
Article; such securities are hereinafter collectively referred to as
"Permitted Junior Securities") is made on account of principal of, premium,
if any, or interest on the Securities or on account of the purchase,
redemption, defeasance or other acquisition of, or in respect of, the
Securities (other than payments previously made pursuant to Section 8.02);
and
(2) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities (excluding Permitted
Junior Securities), by set-off or otherwise, to which the Holders or the
Trustee would be entitled but for the provisions of this Article shall be
paid by the liquidating trustee or agent or other person making such
payment or distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the holders of Senior
Indebtedness or their representative or representatives or to the trustee
or trustees under any indenture under which any instruments evidencing any
of such Senior Indebtedness may have been issued, ratably according to the
aggregate amounts remaining unpaid on account of the Senior Indebtedness
held or represented by each, to the extent necessary to make payment in
full in cash or Cash Equivalents of all Senior Indebtedness remaining
unpaid, after giving effect to any concurrent payment or distribution to
the holders of such Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing provisions of
this Section 10.02, the Trustee or the Holder of any Security shall have
received any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, in respect of
principal of, premium, if any, or interest on the Securities before all
Senior Indebtedness is paid in full in cash or Cash Equivalents then and in
such event such payment or distribution (excluding Permitted Junior
Securities) shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or
other person making payment or distribution of assets of the Company for
application to the payment of all Senior Indebtedness remaining unpaid, to
the extent necessary to pay all Senior Indebtedness in full in cash or Cash
Equivalents after giving effect to any concurrent payment or distribution
to or for the holders of Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company with
or into, another person or the liquidation or dissolution of the Company
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another person upon the terms and conditions
set forth in Article Five hereof shall not be deemed a dissolution, winding-up,
liquidation, reorganization, assignment for the benefit of
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creditors or marshalling of assets and liabilities of the Company for the
purposes of this Article if the person formed by such consolidation or the
surviving entity of such merger or the person which acquires by conveyance,
transfer or lease such properties and assets substantially as an entirety, as
the case may be, shall, as a part of such consolidation, merger, conveyance,
transfer or lease, comply with the conditions set forth in such Article Five.
SECTION 10.03. Suspension of Payment When Senior Indebtedness in Default.
(a) Unless Section 10.02 shall be applicable, upon the occurrence and during
the continuance of any default in the payment of principal, premium, if any, or
interest on any Senior Indebtedness, when the same becomes due (whether due to
lapse of time or at maturity, whether by acceleration or otherwise) (a "Payment
Default"), and after receipt by the Trustee and the Company from
representatives of holders of such Senior Indebtedness of written notice of
such default, no direct or indirect payment (other than payments previously
made pursuant to Article Eight) by or on behalf of the Company of any kind or
character (excluding Permitted Junior Securities) may be made on account of the
principal of, premium, if any, or interest on, or the purchase, redemption,
defeasance or other acquisition of, the Securities unless and until such Payment
Default has been cured or waived or has ceased to exist or such Senior
Indebtedness shall have been discharged or paid in full in cash or Cash
Equivalents.
(b) Unless Section 10.02 shall be applicable, upon the occurrence and
during the continuance of any default (other than a Payment Default) in respect
of any Designated Senior Indebtedness the terms of which provide that the
maturity thereof may be accelerated (a "Non-payment Default") and upon the
earlier to occur of (1) the receipt by the Trustee from the representatives of
holders of such Designated Senior Indebtedness of a written notice of such
Non-payment Default or (2) if such Non-payment Default results from the
acceleration of the Securities, the date of such acceleration, no payment
(other than payments previously made pursuant to Article Eight) or distribution
of any assets of the Company of any kind or character (excluding Permitted
Junior Securities) may be made by the Company on account of the principal of,
premium, if any, or interest on, or the purchase, redemption, defeasance or
other acquisition of, the Securities for the period specified below (the
"Payment Blockage Period").
(c) The Payment Blockage Period shall commence upon the receipt of notice
of a Non-payment Default by the Trustee from the representatives of holders of
Designated Senior Indebtedness or the date of the acceleration referred to in
clause (2) of the preceding paragraph, as the case may be, and shall end on the
earliest to occur of the following events: (1) 179 days have elapsed since the
receipt of such notice or the date of such acceleration (provided such
Designated Senior Indebtedness shall not theretofore have been accelerated),
(ii) such default is cured or waived or ceases to exist or such Designated
Senior Indebtedness is discharged or paid in full in cash or Cash Equivalents
(provided that no other Non-payment Default has occurred and is then continuing
after giving effect to such
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cure or waiver), or (iii) such Payment Blockage Period shall have been
terminated by written notice to the Company or the Trustee from the
representatives of holders of Designated Senior Indebtedness initiating such
Payment Blockage Period, after which the Company shall promptly resume making
any and all required payments in respect of the Securities, including any missed
payments (except where the provisions of Section 10.03(a) are then applicable in
respect of any Senior Indebtedness or where payment is otherwise not permitted
under the terms of this Indenture). No Non-payment Default with respect to
Designated Senior Indebtedness that existed or was continuing on the date of the
commencement of any Payment Blockage Period with respect to the Designated
Senior Indebtedness initiating such Payment Blockage Period will be, or can be,
made the basis for the commencement of a second Payment Blockage Period, whether
or not within a period of 365 consecutive days, unless such default has been
cured or waived for a period of not less than 90 consecutive days. In no event
will a Payment Blockage Period extend beyond 179 days from the receipt by the
Trustee of the notice or the date of the acceleration initiating such Payment
Blockage Period and there must be a 186 consecutive day period in any 365 day
period during which no Payment Blockage Period is in effect.
(d) In the event of the acceleration of the maturity of any of the
Securities, the holders of all Senior Indebtedness will first be entitled to
receive payment in full of all amounts due thereon before the Holders of the
Securities will be entitled to receive any payment on the principal of,
premium, if any, or interest on, the Securities (other than payments previously
made pursuant to Article Eight).
(e) In the event that, notwithstanding the foregoing, the Trustee or the
Holder of any Security shall have received any payment prohibited by the
foregoing provisions of this Section 10.03, then and in such event such payment
shall be paid over and delivered forthwith to the holders of Senior
Indebtedness or their representatives or as a court of competent jurisdiction
shall direct for application to the payment of any due and unpaid Senior
Indebtedness, to the extent necessary to pay all such due and unpaid Senior
Indebtedness in cash or Cash Equivalents, after giving effect to any concurrent
payment to or for the holders of Senior Indebtedness.
SECTION 10.04. Trustee's Relation to Senior Indebtedness. With respect
to the holders of Senior Indebtedness, the Trustee undertakes to perform or to
observe only such of its covenants and obligations as are specifically set
forth in this Article Ten (and in Article Twelve with respect to any Guarantor
Senior Indebtedness), and no implied covenants or obligations with respect to
the holders of Senior Indebtedness shall be read into this Indenture against
the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness.
SECTION 10.05. Subrogation to Rights of Holders of Senior Indebtedness.
Upon the payment in full of all Senior Indebtedness, the Holders of the
Securities shall be subrogated to the rights of the holders of such Senior
Indebtedness, to the extent payments or
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distributions otherwise payable to the Holders have been applied to the payment
of Senior Indebtedness, to receive payments and distributions of cash, property
and securities applicable to the Senior Indebtedness until the principal of,
premium, if any, and interest on the Securities shall be paid in full in cash or
Cash Equivalents. For purposes of such subrogation, no payments or
distributions to the holders of Senior Indebtedness of any cash, property or
securities to which the Holders of the Securities or the Trustee would be
entitled except for the provisions of this Article, and no payments over
pursuant to the provisions of this Article Ten to the holders of Senior
Indebtedness by Holders of the Securities or the Trustee shall, as among the
Company, its creditors other than holders of Senior Indebtedness, and the
Holders of the Securities, be deemed to be a payment or distribution by the
Company to or on account of the Senior Indebtedness.
If any payment or distribution to which the Holders would otherwise have
been entitled but for the provisions of this Article Ten shall have been
applied, pursuant to the provisions of this Article Ten, to the payment of all
amounts payable under the Senior Indebtedness of the Company, then and in such
case the Holders shall be entitled to receive from the holders of such Senior
Indebtedness at the time outstanding any payments or distributions received by
such holders of such Senior Indebtedness in excess of the amount sufficient to
pay all amounts payable under or in respect of such Senior Indebtedness in
full.
SECTION 10.06. Provisions Solely to Define Relative Rights. The
provisions of this Article Ten are and are intended solely for the purpose of
defining the relative rights of the Holders of the Securities on the one hand
and the holders of Senior Indebtedness on the other hand. Nothing contained in
this Article Ten or elsewhere in this Indenture or in the Securities is
intended to or shall (a) impair, as among the Company, its creditors other than
holders of Senior Indebtedness and the Holders of the Securities, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders of the Securities the principal of, premium, if any, and interest on
the Securities as and when the same shall become due and payable in accordance
with their terms; or (b) affect the relative rights against the Company of the
Holders of the Securities and creditors of the Company other than the holders
of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any
Security from exercising all remedies otherwise permitted by applicable law
upon a Default or an Event of Default under this Indenture, subject to the
rights, if any, under this Article Ten of the holders of Senior Indebtedness.
The failure to make a payment on account of principal of, premium, if any,
or interest on the Securities by reason of any provision of this Article Ten
shall not be construed as preventing the occurrence of a Default or an Event of
Default hereunder.
SECTION 10.07. Trustee to Effectuate Subordination. Each Holder of a
Security by such Holder's acceptance thereof authorizes and directs the Trustee
on such Holder's behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article Ten and appoints the
Trustee his attorney-in-fact for
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any and all such purposes, including, in the event of any dissolution,
winding-up, liquidation or reorganization of the Company whether in bankruptcy,
insolvency, receivership proceedings, or otherwise, the timely filing of a claim
for the unpaid balance of the Indebtedness of the Company owing to such Holder
in the form required in such proceedings and the causing of such claim to be
approved. If the Trustee does not file such a claim prior to 30 days before the
expiration of the time to file such a claim, the holders of Senior Indebtedness,
or any Senior Representative, may file such a claim on behalf of Holders of the
Securities.
SECTION 10.08. No Waiver of Subordination Provisions. (a) No right of
any present or future holder of any Senior Indebtedness to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any non-compliance
by the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
(b) Without limiting the generality of Section 10.08(a), the holders of
Senior Indebtedness may, at any time and from time to time, without the consent
of or notice to the Trustee or the Holders of the Securities, without incurring
responsibility to the Holders of the Securities and without impairing or
releasing the subordination provided in this Article Ten or the obligations
hereunder of the Holders of the Securities to the holders of Senior
Indebtedness, do any one or more of the following: (1) change the manner,
place or terms of payment or the amount of interest, fees or other amounts
payable, in respect of Senior Indebtedness; (2) extend the time of payment of,
or renew, increase or otherwise alter, Senior Indebtedness, or amend, waive, or
otherwise modify any terms of any instrument or agreement of any kind
evidencing, guaranteeing, securing or otherwise affecting or relating to Senior
Indebtedness; (3) exchange, release, sell, fail to perfect any security
interest or other Lien on or otherwise deal with, any property pledged,
mortgaged or otherwise subject to a security interest or other Lien securing
Senior Indebtedness; (4) release any guarantor or any other person liable in
any manner for the payment or collection of Senior Indebtedness; (5) exercise
or fail to exercise any right, power, privilege, or remedy in respect of Senior
Indebtedness or under any instrument or agreement evidencing, guaranteeing,
securing or otherwise affecting or relating to Senior Indebtedness; (6) give or
fail to give any notice, or take or fail to take any other action, required by
law, by agreement or otherwise to preserve the rights of any holder of Senior
Indebtedness against the Company or any guarantor or other person liable in
respect of Senior Indebtedness or with respect to any property pledged,
mortgaged or otherwise subject to a security interest or Lien securing Senior
Indebtedness; (7) perform or fail to perform any obligation of the holder of
Senior Indebtedness under any instrument or agreement evidencing, guaranteeing,
securing or otherwise affecting or relating to Senior Indebtedness;or (8) take
or fail to take any action that might otherwise constitute a defense available
to, or a discharge of, the Company or any guarantor or other person liable in
respect of Senior Indebtedness or the Trustee in respect of this Indenture;
provided,
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however, that in no event shall any such actions limit the right of the Holders
of the Securities to take any action to accelerate the maturity of the
Securities pursuant to Article Six hereof or to pursue any rights or remedies
hereunder or under applicable laws if the taking of such action does not
otherwise violate the terms of this Indenture.
SECTION 10.09. Notice to Trustee. (a) The Company shall give prompt
written notice to the Trustee of any fact known to the Company which would
prohibit the making of any payment to or by the Trustee in respect of the
Securities. Notwithstanding the provisions of this Article Ten or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts which would prohibit the making of any payment to or
by the Trustee in respect of the Securities, unless and until the Trustee shall
have received written notice thereof from the Company or a holder of Senior
Indebtedness or from any trustee, fiduciary or agent therefor; and, prior to
the receipt of any such written notice, the Trustee, subject to the provisions
of this Section 10.09, shall be entitled in all respects to assume that no such
facts exist; provided, however, that if the Trustee shall not have received the
notice provided for in this Section 10.09 prior to the time at which by the
terms hereof any money may become payable for any purpose under this Indenture
(including, without limitation, the payment of the principal of, premium, if
any, or interest on any Security), then, anything herein contained to the
contrary notwithstanding but without limiting the rights and remedies of the
holders of Senior Indebtedness or any trustee, fiduciary or agent thereof, the
Trustee shall have full power and authority to receive such money and to apply
the same to the purpose for which such money was received and shall not be
affected by any notice to the contrary which may be received by it prior to
such time; nor shall the Trustee be charged with knowledge of the curing of any
such default or the elimination of the act or condition preventing any such
payment unless and until the Trustee shall have received an Officers'
Certificate to such effect.
(b) Subject to the provisions of Section 7.01, the Trustee shall be
entitled to rely on the delivery to it of a written notice to the Trustee and
the Company by a person representing himself to be a holder of Senior
Indebtedness (or a trustee, fiduciary or agent therefor) to establish that such
notice has been given by a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor). In the event that the Trustee determines in good
faith that further evidence is required with respect to the right of any person
as a holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article Ten, the Trustee may request such person
to furnish evidence to the reasonable satisfaction of the Trustee as to the
amount of Senior Indebtedness held by such person, the extent to which such
person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such person under this Article Ten, and if
such evidence is not furnished, the Trustee may defer any payment to such
person pending judicial determination as to the right of such person to receive
such payment.
SECTION 10.10. Reliance on Judicial Order or Certificate of Liquidating
Agent. Upon any payment or distribution of assets of the Company referred to
in this
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Article Ten, the Trustee, subject to the provisions of Section 7.01, and the
Holders, shall be entitled to rely upon any order or decree entered by any court
of competent jurisdiction in which such insolvency, bankruptcy, receivership,
liquidation, reorganization, dissolution, winding-up or similar case or
proceeding is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of creditors, agent or
other person making such payment or distribution, delivered to the Trustee or to
the Holders, for the purpose of ascertaining the persons entitled to participate
in such payment or distribution, the holders of Senior Indebtedness and other
Indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article.
SECTION 10.11. Rights of Trustee as a Holder of Senior Indebtedness;
Preservation of Trustee's Rights. The Trustee in its individual capacity shall
be entitled to all the rights set forth in this Article Ten with respect to any
Senior Indebtedness which may at any time be held by it, to the same extent as
any other holder of Senior Indebtedness, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder. Nothing in this
Article Ten shall apply to claims of, or payments to, the Trustee under or
pursuant to Section 7.08.
SECTION 10.12. Article Applicable to Paying Agents. In case at any time
any Paying Agent other than the Trustee shall have been appointed by the
Company and be then acting hereunder, the term "Trustee" as used in this
Article shall in such case (unless the context otherwise requires) be construed
as extending to and including such Paying Agent within its meaning as fully for
all intents and purposes as if such Paying Agent were named in this Article Ten
in addition to or in place of the Trustee; provided, however, that Section
10.11 shall not apply to the Company or any Affiliate of the Company if it or
such Affiliate acts as Paying Agent.
SECTION 10.13. No Suspension of Remedies. Nothing contained in this
Article Ten shall limit the right of the Trustee or the Holders of Securities
to take any action to accelerate the maturity of the Securities pursuant to
Article Six or to pursue any rights or remedies hereunder or under applicable
law, subject to the rights, if any, under this Article Ten of the holders, from
time to time, of Senior Indebtedness.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act of 1939. This Indenture is subject to
the provisions of the TIA that are required to be a part of this Indenture, and
shall, to the extent applicable, be governed by such provisions.
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If any provision of this Indenture modifies or excludes any provision of
the Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or
excluded, as the case may be.
SECTION 11.02. Notices. Any notice or communication shall be
sufficiently given if in writing and delivered in person or mailed by first
class mail, postage prepaid, addressed as follows:
If to the Company or any Guarantor to:
Interface, Inc.
2859 Paces Ferry Road
Suite 2000
Atlanta, GA 30339
Attn: General Counsel
With a copy to:
Kilpatrick & Cody
1100 Peachtree Street
Atlanta, GA 30309
Attn: G. Kimbrough Taylor
If to the Trustee to:
First Union National Bank of Georgia
Suite 1100, First Union Plaza
999 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attn: Corporate Trust Department
The parties hereto by notice to the other parties may designate additional
or different addresses for subsequent notices or communications.
Any notice or communication mailed, postage prepaid, to a Holder,
including any notice delivered in connection with TIA Section 310(b), TIA
Section 313(c), TIA Section 314(a) and TIA Section 315(b), shall be mailed
by first class mail to such Holder at the address of such Holder as it appears
on the Securities register maintained by the Registrar and shall be
sufficiently given to such Holder if so mailed within the time prescribed.
Copies of any such communication or notice to a Holder shall also be mailed to
the Trustee.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other Holders.
Except for a notice to the
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Trustee, which is deemed given only when received, if a notice or communication
is mailed in the manner provided above, it is duly given, whether or not the
addressee receives it.
SECTION 11.03. Communication by Holders with Other Holders. Holders may
communicate pursuant to TIA Section 312(b) with other Holders with respect to
their rights under this Indenture or the Securities. The obligors, the
Trustee, the Registrar and any other person shall have the protection of TIA
Section 312(c).
SECTION 11.04. Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Company or any Guarantor to the Trustee to
take any action under this Indenture, such obligor shall furnish to the
Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(a) a statement that the person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statement or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
opinion as to whether or not such covenant or condition has been complied
with; and
(d) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with; provided, however, that
with respect to matters of fact, an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar. The Trustee
may make reasonable rules for action by or at a meeting of Securityholders.
The Paying Agent or Registrar may make reasonable rules for its functions.
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SECTION 11.07. Governing Law. The laws of the State of New York shall
govern this Indenture, the Guarantees and the Securities. The Trustee, the
Company, each Guarantor and the Holders agree to submit to the jurisdiction of
the courts of the State of New York in any action or proceeding arising out of
or relating to this Indenture, the Guarantees or the Securities.
SECTION 11.08. No Interpretation of Other Agreements. This Indenture may
not be used to interpret another indenture, loan or debt agreement of the
Company, any Guarantor or any of its Subsidiaries. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
SECTION 11.09. No Recourse Against Others. A director, officer,
employee, stockholder or Affiliate, as such, of the Company or any Guarantor
shall not have any liability for any obligations of the Company under the
Securities or this Indenture, or for any obligations of a Guarantor under any
Guarantee, or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Holder by accepting a Security waives and
releases all such liability.
SECTION 11.10. Successors. All agreements of the Company and any
Guarantor in this Indenture and the Securities and the Guarantees shall bind
its successors except as otherwise provided herein. All agreements of the
Trustee in this Indenture shall bind its successors.
SECTION 11.11. Duplicate Originals. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all such
executed copies together represent the same agreement.
SECTION 11.12. Separability. In case any provision in this Indenture,
any Guarantee or the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby, and a Holder shall have no claim
therefor against any party hereto.
SECTION 11.13. Table of Contents, Headings, etc. The Table of Contents,
the Reconciliation and tie and the headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
SECTION 11.14. Benefits of Indenture. Except as provided in Article Ten,
nothing in this Indenture or in the Securities, express or implied, shall give
to any person, other than the parties hereto and their successors hereunder,
and the Holders, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
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ARTICLE TWELVE
GUARANTEE OF SECURITIES
SECTION 12.01. Guarantee. Subject to the provisions of this Article
Twelve, each Guarantor hereby jointly and severally unconditionally guarantees
to each Holder of a Security authenticated and delivered by the Trustee and to
the Trustee and its successors and assigns, irrespective of the validity and
enforceability of this Indenture, the Securities or the obligations of the
Company or any other Guarantors to the Holders or the Trustee hereunder or
thereunder, that: (a) the principal of, premium, if any, and interest on the
Securities will be duly and punctually paid in full when due, whether at
maturity, by acceleration or otherwise, and interest on the overdue principal
and (to the extent permitted by law) interest, if any, on the Securities and
all other obligations of the Company or the Guarantors to the Holders or the
Trustee hereunder or thereunder (including fees, expenses or other) and all
other Senior Subordinated Note Obligations will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and (b) in case
of any extension of time of payment or renewal of any Securities or any of such
other Senior Subordinated Note Obligations, the same will be promptly paid in
full when due or performed in accordance with the terms of the extension or
renewal, whether at Stated Maturity, by acceleration or otherwise. Failing
payment when due of any amount so guaranteed, or failing performance of any
other obligation of the Company to the Holders, for whatever reason, each
Guarantor will be obligated to pay, or to perform or cause the performance of,
the same immediately. An Event of Default under this Indenture or the
Securities shall constitute an event of default under this Guarantee, and shall
entitle the Holders of Securities to accelerate the obligations of the
Guarantors hereunder in the same manner and to the same extent as the
obligations of the Company.
Each of the Guarantors hereby agrees that its obligations hereunder shall
be unconditional, irrespective of the validity, regularity or enforceability of
the Securities or this Indenture, the absence of any action to enforce the
same, any waiver or consent by any holder of the Securities with respect to any
provisions hereof or thereof, any release of any other Guarantor, the recovery
of any judgment against the Company, any action to enforce the same, whether or
not a Guarantee is affixed to any particular Security, or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a guarantor. Each of the Guarantors hereby waives the benefit of
diligence, presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands
whatsoever and covenants that its Guarantee will not be discharged except by
complete performance of the obligations contained in the Securities, this
Indenture and this Guarantee. If any Holder or the Trustee is required by any
court or otherwise to return to the Company or to any Guarantor, or any
custodian, trustee, liquidator or other similar official acting in relation to
the Company or such Guarantor, any amount paid by the Company or such Guarantor
to the Trustee or such Holder, this Guarantee, to the extent
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theretofore discharged, shall be reinstated in full force and effect. Each
Guarantor further agrees that, as between it, on the one hand, and the Holders
of Securities and the Trustee, on the other hand subject to this Article Twelve,
(a) the maturity of the obligations guaranteed hereby may be accelerated as
provided in Article Six hereof for the purposes of this Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (b) in the
event of any acceleration of such obligations as provided in Article Six hereof,
such obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantors for the purpose of this Guarantee.
This Guarantee shall remain in full force and effect and continue to be
effective should any petition be filed by or against the Company for
liquidation or reorganization, should the Company become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of the Company's assets, and shall,
to the fullest extent permitted by law, continue to be effective or be
reinstated, as the case may be, if at any time payment and performance of the
Securities are, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee on the Securities,
whether as a "voidable preference," "fraudulent transfer" or otherwise, all as
though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Securities shall, to the fullest extent permitted by law, be reinstated and
deemed reduced only by such amount paid and not so rescinded, reduced, restored
or returned.
No stockholder, officer, director, employer or incorporator, past, present
or future, or any Guarantor, as such, shall have any personal liability under
this Guarantee by reason of his, her or its status as such stockholder,
officer, director, employer or incorporator.
The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does not impair the
rights of the Holders under this Guarantee.
The Guarantee of each Guarantor is limited to an amount that would not
render such Guarantor insolvent. The Guarantee of any Guarantor, and this
Section 12.01 as applicable to any Guarantor, may be modified, without the
consent of the Holders, to reflect such further fraudulent conveyance savings
provisions, net worth or maximum amount limitations as to recourse or similar
provisions as are set forth in, and after giving effect to, any guarantee of
such Guarantor issued under the Credit Agreements and shall be required to be
modified in the same manner as such guarantee under the Credit Agreements are
amended or modified; provided that no such amendment or modification to
thereafter conform to the Credit Agreements shall be in a manner which is
adverse to the Holders in any respect. No modification or amendment referred
to in the preceding sentence shall be permitted if it would disadvantage the
Holders relative to the holders of the obligations of such Guarantor
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under the Credit Agreements other than by operation of the subordination
provisions of this Article Twelve and any Permitted Liens. Any amendment or
modification pursuant to this paragraph shall comply with the provisions of
Article Nine.
SECTION 12.02. Execution and Delivery of Guarantee. To further evidence
the Guarantee set forth in Section 12.01, each Guarantor hereby agrees that a
notation of such Guarantee, substantially in the form included in Exhibit B
hereto, shall be endorsed on each Security authenticated and delivered by the
Trustee after such Guarantee is executed and executed by either manual or
facsimile signature of an Officer of each Guarantor. The validity and
enforceability of any Guarantee shall not be affected by the fact that it is
not affixed to any particular Security.
Each of the Guarantors hereby agrees that its Guarantee set forth in
Section 12.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Security a notation of such Guarantee.
If an Officer of a Guarantor whose signature is on this Indenture or a
Security no longer holds that office at the time the Trustee authenticates such
Security or at any time thereafter, such Guarantor's Guarantee of such Security
shall be valid nevertheless.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantee set forth in
this Indenture on behalf of the Guarantor.
SECTION 12.03. Additional Guarantors. (a) Any person may become a
Guarantor by executing and delivering to the Trustee (i) a supplemental
indenture in form and substance satisfactory to the Trustee, which subjects
such person to the provisions of this Indenture as a Guarantor, and (ii) an
Opinion of Counsel to the effect that such supplemental indenture has been duly
authorized and executed by such person and constitutes the legal, valid,
binding and enforceable obligation of such person (subject to such customary
exceptions concerning fraudulent conveyance laws, creditors' rights and
equitable principles as may be acceptable to the Trustee in its discretion).
(b) If the Company or any of its Subsidiaries acquires or forms a Material
U.S. Subsidiary or if any Subsidiary of the Company shall become a Material
U.S. Subsidiary, the Company will cause any such Subsidiary to (i) execute and
deliver to the Trustee a supplemental indenture in form and substance
reasonably satisfactory to the Trustee pursuant to which such Subsidiary shall
guarantee all of the obligations of the Company with respect to the Securities
issued under this Indenture on a senior subordinated basis in substantially the
same manner and to the same extent set forth in this Article Twelve and (ii)
deliver to such Trustee an Opinion of Counsel reasonably satisfactory to such
Trustee to the effect that a supplemental indenture has been duly executed and
delivered by such Subsidiary and such Subsidiary is in compliance with the
terms of the Indenture.
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SECTION 12.04. Guarantee Obligations Subordinated to Guarantor Senior
Indebtedness. Each Guarantor covenants and agrees, and each Holder of a
Security, by its acceptance thereof, likewise covenants and agrees, that, to
the extent and in the manner hereinafter set forth in this Article Twelve, the
Indebtedness represented by the Guarantee made by or on behalf of such
Guarantor is hereby expressly made subordinate and subject in right of payment
as provided in this Article Twelve to the prior payment in full in cash or Cash
Equivalents or, as acceptable to the holders of Guarantor Senior Indebtedness
in any other manner, of all amounts payable under all existing and future
Guarantor Senior Indebtedness of such Guarantor.
This Section 12.04 and the following Sections 12.05 through 12.17 of this
Article Twelve shall constitute a continuing offer to all persons who, in
reliance upon such provisions, become holders of, or continue to hold Guarantor
Senior Indebtedness of any Guarantor and, to the extent set forth in Section
12.06(b), holders of Designated Senior Indebtedness; and such provisions are
made for the benefit of the holders of Guarantor Senior Indebtedness of each
Guarantor and, to the extent set forth in Section 12.06(b), holders of
Designated Senior Indebtedness; and such holders (to such extent) are made
obligees hereunder and they or each of them may enforce such provisions.
SECTION 12.05. Payment Over of Proceeds upon Dissolution, etc., of a
Guarantor. In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relating to any Guarantor or to its
assets, or (b) any liquidation, dissolution or other winding-up of any
Guarantor, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any marshalling of assets or liabilities of any Guarantor, then and in any
such event:
(1) all Guarantor Senior Indebtedness of such Guarantor must be paid
in full in cash or Cash Equivalents before the Holders of the Securities
are entitled to receive, pursuant to this Guarantee, any direct or indirect
payment or distribution by or on behalf of such Guarantor (excluding
Permitted Junior Securities of such Guarantor) on account of its Guarantee;
and
(2) any payment or distribution of assets of such Guarantor of any
kind or character, whether in cash, property or securities (excluding
Permitted Junior Securities of such Guarantor), by set-off or otherwise, to
which the Holders or the Trustee would be entitled but for the
subordination provisions of this Article Twelve shall be paid by the
liquidating trustee or agent or other person making such payment or
distribution whether a trustee in bankruptcy, a receiver or liquidating
trustee or otherwise, directly to the holders of Guarantor Senior
Indebtedness of such Guarantor or their representative or representatives
or to the trustee or trustees under any indenture under which any
instruments evidencing any of such Guarantor Senior Indebtedness may have
been issued, ratably according to the aggregate amounts remaining unpaid on
account
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of such Guarantor Senior Indebtedness held or represented by each, to the
extent necessary to make payment in full in cash or Cash Equivalents of all
such Guarantor Senior Indebtedness remaining unpaid, after giving effect to
any concurrent payment or distribution to the holders of such Guarantor
Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing provisions of
this Section 12.05, the Trustee or the Holder of any Security shall have
received any payment or distribution of assets of such Guarantor of any
kind or character, whether in cash, property or securities, in respect of
the Guarantee of such Guarantor before all Guarantor Senior Indebtedness of
such Guarantor is paid in full in cash or Cash Equivalents, then and in
such event such payment or distribution (excluding Permitted Junior
Securities of such Guarantor) shall be paid over or delivered forthwith to
the trustee in bankruptcy, receiver, liquidating trustee, custodian,
assignee, agent or other person making payment or distribution of assets of
such Guarantor for application to the payment of all such Guarantor Senior
Indebtedness remaining unpaid, to the extent necessary to pay all of such
Guarantor Senior Indebtedness in full in cash or Cash Equivalents after
giving effect to any concurrent payment or distribution to or for the
holders of such Guarantor Senior Indebtedness.
The consolidation of a Guarantor with, or the merger of a Guarantor with
or into, another person or the liquidation or dissolution of a Guarantor
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another person upon the terms and conditions
set forth in Article Five hereof shall not be deemed a dissolution, winding-up,
liquidation, reorganization, assignment for the benefit of creditors or
marshalling of assets and liabilities of a Guarantor for the purposes of this
Article if the person formed by such consolidation or the surviving entity of
such merger or the person which acquires by conveyance, transfer or lease such
properties and assets substantially as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance, transfer or lease, comply
with the conditions set forth in such Article Five.
SECTION 12.06. Suspension of Payment When Guarantor Senior Indebtedness
in Default. (a) Unless Section 12.05 shall be applicable, after the
occurrence of a Payment Default no payment or distribution of any assets of
such Guarantor of any kind or character (other than Permitted Junior Securities
of such Guarantor) shall be made by or on behalf of such Guarantor on account
of the payment of principal of, premium, if any, or interest on any Securities
or on account of the purchase, redemption, defeasance or other acquisition of
the Securities or any of the obligations of such Guarantor under this Guarantee
(other than payments previously made pursuant to Article Eight) unless and
until such Payment Default shall have been cured or waived or shall have ceased
to exist or the Senior Indebtedness as to which such Payment Default relates
shall have been discharged or paid in full in cash or Cash Equivalents, after
which, subject to Section 12.05 (if applicable), such Guarantor shall
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resume making any and all required payments in respect of its obligations under
this Guarantee, including any missed payments.
(b) Unless Section 12.05 shall be applicable, during any Payment Blockage
Period in respect of the Securities, no payment or distribution of any assets
of a Guarantor of any kind or character shall be made by or on behalf of a
Guarantor on account of the payment of principal of, premium, if any, or
interest on any Securities or on account of the purchase, redemption,
defeasance or other acquisition of any Securities or this Guarantee or on
account of any of the other obligations of such Guarantor under this Guarantee;
provided, however, that the foregoing prohibition shall not apply unless such
Payment Blockage Period has been instituted under Section 10.03(b) by a Senior
Representative acting for holders of Designated Senior Indebtedness who also
hold Guarantor Senior Indebtedness in respect of such Designated Senior
Indebtedness. Upon the termination of any Payment Blockage Period, subject to
Section 12.05 (if applicable), such Guarantor shall resume making any and all
required payments in respect of its obligations under this Guarantee, including
any missed payments (except where the provisions of Section 12.06(a) are then
applicable in respect of any Guarantor Senior Indebtedness or where payment is
otherwise not permitted under the terms of this Indenture).
(c) In the event of the acceleration of the maturity of the Securities,
the holders of all Guarantor Senior Indebtedness of such Guarantor will first
be entitled to receive payment in full of all amounts due thereon before the
holders of the Securities will be entitled to receive any payment by or on
behalf of such Guarantor (excluding Permitted Junior Securities of such
Guarantor) on account of its Guarantee.
(d) In the event that, notwithstanding the foregoing, the Trustee or the
Holder of any Security shall have received any payment from a Guarantor
prohibited by the foregoing provisions of this Section 12.06, then and in such
event such payment shall be paid over and delivered forthwith to the holders of
Guarantor Senior Indebtedness or their representatives, or as a court of
competent jurisdiction shall direct for application to the payment of any due
and unpaid Guarantor Senior Indebtedness, to the extent necessary to pay all
such due and unpaid Guarantor Senior Indebtedness in cash or Cash Equivalents,
after giving effect to any concurrent payment to or for the holders of
Guarantor Senior Indebtedness.
SECTION 12.07. Release of a Guarantor. (a) Upon the sale or disposition
of all of the Capital Stock of a Guarantor by the Company or a Subsidiary of
the Company, or upon the consolidation or merger of a Guarantor with or into
any person (in each case, other than to the Company or an Affiliate of the
Company), such Guarantor shall be deemed automatically and unconditionally
released and discharged from all obligations under this Article Twelve without
any further action required on the part of the Trustee or any Holder;
provided, however, that each such Guarantor which is a Significant Subsidiary
of the Company is sold or disposed of in accordance with Section 4.12 hereof;
provided further that the foregoing proviso shall not apply to the sale or
disposition of a Guarantor pursuant to, or
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in lieu of, the exercise by one or more holders of Senior Indebtedness of rights
and remedies in respect of the capital stock of such Guarantor previously
pledged or assigned to such holder or holders to secure such Indebtedness or
other sale or disposition the proceeds of which are used to repay Senior
Indebtedness secured by such capital stock.
(b) The Trustee shall deliver an appropriate instrument evidencing the
release of a Guarantor upon receipt of a request of the Company accompanied by
an Officers' Certificate certifying as to the compliance with this Section
12.07. Any Guarantor not so released or the entity surviving such Guarantor,
as applicable, will remain or be liable under its Guarantee as provided in this
Article Twelve.
The Trustee shall execute any documents reasonably requested by the
Company or a Guarantor in order to evidence the release of such Guarantor from
its obligations under its Guarantee endorsed on the Securities and under this
Article Twelve.
Nothing contained in this Indenture or in any of the Securities shall
prevent any consolidation or merger of a Guarantor with or into the Company or
another Guarantor or shall prevent any sale or conveyance of the property of a
Guarantor as an entirety or substantially as an entirety to the Company or
another Guarantor.
SECTION 12.08. Waiver of Subrogation. Each Guarantor hereby irrevocably
waives any claim or other rights which it may now or hereafter acquire against
the Company that arise from the existence, payment, performance or enforcement
of such Guarantor's obligations under this Guarantee and this Indenture,
including, without limitation, any right of subrogation, reimbursement,
exoneration, indemnification, and any right to participate in any claim or
remedy of any Holder of Securities against the Company, whether or not such
claim, remedy or right arises in equity, or under contract, statute or common
law, including, without limitation, the right to take or receive from the
Company, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security on account of such claim or other rights.
If any amount shall be paid to any Guarantor in violation of the preceding
sentence and the Securities shall not have been paid in full, such amount shall
have been deemed to have been paid to such Guarantor for the benefit of, and
held in trust for the benefit of, the Holders of the Securities, and shall,
subject to the subordination provisions of this Article and to Article Ten,
forthwith be paid to the Trustee for the benefit of such Holders to be credited
and applied upon the Securities, whether matured or unmatured, in accordance
with the terms of this Indenture. Each Guarantor acknowledges that it will
receive direct and indirect benefits from the financing arrangements
contemplated by this Indenture and that the waiver set forth in this Section
12.08 is knowingly made in contemplation of such benefits.
This Section 12.08 as applicable to any particular Guarantor may be
amended or modified, without the consent of the Holders, in a manner to be
consistent with the terms of any waiver of subrogation language set forth in any
guarantee of such Guarantor issued under
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the Credit Agreements and shall be required to be modified in the same manner as
such guarantee under the Credit Agreements is amended or modified; provided that
no such amendment or modification to thereafter conform to the Credit Agreements
shall be in a manner which is adverse to the Holders in any respect. No
modification or amendment referred to in the preceding sentence shall be
permitted if it would disadvantage the Holders relative to the lenders under the
Credit Agreements other than by operation of the subordination provisions of
this Article Twelve and any Permitted Liens.
SECTION 12.09. Guarantee Provisions Solely to Define Relative Rights.
The subordination provisions of this Article are and are intended solely for
the purpose of defining the relative rights of the Holders of the Securities on
the one hand and the holders of Guarantor Senior Indebtedness of each Guarantor
and, to the extent set forth in Section 12.06, holders of Designated Senior
Indebtedness on the other hand. Nothing contained in this Article Twelve
(other than a release pursuant to Section 12.07) or elsewhere in this Indenture
or in the Securities is intended to or shall (a) impair, as among each
Guarantor, its creditors other than holders of its Guarantor Senior
Indebtedness and the Holders of the Securities, the obligation of such
Guarantor, which is absolute and unconditional, to make payments to the Holders
in respect of its obligations under this Guarantee as and when the same shall
become due and payable in accordance with their terms; or (b) affect the
relative rights against such Guarantor of the Holders of the Securities and
creditors of such Guarantor other than the holders of the Guarantor Senior
Indebtedness of such Guarantor; or (c) prevent the Trustee or the Holder of any
Security from exercising all remedies otherwise permitted by applicable law
upon Default or an Event of Default under this Indenture, subject to the
rights, if any, under the subordination provisions of this Article Twelve of
the holders of Guarantor Senior Indebtedness of the Guarantors hereunder and,
to the extent set forth in Section 12.06, holders of Designated Senior
Indebtedness.
The failure by any Guarantor to make a payment in respect of its
obligations under this Guarantee by reason of any provision of this Article
Twelve shall not be construed as preventing the occurrence of a Default or an
Event of Default hereunder.
SECTION 12.10. Trustee To Effectuate Subordination of Guarantee
Obligations. Each Holder of a Security by his acceptance thereof authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article Twelve and appoints the Trustee his attorney-in-fact for any and all
such purposes, including, in the event of any dissolution, winding-up,
liquidation or reorganization of any Guarantor whether in bankruptcy,
insolvency, receivership proceedings, or otherwise, the timely filing of a
claim for the unpaid balance of the Indebtedness of such Guarantor owing to
such Holder in the form required in such proceedings and the causing of such
claim to be approved. If the Trustee does not file such a claim prior to 30
days before the expiration of the time to file such a claim, the holders of
Guarantor Senior Indebtedness, or any Senior Representative, may file such a
claim on behalf of Holders of the Securities.
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SECTION 12.11. No Waiver of Guarantee Subordination Provisions. (a) No
right of any present or future holder of any Guarantor Senior Indebtedness of
any Guarantor or any Designated Senior Indebtedness to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or any Guarantor or by any act
or failure to act, in good faith, by any such holder, or by any non-compliance
by the Company or any Guarantor with the terms, provisions and covenants of
this Indenture, regardless of any knowledge thereof any such holder may have or
be otherwise charged with.
(b) Without limiting the generality of Section 12.11(a), the holders of
Guarantor Senior Indebtedness of any Guarantor may, at any time and from time
to time, without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article
Twelve or the obligations hereunder of the Holders of the Securities to the
holders of such Guarantor Senior Indebtedness, do any one or more of the
following: (1) change the manner, place or terms of payment or the amount of
interest, fees or other amounts payable, in respect of Guarantor Senior
Indebtedness or Senior Indebtedness; (2) extend the time of payment of, or
renew, increase or otherwise alter, Guarantor Senior Indebtedness or Senior
Indebtedness, or amend, waive, or otherwise modify any terms of any instrument
or agreement of any kind evidencing, guaranteeing, securing or otherwise
affecting or relating to Guarantor Senior Indebtedness or Senior Indebtedness;
(3) exchange, release, sell, fail to perfect any security interest or other
Lien on or otherwise deal with, any property pledged, mortgaged or otherwise
subject to a security interest or other Lien securing Guarantor Senior
Indebtedness or Senior Indebtedness; (4) release any guarantor or any other
person liable in any manner for the payment or collection of Guarantor Senior
Indebtedness or Senior Indebtedness; (5) exercise or fail to exercise any
right, power, privilege, or remedy in respect of Guarantor Senior Indebtedness
or Senior Indebtedness or under any instrument or agreement evidencing,
guaranteeing, securing or otherwise affecting or relating to Guarantor Senior
Indebtedness or Senior Indebtedness; (6) give or fail to give any notice, or
take or fail to take any other action, required by law, by agreement or
otherwise to preserve the rights of any holder of Guarantor Senior Indebtedness
against the Company or any guarantor or other person liable in respect of
Guarantor Senior Indebtedness or Senior Indebtedness or with respect to any
property pledged, mortgaged or otherwise subject to a security interest or Lien
securing Guarantor Senior Indebtedness or Senior Indebtedness; (7) perform or
fail to perform any obligation of the holder of Guarantor Senior Indebtedness
under any instrument or agreement evidencing, guaranteeing, securing or
otherwise affecting or relating to Guarantor Senior Indebtedness or Senior
Indebtedness; or (8) take or fail to take any action that might otherwise
constitute a defense available to, or a discharge of, the Company or any
guarantor or other person liable in respect of Guarantor Senior Indebtedness or
Senior Indebtedness or the Trustee in respect of this Indenture; exercise or
refrain from exercising any rights against such Guarantor and any other person;
provided, however, that in no event shall any such actions limit the right of
the Holders of the Securities to take any action to accelerate the maturity of
the Securities pursuant to
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Article Six hereof or to pursue any rights or remedies hereunder or under
applicable laws if the taking of such action does not otherwise violate the
terms of this Indenture.
SECTION 12.12. Guarantors to Give Notice to Trustee. (a) Each Guarantor
shall give prompt written notice to the Trustee of any fact known to such
Guarantor which would prohibit the making of any payment by such Guarantor to
or by the Trustee in respect of the Securities. Notwithstanding the
subordination provisions of this Article or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts which would prohibit the making of any payment to or by the Trustee
in respect of the Securities, unless and until the Trustee shall have received
written notice thereof from the Company, such Guarantor or a holder of its
Guarantor Senior Indebtedness or from any trustee, fiduciary or agent therefor;
and, prior to the receipt of any such written notice, the Trustee, subject to
the provisions of this Section 12.12, shall be entitled in all respects to
assume that no such facts exist; provided, however, that if the Trustee shall
not have received the notice provided for in this Section 12.12 prior to the
time at which by the terms hereof any money may become payable for any purpose
under this Indenture (including, without limitation, the payment of the
principal of, premium, if any, or interest on any Security), then, anything
herein contained to the contrary notwithstanding but without limiting the
rights and remedies of the holders of such Guarantor Senior Indebtedness or any
trustee, fiduciary or agent thereof, the Trustee shall have full power and
authority to receive such money and to apply the same to the purpose for which
such money was received and shall not be affected by any notice to the contrary
which may be received by it prior to such time; nor shall the Trustee be
charged with knowledge of the curing of any such default or the elimination of
the act or condition preventing any such payment unless and until the Trustee
shall have received an Officers' Certificate from such Guarantor to such
effect.
(b) Subject to the provisions of Section 7.01, the Trustee shall be
entitled to rely on the delivery to it of a written notice to the Trustee and
the Company by a person representing himself to be a holder of Guarantor Senior
Indebtedness of any Guarantor (or a trustee, fiduciary or agent therefor) to
establish that such notice has been given by a holder of Guarantor Senior
Indebtedness of a Guarantor (or a trustee, fiduciary or agent therefor). In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any person as a holder of Guarantor
Senior Indebtedness of any Guarantor to participate in any payment or
distribution pursuant to this Article Twelve, the Trustee may request such
person to furnish evidence to the reasonable satisfaction of the Trustee as to
the amount of Guarantor Senior Indebtedness of each Guarantor held by such
person, the extent to which such person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
person under this Article Twelve, and if such evidence is not furnished, the
Trustee may defer any payment to such person pending judicial determination as
to the right of such person to receive such payment.
SECTION 12.13. Reliance on Judicial Order or Certificate of Liquidating
Agent Regarding Dissolution, etc., of Guarantors. Upon any payment or
distribution of
<PAGE> 112
104
assets of any Guarantor referred to in this Article Twelve, the Trustee subject
to the provisions of Section 7.01, and the Holders shall be entitled to rely
upon any order or decree entered by any court of competent jurisdiction in
which such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding-up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other person making
such payment or distribution, delivered to the Trustee or to the Holders, for
the purpose of ascertaining the persons entitled to participate in such payment
or distribution, the holders of Guarantor Senior Indebtedness of such Guarantor
and other Indebtedness of such Guarantor, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article Twelve.
SECTION 12.14. Rights of Trustee as a Holder of Guarantor Senior
Indebtedness; Preservation of Trustee's Rights. The Trustee in its individual
capacity shall be entitled to all the rights set forth in this Article Twelve
with respect to any Guarantor Senior Indebtedness of any Guarantor which may at
any time be held by the Trustee, to the same extent as any other holder of such
Guarantor Senior Indebtedness, and nothing in this Indenture shall deprive the
Trustee of any of its rights as such holder. Nothing in this Article Twelve
shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 7.08.
SECTION 12.15. Article Twelve Applicable to Paying Agents. In case at
any time any Paying Agent other than the Trustee shall have been appointed by
the Company and be then acting hereunder, the term "Trustee" as used in this
Article Twelve shall in such case (unless the context otherwise requires) be
construed as extending to and including such Paying Agent within its meaning as
fully for all intents and purposes as if such Paying Agent were named in this
Article Twelve in addition to or in place of the Trustee; provided, however,
that Section 12.14 shall not apply to the Company or any Affiliate of the
Company if it or such Affiliate acts as Paying Agent.
SECTION 12.16. No Suspension of Remedies. Nothing contained in this
Article Twelve shall limit the right of the Trustee or the Holders of
Securities to take any action to accelerate the maturity of the Securities
pursuant to Article Six or to pursue any rights or remedies hereunder or under
applicable law, subject to the rights, if any, under this Article Twelve of the
holders, from time to time, of Guarantor Senior Indebtedness of the Guarantors.
SECTION 12.17. Trustee's Relation to Guarantor Senior Indebtedness. With
respect to the holders of Guarantor Senior Indebtedness of any Guarantor, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Twelve (and in
Article Ten with respect to Senior Indebtedness), and no implied covenants or
obligations with respect to the holders of Guarantor Senior Indebtedness of any
Guarantor shall be read into this Indenture against the
<PAGE> 113
105
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Guarantor Senior Indebtedness of any Guarantor.
SECTION 12.18. Subrogation. Upon the payment in full of all Guarantor
Senior Indebtedness of the Guarantors and of all Senior Indebtedness of the
Company, the Holders shall be subrogated to the rights of the holders of such
Guarantor Senior Indebtedness of the Guarantors, to the extent payments or
distributions otherwise payable to the Holders have been applied to the payment
of Guarantor Senior Indebtedness, to receive payments and distributions of
cash, property and securities applicable to such Guarantor Senior Indebtedness
until all amounts due under the Guarantee shall be paid in full in cash or Cash
Equivalents. For purposes of such subrogation, no payments or distributions to
the holders of Guarantor Senior Indebtedness of any cash, property or
securities to which Holders of the Securities or the Trustee would be entitled
except for the provisions of this Article Twelve, and no payment pursuant to
the provisions of this Article Twelve to holders of such Guarantor Senior
Indebtedness of the Guarantors by the Holders or the Trustee, shall, as between
each Guarantor, its creditors other than holders of such Guarantor Senior
Indebtedness of the Guarantors and the Holders, be deemed to be a payment by
such Guarantor to or on account of such Guarantor Senior Indebtedness of the
Guarantors.
If any payment or distribution to which the Holders would otherwise have
been entitled but for the provisions of this Article Twelve shall have been
applied, pursuant to the provisions of this Article Twelve, to the payment of
all amounts payable under the Guarantor Senior Indebtedness of the Guarantors,
then and in such case, the Holders shall be entitled to receive from the
holders of such Guarantor Senior Indebtedness of the Guarantors at the time
outstanding any payments or distributions received by such holders of Guarantor
Senior Indebtedness of the Guarantors in excess of the amount sufficient to pay
all amounts payable under or in respect of such Guarantor Senior Indebtedness
of the Guarantors in full.
<PAGE> 114
106
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
INTERFACE, INC.
By /s/ David W. Porter
------------------------------
Name: David W. Porter
Title: Senior Vice President
BENTLEY MILLS, INC.
GUILFORD (DELAWARE), INC.
GUILFORD OF MAINE, INC.
INTERFACE ASIA-PACIFIC, INC.
INTERFACE EUROPE, INC.
INTERFACE FLOORING SYSTEMS, INC.
INTERFACE RESEARCH CORPORATION
PANDEL, INC.
PRINCE STREET TECHNOLOGIES, LTD.
ROCKLAND REACT-RITE, INC.
By /s/ David W. Porter
-----------------------------
Name: David W. Porter
Title: Senior Vice President
FIRST UNION NATIONAL BANK OF GEORGIA, as Trustee
By /s/ Frederick A. Schaal
------------------------------
Name: Frederick A. Schaal
<PAGE> 115
EXHIBIT A
INTERFACE, INC.
% [SERIES B]** SENIOR SUBORDINATED NOTE DUE NOVEMBER 15, 2005
No. ______ $__________
Interface, Inc., a corporation incorporated under the laws of the State of
Georgia (herein called the "Company", which term includes any successor
corporation under the Indenture hereinafter referred to), for value received,
hereby promises to pay to _______________ or registered assigns, the principal
sum of _______________ Dollars on November 15, 2005, at the office or agency of
the Company referred to below, and to pay interest semiannually thereon on May
15 and November 15, in each year, commencing on May 15, 1996, accruing from the
most recent Interest Payment Date to which interest has been paid or duly
provided for or, if no interest has been paid, from the original date of
issuance, at the rate of 9 1/2% per annum, until the principal hereof is paid
or duly provided for. Interest will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the original date
of issuance (the"Issue Date"). Interest shall be computed on the basis of a
360-day year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture referred to on the
reverse hereof, be paid to the person in whose name this Security (or one or
more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest, which shall be May 1 or November 1
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date (each a "Regular Record Date"). Any such interest not so
punctually paid, or duly provided for, and interest on such defaulted interest
at the rate borne by the Securities, to the extent lawful, shall forthwith
cease to be payable to the Holder on such Regular Record Date, and may be paid
to the person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a special record date for
the payment of such defaulted interest to be fixed by the Trustee, notice of
which shall be given to Holders of Securities not less than 10 days prior to
such special record date, or may be paid at any time in any other lawful manner
not inconsistent with the requirements of any securities exchange on which the
Securities may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in such Indenture.
_______________
**Include only for Exchange Notes.
<PAGE> 116
2
[The Holder of this Security is entitled to the benefits of the
Registration Rights Agreement, dated as of November 21, 1995, among the
Company, the Guarantors and the Purchasers named therein (the "Registration
Rights Agreement"). In the event that either (a) the Exchange Offer
Registration Statement (as such term is defined in the Registration Rights
Agreement) is not filed with the Securities and Exchange Commission on or prior
to the 30th day following the date of original issue of the Securities, (b) the
Exchange Offer Registration Statement has not been declared effective on or
prior to the 75th day following the date of original issue of the Securities or
(c) the Exchange Offer (as such term is defined in the Registration Rights
Agreement) is not consummated or a Shelf Registration Statement (as such term
is defined in the Registration Rights Agreement) is not declared effective on
or prior to the 105th day following the date of original issue of the
Securities, the interest rate borne by this Security shall be increased by
0.50% per annum, which rate will be increased by an additional one-quarter of
one percent per annum for each 90-day period that any such additional interest
continues to accrue; provided that the aggregate increase in such interest rate
may in no event exceed 1.50% per annum. Upon (x) the filing of the Exchange
Offer Registration Statement in the case of clause (a) above, (y) the
effectiveness of the Exchange Offer Registration Statement in the case of
clause (b) above or (z) the day before the date of the consummation of the
Exchange Offer or the effectiveness of a Shelf Registration Statement, as the
case may be, in the case of clause (c) above, the interest rate borne by the
Security from the date of such filing, effectiveness or consummation, as the
case may be, will be reduced to the original interest rate set forth above;
provided, however, that, if after such reduction in interest rate, a different
event specified in clauses (a), (b) or (c) above occurs, the interest rate may
again be increased pursuant to the foregoing provisions.]*
Payment of the principal of, premium, if any, and interest on this
Security will be made at the office or agency of the Company maintained for
that purpose in Atlanta, Georgia, or at such other office or agency of the
Company as may be maintained for such purpose, in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts; provided, however, that payment of interest may be
made at the option of the Company by check mailed to the address of the person
entitled thereto as such address shall appear on the security register
maintained by the Registrar.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof.
Unless the certificate of authentication hereon has been duly executed by
the Trustee referred to on the reverse hereof by manual signature, and a seal
has been affixed hereon, this Security shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
_______________
*Include only for Initial Notes.
<PAGE> 117
3
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: , INTERFACE, INC.
By:
________________________________
Name:
Title:
[SEAL]
Attest:
- ---------------------------
Authorized Signature
<PAGE> 118
4
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Securities referred to in the within-mentioned
Indenture.
FIRST UNION NATIONAL BANK
OF GEORGIA, as Trustee
By
---------------------------
Authorized Officer
<PAGE> 119
5
(Reverse of Security)
1. Indenture. This Security is one of a duly authorized issue of
Securities of the Company designated as its 9 1/2% [Series B]* Senior
Subordinated Securities due 2005, limited (except as otherwise provided in the
Indenture referred to below) in aggregate principal amount to $125,000,000,
which may be issued under an indenture (herein called the "Indenture") dated as
of November 15, 1995, among Interface, Inc., a Georgia corporation, as issuer
(the "Company") Bentley Mills, Inc., Guilford (Delaware), Inc., Guilford of
Maine, Inc., Interface Asia-Pacific, Inc., Interface Europe, Inc., Interface
Flooring Systems, Inc., Interface Research Corporation, Pandel, Inc., Prince
Street Technologies, Ltd., and Rockland React-Rite, Inc., (collectively, the
"Guarantors"), and First Union National Bank of Georgia, a national banking
association, as trustee (herein called the "Trustee," which term includes any
successor Trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties, obligations and immunities thereunder of
the Company, the Trustee, the Guarantors and the Holders of the Securities, and
of the terms upon which the Securities are, and are to be, authenticated and
delivered.
All capitalized terms used in this Security which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Indenture.
No reference herein to the Indenture and no provisions of this Security
shall alter or impair the obligation of the Company or any Guarantor to pay the
principal of, premium, if any, and interest on this Security at the times,
place and rate, and in the coin or currency, herein prescribed.
2. Subordination. The Indebtedness evidenced by the Securities is, to the
extent and in the manner provided in the Indenture, subordinate and subject in
right of payment to the prior payment in full in cash or Cash Equivalents of
all Senior Indebtedness (including interest accruing after the filing of a
petition initiating any proceeding under any state, federal or foreign
bankruptcy or insolvency laws, whether or not allowable as a claim in such
proceeding) as defined in the Indenture, and this Security is issued subject to
such provisions. Each Holder of this Security, by accepting the same, (a)
agrees to and shall be bound by such provisions, (b) authorizes and directs
the Trustee, on behalf of such Holder, to take such action as may be necessary
or appropriate to effectuate the subordination as provided in the Indenture and
(c) appoints the Trustee attorney-in-fact of such Holder for such purpose;
provided, however, that the Indebtedness evidenced by this Security shall cease
to be so subordinate and subject in right of payment upon any defeasance of
this Security referred to in Paragraph 6 below.
_______________
*Include only for Exchange Notes.
<PAGE> 120
6
3. Redemption. (a) Optional Redemption. The Securities are subject to
redemption, at the option of the Company, as a whole or in part, in principal
amounts of $1,000 or any integral multiple of $1,000, at any time on or after
November 15, 2000 upon not less than 30 nor more than 60 days' prior notice at
the following Redemption Prices (expressed as percentages of the principal
amount), if redeemed during the 12-month period beginning November 15 of the
years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2000 104.750%
2001 103.167%
2002 101.583%
2003 and thereafter 100.000%
</TABLE>
plus accrued and unpaid interest, if any, to the Redemption Date, all as
provided in the Indenture.
(b) Offer to Purchase upon a Change of Control and Certain Asset Sales.
The Company (a) is obligated, upon the occurrence of a Change of Control, to
make an offer to purchase all outstanding Securities at a purchase price of
101% of the principal amount thereof, plus accrued and unpaid interest, if any,
to the date of purchase, and (b) may be obligated to make an offer to purchase
Securities with a portion of the net cash proceeds of certain sales or other
dispositions of assets at a purchase price of 100% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of purchase.
(c) Interest Payments. In the case of any redemption of Securities,
interest installments whose Stated Maturity is on or prior to the Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Date referred to on the face hereof. Securities (or portions thereof)
for whose redemption and payment provision is made in accordance with the
Indenture shall cease to bear interest from and after the Redemption Date.
(d) Partial Redemption. In the event of redemption of this Security in
part only, a new Security or Securities for the unredeemed portion hereof shall
be issued in the name of the Holder hereof upon the cancellation hereof.
4. Guarantees. This Security is entitled to certain senior subordinated
Guarantees made for the benefit of the Holders. Reference is hereby made to
the Guarantee attached hereto and to Section 4.16 of the Indenture and to
Article Twelve of the Indenture for the terms of the Guarantees.
5. Defaults and Remedies. If an Event of Default shall occur and be
continuing, the principal of all of the outstanding Securities, plus all
accrued and unpaid interest, if any, to and including the date the Securities
are paid, may be declared due and payable in the manner and with the effect
provided in the Indenture.
<PAGE> 121
7
6. Defeasance. The Indenture contains provisions (which provisions apply
to this Security) for defeasance at any time of (a) the entire indebtedness of
the Company and any Guarantor under this Security and (b) certain restrictive
covenants and related Defaults and Events of Default, in each case upon
compliance by the Company with certain conditions set forth therein.
7. Amendments and Waivers. The Indenture permits, with certain exceptions
as therein provided, the amendment thereof and the modification of the rights
and obligations of the Company and the rights of the Holders under the
Indenture at any time by the Company and the Trustee with the consent of the
Holders of not less than a majority in aggregate principal amount of the
Securities at the time outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount
of the Securities at the time outstanding, on behalf of the Holders of all the
Securities, to waive compliance by the Company with certain provisions of the
Indenture and certain past Defaults under the Indenture and this Security and
their consequences. Any such consent or waiver by or on behalf of the Holder
of this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Security.
8. Denominations, Transfer and Exchange. The Securities are issuable only
in registered form without coupons in denominations of $1,000 and any integral
multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, the Securities are exchangeable for a like
aggregate principal amount of Securities of a different authorized
denomination, as requested by the Holder surrendering the same.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable on the security
register of the Company, upon surrender of this Security for registration of
transfer at the office or agency of the Company maintained for such purpose in
Atlanta, Georgia or at such other office or agency of the Company as may be
maintained for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Registrar
duly executed by, the Holder hereof or his attorney duly authorized in writing,
and thereupon one or more new Securities, of authorized denominations and for
the same aggregate principal amount, will be issued to the designated
transferee or transferees.
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
9. Persons Deemed Owners. Prior to and at the time of due presentment of
this Security for registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the person in whose name this
Security is registered as the owner hereof for all purposes, whether or not
this Security shall be overdue, and neither the Company, the Trustee nor any
agent shall be affected by notice to the contrary.
<PAGE> 122
8
10. Governing Law. This Security and the Guarantees shall be governed by
and construed in accordance with the laws of the State of New York.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL INITIAL SECURITIES]
In connection with any transfer of this Security occurring prior to the
date that is the earlier of (i) the date of an effective Registration Statement
containing a prospectus covering the resale of this Security by the Holder
hereof or (ii) November 21, 1998, the undersigned confirms that without
utilizing any general solicitation or general advertising that:
[Check One]
[ ] (a) this Security is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended, provided
by Rule 144A thereunder.
or
[ ] (b) this Security is being transferred other than in accordance with (a)
above and documents are being furnished that comply with the conditions
of transfer set forth in this Security and the Indenture.
<PAGE> 123
9
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Security in the name of any Person other than
the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in the Indenture shall have been satisfied.
Date: _____________________ _________________________________
NOTICE: The signature to this assignment must
correspond with the name as written upon the
face of the within-mentioned instrument in every
particular, without alteration or any change
whatsoever.
Signature Guarantee:_______________________________
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
of 1933, as amended, and is aware that the sale to it is being made in reliance
on Rule 144A and acknowledges that it has received such information regarding
the Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: ____________________ _________________________________
NOTICE: To be executed by an executive
Officer.
<PAGE> 124
10
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security and the Guarantees purchased by the
Company pursuant to Section 4.11 or 4.12 of the Indenture, check the
appropriate box:
Section 4.11 [ ]
Section 4.12 [ ]
If you wish to have a portion of this Security purchased by the Company
pursuant to Section 4.11 or 4.12 of the Indenture, state the amount:
$____________
Date:___________________ Your Signature: ___________________________
(Sign exactly as your
name appears on the
other side of this
Security)
Signature Guarantee:_________________________
<PAGE> 125
EXHIBIT B
SENIOR SUBORDINATED GUARANTEE
For value received, the undersigned hereby unconditionally guarantees to
the Holder of this Security the payments of principal of, premium, if any, and
interest on this Security in the amounts and at the time when due and interest
on the overdue principal, premium, if any, and interest, if any, of this
Security, if lawful, and the payment or performance of all other obligations of
the Company under the Indenture or the Securities, to the Holder of this
Security and the Trustee, all in accordance with and subject to the terms and
limitations of this Security, Article Twelve of the Indenture and this
Guarantee. The validity and enforceability of any Guarantee shall not be
affected by the fact that it is not affixed to any particular Security.
The obligations of the undersigned to the Holders of Securities and to the
Trustee pursuant to the Guarantee and the Indenture are expressly set forth in
Article Twelve of the Indenture and reference is hereby made to the Indenture
for the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates. The Indebtedness evidenced by this
Guarantee is, to the extent and in the manner provided in the Indenture,
subordinate and subject in right of payment to the prior payment in full in
cash or Cash Equivalents of all Guarantor Senior Indebtedness as defined in the
Indenture, and this Guarantee is issued subject to such provisions. Each
Holder of a Security, by accepting the same, (a) agrees to and shall be bound
by such provisions, (b) authorizes and directs the Trustee, on behalf of such
Holder, to take such action as may be necessary and appropriate to effectuate
the subordination as provided in the Indenture and (c) appoints the Trustee
attorney-in-fact of such Holder for such purpose; provided, however, that such
subordination provisions shall cease to affect amounts deposited in accordance
with the defeasance provisions of the Indenture upon the terms and conditions
set forth therein.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
[NAME OF GUARANTOR]
By:
Name:
Title:
<PAGE> 126
2
ASSIGNMENT FORM
If you the holder want to assign this Security, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Security to
(Insert assignee's social security or tax ID number)
(Print or type assignee's name, address and zip code) and irrevocably appoint
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Date: _____________ Your signature: __________________________
(Sign exactly as your name
appears on the other side of
this Security)
Signature Guarantee:
<PAGE> 1
EXHIBIT 4.2
$125,000,000
INTERFACE, INC.
9 1/2% Senior Subordinated Notes due 2005
PURCHASE AGREEMENT
November 16, 1995
SMITH BARNEY INC.
MERRILL LYNCH, PIERCE, FENNER,
& SMITH INCORPORATED
THE ROBINSON-HUMPHREY COMPANY, INC.
WHEAT, FIRST SECURITIES, INC.
FIRST CHICAGO CAPITAL MARKETS, INC.
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
Interface, Inc., a Georgia corporation (the "Company"), proposes, upon the
terms and conditions set forth herein, to issue and sell to you, as the initial
purchasers (the "Initial Purchasers"), $125,000,000 aggregate principal amount
of its 9 1/2% Senior Subordinated Notes due 2005 (the "Notes"). The Notes will
be issued pursuant to the provisions of an Indenture, to be dated as of
November 15, 1995 (the "Indenture"), between the Company, as issuer, the
subsidiary guarantors listed on Schedule III hereto (the "Subsidiary
Guarantors"), and First Union National Bank of Georgia, as Trustee (the
"Trustee"). The Notes will be guaranteed, jointly and severally, on an
unsecured senior subordinated basis (the "Guarantees") as to principal,
premium, if any, and interest by the Subsidiary Guarantors.
The Company wishes to confirm as follows its agreement with the Initial
Purchasers in connection with the purchase and resale of the Notes.
1. Preliminary Offering Memorandum and Offering Memorandum. The Notes
will be offered and sold to the Initial Purchasers without registration under
the Securities Act of 1933, as amended (the "Act"), in reliance on an exemption
pursuant to Section 4(2) under the Act. The Company has prepared a preliminary
offering memorandum, dated October 31, 1995 (the "Preliminary Offering
Memorandum"), and an offering memorandum, dated November 16,
<PAGE> 2
2
1995 (the "Offering Memorandum"), setting forth information regarding the
Company, the Notes and the Guarantees. Any references herein to the
Preliminary Offering Memorandum and the Offering Memorandum shall be deemed to
include all amendments and supplements thereto. The Company hereby confirms
that it has authorized the use of the Preliminary Offering Memorandum and the
Offering Memorandum in connection with the offering and resale of the Notes by
the Initial Purchasers.
The Company understands that the Initial Purchasers propose to make offers
and sales (the "Exempt Resales") of the Notes purchased by the Initial
Purchasers hereunder only on the terms and in the manner set forth in the
Offering Memorandum and Section 2 hereof, as soon as the Initial Purchasers
deem advisable after this Agreement has been executed and delivered, (i) to
persons in the United States whom the Initial Purchasers reasonably believe to
be qualified institutional buyers ("Qualified Institutional Buyers") as defined
in Rule 144A under the Act, as such rule may be amended from time to time
("Rule 144A"), in transactions under Rule 144A, (ii) to a limited number of
other institutional "accredited investors" (as defined in Rule 501(a)(1), (2),
(3) and (7) under Regulation D of the Act) ("Accredited Investors") in private
sales exempt from registration under the Act and (iii) outside the United
States to persons other than U.S. persons in reliance upon Regulation S
("Regulation S") under the Act (such persons specified in clauses (i), (ii) and
(iii) being referred to herein as the "Eligible Purchasers"). As used herein
the terms "United States" and "U.S. persons" have the meanings given them in
Regulation S.
It is understood and acknowledged that upon original issuance thereof, and
until such time as the same is no longer required under the applicable
requirements of the Act, the Notes shall bear the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER
THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2)
AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE
ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND
<PAGE> 3
3
AGREEMENTS (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D)
OUTSIDE THE UNITED STATES TO PERSONS OTHER THAN U.S. PERSONS IN OFFSHORE
TRANSACTIONS MEETING THE REQUIREMENTS OF RULE 904 UNDER REGULATION S UNDER
THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON"
HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.
It is also understood and acknowledged that holders (including subsequent
transferees) of the Notes will have the registration rights set forth in the
registration rights agreement (the "Registration Rights Agreement"), to be
dated as of the Closing Date (as defined herein), in substantially the form of
Exhibit A hereto, for so long as such Notes constitute "Registrable Notes" (as
defined in the Registration Rights Agreement). Pursuant to the Registration
Rights Agreement, the Company will agree (i) to file with the Securities and
Exchange Commission (the "Commission") under the circumstances set forth
therein, a registration statement on the appropriate form under the Act
relating to the resale of the Notes by certain holders thereof from time to
time in accordance with the methods of distribution set forth in such
registration statement and Rule 415 under the Act (the "Shelf Registration
Statement") and (ii) to use its reasonable best efforts to cause such Shelf
Registration Statement to be declared effective. This Agreement, the Indenture
and the Registration Rights Agreement are hereinafter referred to collectively
as the "Operative Documents."
Capitalized terms used herein without definition have the respective
meanings specified therefor in the Offering Memorandum.
2. Agreements to Sell, Purchase and Resell. (a) The Company hereby
agrees, subject to all the terms and conditions set forth herein and upon the
basis of the representations, warranties and agreements of the Initial
Purchasers herein contained, to issue and sell to the several Initial
Purchasers and, upon the basis of the representations, warranties and
agreements of the Company herein contained and subject to all the terms and
conditions set forth herein, the Initial Purchasers agree, severally and not
jointly, to purchase from the Company, at a purchase price of 97.25% of the
principal amount thereof, the principal amount of Notes set forth opposite the
name of the respective Initial Purchaser in Schedule I hereto.
<PAGE> 4
4
(b) Each Initial Purchaser has advised the Company that it proposes
to offer the Notes for sale upon the terms and conditions set forth in this
Agreement and in the Offering Memorandum. Each Initial Purchaser hereby
represents and warrants to, and agrees with, the Company that such Initial
Purchaser (i) is purchasing the Notes pursuant to a private sale exempt
from registration under the Act, (ii) will not solicit offers for, or offer
or sell, the Notes by means of any form of general solicitation or general
advertising or in any manner involving a public offering within the meaning
of Section 4(2) of the Act, and (iii) will solicit offers for the Notes
only from, and will offer, sell or deliver the Notes as part of its initial
offering, only to (A) persons in the United States whom such Initial
Purchaser reasonably believes to be Qualified Institutional Buyers, or if
any such person is buying for one or more institutional accounts for which
such person is acting as fiduciary or agent, only when such person has
represented to such Initial Purchaser that each such account is a Qualified
Institutional Buyer, to whom notice has been given that such sale or
delivery is being made in reliance on Rule 144A, in each case, in
transactions under Rule l44A, (B) to a limited number of Accredited
Investors that make the representations to and agreements with the Company
specified in Annex A to the Offering Memorandum in private sales exempt
from registration under the Act and (C) outside the United States to
persons other than U.S. persons in reliance on Regulation S. Each Initial
Purchaser has advised the Company that it will offer the Notes to Eligible
Purchasers at a price initially equal to 100% of the principal amount
thereof, plus accrued interest, if any, from the date of issuance of the
Notes. Such price may be changed by the Initial Purchasers at any time
thereafter without notice.
(c) Each Initial Purchaser represents and warrants that it has
offered and sold the Notes and agrees that it will offer and sell the Notes
(i) as part of its distribution at any time, and (ii) otherwise until 40
days after the later of the commencement of the offering of the Notes and
the Closing Date, only in accordance with Rule 903 of Regulation S or as
otherwise permitted pursuant to paragraph (c) above. Accordingly, each
Initial Purchaser represents and agrees that neither such Initial
Purchaser, its affiliates nor any persons acting on its or their behalf has
engaged or will engage in any directed selling efforts with respect to the
Notes, and it and they have complied and will comply with the offering
restrictions requirement of Regulation S. Each Initial Purchaser agrees
that, at or prior to confirmation of the sale of Notes other than a sale
pursuant to Rule 144A, it will have sent to each distributor, dealer or
person receiving a selling concession, fee or other remuneration that
purchases Notes from such Initial Purchaser during the restricted period a
confirmation or notice to substantially the following effect: ``
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933, as amended (the "Securities Act"), and
may not be offered and sold within the United States or to, or for
the account or benefit of, U.S. persons (i) as part of the
distribution at any time or (ii) otherwise until 40 days after the
later of the commencement of the offering and the closing date of the
sale, except in
<PAGE> 5
5
either case in accordance with Regulation S (or Rule 144A) under the
Securities Act. Terms used above and not otherwise defined have the
meaning given to them by Regulation S."
Each Initial Purchaser understands that the Company and, for purposes
of the opinions to be delivered to the Initial Purchasers pursuant to Sections 7
(c) (xvi) and 7 (f) hereof, counsel to the Company and counsel to the Initial
Purchasers will rely upon the accuracy and truth of the foregoing
representations and agreements and each Initial Purchaser hereby consents to
such reliance.
3. Delivery of the Notes and Payment Therefor. Delivery to the
Initial Purchasers of and payment for the Notes shall be made at the office of
Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, at 10:00 A.M., New
York City time, on November 21, 1995 (the "Closing Date"). The place of closing
for the Notes and the Closing Date may be varied by agreement between the
Initial Purchasers and the Company.
The Notes will be delivered to the Initial Purchasers against payment of
the purchase price therefor by certified or official bank check or checks
payable in New York Clearing House (next day) funds to the order of the
Company. The Notes will be evidenced by a single global security in definitive
form (the "Global Note") and/or by additional definitive securities, and will
be registered, in the case of the Global Note, in the name of Cede & Co. as
nominee of The Depository Trust Company ("DTC"), and in the other cases, in
such names and in such denominations as the Initial Purchasers shall request
prior to 1:00 p.m., New York City time, on the third business day preceding the
Closing Date. The Notes to be delivered to the Initial Purchasers shall be
made available to the Initial Purchasers in New York City for inspection and
packaging not later than 9:30 a.m., New York City time, on the business day
next preceding the Closing Date.
4. Agreements of the Company. The Company agrees with the Initial
Purchasers as follows:
(a) The Company will advise the Initial Purchasers promptly and, if
requested by them, will confirm such advice in writing, within the period
of time referred to in paragraph (e) below, of any change in the Company's
condition (financial or other), business, prospects, properties, net worth
or result of operations, or of the happening of any event which makes any
statement made in the Offering Memorandum (as then amended or supplemented)
untrue or which requires the making of any additions to or changes in the
Offering Memorandum (as then amended or supplemented) in order to make the
statements therein not misleading, or of the necessity to amend or
supplement the Offering Memorandum (as then amended or supplemented) to
comply with law.
<PAGE> 6
6
(b) The Company will furnish to the Initial Purchasers, without
charge, as of the date of the Offering Memorandum, such number of copies of
the Offering Memorandum as may then be amended or supplemented as they may
reasonably request.
(c) The Company will not make any amendment or supplement to the
Preliminary Offering Memorandum or to the Offering Memorandum of which the
Initial Purchasers shall not previously have been advised or to which they
shall reasonably object after being so advised, without delivering a copy
of such document to the Initial Purchasers, prior to or concurrently with
such filing.
(d) Prior to the execution and delivery of this Agreement, the
Company has delivered or will deliver to the Initial Purchasers, without
charge, in such quantities as the Initial Purchasers shall have requested
or may hereafter reasonably request, copies of the Preliminary Offering
Memorandum. The Company consents to the use, in accordance with the
securities or Blue Sky laws of the jurisdictions in which the Notes are
offered by the Initial Purchasers and by dealers, prior to the date of the
Offering Memorandum, of each Preliminary Offering Memorandum so furnished
by the Company. The Company consents to the use of the Offering Memorandum
(and of any amendment or supplement thereto) in accordance with the
securities or Blue Sky laws of the jurisdictions in which the Notes are
offered by the Initial Purchasers and by all dealers to whom Notes may be
sold, in connection with the offering and sale of the Notes.
(e) If, at any time prior to completion of the distribution of the
Notes by the Initial Purchasers to Eligible Purchasers, any event shall
occur that in the judgment of the Company or in the opinion of counsel for
the Initial Purchasers should be set forth in the Offering Memorandum (as
then amended or supplemented) in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
or if it is necessary to supplement or amend the Offering Memorandum to
comply with law, the Company will forthwith prepare an appropriate
supplement or amendment thereto, and will expeditiously furnish to the
Initial Purchasers and dealers a reasonable number of copies thereof. If
the Company and the Initial Purchasers agree that the Offering Memorandum
should be amended or supplemented, the Company, if requested by the Initial
Purchasers, will promptly issue a press release announcing or disclosing
the matters to be covered by the proposed amendment or supplement or such
document provided that such public announcement would not cause any
applicable exemptions under the Securities Act to become unavailable.
(f) The Company will cooperate with the Initial Purchasers and with
their counsel in connection with the qualification of the Notes for
offering and sale by the Initial Purchasers and by dealers under the
securities or Blue Sky laws of such jurisdictions as the Initial Purchasers
may designate and will file such consents to service of process or other
documents necessary or appropriate in order to effect such qualification;
provided that in no
<PAGE> 7
7
event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which
would subject it to service of process in suits, other than those arising
out of the offering or sale of the Notes, in any jurisdiction where it is
not now so subject.
(g) So long as any of the Notes are outstanding, the Company will
furnish to the Initial Purchasers (i) as soon as available, a copy of each
report of the Company mailed to stockholders or filed with the Commission,
and (ii) from time to time such other information concerning the Company as
the Initial Purchasers may request.
(h) If this Agreement shall terminate or shall be terminated after
execution and delivery pursuant to any provisions hereof (otherwise than by
notice given by the Initial Purchasers terminating this Agreement pursuant
to Section 9 or Section 10 hereof) or if this Agreement shall be terminated
by the Initial Purchasers because of any failure or refusal on the part of
the Company to perform its obligations hereunder, the Company agrees to
reimburse the Initial Purchasers for all out-of-pocket expenses (including
fees and expenses of its counsel) reasonably incurred by it in connection
herewith, but without any further obligation on the part of the Company for
loss of profits or otherwise.
(i) The Company will apply the net proceeds from the sale of the
Notes to be sold by it hereunder substantially in accordance with the
description set forth in the Offering Memorandum.
(j) Except as stated in this Agreement and in the Preliminary
Offering Memorandum and Offering Memorandum, the Company has not taken, nor
will it take, directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation
of the price of the Notes to facilitate the sale or resale of the Notes.
Except as permitted by the Act, the Company will not distribute any
offering material in connection with the Exempt Resales.
(k) From and after the Closing Date, so long as any of the Notes are
outstanding and are "Restricted Securities" within the meaning of the Rule
144(a)(3) under the Act or, if earlier, until three years after the Closing
Date, and during any period in which the Company is not subject to Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Company will furnish to holders of the Notes and
prospective purchasers of Notes designated by such holders, upon request of
such holders or such prospective purchasers, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Act to permit compliance
with Rule 144A in connection with resale of the Notes.
<PAGE> 8
8
(l) The Company and the Subsidiary Guarantors each has complied and
will comply with all provisions of Florida Statutes Section 517.075
relating to issuers doing business with Cuba.
(m) The Company agrees not to sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in the
Act) that would be integrated with the sale of the Notes in a manner that
would require the registration under the Act of the sale to the Initial
Purchasers or the Eligible Purchasers of the Notes.
(n) The Company and the Subsidiary Guarantors each agrees to comply
with all of the terms and conditions of the Registration Rights Agreement,
and all agreements set forth in the representation letters of the Company
to DTC relating to the approval of the Notes by DTC for "book entry"
transfer.
(o) The Company and the Subsidiary Guarantors each agrees that prior
to any registration of the Notes and Guarantees pursuant to the
Registration Rights Agreement, or at such earlier time as may be so
required, the Indenture shall be qualified under the Trust Indenture Act of
1939 (the "1939 Act") and will cause to be entered into any necessary
supplemental indentures in connection therewith.
(p) The Company shall, and shall use its best efforts to cause the
transfer agent with respect to the Notes to, refuse to register any
transfer of Notes sold pursuant to Rule 144A or Regulation S if it has
knowledge that such transfer is not made in accordance with the provisions
of Rule 144A or Regulation S.
(q) The Company shall not, without the prior consent of the Initial
Purchasers, offer, sell, contract to sell or otherwise dispose of any
securities that are similar in quality or nature to the Notes (other than
pursuant to an exchange offer for the Notes) for a period of 180 days after
the Closing Date.
5. Representations and Warranties of the Company. The Company
represents and warrants to each Initial Purchaser that:
(a) The Preliminary Offering Memorandum and Offering Memorandum with
respect to the Notes have been prepared by the Company for use by the
Initial Purchasers in connection with the Exempt Resales. No order or
decree preventing the use of the Preliminary Offering Memorandum or the
Offering Memorandum or any amendment or supplement thereto, or any order
asserting that the transactions contemplated by this Agreement are subject
to the registration requirements of the Act has been issued and no
proceeding for that purpose has commenced or is pending or, to the
knowledge of the Company, is contemplated.
<PAGE> 9
9
(b) The Preliminary Offering Memorandum and the Offering Memorandum
as of their respective dates and the Offering Memorandum as of the Closing
Date, did not or will not at any time contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
that this representation and warranty does not apply to statements in or
omissions from the Preliminary Offering Memorandum and Offering Memorandum
made in reliance upon and in conformity with information relating to the
Initial Purchasers furnished to the Company in writing by or on behalf of
the Initial Purchasers expressly for use therein.
(c) The Indenture has been duly and validly authorized by the
Company and, upon its execution, delivery and performance by the Company
and the Subsidiary Guarantors and assuming due authorization, execution,
delivery and performance by the Trustee, will be a valid and binding
agreement of the Company and the Subsidiary Guarantors, enforceable in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency or other similar laws affecting creditors' rights
generally and subject to the applicability of general principles of equity,
and conforms in all material respects to the description thereof in the
Offering Memorandum; no qualification of the Indenture under the 1939 Act
is required in connection with the offer and sale of the Notes contemplated
hereby or in connection with the Exempt Resales.
(d) The Notes have been duly authorized by the Company and, when
executed by the Company and authenticated by the Trustee in accordance with
the Indenture and delivered to the Initial Purchasers against payment
therefor in accordance with the terms hereof, will have been validly issued
and delivered, and will constitute valid and binding obligations of the
Company entitled to the benefits of the Indenture and enforceable in
accordance with their terms, except as enforcement thereof may be limited
by bankruptcy, insolvency or other similar laws affecting the enforcement
of creditors' rights generally, and the Notes will conform in all material
respects to the description thereof in the Offering Memorandum.
(e) The Guarantees have been duly authorized by the Subsidiary
Guarantors and, when the Notes and the Guarantees have been executed by the
Company and the Subsidiary Guarantors and authenticated by the Trustee in
accordance with the Indenture and delivered to the Initial Purchasers
against payment therefor in accordance with the terms hereof, will
constitute valid and binding obligations of the Subsidiary Guarantors
entitled to the benefits of the Indenture and enforceable in accordance
with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and subject to the applicability of general
principles of equity, and the Guarantees will conform in all material
respects to the description thereof in the Offering Memorandum.
(f) All the outstanding shares of capital stock of the Company have
been duly authorized and validly issued, are fully paid and nonassessable
and are free of any
<PAGE> 10
10
preemptive or, except as set forth in the Offering Memorandum, similar
rights and were issued and sold in compliance with all applicable Federal
and state securities laws; and the authorized capital stock of the Company
conforms to the description thereof in the Offering Memorandum.
(g) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Georgia with full corporate
power and authority to own, lease and operate its properties and to conduct
its business as described in the Offering Memorandum, and is duly
registered and qualified to conduct its business and is in good standing in
each jurisdiction or place where the nature of its properties or the
conduct of its business requires such registration or qualification, except
where the failure so to register or qualify or be in good standing does not
have a material adverse effect on the condition (financial or other),
business, prospects, properties, net worth or results of operations of the
Company and its Subsidiaries (as hereinafter defined) taken as a whole (a
"Material Adverse Effect").
(h) All the Company's subsidiaries (as defined in the Act), exclusive
of the subsidiaries listed on Schedule II hereto (the "Inactive
Subsidiaries"), are referred to herein individually as a "Subsidiary" and
collectively as the "Subsidiaries." Each Subsidiary is a corporation duly
organized, validly existing and in good standing in the jurisdiction of its
incorporation, with full corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Offering Memorandum, and is duly registered and qualified to conduct its
business and is in good standing in each jurisdiction or place where the
nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify or be in good standing does not have a Material Adverse Effect.
None of the Inactive Subsidiaries is engaged in any business activities or
operations or has any material assets or liabilities. All the outstanding
shares of capital stock of each of the Subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable, and
(except for directors' qualifying shares or similar interests) are wholly
owned by the Company directly or indirectly through one of the other
Subsidiaries, free and clear of any lien, adverse claim, security interest,
equity or other encumbrance, except as described in the Offering
Memorandum.
(i) The Subsidiary Guarantors listed on Schedule III hereto are the
only Subsidiaries of the Company that (i) are incorporated in the United
States or any State thereof and (ii) are Material Subsidiaries. For
purposes of the preceding sentence, "Material Subsidiary" shall mean each
Subsidiary that has total assets in excess of $10,000,000, or holds any
fixed assets material to the operations or business of another Material
Subsidiary.
(j) There are no legal or governmental proceedings pending or, to
the knowledge of the Company, threatened, against the Company or any of the
Subsidiaries, or to which the Company or any of the Subsidiaries, or to
which any of their respective properties, is
<PAGE> 11
11
subject, that are not disclosed in the Offering Memorandum and which, if
adversely decided, are reasonably likely to cause a Material Adverse Effect
or materially affect the issuance of the Notes or the consummation of the
transactions contemplated by the Operative Documents. There are no
material agreements, contracts, indentures, leases or other instruments
that are not described in the Offering Memorandum or that are required to
be filed as an exhibit to any document filed under the Exchange Act that
are not so filed. Neither the Company nor any Subsidiary is involved in any
strike, collective job action or collective labor dispute with any group of
employees, and, to the Company's knowledge, no such action or dispute is
threatened.
(k) Neither the Company nor any of the Subsidiaries is (i) in
violation of its certificate or articles of incorporation or by-laws or
other organizational documents, or of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or any of the
Subsidiaries or of any decree of any court or governmental agency or body
having jurisdiction over the Company or any of the Subsidiaries, except
where any such violation or violations in the aggregate would not have a
Material Adverse Effect or (ii) in default in any material respect in the
performance of any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness or in any
material agreement, indenture, lease or other material instrument to which
the Company or any of the Subsidiaries is a party or by which any of them
or any of their respective properties may be bound, except as may be
disclosed in the Offering Memorandum.
(l) Neither the issuance, offer, sale or delivery of the Notes, the
issuance of the Guarantees by the Subsidiary Guarantors, the execution,
delivery or performance of this Agreement, the Indenture or the
Registration Rights Agreement by the Company and the Subsidiary Guarantors
nor the consummation by the Company and the Subsidiary Guarantors of the
transactions contemplated hereby or thereby (i) requires any consent,
approval, authorization or other order of, or registration or filing with,
any court, regulatory body, administrative agency or other governmental
body, agency or official (except such as may be required in connection with
the registration under the Act of the Notes and the Guarantees in
accordance with the Registration Rights Agreement, the qualification of the
Indenture under the 1939 Act and except for compliance with the securities
or Blue Sky laws of various jurisdictions) or conflicts or will conflict
with or constitutes or will constitute a breach of, or a default under, the
certificate or articles of incorporation or bylaws, or other organizational
documents, of the Company or any of the Subsidiaries or (ii) conflicts or
will conflict with or constitutes or will constitute a breach of, or a
default under, in any material respect, any material agreement, indenture,
lease or other material instrument to which the Company or any of the
Subsidiaries is a party or by which any of them or any of their respective
properties may be bound, or violates or will violate in any material
respect any statute, law, regulation or filing or judgment, injunction,
order or decree applicable to the Company or any of the Subsidiaries or any
of their respective properties, or will result in
<PAGE> 12
12
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of the Subsidiaries pursuant to
the terms of any agreement or instrument to which any of them is a party or
by which any of them may be bound or to which any of the property or assets
of any of them is subject.
(m) The accountants, BDO Seidman, LLP, who have certified or shall
certify the financial statements included as part of the Offering
Memorandum (or any amendment or supplement thereto), are independent public
accountants under Rule 101 of the AICPA's Code of Professional Conduct, and
its interpretation and rulings.
(n) The financial statements, together with related schedules and
notes forming part of the Offering Memorandum (and any amendment or
supplement thereto), present fairly in all material respects the
consolidated financial position, results of operations and changes in
stockholders' equity and cash flows of the Company and the Subsidiaries on
the basis stated in the Offering Memorandum at the respective dates or for
the respective periods to which they apply; such statements and related
schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein; the assumptions used in preparing
the adjusted financial information and related notes included in the
Offering Memorandum are reasonable; and the other financial and statistical
information and data set forth in the Offering Memorandum (and any
amendment or supplement thereto) are accurately presented and, to the
extent such information and data are derived from the financial books and
records of the Company, are prepared on a basis consistent with such
financial statements and the books and records of the Company.
(o) The Company and the Subsidiary Guarantors each has all requisite
power and authority to execute, deliver and perform its obligations under
this Agreement and the Registration Rights Agreement; the execution and
delivery of, and the performance by each of the Company and the Subsidiary
Guarantors of its obligations under, this Agreement and the Registration
Rights Agreement have been duly and validly authorized by each of the
Company and the Subsidiary Guarantors, and this Agreement and the
Registration Rights Agreement have been duly executed and delivered by each
of the Company and the Subsidiary Guarantors and constitute the valid and
legally binding agreements of the Company and the Subsidiary Guarantors,
enforceable against the Company and the Subsidiary Guarantors in accordance
with their terms, except as the enforcement hereof and thereof may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and subject to the applicability
of general principles of equity, and except as rights to indemnity and
contribution hereunder and thereunder may be limited by Federal or state
securities laws or principles of public policy.
(p) Except as disclosed in the Offering Memorandum (or any amendment
or supplement thereto), subsequent to the date as of which such information
is given in the
<PAGE> 13
13
Offering Memorandum (or any amendment or supplement thereto), neither the
Company nor any of the Subsidiaries has incurred any liability or
obligation, direct or contingent, or entered into any transaction, not in
the ordinary course of business, that is material to the Company and the
Subsidiaries taken as a whole, and there has not been any material change
in the capital stock, or material increase in the short-term or long-term
debt, of the Company or any of the Subsidiaries, or any material adverse
change, or any development involving or which could reasonably be expected
to involve a prospective material adverse change, in the condition
(financial or other), business, properties, net worth or results of
operations of the Company and the Subsidiaries taken as a whole.
(q) Each of the Company and the Subsidiaries has good and marketable
title to all property (real and personal) described in the Offering
Memorandum as being owned by it, free and clear of all liens, claims,
security interests or other encumbrances except such as are described in
the Offering Memorandum, and all the property described in the Offering
Memorandum as being held under lease by each of the Company and the
Subsidiaries is held by it under valid, subsisting and enforceable leases,
with only such exceptions as in the aggregate are not materially burdensome
and do not interfere in any material respect with the conduct of the
business of the Company and the Subsidiaries taken as a whole.
(r) Except as permitted by the Act, the Company has not distributed
and, prior to the later to occur of the Closing Date and completion of the
distribution of the Notes, will not distribute any offering material in
connection with the offering and sale of the Notes other than the
Preliminary Offering Memorandum and Offering Memorandum.
(s) Each of the Company and the Subsidiaries has such permits,
licenses, franchises and other approvals or authorizations of governmental
or regulatory authorities ("Permits") as are necessary under applicable law
to own or lease their respective properties and to conduct their respective
business in the manner described in the Offering Memorandum except to the
extent that the failure to have such Permits would not have a Material
Adverse Effect; the Company and each of the Subsidiaries have fulfilled and
performed in all material respects, all their respective material
obligations with respect to the Permits, and no event has occurred which
allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of the
rights of the holder of any such Permit, subject in each case to such
qualification as may be set forth in the Offering Memorandum and except to
the extent that any such revocation or termination would not have a
Material Adverse Effect.
(t) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to
assets is
<PAGE> 14
14
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(u) Neither the Company nor any of the Subsidiaries nor, to the
Company's knowledge, any employee or agent of the Company or any Subsidiary
has made any payment of funds of the Company or any Subsidiary or received
or retained any funds in violation of any law, rule or regulation, which
violation would have a Material Adverse Effect.
(v) Except as disclosed in the Offering Memorandum, the Company and
each of the Subsidiaries have filed all tax returns required to be filed,
which returns are true and correct in all material respects, and neither
the Company nor any Subsidiary is in default in the payment of any taxes
which were payable pursuant to said returns or any assessments with respect
thereto, except where the failure to file such returns and make such
payments would not have a Material Adverse Effect.
(w) No holder of any security of the Company (other than holders of
the Notes) has any right to request or demand registration of shares of
Common Stock or any other security of the Company because of the
consummation of the transactions contemplated by this Agreement or the
Registration Rights Agreement, except as contemplated by the Operative
Documents. Except as described in or contemplated by the Operative
Documents or the Offering Memorandum, there are no outstanding options,
warrants or other rights calling for the issuance of, and there are no
commitments, plans or arrangements to issue, any shares of capital stock of
the Company or any security convertible into or exchangeable or exercisable
for capital stock of the Company.
(x) The Company and the Subsidiaries own or possess all patents,
trademarks, trademark registration, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets
and rights described in the Offering Memorandum as being owned by any of
them or necessary for the conduct of their respective businesses, and the
Company is not aware of any claim to the contrary or any challenge by any
other person to the rights of the Company and the Subsidiaries with respect
to the foregoing.
(y) The Company is not and, upon sale of the Notes to be issued and
sold in accordance herewith and the application of the net proceeds to the
Company of such sale as described in the Offering Memorandum under the
caption "Use of Proceeds," will not be an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(z) When the Notes are issued and delivered pursuant to this
Agreement, such Notes will not be of the same class (within the meaning of
Rule 144A(d)(3) under the Act) as any security of the Company that is
listed on a national securities exchange registered under
<PAGE> 15
15
Section 6 of the Exchange Act or that is quoted in a United States
automated interdealer quotation system.
(aa) Neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D ("Regulation D") under the Act) of the Company has
directly, or through any agent (provided that no representation is made as
to any Initial Purchaser or any person acting on its behalf), (i) sold,
offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any security (as defined in the Act) which is or will be
integrated with the offering and sale of the Notes in a manner that would
require the registration of the Notes under the Act or (ii) engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offering of the Notes.
(ab) The Company is not required to deliver the information specified
in Rule 144A(d)(4) in connection with the offering and resale of the Notes
by the Initial Purchasers.
(ac) Assuming that (i) the representations and warranties in Section
2 hereof are true, (ii) the Initial Purchasers comply with the covenants
set forth in Section 2 hereof and (iii) each person to whom the Initial
Purchasers offer, sell or deliver the Notes is a Qualified Institutional
Buyer, an Accredited Investor or a person other than a U.S. person outside
the United States in reliance on Regulation S under the Act, the purchase
and sale of the Notes pursuant hereto (including the Initial Purchasers'
proposed offering of the Notes on the terms and in the manner set forth in
the Offering Memorandum and Section 2 hereof) is exempt from the
registration requirements of the Act. None of the Company, its
Subsidiaries or affiliates or any person acting on its or their behalf
(other than the Initial Purchasers) has engaged in any directed selling
efforts (as that term is defined in Regulation S under the Act) with
respect to the Notes and the Company, its Subsidiaries or affiliates and
any person acting on its or their behalf (other than the Initial
Purchasers) have complied with the offering restrictions requirement of
Regulation S.
(ad) The execution and delivery of this Agreement and the other
Operative Documents and the sale of the Notes to the Initial Purchasers or
by the Initial Purchasers to Eligible Purchasers will not involve any
prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Code. The representation made by the Company in the
preceding sentence is made in reliance upon and subject to the accuracy of,
and compliance with, the representations and covenants made or deemed made
by the Eligible Purchasers as set forth in the Offering Memorandum under
the sections entitled "Transfer Restrictions" and "ERISA Considerations."
(ae) The Company is not required to obtain shareholder consent or
approval pursuant to the rules of the Nasdaq National Market or any other
exchange or trading facility in connection with the offering and sale of
the Notes.
<PAGE> 16
16
(af) Except as disclosed in the Offering Memorandum and except as
would not individually or in the aggregate have a Material Adverse Effect,
(A) the operations of the Company and the Subsidiaries are each in
compliance with all applicable Environmental Laws, (B) the Company and the
Subsidiaries have all permits, authorizations and approvals required under
any applicable Environmental Laws and are each in compliance with their
requirements, (C) there are no pending or threatened Environmental Claims
against the Company or any of the Subsidiaries, and (D) there are no
circumstances with respect to any property or operations of the Company or
the Subsidiaries that could reasonably be anticipated to form the basis of
an Environmental Claim against the Company or the Subsidiaries. For
purposes of this Agreement, the following terms shall have the following
meanings: "Environmental Law" means any United States (or other applicable
jurisdiction's) federal, state, local or municipal statute, law, rule,
regulation, ordinance or code and any judicial or administrative
interpretation thereof including any judicial or administrative judgment
and order or decree to which the Company or any Subsidiary is a party,
relating to pollution or protection of the environment or the release,
discharge or handling of hazardous or toxic substances or hazardous or
solid wastes. "Environmental Claims" means any and all administrative,
regulatory or judicial actions, suits, demands, claims, liens, notices of
noncompliance or violation, investigations or proceedings relating in any
way to any Environmental Law.
6. Indemnification and Contribution. (a) The Company and the Subsidiary
Guarantors agree to indemnify and hold harmless each Initial Purchaser and each
person, if any, who controls such Initial Purchaser within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, from and against any
and all losses, claims, damages, liabilities and expenses (including reasonable
costs of investigation) arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Preliminary
Offering Memorandum or Offering Memorandum or in any amendment or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses arise out of or are based upon any untrue
statement or omission or alleged untrue statement or omission which has been
made therein or omitted therefrom in reliance upon and in conformity with the
information relating to the Initial Purchasers furnished in writing to the
Company by or on behalf of the Initial Purchasers expressly for use in
connection therewith; provided, however, that the indemnification contained in
this paragraph (a) with respect to the Preliminary Offering Memorandum shall not
inure to the benefit of any Initial Purchaser (or to the benefit of any person
controlling such Initial Purchaser) on account of any such loss, claim, damage,
liability or expense arising from the sale of the Notes by such Initial
Purchaser to any person if the untrue statement or alleged untrue statement or
omission or alleged omission of a material fact contained in the Preliminary
Offering Memorandum was corrected in the Offering Memorandum and such Initial
Purchaser sold Notes to that person without sending or giving at or prior to the
written confirmation of such sale, a copy of the Offering Memorandum (as then
amended or supplemented) if the
<PAGE> 17
17
Company has previously furnished sufficient copies thereof to such Initial
Purchaser on a timely basis. The foregoing indemnity agreement shall be in
addition to any liability which the Company and the Subsidiary Guarantors may
otherwise have.
(b) If any action, suit or proceeding shall be brought against any
Initial Purchaser or any person controlling such Initial Purchaser in respect
of which indemnity may be sought against the Company or any Subsidiary
Guarantor, such Initial Purchaser or such controlling person shall promptly
notify the parties against whom indemnification is being sought (the
"indemnifying parties"), and such indemnifying parties shall assume the defense
thereof, including the employment of counsel and payment of all fees and
expenses. Such Initial Purchaser or any such controlling person shall have the
right to employ separate counsel in any such action, suit or proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Initial Purchaser or such controlling person
unless (i) the indemnifying parties have agreed in writing to pay such fees and
expenses, (ii) the indemnifying parties have failed to assume the defense and
employ counsel, or (iii) the named parties to any such action, suit or
proceeding (including any impleaded parties) include both such Initial
Purchaser or such controlling person and the indemnifying parties and such
Initial Purchaser or such controlling person shall have been advised by its
counsel (in writing with a copy thereof furnished to the indemnifying parties
upon request) that representation of such indemnified party and any
indemnifying party by the same counsel would be inappropriate under applicable
standards of professional conduct (whether or not such representation by the
same counsel has been proposed) due to actual or potential differing interests
between them (in which case the indemnifying party shall not have the right to
assume the defense of such action, suit or proceeding on behalf of such Initial
Purchaser or such controlling person). It is understood, however, that the
indemnifying parties shall, in connection with any one such action, suit or
proceeding or separate but substantially similar or related actions, suits or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
only one separate firm of attorneys (in addition to any local counsel) at any
time for the Initial Purchasers and controlling persons not having actual or
potential differing interests with the Initial Purchasers or among themselves,
which firm shall be designated in writing by Smith Barney Inc. The
indemnifying parties shall not be liable for any settlement of any such action,
suit or proceeding effected without their written consent, but if settled with
such written consent, or if there be a final judgment for the plaintiff in any
such action, suit or proceeding, the indemnifying parties agree to indemnify
and hold harmless each Initial Purchaser, to the extent provided in paragraph
(a), and any such controlling person from and against any loss, claim, damage,
liability or expense by reason of such settlement or judgment.
(c) Each Initial Purchaser agrees to indemnify and hold harmless the
Company and each Subsidiary Guarantor, and their directors and officers, and
any person who controls the Company within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act to the same extent as the indemnity from the
Company and each Subsidiary Guarantor to the Initial
<PAGE> 18
18
Purchasers set forth in paragraph (a) hereof, but only with respect to
information relating to the Initial Purchasers furnished in writing by or on
behalf of the Initial Purchasers expressly for use in the Preliminary Offering
Memorandum or Offering Memorandum or any amendment or supplement thereto. If
any action, suit or proceeding shall be brought against the Company or any
Subsidiary Guarantor, any of their directors or officers, or any such
controlling person based on the Preliminary Offering Memorandum or Offering
Memorandum, or any amendment or supplement thereto, and in respect of which
indemnity may be sought against the Initial Purchasers pursuant to this
paragraph (c), the Initial Purchasers shall have the rights and duties given to
the Company and the Subsidiary Guarantors by paragraph (b) above (except that
if the Company shall have assumed the defense thereof the Initial Purchasers
shall not be required to do so, but may employ separate counsel therein and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the Initial Purchasers' expense), and the Company and the
Subsidiary Guarantors, their directors and officers, and any such controlling
person shall have the rights and duties given to the Initial Purchasers by
paragraph (b) above. The foregoing indemnity agreement shall be in addition to
any liability which the Initial Purchasers may otherwise have.
(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company and the Subsidiary Guarantors on the one hand and the Initial
Purchasers on the other hand from the offering of the Notes, or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Subsidiary Guarantors on the one hand and the Initial Purchasers on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company and
the Subsidiary Guarantors on the one hand and the Initial Purchasers on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the Initial
Purchasers, in each case as set forth in the table on the cover page of the
Offering Memorandum. The relative fault of the Company and the Subsidiary
Guarantors on the one hand and the Initial Purchasers on the other hand shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company and the
Subsidiary Guarantors on the one hand or by the Initial Purchasers on the other
hand and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
<PAGE> 19
19
(e) The Company, the Subsidiary Guarantors and the Initial Purchasers
agree that it would not be just and equitable if contribution pursuant to this
Section 6 were determined by a pro rata allocation or by any other method of
allocation that does not take account of the equitable considerations referred
to in paragraph (d) above. The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, liabilities and expenses referred
to in paragraph (d) above shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating any claim or defending
any such action, suit or proceeding. Notwithstanding the provisions of this
Section 6, the Initial Purchasers shall not be required to contribute any
amount in excess of the amount by which the total price of the Notes resold by
them in the initial placement of such Notes exceeds the amount of any damages
which the Initial Purchasers have otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section 11
(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 6 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 6 and the
representations and warranties of the Company or of the Initial Purchasers, as
the case may be, set forth in this Agreement shall remain operative and in full
force and effect, regardless of (i) any investigation made by or on behalf of
the Initial Purchasers, the Company or the Subsidiary Guarantors or any person
controlling any Initial Purchaser, the Company or the Subsidiary Guarantors or
their directors or officers, (ii) acceptance of any Notes and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Initial Purchaser or any person controlling such Initial Purchaser, or to the
Company or any Subsidiary Guarantors, their directors or officers or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 6.
(g) No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
7. Conditions of the Initial Purchasers' Obligations. The obligations of
the Initial Purchasers to purchase the Notes hereunder are subject to the
following conditions:
<PAGE> 20
20
(a) At the time of execution of this Agreement and on the Closing
Date, no order or decree preventing the use of the Offering Memorandum or any
amendment or supplement thereto, or any order asserting that the transactions
contemplated by this Agreement are subject to the registration requirements of
the Act shall have been issued and no proceedings for that purpose shall have
been commenced or shall be pending or, to the knowledge of the Company, be
contemplated. No stop order suspending the sale of the Notes in any
jurisdiction designated by the Initial Purchasers shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending or,
to the knowledge of the Company, shall be contemplated.
(b) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any change, or any development involving a prospective
change, in or affecting the condition (financial or other), business,
properties, net worth, or results of operations of the Company or the
Subsidiaries not contemplated by the Offering Memorandum, which in the opinion
of the Initial Purchasers, would materially adversely affect the market for the
Notes, or (ii) any event or development relating to or involving the Company or
any officer or director of the Company which makes any statement of a material
fact made in the Offering Memorandum untrue or which, in the opinion of the
Company and its counsel or the Initial Purchasers and their counsel, requires
the making of any addition to or change in the Offering Memorandum in order to
state a material fact required by law to be stated therein or necessary in
order to make the statements therein not misleading, if amending or
supplementing the Offering Memorandum to reflect such event or development
would, in the opinion of the Initial Purchasers, materially adversely affect
the market for the Notes.
(c) The Initial Purchasers shall have received on the Closing Date an
opinion of Kilpatrick & Cody, counsel for the Company, dated the Closing Date
and addressed to the Initial Purchasers, to the effect that:
(i) The Company is a corporation duly incorporated and
validly existing in good standing under the laws of the State of
Georgia with full corporate power and authority to own, lease and
operate its properties and to conduct its business as described in
the Offering Memorandum (and any amendment or supplement thereto);
(ii) Each of the Subsidiary Guarantors and each other
Significant Subsidiary (as defined in Section 1.02(v) of Regulation
S-X promulgated under the Act) incorporated in the United States is a
corporation duly organized and validly existing and in good standing
under the laws of the jurisdiction of its organization, with full
corporate power and authority to own, lease, and operate its
properties and to conduct its business as described in the Offering
Memorandum (and any amendment or supplement thereto); and all the
outstanding shares of capital stock of each of the Subsidiary
Guarantors and each other Significant Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable, and
(except for directors' qualifying shares or similar interests) to the
<PAGE> 21
21
knowledge of such counsel, are wholly owned by the Company directly,
or indirectly through one of the other Subsidiaries, free and clear
of any perfected security interest, lien, adverse claim, equity or
other encumbrance, except as described in the Offering Memorandum and
except for the shares of capital stock of such Subsidiaries pledged
to Trust Company Bank and The First National Bank of Chicago as
agents in connection with the Credit Agreements;
(iii) The authorized capital stock of the Company is as set
forth under the caption "Capitalization" in the Offering Memorandum;
and the Series A Convertible Preferred Stock of the Company conforms
in all material respects as to legal matters to the description
thereof contained in the Offering Memorandum under the caption
"Description of Certain Indebtedness and Other Obligations";
(iv) All the outstanding shares of capital stock of the
Company have been duly authorized and validly issued (without
expressing any opinion with respect to compliance with federal or
state securities laws) and no holder thereof is or will be subject to
personal liability by reason of being such a holder; and none of the
outstanding shares of capital stock of the Company was issued in
violation of any preemptive rights provided by statute or the
Company's articles of incorporation or bylaws, or, to the knowledge
of such counsel, any other preemptive rights of any shareholder of
the Company;
(v) The Company has corporate power and authority to enter
into this Agreement and the Registration Rights Agreement and to
issue, sell and deliver the Notes to be sold by it to the Initial
Purchasers as provided herein, and this Agreement and the
Registration Rights Agreement have been duly authorized, executed and
delivered by the Company;
(vi) Each of the Subsidiary Guarantors has corporate power and
authority to enter into this Agreement and the Registration Rights
Agreement and to issue the Guarantees, and this Agreement and the
Registration Rights Agreement have been duly authorized, executed and
delivered by each of the Subsidiary Guarantors;
(vii) The Indenture has been duly and validly authorized,
executed and delivered by each of the Company and the Subsidiary
Guarantors; no qualification of the Indenture under the 1939 Act is
required in connection with the offer and sale of the Notes
contemplated hereby or in connection with the Exempt Resales;
(viii) The Notes have been duly and validly authorized by the
Company and when executed by the Company in accordance with the
Indenture and, assuming due authentication of the Notes by the
Trustee, upon delivery to the Initial Purchasers against
<PAGE> 22
22
payment therefor in accordance with the terms hereof, will have been
validly issued and delivered;
(ix) The Guarantees have been duly and validly authorized by
each of the Subsidiary Guarantors and, when the Notes have been
executed by the Company in accordance with the Indenture and
delivered to the Initial Purchasers against payment therefor in
accordance with the terms hereof, the Guarantees will have been
validly issued and delivered;
(x) Neither the offer, sale or delivery of the Notes, the
issuance of the Guarantees by the Subsidiary Guarantors, the
execution, delivery or performance by the Company and the Subsidiary
Guarantors of this Agreement, the Registration Rights Agreement or
the Indenture, compliance by the Company and the Subsidiary
Guarantors with the provisions hereof or thereof nor consummation by
the Company of the transactions contemplated hereby or thereby
conflicts or will conflict with or constitutes or will constitute a
breach of, or a default under, in any material respect, the
certificate or articles of incorporation or bylaws or other
organizational documents of the Company or any of the Subsidiary
Guarantors or such other Significant Subsidiaries incorporated in the
United States or any material agreement, indenture, lease or other
material instrument to which the Company or any of the Subsidiary
Guarantors or such other Significant Subsidiaries is a party or by
which any of them or any of their respective properties is bound that
is an exhibit to any document filed under the Exchange Act or is
known to such counsel, or will result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the
Company or any of the Subsidiary Guarantors or such other Significant
Subsidiaries pursuant to the terms of any material agreement or
instrument to which any of them is a party or by which any of them
may be bound or to which any of the property or assets of any of them
is subject that is an exhibit to any document filed under the
Exchange Act or is known to such counsel, nor will any such action
result in any violation in any material respect of any existing law,
or any regulation, ruling (assuming compliance with all applicable
state securities and Blue Sky laws and, in the case of the
Registration Rights Agreement, the Act and the Exchange Act and the
1939 Act), judgment, injunction, order or decree known to such
counsel, applicable to the Company, the Subsidiary Guarantors or such
other Significant Subsidiaries or any of their respective properties;
(xi) No consent, approval, authorization or other order of, or
registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency, or official
is required on the part of the Company or any Subsidiary Guarantor
(except as have been obtained under the Exchange Act, or such as may
be required under state securities or Blue Sky laws governing the
purchase and distribution of the Notes, and such as may be required
in connection with the performance by the Company and the Subsidiary
Guarantors of their obligations under the Registration Rights
<PAGE> 23
23
Agreement, as to which such counsel need not express an opinion) for
the valid issuance and sale of the Notes to the Initial Purchasers as
contemplated by this Agreement;
(xii) To the knowledge of such counsel, (A) other than as
described or contemplated in the Offering Memorandum (or any
amendment or supplement thereto), there are no legal or governmental
proceedings pending or threatened against the Company or any of the
Subsidiaries, or to which the Company or any of the Subsidiaries, or
any of their property, are subject, which are not disclosed in the
Offering Memorandum and which, if adversely decided, are reasonably
likely to cause a Material Adverse Effect or materially affects the
issuance of the Notes or the consummation of the transactions
contemplated by the Operative Documents and (B) there are no material
agreements, contracts, indentures, leases or other material
instruments, that are not described in the Offering Memorandum (or
any amendment or supplement thereto) or that are required to be filed
as an exhibit to any document filed under the Exchange Act that are
not filed as required;
(xiii) The Company and each of the Subsidiary Guarantors and
other Significant Subsidiaries incorporated in the United States have
full corporate power and authority to own their respective properties
and to conduct their respective businesses as now being conducted as
described in the Offering Memorandum and, to the knowledge of such
counsel, have all Permits as are necessary under applicable law to
own their respective properties and to conduct their respective
businesses as now being conducted as described in the Offering
Memorandum, subject to such qualifications as may be set forth in the
Offering Memorandum and except where the failure to have such
Permits, individually or in the aggregate, would not have a Material
Adverse Effect;
(xiv) The statements contained in the Offering Memorandum under
the captions "Risk Factors--Restrictions Imposed by Terms of
Indebtedness, --Subordination of the Notes; Holding Company
Structure, --Control of Election of Majority of Board, and
--Fraudulent Conveyance Considerations," "Security Ownership of
Management and Principal Holders--Class B Stock Voting Agreement,"
"Description of Certain Indebtedness and Other Obligations,"
"Description of the Notes," "Certain U.S. Federal Income Tax
Consequences," "Transfer Restrictions," and "ERISA Considerations,"
insofar as they are descriptions of contracts, agreements or other
legal documents, or refer to statements of law or legal conclusions,
are accurate in all material respects;
(xv) When the Notes are issued and delivered pursuant to this
Agreement, such Notes will not be of the same class (within the
meaning of Rule 144A(d)(3) under the Act) as any security of the
Company that is listed on a national securities exchange registered
under Section 6 of the Exchange Act or that is quoted in a United
States automated interdealer quotation system;
<PAGE> 24
24
(xvi) No registration of the Notes or Guarantees under the Act
is required for the sale of the Notes to the Initial Purchasers as
contemplated in this Agreement or for the Exempt Resales (assuming
(A) that any Eligible Purchaser who buys the Notes in the Exempt
Resales is a Qualified Institutional Buyer, Accredited Investor or a
person other than a U.S. person outside the United States in reliance
on Regulation S, (B) the accuracy of the Initial Purchasers'
representations and those of the Company in this Agreement regarding
the absence of general solicitation in connection with the Exempt
Resales and (C) the accuracy of the representations made by each
Accredited Investor who purchases Notes pursuant to an Exempt Resale
as set forth in the letter of representation executed by such
Accredited Investor in the form of Annex A to the Offering
Memorandum);
(xvii) The Company is not required to deliver the information
specified in Rule 144A(d)(4) in connection with the offering and
resale of the Notes by the Initial Purchasers; and
(xviii) Although such counsel have not undertaken, except as
otherwise expressly stated in their opinion, to determine
independently, and do not assume any responsibility for, the
accuracy, completeness or fairness of the statements in the Offering
Memorandum, such counsel have participated, solely in their capacity
as attorneys, in the preparation of the Offering Memorandum,
including review and discussion of the contents thereof with
officers of the Company, and nothing has come to the attention of
such counsel that has caused them to believe that the Offering
Memorandum, as of its date and as of the Closing Date, contained an
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading or that any amendment or supplement to the
Offering Memorandum, as of its respective date, and as of the
Closing Date, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading (it being
understood that such counsel need express no statement with respect
to the financial statements and the notes thereto and the schedules
and other financial and statistical data included or incorporated by
reference in the Offering Memorandum and information furnished by or
on behalf of the Initial Purchasers).
The opinion of such counsel shall be limited to the laws of the
United States and the State of Georgia. In giving such opinion, such
counsel may rely, as to all matters governed by the laws of jurisdictions
other than the law of the State of Georgia and the federal law of the
United States, upon the opinions of counsel satisfactory to you. Such
counsel may also state that, insofar as such opinion involves factual
matters, they have relied upon certificates of officers of the Company and
the Subsidiaries and certificates of public officials; provided that such
certificates have been delivered to the Initial Purchasers.
<PAGE> 25
25
(d) The Initial Purchasers shall have received on the Closing Date
an opinion of David W. Porter, Esq., General Counsel of the Company, dated the
Closing Date and addressed to the Initial Purchasers to the effect that:
(i) The Company is duly registered and qualified to conduct
its business and is in good standing as a foreign corporation in each
jurisdiction or place where the nature of its properties or the
conduct of its business requires such registration or qualification,
except where the failure so to register or qualify or to be in good
standing does not have a Material Adverse Effect;
(ii) Each Guarantor is duly registered and qualified to
conduct its business and is in good standing as a foreign corporation
in each jurisdiction or place where the nature of its properties or
the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify or
to be in good standing does not have a Material Adverse Effect;
(iii) Neither the Company nor any of the Guarantors is in
violation in any material respect of its respective certificate or
articles of incorporation or bylaws, or other organizational
documents or, to the best knowledge of such counsel obtained in the
ordinary course of such counsel's duties without special inquiry, is
in default in any material respect in the performance of any material
obligation, agreement or condition contained in any bond, debenture,
note or other evidence of indebtedness or in any material agreement,
indenture, lease or other material instrument to which the Company or
any of the Guarantors is a party or by which any of them or any of
their respective properties is expressly bound, except as disclosed
in the Offering Memorandum and except to the extent that any such
violation or default would not have a Material Adverse Effect; and
(iv) To the best knowledge of such counsel obtained in the
ordinary course of such counsel's duties without special inquiry,
neither the Company nor any of the Guarantors is in material
violation of any law, ordinance, administrative or governmental rule
or regulation applicable to the Company or any of the Guarantors or
of any decree of any court or governmental agency or body having
jurisdiction over the Company or any of the Guarantors, except to the
extent that any such violation would not have a Material Adverse
Effect.
In giving such opinion, such counsel may rely, as to all matters
governed by the laws of jurisdictions other than the law of the State of
Georgia and the federal law of the United States, upon the opinions of counsel
satisfactory to you. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied upon certificates of officers of the
Company and the Subsidiaries and certificates of public officials; provided
that such certificates have been delivered to the Initial Purchasers.
<PAGE> 26
26
(e) The Initial Purchasers shall have received on the Closing Date
an opinion of Han van Beers, Senior Vice President and Counsel to Interface
Europe, B.V., dated the Closing Date and addressed to the Initial Purchasers to
the effect that:
(i) Each of Interface Europe B.V., Interface Scherpenzeel
B.V. and Interface Europe Limited is duly organized and validly
existing under the laws of the jurisdiction of its organization, with
full corporate power and authority to own, lease, and operate its
properties and to conduct its business as described in the Offering
Memorandum (and any amendment or supplement thereto); and all the
outstanding shares of capital stock of each such Subsidiary have been
duly authorized and validly issued, are fully paid and nonassessable,
and to the knowledge of such counsel, are wholly owned by the Company
directly, or indirectly through one of the other Subsidiaries, free
and clear of any security interest, lien, adverse claim, equity or
other encumbrance, except as described in the Offering Memorandum and
except for the shares of capital stock of such Subsidiaries pledged
to Trust Company Bank and The First National Bank of Chicago as
agents in connection with the Credit Agreements;
(ii) Neither Interface Europe B.V., Interface Scherpenzeel
B.V. nor Interface Europe Limited is in violation in any material
respect of its respective certificate or articles of incorporation or
bylaws, or other organizational documents or, to the best knowledge
of such counsel obtained in the ordinary course of such counsel's
duties without special inquiry, is in default in any material respect
in the performance of any material obligation, agreement or condition
contained in any bond, debenture, note or other evidence of
indebtedness or in any material agreement, indenture, lease or other
material instrument to which any of such Subsidiaries is a party or
by which any of them or any of their respective properties may be
bound, except as disclosed in the Offering Memorandum and except to
the extent that any such violation or default would not have a
Material Adverse Effect;
(iii) To the best knowledge of such counsel obtained in the
ordinary course of such counsel's duties without special inquiry,
neither Interface Europe B.V., Interface Scherpenzeel B.V. nor
Interface Europe Limited is in material violation of any law,
ordinance, administrative or governmental rule or regulation
applicable to any such Subsidiaries or of any decree of any court or
governmental agency or body having jurisdiction over any such
Subsidiaries, except to the extent that any such violation would not
have a Material Adverse Effect; and
(iv) Neither the offer, sale or delivery of the Notes, the
issuance of the Guarantees by the Subsidiary Guarantors, the
execution, delivery or performance by the Company and the Subsidiary
Guarantors of this Agreement, the Registration Rights Agreement or
the Indenture, compliance by the Company and the Subsidiary
Guarantors with the provisions hereof or thereof nor consummation by
the Company of the
<PAGE> 27
27
transactions contemplated hereby or thereby conflicts or will
conflict with or constitutes or will constitute a breach of, or a
default under, in any material respect, the certificate or articles
of incorporation or bylaws or other organizational documents of
Interface Europe B.V., Interface Scherpenzeel B.V. or Interface
Europe Limited or any material agreement, indenture, lease or other
material instrument to which such Subsidiary is a party or by which
any of them or any of their respective properties is bound that is
known to such counsel, or will result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of any
such Subsidiary pursuant to the terms of any material agreement or
instrument to which any of them is a party or by which any of them
may be bound or to which any of the property or assets of any of them
is subject that is known to such counsel.
(f) The Initial Purchasers shall have received on the Closing Date
an opinion of Shearman & Sterling, counsel for the Initial Purchasers, dated the
Closing Date, and addressed to the Initial Purchasers, with respect to the
matters referred to in clauses (vii), (viii), (ix), (xvi) and (xviii) of the
foregoing paragraph (c) and such other related matters as the Initial Purchasers
may request. In giving such opinion, such counsel may rely, as to all matters
governed by the laws of jurisdictions other than the law of the State of New
York, the federal law of the United States and the General Corporation Law of
the State of Delaware, upon the opinions of counsel satisfactory to you. Such
counsel may also state that, insofar as such opinion involves factual matters,
they have relied, to the extent they deem proper, upon certificates of officers
of the Company and the Subsidiaries and certificates of public officials;
provided that such certificates have been delivered to the Initial Purchasers.
(g) The Initial Purchasers shall have received letters addressed to
the Initial Purchasers, and dated the date hereof and the Closing Date from BDO
Seidman, LLP, independent certified public accountants, substantially in the
forms heretofore approved by the Initial Purchasers.
(h) The Company and the Subsidiary Guarantors shall have executed the
Registration Rights Agreement in substantially the form of Exhibit A hereto.
(i) (i) There shall not have been any change in the capital stock of
the Company nor any material increase in the short-term or long-term debt of the
Company (other than in the ordinary course of business) from that set forth or
contemplated in the Offering Memorandum (or any amendment or supplement
thereto); (ii) there shall not have been, since the respective dates as of which
information is given in the Offering Memorandum (or any amendment or supplement
thereto), except as may otherwise be stated in the Offering Memorandum (or any
amendment or supplement thereto), any Material Adverse Effect; (iii) the Company
and the Subsidiaries shall not have any liabilities or obligations, direct or
contingent (whether or not in the ordinary course of business), that are
material to the
<PAGE> 28
28
Company and the Subsidiaries, taken as a whole, other than those reflected in or
contemplated by the Offering Memorandum (or any amendment or supplement
thereto); and (iv) all the representations and warranties of the Company
contained in this Agreement shall be true and correct in all material respects
on and as of the date hereof and on and as of the Closing Date as if made on and
as of the Closing Date, and the Initial Purchasers shall have received a
certificate, dated the Closing Date and signed by the chief executive officer
and the chief accounting officer of the Company (or such other officers as are
acceptable to the Initial Purchasers), to the effect set forth in this Section
7(g) and in Section 7(h) hereof.
(j) The Company shall not have failed at or prior to the Closing Date
to have performed or complied with any of its agreements herein contained and
required to be performed or complied with by it hereunder at or prior to the
Closing Date.
(k) The Initial Purchasers shall have received certificates dated the
date hereof and the Closing Date signed by the chief accounting officer of the
Company substantially in the forms heretofore approved by the Initial
Purchasers, respecting the Company's compliance with the financial covenants set
forth in the Credit Agreements.
(l) There shall not have been any announcement by any "nationally
recognized statistical rating organization," as defined for purposes of Rule
436(g) under the Act, that (i) it is downgrading its rating assigned to any
class of securities of the Company, or (ii) it is reviewing its ratings assigned
to any class of securities of the Company with a view to possible downgrading,
or with negative implications, or direction not determined.
(m) The Company shall have furnished or caused to be furnished to the
Initial Purchasers such further certificates and documents as the Initial
Purchasers shall have reasonably requested.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to the Initial Purchasers and counsel for the Initial
Purchasers.
Any certificate or document signed by any officer of the Company and
delivered to the Initial Purchasers, or to counsel for the Initial Purchasers,
shall be deemed a representation and warranty by the Company to the Initial
Purchasers as to the statements made therein.
8. Expenses. The Company and the Subsidiary Guarantors agree to pay the
following costs and expenses and all other costs and expenses incident to the
performance by them of their obligations hereunder: (i) the preparation,
printing or reproduction of the Offering Memorandum (including financial
statements annexed thereto), and each amendment or supplement to any of them,
this Agreement, the Registration Rights Agreement and the Indenture; (ii) the
printing (or reproduction) and delivery (including postage, air freight charges
<PAGE> 29
29
and charges for counting and packaging) of such copies of the Offering
Memorandum, the Preliminary Offering Memorandum, and all amendments or
supplements to any of them as may be reasonably requested for use in connection
with the offering and sale of the Notes; (iii) the preparation, printing,
authentication, issuance and delivery of certificates for the Notes, including
any stamp taxes in connection with the original issuance and sale of the Notes;
(iv) the printing (or reproduction) and delivery of this Agreement, the
Registration Rights Agreement, the preliminary and supplemental Blue Sky
Memoranda and all other agreements or documents printed (or reproduced) and
delivered in connection with the offering of the Notes; (v) the qualification of
the Notes for offer and sale under the securities or Blue Sky laws of the
several states as provided in Section 4(f) hereof (including the reasonable
fees, expenses and disbursements of counsel for the Initial Purchasers relating
to the preparation, printing or reproduction, and delivery of the preliminary
and supplemental Blue Sky Memoranda and such qualification); (vi) the
qualification of the Notes for trading in the PORTAL system and for trading in
the book entry system maintained by the Depository Trust Company; (vii) the
performance by the Company and the Subsidiary Guarantors of their obligations
under the Registration Rights Agreement; and (viii) the fees and expenses of the
Company's accountants, the fees and expenses of counsel (including local and
special counsel) for the Company and the fees and expenses of the Trustee under
the Indenture and its counsel. The Company hereby agrees that it will pay in
full on the Closing Date the fees and expenses referred to in clause (v) of this
Section 8 by delivering to counsel for the Initial Purchasers on such date a
check payable to such counsel in the requisite amount.
9. Effective Date of Agreement. This Agreement shall become effective
upon the execution and delivery hereof by all the parties hereto. Until such
time as this Agreement shall have become effective, to the extent that a party
hereto, but not the other parties hereto, has executed and delivered this
Agreement, such party executing and delivering this Agreement may rescind such
execution and delivery by written notice to the other parties hereto.
Any notice under this Section 9 may be given by telegram, telecopy or
telephone and shall be subsequently confirmed by letter.
10. Termination of Agreement. This Agreement shall be subject to
termination in the absolute discretion of the Initial Purchasers, without
liability on the part of the Initial Purchasers to the Company, by notice to
the Company, if prior to the Closing Date (i) trading in securities generally
on the New York Stock Exchange, American Stock Exchange or the Nasdaq National
Market shall have been suspended or materially limited, (ii) a general
moratorium on commercial banking activities in New York shall have been
declared by either Federal or state authorities, or (iii) there shall have
occurred any outbreak or escalation of hostilities or other international or
domestic calamity, crisis or change in political, financial or economic
conditions, the effect of which on the financial markets of the United States
is such as to make it, in the judgment of the Initial Purchasers, impracticable
or inadvisable to commence or continue the offering of the Notes on the terms
set forth on the cover page of the Offering Memorandum or
<PAGE> 30
30
to enforce contracts for the resale of the Notes by the Initial Purchasers.
Notice of such termination may be given to the Company by telegram, telecopy or
telephone and shall be subsequently confirmed by letter.
11. Information Furnished by the Initial Purchasers. The statements set
forth in the stabilization legend in the first paragraph on page two, the last
paragraph on the cover page, under the caption "Private Placement" and the
second sentence under the caption "Legal Matters" in the Preliminary Offering
Memorandum and Offering Memorandum, constitute the only information furnished by
or on behalf of the Initial Purchasers as such information is referred to in
Sections 5(b) and 6 hereof.
12. Miscellaneous. Except as otherwise provided in Sections 4, 9 and 10
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company, at the office of the
Company at 2859 Paces Ferry Road, Suite 2000, Atlanta, Georgia 30339,
Attention: Daniel T. Hendrix, Chief Financial Officer, or (ii) if to the
Initial Purchasers, to Smith Barney Inc., 388 Greenwich Street, New York, NY
10013, Attention: Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit of the Initial
Purchasers, the Company and the Subsidiary Guarantors, their directors,
officers and controlling persons referred to in Section 6 hereof and their
respective successors and assigns, to the extent provided herein, and no other
person shall acquire or have any right under or by virtue of this Agreement.
Neither the term "successor" nor the term "successors and assigns" as used in
this Agreement shall include a purchaser from the Initial Purchasers of any of
the Notes in its status as such purchaser.
13. Applicable Law; Counterparts. This Agreement shall be governed by the
laws of the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
<PAGE> 31
31
Please confirm that the foregoing correctly sets forth the agreement among
the Company, the Subsidiary Guarantors and the Initial Purchasers.
Very truly yours,
INTERFACE, INC.
By /s/ Ray C. Anderson
-----------------------------------
Name: Ray C. Anderson
Title: Chairman, President and CEO
Each of the Subsidiary Guarantors
Listed On Schedule III
By INTERFACE, INC.
By /s/ Ray C. Anderson
-----------------------------------
Name: Ray C. Anderson
Title: Chairman, President and CEO
Confirmed as of the date first
above mentioned.
SMITH BARNEY INC.
MERRILL LYNCH, PIERCE, FENNER,
& SMITH INCORPORATED
THE ROBINSON-HUMPHREY COMPANY, INC.
WHEAT, FIRST SECURITIES, INC.
FIRST CHICAGO CAPITAL MARKETS, INC.
By SMITH BARNEY INC.
By /s/ Michael J. Levitt
--------------------------------
Name:
Title:
<PAGE> 32
SCHEDULE I
INTERFACE, INC.
<TABLE>
<CAPTION>
Initial Purchaser Principal Amount
- ----------------- of Notes
----------------
<S> <C>
Smith Barney Inc................... $ 62,500,000
Merrill Lynch, Pierce, Fenner
& Smith Incorporated....... $ 43,750,000
The Robinson-Humphrey Company, Inc. $6,250,000
Wheat, First Securities, Inc....... $6,250,000
First Chicago Capital Markets, Inc. $6,250,000
------------
Total...................... $125,000,000
============
</TABLE>
<PAGE> 33
SCHEDULE II
INTERFACE, INC.
Inactive Subsidiaries
Interface Architectural Resources, Inc. (GA)
Interface Leasing Inc. (GA)
Interface International, Inc. (Barbados FSC)
Future Step Technologies Inc. (CND)
KCI, Inc. (GA)
Interface Installations, Inc. (GA)
Interface Environmental, Inc. (GA)
Macro-Septic, Inc. (GA)
Interface Disc Corp. (GA)
IDISC, Inc. (GA Disc) (GA)
Intrinsic Systems, Inc. (GA)
Manchaug Reservoir Corp. (Mass.)
Munford River Reservoir Company (Mass.)
Interface Flooring Systems (AUS) Pty, Ltd.
Heuga Overseas Ltd.
Shelf Investments Ltd.
Carpet International Hong Kong Ltd. (Hong Kong)
Heuga Tile Corp. (U.S.)
Heuga Leasing Corp. (U.S.)
Heuga Research A.G. (Switz.)
Heuga Rohsag Scotland Ltd. (Scotland)
Interface Heuga Japan Ltd. (Japan)
<PAGE> 34
SCHEDULE III
INTERFACE, INC.
Subsidiary Guarantors
Bentley Mills, Inc.
Guilford (Delaware), Inc.
Guilford of Maine, Inc.
Interface Asia-Pacific, Inc.
Interface Europe, Inc.
Interface Flooring Systems, Inc.
Interface Research Corporation
Pandel, Inc.
Prince Street Technologies, Ltd.
Rockland React-Rite, Inc.
<PAGE> 1
EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of the 21st day of November, 1995, by and among Interface, Inc., a
Georgia corporation (the "Company"), Bentley Mills, Inc., Guilford (Delaware),
Inc., Guilford of Maine, Inc., Interface Asia-Pacific, Inc., Interface Europe,
Inc., Interface Flooring Systems, Inc., Interface Research Corporation, Pandel,
Inc., Prince Street Technologies, Ltd., Rockland React-Rite, Inc.
(collectively, the "Guarantors") and Smith Barney Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, The Robinson-Humphrey Company, Inc., Wheat, First
Securities, Inc. and First Chicago Capital Markets, Inc. (collectively, the
"Purchasers").
This Agreement is made pursuant to the Purchase Agreement dated November
16, 1995, among the Company, the Guarantors, and the Purchasers (the "Purchase
Agreement"), which provides for the sale by the Company to the Purchasers of 9
1/2% Senior Subordinated Notes due 2005 (the "Senior Subordinated Notes"). The
Senior Subordinated Notes are to be issued by the Company pursuant to the
provisions of an Indenture dated as of November 15, 1995 (as amended,
supplemented or otherwise modified from time to time, the "Indenture") between
the Company and First Union National Bank of Georgia, as trustee (the
"Trustee").
In order to induce the Purchasers to enter into the Purchase Agreement,
the Company has agreed to provide to the Purchasers and their direct and
indirect transferees the registration rights with respect to the Senior
Subordinated Notes set forth in this Agreement. The execution of this
Agreement is a condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. Definitions.
As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from
time to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Closing Date" shall mean the Closing Date as defined in the
Purchase Agreement.
"Company" shall have the meaning set forth in the preamble and shall
also include the Company's successors.
"Exchange Date" shall have the meaning set forth in Section
2(a)(ii).
<PAGE> 2
2
"Exchange Notes" shall mean securities issued by the Company under
the Indenture containing terms identical to the Senior Subordinated Notes
(except that (i) interest thereon shall accrue from the last date on which
interest was paid on the Senior Subordinated Notes or, if no such interest
has been paid, from November 21, 1995 and (ii) the Exchange Notes will not
provide for an increase in the rate of interest and will not contain terms
with respect to transfer restrictions) and to be offered to Holders of
Senior Subordinated Notes in exchange for Senior Subordinated Notes
pursuant to the Exchange Offer.
"Exchange Offer" shall mean the exchange offer by the Company of
Exchange Notes for Registrable Notes pursuant to Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under the
1933 Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another
appropriate form) and all amendments and supplements to such registration
statement, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Guarantees" shall mean the guarantee of the Senior Subordinated
Notes by each Guarantor.
"Holder" shall mean the Purchasers, for so long as they own any
Registrable Notes, and each of their successors, assigns and direct and
indirect transferees who become registered owners of Registrable Notes
under the Indenture; provided that for purposes of Sections 4 and 5 of this
Agreement, the term "Holder" shall include Participating Broker-Dealers (as
defined in Section 4(a)).
"Indenture" shall have the meaning set forth in the preamble.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Notes; provided that,
for purposes of Section 6(b), whenever the consent or approval of Holders
of a specified percentage of Registrable Notes is required hereunder,
Registrable Notes held by the Company or any of its affiliates (as such
term is defined in Rule 405 under the 1933 Act) (other than the Purchasers
or subsequent holders of Registrable Notes if such subsequent holders are
deemed to be such affiliates solely by reason of their holding of such
Registrable Notes) shall not be counted in determining whether such consent
or approval was given by the Holders of such required percentage or amount.
"Offer Termination Date" shall have the meaning set forth in Section
2(a)(iv).
<PAGE> 3
3
"Participating Broker-Dealer" shall have the meaning set forth in
Section 4(a) hereof.
"Person" shall mean an individual, partnership, corporation, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus or offering memorandum, and
any such prospectus as amended or supplemented by any prospectus
supplement, including a prospectus supplement with respect to the terms of
the offering of any portion of the Registrable Notes covered by a Shelf
Registration Statement, and by all other amendments and supplements to such
prospectus, and in each case including all material incorporated by
reference therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble.
"Purchasers" shall have the meaning set forth in the preamble.
"Registrable Notes" shall mean the Senior Subordinated Notes;
provided, however, that the Senior Subordinated Notes shall cease to be
Registrable Notes (i) when a Registration Statement with respect to such
Senior Subordinated Notes shall have been declared effective under the 1933
Act and such Senior Subordinated Notes shall have been disposed of or
exchanged pursuant to such Registration Statement, (ii) upon the expiration
of the Exchange Offer period with respect to any Exchange Offer
Registration Statement if all Registrable Notes validly tendered in
connection with such Exchange Offer shall have been exchanged for Exchange
Notes, (iii) when such Senior Subordinated Notes have been sold or are
eligible for sale to the public pursuant to Rule 144(k) (or any similar
provision then in force, but not Rule 144A) under the 1933 Act or (iv) when
such Senior Subordinated Notes shall have ceased to be outstanding;
provided, however, that if an opinion of counsel is delivered to the
Company as provided in clause (iii) of Section 2(b), then Senior
Subordinated Notes held by the Purchasers shall not cease to be Registrable
Notes solely by reason of clause (ii) above.
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees, (ii) all fees and
expenses incurred in connection with compliance with state securities or
blue sky laws, (iii) all expenses of any Person in preparing or assisting
in preparing, word processing, printing and distributing, at the request of
the Company, any Registration Statement, any Prospectus, any amendments or
supplements thereto, any underwriting agreements, securities sales
agreements and other documents relating to the performance of and
compliance with this Agreement, (iv)
<PAGE> 4
4
all fees and disbursements relating to the qualification of the Indenture
under applicable securities laws, (v) the fees and disbursements of the
Trustee and its counsel, (vi) the fees and disbursements of counsel for the
Company and, in the case of a Shelf Registration Statement, the fees and
disbursements of one counsel for the Holders incurred on or before the
initial effectiveness of the Shelf Registration Statement, which counsel
shall be counsel for the Purchasers or other counsel selected by the
Company and not objected to by the Majority Holders ("counsel for the
Holders") and (vii) the fees and disbursements of the independent public
accountants of the Company, including the expenses of any special audits or
"cold comfort" letters required by or incident to such performance and
compliance, but excluding underwriting discounts, if any, and commissions
and transfer taxes, if any, relating to the sale or disposition of
Registrable Notes by a Holder.
"Registration Statement" shall mean any registration statement of
the Company that covers any of the Exchange Notes, Registrable Notes or
Guarantees pursuant to the provisions of this Agreement and all amendments
and supplements to any such Registration Statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"SEC" shall mean the Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected pursuant to
Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 2(b) of this
Agreement which covers all of the Registrable Notes and Guarantees on an
appropriate form under Rule 415 under the 1933 Act, or any similar rule
that may be adopted by the SEC, and all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"TIA" shall have the meaning set forth in Section 3(l) hereof.
"Trustee" shall have the meaning set forth in the preamble.
<PAGE> 5
5
2. Registration under the 1933 Act.
(a) To the extent not prohibited by any applicable law or applicable
interpretation of the Staff of the SEC, the Company and the Guarantors shall
use their best efforts to cause to be filed an Exchange Offer Registration
Statement covering the offer by the Company to the Holders to exchange all of
the Registrable Notes for Exchange Notes, to have such Registration Statement
remain effective until the closing of the Exchange Offer and to consummate the
Exchange Offer on or prior to the date that is 105 days after the Closing Date.
The Company and the Guarantors shall commence the Exchange Offer promptly
after the Exchange Offer Registration Statement has been declared effective by
the SEC and use their best efforts to have the Exchange Offer consummated not
later than 30 days after such effective date. For purposes hereof,
"consummate" shall mean that the Exchange Offer Registration Statement shall
have been declared effective, subject to Section 2(b), the period of the
Exchange Offer provided in accordance with clause (ii) below shall have expired
and all Registrable Notes validly tendered in connection with such Exchange
Offer shall have been exchanged for Exchange Notes. The Company and the
Guarantors shall commence the Exchange Offer by mailing the related exchange
offer Prospectus and accompanying documents to each Holder stating, in addition
to such other disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to this
Registration Rights Agreement and that all Registrable Notes validly
tendered will be accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be a
period of at least 25 days from the date such notice is mailed) (each
such date being an "Exchange Date");
(iii) that any Registrable Note not tendered will remain
outstanding and continue to accrue interest, but will not retain any
rights under this Agreement;
(iv) that Holders electing to have a Registrable Note
exchanged pursuant to the Exchange Offer will be required to
surrender such Registrable Note, together with the enclosed letters
of transmittal, to the institution and at the address specified in
the notice prior to the close of business on the last Exchange Date
(the "Offer Termination Date"); and
(v) that Holders will be entitled to withdraw their election,
not later than the close of business on the Offer Termination Date,
by sending to the institution and at the address specified in the
notice a telegram, telex, facsimile transmission or letter setting
forth the name of such Holder, the principal amount of Registrable
Notes delivered for exchange and a statement that such Holder is
withdrawing his election to have such Registrable Notes exchanged.
As soon as practicable after the Offer Termination Date, the
Company shall:
<PAGE> 6
6
(A) accept for exchange Registrable Notes or portions thereof
tendered and not validly withdrawn pursuant to the Exchange Offer; and
(B) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Notes or portions thereof so accepted for
exchange by the Company and issue, and cause the Trustee to promptly
authenticate and mail to each Holder, an Exchange Note equal in aggregate
principal amount to the aggregate principal amount of the Registrable
Notes surrendered by such Holder.
The Company and the Guarantors shall use their best efforts to complete the
Exchange Offer as provided above and shall comply with the applicable
requirements of the 1933 Act, the 1934 Act and other applicable laws and
regulations in connection with the Exchange Offer. The Exchange Offer shall
not be subject to any conditions, other than that the Exchange Offer does not
violate applicable law or any applicable interpretation of the Staff of the
SEC. The Company shall inform the Purchasers of the names and addresses of the
Holders to whom the Exchange Offer is made, and the Purchasers shall have the
right, subject to applicable law, to contact such Holders and otherwise
facilitate the tender of Registrable Notes in the Exchange Offer.
(b) In the event that (i) the Company determines that the Exchange
Offer Registration provided for in Section 2(a) above is not available or may
not be consummated as soon as practicable after the Offer Termination Date
because it would violate applicable law or the applicable interpretations of the
Staff of the SEC, (ii) the Exchange Offer is not for any other reason
consummated within 105 days after the Closing Date or (iii) in the opinion of
counsel for the Purchasers, which shall be given reasonably promptly, a
Registration Statement must be filed and a Prospectus must be delivered by the
Purchasers in connection with any offering or sale of Registrable Notes, the
Company and the Guarantors shall use their best efforts to cause to be filed as
soon as practicable after such determination, date or notice of such opinion of
counsel is given to the Company, as the case may be, a Shelf Registration
Statement providing for the sale by the Holders of all of the Registrable Notes
and to have such Shelf Registration Statement declared effective by the SEC. In
the event the Company and the Guarantors are required to file a Shelf
Registration Statement solely as a result of the matters referred to in clause
(iii) of the preceding sentence, the Company and the Guarantors shall file and
have declared effective by the SEC both an Exchange Offer Registration Statement
pursuant to Section 2(a) with respect to all Registrable Notes and a Shelf
Registration Statement (which may be a combined Registration Statement with the
Exchange Offer Registration Statement) with respect to offers and sales of
Registrable Notes held by the Purchasers after completion of the Exchange Offer.
The Company and the Guarantors agree to use their best efforts to keep the Shelf
Registration Statement continuously effective until the third anniversary of the
Closing Date or such shorter period that will terminate when all of the
Registrable Notes covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement. The Company and the Guarantors
further agree to supplement or amend the Shelf Registration Statement if
required by the rules, regulations or instructions applicable to the
registration form used by the Company and the Guarantors for such Shelf
Registration Statement or by the 1933 Act or by any other
<PAGE> 7
7
rules and regulations thereunder for shelf registration or if reasonably
requested by a Holder with respect to information relating to such Holder, and
to use their best efforts to cause any such amendment to become effective and
such Shelf Registration Statement to become usable as soon as thereafter
practicable. The Company agrees to furnish to the Holders of Registrable Notes
copies of any such supplement or amendment promptly after its being used or
filed with the SEC.
(c) The Company and the Guarantors shall pay all Registration
Expenses in connection with the registration pursuant to Section 2(a) or Section
2(b). Each Holder shall pay all underwriting discounts, if any, and commissions
and transfer taxes, if any, relating to the sale or disposition of such Holder's
Registrable Notes pursuant to the Shelf Registration Statement.
(d) An Exchange Offer Registration Statement pursuant to Section 2(a)
hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will
not be deemed to have become effective unless it has been declared effective by
the SEC; provided, however, that, if, after it has been declared effective, the
offering of Registrable Notes pursuant to a Shelf Registration Statement is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, such Registration Statement
will be deemed not to have become effective during the period of such
interference until the offering of Registrable Notes pursuant to such
Registration Statement may legally resume. As provided for in the Indenture,
in the event the Exchange Offer is not consummated and the Shelf Registration
Statement is not declared effective on or prior to March 5, 1996, Penalty
Interest (in addition to the interest otherwise due on the Notes after such
date) shall be accrued on the Notes as follows:
(i) (A) if an Exchange Offer Registration Statement or, in the
event that due to current interpretations by the SEC the Company is not
permitted to effect the Exchange Offer, a Shelf Registration Statement is
not filed within 30 days following the Closing Date or (B) in the event
that within the prescribed time period, any holder of Registrable Notes
shall notify the Company that such holder (x) is prohibited by applicable
law or SEC policy from participating in the Exchange Offer, (y) may not
resell Exchange Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and that the prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for
such resales by such holder or (z) is a broker-dealer and holds
Registrable Notes acquired directly from the Company or an "affiliate" of
the Company, a Shelf Registration Statement is not filed within 30 days
after expiration of the prescribed time period, then commencing on the 31st
day after the Closing Date or the expiration of the prescribed time period,
as the case may be, Penalty Interest shall be accrued on the Notes over and
above the accrued interest at a rate of .50% per annum for the first 90
days immediately following the 31st day after the Closing Date or the
expiration of the prescribed time period, as the case may be, such Penalty
Interest rate increasing by an additional .25% per annum at the beginning
of each subsequent 90-day period;
<PAGE> 8
8
(ii) if an Exchange Offer Registration Statement or a Shelf
Registration Statement is filed pursuant to Section 2(d)(i) hereof and is
not declared effective within 75 days following the Closing Date or the
expiration of the prescribed time period, as the case may be, then
commencing on the 76th day after the Closing Date or the expiration of the
prescribed time period, as the case may be, Penalty Interest shall be
accrued on the Registrable Notes over and above the accrued interest at a
rate of .50% per annum for the first 90 days immediately following the 76th
day after the Closing Date or the expiration of the prescribed time period,
as the case may be, such Penalty Interest rate increased by an additional
.25% per annum at the beginning of each subsequent 90-day period; and
(iii) if either (A) the Company has not exchanged Exchange
Notes for all Registrable Notes validly tendered in accordance with the
terms of the Exchange Offer on or prior to 30 days after the date on which
the Exchange Offer Registration Statement was declared effective, or (B) if
applicable, a Shelf Registration Statement has been declared effective and
such Shelf Registration Statement ceases to be effective prior to three
years from its original effective date, then, subject to certain
exceptions, Penalty Interest shall be accrued on the Registrable Notes over
and above the accrued interest at a rate of .50% per annum for the first 60
days immediately following the (x) 31st day after such effective date, in
the case of (A) above, or (y) the day such Shelf Registration Statement
ceases to be effective in the case of (B) above, such Penalty Interest rate
increasing by an additional .25% per annum at the beginning of each
subsequent 60-day period;
provided, however, that the Penalty Interest rate on the Registrable Notes may
not exceed 1.5% per annum; and provided further that (1) upon the filing of the
Exchange Offer Registration Statement or a Shelf Registration Statement (in the
case of (d)(i) above), (2) upon the effectiveness of the Exchange Offer
Registration Statement or a Shelf Registration Statement (in the case of
(d)(ii) above), or (3) upon the exchange of Exchange Notes for all Registrable
Notes tendered in the Exchange Offer or upon the effectiveness of the Shelf
Registration Statement which had ceased to remain effective prior to three
years from its original effective date (in the case of (d)(iii) above), Penalty
Interest on the Registrable Notes as a result of such clause (i), (ii) or (iii)
shall cease to accrue.
Any amounts of Penalty Interest due pursuant to clause (i), (ii) or (iii)
above will be payable in cash on the interest payment dates of the Registrable
Notes. The amount of Penalty Interest will be determined by multiplying the
applicable Penalty Interest rate by the principal amount of the Registrable
Notes, multiplied by a fraction, the numerator of which is the number of days
such Penalty Interest rate was applicable during such period (determined on the
basis of a 360-day year composed of twelve 30-day months), and the denominator
of which is 360.
<PAGE> 9
9
If the Company effects the Exchange Offer, the Company will be entitled to
close the Exchange Offer provided that it has accepted all Registrable Notes
theretofore validly tendered in accordance with the terms of the Exchange Offer.
Registrable Notes not tendered in the Exchange Offer shall bear interest at the
same rate as in effect at the time of issuance of the Registrable Notes.
(e) Without limiting the remedies available to the Purchasers and the
Holders, the Company and the Guarantors acknowledge that any failure by the
Company and the Guarantors to comply with their obligations under Section 2(a)
and Section 2(b) hereof may result in material irreparable injury to the
Purchasers or the Holders for which there is no adequate remedy at law, that it
will not be possible to measure damages for such injuries precisely and that,
in the event of any such failure, the Purchasers or any Holder may obtain such
relief as may be required to specifically enforce the Company's and the
Guarantors' obligations under Section 2(a) and Section 2(b) hereof.
3. Registration Procedures.
In connection with the obligations of the Company and the Guarantors with
respect to the Registration Statements pursuant to Section 2(a) and Section
2(b) hereof, the Company and the Guarantors shall reasonably promptly:
(a) prepare and file with the SEC a Registration Statement on the
appropriate form under the 1933 Act, which form shall (x) be selected by the
Company, (y) in the case of a Shelf Registration, be available for the sale of
the Registrable Notes by the selling Holders thereof and (z) comply as to form
in all material respects with the requirements of the applicable form and
include all financial statements required by the SEC to be filed therewith, and
use their best efforts to cause such Registration Statement to become effective
and remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective for the applicable period and cause each
Prospectus to be supplemented by any required prospectus supplement and, as so
supplemented, to be filed pursuant to Rule 424 under the 1933 Act; and keep each
Prospectus current during the period described under Section 4(3) and Rule 174
under the 1933 Act that is applicable to transactions by brokers or dealers with
respect to the Registrable Notes or Exchange Notes;
(c) in the case of a Shelf Registration, furnish to each Holder of
Registrable Notes, to counsel for the Purchasers and to counsel for the Holders,
without charge, as many copies of each Prospectus, including each preliminary
Prospectus and any amendment or supplement thereto and such other documents as
such Holder may
<PAGE> 10
10
reasonably request, in order to facilitate the public sale or other disposition
of the Registrable Notes; and the Company and the Guarantors consent to the use
of such Prospectus and any amendment or supplement thereto in accordance with
applicable law by each of the selling Holders of Registrable Notes in connection
with the offering and sale of the Registrable Notes covered by and in the manner
described in such Prospectus or any amendment or supplement thereto in
accordance with applicable law;
(d) use their best efforts (i) to register or qualify the
Registrable Notes and the Guarantees under all applicable state securities or
blue sky laws of such jurisdictions as any Holder of Registrable Notes covered
by a Registration Statement shall reasonably request in writing by the time the
applicable Registration Statement is declared effective by the SEC and (ii) to
cooperate with such Holders in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. and do any and all
other acts and things which may be reasonably necessary or advisable to enable
such Holder to consummate the disposition in each such jurisdiction of such
Registrable Notes owned by such Holder; provided, however, that the Company and
the Guarantors shall not be required to (A) qualify as a foreign corporation or
as a dealer in securities in any jurisdiction where they would not otherwise be
required to qualify but for this Section 3(d), (B) file any general consent to
service of process or (C) subject themselves to taxation in any such
jurisdiction if they are not so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Notes, counsel for the Holders and counsel for the Purchasers
promptly and, if requested by any such Holder, counsel for the Holders or
counsel for the Purchasers, confirm such advice in writing (i) when a
Registration Statement has become effective and when any post-effective
amendment thereto has been filed and becomes effective, (ii) of any request by
the SEC or any state securities authority for amendments and supplements to a
Registration Statement and Prospectus or for additional information after the
Registration Statement has become effective, (iii) of the issuance by the SEC or
any state securities authority of any stop order suspending the effectiveness of
a Registration Statement or the initiation of any proceedings for that purpose,
(iv) if, between the effective date of a Registration Statement and the closing
of any sale of Registrable Notes covered thereby, the representations and
warranties of the Company contained in any securities sales agreement or other
similar agreement, if any, relating to the offering cease to be true and correct
in all material respects or if the Company receives any notification with
respect to the suspension of the qualification of the Registrable Notes for sale
in any jurisdiction or the initiation of any proceeding for such purpose, (v) of
the happening of any event during the period a Shelf Registration Statement is
effective which makes any statement made in such Registration Statement or the
related Prospectus untrue in any material respect or which requires the making
of any changes in such Registration Statement or Prospectus in order to make the
statements therein not misleading and (vi)
<PAGE> 11
11
of any determination by the Company that a post-effective amendment to a
Registration Statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at the earliest
possible moment and provide immediate notice to each Holder of the withdrawal of
any such order;
(g) in the case of a Shelf Registration, furnish to each Holder of
Registrable Notes, without charge, at least one conformed copy of each
Registration Statement and any post-effective amendment thereto (without
documents incorporated therein by reference or exhibits thereto, unless
requested);
(h) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Notes to facilitate the timely preparation and delivery
of certificates representing Registrable Notes to be sold and not bearing any
restrictive legends and enable such Registrable Notes to be in such
denominations (consistent with the provisions of the Indenture) and registered
in such names as the selling Holders may reasonably request at least two
business days prior to the closing of any sale of Registrable Notes;
(i) in the case of a Shelf Registration, upon the occurrence of any
event contemplated by Section 3(e)(v) hereof, use their best efforts to prepare
a supplement or post-effective amendment to a Registration Statement or the
related Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Notes, such Prospectus will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Company agrees to notify the Holders to suspend use of the
Prospectus as promptly as practicable after the occurrence of such an event, and
the Holders hereby agree to suspend use of the Prospectus until the Company has
amended or supplemented the Prospectus to correct such misstatement or omission;
(j) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus, provide copies of such document to the
Purchasers and their counsel (and, in the case of a Shelf Registration
Statement, counsel for the Holders) and make such of the representatives of the
Company as shall be reasonably requested by the Purchasers or its counsel (and,
in the case of a Shelf Registration Statement, counsel for the Holders),
available for discussion of such document, and shall not at any time file or
make any amendment to the Registration Statement, any Prospectus or any
amendment of or supplement to a Registration Statement or a Prospectus, of which
the Purchasers and their counsel (and, in the case of a Shelf Registration
Statement, counsel for the Holders) shall not have previously been advised and
furnished a copy or to which the
<PAGE> 12
12
Purchasers or their counsel (and, in the case of a Shelf Registration Statement,
counsel for the Holders) shall object reasonably promptly in light of the
circumstances;
(k) obtain a CUSIP number for all Exchange Notes or Registrable
Notes (if applicable), as the case may be, not later than the effective date of
a Registration Statement;
(l) cause the Indenture to be qualified under the Trust Indenture
Act of 1939, as amended (the "TIA"), in connection with the registration of the
Exchange Notes or Registrable Notes, as the case may be, cooperate with the
Trustee and the Holders to effect such changes to the Indenture as may be
required for the Indenture to be so qualified in accordance with the terms of
the TIA and execute, and use their best efforts to cause the Trustee to execute,
all documents as may be required to effect such changes and all other forms and
documents required to be filed with the SEC to enable the Indenture to be so
qualified in a timely manner;
(m) in the case of a Shelf Registration, make available for
inspection by a representative of the Holders of the Registrable Notes, and
attorneys and accountants designated by the Holders and reasonably acceptable to
the Company, at reasonable times and in a reasonable manner and subject to the
execution of appropriate confidentiality agreements, all financial and other
records, pertinent documents and properties of the Company and the Guarantors,
and cause the respective officers, directors and employees of the Company and
the Guarantors to supply all information reasonably requested by any such
representative, attorney or accountant in connection with a Shelf Registration
Statement;
(n) if reasonably requested by any Holder of Registrable Notes
covered by a Registration Statement, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment such information with respect to such
Holder as such Holder reasonably requests to be included therein and (ii) make
all required filings of such Prospectus supplement or such post-effective
amendment as soon as the Company has received notification of the matters to be
incorporated in such filing; and
(o) in the case of a Shelf Registration, in connection with the
initial effectiveness thereof and thereafter each time the Company files its
Annual Report on Form 10-K with the SEC, enter into such customary agreements
and take all such other reasonable actions in connection therewith (including
those reasonably requested by counsel for the Holders) in order to expedite or
facilitate the disposition of such Registrable Notes and in such connection, (i)
to the extent possible, make such representations and warranties to the Holders
of such Registrable Notes with respect to the business of the Company and its
subsidiaries, the Registration Statement, Prospectus and documents incorporated
by reference or deemed incorporated by reference, if any,
<PAGE> 13
13
in each case, in form, substance and scope as are customarily made by
issuers to underwriters in underwritten offerings and confirm the same if
and when requested, (ii) obtain opinions of counsel to the Company (which
counsel and opinions, in form, scope and substance, shall be reasonably
satisfactory to the Holders and counsel for the Holders) addressed to each
selling Holder of Registrable Notes, covering the matters customarily
covered in opinions requested in underwritten offerings, (iii) obtain
"cold comfort" letters from the independent certified public accountants
of the Company (and, if necessary, any other certified public accountant
of any subsidiary of the Company, or of any business acquired by the
Company for which financial statements and financial data are or are
required to be included in the Registration Statement) addressed to each
selling Holder of Registrable Notes, such letters to be in customary form
and covering matters of the type customarily covered in "cold comfort"
letters in connection with underwritten offerings, and (iv) deliver such
documents and certificates as may be reasonably requested by counsel for
the Holders to evidence the continued validity of the representations and
warranties of the Company made pursuant to clause (i) above and to
evidence compliance with any customary conditions contained in an
underwriting agreement.
In the case of a Shelf Registration Statement, the Company may require
each Holder of Registrable Notes to promptly furnish to the Company such
information regarding the Holder and the proposed distribution by such Holder
of such Registrable Notes as the Company may from time to time reasonably
request in writing. Any Holder of Registrable Notes who fails to provide such
information reasonably requested by the Company shall not be entitled to
receive any Penalty Interest that the Company otherwise becomes obligated to
pay as a result of such failure.
In the case of a Shelf Registration Statement, each Holder agrees that,
upon receipt of any notice from the Company of the happening of any event of
the kind described in Section 3(e)(v) hereof, such Holder will forthwith
discontinue disposition of Registrable Notes pursuant to a Registration
Statement until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(i) hereof, and, if so directed by
the Company, such Holder will deliver to the Company (at its expense) all
copies in its possession, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Registrable Notes current
at the time of receipt of such notice. Each Holder agrees to indemnify the
Company, the Guarantors, the Purchasers and the other selling Holders and each
of their respective officers and directors who sign the Registration Statement
and each person, if any, who controls any such person for any losses, claims,
damages and liabilities caused by the failure of such Holder to discontinue
disposition of Registrable Notes after receipt of the notice referred to in the
preceding sentence or the failure of such Holder to comply with applicable
prospectus delivery requirements with respect to any Prospectus (including, but
not limited to, any amended or supplemented Prospectus) provided by the Company
for such use.
<PAGE> 14
14
4. Participation of Broker-Dealers in Exchange Offer.
(a) The Company understands that the Staff of the SEC has taken the
position that any broker-dealer that receives Exchange Notes for its own
account in the Exchange Offer in exchange for Senior Subordinated Notes that
were acquired by such broker-dealer as a result of market-making or other
trading activities (a "Participating Broker-Dealer"), may be deemed to be an
"underwriter" within the meaning of the 1933 Act and must deliver a prospectus
meeting the requirements of the 1933 Act in connection with any resale of such
Exchange Notes.
The Company understands that it is the Staff's position that if the
Prospectus contained in the Exchange Offer Registration Statement includes a
plan of distribution containing a statement to the above effect and the means
by which Participating Broker-Dealers may resell the Exchange Notes, without
naming the Participating Broker-Dealers or specifying the amount of Exchange
Notes owned by them, such Prospectus may be delivered by Participating
Broker-Dealers to satisfy their prospectus delivery obligation under the 1933
Act in connection with resales of Exchange Notes for their own accounts, so
long as the Prospectus otherwise meets the requirements of the 1933 Act.
(b) In light of the above, notwithstanding the other provisions of
this Agreement, the Company agrees that the provisions of this Agreement as they
relate to a Shelf Registration shall also apply to an Exchange Offer
Registration to the extent, and with such reasonable modifications thereto as
may be, reasonably requested by the Purchasers or by one or more Participating
Broker-Dealers, in each case as provided in clause (ii) below, in order to
expedite or facilitate the disposition of any Exchange Notes by Participating
Broker-Dealers consistent with the positions of the Staff recited in Section
4(a) above; provided that:
(i) the Company shall not be required to amend or supplement
the Prospectus contained in the Exchange Offer Registration Statement, as
would otherwise be contemplated by Section 3(i), for a period exceeding 180
days after the Offer Termination Date and Participating Broker-Dealers
shall not be authorized by the Company to deliver and shall not deliver
such Prospectus after such period in connection with the resales
contemplated by this Section 4; and
(ii) the application of the Shelf Registration procedures set
forth in Section 3 of this Agreement to an Exchange Offer Registration, to
the extent not required by the positions of the Staff of the SEC or the
1933 Act and the rules and regulations thereunder, will be in conformity
with the reasonable request to the Company by the Purchasers or with the
reasonable request in writing to the Company by one or more broker-dealers
who certify to the Purchasers and the Company in writing that they
anticipate that they will be Participating Broker-Dealers; and provided
further that, in connection with such application of the Shelf Registration
procedures set forth in Section 3 to an Exchange Offer Registration, the
Company shall be obligated (x) to deal only
<PAGE> 15
15
with one entity representing the Participating Broker-Dealers, which shall
be Smith Barney Inc. unless it elects not to act as such representative,
(y) to pay the fees and expenses of only one counsel representing the
Participating Broker-Dealers, which shall be counsel to the Purchasers
unless such counsel elects not to so act and (z) to cause to be delivered
only one, if any, "cold comfort" letter with respect to the Prospectus in
the form existing on the Offer Termination Date and with respect to each
subsequent amendment or supplement, if any, effected during the period
specified in clause (i) above.
(c) The Purchasers shall have no liability to the Company or any
Holder for costs and expenses of the Exchange Offer Registration with respect to
any request that they may make pursuant to Section 4(b) above.
5. Indemnification and Contribution.
(a) The Company and the Guarantors agree to indemnify and hold
harmless the Purchasers, each Holder and each person, if any, who controls the
Purchasers or any Holder within the meaning of either Section 15 of the 1933 Act
or Section 20 of the 1934 Act, or is under common control with, or is controlled
by, the Purchasers or any Holder, from and against all losses, claims, damages
and liabilities (including, without limitation, any legal or other expenses
reasonably incurred by the Purchasers, any Holder or any such controlling or
affiliated person in connection with defending or investigating any such action
or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement (or any amendment thereto)
pursuant to which Exchange Notes or Registrable Notes were registered under the
1933 Act, including all documents incorporated therein by reference, or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, or
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or caused by any omission
or alleged omission to state therein a material fact necessary to make the
statements therein in light of the circumstances under which they were made not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to the Purchasers or any Holder
furnished to the Company in writing by the Purchasers or any selling Holder
expressly for use therein and, in the case of a Shelf Registration including a
plan of distribution section, such plan of distribution section; provided,
however, that the indemnification contained in this paragraph (a) with respect
to such Registration Statement or Prospectus shall not inure to the benefit of
any Purchaser, any Holder or any such controlling or affiliated person on
account of any such loss, claim, damages or liabilities caused by the failure of
such person to discontinue disposition of Registrable Notes after receipt of the
notice referred to in the final paragraph of Section 3 hereof.
<PAGE> 16
16
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Company, the Guarantors, the Purchasers and the other selling
Holders, and each of their respective directors and officers who sign the
Registration Statement and each Person, if any, who controls the Company, the
Guarantors, the Purchasers and any other selling Holder within the meaning of
either Section 15 of the 1933 Act or Section 20 of the 1934 Act to the same
extent as the foregoing indemnity from the Company and the Guarantor to the
Purchasers and the Holders, but only with reference to information relating to
such Holder furnished to the Company in writing by such Holder expressly for use
in any Registration Statement (or any amendment thereto) or any Prospectus (or
any amendment or supplement thereto).
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to either paragraph (a) or paragraph (b) above, such person
(the "indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding
and shall pay the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be
at the expense of such indemnified party unless (i) the indemnifying party and
the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for (a)
the fees and expenses of more than one separate firm (in addition to any local
counsel) for the Purchasers and all persons, if any, who control the Purchasers
within the meaning of either Section 15 of the 1933 Act or Section 20 of the
1934 Act, (b) the fees and expenses of more than one separate firm (in addition
to any local counsel) for the Company and the Guarantors, their directors,
their officers who sign the Registration Statement and each person, if any, who
controls the Company and the Guarantors within the meaning of either such
Section and (c) the fees and expenses of more than one separate firm (in
addition to any local counsel) for all Holders and all persons, if any, who
control any Holders within the meaning of either such Section, and that all
such fees and expenses shall be reimbursed as they are incurred. In such case
involving the Purchasers and persons who control the Purchasers, such firm
shall be designated in writing by the Purchasers. In such case involving the
Holders and such persons who control Holders, such firm shall be designated in
writing by the Majority Holders. In all other cases, such firm shall be
designated by the Company. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but, if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment.
<PAGE> 17
17
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have properly requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any good faith settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party for such fees
and expenses of counsel in accordance with such request prior to the date of
such settlement. No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which such indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) If the indemnification provided for in paragraph (a) or paragraph
(b) of this Section 4 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities, then each indemnifying
party under such paragraph, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party or parties on the one hand and of the indemnified party or parties on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company, the Guarantors and the
Holders shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
and the Guarantors or by the Holders and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Holders' respective obligations to contribute
pursuant to this Section 5(d) are several in proportion to the respective
principal amount of Registrable Notes of such Holder that were registered
pursuant to a Registration Statement.
(e) The Company, the Guarantors and each Holder agree that it would
not be just or equitable if contribution pursuant to this Section 5 were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in paragraph (d)
above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in paragraph (d) above shall
be deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 5, no Holder shall be required to indemnify or
contribute any amount in excess of the amount by which the total price at which
Registrable Notes were sold by such Holder exceeds the amount of any damages
that such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The remedies provided for in
<PAGE> 18
18
this Section 5 are not exclusive and shall not limit any rights or remedies
which may otherwise be available to any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this Section 5
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
the Purchasers, any Holder or any person controlling the Purchasers or any
Holder, or by or on behalf of the Company and the Guarantors, their officers or
directors or any person controlling the Company and the Guarantors, (iii)
acceptance of any of the Exchange Notes and (iv) any sale of Registrable Notes
pursuant to a Shelf Registration Statement.
6. Miscellaneous.
(a) No Inconsistent Agreements. The Company and the Guarantors have
not entered into, and on or after the date of this Agreement will not enter
into, any agreement which is inconsistent with the rights granted to the Holders
of Registrable Notes in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any
way conflict with and are not inconsistent with the rights granted to the
holders of the Company's or the Guarantors' other issued and outstanding
securities under any such agreements.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Notes affected by such amendment, modification, supplement, waiver
or consent; provided, however, that no amendment, modification, supplement,
waiver or consents to any departure from the provisions of Section 5 hereof
shall be effective as against any Holder of Registrable Notes unless consented
to in writing by such Holder.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder
to the Company by means of a notice given in accordance with the provisions of
this Section 6(c), which address initially is, with respect to the Purchasers,
the address set forth in the Purchase Agreement; and (ii) if to the Company and
the Guarantors, initially at the Company's address set forth in the Purchase
Agreement and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 6(c).
All such notices and communications shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
<PAGE> 19
19
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the person giving the same to the Trustee, at the
address specified in the Indenture.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment or assumption, subsequent Holders; provided that nothing
herein shall be deemed to permit any assignment, transfer or other disposition
of Registrable Notes in violation of the terms of the Purchase Agreement. If
any transferee of any Holder shall acquire Registrable Notes, in any manner,
whether by operation of law or otherwise, such Registrable Notes shall be held
subject to all of the terms of this Agreement, and by taking and holding such
Registrable Notes such person shall be conclusively deemed to have agreed to be
bound by and to perform all of the terms and provisions of this Agreement and
such person shall be entitled to receive the benefits hereof. The Purchasers
shall have no liability or obligation to the Company with respect to any failure
by a Holder to comply with, or any breach by any Holder of, any of the
obligations of such Holder under this Agreement.
(e) Purchases and Sales of Notes. The Company shall not, and shall
use best efforts to cause its affiliates (as defined in Rule 405 under the 1933
Act) not to, purchase and then resell or otherwise transfer any Senior
Subordinated Notes.
(f) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Purchasers, on the other hand, and shall
have the right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. This Agreement shall be governed by laws of the
State of New York.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable the validity, legality and enforceability
of any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
<PAGE> 20
20
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
INTERFACE, INC.
By /s/ David W. Porter
--------------------------------------
Name: David W. Porter
Title: Senior Vice President
BENTLEY MILLS, INC.
GUILFORD (DELAWARE), INC.
GUILFORD OF MAINE, INC.
INTERFACE ASIA-PACIFIC, INC.
INTERFACE EUROPE, INC.
INTERFACE FLOORING SYSTEMS, INC.
INTERFACE RESEARCH CORPORATION
PANDEL, INC.
PRINCE STREET TECHNOLOGIES, LTD.
ROCKLAND REACT-RITE, INC.
By /s/ David W. Porter
--------------------------------------
Name: David W. Porter
Title: Vice President
Confirmed and accepted as of
the date first above written:
SMITH BARNEY INC.
MERRILL LYNCH, PIERCE, FENNER, & SMITH INCORPORATED
THE ROBINSON-HUMPHREY COMPANY, INC.
WHEAT, FIRST SECURITIES, INC.
FIRST CHICAGO CAPITAL MARKETS, INC.
By SMITH BARNEY INC.
By /s/ John J. Braden
----------------------------------
Name: John J. Braden
Title:
<PAGE> 1
EXHIBIT 8
December 20, 1995
404 815-6500
Interface, Inc.
2859 Paces Ferry Road
Suite 2000
Atlanta, Georgia 30339
Gentlemen:
We have acted as counsel to Interface, Inc., a Georgia corporation ("the
Company"), in connection with the offer by the Company to exchange (the
"Exchange Offer") its 9 1/2% Senior Subordinated Notes Due 2005, Series B (the
"Exchange Notes"), for all outstanding 9 1/2% Senior Subordinated Notes Due
2005, Series A (the "Outstanding Notes"). This letter will confirm that we
have advised the Company with respect to certain United States federal income
tax consequences of the Exchange Offer, which advice formed the basis for the
discussion set forth under the caption "Certain U.S. Federal Income Tax
Consequences" in the Prospectus included in the Registration Statement on Form
S-4 (the "Registration Statement"), filed on this date with the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "Act"). Unless otherwise defined, capitalized terms used herein shall
have the respective meanings ascribed to them in the Registration Statement.
We have based our opinions set forth in this letter on the provisions of
the Internal Revenue Code of 1986, as presently amended (the "Code"), existing
Treasury regulations thereunder (the "Regulations"), published rulings and
practices of the Internal Revenue Service (the "Service") and court decisions.
It should be noted that the federal income tax consequences discussed in this
letter might be modified by legislative, judicial or administrative action at
any time, and such action might be applied retroactively or otherwise in a
manner that might alter such tax consequences.
<PAGE> 2
Interface, Inc.
December 20, 1995
Page 2
Based on the assumptions and subject to the qualifications and limitations
set forth therein, the discussion set forth under the caption "Certain U.S.
Federal Income Tax Consequences" in the Registration Statement, (i) in our
opinion accurately describes the material United States federal income tax
consequences of the acquistion, ownership and disposition of the Notes, and
(ii) constitutes our opinion to the extent the discussion relates to statements
of law. Such discussion does not purport to discuss all possible federal
income tax consequences of the acquistion, ownership and disposition of the
Notes.
Except as stated above, we express no opinion with respect to any other
matter. We are furnishing this opinion to you solely in connection with the
Exchange Offer, and this opinion is not to be relied upon, circulated, quoted,
or otherwise referred to for any other purpose.
We hereby consent to the filing of this opinion letter as an exhibit to
the Registration Statement, to the use of our name in the Registration
Statement and to the reference to us and this opinion letter in the
Registration Statement. By giving such consent, we do not thereby admit that
we are "experts" with respect to this letter, as that term is used in the Act,
or the rules and regulations of the SEC thereunder.
KILPATRICK & CODY
By: /s/ Lynn E. Fowler
------------------------------
Lynn E. Fowler, A Partner
<PAGE> 1
EXHIBIT 12.1
Interface, Inc.
Computation of the Ratio of Earnings to Fixed Charges
(in thousands, except ratios)
<TABLE>
<CAPTION>
Year ended
---------------------------------------------------------------------------------
Adjusted
December 30, December 39, January 3, January 2, January 1, January 1,
FIXED CHARGES 1990 1991 1993 1994 1995 1995
----------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Interest 25,192 23,253 21,894 22,840 24,094 26,307
Interest element of rentals (1) 1,875 3,200 3,533 3,500 4,033 4,033
Preferred Stock Dividends 0 0 0 913 1,750 1,750
----------- ---------- ---------- ---------- ---------- -----------
27,067 26,453 25,427 27,253 29,877 32,090
----------- ---------- ---------- ---------- ---------- -----------
EARNINGS:
Net Income 23,602 8,921 12,250 13,849 16,456 16,456
Taxes on income 14,078 5,409 6,311 7,455 9,257 9,257
Fixed Charges 27,067 26,453 25,427 26,340 28,127 30,340
----------- ---------- ---------- ---------- ---------- -----------
64,747 40,783 43,988 47,644 53,840 56,053
----------- ---------- ---------- ---------- ---------- -----------
RATIO OF EARNINGS TO
FIXED CHARGES 2.39 1.54 1.73 1.75 1.80 1.75
----------- ---------- ---------- ---------- ---------- -----------
<CAPTION>
Nine months ended
---------------------------------------
Adjusted
October 2, October 1, October 1,
FIXED CHARGES 1994 1995 1995
----------- ---------- ----------
<S> <C> <C> <C>
Interest 17,888 21,194 22,854
Interest element of rentals (1) 2,650 3,050 3,050
Preferred Stock Dividends 1,313 1,312 1,312
----------- ---------- ----------
21,851 25,556 27,216
----------- ---------- ----------
EARNINGS:
Net Income 10,770 14,418 14,418
Taxes on income 6,057 8,838 8,838
Fixed Charges 20,538 24,244 25,904
----------- ---------- ----------
37,365 47,500 49,160
----------- ---------- ----------
RATIO OF EARNINGS TO
FIXED CHARGES 1.71 1.86 1.81
----------- ---------- ----------
</TABLE>
(1) Deemed to be approximately one-third (1/3) of rent expense.
<PAGE> 1
EXHIBIT 25
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM T-1
---------------------------
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED,
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305 (b) (2) X
-----
---------------------------
FIRST UNION NATIONAL BANK OF GEORGIA
(Exact name of Trustee as specified in its charter)
<TABLE>
<S> <C> <C>
999 PEACHTREE STREET
ATLANTA, GEORGIA 30309 58-1079889
(Address of principal executive office) (Zip Code) (I.R.S. Employer Identification No.)
</TABLE>
R. Douglas Milner
First Union National Bank of Georgia
999 Peachtree Street N.E.
Atlanta, Georgia 30309
(404) 827-7349
(Name, Address and Telephone Number of Agent for Service)
---------------------------
INTERFACE, INC.
(Exact name of Obligor as specified in its charter)
<TABLE>
<S> <C>
Georgia 58-1451243
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
2859 Paces Ferry Road, Suite 2000
Atlanta, GA 30309
(Address of principal executive offices) (Zip Code)
</TABLE>
9 1/2% Senior Subordinated Notes Due 2005, Series A
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
1. General information.
(a) The following are the names and addresses of each examining or
supervising authority to which the Trustee is subject:
The Comptroller of the Currency, Washington, D.C.
Federal Reserve Bank of Atlanta, Georgia.
Federal Deposit Insurance Corporation, Washington, D.C.
Securities and Exchange Commission, Division of Market
Regulation, Washington, D.C.
(b) The Trustee is authorized to exercise corporate trust powers.
2. Affiliations with obligor.
The obligor is not an affiliate of the Trustee.
(See Note 2 on Page 5)
3. Voting Securities of the Trustee.
The following information is furnished as to each class of
voting securities of the Trustee:
As of June 30, 1995
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------
Column A Column B
- -------------------------------------------------------------------------------------------------------------
Title of Class Amount Outstanding
Common 1,462,700 shares
- -------------------------------------------------------------------------------------------------------------
Common Stock, par value $10.00 a share
</TABLE>
4. Trusteeships under other indentures.
The Trustee is not a trustee under any other indenture under
which any other securities, or certificates of interest or
participation in any other securities, of the obligor are outstanding.
5. Interlocking directorates and similar relationships with the obligor
or underwriters.
Neither the Trustee nor any of the directors or executive
officers of the Trustee is a director, officer, partner, employee,
appointee or representative of the obligor or of any underwriter for
the obligor. (See Note 2 on Page 5)
2
<PAGE> 3
6. Voting securities of the Trustee owned by the obligor or its
officials.
Voting securities of the Trustee owned by the obligor and its
directors, partners and executive officers, taken as a group, do not
exceed one percent of the outstanding voting securities of the
Trustee.
(See Notes 1 and 2 on Page 5)
7. Voting securities of the Trustee owned by underwriters or their
officials.
Voting securities of the Trustee owned by any underwriter and
its directors, partners, and executive officers, taken as a group, do
not exceed one percent of the outstanding voting securities of the
Trustee.
(See Notes 1 and 2 on Page 5)
8. Securities of the obligor owned or held by the Trustee.
The amount of securities of the obligor which the Trustee owns
beneficially or holds as collateral security for obligations in
default does not exceed one percent of the outstanding securities of
the obligor.
(See Note 2 on Page 5)
9. Securities of underwriters owned or held by the Trustee.
The Trustee does not own beneficially or hold as collateral
security for obligations in default any securities of an underwriter
for the obligor.
(See Note 2 on Page 5)
10. Ownership or holdings by the Trustee of voting securities of certain
affiliates or security holders of the obligor.
The Trustee does not own beneficially or hold as collateral
security for obligations in default voting securities of a person,
who, to the knowledge of the Trustee (1) holds 10% or more of the
voting securities of the obligor or (2) is an affiliate, other than a
subsidiary, of the obligor.
(See Note 2 on Page 5)
11. Ownership or holdings by the Trustee of any securities of a person
owning 50 percent or more of the voting securities of the obligor.
The Trustee does not own beneficially or hold as collateral
security for obligations in default any securities of a person who, to
the knowledge of Trustee, owns 50 percent or more of the voting
securities of the obligor. (See Note 2 on Page 5)
3
<PAGE> 4
12. Indebtedness of the obligor to the Trustee.
The obligor is not indebted to the Trustee.
13. Defaults by the obligor.
There are no defaults.
14. Affiliations with the underwriters.
No underwriter is an affiliate of the Trustee.
15. Foreign trustee.
Not applicable.
16. List of Exhibits.
(1) Articles of Association of the Trustee as now in effect. (See
Exhibit 1 of the Form T-1 filed in connection with Registration
Statement No. 33-92776, which is incorporated herein by reference)
(2) Certificate of Authority of the Trustee to commence business. (See
Exhibit 2 of the Form T-1 filed in connection with Registration
Statement No. 33-92776, which is incorporated herein by reference)
(3) Authorization of the Trustee to exercise corporate trust powers.
Incorporated in Exhibit (4).
(4) By-Laws of the Trustee, as amended, to date. (See Exhibit 4 of the
Form T-1 filed in connection with Registration Statement No.
33-92776, which is incorporated herein by reference)
(5) Not applicable.
(6) Consent by the Trustee required by Section 321(b) of the Trust
Indenture Act of 1939. Included on Page 6 of this Form T-1
Statement.
(7) Most recent report of condition of the Trustee.
(8) Not applicable.
(9) Not applicable.
4
<PAGE> 5
________________________________
NOTES
________________________________
1. Since the Trustee is a member of First Union Corporation, a
bank holding company, all of the voting securities of the Trustee are held by
First Union Corporation. The securities of First Union National Bank of
Georgia are described in Item 3.
2. Inasmuch as this Form T-1 is filed prior to the ascertainment by
the Trustee of all facts on which to base responsive answers to Items 2, 5, 6,
7, 8, 9, 10 and 11, the answers to said Items are based on incomplete
information. Items 2, 5, 6, 7, 8, 9, 10 and 11 may, however by considered as
correct unless amended by an amendment to this Form T-1.
5
<PAGE> 6
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, FIRST UNION NATIONAL BANK OF GEORGIA, a national
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility and qualification to be
signed on its behalf by the undersigned, thereunto duly authorized, all in the
City of Atlanta, and State of Georgia on the 14th day of December, 1995.
FIRST UNION NATIONAL BANK OF GEORGIA
(Trustee)
BY: R. Douglas Milner
----------------------------------------------
R. Douglas Milner, Assistant Vice President
EXHIBIT T-1 (6)
CONSENT OF TRUSTEE
Under section 321(b) of the Trust Indenture Act of 1939 and in
connection with the proposed issuance by Interface, Inc. of its 9 1/2 Senior
Subordinated Notes, Series A, First Union National Bank of Georgia, as the
Trustee herein named, hereby consents that reports of examinations of said
Trustee by Federal, State, Territorial or District authorities may be furnished
by such authorities to the Securities and Exchange Commission upon request
therefor.
FIRST UNION NATIONAL BANK OF GEORGIA
BY: Frederick A. Schaal
---------------------------------------------
Dated: December 14, 1995 Frederick A. Schaal, Vice President
6
<PAGE> 7
EXHIBIT 7
<TABLE>
<S> <C>
Legal Title of Bank: FIRST UNION NATIONAL BANK OF GEORGIA Call Date: 9/30/95 ST-BK: 13-0795 FFIEC 032
Address: 999 PEACHTREE STREET Page RC-1
City, State Zip: ATLANTA, GA 30303
FDIC Certificate No.: /2/0/1/4/7/
-----------
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR SEPTEMBER 30, 1995
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<CAPTION> --------
C300
-------- --------
Dollar Amounts in Thousands RCON Bil Mil Thou
- ------------------------------------------------------------------------------------------------ ------------------
<S> <C> <C>
ASSETS //////////////////
1. Cash and balance due from depository institutions (from Schedule RC-A): //////////////////
a. Noninterest-bearing balances and currency and coin(1) ................................... 0081 526,559 1.a.
b. Interest-bearing balances(2) ............................................................ 0071 0 1.b.
2. Securities: //////////////////
a. Held-to-maturity securities (from Schedule RC-B, column A) .............................. 1754 272,180 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) ............................ 1773 1,047,509 2.b.
3. Federal funds sold and securities purchased under agreements to resell: //////////////////
a. Federal funds sold ...................................................................... 0276 138,562 3.a.
b. Securities purchased under agreements to resell ......................................... 0277 0 3.b.
4. Loans and lease financing receivables: //////////////////
a. Loans and leases, net of unearned income (from Schedule RC-C) / RCON 2122 / 8,846,299 ////////////////// 4.a.
b. LESS: Allowance for loan and lease losses ................... / RCON 3123 / 230,575 ////////////////// 4.b.
c. LESS: Allocated transfer risk reserve ....................... / RCON 3128 / 0 ////////////////// 4.c.
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus 4.b and 4.c) ..................................... 2125 8,615,724 4.d.
5. Trading assets (from Schedule RC-D) ......................................................... 3545 1,802 5.
6. Premises and fixed assets (including capitalized leases) .................................... 2145 150,317 6.
7. Other real estate owned (from Schedule RC-M) ................................................ 2150 20,760 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) .... 2130 0 8.
9. Customers' liability to this bank on acceptances outstanding ................................ 2155 2,914 9.
10. Intangible assets (from Schedule RC-M) ...................................................... 2143 90,627 10.
11. Other assets (from Schedule RC-F) ........................................................... 2160 369,398 11.
12. Total assets (sum of items 1 through 11) .................................................... 2170 11,236,352 12.
------------------
</TABLE>
____________________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE> 8
<TABLE>
<S> <C>
Legal Title of Bank: FIRST UNION NATIONAL BANK OF GEORGIA Call Date: 9/30/95 ST-BK: 13-0795 FFIEC 032
Address: 999 PEACHTREE STREET Page RC-2
City, State Zip: ATLANTA, GA 30303
FDIC Certificate No.: /2/0/1/4/7/
SCHEDULE RC--CONTINUED
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
- --------------------------------------------------------------------------------------------------- ------------------
<S> <C> <C>
LIABILITIES //////////////////
13. Deposits: //////////////////
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E) ............... 2200 7,538,603 13.a.
(1) Noninterest-bearing (1) .................................../ RCON 6631 / 1,092,327 ////////////////// 13.a. (1)
(2) Interest-bearing ........................................../ RCON 6636 / 6,446,276 ////////////////// 13.a. (2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs ........................... //////////////////
(1) Noninterest-bearing ................................................................. //////////////////
(2) Interest-bearing .................................................................... //////////////////
14. Federal funds purchased and securities sold under agreements to repurchase: //////////////////
a. Federal funds purchased ................................................................. 0278 1,594,033 14.a.
b. Securities sold under agreements to repurchase .......................................... 0279 244,144 14.b.
15. a. Demand notes issued to the U.S. Treasury ................................................ 2840 6,000 15.a.
b. Trading liabilities (from Schedule RC-D) ................................................ 3548 1,802 15.b.
16. Other borrowed money: //////////////////
a. With original maturity of one year or less .............................................. 2332 279,667 16.a.
b. With original maturity of more than one year ............................................ 2333 528,832 16.b.
17. Mortgage indebtedness and obligations under capitalized leases .............................. 2910 2,663 17.
18. Bank's liability on acceptances executed and outstanding .................................... 2920 2,914 18.
19. Subordinated notes and debentures ........................................................... 3200 255,832 19.
20. Other liabilties (from Schedule RC-G) ....................................................... 2930 175,746 20.
21. Total liabilities (sum of items 13 through 20) .............................................. 2948 10,630,236 21.
//////////////////
22. Limited-life preferred stock and related surplus ............................................ 3282 0 22.
EQUITY CAPITAL //////////////////
23. Perpetual preferred stock and related surplus ............................................... 3838 0 23.
24. Common stock ................................................................................ 3230 14,628 24.
25. Surplus (exclude all surplus related to preferred stock) .................................... 3839 374,799 25.
26. a. Undivided profits and capital reserves ................................................... 3632 222,844 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ................... 8434 (6,155) 26.b.
27. Cumulative foreign currency translation adjustments ......................................... //////////////////
28. Total equity capital (sum of items 23 through 27) ........................................... 3210 606,116 28.
29. Total liabilities, limited-life preferred stock, and equity capital //////////////////
(sum of items 21, 22, and 28) ............................................................... 3300 11,236,352 29.
------------------
</TABLE>
Memorandum
TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION.
<TABLE>
<S> <C>
1. Indicate in the box at the right the number of the statement below that Number
best describes the most comprehensive level of auditing work performed for ---------------------
the bank by independent external auditors as of any date during 1994 ........................ / RCON 6724 / N/A / M.1.
---------------------
</TABLE>
<TABLE>
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in accor- 8 = No external audit work
dance with generally accepted auditing standards by a
certified public accounting firm (may be required by state
chartering authority)
</TABLE>
____________________
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR
TENDER OF 9 1/2% SENIOR SUBORDINATED NOTES DUE 2005, SERIES A
IN EXCHANGE FOR
9 1/2% SENIOR SUBORDINATED NOTES DUE 2005, SERIES B
INTERFACE, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., ATLANTA, GEORGIA TIME, ON
____________________, 1996, UNLESS EXTENDED (THE "EXPIRATION DATE").
OUTSTANDING NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME
PRIOR TO THE EXPIRATION DATE.
Deliver To The Exchange Agent: First Union National Bank of Georgia
<TABLE>
<CAPTION>
By Hand/Overnight Courier: By Mail: By Facsimile:
- -------------------------- -------- -------------
<S> <C> <C>
Suite 1100 Suite 1100 1-404-827-7305
First Union Plaza First Union Plaza (For Eligible Institutions Only)
999 Peachtree Street, N.E. 999 Peachtree Street, N.E. Confirm by Telephone: 1-404-827-7349
Atlanta, GA 30309 Atlanta, GA 30309
Attention Corporate Trust Dept. Attention Corporate Trust Dept.
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
The undersigned hereby acknowledges receipt and review of the Prospectus
dated __________, 1996 (the "Prospectus") of Interface, Inc. (the "Company")
and this Letter of Transmittal (the "Letter of Transmittal"), which together
describe the Company's offer (the "Exchange Offer") to exchange its 9 1/2%
Senior Subordinated Notes due ______, 2005, Series B (the "Exchange Notes"),
which have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which the Prospectus
is a part, for a like principal amount of its issued and outstanding 9 1/2%
Senior Subordinated Notes due 2005, Series A (the "Outstanding Notes").
Capitalized terms used but not defined herein have the respective meaning given
to them in the Prospectus.
The Company reserves the right, at any time and from time to time, to
extend the Exchange Offer at its discretion, in which event the term
"Expiration Date" shall mean the latest time and date to which the Exchange
Offer is extended. The Company shall notify the holders of the Outstanding
Notes of any extension by oral or written notice prior to 9:00 A.M., Atlanta,
Georgia time, on the next Business Day after the previously scheduled
Expiration Date.
This Letter of Transmittal is to be used by a Holder of Outstanding Notes
either if original Outstanding Notes are to be forwarded herewith or if
delivery of Outstanding Notes, if available, is to be made by book-entry
transfer to the account maintained by the Exchange Agent at The Depository
Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures
set forth in the Prospectus under the caption "The Exchange Offer-Book-Entry
Transfer." Holders of Outstanding Notes whose Outstanding Notes are not
immediately available, or who are unable to deliver their Outstanding Notes and
all other documents required by this Letter of Transmittal to the Exchange
Agent on or prior to the Expiration Date, or who are unable to complete the
procedure for book-entry
<PAGE> 2
transfer on a timely basis, must tender their Outstanding Notes according to the
guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer-Guaranteed Delivery Procedures." See Instruction 2.
Delivery of documents to the Book-Entry Transfer Facility does not constitute
delivery to the Exchange Agent.
The term "Holder" with respect to the Exchange Offer means any person in
whose name Outstanding Notes are registered on the books of the Company or any
other person who has obtained a properly completed bond power from the
registered Holder. The undersigned has completed, executed and delivered this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer. Holders who wish to tender their
Outstanding Notes must complete this Letter of Transmittal in its entirety.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE
FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF
THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE
AGENT.
List below the Outstanding Notes to which this Letter of Transmittal
relates. If the space below is inadequate, list the registered numbers and
principal amounts on a separate signed schedule and affix the list to this
Letter of Transmittal.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
DESCRIPTION OF OUTSTANDING NOTES TENDERED
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Aggregate** Registered
Name(s) and Address(es) of Registered Holder(s) Principal Amount Numbers*
- ---------------------------------------------------------------------------------------------------
---------------- -------------
---------------- -------------
---------------- -------------
---------------- -------------
---------------- -------------
---------------- -------------
---------------- -------------
---------------- -------------
- ---------------------------------------------------------------------------------------------------
Attached separate schedule if necessary
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry Holders.
** Unless otherwise indicated, any tendering Holder of Outstanding Notes will be
deemed to have tendered the entire aggregate principal amount represented
by such Outstanding Notes. All tenders must be in integral multiples of
$1,000.
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE ENCLOSED HEREWITH.
-2-
<PAGE> 3
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE
INSTITUTIONS ONLY):
Name of Tendering Institution:
--------------------------------------------------
Account Number:
-----------------------------------------------------------------
Transaction Code Number:
--------------------------------------------------------
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING
(FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered Holder(s) of Outstanding Notes:
---------------------------
Date of Execution of Notice of Guaranteed Delivery:
-----------------------------
Window Ticket Number (if available):
--------------------------------------------
Name of Eligible Institution that Guaranteed Delivery:
--------------------------
Account Number (if delivered by book-entry transfer):
---------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name:
------------------------------------------
Address:
---------------------------------------
---------------------------------------
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Outstanding Notes, it
acknowledges that the Outstanding Notes were acquired as a result of
market-making activities or other trading activities and that it will deliver a
prospectus in connection with any resale of such Exchange Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
SIGNATURES MUST BE PROVIDED BELOW;
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company for exchange the principal amount of Outstanding
Notes indicated above. Subject to and effective upon the acceptance for
exchange of the principal amount of Outstanding Notes tendered in accordance
with this Letter of Transmittal, the undersigned hereby exchanges, assigns and
transfers to the Company all right, title and interest in and to the
Outstanding Notes tendered for exchange hereby. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent the agent and
attorney-in-fact of the undersigned (with full knowledge that the Exchange
Agent also acts as the agent of the Company in connection with the Exchange
Offer) with respect to the tendered Outstanding Notes with full power of
substitution to (i) deliver such Outstanding Notes, or transfer ownership of
such Outstanding Notes on the account books maintained by the Book-Entry
Transfer Facility, to the Company and deliver all accompanying evidences of
transfer and authenticity, and (ii) present such Outstanding Notes for transfer
on the books of the Company and receive all benefits and otherwise exercise all
rights of beneficial ownership of such Outstanding Notes, all in accordance
with the terms of the Exchange Offer. The power of attorney granted in this
paragraph shall be deemed to be irrevocable and coupled with an interest.
-3-
<PAGE> 4
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the
Outstanding Notes tendered hereby and to acquire the Exchange Notes issuable
upon the exchange of such tendered Outstanding Notes, and that the Company will
acquire good and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim,
when the same are accepted for exchange by the Company.
The undersigned acknowledge(s) that this Exchange Offer is being made in
reliance upon interpretations contained in no-action letters issued to third
parties by the staff of the Securities and Exchange Commission (the
"Commission"), that the Exchange Notes issued in exchange for the Outstanding
Notes pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by Holders thereof (other than any such Holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such Holders' business and such Holders are
not engaging in and do not intend to engage in a distribution of the Exchange
Notes and have no arrangement or understanding with any person to participate
in a distribution of such Exchange Notes. The undersigned hereby further
represent(s) to the Company that (i) any Exchange Notes acquired in exchange
for Outstanding Notes tendered hereby are being acquired in the ordinary course
of business of the person receiving such Exchange Notes, whether or not the
undersigned is such person, (ii) neither the undersigned nor any such other
person is engaging in or intends to engage in a distribution of the Exchange
Notes, (iii) neither the undersigned nor any such other person has an
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes, and (iv) neither the Holder nor any such other person
is an "affiliate," as defined in Rule 405 under the Securities Act, of the
Company or, if it is an affiliate, it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent
applicable.
If the undersigned or the person receiving the Exchange Notes is a
broker-dealer that is receiving Exchange Notes for its own account in exchange
for Outstanding Notes that were acquired as a result of market-making
activities or other trading activities, the undersigned acknowledges that it or
such other person will deliver a prospectus in connection with any resale of
such Exchange Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that the undersigned or
such other person is an "underwriter" within the meaning of the Securities Act.
The undersigned acknowledges that if the undersigned is participating in the
Exchange Offer for the purpose of distributing the Exchange Notes (i) the
undersigned cannot rely on the position of the staff of the Commission in
certain no-action letters and, in the absence of an exemption therefrom, must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction of the
Exchange Notes, in which case the registration statement must contain the
selling security holder information required by Item 507 or Item 508, as
applicable, of Regulation S-K of the Commission, and (ii) failure to comply
with such requirements in such instance could result in the undersigned
incurring liability under the Securities Act for which the undersigned is not
indemnified by the Company.
If the undersigned or the person receiving the Exchange Notes is an
"affiliate" (as defined in Rule 405 under the Securities Act), the undersigned
represents to the Company that the undersigned understands and acknowledges
that the Exchange Notes may not be offered for resale, resold or otherwise
transferred by the undersigned or such other person without registration under
the Securities Act or an exemption therefrom.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Outstanding
Notes tendered hereby, including the transfer of such Outstanding Notes on the
account books maintained by the Book-Entry Transfer Facility.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted for exchange validly tendered Outstanding Notes when, as and if the
Company gives oral or written notice thereof to the Exchange Agent. Any
tendered Outstanding Notes that are not accepted for exchange pursuant to the
Exchange Offer for any reason will be returned, without expense, to the
undersigned at the address shown below or at a different address as may be
indicated herein under "Special Delivery Instructions" as promptly as
practicable after the Expiration Date.
-4-
<PAGE> 5
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned acknowledges that the Company's acceptance of properly
tendered Outstanding Notes pursuant to the procedures described under the
caption "The Exchange Offer -- Procedures for Tendering" in the Prospectus and
in the instructions hereto will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of the
Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the Exchange Notes issued in exchange for the Outstanding Notes accepted
for exchange and return any Outstanding Notes not tendered or not exchanged, in
the name(s) of the undersigned. Similarly, unless otherwise indicated under
"Special Delivery Instructions," please mail or deliver the Exchange Notes
issued in exchange for the Outstanding Notes accepted for exchange and any
Outstanding Notes not tendered or not exchanged (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s). In the event that both "Special Issuance Instructions" and
"Special Delivery Instructions" are completed, please issue the Exchange Notes
issued in exchange for the Outstanding Notes accepted for exchange in the
name(s) of, and return any Outstanding Notes not tendered or not exchanged to,
the person(s) so indicated. The undersigned recognizes that the Company has no
obligation pursuant to the "Special Issuance Instructions" and "Special
Delivery Instructions" to transfer any Outstanding Notes from the name of the
registered holder(s) thereof if the Company does not accept for exchange any of
the Outstanding Notes so tendered for exchange.
-5-
<PAGE> 6
SIGN HERE
(Complete Substitute Form W-9 on Reverse)
................................................................................
................................................................................
Signature(s) of Owner(s)
(See Guarantee Requirement Below)
Date:.............
(Must be signed by the registered Holder(s) exactly as name(s) appear(s)
on Outstanding Notes or on a security position listing or by person(s)
authorized to become registered Holder(s) by a properly completed bond power
from the registered Holder(s), a copy of which must be transmitted with this
Letter of Transmittal. If Outstanding Notes to which this Letter of
Transmittal relate are held of record by two or more joint Holders, then all
such Holders must sign this Letter of Transmittal. If signing is by an
executor, administrator, trustee, guardian, attorney-in-fact, agent or other
person acting in a fiduciary or representative capacity, please provide the
following information. See Instruction 6.)
Name(s)....................................................................
...........................................................................
(Please Print)
Capacity (full title)......................................................
Address....................................................................
...........................................................................
(Print Address, Including Zip Code)
Area Code and Telephone Number.............................................
Tax Identification or Social Security No...................................
(Complete Substitute Form W-9 on Reverse)
MEDALLION SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 5)
Certain signatures must be Guaranteed by an Eligible Institution.
Signature(s) Guaranteed by an Eligible Institution:...........................
(Authorized Signature)
..............................................................................
(Title)
..............................................................................
(Name of Firm)
..............................................................................
(Address, Include Zip Code)
..............................................................................
(Area Code and Telephone Number)
Dated:............................................................. ,1996
- 6 -
<PAGE> 7
SPECIAL INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
<TABLE>
<S> <C>
Box A: SPECIAL ISSUANCE Box B: SPECIAL DELIVERY
INSTRUCTIONS INSTRUCTIONS
To be completed ONLY (i) if Outstanding Notes To be completed ONLY if Outstanding Notes
in a principal amount not tendered, or Exchange in a principal amount not tendered, or Exchange
Notes issued in exchange for Outstanding Notes Notes issued in exchange for Outstanding Notes
accepted for exchange, are to be issued in the accepted for exchange, are to be mailed or
name of someone other than the undersigned, or delivered to someone other than the undersigned,
(ii) if Outstanding Notes tendered by book-entry or to the undersigned at an address other than
transfer which are not exchanged are to be that shown below the undersigned's signature
returned by credit to an account maintained by
by at the Book-Entry Transfer Facility. Mail to:
Issue Exchange Notes and/or Outstanding Notes to: Name:...........................................
(Print Name)
Name:...........................................
(Print Name) Address:........................................
................................................
Address:........................................ (Print Address, Including Zip Code)
................................................
(Print Address, Including Zip Code) [ ] Check ONLY if the address above is a new
permanent address.
................................................ (Attach Separate Signed Schedule if Necessary)
(Tax Identification or Social Security Number)
(Complete Substitute Form W-9)
(Attach Separate Signed Schedule if Necessary)
</TABLE>
[ ] Credit unexchanged Outstanding Notes delivered by book-entry transfer to
the Book-Entry Transfer Facility set forth below:
____________________________________________________________
(Book-Entry Transfer Facility Account Number, if applicable)
INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE
OFFER.
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OUTSTANDING NOTES OR
BOOK-ENTRY CONFIRMATIONS. All physically delivered Outstanding Notes or any
confirmation of a book-entry transfer to the Exchange Agent's account at the
Book-Entry Transfer Facility of Outstanding Notes tendered by book-entry
transfer (a "Book-Entry Confirmation"), as well as a properly completed and
duly executed copy of this Letter of Transmittal or facsimile hereof, and any
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., Atlanta,
Georgia time, on the Expiration Date. The method of delivery of the tendered
Outstanding Notes, this Letter of Transmittal and all other required documents
to the Exchange Agent is at the election and risk of the Holder and, except as
otherwise provided below, the delivery will be deemed made only when actually
received or confirmed by the Exchange Agent. Instead of delivery by mail, it
is recommended that the Holder use an overnight or hand delivery service. In
all cases, sufficient time should be allowed to assure delivery to the Exchange
Agent before the Expiration Date. No Letter of Transmittal or Outstanding
Notes should be sent to the Company.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their
Outstanding Notes and (a) whose Outstanding Notes are not immediately
available, or (b) who cannot deliver their Outstanding Notes, this Letter of
Transmittal or any other documents required hereby to the Exchange Agent prior
to the Expiration Date, or (c) who are unable to complete the procedure for
book-entry transfer on a timely basis, must tender their
-7-
<PAGE> 8
Outstanding Notes according to the guaranteed delivery procedures set forth in
the Prospectus. Pursuant to such procedures: (i) such tender must be made by or
through a firm which is a member of a registered national securities exchange or
of the National Association of Securities Dealers Inc. or a commercial bank or a
trust company having an office or correspondent in the United States (an
"Eligible Institution"); (ii) prior to the Expiration Date, the Exchange Agent
must have received from the Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the Holder of the Outstanding
Notes, the registration number(s) of such Outstanding Notes and the principal
amount of Outstanding Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within three (3) New York Stock Exchange, Inc.
("NYSE") trading days after the Expiration Date, this Letter of Transmittal (or
facsimile hereof) together with the Outstanding Notes (or a Book-Entry
Confirmation) in proper form for transfer, will be received by the Exchange
Agent; and (iii) the certificates for all physically tendered shares of
Outstanding Notes, in proper form for transfer, or Book-Entry Confirmation, as
the case may be, and all other documents required by this Letter must be
received by the Exchange Agent within three (3) NYSE trading days after the date
of execution of the Notice of Guaranteed Delivery.
Any Holder of Outstanding Notes who wishes to tender Outstanding Notes
pursuant to the guaranteed delivery procedures described above must ensure that
the Exchange Agent receives the Notice of Guaranteed Delivery prior to 5:00
p.m., Atlanta, Georgia time, on the Expiration Date. Upon request of the
Exchange Agent, a Notice of Guaranteed Delivery will be sent to Holders who
wish to tender their Outstanding Notes according to the guaranteed delivery
procedures set forth above. See "The Exchange Offer -- Guaranteed Delivery
Procedures" section of the Prospectus.
3. TENDER BY HOLDER. Only a Holder of Outstanding Notes may tender such
Outstanding Notes in the Exchange Offer. Any beneficial Holder of Outstanding
Notes who is not the registered Holder and who wishes to tender should arrange
with the registered Holder to execute and deliver this Letter of Transmittal on
his behalf or must, prior to completing and executing this Letter of
Transmittal and delivering his Outstanding Notes, either make appropriate
arrangements to register ownership of the Outstanding Notes in such Holder's
name or obtain a properly completed bond power from the registered Holder.
4. PARTIAL TENDERS. Tenders of Outstanding Notes will be accepted only
in integral multiples of $1,000. If less than the entire principal amount of
any Outstanding Notes is tendered, the tendering Holder should fill in the
principal amount tendered in the second column of the box entitled "Description
of Outstanding Notes Tendered" above. The entire principal amount of
Outstanding Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated. If the entire principal amount of all
Outstanding Notes is not tendered, then Outstanding Notes for the principal
amount of Outstanding Notes not tendered and Exchange Notes issued in exchange
for any Outstanding Notes accepted will be sent to the Holder at his or her
registered address, unless a different address is provided in the appropriate
box on this Letter of Transmittal, promptly after the Outstanding Notes are
accepted for exchange.
5. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS; MEDALLION GUARANTEE OF SIGNATURES. If this Letter of Transmittal
(or facsimile hereof) is signed by the record Holder(s) of the Outstanding
Notes tendered hereby, the signature must correspond with the name(s) as
written on the face of the Outstanding Notes without alteration, enlargement or
any change whatsoever. If this Letter of Transmittal is signed by a
participant in the Book-Entry Transfer Facility, the signature must correspond
with the name as it appears on the security position listing as the Holder of
the Outstanding Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders of Outstanding Notes listed and tendered hereby
and the Exchange Note(s) issued in exchange therefor are to be issued (or any
untendered principal amount of Outstanding Notes is to be reissued) to the
registered Holder, the said Holder need not and should not endorse any tendered
Outstanding Notes, nor provide a separate bond power. In any other case, such
Holder must either properly endorse the Outstanding Notes tendered or transmit
a properly completed separate bond power with this Letter of Transmittal, with
the signatures on the endorsement or bond power guaranteed by an Eligible
Institution.
-8-
<PAGE> 9
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered Holder or Holders of any Outstanding Notes listed,
such Outstanding Notes must be endorsed or accompanied by appropriate bond
powers, in each case signed as the name of the registered Holder or Holders
appears on the Outstanding Notes.
If this Letter of Transmittal (or facsimile hereof) or any Outstanding
Notes or bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, or officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and, unless waived by the Company, evidence satisfactory to the
Company of their authority so to act must be submitted with this Letter of
Transmittal.
Endorsements on Outstanding Notes or signatures on bond powers required by
this Instruction 5 must be guaranteed by an Eligible Institution.
No signature guarantee is required if (i) this Letter of Transmittal is
signed by the registered holder(s) of the Outstanding Notes tendered herewith
(or by a participant in the Book-Entry Transfer Facility whose name appears on
a security position listing as the owner of the tendered Outstanding Notes) and
the issuance of Exchange Notes (and any Outstanding Notes not tendered or not
accepted) are to be issued directly to such registered holder(s) (or, if signed
by a participant in the Book-Entry Transfer Facility, any Exchange Notes or
Outstanding Notes not tendered or not accepted are to be deposited to such
participant's account at such Book-Entry Transfer Facility) and neither the box
entitled "Special Delivery Instructions" nor the box entitled "Special
Registration Instructions" has been completed, or (ii) such Outstanding Notes
are tendered for the account of an Eligible Institution. In all other cases,
all signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders
should indicate, in the applicable box or boxes, the name and address (or
account at the Book-Entry Transfer Facility) to which Exchange Notes or
substitute Outstanding Notes for principal amounts not tendered or not accepted
for exchange are to be issued or sent, if different from the name and address
of the person signing this Letter of Transmittal. In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Outstanding Notes pursuant to the Exchange Offer.
If, however, Exchange Notes or Outstanding Notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered
Holder of the Outstanding Notes tendered hereby, or if tendered Outstanding
Notes are registered in the name of any person other than the person signing
this Letter of Transmittal, or if a transfer tax is imposed for any reason
other than the exchange of Outstanding Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
Holder or any other persons) will be payable by the tendering Holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with this Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering Holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OUTSTANDING NOTES LISTED IN THIS
LETTER OF TRANSMITTAL.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder of any Outstanding Notes which are accepted for exchange must provide
the Company (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a holder who is an individual, is his or her social
security number. If the Company is not provided with the correct TIN, the
Holder may be subject to a $50 penalty imposed by Internal Revenue Service. (If
withholding results in an over-payment of taxes, a refund may be obtained.)
Certain holders (including, among others, all corporations and certain foreign
individuals) are not subject to these
-9-
<PAGE> 10
backup withholding and reporting requirements. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue
Service has notified the holder that such holder is no longer subject to backup
withholding. If the Outstanding Notes are registered in more than one name or
are not in the name of the actual owner, see the enclosed "Guidelines for
Certification of Taxpayer Identification Number of Substitute Form W-9" for
information on which TIN to report.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), and acceptance of tendered Outstanding
Notes will be determined by the Company, in its sole discretion, which
determination will be final and binding. The Company reserves the right to
reject any and all Outstanding Notes not validly tendered or any Outstanding
Notes, the Company's acceptance of which would, in the opinion of the Company
or its counsel, be unlawful. The Company also reserves the right to waive any
conditions of the Exchange Offer or defects or irregularities in tenders of
Outstanding Notes as to any ineligibility of any holder who seeks to tender
Outstanding Notes in the Exchange Offer. The interpretation of the terms and
conditions of the Exchange Offer (which includes this Letter of Transmittal and
the instructions hereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Outstanding Notes must be cured within such time as the Company
shall determine. The Company will use reasonable efforts to give notification
of defects or irregularities with respect to tenders of Outstanding Notes, but
shall not incur any liability for failure to give such notification.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to
waive, in whole or part, any of the conditions to the Exchange Offer set forth
in the Prospectus.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular or
contingent tender of Outstanding Notes on transmittal of this Letter of
Transmittal will be accepted.
12. MUTILATED, LOST, STOLEN, OR DESTROYED OUTSTANDING NOTES. Any Holder
whose Outstanding Notes have been mutilated, lost, stolen, or destroyed should
contact the Exchange Agent at the address indicated above for further
instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for
assistance or for additional copies of the Prospectus or this Letter of
Transmittal may be directed to the Exchange Agent at the address or telephone
number set forth on the cover page of this Letter of Transmittal. Holders may
also contact their broker, dealer, commercial bank, trust company or other
nominee for assistance concerning the Exchange Offer.
14. ACCEPTANCE OF TENDERED OUTSTANDING NOTES AND ISSUANCE OF EXCHANGE
NOTES; RETURN OF OUTSTANDING NOTES. Subject to the terms and conditions of the
Exchange Offer, the Company will accept for exchange all validly tendered
Outstanding Notes as soon as practicable after the Expiration Date and will
issue Exchange Notes therefor as soon as practicable thereafter. For purposes
of the Exchange Offer, the Company shall be deemed to have accepted tendered
Outstanding Notes when, as and if the Company has given written and oral notice
thereof to the Exchange Agent. If any tendered Outstanding Notes are not
exchanged pursuant to the Exchange Offer for any reason, such unexchanged
Outstanding Notes will be returned, without expense, to the undersigned at the
address shown above (or credited to the undersigned's account at the Book-Entry
Transfer Facility designated above) or at a different address as may be
indicated under the box entitled "Special Delivery Instructions."
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<PAGE> 11
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer -- Withdrawal of Tenders."
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE
HEREOF (TOGETHER WITH THE OUTSTANDING NOTES WHICH MUST BE DELIVERED BY
BOOK-ENTRY TRANSFER OR IN ORIGINAL HARD COPY FORM) OR THE NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M. ON THE
EXPIRATION DATE.
(TO BE COMPLETED BY ALL TENDERING HOLDERS (SEE INSTRUCTION 5))
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: INTERFACE, INC.
- ---------------------------------------------------------------------------------------------------------------------------------
PART 1 - PLEASE PROVIDE YOUR TIN IN Social security number
THE BOX AT RIGHT AND CERTIFY BY
SIGNING AND DATING BELOW. OR ________________________________
SUBSTITUTE Employer Identification Number
--------------------------------------------------------------------------------------------
PART 2 - Check the box if you are NOT subject to backup withholding under the provisions
Form W-9 of Section 3406(a)(i)(C) of the Internal Revenue Code because (1) you have not been
Department of the Treasury notified that you are subject to backup withholding as a result of failure to report all
Internal revenue Service interest or dividends, or (2) the Internal Revenue Service has notified you that you are no
Payer's Request for Taxpayer longer subject to backup withholding. [ ]
Identification Number ("TIN") ---------------------------------------------------------------------------------------------
CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I PART 3-
CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM
IS TRUE, CORRECT AND COMPLETE Awaiting TIN [ ]
SIGNATURE........................ DATE............
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Part 1 - Taxpayer Identification No. - For All Accounts. Enter your taxpayer
identification number in the appropriate box. For most individuals and sole
proprietors, this is your social security number. For other entities, it is
your Employer Identification Number. If you do not have a number, see How to
Obtain a TIN in the enclosed Guidelines. Note: If the account is in more than
one name, see the chart on page 2 of the enclosed Guidelines to determine what
number to enter.
Part 2 - For Payees Exempt from Backup Withholding (see enclosed Guidelines).
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU WITH RESPECT TO THE EXCHANGE
NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office, or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number within sixty (60) days, 31% of all
reportable payments made to me thereafter will be withheld until I provide a
number.
SIGNATURE.................................................DATE..................
-11-
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF 9 1/2% SENIOR SUBORDINATED NOTES DUE 2005, SERIES A
IN EXCHANGE FOR
9 1/2% SENIOR SUBORDINATED NOTES DUE 2005, SERIES B
INTERFACE, INC.
This form or one substantially equivalent hereto must be used by a holder
to accept the Exchange Offer of Interface, Inc., a Georgia corporation (the
"Company"), who wishes to tender 9 1/2% Senior Subordinated Notes due 2005,
Series A (the "Outstanding Notes") to the Exchange Agent pursuant to the
guaranteed delivery procedures described in "The Exchange Offer -- Guaranteed
Delivery Procedures" of the Company's Prospectus, dated ____________, 1996 (the
"Prospectus") and in Instruction 2 to the related Letter of Transmittal. Any
holder who wishes to tender Outstanding Notes pursuant to such guaranteed
delivery procedures must ensure that the Exchange Agent receives this Notice of
Guaranteed Delivery and a duly executed Letter of Transmittal prior to the
Expiration Date (as defined below) of the Exchange Offer. Capitalized terms
used but not defined herein have the meanings ascribed to them in the
Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., ATLANTA, GEORGIA TIME, ON
_______, 1996, UNLESS EXTENDED (THE "EXPIRATION DATE"). OUTSTANDING NOTES
TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE.
The Exchange Agent for the Exchange Offer is: First Union National Bank of
Georgia
<TABLE>
<CAPTION>
By Hand/Overnight Courier: By Mail: By Facsimile:
- -------------------------- -------- -------------
<S> <C> <C>
Suite 1100 Suite 1100 1-404-827-7305
First Union Plaza First Union Plaza Confirm by Telephone: 1-404-827-7349
999 Peachtree Street, N.E. 999 Peachtree Street, N.E. (For Eligible Institutions Only)
Atlanta, GA 30309 Atlanta, GA 30309
Attention Corporate Trust Dept. Attention Corporate Trust Dept.
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS
SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED ON THE LETTER
OF TRANSMITTAL FOR GUARANTEE OF SIGNATURES.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Outstanding Notes set forth below pursuant to the guaranteed delivery
procedures set forth in the Prospectus and in Instruction 2 of the Letter of
Transmittal.
The undersigned hereby tenders the Outstanding Notes listed below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
DESCRIPTION OF OUTSTANDING NOTES TENDERED
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Aggregate** Registered
Name(s) and Address(es) of Registered Holder(s) Principal Amount Numbers*
- ---------------------------------------------------------------------------------------------------
---------------- -------------
---------------- -------------
---------------- -------------
---------------- -------------
---------------- -------------
---------------- -------------
---------------- -------------
---------------- -------------
- ---------------------------------------------------------------------------------------------------
Attached separate schedule if necessary
- ---------------------------------------------------------------------------------------------------
</TABLE>
PLEASE SIGN AND COMPLETE
Date:___________
<TABLE>
<S> <C>
Signature(s) of Registered Holder(s) or Authorized Signatory: Name(s) of Registered Holder(s):
- ------------------------------------------- ----------------------------------
- ------------------------------------------- ----------------------------------
- ------------------------------------------- ----------------------------------
Address:
- -------------------------------------------
- ------------------------------------------- Area Code and Telephone No:
- ------------------------------------------- ------------------------
(Include Zip Code)
</TABLE>
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Outstanding Notes or on a security
position listing as the owner of Outstanding Notes, or by a person(s)
authorized to become a Holder(s) by endorsements and documents transmitted with
this Notice of Guaranteed Delivery. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer or other person acting in a
fiduciary or representative capacity, such person must provide the following
information.
<TABLE>
<S> <C>
Names(s): Capacity:
- ------------------------------------------ ----------------------------------
- ------------------------------------------ ----------------------------------
- ------------------------------------------ ----------------------------------
(Please print name(s) and address(es))
Address(es):
- -------------------------------------------
- -------------------------------------------
- -------------------------------------------
(Include Zip Code)
</TABLE>
-2-
<PAGE> 3
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934,
guarantees deposit with the Exchange Agent of the Letter of Transmittal (or
facsimile thereof), together with the Outstanding Notes tendered hereby in
proper form for transfer (or confirmation of the book-entry transfer of such
Outstanding Notes) into the Exchange Agent's account at the Book-Entry Transfer
Facility described in the Prospectus under the caption "The Exchange Offer --
Guaranteed Delivery Procedures" and in the Letter of Transmittal and any other
required documents, all by 5:00 p.m., Atlanta, Georgia time, within three (3)
New York Stock Exchange trading day following the Expiration Date.
Name of Firm: ______________________________________
Authorized Signature:________________________________
Name:______________________________________________
Title: __________________________________________
(Please type or print)
Address: _________________________________________
_________________________________________
_________________________________________
(Include Zip Code)
Area Code and Telephone Number:____________________
Date: __________________, 1996
DO NOT SEND OUTSTANDING NOTES WITH THIS FORM. ACTUAL SURRENDER OF
OUTSTANDING NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY A PROPERLY
COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED
DOCUMENTS.
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by
the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any
other required documents to the Exchange Agent is at the election and sole risk
of the Holder, and the delivery will be deemed made only when actually received
by the Exchange Agent. If delivery is by mail, registered mail with return
receipt requested, properly insured, is recommended. As an alternative to
delivery by mail, the Holders may wish to consider using an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. For a description of the guaranteed delivery procedures, see
Instruction 2 of the Letter of Transmittal.
-3-
<PAGE> 4
2. SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY. If this Notice of
Guaranteed Delivery is signed by the registered Holder(s) of the Outstanding
Notes referred to herein, the signature must correspond with the name(s)
written on the face of the Outstanding Notes without alteration, enlargement,
or any change whatsoever. If this Notice of Guaranteed Delivery is signed by a
participant of the Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of the Outstanding Notes, the signature
must correspond with the name shown on the security position listing as the
owner of the Outstanding Notes. If this Notice of Guaranteed Delivery is
signed by a person other than the registered Holder(s) of any Outstanding Notes
listed or a participant of the Book-Entry Transfer Facility, this Notice of
Guaranteed Delivery must be accompanied by appropriate bond powers, signed as
the name of the registered Holder(s) appears on the Outstanding Notes or signed
as the name of the participant shown on the Book-Entry Transfer Facility's
security position listing. If this Notice of Guaranteed Delivery is signed by
a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation, or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing and submit with the Letter of
Transmittal evidence satisfactory to the Company of such person's authority to
so act.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
-4-
