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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1995
Commission File No: 0-12016
INTERFACE, INC.
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(Exact name of registrant as specified in its charter)
GEORGIA 58-1451243
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(State of incorporation) (I.R.S. Employer
Identification No.)
2859 PACES FERRY ROAD
SUITE 2000
ATLANTA, GEORGIA 30339
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(Address of principal (zip code)
executive offices)
Registrant's telephone number, including area code: (770) 437-6800
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Securities Registered Pursuant to Section 12(b) of the Act: NONE
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Securities Registered Pursuant to Section 12(g) of the Act: CLASS A COMMON
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STOCK, $0.10 PAR VALUE PER SHARE
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter peiod that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 15, 1996 (assuming conversion of Class B Common Stock
into Class A Common Stock): $206,275,757 (16,668,748) shares valued at the last
sales price of $12.375). See Item 12.
Number of shares outstanding of each of the registrant's classes of Common
Stock, as of March 15, 1996:
CLASS NUMBER OF SHARES
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Class A Common Stock,
$0.10 par value per share ....................................15,512,710
Class B Common Stock,
$0.10 par value per share .....................................2,980,694
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the fiscal year ended
December 31, 1995 are incorporated by reference into Parts I and II.
Portions of the Proxy Statement for the 1996 Annual Meeting of
Shareholders are incorporated by reference into Part III.
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PART I
ITEM 1. BUSINESS
GENERAL
Interface, Inc. ("Interface" or the "Company") was founded in 1973 to
pioneer the introduction of the carpet tile concept in the United States, and
is now a global manufacturer and marketer of products for the commercial and
institutional interiors market. The Company 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, 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
the broadloom segment. The Company, through its Guilford of Maine, Inc.
("Guilford") subsidiary, is the leading U.S. manufacturer of panel fabrics for
use in open plan office furniture systems, with a market share in excess of
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, 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, and raised/access flooring systems. In fiscal 1995, the Company had
total sales of $802 million, with carpet sales of $654 million, fabric sales
of $124 million, and chemicals and specialty products sales of $24 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,
Toltec and Intek in interior fabrics; and Intersept in chemicals. The Company's
principal geographic markets are North America (58% of 1995 sales), the United
Kingdom and Western Europe (32% of 1995 sales), and Japan and Australia (5% of
1995 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 24 manufacturing facilities at
varied locations in North America, Europe, Southeast Asia 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 over 60 locations in 40 countries, to market the Company's carpet
products and services in person to its customers. The Company's Fabrics Group
has its own specialized marketing and sales force (approximately 80 persons)
for marketing the Company's 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 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.
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. 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
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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
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 (IIDA), including all five awards in
the carpet tile division. In 1995, the Company introduced over 35 new carpet
designs, and garnered three IIDA awards. 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
capabilities. Interface's strategic acquisitions of Toltec Fabrics, Inc.
("Toltec Fabrics") in June 1995, and of the Intek division of Springs
Industries (now operated as Intek, Inc.) in December 1995, 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 realized in excess of $7 million
in savings (through eliminating such waste) during 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
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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 constructed a carpet tile manufacturing facility in Thailand which
became operational in March 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.
New Distribution Channel and Dealer Network. In January 1996, the Company
announced a nationwide initiative to strengthen and streamline the distribution
channels for its commercial carpet products. Under this program, the Company
intends to acquire approximately 15 strategically located commercial
floorcovering contractors, and form preferred distributorship alliances with a
significantly higher number of select dealers throughout the United States.
The Company has employed the former management team of StarNet (the largest
consortium of floorcovering contractors in the U.S.) to help the Company launch
this initiative and build its dealer network, which the Company will operate
under the name Re: Source Americas(TM). The program's primary goals are to (i)
increase sales of Company products as dealers in the network seek to supply
Company products on a preferred basis, (ii) enhance customer satisfaction by
providing hassle-free service throughout the process of selecting, purchasing,
installing and maintaining carpet products, and (iii) improve operating margins
for owned dealers, as well as for the Company, by consolidating administrative
functions of dealers and coordinating and streamlining sales efforts by Company
and dealer sales personnel. The Company closed the simultaneous acquisitions
of three key dealerships (owned by certain of the former members of the StarNet
management team) in March 1996, and expects to complete the majority of its
planned acquisitions and investments in the second and third quarters of 1996.
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 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
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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. Collectively, they won three APEX (a
product of excellence) awards in 1994, and two in 1995, from the International
Interior Design Association, and the Prince Street and Bentley Mills 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 Flooring
Systems 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, Research and Development", below.)
The Company's mass customization initiative, implemented 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 recently embarked on a program to
create a network of owned and allied dealers. (See "-- Business Strategy and
Principal Initiatives", above.) 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
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independent dealers, although the Company recently acquired three dealerships
and intends to acquire others.) 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, Australia and, beginning in 1996, Southeast Asia. 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 became
operational in March 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 and 1995, 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".)
In 1994, the Company entered into arrangements with E. I. DuPont de
Nemours and Company ("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, the Company
currently purchases fiber from other long-term suppliers, and 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.
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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 and its other Interior Fabrics Group
subsidiaries, 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 57% in 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 furnishings
upholstery markets, enhanced the Company's presence in the contract jobber
market. In addition, the December 1995 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, Research and Development", below.)
In both 1995 and 1994, the number of new products introduced by the Company
nearly doubled the number introduced in the preceding year.
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 wallcoverings
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, Toltec and Intek 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
-6-
<PAGE> 8
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, Research 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. Guilford's international sales increased by approximately 25% in
1995.
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 will be
completed in phases during 1996, 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 acquisition of Intek in December 1995
provided the Company with immediate and significant capabilities in the
efficient production of lighter weight, less expensive panel fabrics.
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 and
Intek, 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.
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<PAGE> 9
CHEMICALS AND SPECIALTY PRODUCTS
The Interface Specialty Resources Group is composed of: Rockland
React-Rite, Inc., which develops, manufactures and markets specialty chemical
products; Pandel, Inc., which produces vinyl carpet tile backing and specialty
mat and foam products; the Company's Intersept antimicrobial sales and
licensing program; and Interface Architectural Resources, Inc., which produces
and markets raised/access flooring systems. This Group was reconstituted in
January 1996 and placed under the corporate direction of Don Russell, a 23 year
veteran with the Company. While the Specialty Resources Group's revenues
represent a relatively small portion of total Company revenues (approximately
3% in fiscal 1995), certain operations within this Group traditionally have had
the highest profit margins of any operating division. These subsidiaries,
together with Interface Research Corporation, 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. 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".)
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 raised/access
flooring systems, a specialty product which it markets through its
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. In February 1996, the Company acquired C-Tec,
Inc., the second largest manufacturer of raised/access flooring in the United
States, with net sales in 1995 of over $20 million. C-Tec, based in Grand
Rapids, Michigan, will be able to produce the Company's Intercell and
Interstitial Systems products in addition to its own advanced line of access
flooring systems.
INTERFACE RESEARCH CORPORATION
Under the leadership of acting President, Dr. Ray Berard, Interface
Research Corporation provides technical support and research & development for
the entire family of Interface companies. Developments in 1995 included
special monomer products for use in the UV-curable coatings industry, and a
more resilient polycarbite polymer carpet tile backing currently being
installation tested by the Company. The advanced materials used to manufacture
the new polycarbite carpet products exhibit superior performance ratings at
lower costs, and the extent of their suitability for use throughout the
Company's business groups and product lines is under careful study. Interface
Research also provides significant support to the Company's EcoSense
initiative, primarily through its efforts in identifying recyclable products
and raw materials and procedures to achieve, ultimately, closed-loop recycling
of the Company's carpet products. (See"-- Environmental Initiatives".)
PRODUCT DESIGN, RESEARCH AND DEVELOPMENT
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.
Innovation and increased customization in product design and styling are
the principal focus of the Company's product development efforts. 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, and another 20 in 1995.
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, and
three IIDA awards in 1995. Mr. Oakey was also instrumental in the Company's
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<PAGE> 10
implementation of a new product development concept -- "simple inputs, 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 the past two years, 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 now
being extended to the Company's international carpet tile operations and
domestic broadloom companies, 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 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.
BACKLOG
The Company's backlog of unshipped orders was approximately $78,900,000 at
December 31, 1995, compared to approximately $78,500,000 at January 1, 1995.
Historically, backlog is subject to significant fluctuations due to the timing
of orders for individual large projects and currency fluctuations. All of the
backlog of orders at December 31, 1995 is expected to be shipped during the
succeeding six to nine months.
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.
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<PAGE> 11
FINANCIAL INFORMATION BY GEOGRAPHIC AREAS
Note 17 of the Company's Consolidated Financial Statements sets forth
information concerning the Company's sales, income and assets by geographic
areas. See Item 8.
EMPLOYEES
At March 15, 1996, 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 a change in control of Interface
Europe B.V. (the Company's modular carpet subsidiary 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.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company, their ages as of March 15, 1996,
and principal positions with the Company are as follows. Executive officers
serve at the pleasure of the Board of Directors.
<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
Brian L. DeMoura 50 Senior Vice President
David Milton 60 Senior Vice President
Don E. Russell 58 Senior Vice President
John H. Walker 51 Senior Vice President
Gordon D. Whitener 33 Senior Vice President
Daniel T. Hendrix 41 Senior Vice President - Finance, Chief Financial Officer and Treasurer
David W. Porter 49 Senior Vice President, General Counsel and Secretary
F. Colville Harrell 61 Vice President - Planning & Analysis
Alan S. Kabus 38 Vice President
John R. Wells 34 Vice President
Raymond S. Willoch 37 Vice President, Corporate Counsel and Assistant Secretary
</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 President of Interface
Flooring Systems, Inc. ("IFS", the Company's principal U.S. modular carpet
subsidiary) and Interface Americas, Inc. (a wholly-owned U.S. holding company),
with responsibility for the Company's modular carpet operations throughout the
Americas. He also became a Senior Vice President of the Company at that time.
In October 1994, Mr. Eitel was promoted to Executive Vice President of the
Company and appointed to the newly created position of President and CEO 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 of Interface Asia-Pacific,
Inc. (a wholly-owned U.S. holding company) and assumed responsibility for the
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<PAGE> 12
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.
Mr. Russell 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 Specialty Resources Group, composed of
the Company's chemical and specialty surfaces subsidiaries (Rockland
React-Rite, Inc. and Pandel, Inc.), Intersept antimicrobial sales and licensing
program, and 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 until
August 1995.
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 President and Chief Executive Officer of IFS and Interface
Americas, and assumed responsibility for the Company's modular carpet
operations throughout North, Central and South America. 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 October
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 October 1995.
Mr. Harrell joined the Company as a planning analyst in 1984, and became
Vice President - Planning and Analysis in 1986. He served as Senor 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. Willoch joined the Company as Corporate Counsel in June 1990. He
became Assistant Secretary in 1991, Assistant Vice President in 1993 and Vice
President in January 1996. Mr. Willoch's varied duties include primary
responsibility for investor relations and communications.
ITEM 2. 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
</TABLE>
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<PAGE> 13
<TABLE>
<CAPTION>
Location Primary Products Floor Space (Sq. Ft.)
----------------------------- ---------------- ---------------------
<S> <C> <C>
Bangkok, Thailand....................................... Modular carpet 66,072
Guilford, Maine(1)...................................... 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
Aberdeen, North Carolina................................ Interior fabrics 63,000
Greensboro, North Carolina.............................. Interior fabrics 63,700
Cartersville, Georgia................................... Specialty products 124,500
Grand Rapids, Michigan.................................. Access flooring 120,000
Rockmart, Georgia....................................... Chemicals 37,500
Chatom, Alabama......................................... Chemicals 7,500
</TABLE>
____________________________
(1) Includes new facility under construction, expected to become operational
in phases during 1996.
The Company owns all of its manufacturing facilities, except Guilford's
facility and a portion of C-Tec'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 80 locations in 40 countries
and distribution facilities in 19 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.
ITEM 3. LEGAL PROCEEDINGS
The Company is not aware of any material pending legal proceedings involving
it or any of its property.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this Report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
The information concerning the market prices for the Company's Class A
Common Stock and dividends on the Company's Common Stock included in Notes 12
and 18 of the Notes to the Company's Consolidated Financial Statements in the
Company's 1995 Annual Report to Shareholders is incorporated herein by
reference. As of March 20, 1996, the Company had 463 holders of record of its
Class A Common Stock and 48 holders of record of its Class B Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Information on page 63 of the Company's 1995 Annual
Report to Shareholders is incorporated herein by reference.
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<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations on pages 41 through 45 of the Company's 1995 Annual Report to
Shareholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The Consolidated Financial Statements and the Report of Independent
Certified Public Accountants included on pages 46 through 60 of the
Company's 1995 Annual Report to Shareholders are incorporated herein by
reference. The Supplemental Guarantor Condensed Consolidating Financial
Statements required pursuant to Rule 3-10(a) of Regulation S-X are included on
pages 19 through 24 of this Report. The Supplemental Consolidating Financial
Statements of the Company (a holding company) and the Guarantors should be read
in conjunction 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 relevant
guarantees, and the Company believes the Supplemental Consolidating Financial
Statements presented are more meaningful in understanding the financial
position of the Guarantors. (See Note 9 on page 52 of the Company's 1995
Annual Report to Shareholders for a description of the notes guaranteed.) There
are no significant restrictions on the ability of the Guarantors to make
distributions to the Company.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained under the caption "Nomination and Election of
Directors" in the Company's definitive Proxy Statement for the Company's 1996
Annual Meeting of Shareholders, to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A not later than 120 days after the end of
the Company's 1995 fiscal year, is incorporated herein by reference. Pursuant
to Instruction 3 to Paragraph (b) of Item 401 of Regulation S-K, information
relating to the executive officers of the Company is included in Item 1 of this
Report.
ITEM 11. EXECUTIVE COMPENSATION
The information contained under the caption "Executive Compensation and
Related Items" in the Company's definitive Proxy Statement for the Company's
1996 Annual Meeting of Shareholders, to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A not later than 120 days after
the end of the Company's 1995 fiscal year, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained under the caption "Principal Shareholders and
Management Stock Ownership" in the Company's definitive Proxy Statement for the
Company's 1996 Annual Meeting of Shareholders, to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A not later than 120 days
after the end of the Company's 1995 fiscal year, is incorporated herein by
reference.
For purposes of determining the aggregate market value of the Company's
voting stock held by non-affiliates, shares held of record by directors and
executive officers of the Company have been excluded. The exclusion of such
shares is not intended to, and shall not, constitute a determination as to
which persons or entities may be "affiliates" of the Company as that term is
defined under federal securities laws.
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<PAGE> 15
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the captions "Compensation Committee
Interlocks and Insider Participation" (second paragraph only) and "Certain
Relationships and Related Transactions" in the Company's definitive Proxy
Statement for the Company's 1996 Annual Meeting of Shareholders, to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A not
later than 120 days after the end of the Company's 1995 fiscal year, is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The following Consolidated Financial Statements and Notes thereto of
Interface, Inc. and subsidiaries and related Report of Independent Certified
Public Accountants contained in the Company's 1995 Annual Report to
Shareholders, are incorporated by reference in Item 8 of this Report:
Consolidated Balance Sheets -- December 31, 1995 and January 1, 1995
Consolidated Statements of Income -- years ended December 31, 1995,
January 1, 1995 and January 2, 1994
Consolidated Statements of Shareholders' Equity -- years ended December
31, 1995, January 1, 1995, and January 2, 1994
Consolidated Statements of Cash Flows -- years ended December 31, 1995,
January 1, 1995, and January 2, 1994
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
2. FINANCIAL STATEMENT SCHEDULES
The following Consolidated Financial Statement Schedules of Interface,
Inc. and subsidiaries and related Report of Independent Certified Public
Accountants are included as part of this Report (see page 18):
Report of Independent Certified Public Accountants
Schedule II -- Valuation and Qualifying Accounts and Reserves
3. EXHIBITS
The following exhibits are included as part of this Report:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
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 (the "1992 10-K") previously filed
with the Commission and incorporated herein by reference) and Articles
of Amendment (Series A Preferred Stock Designation), dated June 17,
1993 (included as Exhibit 4.1 to the Company's current report on Form
8-K, filed with the Commission on July 7, 1993 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 See Exhibits 3.1 and 3.2 for provisions in the Company's Articles of
Incorporation, as amended, and Bylaws defining the rights of holders
of Common Stock of the Company.
4.2 Indenture governing the Company's 9.5% Senior Subordinated Notes due
2005, dated as of November 15, 1995, among the Company, certain U.S.
subsidiaries of the Company, as Guarantors, and First Union National
Bank
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<PAGE> 16
of Georgia, as Trustee (included as Exhibit 4.1 to the Company's
registration statement on Form S-4, File No. 33-65201, previously
filed with the Commission and incorporated herein by reference).
4.3 Registration Rights Agreement dated as of November 21, 1995, among the
Company, certain subsidiaries of the Company as Guarantors and the
Initial Purchasers of the Company's Notes (included as Exhibit 4.3 to
the Company's registration statement on Form S-4, File No. 33-65201,
previously filed with the Commission and incorporated herein by
reference).
4.4 Form of Exchange Note (included as part of Exhibit 4.2).
10.1 Plan for Reimbursement of Medical and Dental Care Expenses, dated May
3, 1978 (included as Exhibit 10.19 to the Company's registration
statement on Form S-1, File No. 2-82188, previously filed with the
Commission and incorporated herein by reference).*
10.2 Salary Continuation Plan, dated May 7, 1982 (included as Exhibit 10.20
to the Company's registration statement on Form S-1, File No. 2-82188,
previously filed with the Commission and incorporated herein by
reference).*
10.3 Salary Continuation Agreement (included as Exhibit 10.23 to the
Company's registration statement on Form S-1, File No. 2-82188,
previously filed with the Commission and incorporated herein by
reference).*
10.4 Amendment No. 3, dated July 28, 1992, to Interface, Inc. Key Employee
Stock Option Plan dated March 1, 1983 (included as Exhibit 10.6 to the
1992 10-K, previously filed with the Commission and incorporated
herein by reference).*
10.5 Interface, Inc. Key Employee Stock Option Plan (1993), effective as of
March 1, 1993 (included as Exhibit 10.7 to the 1992 10-K, previously
filed with the Commission and incorporated herein by reference);
Amendment No. 1 thereto (included as Exhibit 10.7 to the Company's
annual report on Form 10-K for the year ended January 2, 1994,
previously filed with the Commission and incorporated here in by
reference); and Amendment No. 2 thereto, as approved by the Company on
February 27, 1996.*
10.6 Interface, Inc. Offshore Stock Option Plan (included as Exhibit 10.15
to the Company's annual report on Form 10-K for the year ended January
1, 1989, previously filed with the Commission and incorporated herein
by reference), and Amendment No. 1 thereto (included as Exhibit 10.11
to the Company's annual report on Form 10-K for the year ended
December 29, 1991, previously filed with the Commission and
incorporated herein by reference).*
10.7 Voting Agreement, dated April 13, 1993, among certain shareholders of
the Company (included as Exhibit 10.1 to the Company's quarterly
report on Form 10-Q for the quarter ended April 4, 1993, previously
filed with the Commission and incorporated herein by reference).
10.8 (a) Credit Agreement, dated as of January 9, 1995, among the Company (and
certain direct and indirect subsidiaries), SunTrust Bank (formerly
Trust Company Bank) and The First National Bank of Chicago (included
as Exhibit 10.10(b) to the Company's annual report on Form 10-K for
the year ended January 1, 1995 (the "1994 10-K"), previously filed
with the Commission and incorporated herein by reference).
(b) Amended and Restated Credit Agreement, dated as of June 30, 1995,
among the Company (and certain direct and indirect subsidiaries),
SunTrust Bank and The First National Bank of Chicago (included as
Exhibit 10 to the Company's quarterly report on 10-Q for the quarter
ended July 2, 1995, previously filed with the Commission and
incorporated herein by reference); Amendment No. 1 thereto dated July
31, 1995, Amendment No. 2 thereto dated November 21, 1995, and
Amendment No. 3 thereto dated February 28, 1996.
10.9 (a) Loan Agreement, dated as of November 1, 1989, between Interface
Flooring Systems, Inc. and West Point Development Authority (included
as Exhibit 10.24(a) to the Company's annual report on Form 10-K for
the year ended December 31, 1989 (the "1989 10-K"), previously filed
with the Commission and incorporated herein by reference).
(b) Indenture of Trust, dated as of November 1, 1989, between West Point
Development Authority and SunTrust Bank, as Trustee (included as
Exhibit 10.24(b) to the Company's 1989 10-K, previously filed with the
Commission and incorporated herein by reference).
-15-
<PAGE> 17
(c) Letter of Credit Agreement, dated as of November 1, 1989, among
Interface Flooring Systems, Inc., the Company and SunTrust Bank
(included as Exhibit 10.24(c) to the Company's 1989 10-K, previously
filed with the Commission and incorporated herein by reference).
(d) Irrevocable Letter of Credit, dated November 2, 1989, established by
SunTrust Bank in favor of SunTrust Bank, as Trustee, in the initial
principal amount of $4,000,000 (included as Exhibit 10.24(d) to the
Company's 1989 10-K, previously filed with the Commission and
incorporated herein by reference).
(e) Pledge and Security Agreement, dated as of November 1, 1989, by
Interface Flooring Systems, Inc. in favor of SunTrust Bank (included
as Exhibit 10.24(e) to the Company's 1989 10-K, previously filed with
the Commission and incorporated herein by reference).
(f) Security Deed and Security Agreement, dated as of November 1, 1989,
between Interface Flooring Systems, Inc. and SunTrust Bank, as Credit
Bank (included as Exhibit 10.24(f) to the Company's 1989 10-K,
previously filed with the Commission and incorporated herein by
reference).
10.10 Revolving Credit Loan Agreement, dated as of August 5, 1991, between
Interface Flooring Systems, Inc. and SunTrust Bank (included as
Exhibit 10.2 to the Company's quarterly report on Form 10-Q for the
quarter ended September 29, 1991, previously filed with the Commission
and incorporated herein by reference); Amendment No. 1 thereto dated
June 30, 1992 (included as Exhibit 10.19 to the Company's 1992 10-K,
previously filed with the Commission and incorporated herein by
reference); Second Amendment, dated August 5, 1993 (included as
Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the
quarter ended October 3, 1993, previously filed with the Commission
and incorporated herein by reference); Third Amendment, dated June 15,
1994 (included as Exhibit 10.2 to the Company's quarterly report on
Form 10-Q for the quarter ended July 3, 1994, previously filed with
the Commission and incorporated herein by reference; Fourth Amendment,
dated August 5, 1994 (included as Exhibit 10.1 to the Company's
quarterly report on Form 10-Q for the quarter ended October 2, 1994,
previously filed with the Commission and incorporated herein by
reference); and Joinder Agreement and Fifth Amendment thereto, dated
as of June 30, 1995.
10.11 Employment Agreement of Charles R. Eitel (included as Exhibit 10.1 to
the Company's quarterly report on Form 10-Q for the quarter ended
April 3, 1994, previously filed with the Commission and incorporated
herein by reference); Amendment No. 1 thereto (included as Exhibit
10.4 to the Company's quarterly report on Form 10-Q for the quarter
ended October 1, 1995 (the "Third Quarter 1995 10-Q,"), previously
filed with the Commission and incorporated herein by reference).*
10.12 Agreement (Change In Control) of Charles R. Eitel (included as Exhibit
10.3 to the Company's Third Quarter 1995 10-Q, previously filed with
the Commission and incorporated herein by reference)*
10.13 Employment Agreement of David Milton (included as Exhibit 10.3 to the
Company's quarterly report on Form 10-Q for the quarter ended July 3,
1994, previously filed with the Commission and incorporated herein by
reference).*
10.14 Employment Agreement of Brian L. DeMoura (included as Exhibit 10.4 to
the Company's quarterly report on Form 10-Q for the quarter ended July
3, 1994, previously filed with the Commission and incorporated herein
by reference); Amendment No. 1 thereto (included as Exhibit 10.2 to
the Company's Third Quarter 1995 10-Q, previously filed with the
Commission and incorporated herein by reference).*
10.15 Agreement (Change In Control) of Brian L. DeMoura (included as Exhibit
10.1 to the Company's Third Quarter 1995 10-Q, previously filed with
the Commission and incorporated herein by reference).*
10.17 Employment Agreement of Don E. Russell (included as Exhibit 10.17 to
the Company's 1994 10-K, previously filed with the Commission and
incorporated by reference); Amendment No. 1 thereto (included as
Exhibit 10.12 to the Company's Third Quarter 1995 10-Q, previously
filed with the Commission and incorporated herein by reference).*
10.18 Agreement (Change In Control) of Don E. Russell (included as Exhibit
10.11 to the Company's Third Quarter 1995 10-Q, previously filed with
the Commission and incorporated herein by reference).*
10.19 Agreement (Change In Control) of Gordon D. Whitener (included as
Exhibit 10.13 to the Company's Third Quarter 1995 10-Q, previously
filed with the Commission and incorporated herein by reference).*
-16-
<PAGE> 18
10.20 Employment Agreement of Daniel T. Hendrix (included as Exhibit 10.8 to
the Company's Third Quarter 1995 10-Q, previously filed with the
Commission and incorporated herein by reference).*
10.21 Agreement (Change In Control) of Daniel T. Hendrix (included as
Exhibit 10.7 to the Company's Third Quarter 1995 10-Q, previously
filed with the Commission and incorporated herein by reference).*
10.22 Employment Agreement of David W. Porter (included as Exhibit 10.10 to
the Company's Third Quarter 1995 10-Q, previously filed with the
Commission and incorporated herein by reference).*
10.23 Agreement (Change In Control) of David W. Porter (included as Exhibit
10.9 to the Company's Third Quarter 1995 10-Q, previously filed with
the Commission and incorporated herein by reference).*
10.24 Employment Agreement of F. Colville Harrell (included as Exhibit 10.6
to the Company's Third Quarter 1995 10-Q, previously filed with the
Commission and incorporated herein by reference).*
10.25 Agreement (Change In Control) of F. Colville Harrell (included as
Exhibit 10.5 to the Company's Third Quarter 1995 10-Q, previously
filed with the Commission and incorporated herein by reference).*
10.26 Receivables Sale Agreement, dated as of August 4, 1995, among
Interface Securitization Corporation, Interface, Inc., Special Purpose
Accounts Receivable Cooperative Corporation and Canadian Imperial Bank
of Commerce.
10.27 Receivables Sale Agreement, dated as of August 4, 1995, among
Interface Securitization Corporation, Interface, Inc., certain
Financial Institutions (as bank purchasers), SunTrust Bank and The
First National Bank of Chicago (as co-agents), SunTrust Bank (as
administrative agent) and The First National Bank of Chicago (as
documentation and collateral agent).
13 Certain information contained in the Company's Annual Report to
Shareholders for the fiscal year ended December 31, 1995, which is
expressly incorporated into this Report by direct reference thereto.
21 Subsidiaries of the Company.
23 Consent of BDO Seidman, LLP to the incorporation by reference of
certain reports dated February 27, 1996 into the prospectuses
constituting parts of the Company's registration statements on Form
S-8 (File Numbers 33-28305 and 33-28307).
27 Financial Data Schedule (for SEC use only).
- ---------------------------
* Management contract or compensatory plan or agreement required to be filed
pursuant to Item 14(c) of this Report.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the fourth quarter
of the fiscal year covered by this Report.
-17-
<PAGE> 19
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Interface, Inc.
Atlanta, Georgia
The audits referred to in our Report dated February 27, 1996 relating to
the Consolidated Financial Statements of Interface, Inc. and subsidiaries,
incorporated in Item 8 of the Form 10-K by reference to the Annual Report to
Shareholders for the fiscal year ended December 31, 1995, included the audit of
Financial Statement Schedule II (Valuation and Qualifying Accounts and
Reserves) set forth in the Form 10-K. The Financial Statement Schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion on the Financial Statement Schedule.
In our opinion, such Schedule presents fairly, in all material respects,
the information set forth therein.
BDO SEIDMAN, LLP
Atlanta, Georgia
February 27, 1996
INTERFACE, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- --------------------------------------------------------------------------------------------------------------------------
Balance at Charged to Charged to Balance at
beginning costs and other Deductions end of
of year expenses(a) accounts (describe) year
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(in thousands)
Allowance for doubtful accounts:
Year ended:
December 31, 1995 ............................... $6,501 $2,448 $-- $3,079(d) $5,870
====== ====== === ====== ======
January 1, 1995 ................................. $5,771 $3,562(b) $-- $2,832(d) $6,501
====== ====== === ====== ======
January 2, 1994 ................................. $3,386 $4,026(c) $-- $1,641(d) $5,771
====== ====== === ====== ======
</TABLE>
- --------------
(a) Includes changes in foreign currency exchange rates.
(b) Includes Prince Street allowance of $780 at acquisition date.
(c) Includes Bentley Mills allowance of $1,300 at acquisition date.
(d) Write off bad debt.
(All other Schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are omitted because they
are either not applicable or the required information is shown in the Company's
Consolidated Financial Statements or the Notes thereto.)
-18-
<PAGE> 20
INTERFACE, INC. AND SUBSIDIARIES
SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Year Ended December 31, 1995
Consolidation
Non- Interface, Inc. and
Guarantor Guarantor (Parent Elimination Consolidated
Subsidiaries Subsidiaries Corporation) Entries Totals
------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net sales.................................... $ 499,398 $ 411,462 $ 246 $ (109,040) $ 802,066
Cost of sales................................ 351,209 308,994 193 (108,753) 551,643
------------ ------------ --------------- ------------- ------------
Gross profit on sales.................... 148,189 102,468 53 (287) 250,423
Selling, general and administrative expenses. 98,372 77,242 13,266 - 188,880
------------ ------------ --------------- ------------- ------------
Operating income......................... 49,817 25,226 (13,213) (287) 61,543
------------ ------------ --------------- ------------- ------------
Other expense (income)
Interest expense........................... 6,609 8,766 11,378 - 26,753
Other...................................... 17,715 (7,817) (6,784) - 3,114
------------ ------------ --------------- ------------- ------------
Total other expenses..................... 24,324 949 4,594 - 29,867
------------ ------------ --------------- ------------- ------------
Income before taxes on income and equity
in income of subsidiaries.............. 25,493 24,277 (17,807) (287) 31,676
Taxes on income.............................. 13,957 4,343 (6,964) - 11,336
Equity in income of subsidiaries............. - - 31,470 (31,470) -
------------ ------------ --------------- ------------- ------------
Income before extraordinary items.......... 11,536 19,934 20,627 (31,757) 20,340
Extraordinary loss (net of tax)............ - - 3,512 - 3,512
------------ ------------ --------------- ------------- ------------
Net income............................... 11,536 19,934 17,115 (31,757) 16,828
Preferred stock dividends.................... - - 1,750 - 1,750
------------ ------------ --------------- ------------- ------------
Net income applicable to common shareholders. $ 11,536 $ 19,934 $ 15,365 $ (31,757) $ 15,078
============ ============ =============== ============= ============
</TABLE>
19
<PAGE> 21
INTERFACE, INC. AND SUBSIDIARIES
SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Year Ended January 1, 1995
Consolidation
Non- Interface, Inc. and
Guarantor Guarantor (Parent Elimination Consolidated
Subsidiaries Subsidiaries Corporation) Entries Totals
-------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net sales......................................... $ 434,580 $ 389,823 $ - $ (99,120) $ 725,283
Cost of sales..................................... 310,493 292,394 - (98,789) 504,098
------------ ------------ --------------- ------------- ------------
Gross profit on sales......................... 124,087 97,429 - (331) 221,185
Selling, general and administrative expenses...... 93,303 76,965 107 - 170,375
------------ ------------ --------------- ------------- ------------
Operating income.............................. 30,784 20,464 (107) (331) 50,810
------------ ------------ --------------- ------------- ------------
Other expense (income)
Interest, expense............................... 7,673 9,287 7,134 - 24,094
Other........................................... 2,468 3,205 (4,670) - 1,003
------------ ------------ --------------- ------------- ------------
Total other expenses.......................... 10,141 12,492 2,464 - 25,097
------------ ------------ --------------- ------------- ------------
Income before taxes on income and equity
in income of subsidiaries................... 20,643 7,972 (2,571) (331) 25,713
Taxes on income................................... 7,355 3,986 (2,084) - 9,257
Equity in income of subsidiaries.................. - - 17,274 (17,274) -
------------ ------------ --------------- ------------- ------------
Net income.................................... 13,288 3,986 16,787 (17,605) 16,456
Preferred stock dividends......................... - - 1,750 - 1,750
------------ ------------ --------------- ------------- ------------
Net income applicable to common shareholders..... $ 13,288 $ 3,986 $ 15,037 $ (17,605) $ 14,706
============ ============ =============== ============= ============
<CAPTION>
Year Ended January 2, 1994
Consolidation
Non- Interface, Inc. and
Guarantor Guarantor (Parent Elimination Consolidated
Subsidiaries Subsidiaries Corporation) Entries Totals
------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net sales........................................ $ 345,157 $ 364,857 $ - $ (84,947) $ 625,067
Cost of sales.................................... 244,603 267,408 - (84,690) 427,321
------------ ------------ --------------- ------------- ------------
Gross profit on sales........................ 100,554 97,449 - (257) 197,746
Selling, general and administrative expenses..... 71,075 80,501 - - 151,576
------------ ------------ --------------- ------------- ------------
Operating income............................. 29,479 16,948 - (257) 46,170
------------ ------------ --------------- ------------- ------------
Other expense (income)
Interest expense............................... 4,201 11,078 7,561 - 22,840
Other.......................................... - 2,026 - - 2,026
------------ ------------ --------------- ------------- ------------
Total other expenses......................... 4,201 13,104 7,561 - 24,866
------------ ------------ --------------- ------------- ------------
Income before taxes on income and equity
in income of subsidiaries.................. 25,278 3,844 (7,561) (257) 21,304
Taxes on income.................................. 9,975 1,688 (4,208) - 7,455
Equity in income of subsidiaries................ - - 17,459 (17,459) -
------------ ------------ --------------- ------------- ------------
Net income................................. 15,303 2,156 14,106 (17,716) 13,849
Preferred stock dividends........................ - - 913 - 913
------------ ------------ --------------- ------------- ------------
Net income applicable to common shareholders.... $ 15,303 $ 2,156 $ 13,193 $ (17,716) $ 12,936
============ ============ =============== ============= ============
</TABLE>
20
<PAGE> 22
INTERFACE, INC. AND SUBSIDIARIES
SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
December 31, 1995
Consolidation
Non- Interface, Inc. and
Guarantor Guarantor (Parent Elimination Consolidated
Subsidiaries Subsidiaries Corporation) Entries Totals
---------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
ASSETS
Current
Cash and cash equivalents................... $ 2,984 $ 5,138 $ 628 $ - $ 8,750
Accounts receivable......................... 69,897 63,361 (21,872) - 111,386
Inventories................................. 82,381 52,123 - - 134,504
Miscellaneous............................... 2,281 11,359 6,106 - 19,746
------------ ------------ --------------- --------------- ------------
Total current assets...................... 157,543 131,981 (15,138) - 274,386
Property and equipment, less accumulated
depreciation................................ 128,859 53,136 1,304 - 183,299
Investments in subsidiaries................... 112,820 17,746 300,688 (431,254) -
Miscellaneous................................. 59,374 22,631 304,249 (348,413) 37,841
Excess of cost over net assets acquired....... 137,602 81,223 - - 218,825
------------ ------------ --------------- --------------- ------------
$ 596,198 $ 306,717 $ 591,103 $ (779,667) $ 714,351
============ ============ =============== =============== ============
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
Current
Notes payable............................... $ 745 $ 7,801 $ - $ - $ 8,546
Accounts payable............................ 30,439 23,923 739 - 55,101
Accrued expenses............................ 22,018 21,742 6,388 - 50,148
Current maturities of long-term debt........ 1,550 10 - - 1,560
------------ ------------ --------------- --------------- ------------
Total current liabilities................. 54,752 53,476 7,127 115,355
Long-term debt, less current maturities....... 146,231 47,081 171,000 (165,290) 199,022
Senior subordinated notes..................... - - 125,000 - 125,000
Deferred income taxes......................... 12,237 550 5,273 - 18,060
------------ ------------ --------------- --------------- ------------
Total liabilities......................... 213,220 101,107 308,400 (165,290) 457,437
Redeemable preferred stock.................... 57,891 - 25,000 (57,891) 25,000
Common stock.................................. 62,054 92,634 2,203 (154,688) 2,203
Additional paid-in capital.................... 165,022 11,030 96,963 (176,152) 96,863
Retained earnings............................. 97,821 87,617 161,430 (199,829) 147,039
Foreign currency translation adjustment....... 190 14,329 (2,893) (8,071) 3,555
Treasury stock................................ - - - (17,746) (17,746)
------------ ------------ --------------- --------------- ------------
$ 596,198 $ 306,717 $ 591,103 $ (779,667) $ 714,351
============ ============ =============== =============== ============
</TABLE>
21
<PAGE> 23
INTERFACE, INC. AND SUBSIDIARIES
SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
January 1, 1995
Interface, Inc. Consolidation
Non- (Parent and
Guarantor Guarantor Corporation) Elimination Consolidated
Subsidiaries Subsidiaries (in thousands) Entries Totals
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current
Cash and cash equivalents.................... $ 416 $ 3,972 $ 1 $ - $ 4,389
Escrowed and restricted funds................ 2,663 - - - 2,663
Accounts receivable.......................... 64,351 68,820 365 - 133,536
Inventories.................................. 72,455 60,195 - - 132,650
Miscellaneous................................ 7,019 11,805 53 - 18,877
------------ ------------ --------------- ------------- ------------
Total current assets....................... 146,904 144,792 419 - 292,115
Property and equipment, less accumulated
depreciation................................. 104,502 48,372 - - 152,874
Investments in subsidiaries.................... 108,978 17,746 316,101 (442,825) -
Miscellaneous.................................. 52,610 20,473 304,510 (342,026) 35,567
Excess of cost over net assets acquired........ 129,354 73,498 - - 202,852
------------ ------------ --------------- ------------- ------------
$ 542,348 $ 304,881 $ 621,030 $ (784,851) $ 683,408
============ ============ =============== ============= ============
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
Current
Notes payable................................ $ 2,951 $ 2,550 $ - $ - $ 5,501
Accounts payable............................. 40,523 25,604 4,675 (16,601) 54,201
Accrued expenses............................. 21,724 23,981 11,235 - 56,940
Current maturities of long-term debt......... 853 - - - 853
------------ ------------ --------------- ------------- ------------
Total current liabilities.................. 66,051 52,135 15,910 (16,601) 117,495
Long-term debt, less current maturities........ 108,992 76,700 231,866 (207,895) 209,663
Convertible subordinated debentures............ - - 103,925 - 103,925
Deferred income taxes.......................... 1,181 8,958 3,096 - 13,235
------------ ------------ --------------- ------------- ------------
Total liabilities.............................. 176,224 137,793 354,797 (224,496) 444,318
Redeemable preferred stock..................... 57,891 - 25,000 (57,891) 25,000
Common stock................................... 66,607 88,791 2,179 (155,398) 2,179
Additional paid-in capital..................... 153,731 11,030 93,450 (164,761) 93,450
Retained earnings.............................. 86,285 67,685 146,932 (164,559) 136,343
Foreign currency translation adjustment........ 1,610 (418) (1,328) - (136)
Treasury stock................................. - - - (17,746) (17,746)
------------ ------------ --------------- ------------- ------------
$ 542,348 $ 304,881 $ 621,030 $ (784,851) $ 683,408
============ ============ =============== ============= ============
</TABLE>
22
<PAGE> 24
INTERFACE, INC. AND SUBSIDIARIES
SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Year Ended December 31, 1995
Consolidation
Interface, Inc. and
Guarantor Non- Guarantor (Parent Elimination Consolidated
Subsidiaries Subsidiaries Corporation) Entries Totals
---------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities.... $ 15,522 $ 64,428 $ (3,402) $ - $ 76,548
------------ -------------- --------------- ------------ ------------
Cash flows from investing activities:
Purchase of plant and equipment....... (30,880) (9,886) (1,357) - (42,123)
Acquisitions, net of cash acquired.... (27,554) - - - (27,554)
Other................................. (6,474) (15,219) 19,211 - (2,482)
------------ -------------- --------------- ------------ ------------
Net cash provided by (used in) investing
activities.............................. (64,098) (25,105) 17,854 - (72,159)
------------ -------------- --------------- ------------ ------------
Cash flows from financing activities:
Net borrowings (repayments)........... 34,092 31,926 (60,864) - 5,154
Proceeds from issuance of common stock - - 984 - 984
Cash dividends paid................... - - (6,132) - (6,132)
Other................................. 17,862 (70,049) 52,187 - -
------------ -------------- --------------- ------------ ------------
Net cash provided by (used in) financing
activities............................ 57,954 (38,123) (13,825) - 6
------------ -------------- --------------- ------------ ------------
Effect of exchange rate changes on cash. - (34) - - (34)
------------ -------------- --------------- ------------ ------------
Net increase (decrease) in cash......... 2,568 1,166 627 - 4,361
Cash at beginning of year............... 416 3,972 1 - 4,389
------------ -------------- --------------- ------------ ------------
Cash at end of year..................... $ 2,984 $ 5,138 $ 628 $ - $ 8,750
============ ============== =============== ============ ============
Year Ended January 1, 1995
Consolidation
Non- Interface, Inc. and
Guarantor Guarantor (Parent Elimination Consolidated
Subsidiaries Subsidiaries Corporation) Entries Totals
---------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities.... $ 16,314 $ 7,372 $ 9,709 $ - $ 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................................. 19,028 (28,605) 6,230 (331) (3,678)
------------ -------------- --------------- ------------- ------------
Net cash provided by (used in) investing
activities.............................. 3,339 (34,231) 4,821 (331) (26,402)
------------ -------------- --------------- ------------- ------------
Cash flows from financing activities:
Net borrowings (repayments)........... (67,714) 105,524 (38,032) - (222)
Proceeds from issuance of common stock - - 678 - 678
Cash dividends paid................... - - (6,073) - (6,073)
Other................................. 48,693 (79,827) 28,777 331 (2,026)
------------ -------------- --------------- ------------- ------------
Net cash provided by (used in) financing
activities............................ (19,021) 25,697 (14,650) 331 (7,643)
------------ -------------- --------------- ------------- ------------
Effect of exchange rate changes on cash. - 365 - - 365
------------ -------------- --------------- ------------- ------------
Net increase (decrease) in cash......... 632 (797) (120) - (285)
Cash at beginning of year............... (216) 4,769 121 - 4,674
------------ -------------- --------------- ------------- ------------
Cash at end of year..................... $ 416 $ 3,972 $ 1 $ - $ 4,389
============ ============== =============== ============= ============
</TABLE>
23
<PAGE> 25
INTERFACE, INC. AND SUBSIDIARIES
SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Year Ended January 2, 1994
Consolidation
Non- Interface, Inc. and
Guarantor Guarantor (Parent Elimination Consolidated
Subsidiaries Subsidiaries Corporation) Entries Totals
--------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities..... $ 1,429 $ 35,844 $ 3,309 $ - $ 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.................................. (5,317) (10,359) 9,298 (257) (6,635)
------------ ------------ --------------- -------------- ------------
Net cash provided by (used in) investing
activities............................. (33,579) (17,945) 9,298 (257) (42,483)
------------ ------------ --------------- -------------- ------------
Cash flows from financing activities:
Net borrowings (repayments)............ 57,112 (137,219) 84,179 - 4,072
Proceeds from issuance of common stock. - - 1,898 - 1,898
Cash dividends paid.................... - - (5,063) - (5,063)
Other.................................. (26,823) 120,066 (93,500) 257 -
------------ ------------ --------------- -------------- ------------
Net cash provided by (used in) financing
activities............................... 30,289 (17,153) (12,486) 257 907
------------ ------------ --------------- -------------- ------------
Effect of exchange rate changes on cash.. - (156) - - (156)
------------ ------------ --------------- -------------- ------------
Net increase (decrease) in cash.......... (1,861) 590 121 - (1,150)
Cash at beginning of year................ 1,645 4,179 - - 5,824
------------ ------------ --------------- -------------- ------------
Cash at end of year...................... $ (216) $ 4,769 $ 121 $ - $ 4,674
============ ============ =============== ============== ============
</TABLE>
24
<PAGE> 26
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Company has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
INTERFACE, INC.
By: /s/ Ray C. Anderson
----------------------------
Ray C. Anderson
Chairman of the Board,
President and Chief
Executive Officer
Date: March 27, 1996
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature appears
below constitutes and appoints Ray C. Anderson as attorney-in-fact, with power
of substitution, for him in any and all capacities, to sign any amendments to
this Report on Form 10-K, and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorney-in-fact may
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
/s/ Ray C. Anderson Chairman of the Board, President and Chief March 27, 1996
- --------------------------- Executive Officer (Principal Executive Officer)
Ray C. Anderson
/s/ Daniel T. Hendrix Senior Vice President - Finance, Chief Financial March 27, 1996
- --------------------------- Officer and Treasurer (Principal Financial and Accounting
Daniel T. Hendrix Officer)
/s/ Brian L. DeMoura Director March 27, 1996
- ---------------------------
Brian L. DeMoura
/s/ Charles R. Eitel Director March 27, 1996
- ---------------------------
Charles R. Eitel
/s/ David Milton Director March 27, 1996
- ---------------------------
David Milton
/s/ Donald E. Russell Director March 27, 1996
- ---------------------------
Donald E. Russell
/s/ Gordon D. Whitener Director March 27, 1996
- ---------------------------
Gordon D. Whitener
/s/ Carl I. Gable Director March 27, 1996
- --------------------------
Carl I. Gable
/s/ June M. Henton Director March 27, 1996
- --------------------------
June M. Henton
/s/ J. Smith Lanier, II Director March 27, 1996
- --------------------------
J. Smith Lanier, II
/s/ Leonard G. Saulter Director March 27, 1996
- --------------------------
Leonard G. Saulter
/s/ David G. Thomas Director March 27, 1996
- --------------------------
David G. Thomas
/s/ Clarinus C.Th. van Andel Director March 27, 1996
- -------------------------------
Clarinus C.Th. van Andel
</TABLE>
25
<PAGE> 27
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DESCRIPTION OF EXHIBIT NUMBER
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
10.5 Amendment No. 2 to Key Employee Stock Option Plan (1993).*
10.8(b) Amendments No. 1, No. 2 and No. 3 to Amended and Restated Credit Agreement among the
Company (and certain direct and indirect subsidiaries), SunTrust Bank (formerly Trust
Company Bank) and The First National Bank of Chicago.
10.10 Joinder Agreement and Fifth Amendment to the Revolving Credit Loan Agreement
between Interface Flooring Systems, Inc. and SunTrust Bank.
10.26 Receivables Sale Agreement, dated as of August 4, 1995, among Interface Securitization
Corporation, Interface, Inc., Special Purpose Accounts Receivable Cooperative Corporation
and Canadian Imperial Bank of Commerce.
10.27 Receivables Sale Agreement, dated as of August 4, 1995, among Interface Securitization
Corporation, Interface, Inc., certain Financial Institutions (as bank purchasers), SunTrust Bank
and The First National Bank of Chicago (as co-agents), SunTrust Bank (as administrative
agent) and The First National Bank of Chicago (as documentation and collateral agent).
13 Certain information contained in the Company's Annual Report to Shareholders for the fiscal
year ended December 31, 1995, which is expressly incorporated into this Report by
direct reference thereto.
21 Subsidiaries of the Company.
23 Consent of BDO Seidman, LLP to the incorporation by reference of certain reports
dated February 27, 1996 into the prospectuses constituting parts of the Company's
registration statements on Form S-8 (File Numbers 33-28305 and 33-28307).
27 Financial Data Schedule (for SEC use only).
</TABLE>
* Management contract or compensatory plan or agreement required to be filed
pursuant to Item 14(c) of this Report.
<PAGE> 1
EXHIBIT 10.5
AMENDMENT NO. 2
TO
INTERFACE, INC.
KEY EMPLOYEE STOCK OPTION PLAN (1993)
WHEREAS, effective March 1, 1993, Interface, Inc. (the "Company") adopted
the Interface, Inc. Key Employee Stock Option Plan (1993), as heretofore
amended (the "Plan"); and
WHEREAS, the Company desires to amend the Plan to increase the maximum
number of shares of Common Stock with respect to which Options and Stock
Appreciation Rights may be granted thereunder;
NOW, THEREFORE, the following amendment to the Plan is hereby adopted,
effective as of February 27, 1996.
Section 1.3(a) of the Plan is hereby amended by deleting the
existing provision in its entirety and substituting the following
therefore:
"The aggregate number of shares of Class A or
Class B Common Stock with respect to which Options
and Stock Appreciation Rights may be granted shall
not exceed a total of 1,500,000 shares in the
aggregate, subject to possible adjustment in
accordance with Section 4.1."
AS APPROVED BY THE BOARD OF DIRECTORS OF INTERFACE, INC. ON FEBRUARY 27,
1996.
INTERFACE, INC.
By: /s/ Daniel T. Hendrix
--------------------------------
Daniel T. Hendrix
Senior Vice President
and Chief Financial Officer
<PAGE> 1
EXHIBIT 10.8(b)
FIRST AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT made and
entered into as of July 31, 1995, by and among INTERFACE, INC., a Georgia
corporation ("Interface"), INTERFACE SCHERPENZEEL B.V., a "besloten
vennootschap met beperkte aansprakelijkheid" (private company with limited
liability) incorporated and existing under the laws of The Netherlands with its
registered seat in Scherpenzeel, Gld., The Netherlands ("Scherpenzeel B.V."),
INTERFACE EUROPE LIMITED, a private company limited by shares organized and
existing under the laws of England and Wales ("Europe Limited"; Interface,
Scherpenzeel B.V. and Europe Limited referred to collectively herein as the
"Borrowers"), TRUST COMPANY BANK, a banking corporation organized under the
laws of the State of Georgia ("TCB"), THE FIRST NATIONAL BANK OF CHICAGO, a
national banking association ("FNBC"), the other banks and lending institutions
listed on the signature pages hereof (TCB, FNBC, and such other banks and
lending institutions referred to collectively herein as the "Lenders"), TRUST
COMPANY BANK, in its capacity as agent for those Lenders having outstanding
Domestic Syndicated Loan Commitments or having outstanding Domestic Revolving
Loans or Term Loans as provided in the Credit Agreement defined below (the
"Domestic Agent"), THE FIRST NATIONAL BANK OF CHICAGO, in its capacity as agent
for those Lenders having outstanding Multicurrency Syndicated Loan Commitments
or having outstanding Multicurrency Revolving Loans as provided in the Credit
Agreement defined below (the "Multicurrency Agent"; the Domestic Agent and the
Multicurrency Agent referred to collectively herein as the "Co-Agents"), and
TRUST COMPANY BANK, in its capacity as collateral agent for the Co-Agents and
Lenders (the "Collateral Agent");
W I T N E S S E T H:
WHEREAS, the Borrowers, the Co-Agents, the Collateral Agent, and the
Lenders are parties to a certain Amended and Restated Credit Agreement dated as
of June 30, 1995 (the "Credit Agreement");
<PAGE> 2
WHEREAS, pursuant to Section 8.12 of the Credit Agreement, the Borrowers
are required to establish certain accounts receivable purchase facilities on or
before September 30, 1995;
WHEREAS, in contemplation of the closing of such accounts receivable
purchase facilities, the Borrowers have requested certain amendments to the
Credit Agreement to allow for, and to more accurately reflect, the terms of
such facilities;
WHEREAS, the Co-Agents, the Collateral Agent, and certain Lenders
constituting the "Required Lenders" pursuant to the Credit Agreement have
agreed to such amendments, as more particularly set forth in this First
Amendment, on the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Borrowers the Lenders, the Co-Agents and the Collateral
Agent agree as follows:
1. DEFINED TERMS. Except as otherwise expressly defined herein, each
capitalized term used in this First Amendment that is defined in the Credit
Agreement shall be used herein with the meaning assigned to such capitalized
term in the Credit Agreement.
2. AMENDMENTS TO SECTION 1.01 ("DEFINITIONS").
(a) Section 1.01 of the Credit Agreement is hereby amended by adding the
following defined terms in proper alphabetical order:
"Bank Purchasers" shall mean the (i) Lenders participating in the
Receivables Backup Purchase Agreement, (ii) any other financial
institutions becoming a party thereto, and (iii) their respective
successors and assigns.
"CIBC" shall mean Canadian Imperial Bank of Commerce, a banking
institution organized and existing under the laws of Canada, and its
successors and assigns.
"Receivables Subordinated Notes" shall mean any and all subordinated
notes executed by Interface SPC from time to time in favor of Interface
and evidencing advances made from time to time by Interface to Interface
SPC in connection with, and pursuant to the terms of, the Accounts
Receivable Facilities, provided that, the aggregate outstanding principal
balance of such notes shall not at any time exceed $40,000,000.
(b) The definition of the term "Accounts Receivable Facilities" in Section
1.01 of the Credit Agreement is hereby amended by deleting said definition in
its entirety and substituting in lieu thereof the following:
-2-
<PAGE> 3
"Accounts Receivable Facilities" shall mean, collectively, the
receivables financing facilities evidenced by the Receivables Transfer
Agreements, the Receivables Sale Agreements and the Receivables Backup
Purchase Agreements pursuant to which (i) certain of the Consolidated
Companies shall sell accounts receivable to Interface SPC, (ii) Interface SPC
shall sell such accounts receivable (or undivided ownership interests therein)
to SPARCC or CIBC, and (iii) under certain circumstances, Interface SPC shall
sell such accounts receivable (or undivided ownership interests therein) to
the Bank Purchasers.
(c) The definition of the term "Adjusted Working Capital" in Section 1.01
of the Credit Agreement is hereby amended by adding the words "without
duplication" after the word "plus" in the third line thereof.
(d) The definition of the term "Asset Sale" in Section 1.01 of the Credit
Agreement is hereby amended by deleting clause (ii) thereof in its entirety and
substituting in lieu thereof the following:
"(ii) sales of accounts receivables (or undivided ownership
interests therein) of a Consolidated Company pursuant to the Accounts
Receivable Facilities."
(e) The definition of the term "Funded Debt" in Section 1.01 of the Credit
Agreement is hereby amended by deleting clauses (ii), (iii) and (iv) thereof
and substituting in lieu thereof the following:
"(ii) the aggregate outstanding "Investment" of the purchasers
pursuant to the Receivables Sale Agreements, (iii) the aggregate
outstanding "Investment" of the purchasers pursuant to the Receivables
Backup Purchase Agreements plus (without duplication) (iv) any other
amounts due and owing to the Bank Purchasers pursuant to the Receivables
Backup Purchase Agreements."
(f) The definition of the term "Intercompany Loans" in Section 1.01 of the
Credit Agreement is hereby amended by adding the following proviso at the end
of said definition:
"provided that, the advances made pursuant to the Receivables
Subordinated Notes shall not constitute Intercompany Loans."
-3-
<PAGE> 4
(g) The definition of the term "Interface SPC" in Section 1.01 of
the Credit Agreement is hereby amended by deleting said definition in its
entirety and substituting in lieu thereof the following:
"Interface SPC" shall mean Interface Securitization Corporation, a
Delaware corporation, the Consolidated Company organized as a special
purpose corporation (i) to acquire accounts receivable from other
Consolidated Companies pursuant to the Receivables Transfer Agreements,
(ii) to sell such accounts receivable (or undivided ownership interests
therein) to SPARCC or CIBC pursuant to the Receivables Sale Agreements,
and (iii) under certain circumstances, to sell such accounts receivable
(or undivided ownership interests therein) to the Bank Purchasers
pursuant to the Receivables Backup Purchase Agreements, and such
Consolidated Company's successors and permitted assigns."
(h) The definition of the term "Pledged Stock" in Section 1.01 of the
Credit Agreement is hereby amended by adding the words "other than Interface
SPC" at the end of clause (i) of said definition.
(i) The definitions of the terms "Receivables Backup Purchase Agreements,"
"Receivables Sale Agreements," and "Receivables Transfer Agreements" in Section
1.01 of the Credit Agreement are hereby amended by deleting said definitions in
their entirety and substituting in lieu thereof the following:
"Receivables Backup Purchase Agreements" shall mean the agreements
among Interface SPC, as seller, Interface, as collection agent, the Bank
Purchasers, as purchasers, TCB and FNBC, as co-agents, and FNBC, as
documentation and collateral agent, providing for the sale by Interface
SPC, and the purchase by the Bank Purchasers, of accounts receivable (or
undivided ownership interests therein) originated by certain of the
Consolidated Companies.
"Receivables Sale Agreements" shall mean the agreements among
Interface SPC, as seller, Interface, as collection agent, SPARCC, as
purchaser, and CIBC, as servicing agent, providing for the sale by
Interface SPC, and the purchase by SPARCC, of accounts receivable (or
undivided ownership interests therein) originated by certain of the
Consolidated Companies.
"Receivables Transfer Agreements" shall mean, collectively, the
agreement(s) between certain of the Consolidated Companies, as
originators, and Interface SPC, as purchaser, providing for the sale by
such Consolidated Companies, and the purchase by Interface SPC, of
accounts receivable originated by such Consolidated Companies.
3. AMENDMENT TO SUBSECTION 8.07(Q) (NOTICE OF "INTERCOMPANY ASSET
TRANSFERS"). Subsection 8.07(q) of the Credit Agreement is hereby amended by
deleting the portion of such
-4-
<PAGE> 5
subsection following the parenthetical in the fifth line of such subsection
and adding the following in lieu thereof:", excluding (i) sales or other
transfers of assets in the ordinary course of business, where the Asset Value
of such assets is greater than $5,000,000, and (ii) sales of accounts
receivables or undivided ownership interests therein pursuant to the terms of
the Accounts Receivable Facilities."
4. AMENDMENT TO SECTION 8.11 ("ADDITIONAL CREDIT PARTIES AND COLLATERAL").
Section 8.11 of the Credit Agreement is hereby amended by deleting the first
eleven words of clause (iv) thereof and substituting in lieu thereof the
following: "the occurrence of any other event creating a new Material
Subsidiary (other than Interface SPC which shall not be deemed to be
a Material Subsidiary for the purposes of this Section 8.11), . . . ."
5. AMENDMENT TO SUBSECTION 9.01(K) ("INDEBTEDNESS"). Subsection 9.01(k) of
the Credit Agreement is hereby amended by deleting said subsection in its
entirety and substituting in lieu thereof the following:
"(k) Indebtedness, if any, owing by Interface or Interface SPC
pursuant to the Accounts Receivable Facilities and Indebtedness, if any,
owing by any other Consolidated Company party to the Receivables Transfer
Agreements with respect thereto; and"
6. AMENDMENT TO SUBSECTION 9.02(I) ("LIENS"). Subsection 9.02(i) of the
Credit Agreement is hereby amended by deleting said subsection in its entirety
and substituting in lieu thereof the following:
"(i) Liens, if any, that may be deemed to have been granted by any
Consolidated Company in favor of SPARCC, the Bank Purchasers or their
respective agents, on accounts receivable and related property of such
Consolidated Companies as a result of the sale and assignment thereof (or
of undivided ownership interests therein) to SPARCC, the Bank Purchasers
or their respective agents pursuant to the Accounts Receivable
Facilities."
7. AMENDMENT TO SECTION 9.03 ("MERGERS, ACQUISITIONS, SALES, ETC."). Section
9.03 of the Credit Agreement is hereby amended by deleting clause (iv) thereof
in its entirety and substituting in lieu thereof the following:
-5-
<PAGE> 6
"(iv) sales of accounts receivable (or of undivided ownership
interests therein) pursuant to the Accounts Receivable Facilities as long
as the total "Investment" of the purchasers party to the Receivables
Backup Purchase Agreements and the Receivables Sale Agreements (as such
term is defined in each such agreement) shall not exceed $100,000,000 in
aggregate amount outstanding at any time,"
8. AMENDMENT TO SUBSECTION 9.05(A) ("INVESTMENTS, LOANS, ETC."). Subsection
9.05(a) of the Credit Agreement is hereby amended by adding the following at
the end of said subsection: "and Investments by Interface in Interface SPC in
the form of the Receivables Subordinated Notes;"
9. AMENDMENT TO SUBSECTION 9.08 ("OPTIONAL PREPAYMENTS"). Subsection 9.08 of
the Credit Agreement is hereby amended by adding the following sentence
at the end of said section: "It is expressly agreed that fluctuations in the
amount of the Receivables Subordinated Notes or the total "Investment" of the
purchasers party to the Receivables Backup Purchase Agreements and the
Receivables Sale Agreements (as such term is defined in each such agreement) in
accordance with the terms of the Accounts Receivable Facilities shall not
constitute an optional prepayment of Indebtedness for purposes of this Section
9.08."
10. AMENDMENT TO SUBSECTION 9.11 ("ADDITIONAL NEGATIVE PLEDGES"). Section
9.11 of the Credit Agreement is hereby amended by deleting the word "and"
before clause (iii) thereof and adding the following at the end of said clause
(iii): "; and (iv) the terms of the Accounts Receivable Facilities with
respect to the accounts receivable and related property transferred thereunder
and the stock and other assets of Interface SPC."
11. AMENDMENT TO SECTION 9.12 ("LIMITATION ON PAYMENT RESTRICTIONS AFFECTING
CONSOLIDATED COMPANIES"). Section 9.12 of the Credit Agreement is hereby
amended by adding the following sentence at the end of said section:
"Notwithstanding the foregoing, nothing in this Section 9.12 shall be deemed to
prohibit restrictions on dividends and distributions payable by Interface SPC,
set forth in, or required by, the terms of any document executed in connection
with the Accounts Receivable Facilities."
12. AMENDMENT TO SECTION 9.13 ("ACTIONS UNDER CERTAIN DOCUMENTS"). Section
9.13 of the Credit Agreement is hereby amended by adding the following sentence
at the end of said section: "In addition to the foregoing, without the prior
consent of the Co-Agents, the Consolidated Companies shall not enter into any
amendment or modification of the documents executed in connection with the
Accounts Receivable Facilities which changes the definition of "Investment" or
"Event of Termination" used therein or any other material provision thereof.
13. AMENDMENT TO SUBSECTION 10.15 ("ACCOUNTS RECEIVABLE FACILITY"). Section
10.15 of the Credit Agreement is hereby amended by deleting said section in its
entirety and substituting in lieu thereof the following:
-6-
<PAGE> 7
"Section 10.15. Accounts Receivable Facility. There shall exist and
continue for five (5) days any "Event of Termination" as provided under the
terms of any of the Receivables Backup Purchase Agreements or the Receivables
Sale Agreements (collectively, the "Receivables Securitization Agreements")
other than an Event of Termination which arises from: (i) the matters
described in subsection 12.1(f) of the Receivables Securitization Agreements;
(ii) any reduction in Interface's credit rating (or the imputed equivalent
thereof); (iii) the operation of a cross-termination provision in such
Receivables Securitization Agreements (that is, a provision in such Receivables
Securitization Agreements under which the occurrence of any "Event of
Termination" under any other Receivables Securitization Agreement is also an
Event of Termination under such Receivables Securitization Agreements) which is
not otherwise an Event of Default hereunder; (iv) any Consolidated Company's
failure to comply with, or its making of any changes in or supplements to, its
credit and collection policies; (v) any failure by Interface to maintain the
minimum net worth required in Interface SPC under the terms of such Receivables
Securitization Agreements; (vi) any amendment of the terms of any Consolidated
Company's accounts receivable or any contract relating thereto or any waiver by
such Consolidated Company of the terms and conditions of such contract; (vii)
any change in the character of the business of any of the Consolidated
Companies (which is not a violation of Section 9.09 hereof) or in their
respective credit and collection policies; (viii) Interface SPC's entering into
or becoming a party to any agreement or instruments incidental to its
administration or operation other than those expressly permitted under the
terms of such Receivables Securitization Agreement; (ix) any determination that
the payment by Interface SPC to any of the Consolidated Companies of 100% of
the net book value of the accounts receivable does not constitute the
"reasonably equivalent value" of the accounts receivable and related rights
sold by such Consolidated Company to Interface SPC in connection with the
Accounts Receivable Facilities; (x) any change in the Certificate of
Incorporation or By-Laws of Interface SPC; (xi) any failure by Interface SPC or
Interface to comply with any of the affirmative or negative covenants in such
Receivables Securitization Agreement which relate to the establishment and
maintenance of Interface SPC's separate legal identity; (xii) the past-due or
defaulted accounts receivable of any or all of the Consolidated Companies
exceeding any applicable limitations set forth in such Receivables
Securitization Agreement; (xiii) the aggregate "Dilutions" (as such term is
defined in such Receivables Securitization Agreement) on any or all of the
Consolidated Companies' accounts receivable exceeding any applicable limitation
set forth in such Receivables Securitization Agreement; or (xiv) the "Portfolio
-7-
<PAGE> 8
Turnover" (as such term is used in such Receivables Securitization
Agreement) exceeding any applicable limitation set forth in such
Receivables Securitization Agreement."
14. AMENDMENTS TO SCHEDULES. The Schedules to the Credit Agreement are hereby
amended as set forth below:
(a) SCHEDULE 7.13. (MATERIAL SUBSIDIARIES). Schedule 7.13 to the Credit
Agreement is hereby amended by adding the following thereto:
"Interface Securitization Corporation, a Delaware corporation
Toltec Fabrics, Inc., a Georgia corporation"
(b) SCHEDULE 7.18 (INDEBTEDNESS). Schedule 7.18 to the Credit Agreement
is hereby amended by adding the following thereto:
"Indebtedness incurred by the Consolidated Companies pursuant to the
Accounts Receivable Facilities and permitted by Section 9.01; provided
that the Lenders acknowledge and agree that the transfer of accounts
receivable (or undivided ownership interests therein) pursuant to the
Accounts Receivable Facilities is intended to constitute a true sale of
such assets."
(c) SCHEDULE 7.22 (PAYMENT OR DIVIDEND RESTRICTIONS). Schedule 7.22 to
the Credit Agreement is hereby amended by adding the following thereto:
"Restrictions on the payment of dividends or other distributions of
Interface SPC set forth in, or required by the terms of, the Accounts
Receivable Facilities."
15. REPRESENTATIONS AND WARRANTIES. Each of Interface (as to itself and all
other Consolidated Companies) and each of the other Borrowers (as to itself and
all of its Subsidiaries) represents and warrants to the Lenders as follows:
(a) All representations and warranties set forth in the Credit Agreement
are true and correct in all material respects with the same effect as though
such representations and warranties have been made on and as of the date hereof
(except that the representation and warranty set forth in Section 7.19 of the
Credit Agreement shall not be deemed to relate to any time subsequent to the
date of the initial Loans under the Credit Agreement);
(b) No Default or Event of Default has occurred and is continuing on the
date hereof;
(c) Since the date of the most recent financial statements of the
Consolidated Companies
-8-
<PAGE> 9
submitted to the Lenders pursuant to Section 8.07(b), there has been
no change which has had or could reasonably be expected to have a Materially
Adverse Effect (whether or not any notice with respect to such change has
otherwise been furnished to the Lenders pursuant to Section 8.07);
(d) Each of the Borrowers has the corporate power and authority to make,
deliver and perform this Amendment and has taken all necessary corporate
action to authorize the execution, delivery and performance of this
Amendment. No consent or authorization of, or filing with, any Person
(including, without limitation, any governmental authority), is required in
connection with the execution, delivery or performance by any Borrower, or the
validity or enforceability against any Borrower, of this Amendment, other than
such consents, authorizations or filings which have been made or obtained
(including without limitation, any necessary consultations with any Borrower's
supervisory board, works council ("Ondernemingsraad") or similar body); and
(e) This Amendment has been duly executed and delivered by each of the
Borrowers and this Amendment constitutes a legal, valid and binding obligations
of the Borrowers, respectively, enforceable against the Borrowers in accordance
with their respective terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity.
16. EFFECTIVENESS OF FIRST AMENDMENT. This First Amendment shall become
effective upon the execution and delivery to the Domestic Agent of counterparts
hereof (whether originals or facsimile transmissions thereof) on behalf of each
of the Borrowers, the Co-Agents, the Collateral Agent, and those Lenders
constituting the Required Lenders for purposes of the Credit Agreement. Upon
the effectiveness of this Amendment, the Borrowers shall be deemed to have
satisfied the requirements of the first sentence of Section 8.12 of the Credit
Agreement.
17. REFERENCES TO CREDIT AGREEMENT. On and after the date this First
Amendment becomes effective as provided in paragraph 16 above, each and every
reference in the Credit Documents to the Credit Agreement shall be deemed to
refer to and mean the Credit Agreement as amended by this First Amendment. The
Borrowers further confirm and agree that (i) except as expressly amended
herein, the Credit Agreement remains in full force and effect in accordance
with its terms, and (ii) all other Credit Documents remain in full force and
effect in accordance with their respective terms.
18. COUNTERPARTS. This First Amendment may be executed in any number of
counterparts and
-9-
<PAGE> 10
by the different parties hereto on separate counterparts, each of which
when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
19. MISCELLANEOUS. This First Amendment and the rights and obligations of the
parties hereunder shall be construed in accordance with and be governed by the
law (without giving effect to the conflict of law principles thereof) of the
State of Georgia. This First Amendment shall be binding on and shall inure to
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto.
-10-
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be duly executed and delivered in Atlanta, Georgia, by their duly authorized
officers as of the day and year first above written.
INTERFACE, INC.
By:
--------------------------
Daniel T. Hendrix
Attorney-in-Fact
INTERFACE SCHERPENZEEL,
B.V.
By:
--------------------------
Daniel T. Hendrix
Attorney-in-Fact
INTERFACE EUROPE LIMITED
By:
--------------------------
Daniel T. Hendrix
Attorney-in-Fact
-11-
<PAGE> 12
[Signature Page to First Amendment to Amended and Restated Credit
Agreement by and between Interfact, Inc., Interface Scherpenzeel B.V. and
Interface Europe Limited, as Borrowers, Trust Company Bank and The First
National Bank of Chicago, as Co-Agents, and the Lenders party thereto]
TRUST COMPANY BANK,
AS DOMESTIC AGENT AND
COLLATERAL AGENT
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
-1-
<PAGE> 13
[SIGNATURE PAGE TO FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT BY
AND BETWEEN INTERFACE, INC., INTERFACE SCHERPENZEEL B.V. AND INTERFACE EUROPE
LIMITED, AS BORROWERS, TRUST COMPANY BANK AND THE FIRST NATIONAL BANK OF
CHICAGO, AS CO-AGENTS, AND THE LENDERS PARTY THERETO]
THE FIRST NATIONAL BANK
OF CHICAGO, AS
MULTICURRENCY AGENT
By:
---------------------------
Name:
-------------------------
Title:
------------------------
-2-
<PAGE> 14
[SIGNATURE PAGE TO FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT BY
AND BETWEEN INTERFACE, INC., INTERFACE SCHERPENZEEL B.V. AND INTERFACE EUROPE
LIMITED, AS BORROWERS, TRUST COMPANY BANK AND THE FIRST NATIONAL BANK OF
CHICAGO, AS CO-AGENTS, AND THE LENDERS PARTY THERETO]
TRUST COMPANY BANK
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
-3-
<PAGE> 15
[SIGNATURE PAGE TO FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT BY
AND BETWEEN INTERFACE, INC., INTERFACE SCHERPENZEEL B.V. AND INTERFACE EUROPE
LIMITED, AS BORROWERS, TRUST COMPANY BANK AND THE FIRST NATIONAL BANK OF
CHICAGO, AS CO-AGENTS, AND THE LENDERS PARTY THERETO]
THE FIRST NATIONAL BANK
OF CHICAGO
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
-4-
<PAGE> 16
[SIGNATURE PAGE TO FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT BY
AND BETWEEN INTERFACE, INC., INTERFACE SCHERPENZEEL B.V. AND INTERFACE EUROPE
LIMITED, AS BORROWERS, TRUST COMPANY BANK AND THE FIRST NATIONAL BANK OF
CHICAGO, AS CO-AGENTS, AND THE LENDERS PARTY THERETO]
ABN AMRO BANK N.V.
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
-5-
<PAGE> 17
[SIGNATURE PAGE TO FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT BY
AND BETWEEN INTERFACE, INC., INTERFACE SCHERPENZEEL B.V. AND INTERFACE EUROPE
LIMITED, AS BORROWERS, TRUST COMPANY BANK AND THE FIRST NATIONAL BANK OF
CHICAGO, AS CO-AGENTS, AND THE LENDERS PARTY THERETO]
BANK SOUTH
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
-6-
<PAGE> 18
[SIGNATURE PAGE TO FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT BY
AND BETWEEN INTERFACE, INC., INTERFACE SCHERPENZEEL B.V. AND INTERFACE EUROPE
LIMITED, AS BORROWERS, TRUST COMPANY BANK AND THE FIRST NATIONAL BANK OF
CHICAGO, AS CO-AGENTS, AND THE LENDERS PARTY THERETO]
THE BANK OF TOKYO LTD.,
ATLANTA AGENCY
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
-7-
<PAGE> 19
[SIGNATURE PAGE TO FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT BY
AND BETWEEN INTERFACE, INC., INTERFACE SCHERPENZEEL B.V. AND INTERFACE EUROPE
LIMITED, AS BORROWERS, TRUST COMPANY BANK AND THE FIRST NATIONAL BANK OF
CHICAGO, AS CO-AGENTS, AND THE LENDERS PARTY THERETO]
CIBC, INC.
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
-8-
<PAGE> 20
[SIGNATURE PAGE TO FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT BY
AND BETWEEN INTERFACE, INC., INTERFACE SCHERPENZEEL B.V. AND INTERFACE EUROPE
LIMITED, AS BORROWERS, TRUST COMPANY BANK AND THE FIRST NATIONAL BANK OF
CHICAGO, AS CO-AGENTS, AND THE LENDERS PARTY THERETO]
CREDITANSTALT-BANKVERIEN
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
-9-
<PAGE> 21
[SIGNATURE PAGE TO FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT BY
AND BETWEEN INTERFACE, INC., INTERFACE SCHERPENZEEL B.V. AND INTERFACE EUROPE
LIMITED, AS BORROWERS, TRUST COMPANY BANK AND THE FIRST NATIONAL BANK OF
CHICAGO, AS CO-AGENTS, AND THE LENDERS PARTY THERETO]
CREDIT LYONNAIS NEW YORK BRANCH
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
-10-
<PAGE> 22
[SIGNATURE PAGE TO FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT BY
AND BETWEEN INTERFACE, INC., INTERFACE SCHERPENZEEL B.V. AND INTERFACE EUROPE
LIMITED, AS BORROWERS, TRUST COMPANY BANK AND THE FIRST NATIONAL BANK OF
CHICAGO, AS CO-AGENTS, AND THE LENDERS PARTY THERETO]
THE DAIWA BANK, LIMITED
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
-11-
<PAGE> 23
[SIGNATURE PAGE TO FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT BY
AND BETWEEN INTERFACE, INC., INTERFACE SCHERPENZEEL B.V. AND INTERFACE EUROPE
LIMITED, AS BORROWERS, TRUST COMPANY BANK AND THE FIRST NATIONAL BANK OF
CHICAGO, AS CO-AGENTS, AND THE LENDERS PARTY THERETO]
FIRST UNION NATIONAL
BANK OF GEORGIA
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
-12-
<PAGE> 24
[SIGNATURE PAGE TO FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT BY
AND BETWEEN INTERFACE, INC., INTERFACE SCHERPENZEEL B.V. AND INTERFACE EUROPE
LIMITED, AS BORROWERS, TRUST COMPANY BANK AND THE FIRST NATIONAL BANK OF
CHICAGO, AS CO-AGENTS, AND THE LENDERS PARTY THERETO]
FLEET BANK OF MAINE
By:
-------------------------------
Name: Neil C. Buitenhuys
Title: Vice President
-13-
<PAGE> 25
[SIGNATURE PAGE TO FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT BY
AND BETWEEN INTERFACE, INC., INTERFACE SCHERPENZEEL B.V. AND INTERFACE EUROPE
LIMITED, AS BORROWERS, TRUST COMPANY BANK AND THE FIRST NATIONAL BANK OF
CHICAGO, AS CO-AGENTS, AND THE LENDERS PARTY THERETO]
NATIONSBANK, N.A. (CAROLINAS)
(FORMERLY KNOWN AS NATIONSBANK
OF NORTH CAROLINA, N.A.)
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
-14-
<PAGE> 26
[SIGNATURE PAGE TO FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT BY
AND BETWEEN INTERFACE, INC., INTERFACE SCHERPENZEEL B.V. AND INTERFACE EUROPE
LIMITED, AS BORROWERS, TRUST COMPANY BANK AND THE FIRST NATIONAL BANK OF
CHICAGO, AS CO-AGENTS, AND THE LENDERS PARTY THERETO]
WACHOVIA BANK OF GEORGIA, N.A.
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
-1-
<PAGE> 27
EXHIBIT 10.8(b)
SECOND AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
-------------------------------------
THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT made and
entered into as of November 21, 1995, by and among INTERFACE, INC., a Georgia
corporation ("Interface"), INTERFACE SCHERPENZEEL B.V., a "besloten
vennootschap met beperkte aansprakelijkheid" (private company with limited
liability) incorporated and existing under the laws of The Netherlands with its
registered seat in Scherpenzeel, Gld., The Netherlands ("Scherpenzeel B.V."),
INTERFACE EUROPE LIMITED, a private company limited by shares organized and
existing under the laws of England and Wales ("Europe Limited"; Interface,
Scherpenzeel B.V. and Europe Limited referred to collectively herein as the
"Borrowers"), SUNTRUST BANK, ATLANTA (formerly Trust Company Bank), a banking
corporation organized under the laws of the State of Georgia ("TCB"), THE FIRST
NATIONAL BANK OF CHICAGO, a national banking association ("FNBC"), the other
banks and lending institutions listed on the signature pages hereof (TCB, FNBC,
and such other banks and lending institutions referred to collectively herein
as the "Lenders"), SUNTRUST BANK, ATLANTA (formerly Trust Company Bank), in its
capacity as agent for those Lenders having outstanding Domestic Syndicated Loan
Commitments or having outstanding Domestic Revolving Loans or Term Loans as
provided in the Credit Agreement defined below (the "Domestic Agent"), THE
FIRST NATIONAL BANK OF CHICAGO, in its capacity as agent for those Lenders
having outstanding Multicurrency Syndicated Loan Commitments or having
outstanding Multicurrency Revolving Loans as provided in the Credit Agreement
defined below (the "Multicurrency Agent"; the Domestic Agent and the
Multicurrency Agent referred to collectively herein as the "Co-Agents"), and
SUNTRUST BANK, ATLANTA (formerly Trust Company Bank), in its capacity as
collateral agent for the Co-Agents and the Lenders (the "Collateral Agent");
W I T N E S S E T H:
--------------------
WHEREAS, the Borrowers, the Co-Agents, the Collateral Agent, and the
Lenders are parties to a certain Amended and Restated Credit Agreement dated as
of June 30, 1995, as amended by a certain First Amendment to Amended and
Restated Credit Agreement dated as of July 31, 1995 (as so amended, the "Credit
Agreement");
WHEREAS, the Borrowers have requested that the Lenders and the Co-Agents
<PAGE> 28
approve, pursuant to the requirements of the Credit Agreement, the terms and
conditions of certain debt instruments to be issued by Interface, and to amend
certain covenants and other provisions of the Credit Agreement as now in
effect;
WHEREAS, the Co-Agents and certain Lenders constituting the "Required
Lenders" pursuant to the Credit Agreement have agreed to approve the terms and
conditions of such debt instruments and to effect such amendments, as more
particularly set forth in this Second Amendment, on the terms and subject to
the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Borrowers, the Lenders, the Co-Agents and the Collateral
Agent agree as follows:
1. DEFINED TERMS. Except as otherwise expressly defined herein, each
capitalized term used in this Second Amendment that is defined in the Credit
Agreement shall be used herein with the meaning assigned to such capitalized
term in the Credit Agreement.
2. AMENDMENTS TO SECTION 1.01 ("DEFINITIONS").
(a) Section 1.01 of the Credit Agreement is hereby amended by adding the
following defined terms in proper alphabetical order:
"Redeemable Capital Stock" shall mean 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 Term Loan Final
Maturity Date or is redeemable at the option of the holder thereof at any
time prior to the Term Loan Final Maturity Date, or is convertible into
or exchangeable for debt securities at any time prior to the Term Loan
Final Maturity Date.
"Senior Subordinated Notes" shall mean, collectively, the unsecured
Senior Subordinated Notes Due 2005 issued by Interface, and guaranteed by
certain Subsidiaries of Interface, in the aggregate principal amount of
$125,000,000 (plus the aggregate principal amount, if any, of such Senior
Subordinated Notes issued pursuant to the underwriters' over-allotment
option up to a total amount of $18,750,000), as more particularly
described on the Senior Subordinated Notes Description, together with any
and all "Exchange Notes" (as defined in the Senior Subordinated Notes
Description) issued to holders of such Senior Subordinated Notes in
exchange therefor.
"Senior Subordinated Notes Description" shall mean the description
of the Senior Subordinated Notes as set forth in Exhibit Y attached
hereto and by this reference made a part hereof.
-2-
<PAGE> 29
"Senior Subordinated Notes Guarantor" shall mean each Subsidiary of
Interface that is a "Guarantor" with respect to the Senior Subordinated
Notes as provided in the Senior Subordinated Notes Description.
"Significant Subsidiary" shall have the same meaning as in Rule
1.02(v) of Regulation S-X under the Securities Act of 1933, as amended.
"Subordinated Debentures Redemption Charge" shall mean the aggregate
amount of the charge(s) (net of income tax), if any, reflected on
Interface's financial statements resulting from the write-off of deferred
financing costs, and the payment of the redemption premium required to be
made, in connection with Interface's early redemption of the Subordinated
Debentures.
(b) The definition of the term "Consolidated EBITA" in Section 1.01 of
the Credit Agreement is hereby amended by deleting said definition in its
entirety and substituting in lieu thereof the following:
"Consolidated EBITA" shall mean, for any fiscal period of Interface,
an amount equal to (A) the sum for such fiscal period of Consolidated Net
Income (Loss) plus, to the extent subtracted in determining such
Consolidated Net Income (Loss), provisions for taxes based on income,
Consolidated Interest Expense, Subordinated Debentures Redemption Charge,
and amortization of goodwill and deferred financing costs, minus (B) any
items of gain (or plus any items of loss) which were included in
determining such Consolidated Net Income (Loss) and were (x) not realized
in the ordinary course of business or (y) the result of any sale of
assets.
(c) The definition of the term "Excess Cash Flow" in Section 1.01 of the
Credit Agreement is hereby amended by deleting said definition in its entirety
and substituting in lieu thereof the following:
"Excess Cash Flow" shall mean, for any fiscal year of Interface (A)
the sum of the amounts for such fiscal year of Consolidated Net Income
(Loss), plus (to the extent subtracted in determining such Consolidated
Net Income (Loss)) depreciation expense, amortization expense, provisions
for deferred tax expense based on income (or minus provisions for
deferred tax credit, as the case may be), the Subordinated Debentures
Redemption Charge, and other non-cash items reducing Consolidated Net
Income (Loss) (or
-3-
<PAGE> 30
minus other non-cash items increasing Consolidated Net Income (Loss)),
as determined in accordance with GAAP, all as determined on a consolidated
basis for the Consolidated Companies, minus (B) the sum of (i) Capital
Expenditures for such fiscal year, (ii) the amount by which Adjusted
Working Capital as determined on the last day of such fiscal year exceeds
(or minus the amount by which such Adjusted Working Capital is less than)
Adjusted Working Capital as determined on the last day of the preceding
fiscal year (such changes in Adjusted Working Capital caused by currency
fluctuations to be calculated in accordance with FASB-52), (iii) required
principal payments on the Term Loans pursuant to Section 2.02(b) during
such fiscal year, (iv) regularly scheduled principal payments on other
Indebtedness of the Consolidated Companies as permitted under Section 9.01
during such fiscal year, and (v) the total amount of regularly scheduled
cash dividends with respect to capital stock paid by Interface during such
fiscal year as permitted under Section 9.04.
(d) The definition of the term "Indebtedness" in Section 1.01 of the
Credit Agreement is hereby amended by deleting said definition in its
entirety and substituting in lieu thereof the following:
"Indebtedness" of any Person shall mean, without duplication (i) all
obligations of such Person which in accordance with GAAP would be shown
on the balance sheet of such Person as a liability (including, without
limitation, obligations for borrowed money and for the deferred purchase
price of property or services, and obligations evidenced by bonds,
debentures, notes or other similar instruments); (ii) all rental
obligations under leases required to be capitalized under GAAP; (iii) all
Guaranties of such Person (including contingent reimbursement obligations
under undrawn letters of credit); (iv) Indebtedness of others secured by
any Lien upon property owned by such Person, whether or not assumed; (v)
obligations or other liabilities under Currency Contracts, Interest Rate
Contracts, or similar agreements or combinations thereof; and (vi)
Redeemable Capital Stock of such Person valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued
dividends. 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 Agreement, and if such price is based on, 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.
(e) The definition of the term "Subordinated Debt" in Section 1.01 of
the Credit Agreement is hereby amended by deleting said definition in its
entirety and substituting in lieu thereof the following:
"Subordinated Debt" shall mean (i) Indebtedness outstanding pursuant
to the
- 4 -
<PAGE> 31
Subordinated Debentures and the Senior Subordinated Notes, and
(ii) other Indebtedness of Interface subordinated to all obligations of
Interface or any other Credit Party arising under this Agreement, the
Notes, and the Guaranty Agreements on terms and conditions satisfactory
in all respects to the Co-Agents and the Required Lenders, including
without limitation, with respect to interest rates, payment terms,
maturities, amortization schedules, covenants, defaults, remedies, and
subordination provisions, as evidenced by the written approval of the
Co-Agents and the Required Lenders.
3. AMENDMENTS TO SECTION 2.03 ("MANDATORY PREPAYMENTS"). Paragraph (a) of
Section 2.03 of the Credit Agreement is hereby amended by deleting said
paragraph (a) in its entirety and substituting in lieu thereof the following:
(a) No mandatory prepayment shall be required pursuant to this
Section 2.03(a) until the aggregate amount of Asset Sales occurring
after October 2, 1994 exceeds $10,000,000 (based on the Asset Values
thereof, but excluding in the foregoing computation (i) Asset Sales
resulting from loss, damage, destruction, or taking where the proceeds
thereof are utilized so as to be excluded from the definition of Net
Proceeds, and (ii) Asset Sales occurring as a part of any sale and
leaseback transactions permitted pursuant to Section 9.06). Whenever
such Asset Values shall have equaled or exceeded such amount, the
following prepayments shall be required to be made:
(i) Within ten (10) Business Days after each date on which
any Consolidated Company receives any Net Proceeds as a result of
or in connection with an Asset Sale by any Consolidated Company, the
Term Loans outstanding under Section 2.01 shall be prepaid by an
amount equal to forty percent (40%) of such Net Proceeds (such
amount being subject to adjustment pursuant to paragraph (c) of this
Section 2.03) plus interest accrued and unpaid on the amount of such
prepayment. If immediately prior to any Asset Sale the aggregate
amount of prior Asset Sales (determined as aforesaid) is less than
$10,000,000, but such Asset Sale causes the $10,000,000 threshold
amount to be exceeded, then forty percent (40%) of a pro rata
portion of the Net Proceeds of such Asset Sale, based upon the ratio
of the amount of the Asset Value of such Asset Sale in excess of the
$10,000,000 threshold to the total Asset Value of such Asset Sale,
shall be applied as set forth in the preceding sentence; and
(ii) If, within fourteen (14) months following an Asset Sale
described in the
- 5 -
<PAGE> 32
preceding clause (i), the remaining sixty percent (60%) of such
Net Proceeds, or pro rata portion thereof, has neither been (x)
invested 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 businesses of Interface and its
Subsidiaries existing on November 1, 1995 or in businesses
reasonably related thereto, or (y) used to prepay the Term Loans
outstanding under Section 2.01 or, if the Term Loans have been paid
in full, to prepay the outstanding Domestic Revolving Loans and
Multicurrency Revolving Loans and permanently reduce the Domestic
Syndicated Loan Commitments and Multicurrency Syndicated Loan
Commitments as provided in Section 3.03(b) and Section 4.03(c),
then Interface shall promptly prepay any and all such remaining
amounts (such amounts being subject to adjustment pursuant to
paragraph (c) of this Section 2.03) not so invested or previously
prepaid and such amounts shall be applied as provided in this
Section 2.03(a) and/or in Section 3.03(b) and Section 4.03(c) with
the permanent reductions in commitments as provided therein.
Notwithstanding the foregoing, if all or substantially all of the assets
of any Senior Subordinated Notes Guarantor that is a Significant
Subsidiary, or all of the capital stock of any Senior Subordinated Notes
Guarantor that is a Significant Subsidiary, is sold (including by
issuance or otherwise) by Interface or any of its Subsidiaries to any
Person other than Interface or its wholly owned Subsidiaries, then the
entire amount of the Net Proceeds from such transaction shall immediately
be used to prepay the Term Loans or, if the Term Loans have been paid in
full, to prepay the outstanding Domestic Revolving Loans and
Multicurrency Revolving Loans and permanently reduce the Domestic
Syndicated Loan Commitments and Multicurrency Syndicated Loan Commitments
as provided in Section 3.03(b) and Section 4.03(c).
All such prepayments under this Section 2.03(a) shall be applied in
each case against all remaining scheduled amortization payments on a pro
rata basis, without prejudice, however, to the provisions of Section
2.03(c). Notwithstanding the limitations on reductions of the Domestic
Syndicated Loan Commitments and Multicurrency Syndicated Loan Commitments
in Section 3.03(b) and Section 4.03(c), respectively, any reductions in
such commitments otherwise required by this Section 2.03(a) shall be made
regardless of whether, after giving effect to such reductions, such
commitments would be less than $135,000,000 in the aggregate.
4. AMENDMENT TO SECTION 8.09 ("FINANCIAL COVENANTS"). Paragraph (e) of
Section 8.09 of the Credit Agreement is hereby amended by deleting said
paragraph (e) in its entirety and substituting in lieu thereof the following:
(e) Leverage Ratio. Maintain as of the last day of each fiscal
quarter a maximum
- 6 -
<PAGE> 33
Leverage Ratio of sixty percent (60%).
5. AMENDMENT TO ARTICLE 8 ("AFFIRMATIVE COVENANTS"). Article 8 of the
Credit Agreement is hereby amended by adding an additional Section 8.13 at the
end of said Article 8 as follows:
SECTION 8.13. USE OF PROCEEDS OF SENIOR SUBORDINATED NOTES.
Interface shall use the proceeds from the issuance of the Senior
Subordinated Notes (net of underwriting discounts and commissions and
other expenses incurred in connection with such issuance) solely for the
purpose of (i) paying the costs of redemption (including any applicable
redemption premium) of all outstanding Subordinated Debentures not being
converted into shares of the Company's common stock pursuant to the terms
of the Subordinated Debentures, and (ii) repaying the principal amounts
outstanding as Domestic Revolving Loans and/or Multicurrency Revolving
Loans, including all interest accrued and unpaid on such principal
amounts so repaid, in accordance with the applicable provisions of
Article 3 and Article 4 hereof.
6. AMENDEMENTS TO SECTION 9.01 ("INDEPTEDNESS"). Section 9.01 of the Credit
Agreement is hereby amended by deleting in their entirety paragraphs (b) and
(g) from said Section 9.01 and substituting in lieu thereof the following
paragraphs (b) and (g):
(b) The Subordinated Debentures, the Senior Subordinated Notes, and
other Indebtedness outstanding on June 30, 1995 and described on Schedule
9.01(b) (excluding Refinanced Indebtedness);
. . . .
(g) Subordinated Debt (other than the Subordinated Debentures and
Senior Subordinated Notes) in an aggregate principal amount not to exceed
$50,000,000;
7. AMENDEMENT TO SECTION 9.04 ("DIVIDENDS, ETC."). Section 9.04 of the
Credit Agreement is hereby amended by deleting said Section 9.04 in its
entirety and substituting in lieu therof the following:
- 7 -
<PAGE> 34
SECTION 9.04. DIVIDENDS, ETC. Interface shall not declare or pay
any dividend on its capital stock, or make any payment to purchase,
redeem, retire or acquire any of its Subordinated Debt or capital stock
or any option, warrant, or other right to acquire such Subordinated Debt
or capital stock, other than:
(i) dividends payable solely in shares of capital stock;
(ii) payments made by Interface to repurchase any shares of
Class A Common Stock of Interface previously delivered as a portion
of the consideration paid in the Prince Street Acquisition, as may
be provided in the Prince Street Acquisition Agreement;
(iii) cash dividends declared and paid, and all other such
payments made, after December 29, 1991 (but excluding any payments
made pursuant to clause (ii) above) in an aggregate amount at any
time not to exceed (x) $10,000,000, plus (y) fifty percent (50%) of
Consolidated Net Income (or minus one hundred percent (100%) of
Consolidated Net Loss) earned during Interface's 1992 fiscal year
and thereafter (such period to be treated as one accounting
period); and
(iv) payments made by Interface, from the proceeds of the
issuance of the Senior Subordinated Notes, to redeem those
Subordinated Debentures not being converted into shares of
Interface's common stock pursuant to the terms of such Subordinated
Debentures, as required by Section 8.13;
provided, however, no such payment may be made pursuant to clause (ii)
above, and no such dividend or other payment may be paid or made pursuant
to clause (iii) above, unless (x) the full amount of the mandatory
prepayment required by Section 2.03(b), Section 3.04 or Section 4.04 has
been made, and (y) no Default or Event of Default exists at the time of
such declaration or payment, or would exist as a result of such
declaration or payment. Nothing in this Section 9.04 shall prevent the
conversion of the Convertible Preferred Stock or the Subordinated
Debentures into the common stock of Interface.
8. AMENDMENT TO SECTION 9.08 ("OPTIONAL PREPAYMENT"). Section 9.08 of the
Credit Agreement is hereby amended by deleting said Section 9.08 in its
entirety and substituting in lieu thereof the following.
SECTION 9.08. OPTIONAL PREPAYMENTS. Directly or indirectly,
prepay, purchase, redeem, retire, defease or otherwise acquire, or make
any optional payment on account of any principal of, interest on, or
premium payable in connection with the optional prepayment, redemption or
retirement of, any of its Indebtedness, or give a notice of redemption
with respect to any such Indebtedness, or make any payment in violation
of the
- 8 -
<PAGE> 35
subordination provisions of any Subordinated Debt, except with
respect to (i) the Obligations under this Agreement and the Notes, (ii)
redemptions, purchases or other acquisition of the Subordinated
Debentures as contemplated by Section 8.13, (iii) prepayments of
Indebtedness outstanding pursuant to revolving credit, overdraft and line
of credit facilities permitted pursuant to Section 9.01, (iv) permitted
prepayments of Indebtedness incurred in connection with industrial
revenue bonds upon the occurrence of a determination of an event of
taxability entitling the holder(s) thereof to receive a higher rate of
interest, (v) Intercompany Loans made or outstanding pursuant to Section
9.01(h)(i) where demand for payment has been made in accordance with
Section 9.13, and (vi) Intercompany Loans made or outstanding pursuant to
Section 9.01(h)(ii) upon the prior written consent of the Co-Agents.
9. AMENDMENT TO ARTICLE 9 ("NEGATIVE COVENANTS"). Article 9 of the Credit
Agreement is hereby amended by adding an additional Section 9.14 at the end of
said Article 9 as follows:
SECTION 9.14. DESIGNATED SENIOR INDEBTEDNESS. Without the prior
written consent of the Co-Agents, cause any Indebtedness of Interface or
any of its Subsidiaries to become "Designated Senior Indebtedness" as
provided in the indenture pursuant to which the Senior Subordinated
Notes have been issued.
10. AMENDMENT TO SECTION 10.02 ("COVENANTS WITHOUT NOTICE"). Section 10.02
of the Credit Agreement is hereby amended by deleting from said Section the
phrase "9.11 through 9.13;" and substituting in lieu thereof the phrase "9.11
through 9.14;".
11. AMENDEMENT TO SECTION 10.11 ("CHANGE IN CONTROL OF INTERFACE").
Section 10.11 of the Credit Agreement is hereby amended by deleting said
Section 10.11 in its entirety and substituting in lieu thereof the following:
SECTION 10.11. CHANGE IN CONTROL OF INTERFACE. (i) So long as the
holders of Interface's Class B common stock are entitled to elect a
majority of Interface's board of directors, the Existing Shareholder
Group shall at any time fail to be the "beneficial owners" (as defined in
Rule 13d-3 under the Exchange Act) of a majority of the issued and
outstanding shares of Interface's Class B common stock; or (ii) at any
time during which the holders of Interface's Class B common stock have
ceased to be entitled to elect a majority
- 9 -
<PAGE> 36
of Interface's board of directors (A) any "person" or "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other
than the Existing Shareholder Group, shall become the "beneficial
owner(s)" (as defined in said Rule 13d-3) of more than 35% of the then
outstanding common stock of Interface entitled to vote for members of
Interface's board of directors, or any such lesser amount of such common
stock so that such "person" or "group" possesses effective control (as
such term is defined in the second sentence of the definition of
"Affiliate" in Section 1.01) of Interface, or (B) during any period of
twenty-four (24) consecutive calendar months, individuals who at the
beginning of such period constituted Interface's board of directors
(together with any new directors whose election by Interface's board of
directors or whose nomination for election by Interface's shareholders
was approved by a vote of at least two-thirds of the directors then still
in office who either were 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 directors then in
office; or (iii) any event or condition shall occur or exist which,
pursuant to the terms of any Change in Control Provision, requires or
permits the holder(s) of Interface Control Debt to require that such
Interface Control Debt be redeemed, repurchased, defeased, prepaid or
repaid, in whole or in part, or the maturity of such Interface Control
Debt to be accelerated in any respect; provided, however, that no Event
of Default hereunder shall be deemed to exist upon the occurrence of any
event or condition described in the foregoing clauses (i), (ii) or (iii)
until thirty (30) days after the first occurrence or existence of such
event or condition;
12. APPROVAL OF SENIOR SUBORDINATED NOTES AS "SUBORDINATED DEBT". Upon
execution of this Second Amendment by the Co-Agents and those Lenders
constituting the Required Lenders under the Credit Agreement and the issuance
of the Senior Subordinated Notes on terms and conditions consistent with those
set forth in the Senior Subordinated Notes Description, the terms and
conditions of the Senior Subordinated Notes shall be approved and the Senior
Subordinated Notes shall constitute "Subordinated Debt" for purposes of the
Credit Agreement.
13. AMENDMENT FEE. Interface agrees to pay to each Lender, on or before
the effective date of this Second Amendment, a fee in the amount of $5,000 in
connection with this Second Amendment.
14. REPRESENTATIONS AND WARRANTIES. Each of Interface (as it itself and
all other Consolidated Companies) and each of the other Borrowers (as to itself
and all of its Subsidiaries) represents and warrants to the Lenders as follows:
(a) All representations and warranties set forth in the Credit
Agreement are true and correct in all material respects with the same
effect as though such representations and warranties have been made on
and as of the date hereof (except that the representation and warranty
set forth
- 10 -
<PAGE> 37
in Section 7.19 of the Credit Agreement shall not be deemed to relate
to any time subsequent to the date of the initial Loans under the Credit
Agreement);
(b) No Default or Event of Default has occurred and is continuing
on the date hereof;
(c) Since the date of the most recent financial statements of the
Consolidated Companies submitted to the Lenders pursuant to Section 8.07(b),
there has been no change which has had or could reasonably be expected to have
a Materially Adverse Effect (whether or not any notice with respect to such
change has otherwise been furnished to the Lenders pursuant to Section 8.07);
(d) Each of the Borrowers has the corporate power and authority to
make, deliver and perform this Amendment and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Amendment. No consent or authorization of, or filing with, any Person
(including, without limitation, any governmental authority), is required in
connection with the execution, delivery or performance by any Borrower, or the
validity or enforceability against any Borrower, of this Amendment, other than
such consents, authorizations or filings which have been made or obtained
(including without limitation, any necessary consultations with any Borrower's
supervisory board, works council ("Ondernemingsraad") or similar body); and
(e) This Amendment has been duly executed and delivered by each of the
Borrowers and this Amendment constitutes a legal, valid and binding obligations
of the Borrowers, respectively, enforceable against the Borrowers in accordance
with their respective terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity.
15. EFFECTIVENESS OF SECOND AMENDMENT. The Second Amendment shall become
effective upon (i) the execution and delivery to the Domestic Agent of
counterparts hereof (whether originals or facsimile transmissions thereof) on
behalf of each of the Borrowers, the Co-Agents, and those Lenders constituting
the Required Lenders for purposes of the Credit Agreement, and (ii) payment of
all fees required to be paid pursuant to Paragraph 13 of this Second Amendment.
16. REFERENCES TO CREDIT AGREEEMENT. On and after the date this Second
Amendment becomes effective as provided in Paragraph 15 above, each and every
reference in the Credit Documents to the Credit Agreement shall be deemed to
refer to and mean the Credit Agreement as amended by this Second Amendment.
The Borrowers further confirm and agree that (i) except as expressly amended
- 11 -
<PAGE> 38
herein, the Credit Agreement remains in full force and effect in accordance
with its terms, and (ii) all other Credit Documents remain in full force and
effect in accordance with their respective terms.
17. COUNTERPARTS. This Second Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
18. MISCELLANEOUS. This Second Amendment and the rights and obligations of
the parties hereunder shall be construed in accordance with and be governed by
the law (without giving effect to the conflict of law principles thereof) of
the State of Georgia. This Second Amendment shall be binding on and shall
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto.
- 12 -
<PAGE> 39
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment
to be duly executed and delivered in Atlanta, Georgia, by their duly authorized
officers as of the day and year first above written.
INTERFACE, INC.
By:
---------------------------
Daniel T. Hendrix
Vice President
INTERFACE SCHERPENZEEL,
B.V.
By:
----------------------------
Daniel T. Hendrix
Attorney-in-Fact
INTERFACE EUROPE LIMITED
By:
----------------------------
Daniel T. Hendrix
Attorney-in-Fact
- 13 -
<PAGE> 40
[Signature Page to Second Amendment to Amended and Restated Credit Agreement by
and between Interface, Inc., Interface Scherpenzeel B.V. and Interface Europe
Limited, as Borrowers, SunTrust Bank, Atlanta, and The First National Bank of
Chicago, as Co-Agents, and the Lenders parties thereto]
SUNTRUST BANK, ATLANTA
(FORMERLY TRUST COMPANY BANK),
AS DOMESTIC AGENT AND
COLLATERAL AGENT
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
-1-
<PAGE> 41
THE FIRST NATIONAL BANK
OF CHICAGO, AS
MULTICURRENCY AGENT
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
- 2 -
<PAGE> 42
[Signature Page to Second Amendment to Amended and Restated Credit Agreement by
and between Interface, Inc., Interface Scherpenzeel B.V. and Interface Europe
Limited, as Borrowers, SunTrust Bank, Atlanta, and the First National Bank of
Chicago, as Co-Agents, and the Lenders parties thereto]
SUNTRUST BANK, ATLANTA
(FORMERLY TRUST COMPANY BANK),
By:
----------------------------
Name:
-----------------------
Title:
----------------------
By:
----------------------------
Name:
-----------------------
Title:
----------------------
- 3 -
<PAGE> 43
THE FIRST NATIONAL BANK
OF CHICAGO
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
- 4 -
<PAGE> 44
[Signature Page to Second Amendment to Amended and Restated Credit Agreement
by and between Interface, Inc., Interface Scherpenzeel B.V. and Interface Europe
Limited, as Borrowers, SunTrust Bank, Atlanta, and The First National Bank of
Chicago, as Co-Agents, and the Lenders party thereto]
ABN AMRO BANK N.V.
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
By:
---------------------------------
Name:
----------------------------
Title:
----------------------------
BANK SOUTH
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
By:
---------------------------------
Name:
----------------------------
Title:
----------------------------
- 5 -
<PAGE> 45
THE BANK OF TOKYO LTD.,
ATLANTA AGENCY
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
- 6 -
<PAGE> 46
[Signature Page to Second Amendment to Amended and Restated Credit Agreement
by and between Interface, Inc., Interface Scherpenzeel B.V. and Interface Europe
Limited, as Borrowers, SunTrust Bank, Atlanta, and The First National Bank of
Chicago, as Co-Agents, and the Lenders party thereto]
CIBC, INC.
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
- 7 -
<PAGE> 47
CREDITANSTALT-BANKVERIEN
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
- 8 -
<PAGE> 48
[Signature Page to Second Amendment to Amended and Restated Credit Agreement
by and between Interface, Inc., Interface Scherpenzeel B.V. and Interface Europe
Limited, as Borrowers, SunTrust Bank, Atlanta, and The First National Bank of
Chicago, as Co-Agents, and the Lenders party thereto]
CREDIT LYONNAIS NEW YORK BRANCH
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
- 9 -
<PAGE> 49
THE DAIWA BANK, LIMITED
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
- 10 -
<PAGE> 50
[Signature Page to Second Amendment to Amended and Restated Credit Agreement
by and between Interface, Inc., Interface Scherpenzeel B.V. and Interface Europe
Limited, as Borrowers, SunTrust Bank, Atlanta, and The First National Bank of
Chicago, as Co-Agents, and the Lenders party thereto]
FIRST UNION NATIONAL
BANK OF GEORGIA
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
- 11 -
<PAGE> 51
FLEET BANK OF MAINE
By:
---------------------------------
Name: Neil C. Buitenhuys
Title: Vice President
- 12 -
<PAGE> 52
[Signature Page to Second Amendment to Amended and Restated Credit Agreement
by and between Interface, Inc., Interface Scherpenzeel B.V. and Interface Europe
Limited, as Borrowers, SunTrust Bank, Atlanta, and The First National Bank of
Chicago, as Co-Agents, and the Lenders party thereto]
NATIONSBANK, N.A. (CAROLINAS)
(FORMERLY KNOWN AS NATIONSBANK
OF NORTH CAROLINA, N.A.)
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
- 13 -
<PAGE> 53
WACHOVIA BANK OF GEORGIA, N.A.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
- 14 -
<PAGE> 54
EXHIBIT 10.8(b)
EXECUTION COPY
================================================================================
THIRD AMENDMENT TO
AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of February 28, 1996
among
INTERFACE, INC.,
INTERFACE SCHERPENZEEL B.V.,
INTERFACE EUROPE LIMITED,
THE LENDERS LISTED HEREIN,
SUNTRUST BANK, ATLANTA
(FORMERLY TRUST COMPANY BANK)
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Co-Agents,
and
SUNTRUST BANK, ATLANTA
as Collateral Agent
=============================================================================
<PAGE> 55
THIRD AMENDMENT TO
AMENDED AND RESTATED
CREDIT AGREEMENT
THIS THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
(this "Third Amendment") made and entered into as of February 28, 1996, by and
among INTERFACE, INC., a Georgia corporation ("Interface"), INTERFACE
SCHERPENZEEL B.V., a "besloten vennootschap met beperkte aansprakelijkheid"
(private company with limited liability) incorporated and existing under the
laws of The Netherlands with its registered seat in Scherpenzeel, Gld., The
Netherlands ("Scherpenzeel B.V."), INTERFACE EUROPE LIMITED, a private company
limited by shares organized and existing under the laws of England and Wales
("Europe Limited"; Interface, Scherpenzeel B.V. and Europe Limited referred to
collectively herein as the "Borrowers"), SUNTRUST BANK, ATLANTA (formerly Trust
Company Bank), a banking corporation organized under the laws of the State of
Georgia ("TCB"), THE FIRST NATIONAL BANK OF CHICAGO, a national banking
association ("FNBC"), the other banks and lending institutions listed on the
signature pages hereof (TCB, FNBC, and such other banks and lending
institutions referred to collectively herein as the "Lenders"), SUNTRUST BANK,
ATLANTA (formerly Trust Company Bank), in its capacity as agent for those
Lenders having outstanding Domestic Syndicated Loan Commitments or having
outstanding Domestic Revolving Loans or Term Loans as provided in the Credit
Agreement defined below (the "Domestic Agent"), THE FIRST NATIONAL BANK OF
CHICAGO, in its capacity as agent for those Lenders having outstanding
Multicurrency Syndicated Loan Commitments or having outstanding Multicurrency
Revolving Loans as provided in the Credit Agreement defined below (the
"Multicurrency Agent"; the Domestic Agent and the Multicurrency Agent referred
to collectively herein as the "Co-Agents"), and SUNTRUST BANK, ATLANTA
(formerly Trust Company Bank), in its capacity as collateral agent for the
Co-Agents and the Lenders (the "Collateral Agent");
W I T N E S S E T H:
WHEREAS, the Borrowers, the Co-Agents, the Collateral Agent,
and the Lenders are parties to a certain Credit Agreement dated as of January
9, 1995, as amended and restated by a certain Amended and Restated Credit
Agreement dated as of June 30, 1995, and as further amended by a certain First
Amendment to Amended and Restated Credit Agreement dated as of July 31, 1995,
and by a certain Second Amendment to Amended and Restated Credit Agreement
dated as of November 21, 1995 (as so amended and restated, the "Credit
Agreement");
<PAGE> 56
WHEREAS, Interface has requested that the domestic revolving
credit facility under the Credit Agreement be increased from an aggregate
principal amount of $140,000,000 to an aggregate principal amount of
$190,000,000;
WHEREAS, Interface has further requested that it be permitted
to borrow "Multicurrency Revolving Loans" pursuant to the terms of the Credit
Agreement and to be a "Multicurrency Borrower" for all purposes thereunder;
WHEREAS, the Borrowers have requested that the Credit
Agreement be amended so as to permit the incurrence by Interface and its
Subsidiaries of certain additional indebtedness, and in certain other respects;
WHEREAS, the Domestic Syndicated Lenders have agreed to
increase or decrease, as the case may be, the aggregate principal amounts of
their respective Domestic Syndicated Loan Commitments to the amounts shown for
such Domestic Syndicated Lenders on the signature pages to this Third
Amendment, and the Multicurrency Syndicated Lenders have agreed to have
Interface become a "Multicurrency Borrower" under the terms of the Credit
Agreement, in each case subject to the terms, conditions, and requirements set
forth in this Third Amendment;
WHEREAS, the Lenders and the Co-Agents have agreed to amend
the Credit Agreement as requested by the Borrowers, subject to the terms,
conditions and requirements set forth in this Third Amendment;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the Borrowers, the Lenders, the Co-Agents
and the Collateral Agent agree as follows:
1. DEFINED TERMS. Except as otherwise expressly defined herein, each
capitalized term used in this Third Amendment that is defined in the Credit
Agreement is used herein with the meaning assigned to such capitalized term in
the Credit Agreement.
2. AMENDMENTS TO SECTION 1.01 ("DEFINITIONS").
(a) Section 1.01 of the Credit Agreement is hereby amended by
adding the following defined terms and definitions thereof in proper
alphabetical order:
"Distributor Credit Facilities" shall mean, collectively, the
unsecured lines of credit established by retail distributors of commercial
products of the Consolidated Companies to fund such retail distributors'
working capital needs and having maturities in each case no longer than two (2)
years with annual renewals thereafter, as such lines of credit were in effect
immediately prior to the time that Interface or its Subsidiaries acquired an
ownership interest in, or all or a substantial portion of the assets or
business of, such retail distributors.
- 2 -
<PAGE> 57
"Senior Subordinated Notes Indenture" shall mean the Indenture
dated as of November 15, 1995, by and among Interface, Bentley, 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, Rockland React-Rite, Inc., and First
Union National Bank of Georgia, pursuant to which Interface issued its Senior
Subordinated Notes.
"Third Amendment Documents" shall mean, collectively, the
Third Amendment to Credit Agreement, the promissory notes described in Sections
6.05(b) and (c), and the Second Master Amendment of Credit Documents described
in Section 6.05(d).
"Third Amendment to Credit Agreement" shall mean the Third
Amendment to Amended and Restated Credit Agreement dated as of February 28,
1996, by and among the Borrowers, the Lenders, the Co-Agents, and the
Collateral Agent, together with all exhibits thereto.
"Third Closing Date" shall mean the date on or before February
28, 1996, on which the conditions set forth in Section 6.05 of this Agreement
are satisfied or waived in accordance with Section 12.02 of this Agreement.
(b) The defined terms and definitions thereof listed below that
appear in the Credit Agreement are hereby amended by deleting said defined
terms and definitions in their entirety and substituting in lieu thereof the
following defined terms and definitions:
"Accepted Multicurrency Bid Rate" shall mean, with respect to
a Multicurrency Bid Rate Loan made by a particular Multicurrency Bid Rate
Lender for the relevant Interest Period, the rate of interest per annum
(rounded to the nearest 1/100 of one percent) offered by such Multicurrency Bid
Rate Lender and accepted by or on behalf of a Multicurrency Borrower pursuant
to Section 4.06(c)(5).
"Borrowers" shall mean, (i) with respect to the Term Loans and
Domestic Revolving Loans, Interface, and (ii) collectively, with respect to the
Multicurrency Revolving Loans, Interface, Scherpenzeel B.V. and Europe Limited,
and their respective successors and permitted assigns.
"Domestic Syndicated Loan Commitments" shall mean, at any time
for any Domestic Syndicated Lender, the amount of such commitment set forth
opposite such Domestic Syndicated Lender's name on the signature pages of the
Third Amendment to Credit Agreement, as the same may be increased or decreased
from time to time as a result of any reduction thereof pursuant to Section
3.03, any assignment thereof pursuant to Section 12.06, or any amendment
thereof pursuant to Section 12.02, such commitment including, without
limitation, such Domestic Syndicated Lender's L/C Subcommitment.
- 3 -
<PAGE> 58
"Guarantors" shall mean, collectively, Interface, Guilford of
Maine, Inc., Guilford (Delaware), Inc., Interface Flooring Systems, Inc.,
Rockland React-Rite Inc., Interface Research Corporation, Interface Europe,
Inc., Pandel, Inc., Interface Asia-Pacific, Inc., Bentley, Prince Street,
Toltec Fabrics, Inc., Intek, Inc., and all other Material Subsidiaries
(excluding Interface SPC) that are not Foreign Subsidiaries, and their
respective successors and permitted assigns.
"Invitation for Multicurrency Bid Rate Quote" shall mean an
invitation from or on behalf of a Multicurrency Borrower to each of the
Multicurrency Syndicated Lenders to submit Multicurrency Bid Rate Quotes
offering to make Multicurrency Bid Rate Loans, substantially in the form of
Exhibit S hereto and transmitted by the Multicurrency Agent in accordance with
Section 4.06(c)(2).
"Material Subsidiary" shall mean (i) each Credit Party other
than Interface, (ii) each other Consolidated Company listed in the definition
of the term "Pledged Stock" in this Section 1.01, but excluding Guilford of
Maine (Canada), Inc., Interface Heuga Singapore Pte Ltd., Interface Heuga Hong
Kong Ltd., and Interface Heuga Australia Pty Ltd., and (iii) each other
Subsidiary of Interface, now existing or hereafter established or acquired,
that at any time prior to the Term Loan Final Maturity Date or
Revolver/Multicurrency Maturity Date (whichever is last to occur), has or
acquires total assets in excess of $10,000,000, or that holds any assets
material to the operations or business of another Material Subsidiary
(including, without limitation, each of Guilford of Maine (U.K.) Ltd., Guilford
of Maine (Canada), Inc., Interface Heuga Singapore Pte Ltd., Interface Heuga
Hong Kong Ltd., and Interface Heuga Australia Pty Ltd., at such time, if any,
as any of them acquires total assets in excess of $10,000,000 or holds such
material assets).
"Multicurrency Bid Rate Acceptance Notice" shall mean the
notice given by or on behalf of a Multicurrency Borrower to the Multicurrency
Agent accepting one or more Multicurrency Bid Rate Quotes as provided in
Section 4.06(c)(5).
"Multicurrency Bid Rate Facility" shall mean the credit
facility being made available by the Multicurrency Syndicated Lenders to the
Multicurrency Borrowers as described in Section 4.06(a).
"Multicurrency Bid Rate Loans" shall mean, collectively, the
loans made to the Multicurrency Borrowers by the Multicurrency Bid Rate Lenders
pursuant to Section 4.06.
"Multicurrency Bid Rate Quote" shall mean an offer or offers
by a Multicurrency Syndicated Lender to make one or more Multicurrency Bid Rate
Loans to a Multicurrency Borrower substantially in the form of Exhibit T
hereto completed and delivered by such Multicurrency Syndicated Lender to the
Multicurrency Agent in accordance with Section 4.06(c)(3).
"Multicurrency Bid Rate Quote Request" shall mean a request
transmitted by or on behalf of a Multicurrency Borrower to the Multicurrency
Agent for offers from the Multicurrency
- 4 -
<PAGE> 59
Syndicated Lenders to make Multicurrency Bid Rate Loans substantially in the
form of Exhibit R hereto completed and delivered to the Domestic Agent in
accordance with Section 4.06(c)(1).
"Multicurrency Borrowers" shall mean, collectively, Interface,
Scherpenzeel B.V. and Europe Limited.
"Multicurrency Swing Line Advance" shall mean a Borrowing in
U.S. Dollars pursuant to Section 4.05 consisting of a Multicurrency Swing Line
Loan (which may be made either as a Base Rate Advance or as a Multicurrency
Transaction Rate Advance) made by the Multicurrency Swing Line Lender to a
Multicurrency Borrower on the same date and interest rate basis and, if made as
a Fixed Rate Advance, for the same Interest Period.
"Multicurrency Swing Line Borrowing Notice" shall mean the
notice given by or on behalf of a Multicurrency Borrower to the Multicurrency
Agent requesting a Multicurrency Swing Line Advance as provided in Section
4.05(c).
"Multicurrency Swing Line Loans" shall mean, collectively, the
loans made to the Multicurrency Borrowers by the Multicurrency Swing Line
Lender pursuant to Section 4.05.
"Multicurrency Syndicated Advance" shall mean a Borrowing
pursuant to Section 4.02 consisting of the aggregate amount of Multicurrency
Syndicated Loans made by the Multicurrency Syndicated Lenders to a
Multicurrency Borrower at the same time, on the same interest rate basis and,
if made as a Fixed Rate Advance, for the same Interest Period.
"Multicurrency Syndicated Borrowing Notice" shall mean the
notice given by or on behalf of a Multicurrency Borrower to the Multicurrency
Agent requesting one or more Multicurrency Syndicated Advances as provided in
Section 4.02(c).
"Multicurrency Syndicated Facility" shall mean the credit
facility made available by the Multicurrency Syndicated Lenders to the
Multicurrency Borrowers as described in Section 4.02(a).
"Multicurrency Syndicated Lenders" shall mean, collectively,
the Lenders extending the Multicurrency Syndicated Loan Commitments to the
Multicurrency Borrowers pursuant to Section 4.02(a).
"Multicurrency Syndicated Loans" shall mean, collectively, the
loans made to a Multicurrency Borrower by the Multicurrency Syndicated Lenders
pursuant to Section 4.02.
- 5 -
<PAGE> 60
"Multicurrency Syndicated Notes" shall mean, collectively, the
promissory notes evidencing the Multicurrency Syndicated Loans in the forms
attached hereto as Exhibits C-1, C-2, and C-3 duly completed in accordance with
the terms hereof.
"Multicurrency Transaction Rate" shall mean the rate of
interest specified by the Multicurrency Swing Line Lender to a Multicurrency
Borrower, or to Interface on behalf of a Multicurrency Borrower, as the case
may be, as being applicable to a Multicurrency Swing Line Loan requested by or
on behalf of a Multicurrency Borrower pursuant to Section 4.05(c).
"Multicurrency Transaction Rate Quote" shall mean an offer by
the Multicurrency Swing Line Lender to make a Multicurrency Swing Line Loan to
Interface, Scherpenzeel B.V. or Europe Limited at the Multicurrency
Transaction Rate specified therein for the Interest Period to be applicable to
the Multicurrency Swing Line Loan as specified therein, pursuant to Section
4.05(c).
"Notice of Multicurrency Conversion/Continuation" shall mean a
notice given by or on behalf of a Multicurrency Borrower in respect of the
conversion or continuation of an outstanding Multicurrency Syndicated Borrowing
pursuant to Section 4.02(e).
"Pledged Stock" shall mean, collectively, (i) all issued and
outstanding capital stock, together with all warrants, stock options, and other
purchase and conversion rights with respect to such capital stock, of each of
Guilford of Maine, Inc., Guilford (Delaware), Inc., Interface Flooring Systems,
Inc., Interface Research Corporation, Rockland React-Rite, Inc., Pandel, Inc.,
Interface Europe, Inc., Interface Asia-Pacific, Inc., Bentley, Prince Street,
Toltec Fabrics, Inc., Intek, Inc., and all other Material Subsidiaries of
Interface organized in the United States other than Interface SPC, and (ii) 66%
of all issued and outstanding capital stock, together with 66% of all warrants,
stock options, and other purchase and conversion rights with respect to such
capital stock, of Europe Limited, Interface Europe B.V., Interface Heuga
Singapore Pte Ltd., Guilford of Maine (Canada), Inc., Interface Flooring
Systems (Canada), Inc., Interface Heuga Japan Ltd., Interface Heuga Hong Kong
Ltd., Interface Heuga Australia Pty Limited, and all other Material
Subsidiaries that are Foreign Subsidiaries directly owned by Interface and/or
one or more other Subsidiaries organized in the United States; provided,
however, that upon (A) the liquidation, dissolution, or similar proceeding with
respect to Interface Heuga Japan Ltd. pursuant to which one of the Consolidated
Companies listed in clause (i) above succeeds to the assets and business of
Interface Heuga Japan Ltd. and (B) the Collateral Agent's receipt of evidence
reasonably satisfactory to it that the events in the foregoing clause (A) have
occurred, the term "Pledged Stock" shall no longer include any capital stock,
warrants, stock options, or other purchase or conversion rights with respect to
the capital stock of Interface Heuga Japan Ltd., and the Collateral Agent shall
execute such documents as it may deem appropriate for the release of any pledge
or security interest therein previously granted to the Collateral Agent.
- 6 -
<PAGE> 61
3. AMENDMENT TO ARTICLE 3 ("DOMESTIC REVOLVING LOANS"). Article 3 of the
Credit Agreement is hereby amended by adding at the end of said Article 3 a new
Section 3.08 as follows:
SECTION 3.08. INCREASE IN DOMESTIC SYNDICATED LOAN
COMMITMENTS ON THIRD CLOSING DATE.
(a) On the Third Closing Date, the aggregate Domestic
Syndicated Loan Commitments of the Lenders shall be increased from
$140,000,000 in aggregate principal amount to $190,000,000 in
aggregate principal amount, with such aggregate increase being the
result of increases in Domestic Syndicated Loan Commitments by certain
of the Lenders, decreases in the Domestic Syndicated Loan Commitments
of certain other Lenders, and the issuance by PNC Bank, N.A. of a new
Domestic Syndicated Loan Commitment in the amount of $10,000,000.
After giving effect to the foregoing actions, the Domestic Syndicated
Loan Commitments of the Lenders (including PNC Bank, N.A.) shall be as
set forth on the signature pages to the Third Amendment to Credit
Agreement. On the Third Closing Date, all outstanding Domestic
Syndicated Loans that had been borrowed or previously continued or
converted prior to the Third Closing Date shall be prepaid in full,
together with all interest accrued and unpaid thereon through the date
of such prepayment occurring and all amounts required to be paid
pursuant to Section 5.12 of the Credit Agreement as a result of such
prepayment occurring on a date other than the last day of an Interest
Period. All Borrowings of Domestic Syndicated Loans pursuant to
Section 3.02 (including, without limitation, all such Borrowings made
by Interface on the Third Closing Date to prepay all Domestic
Syndicated Loans then outstanding) and all continuations and
conversions of outstanding Domestic Syndicated Loans pursuant to
Section 3.02 occurring after the Third Closing Date shall be made on
the basis of the revised Domestic Syndicated Loan Commitments as
provided in the Third Amendment to Credit Agreement. All Domestic Bid
Rate Loans outstanding on the Third Closing Date and scheduled to
mature after the Third Closing Date shall continue to remain
outstanding in accordance with their respective terms and shall not be
repaid or otherwise affected by the transactions described in this
Section 3.08.
(b) Interface's obligations to pay the principal of, and
interest on, all Domestic Syndicated Loans under the Domestic
Syndicated Notes being executed and delivered on the Third Closing
Date by Interface pursuant to Section 6.05(b) of the Third Amendment
to Credit Agreement shall be evidenced by the records of the Domestic
Agent and each such Lender and by such Domestic Syndicated Note
payable to such Lender completed in conformity with this Agreement.
- 7 -
<PAGE> 62
(c) From and after the Third Closing Date, all
references in this Agreement to the Domestic Syndicated Loan
Commitments shall be deemed to include the Domestic Syndicated
Loan Commitments as increased by this Section 3.08 (subject,
however, to subsequent increases or decreases from time to
time as a result of any reduction thereof pursuant to the
provisions of this Agreement).
4. AMENDMENT TO SECTION 5.05 ("FEES"). Section 5.05 of the Credit
Agreement is hereby amended by adding at the end of said Section 5.05 a new
subsection (f) as follows:
(f) On the Third Closing Date, Interface shall pay to the
Domestic Agent, (x) for the benefit of each Domestic Syndicated Lender
whose Domestic Syndicated Loan Commitment is being increased pursuant
to the terms of the Third Amendment to Credit Agreement a facility fee
in an amount equal to one-fifth of one percent (.20%) of the amount of
such increase in such Domestic Syndicated Lender's Domestic Syndicated
Loan Commitment, and (y) for the benefit of PNC Bank, N.A., a facility
fee in an amount equal to one-fifth of one percent (.20%) of the
amount of its Domestic Syndicated Loan Commitment issued on the Third
Closing Date.
5. AMENDMENTS TO ARTICLE 6 ("CONDITIONS TO BORROWINGS").
(a) Section 6.04 of the Credit Agreement is hereby amended by
deleting subsection (f) of said Section 6.04 in its entirety and substituting
in lieu thereof new subsections (f) and (g) as follows:
(f) Interface shall have given to the Co-Agents with its
notice of Borrowing written notice of its intent to use any proceeds
of any Loan then being requested for the purchase or carrying of any
"margin stock" (as defined in the Margin Regulations); and
(g) The Co-Agents shall have received such other
documents (including, without limitation, any necessary Federal
Reserve Form U-1 or other similar form required by the Margin
Regulations) or legal opinions as the Co-Agents or any Lender may
reasonably request, all in form and substance reasonably satisfactory
to the Co-Agents.
(b) Article 6 of the Credit Agreement is hereby amended by adding
at the end of said Article 6 a new Section 6.05 as follows:
SECTION 6.05. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIRD
AMENDMENT TO CREDIT AGREEMENT. At the time of the effectiveness of
the Third Amendment to Credit Agreement on the Third Closing Date, all
obligations of the Borrowers hereunder incurred prior to such date and
being due and payable on or before the Third Closing Date (including,
- 8 -
<PAGE> 63
without limitation, the Borrowers' obligations to reimburse the
reasonable fees and expenses of counsel to the Co-Agents and any fees
and expenses payable to the Co-Agents and the Lenders as agreed with
Interface), shall have been paid in full, and the Co-Agents shall have
received the following, in form and substance satisfactory in all
respects to the Co-Agents:
(a) The duly executed counterparts of the Third Amendment
to Credit Agreement;
(b) The duly completed Domestic Syndicated Notes payable
to each of the Domestic Syndicated Lenders whose respective Domestic
Syndicated Loan Commitments have been increased or decreased pursuant
to the terms of the Third Amendment to Credit Agreement, in the form
of Exhibit B-2 attached to the Third Amendment to Credit Agreement,
and a Domestic Syndicated Note and Domestic Bid Rate Note payable to
PNC Bank, N.A., substantially in the respective forms of Exhibit B-1
and Exhibit L attached to the Credit Agreement, all as executed on
behalf of Interface;
(c) The duly completed Multicurrency Syndicated Notes
payable to the Multicurrency Syndicated Lenders in the form of Exhibit
C-3 attached to the Third Amendment to Credit Agreement, the
Multicurrency Swing Line Note payable to FNBC substantially in the form
of Exhibit M attached to the Credit Agreement, and the Multicurrency
Bid Rate Notes payable to the Multicurrency Syndicated Lenders
substantially in the form of Exhibit N attached to the Credit
Agreement, each as executed on behalf of Interface;
(d) The Second Master Amendment of Credit Documents, in
the form of Exhibit Z attached to the Third Amendment to Credit
Agreement, as executed on behalf of the Borrowers, the Guarantors, and
the Collateral Agent;
(e) The certificate of the Borrowers, in the form of
Exhibit AA attached to the Third Amendment to Credit Agreement, as
executed on behalf of the Borrowers;
(f) The certificate of the Secretary or an Assistant
Secretary of each of the Borrowers and the Guarantors (or, in the case
of any Foreign Subsidiary, a comparable company officer) attaching and
certifying copies of the resolutions of the board of directors (or, in
the case of any Foreign Subsidiary, the comparable governing body of
such entity) of the Borrower or the Guarantor, as the case may be,
authorizing as applicable, the execution, delivery and performance of
the Third Amendment Documents;
(g) The certificate of the Secretary or an Assistant
Secretary of each of the Borrowers and the Guarantors (or, in the case
of any Foreign Subsidiary, a comparable
- 9 -
<PAGE> 64
company officer) certifying (i) the name, title and true signature of
each officer of such Borrower or Guarantor, as the case may be,
executing the Third Amendment Documents, and (ii) the bylaws or
comparable governing documents of such Borrower or Guarantor;
(h) A certified copy of the certificate or articles of
incorporation of each of the Borrowers and Guarantors (or comparable
organizational document of each Foreign Subsidiary), together with a
certificate of good standing or existence, as may be available from
the Secretary of State (or comparable office or registry for each
Foreign Subsidiary) of the jurisdiction of incorporation or
organization of such Borrower or Guarantor;
(i) Copies of all documents and instruments, including
all consents, authorizations and filings, required or advisable under
any Requirement of Law or by any material Contractual Obligation of
the Borrowers or the Guarantors, in connection with the execution,
delivery, performance, validity and enforceability of the Credit
Documents, the Third Amendment Documents, and the other documents to
be executed and delivered hereunder, and such consents,
authorizations, filings and orders shall be in full force and effect
and all applicable waiting periods shall have expired; and
(j) The favorable opinion of Kilpatrick & Cody, United
States counsel to Interface and the other Borrowers and Guarantors,
substantially in the form of Exhibit BB attached to the Third
Amendment to Credit Agreement.
In addition to the foregoing, all corporate proceedings and all other legal
matters in connection with the authorization, legality, validity, and
enforceability of the documents described in this Section 6.05 shall have been
reasonably satisfactory in form and substance to the Required Lenders.
6. AMENDMENT TO SECTION 9.01 ("INDEBTEDNESS"). Section 9.01 of the
Credit Agreement is hereby amended by deleting subsection (l) of said Section
9.01 in its entirety and substituting in lieu thereof new subsections (l) and
(m) as follows:
(l) Indebtedness in an aggregate principal amount not to
exceed $20,000,000 under the Distributor Credit Facilities (including,
without limitation, Indebtedness arising from any Guaranty by
Interface or its Subsidiaries required to be given in respect of a
portion of the Distributor Credit Facilities in connection with the
acquisition of ownership interests in any retail distributor),
together with any extensions or renewals of such Distributor Credit
Facilities to the extent that such extensions or renewals do not
increase the respective principal amounts that may be outstanding
under such Distributor Credit Facilities; and
(m) other Indebtedness not to exceed $10,000,000 at any
one time outstanding.
- 10 -
<PAGE> 65
7. AMENDMENT TO SECTION 12.06 ("BENEFIT OF AGREEMENT").
Subsection (c) of Section 12.06 of the Credit Agreement is hereby
amended by deleting the third sentence of subsection (c) in its
entirety and substituting in lieu thereof the following sentence:
Notwithstanding the foregoing, the assigning Lender must
retain after the consummation of such Assignment and
Acceptance, a minimum aggregate amount of Commitments and Term
Loans of $10,000,000; provided, however, no such minimum
amount shall be required with respect to any such assignment
(i) made at any time there exists an Event of Default
hereunder, or (ii) where such Lender is assigning the entire
amount of its Commitments and Term Loans hereunder.
8. NEW LENDER; LENDER INFORMATION.
(a) On and after the Third Closing Date, PNC Bank, N.A. shall, for
all purposes of the Credit Agreement and the other Credit Documents, be a
"Lender" and a "Domestic Syndicated Lender", having in effect the Domestic
Syndicated Loan Commitment and the L/C Subcommitment as shown for PNC Bank,
N.A. on its signature page attached to this Third Amendment. The address for
notices and specification of the Domestic Lending Office and Eurodollar Lending
Office of PNC Bank, N.A. shall be as shown on its signature page as attached to
this Third Amendment. PNC Bank, N.A. agrees that, on and after the Third
Closing Date, PNC Bank, N.A. shall be a party to the Credit Agreement and
Letter of Credit Agreement and hereby assumes and agrees to pay and perform all
obligations that it may have or incur as a "Lender" or as a "Domestic
Syndicated Lender" under the terms of the Credit Agreement and Letter of Credit
Agreement, with the same extent and with the same effect as though PNC Bank,
N.A. had been an original party to the Credit Agreement and Letter of Credit
Agreement.
(b) The parties agree that, with respect of to each of the
Lenders, the address for notices and specification of the Domestic Lending
Offices and Eurodollar Lending Offices of such Lenders shall be as shown on the
signature pages for such Lenders attached to this Third Amendment.
9. ADDITIONAL EXHIBITS.
(a) Exhibit B (Form of Revolving Credit Note) attached to the
Credit Agreement is hereby re-designated as Exhibit B-1.
(b) The Credit Agreement is hereby amended by adding to the Credit
Agreement the following exhibits attached to this Third Amendment and made a
part of the Credit Agreement by this reference: Exhibit B-2 (Form of Domestic
Syndicated Note), Exhibit C-3 (Form of
- 11 -
<PAGE> 66
Multicurrency Syndicated Note from Interface), Exhibit Z (Form of
Second Master Amendment of Credit Documents), Exhibit AA (Form of
Third Closing Certificate), and Exhibit BB (Form of Opinion of
Kilpatrick & Cody).
10. WAIVER FOR C-TEC INDUSTRIAL DEVELOPMENT REVENUE BONDS. Interface has
advised the Lenders that Interface intends to acquire all of the outstanding
capital stock of C-Tec, Inc., a Michigan corporation ("C-Tec"), on or about
February 29, 1996, and that, at the time of such acquisition, there will remain
outstanding the $4,385,000 aggregate original principal amount of Limited
Obligation Revenue Bonds (C-Tec, Inc. Project) issued by the Michigan Strategic
Fund (the "C-Tec Bonds"), supported by an irrevocable letter of credit issued
by Old Kent Bank and Trust Company for the account of C-Tec (the "C-Tec Letter
of Credit") and secured by certain property of C-Tec. Interface has further
advised the Lenders that the aggregate principal amount outstanding under the
C-Tec Bonds as of February 28, 1996, is $2,970,000.00. The Lenders hereby
agree to waive any Default or Event of Default that may otherwise occur or
exist pursuant to Section 9.01 of the Credit Agreement as a result of the
Indebtedness of C-Tec or Interface in respect of the C-Tec Bonds or the C-Tec
Letter of Credit, or pursuant to Section 9.02 of the Credit Agreement as a
result of the Liens on property of C-Tec securing its obligations in respect of
the C-Tec Bonds and the C-Tec Letter of Credit, in each case from the date of
Interface's acquisition of C-Tec through April 30, 1996, at which time the
foregoing waiver shall automatically terminate and cease to have any further
force or effect. Interface agrees that, on or before May 1, 1996, it will
cause the C-Tec Letter of Credit to be replaced by a Letter of Credit issued
pursuant to the Letter of Credit Agreement and/or other appropriate action to
be taken so that the existence of the Indebtedness in respect of the C-Tec
Bonds or Liens on property of C-Tec do not result in the occurrence or
existence of any Default or Event of Default under the Credit Agreement on or
after May 1, 1996. Except as expressly provided in this paragraph 10, no other
waiver of any provisions of the Credit Agreement shall be deemed to have been
agreed or granted by the Lenders in respect of the transactions described
herein.
11. AMENDMENT FEE. Interface agrees to pay to the Domestic Agent, for the
account of each Lender, on or before the Third Closing Date, a fee for each
Lender in the amount of $5,000 in connection with this Third Amendment.
12. REPRESENTATIONS AND WARRANTIES. Each of Interface (as to itself and
all other Consolidated Companies) and each of the other Borrowers (as to itself
and all of its Subsidiaries) represents and warrants to the Lenders as follows:
(a) All representations and warranties set forth in the Credit
Agreement are true and correct in all material respects with the same effect as
though such representations and warranties have been made on and as of the date
hereof (except that the representation and warranty set forth
- 12 -
<PAGE> 67
in Section 7.19 of the Credit Agreement shall not be deemed to relate to any
time subsequent to the date of the initial Loans under the Credit Agreement);
(b) No Default or Event of Default has occurred and is continuing
on the date hereof;
(c) Since the date of the most recent financial statements of the
Consolidated Companies submitted to the Lenders pursuant to Section 8.07(b),
there has been no change which has had or could reasonably be expected to have
a Materially Adverse Effect (whether or not any notice with respect to such
change has otherwise been furnished to the Lenders pursuant to Section 8.07);
(d) Each of the Borrowers and the Guarantors has the corporate
power and authority to make, deliver and perform their respective obligations
under this Third Amendment and the other Third Amendment Documents and has
taken all necessary corporate action to authorize the execution, delivery and
performance of the Third Amendment Documents. No consent or authorization of,
or filing with, any Person (including, without limitation, any governmental
authority), is required in connection with the execution, delivery or
performance by any Borrower or Guarantor, or the validity or enforceability
against any Borrower or Guarantor, of any of the Third Amendment Documents,
other than such consents, authorizations or filings which have been made or
obtained (including without limitation, any necessary consultations with any
Borrower's supervisory board, works council ("Ondernemingsraad") or similar
body);
(e) Each of the Third Amendment Documents has been duly executed
and delivered by each of the Borrowers and the Guarantors, as applicable, and
each of the Third Amendment Documents constitutes the legal, valid and binding
obligations of the Borrowers and the Guarantors, respectively, enforceable
against the Borrowers and the Guarantors in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity. The
execution, delivery and performance by the Borrowers and the Guarantors of the
Third Amendment Documents will not violate any Requirement of Law or cause a
breach or default under any of their respective contractual obligations; and
(f) The "Consolidated Fixed Charge Coverage Ratio" (as defined in
the Senior Subordinated Notes Indenture) of Interface is greater than 2.0 to
1.0 and, accordingly, the Senior Subordinated Notes Indenture does not restrict
or limit the amount of indebtedness that may be incurred by Interface or any of
its Subsidiaries, and all of the Obligations under the Credit Documents (as
amended on the date hereof) constitute "Senior Indebtedness" for all purposes
of the Senior Subordinated Notes Indenture.
- 13 -
<PAGE> 68
13. REFERENCES TO CREDIT AGREEMENT. On and after the date this Third
Amendment becomes effective as provided in Section 6.05 of the Credit
Agreement, each and every reference in the Credit Documents to the Credit
Agreement shall be deemed to refer to and mean the Credit Agreement as amended
by this Third Amendment. The parties further confirm and agree that (i) except
as expressly amended herein, the Credit Agreement remains in full force and
effect in accordance with its terms, and (ii) except as expressly amended by
the Second Master Amendment of Credit Documents described in Section 6.05(d) of
the Credit Agreement, all other Credit Documents remain in full force and
effect in accordance with their respective terms.
14. AMENDMENT TO LETTER OF CREDIT AGREEMENT. Each of the Domestic
Syndicated Lenders, by its execution and delivery of this Third Amendment,
hereby confirms and agrees to the amendments to the Letter of Credit Agreement
effected by the Second Master Amendment of Credit Documents described in
Section 6.05(d) and agrees to be bound in all respects by the terms thereof.
15. COUNTERPARTS. This Third Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
16. MISCELLANEOUS. This Third Amendment and the rights and obligations of
the parties hereunder shall be construed in accordance with and be governed by
the law (without giving effect to the conflict of law principles thereof) of
the State of Georgia. This Third Amendment shall be binding on and shall inure
to the benefit of and be enforceable by the respective successors and assigns
of the parties hereto.
- 14 -
<PAGE> 69
IN WITNESS WHEREOF, the parties hereto have caused this Third
Amendment to be duly executed and delivered in Atlanta, Georgia, by their duly
authorized officers as of the day and year first above written.
INTERFACE, INC.
By:
---------------------------
Daniel T. Hendrix
Vice President
INTERFACE SCHERPENZEEL, B.V.
By:
---------------------------
Daniel T. Hendrix
Attorney-in-Fact
INTERFACE EUROPE LIMITED
By:
---------------------------
Daniel T. Hendrix
Attorney-in-Fact
- 15 -
<PAGE> 70
SUNTRUST BANK, ATLANTA
(FORMERLY TRUST COMPANY BANK),
AS DOMESTIC AGENT AND
COLLATERAL AGENT
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
- 1 -
<PAGE> 71
THE FIRST NATIONAL BANK
OF CHICAGO, AS
MULTICURRENCY AGENT
By:
---------------------------
Name:
Title:
- 2 -
<PAGE> 72
Address for Notices: SUNTRUST BANK, ATLANTA
(FORMERLY TRUST COMPANY BANK)
One Park Place, N.E.
Atlanta, Georgia 30303
Attn: John K. Shoffner By:
---------------------------
Name:
Title:
Telex No.: 542210
Answerback: TRUSCO INT ATL
By:
---------------------------
Name:
Title:
Domestic Lending Office:
One Park Place, N.E.
Atlanta, Georgia 30303
Telex No.: 542210
Answerback: TRUSCO INT ATL
Eurocurrency Lending Office:
One Park Place, N.E.
Atlanta, Georgia 30303
Telex No.: 542210
Answerback: TRUSCO INT ATL
<TABLE>
<CAPTION>
PRO RATA
AMOUNT SHARE
------ --------
<S> <C> <C>
TERM LOAN COMMITMENT: $ 4,500,000.00 9.0000%
DOMESTIC SYNDICATED
LOAN COMMITMENT: $ 19,625,000.00 10.3289%
DOMESTIC SWING LINE
COMMITMENT: $ 5,000,000.00 100.0000%
L/C SUBCOMMITMENT: $ 4,131,578.95 10.3289%
</TABLE>
- 3 -
<PAGE> 73
<TABLE>
<CAPTION>
<S> <C> <C>
MULTICURRENCY SYNDICATED
LOAN COMMITMENT: $ 6,600,000.00 11.0000%
TOTAL COMMITMENT
(EXCLUDING DOMESTIC
SWING LINE): $ 30,725,000.00 10.2417%
</TABLE>
- 4 -
<PAGE> 74
Address for Notices: THE FIRST NATIONAL BANK
Mail Suite 0374 OF CHICAGO
One First National Plaza
Chicago, Illinois 60670-0374
Attention: Al R. Chircop
By:
--------------------------------
Name:
Telex No.: 4330253 Title:
Answerback: FNBC UI
Telecopy No.: 312/732-3885
Administrative Office:
One First National Plaza
Chicago, Illinois 60670
Attention: Al R. Chircop
Payment Offices:
(See Schedule 4.01)
<TABLE>
<CAPTION>
PRO RATA
AMOUNT SHARE
------ --------
<S> <C> <C>
TERM LOAN COMMITMENT: $ 4,500,000.00 9.0000%
DOMESTIC SYNDICATED
LOAN COMMITMENT: $ 11,225,000.00 5.9079%
L/C SUBCOMMITMENT: $ 2,363,157.89 5.9079%
MULTICURRENCY LOAN COMMITMENT: $ 15,000,000.00 25.0000%
MULTICURRENCY SWING LINE
COMMITMENT: $ 5,000,000.00 100.0000%
TOTAL COMMITMENT
(EXCLUDING MULTICURRENCY
SWING LINE): $ 30,725,000.00 10.2417%
</TABLE>
- 5 -
<PAGE> 75
Address for Notices: ABN AMRO BANK N.V.
Suite 1200, One Ravinia Drive
Atlanta, Georgia 30346
Attn: Patrick Thom By:
--------------------------
Name:
Telephone: 404/396-0066 Title:
Telecopy: 404/395-9188
Telex: 682 7258 By:
Answerback: ABNBANKATL --------------------------
Name:
Title:
Domestic Lending Office:
ABN AMRO Bank N.V., Atlanta Agency
Suite 1200, One Ravinia Drive
Atlanta, GA 30346
Eurocurrency Lending Office:
ABN AMRO Bank N.V., Atlanta Agency
Suite 1200, One Ravinia Drive
Atlanta, GA 30346
<TABLE>
<CAPTION>
PRO RATA
AMOUNT SHARE
------ --------
<S> <C> <C>
TERM LOAN COMMITMENT: $ 4,200,000.00 8.4000%
DOMESTIC SYNDICATED
LOAN COMMITMENT: $ 1,643,333.00 .8649%
L/C SUBCOMMITMENT: $ 345,964.84 .8649%
MULTICURRENCY SYNDICATED
LOAN COMMITMENT: $ 15,000,000.00 25.0000%
TOTAL COMMITMENT: $ 20,843,333.00 6.9478%
</TABLE>
- 6 -
<PAGE> 76
Address for Notices: BANK SOUTH, A DIVISION OF
NATIONSBANK, N.A. (SOUTH)
600 Peachtree Street, 19th Floor (SUCCESSOR BY MERGER TO BANK SOUTH,
Atlanta, GA 30308-2214 N.A.)
Attention: George Hodges
Telephone: 404/607-4591 By:
Telecopy: 404/607-6323 --------------------------------
Name:
Title:
By:
---------------------------------
Name:
With a copy to: Title:
c/o NationsBank, N.A.
100 North Tryon Street
Mail Code NC1-007-08-11
Charlotte, NC 28255
Attention: Lance Walton
Domestic Lending Office:
600 Peachtree Street
19th Floor
Atlanta, GA 30308-2214
Eurodollar Lending Office:
600 Peachtree Street
19th Floor
Atlanta, GA 30308-2214
<TABLE>
<CAPTION>
PRO RATA
AMOUNT SHARE
------ --------
<S> <C> <C>
TERM LOAN COMMITMENT: $ 4,000,000.00 8.0000%
DOMESTIC SYNDICATED
LOAN COMMITMENT: $ 0.00 0.0000%
</TABLE>
- 7 -
<PAGE> 77
<TABLE>
<CAPTION>
<S> <C> <C>
L/C SUBCOMMITMENT: $ 0.00 0.0000%
MULTICURRENCY SYNDICATED
LOAN COMMITMENT: $ 0.00 0.0000%
TOTAL COMMITMENT: $ 4,000,000.00 1.3333%
</TABLE>
- 8 -
<PAGE> 78
Address for Notices: THE BANK OF TOKYO LTD.,
ATLANTA AGENCY
5050 Georgia-Pacific Center
133 Peachtree Street, N.E.
Atlanta, Georgia 30303 By:
Attn: Richard Davis ------------------------
Name:
Title:
Telephone: 404/577-2960
Telecopy: 404/577-1155
Telex No.: 6827300
Answerback: 6827300BOT ATL
Domestic Lending Office:
5050 Georgia-Pacific Center
133 Peachtree Street, N.E.
Atlanta, Georgia 30303
Eurodollar Lending Office:
5050 Georgia-Pacific Center
133 Peachtree Street, N.E.
Atlanta, Georgia 30303
<TABLE>
<CAPTION>
PRO RATA
AMOUNT SHARE
------ --------
<S> <C> <C>
TERM LOAN COMMITMENT: $ 3,200,000.00 6.4000%
DOMESTIC SYNDICATED
LOAN COMMITMENT: $ 18,593,333.00 9.7860%
L/C SUBCOMMITMENT: $ 3,914,385.89 9.7860%
MULTICURRENCY SYNDICATED
LOAN COMMITMENT: $ 0.00 0.0000%
TOTAL COMMITMENT: $ 21,793,333.00 7.2644%
</TABLE>
- 9 -
<PAGE> 79
Address for Notices: CIBC, INC.
Canadian Imperial Bank of
Commerce
Two Paces West By:
2727 Paces Ferry Road, Suite 1200 ------------------------
Atlanta, Georgia 30339 Name:
Attn: William C. Humphries Title:
Vice President
Telephone: 404/319-4999
Telecopy: 404/319-4950
Domestic Lending Office:
Canadian Imperial Bank of Commerce
Two Paces West
2727 Paces Ferry Road, Suite 1200
Atlanta, Georgia 30339
Eurocurrency Lending Office:
Canadian Imperial Bank of Commerce
Two Paces West
2727 Paces Ferry Road, Suite 1200
Atlanta, Georgia 30339
<TABLE>
<CAPTION>
PRO RATA
AMOUNT SHARE
------ --------
<S> <C> <C>
TERM LOAN COMMITMENT: $ 4,200,000.00 8.4000%
DOMESTIC SYNDICATED
LOAN COMMITMENT: $ 15,010,000.00 7.9000%
L/C SUBCOMMITMENT: $ 3,160,000.00 7.9000%
MULTICURRENCY SYNDICATED
LOAN COMMITMENT: $ 7,800,000.00 13.0000%
TOTAL COMMITMENT: $ 27,010,000.00 9.0033%
</TABLE>
- 10 -
<PAGE> 80
Address for Notices: CREDITANSTALT-BANKVEREIN
Two Ravinia Drive, Suite 1680
Atlanta, Georgia 30346
Attention: Craig Stamm By:
--------------------------------
Name:
Telephone: 770/390-1850 Title:
Telecopy: 770/389-1851
By:
--------------------------------
Name:
Title:
Domestic Lending Office:
245 Park Avenue
New York, New York 10167
Eurodollar Lending Office:
45 Park Avenue
New York, New York 10167
<TABLE>
<CAPTION>
PRO RATA
AMOUNT SHARE
------ --------
<S> <C> <C>
TERM LOAN COMMITMENT: $ 4,000,000.00 8.0000%
DOMESTIC SYNDICATED
LOAN COMMITMENT: $ 23,200,000.00 12.2105%
L/C SUBCOMMITMENT: $ 4,884,210.53 12.2105%
MULTICURRENCY SYNDICATED
LOAN COMMITMENT: $ 0.00 0.0000%
TOTAL COMMITMENT: $ 27,200,000.00 9.0667%
</TABLE>
- 11 -
<PAGE> 81
Address for Notices: CREDIT LYONNAIS NEW YORK BRANCH
Credit Lyonnais Atlanta Agency
303 Peachtree Street, N.E.
Suite 4400 By: ---------------------------
Atlanta, GA 30303 Name:
Attn: Rainer Zeck Title:
Telephone: 404/524-3700
Telecopy: 404/584-5249 CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By: ---------------------------
Name:
Title:
Domestic Lending Office:
Credit Lyonnais New York
1301 Avenue of the Americas
New York, New York 10019
Eurodollar Lending Office:
Credit Lyonnais Cayman Island
c/o 1301 Avenue of the Americas
New York, New York 10019
<TABLE>
<CAPTION>
PRO RATA
AMOUNT SHARE
------ --------
<S> <C> <C>
TERM LOAN COMMITMENT: $ 3,200,000.00 6.4000%
DOMESTIC SYNDICATED
LOAN COMMITMENT: $ 18,593,333.00 9.7960%
L/C SUBCOMMITMENT: $ 3,914,385.89 9.7960%
MULTICURRENCY SYNDICATED
LOAN COMMITMENT: $ 0.00 0.0000%
</TABLE>
- 12 -
<PAGE> 82
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL COMMITMENT: $21,793,333.00 7.2644%
</TABLE>
Address for Notices: THE SUMITOMO BANK, LIMITED
(ASSIGNEE OF THE DAIWA BANK, LIMITED)
233 South Wacker Drive
Suite 5400
Chicago, Illinois 60606
Attn: Operations Manager By:
---------------------------------
Name:
Title:
Telephone: 312/876-0181
Telecopy: 312/876-1995
By:
--------------------------------
Name:
Title:
Domestic Lending Office:
233 South Wacker Drive
Suite 5400
Chicago, Illinois 60606
Eurodollar Lending Office:
233 South Wacker Drive
Suite 5400
Chicago, Illinois 60606
<TABLE>
<CAPTION>
PRO RATA
AMOUNT SHARE
------ --------
<S> <C> <C>
TERM LOAN COMMITMENT: $ 3,200,000.00 6.4000%
DOMESTIC SYNDICATED
LOAN COMMITMENT: $ 12,760,000.00 6.7158%
L/C SUBCOMMITMENT: $ 2,686,315.79 6.7158%
MULTICURRENCY SYNDICATED
LOAN COMMITMENT: $ 0.00 0.0000%
</TABLE>
- 13 -
<PAGE> 83
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL COMMITMENT: $15,960,000.00 5.3200%
</TABLE>
- 14 -
<PAGE> 84
Address for Notices: FIRST UNION NATIONAL BANK OF
GEORGIA
999 Peachtree Street, N.E.
12th Floor
Atlanta, Georgia 30309
Attn: Michael S. Murphey By:
Senior Vice President -------------------------
Name:
Title:
Telephone: 404/225-4004
Telecopy: 404/225-4255
Domestic Lending Office:
999 Peachtree Street, N.E.
12th Floor
Atlanta, Georgia 30309
Eurodollar Lending Office:
999 Peachtree Street, N.E.
12th Floor
Atlanta, Georgia 30309
<TABLE>
<CAPTION>
PRO RATA
AMOUNT SHARE
------ --------
<S> <C> <C>
TERM LOAN COMMITMENT: $ 4,200,000.00 8.4000%
DOMESTIC SYNDICATED
LOAN COMMITMENT: $ 22,810,000.00 12.0053%
L/C SUBCOMMITMENT: $ 4,802,105.26 12.0053%
MULTICURRENCY SYNDICATED
LOAN COMMITMENT: $ 0.00 0.0000%
TOTAL COMMITMENT: $ 27,010,000.00 9.0033%
</TABLE>
- 15 -
<PAGE> 85
Address for Notices: FLEET BANK OF MAINE
80 Exchange Street
Bangor, Maine 04401
Attn: Neil Buitenhuys By:
--------------------
Name:
Telephone: 207/941-6140 or 6180 Title:
Telecopy: 207/941-6023
Domestic Lending Office:
511 Congress St., P.O. Box 1280
Portland, Maine 04104-5006
Eurodollar Lending Office:
511 Congress St., P.O. Box 1280
Portland, Maine 04104-5006
<TABLE>
<CAPTION>
PRO RATA
AMOUNT SHARE
------ --------
<S> <C> <C>
TERM LOAN COMMITMENT: $ 2,400,000.00 4.8000%
DOMESTIC SYNDICATED
LOAN COMMITMENT: $ 14,320,000.00 7.5368%
L/C SUBCOMMITMENT: $ 3,014,736.84 7.5368%
MULTICURRENCY SYNDICATED
LOAN COMMITMENT: $ 0.00 0.0000%
TOTAL COMMITMENT: $ 16,720,000.00 5.5733%
</TABLE>
- 16 -
<PAGE> 86
Address for Notices: NATIONSBANK, N.A.
(FORMERLY KNOWN AS NATIONSBANK, N.A.
(CAROLINAS) AND NATIONSBANK
OF NORTH CAROLINA, N.A.)
100 North Tryon Street
Mail Code NC1-007-08-11
Charlotte, NC 28255 By:
Attention: Lance Walton --------------------------------
Name:
Title:
Telephone: 704/386-6744
Telecopy: 704/386-1270
Domestic Lending Office:
One Independence Center
101 North Tryon Street
Mail Code NC1-001-15-03
Charlotte, North Carolina 28255
Eurocurrency Lending Office:
One Independence Center
101 North Tryon Street
Mail Code NC1-001-15-03
Charlotte, North Carolina 28255
<TABLE>
<CAPTION>
PRO RATA
AMOUNT SHARE
------ --------
<S> <C> <C>
TERM LOAN COMMITMENT: $ 4,200,000.00 8.4000%
DOMESTIC SYNDICATED
LOAN COMMITMENT: $ 7,210,000.00 3.7947%
L/C SUBCOMMITMENT: $ 1,517,894.74 3.7947%
MULTICURRENCY SYNDICATED
LOAN COMMITMENT: $ 7,800,000.00 13.0000%
TOTAL COMMITMENT: $19,210,000.00 6.4033%
</TABLE>
- 17 -
<PAGE> 87
Address for Notices: PNC BANK, N.A.
One PNC Plaza
Fifth Avenue and Wood Street
Pittsburgh, PA 15265
Attn: Robert J. Mitchell, Jr. By:
-----------------------
Name:
Telephone: 412/762-6547 Title:
Telecopy: 412/762-6484
Domestic Lending Office:
One PNC Plaza
Fifth Avenue and Wood Street
Pittsburgh, PA 15265
Eurodollar Lending Office:
One PNC Plaza
Fifth Avenue and Wood Street
Pittsburgh, PA 15265
<TABLE>
<CAPTION>
PRO RATA
AMOUNT SHARE
------ --------
<S> <C> <C>
TERM LOAN COMMITMENT: $ 0.00 0.000%
DOMESTIC SYNDICATED
LOAN COMMITMENT: $10,000,000.00 5.2632%
L/C SUBCOMMITMENT: $ 2,105,263.16 5.2632%
MULTICURRENCY SYNDICATED
LOAN COMMITMENT: $ 0.00 0.0000%
TOTAL COMMITMENT: $10,000,000.00 3.3333%
</TABLE>
- 18 -
<PAGE> 88
Address for Notices: WACHOVIA BANK OF GEORGIA, N.A.
191 Peachtree Street, N.E.
30th Floor
Atlanta, Georgia 30383
Attn: Doug Strickland By:
-----------------------------
Name:
Title:
By:
-----------------------------
Name:
Telecopy: 404/332-1382 Title:
Telex: 404/332-6920
Answerback: FNBAINTL
Domestic Lending Office:
191 Peachtree Street, N.E.
Atlanta, Georgia 30383
Eurocurrency Lending Office:
191 Peachtree Street, N.E.
Atlanta, Georgia 30383
<TABLE>
<CAPTION>
PRO RATA
AMOUNT SHARE
------ --------
<S> <C> <C>
TERM LOAN COMMITMENT: $ 4,200,000.00 8.4000%
DOMESTIC SYNDICATED
LOAN COMMITMENT: $ 15,010,000.00 7.9000%
L/C SUBCOMMITMENT: $ 3,160,000.00 7.9000%
MULTICURRENCY SYNDICATED
LOAN COMMITMENT: $ 7,800,000.00 13.0000%
TOTAL COMMITMENT: $ 27,010,000.00 9.0033%
</TABLE>
-19-
<PAGE> 1
EXHIBIT 10.10
JOINDER AGREEMENT AND
FIFTH AMENDMENT TO REVOLVING CREDIT LOAN AGREEMENT
THIS JOINDER AGREEMENT AND FIFTH AMENDMENT TO REVOLVING CREDIT LOAN
AGREEMENT dated as of June 30, 1995 (the "Fifth Amendment") by and among
INTERFACE FLOORING SYSTEMS, INC., a corporation organized and existing under
the laws of the State of Georgia (the "Borrower"), TRUST COMPANY BANK, a
Georgia banking corporation (the "Bank") and INTERFACE, INC., a corporation
organized and existing under the laws of the State of Georgia ("Interface").
W I T N E S S E T H:
WHEREAS, the Borrower and the Bank are parties to, and Interface has
executed, for the purpose of acknowledging certain terms thereof, that certain
Revolving Credit Loan Agreement dated as of August 5, 1991, as amended by that
certain First Amendment to Revolving Credit Agreement dated as of June 30,
1992, by that certain Second Amendment to Revolving Credit Agreement dated as
of August 5, 1993, by that certain Third Amendment to Revolving Credit
Agreement dated as of June 15, 1994, and as further amended by that certain
Fourth Amendment to Revolving Credit Loan Agreement dated as of August 5, 1994,
pursuant to which the Bank agreed to make to the Borrower certain revolving
credit loans in an aggregate principal amount at any one time outstanding not
to exceed $4,250,000.00 (as amended, the "Loan Agreement"; all terms used
herein without definition shall have the meanings set forth in the Loan
Agreement); and
WHEREAS, the Borrower has requested and the Bank has agreed to amend the
Loan Agreement to allow Interface to become a joint and several borrower
thereunder, to extend the Commitment for an additional year and to make certain
other conforming changes to the Loan Agreement;
NOW, THEREFORE, for and in consideration of the sum of Ten Dollars
($10.00) paid in hand and for further good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
<PAGE> 2
A. JOINDER AGREEMENT. Interface hereby agrees that it is and hereafter
shall be jointly and severally liable with the Borrower with respect to all of
the Obligations of the Borrower arising pursuant to the Loan Documents, whether
now existing or hereafter created, and shall be primarily and fully liable
thereunder to the Bank to the same extent and with the same effect as though
Interface had been named as a joint and several borrower originally executing
and delivering the Loan Agreement and the Revolving Credit Note.
B. AMENDMENTS. The Loan Agreement is hereby amended as follows:
1. The words "joined in by" and "to the extent and for the purposes set
forth below in Articles IV and V" set forth in the last three lines of the
preamble to the Loan Agreement are hereby deleted.
2. Section 1.01 of the Loan Agreement is hereby amended as follows:
(a) by deleting the definitions of "1993 Credit
Agreement," "Credit Party," "Guarantors" and "Guaranty Agreements" in
their entirety and substituting the following in lieu thereof:
"1995 Credit Agreement" shall mean that certain Amended and
Restated Credit Agreement dated as of June 30, 1995 among Interface,
Inc., Interface Scherpenzeel B.V., Interface Europe Limited, each of
the Lenders listed on the signature pages thereof, The First
National Bank of Chicago as Multicurrency Agent thereunder and Trust
Company Bank as Domestic Agent and Collateral Agent thereunder.
"Credit Parties" shall mean, collectively, the Primary Credit
Party and the Guarantors.
"Guarantors" shall mean, collectively, Interface Europe, Inc.,
formerly, Interface International, Inc., a Georgia corporation,
Rockland React-Rite, Inc., a Georgia
-2-
<PAGE> 3
corporation, Interface Research Corporation, a Georgia corporation,
and Pandel, Inc. a Georgia corporation.
"Guaranty Agreements" shall mean, any one or more Guaranty
Agreements executed in favor of the Bank substantially in the form
of Exhibit B attached hereto, by each of the Guarantors.'
(b) by adding the following definition of "Primary
Credit Party" in appropriate alphabetical order:
`"Primary Credit Party" shall mean, collectively,
the Borrower and Interface, who are jointly and severally liable for
the Obligations under this Agreement and the Revolving Credit Note,
and with respect to the provisions of the Loan Agreement regarding
the ability to request Borrowings pursuant to the Commitment, to
select interest rates applicable thereto and continuations and
conversions thereof, shall mean either of the Borrower or
Interface.'
3. Section 2.01 of the Loan Agreement is hereby deleted in its
entirety and the following substituted in lieu thereof:
"SECTION 2.01. Commitment and Revolving Credit Note. Subject to and
upon the terms and conditions set forth in this Agreement, the Bank
establishes until August 5, 1996 a revolving credit in favor of the
Primary Credit Party, jointly and severally, in aggregate principal at any
one time outstanding not to exceed $4,250,000 (the "Commitment"). Within
the limits of the Commitment, the Primary Credit Party may borrow, repay
and reborrow under the terms of this Agreement; provided, however, that
the Primary Credit Party may neither borrow nor reborrow should there
exist a Default or an Event of Default (which has not been waived in
accordance with the terms of this Agreement). All Borrowings under the
Commitment shall be evidenced by a single Revolving Credit Note payable to
the Bank in the form of Exhibit A attached hereto with appropriate
insertions. The Revolving Credit Note shall be dated the date hereof,
shall be payable to the order of the Bank in a principal amount equal to
the Commitment, shall bear interest as hereinafter provided and
-3-
<PAGE> 4
shall mature on August 5, 1996 or sooner should the principal and accrued
interest thereon be declared immediately due and payable as provided for
hereinafter (the "Termination Date"). The aggregate principal amount of
each Borrowing under the Commitment shall be not less than $100,000.00 and
shall be in integral multiples of $50,000.00. The Bank shall not have any
obligation to advance funds in excess of the amount of the Commitment."
4. Section 5.04 of the Loan Agreement is hereby deleted in its entirety and
the words "INTENTIONALLY OMITTED" substituted in lieu thereof.
5. Section 7.02 of the Loan Agreement is hereby amended to delete the
address for the Borrower set forth therein and to substitute the following in
lieu thereof:
<TABLE>
<S> <C>
"If to Borrower: Interface Flooring Systems, Inc.
2859 Paces Ferry Road
Suite 2000
Atlanta, Georgia 30339
Attention: Daniel T. Hendrix
Telephone: (404) 437-6840
Telecopy: (404) 319-0070
with a copy to: Interface, Inc.
2859 Paces Ferry Road
Suite 2000
Atlanta, Georgia 30339
General Counsel
Telephone: (404) 437-6860
Telecopy: (404) 319-6270
If to Interface: Interface, Inc.
2859 Paces Ferry Road
Suite 2000
Atlanta, Georgia 30339
</TABLE>
-4-
<PAGE> 5
<TABLE>
<S> <C>
Attention: Daniel T. Hendrix
Telephone: (404) 437-6840
Telecopy: (404) 319-0070
with a copy to: Interface, Inc.
2859 Paces Ferry Road
Suite 2000
Atlanta, Georgia 30339
General Counsel
Telephone: (404) 437-6860
Telecopy: (404) 319-6270
</TABLE>
6. All references to the "1993 Credit Agreement" in the Loan Agreement
shall hereafter be deemed to refer to the "1995 Credit Agreement" as defined
herein.
7. All references to the "Borrower" in Articles II, III, Sections 6.02,
7.09, 7.10, 7.12, 7.13, 7.14, 7.15, 7.16, 7.17 and 7.18 and in the definitions
of "ERISA Affiliate," "Interest Period" and "Revolving Credit Note" shall
hereafter be deemed to refer to the "Primary Credit Party".
8. Exhibit "A" to the Loan Agreement is hereby deleted in its entirety and
Exhibit "A" attached hereto and incorporated herein by this reference is hereby
substituted therefor and Exhibit "B-1" to the Loan Agreement is hereby deleted
in its entirety and Exhibit "B-2" thereto is hereby renamed Exhibit "B".
C. MISCELLANEOUS.
1. This Fifth Amendment shall be effective upon the receipt of the Bank of
a duly executed counterpart of this Fifth Amendment in its office in Atlanta,
Georgia together with duly executed revolving credit note in the form of
Exhibit "A" attached hereto. Upon such receipt all references to the Loan
Agreement shall mean the Loan Agreement as amended by this Fifth Amendment, all
references to the "Revolving Credit Note" or "Note" shall mean the revolving
credit note delivered pursuant hereto, and all
-5-
<PAGE> 6
references to the "Termination Date" shall mean the Termination Date as defined
in this Fifth Amendment. Except as expressly provided in this Fifth Amendment,
the execution and delivery of this Fifth Amendment does not and will not amend,
modify or supplement any provision of, or constitute a consent to or waiver of
the noncompliance with the provisions of the Loan Agreement and, except as
specifically provided in this Fifth Amendment, the Loan Agreement shall remain
in force and effect.
2. This Fifth Amendment shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
3. This Fifth Amendment shall be governed by and construed in accordance
with the laws of the State of Georgia without regard to the conflict of laws
principles thereof.
-6-
<PAGE> 7
IN WITNESS WHEREOF the parties hereto have caused this Fifth Amendment to
be executed and delivered by their duly authorized officers as of the day and
year first above written on this 30th day of June, 1995.
INTERFACE FLOORING SYSTEMS, INC.
By: ----------------------------
Title: ----------------------
Attest: ------------------------
Title: ------------------
[Corporate Seal]
INTERFACE, INC.
By: ----------------------------
Title: ----------------------
Attest: ------------------------
Title: ------------------
[Corporate Seal]
TRUST COMPANY BANK
By: ----------------------------
Title: ----------------------
By: ----------------------------
Title: ----------------------
-7-
<PAGE> 8
THE UNDERSIGNED GUARANTORS HEREBY CONSENT AND AGREE TO THE TERMS OF THE
FOREGOING FIFTH AMENDMENT AND HEREBY RATIFY AND CONFIRM THAT THE GUARANTY
AGREEMENT REMAINS IN FULL FORCE AND EFFECT AS OF THIS 30TH DAY OF JUNE, 1995:
INTERFACE EUROPE, INC., formerly,
Interface International, Inc.
By:
-----------------------------
Title:
-----------------------
ROCKLAND REACT-RITE, INC.
By:
-----------------------------
Title:
-----------------------
INTERFACE RESEARCH CORPORATION
By:
-----------------------------
Title:
-----------------------
PANDEL, INC.
By:
-----------------------------
Title:
-----------------------
-8-
<PAGE> 9
EXHIBIT A
AMENDED AND RESTATED
REVOLVING CREDIT NOTE
U.S. $4,250,000.00 ___________ __, 1995
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned INTERFACE FLOORING SYSTEMS, INC., a
Georgia corporation (herein called the "Borrower") and INTERFACE, INC., a
Georgia corporation (herein called "Interface;" the Borrower and Interface
collectively referred to herein as the "Primary Credit Party") hereby, jointly
and severally, promise to pay to the order of TRUST COMPANY BANK, a Georgia
banking corporation (herein, together with any subsequent holder hereof, called
the "Bank"), the lesser of (i) the principal sum of FOUR MILLION TWO HUNDRED
FIFTY THOUSAND AND NO/100 DOLLARS ($4,250,000.00) or (ii) outstanding principal
amount of the Borrowings made by the Primary Credit Party pursuant to the terms
of the Loan Agreement referred to below on the earlier of (x) August 5, 1996
and (y) the date on which all amounts outstanding under this Revolving Credit
Note have become due and payable pursuant to the provisions of Article VI of
the Loan Agreement. The Primary Credit Party likewise promises to pay interest
on the outstanding principal amount of each such Borrowing, at such interest
rates, payable at such times, and computed in such manner, as are specified in
the Loan Agreement in strict accordance with the terms thereof.
The Bank shall record all Borrowings made pursuant to the Loan Agreement
and all payments of principal of such Borrowings and, prior to any transfer
hereof, shall endorse such Borrowings and payments on the schedule annexed
hereto and made a part hereof, or on any continuation thereof which shall be
attached hereto and made a part hereof, which endorsement shall constitute
prima facie evidence of the accuracy of the information so endorsed; provided,
however, that delay or failure of the Bank to make any such endorsement or
recordation shall not affect the obligations of the
-1-
<PAGE> 10
Primary Credit Party hereunder or under the Loan Agreement with respect to the
Borrowings evidenced hereby.
Any principal or interest (to the extent permitted by law) due under this
Revolving Credit Note that is not paid on the due date therefor, whether on the
maturity date, or resulting from the acceleration of maturity upon the
occurrence of an Event of Default, shall bear interest from the date due to
payment in full at the rate as provided in Section 2.15 of the Loan Agreement.
All payments of principal and interest shall be made in lawful money of
the United States of America in immediately available funds at the office of
the Bank specified in the Loan Agreement.
This Revolving Credit Note is issued pursuant to, and is the Revolving
Credit Note referred to in, the Loan Agreement dated as of August 5, 1991 among
the Primary Credit Party and the Bank, as amended by that certain First
Amendment to Revolving Credit Loan Agreement dated as of June 30, 1992, as
further extended and amended by that certain Second Amendment to Revolving
Credit Loan Agreement dated as of August 5, 1993, as further amended by that
certain Third Amendment to Revolving Credit Agreement dated as of June 15,
1994, as further extended and amended by that certain Fourth Amendment to
Revolving Credit Agreement dated as of August 5, 1994 and as further extended
and amended by that certain Joinder Agreement and Fifth Amendment to Revolving
Credit Agreement dated as of even date herewith (as the same may be further
amended, modified and supplemented from time to time, the "Loan Agreement"),
and the Bank is and shall be entitled to all benefits thereof and all
Guaranties executed and delivered to the Bank in connection therewith. Terms
defined in the Loan Agreement are used herein with the same meaning. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events.
The Primary Credit Party agrees to make payments of principal on the dates
and in the amounts specified in the Loan Agreement in strict accordance with
the terms thereof.
This Revolving Credit Note may be prepaid in whole or in part without
premium or penalty but with accrued interest on the principal amount prepaid to
the date of prepayment in accordance
-2-
<PAGE> 11
with the terms and conditions of Section 2.06 of the Loan Agreement.
In case an Event of Default shall occur and be continuing, the principal
and all accrued interest of this Revolving Credit Note may automatically
become, or be declared, due and payable in the manner and with the effect
provided in the Loan Agreement. The Primary Credit Party agrees to pay, and
save the Bank harmless against any liability for the payment of, all reasonable
out-of-pocket costs and expenses, including reasonable attorneys' fees actually
incurred, arising in connection with the enforcement by the Bank of any of its
rights under this Revolving Credit Note or the Loan Agreement.
This Revolving Credit Note has been executed and delivered in Georgia and
the rights and obligations of the Bank and the Primary Credit Party hereunder
shall be construed in accordance with and governed by the laws (without giving
effect to the conflict of law principles thereof) of the State of Georgia.
This Revolving Credit Note extends and replaces that certain
Revolving Credit Note dated as of August 5, 1991 and later replacements
thereof, in each case made by the Company to the Bank in the principal amount
hereof, and is not being given by the Primary Credit Party or accepted by the
Bank as a novation thereof.
The Primary Credit Party expressly waives any presentment, demand, protest
or notice in connection with this Revolving Credit Note, now or hereafter
required by applicable law. Time is of the essence of this Revolving Credit
Note.
IN WITNESS WHEREOF, the Primary Credit Party has caused this Revolving
Credit Note to be executed and delivered by its duly authorized officers as of
the date first above written.
INTERFACE FLOORING SYSTEMS, INC.
By:
-----------------------------------
Name:
Title:
-3-
<PAGE> 12
Attest:
----------------------------
- ----------------------------------- Name:
Title:
- -----------------------------------
- ----------------------------------- [CORPORATE SEAL]
INTERFACE, INC.
By:
--------------------------------
Name:
Title:
Attest:
----------------------------
- ----------------------------------
Name:
Title:
- ----------------------------------
- ---------------------------------- [CORPORATE SEAL]
-4-
<PAGE> 13
Revolving Credit Note (cont'd)
BORROWINGS AND PAYMENTS OF PRINCIPAL
<TABLE>
Last Day of
Amount Amount of Applicable
of Interest Principal Interest Notation
Date Borrowing Rate Prepaid Period Made By
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
-5-
<PAGE> 1
EXHIBIT 10.26
RECEIVABLES SALE AGREEMENT
among
INTERFACE SECURITIZATION CORPORATION
as Seller
INTERFACE, INC.
as Collection Agent
SPECIAL PURPOSE ACCOUNTS RECEIVABLE COOPERATIVE CORPORATION
as Purchaser
and
CANADIAN IMPERIAL BANK OF COMMERCE
as Servicing Agent
Dated as of August 4, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I: DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II: OFFERING FACILITY. . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.1. The Facility. . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE III: WHAT IS SOLD. . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.1. Determination of Ownership Interest . . . . . . . . . . 14
SECTION 3.2. Frequency of Determining Ownership
Interest. . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.3. Maximum Ownership Interest. . . . . . . . . . . . . . . . 16
ARTICLE IV: PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 4.1. Determination of Cash Component of
Purchase Price . . . . . . . . . . . . . . . . . . . . . 16
SECTION 4.2. Satisfaction of Deferred Payment
Component of Purchase Price . . . . . . . . . . . . . . 17
ARTICLE V: FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 5.1. Structuring Fee . . . . . . . . . . . . . . . . . . . . . 17
SECTION 5.2. Settlement Date Payments. . . . . . . . . . . . . . . . . 17
SECTION 5.2.1. Purchase Discount . . . . . . . . . . . . . . . . . . . 17
SECTION 5.2.2. Purchase Premium . . . . . . . . . . . . . . . . . . . 18
SECTION 5.2.3. Unused Facility Fee . . . . . . . . . . . . . . . . . 19
SECTION 5.2.4. Operating Expense Fee . . . . . . . . . . . . . . . . . 20
SECTION 5.2.5. Collection Agent Fee . . . . . . . . . . . . . . . . . 20
SECTION 5.3. Legal Fees and Other Expenses . . . . . . . . . . . . . . 20
SECTION 5.4. Interest on Unpaid Amounts . . . . . . . . . . . . . . . 20
ARTICLE VI: PURCHASE PROCEDURES . . . . . . . . . . . . . . . . . . . . . 21
SECTION 6.1. Types of Purchases . . . . . . . . . . . . . . . . . . . 21
SECTION 6.2. Notice Requirements . . . . . . . . . . . . . . . . . . . 21
SECTION 6.3. Conditions Precedent to Initial Purchase. . . . . . . . . 22
SECTION 6.3.1. Membership in the Purchaser . . . . . . . . . . . . . . 22
SECTION 6.3.2. Structuring Fee . . . . . . . . . . . . . . . . . . . . 22
SECTION 6.3.3. Absence of Liens. . . . . . . . . . . . . . . . . . . . 22
SECTION 6.3.4. Financing Statements. . . . . . . . . . . . . . . . . . 22
SECTION 6.3.5. Lock-Box Agreements . . . . . . . . . . . . . . . . . . 22
SECTION 6.3.6. Receivables Activity Report and
Calculation of Ownership Interest . . . . . . . . . . 22
SECTION 6.3.7. Resolutions . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 6.3.8. Legal Opinion of Seller's Counsel . . . . . . . . . . 23
SECTION 6.3.9. Good Standing Certificates. . . . . . . . . . . . . . . 23
SECTION 6.3.10. Subordinated Note . . . . . . . . . . . . . . . . . . 23
SECTION 6.3.11. Other Agreements . . . . . . . . . . . . . . . . . . . 24
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 6.4. Condition Precedent to all Incremental
Purchases . . . . . . . . . . . . . . . . . . . . 24
SECTION 6.5. Conditions Precedent to All Purchases . . . . . . . . . . 24
SECTION 6.5.1. Representations and Covenants . . . . . . . . . . . . . 24
SECTION 6.5.2. Other Documents . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VII: SETTLEMENT PROCEDURES . . . . . . . . . . . . . . . . . . . . 24
SECTION 7.1. Settlement Dates . . . . . . . . . . . . . . . . . . . . 24
SECTION 7.2. Application of Collections. . . . . . . . . . . . . . . . 25
SECTION 7.2.1. Application of Collections on Days That
Are Not Settlement Dates . . . . . . . . . . . . . . . 25
SECTION 7.2.2. Application of Collections on
Settlement Dates . . . . . . . . . . . . . . . . . . . 25
SECTION 7.3. Adjustments due to Dilution, Etc. . . . . . . . . . . . . 27
SECTION 7.4. Receivables Activity Report . . . . . . . . . . . . . . . 27
ARTICLE VIII: SERVICING AGENT AND COLLECTION AGENT . . . . . . . . . . . . 28
SECTION 8.1. Appointment of Servicing Agent. . . . . . . . . . . . . . 28
SECTION 8.1.1. Replacement of Servicing Agent. . . . . . . . . . . . . 28
SECTION 8.2. Appointment of Collection Agent . . . . . . . . . . . . . 28
SECTION 8.2.1. Replacement of Collection Agent;
Notification of Obligors . . . . . . . . . . . . . . . 29
ARTICLE IX: REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 30
SECTION 9.1. Representations and Warranties of the
Seller and the Collection Agent. . . . . . . . . . . . . 30
SECTION 9.2. Representations and Warranties of
Interface . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE X: COVENANTS 35
SECTION 10.1. Affirmative Covenants of the Seller and
the Collection Agent . . . . . . . . . . . . . . . . . 35
SECTION 10.2. Reporting Requirements of the Seller . . . . . . . . . . 37
SECTION 10.3. Negative Covenants of the Seller and the
Collection Agent. . . . . . . . . . . . . . . . . . . . 38
SECTION 10.4. Covenants of the Seller and Interface. . . . . . . . . . 41
SECTION 10.5. Covenants of Interface. . . . . . . . . . . . . . . . . 44
ARTICLE XI: INDEMNIFICATIONS; INCREASED COSTS . . . . . . . . . . . . . . 44
SECTION 11.1. Indemnification by the Seller of the
Purchaser, etc . . . . . . . . . . . . . . . . . . . . 44
SECTION 11.2. Indemnification Due to Failure to
Consummate Purchase . . . . . . . . . . . . . . . . . . 47
SECTION 11.3. Increased Costs under Liquidity
Facilities and Credit Facilities . . . . . . . . . . . 47
SECTION 11.4. Notices . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE XII: EVENTS OF TERMINATION . . . . . . . . . . . . . . . . . . . . 48
SECTION 12.1. Events of Termination . . . . . . . . . . . . . . . . . 48
SECTION 12.2. Remedies . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE XIII: MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . 51
SECTION 13.1. Amendments, Etc . . . . . . . . . . . . . . . . . . . . 51
SECTION 13.2. Notices, Etc . . . . . . . . . . . . . . . . . . . . 51
SECTION 13.3. Payments Net of Taxes . . . . . . . . . . . . . . . . . 52
SECTION 13.4. No Waiver; Remedies . . . . . . . . . . . . . . . . . . 53
SECTION 13.5. Binding Effect; Assignability;
Continuing Obligation. . . . . . . . . . . . . . . . . 53
SECTION 13.6. Governing Law . . . . . . . . . . . . . . . . . . . . . 54
SECTION 13.7. Security Interest . . . . . . . . . . . . . . . . . . . 54
SECTION 13.8. Construction of the Agreement . . . . . . . . . . . . . 54
SECTION 13.9. No Proceedings . . . . . . . . . . . . . . . . . . . . 54
SECTION 13.10. Confidentiality . . . . . . . . . . . . . . . . . . . 54
SECTION 13.11. Purchaser Determinations on
Concentration Limits. . . . . . . . . . . . . . . . . 54
SECTION 13.14. Execution in Counterparts . . . . . . . . . . . . . . 55
SECTION 13.15. Submission to Jurisdiction, Appointment. . . . . . . .
of Agent to Accept Service of Process . . . . . . . . 56
</TABLE>
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<PAGE> 5
Schedules
Schedule A - Special Concentration Limits
Schedule B - Credit and Collection Policy
Schedule C - List of Lock-Box Banks
Schedule D - List of the Addresses of Transaction Parties
Schedule E - List of Assumed Names
Schedule F - List of Fiscal Month Closing Dates
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Exhibits
Exhibit A - Form of Notice for Initial and Incremental Purchases
Exhibit B-1 - Form of Notice of Election Not to Make Reinvestment Purchases
Exhibit B-2 - Form of Notice of Payment to Reduce Investment
Exhibit C - Form of Membership Agreement
Exhibit D - Form of Notice to Lock-Box Bank
Exhibit E - Form of Lock-Box Agreement
Exhibit F - Form of Receivables Activity Report
Exhibit G - Form of Legal Opinion of Counsel for the Transaction Parties
Exhibit H - Form of Transfer Agreement
Exhibit I - Form of Consent and Acknowledgment
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<PAGE> 7
RECEIVABLES SALE AGREEMENT dated as of August 4, 1995 among INTERFACE
SECURITIZATION CORPORATION, a Delaware corporation (the "Seller"), INTERFACE,
INC., a Georgia corporation ("Interface"), as the initial "Collection Agent,"
SPECIAL PURPOSE ACCOUNTS RECEIVABLE COOPERATIVE CORPORATION (the "Purchaser")
and CANADIAN IMPERIAL BANK OF COMMERCE, as servicing agent (the "Servicing
Agent") for the Purchaser.
ARTICLE I: DEFINITIONS
SECTION 1.1. Definitions. In addition to any other terms defined herein,
the following terms used herein shall have the meanings specified (to be
equally applicable to both the singular and plural forms of the terms defined):
"Affiliate" means, with respect to any Person, a Person: (i) that
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such Person; (ii) that
beneficially owns or holds 10% or more of any class of the voting stock (or, in
the case of a Person that is not a corporation, 10% or more of the equity
interest) of such Person; or (iii) 10% or more of the voting stock (or, in the
case of a Person that is not a corporation, 10% or more of the equity interest)
of which is beneficially owned or held, directly or indirectly, by such Person.
The term "control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting stock or an equity interest, by
contract or otherwise. For purposes of this Agreement, neither the Purchaser
nor the Servicing Agent shall be deemed to be an Affiliate of the Seller.
"Aged Receivables Ratio" means, as of any date of determination, a
fraction, expressed as a percentage, (i) the numerator of which is the
aggregate unpaid balance of Receivables that were either (a) past due (from the
original due date) 61 days to 90 days as of the end of the fiscal month then
most recently ended (or ending on such date of determination), or (b) were less
than 90 days past due (from the original due date) as of such date but which
were Defaulted Receivables as of such date and (ii) the denominator of which is
the aggregate amount of net sales of the Originators during the third full
fiscal month prior to such fiscal month.
"Agreement" means this Receivables Sale Agreement, as it may be amended,
restated, supplemented or otherwise modified from time to time.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978 (11 U.S.C.
Section Section 101 et seq.), as amended.
<PAGE> 8
"Bentley" means Bentley Mills, Inc., a Delaware corporation.
"Business Day" means any day on which banks are not authorized or required
to close in New York City or Atlanta, Georgia.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collection" means any amount paid by an Obligor or any other party with
respect to a Receivable.
"Collection Agent" means Interface or any replacement thereof under
Section 8.2.1.
"Collection Agent Fee" means the percentage used to determine the fee
payable by the Purchaser to the Collection Agent, as described in Section
5.2.5.
"Consent and Acknowledgment" means a letter agreement dated as of the date
hereof made by an Originator in favor of the Purchaser pursuant to which, among
other things, such Originator consents to, and acknowledges, the transactions
contemplated hereby, in substantially the form attached hereto as Exhibit I, as
such letter agreement may be amended, restated, supplemented or otherwise
modified from time to time.
"Credit and Collection Policy" means, in the case of any Originator, the
written credit and collection policy utilized by such Originator as of the date
hereof, a copy of which is attached hereto in Schedule B, as the same may be
amended or otherwise modified in strict compliance with this Agreement.
"Credit Facilities" means each of the committed loan facilities, lines of
credit, letters of credit, surety bonds and other forms of credit enhancement
available to the Purchaser to support the Purchaser's commercial paper notes
and medium-term notes which are not Liquidity Facilities.
"Defaulted Receivable" means any Receivable which:
(1) has been or should have been charged-off in
conformity with the applicable Credit and Collection Policy;
or
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(2) is owed by an Obligor who is in bankruptcy,
reorganization, insolvency or similar proceedings.
"Dilution Horizon" means, as of any date of determination, a fraction,
expressed as a percentage, the numerator of which shall be the aggregate net
sales by all of the Originators during the fiscal month then most recently
ended (or ending on such date of determination) and the denominator of which
shall be the aggregate Eligible Receivables originated by Originators and
outstanding as of the last day of such fiscal month.
"Dilution Ratio" means, as of any date of determination, a fraction,
expressed as a percentage, the numerator of which is the aggregate amount of
Dilutions in respect of Receivables for the fiscal month then most recently
completed (or ending on such date of determination) and the denominator of
which is the aggregate amount of net sales by all of the Originators occurring
during the fiscal month prior to such fiscal month then most recently completed
(or then ending).
"Dilution Reserve" means, as of any date of determination, a percentage
equal to the following:
DPR = (2.25 x DH x ADP) + ((HDP - ADP) x HDP/ADP)
where: DPR = the Dilution Reserve;
DH = the Dilution Horizon;
ADP = the average Dilution Ratio during the period of twelve
consecutive full fiscal months immediately preceding (or
ending on) such date of determination; and
HDP = the highest Dilution Ratio during the twelve consecutive
full fiscal months immediately preceding (or ending on)
such date of determination.
"Dilutions" means the aggregate amount of any reductions and cancellations
of Receivables which have been reduced or cancelled, respectively, for any
reason other than that (1) the Obligors have made payments thereon or (2) the
Seller has charged-off such Receivables in accordance with the applicable
Credit and Collection Policy. The term "Dilutions" shall include, without
limitation, credits, rebates, freight
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<PAGE> 10
charges, cash discounts, volume discounts, cooperative advertising expenses,
royalty payments, warranties, allowances, disputes, chargebacks, returned or
repossessed goods, and allowances for early payments.
"Dollars" or "$" means, unless another currency is expressly identified,
the lawful currency of the United States.
"Eligible Receivable" means any Receivable:
(1) which is not unpaid for more than 60 days past
the date on which it was due;
(2) which is required to be paid in full within 31
days of the invoice date; provided that a Receivable that
meets the criteria set forth in this definition but for this
clause (2) may nonetheless constitute an "Eligible Receivable"
if (a) such Receivable is required to be paid in full within
61 days of the invoice date and (b) the outstanding balance of
such Receivable, together with the aggregate outstanding
balance of all other Receivables that constitute "Eligible
Receivables" by reason of this proviso, does not at any time
exceed an amount equal to 30% of the aggregate outstanding
balance of all Receivables that constitute Eligible
Receivables at such time (including Receivables that are
Eligible Receivables by reason of this proviso);
(3) which is denominated in, and payable only in,
U.S. Dollars;
(4) which is not a Defaulted Receivable;
(5) the Obligor of which has had no Defaulted
Receivable at any time during the immediately preceding
twelve-month period;
(6) the Obligor of which does not then have more than
10% of its total Receivables unpaid for more than 120 days
past the dates on which they were due;
(7) the Obligor of which is not an Affiliate of any
of the Transaction Parties or the Purchaser;
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<PAGE> 11
(8) the Obligor of which is not a government or
subdivision or agency of a government; provided that a
Receivable that meets the criteria set forth in this
definition but for this clause (8) may nonetheless constitute
an "Eligible Receivable" if (a) the Obligor thereon is a
governmental entity acceptable to the Servicing Agent and (b)
the outstanding balance of such Receivable, together with the
aggregate outstanding balance of all other Receivables that
constitute "Eligible Receivables" by reason of this proviso,
does not at any time exceed an amount equal to 8% of the
Investment (net of any amounts owed by the Seller to the
Purchaser under Article XI) at such time;
(9) the Obligor of which is a resident of the United
States; provided that a Receivable that meets the criteria set
forth in this definition but for this clause (9) may
nonetheless constitute an "Eligible Receivable" if:
(a) the outstanding balance of such Receivable,
together with the aggregate outstanding balance of all
other Receivables that constitute "Eligible
Receivables" by reason of this proviso, does not exceed
an amount equal to that portion of the aggregate
Reserve at such time representing the components
described in clauses (1) and (3) of the definition of
"Reserve";
(b) in addition to the restrictions set forth in
clause (a): in the case of any Receivable owing by an
Obligor that is located in a country in respect of
which the "sovereign rating" assigned by S&P is
"investment grade", the outstanding balance thereof,
together with the aggregate outstanding balance of all
other Receivables that constitute "Eligible
Receivables" by reason of this proviso and that are
owed by Obligors in such countries, does not exceed a
sublimit equal to that portion of the aggregate Reserve
at such time representing the component described in
clause (1) of the definition of "Reserve";
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<PAGE> 12
(c) in addition to the restrictions set forth in
clause (a): in the case of any Receivable owing by an
Obligor that is located in a country in respect of
which the "sovereign rating" assigned by S&P is less
than "investment grade" (or in respect of which S&P has
not assigned a "sovereign rating"), the outstanding
balance thereof, together with the aggregate
outstanding balance of all other Receivables that
constitute "Eligible Receivables" by reason of this
proviso and that are owed by Obligors in such
countries, does not exceed a sublimit equal to the
Standard Concentration Limit then in effect; and
(d) the Seller is in compliance with the terms of
Section 3.3 at such time;
(10) which is not (i) subject to any dispute, claim,
defense or offset and which has not been compromised, adjusted
or modified (including by extension of time for payment or the
granting of any discounts, allowances or credits) or (ii)
evidenced by any note or other instrument;
(11) which arises out of a "current transaction", and
the purchase of which with the proceeds of notes having a
maturity at the time of issuance not exceeding 270 days would
constitute a "current transaction", as such term is defined in
Section 3(a)(3) of the Securities Act of 1933, as amended;
(12) which is an "account" within the meaning of the
Uniform Commercial Code of the State in which is located the
Seller's principal place of business or, if the Seller has
more than one place of business, its chief executive office;
(13) which arose from a bona fide sale of merchandise
or insurance or the rendering of services accepted by the
Obligor of that Receivable, the performance and delivery of
which has been completed by the applicable Originator and by
all parties other than the Obligor; without limiting the
generality of the foregoing, such sale is not a "bill and
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<PAGE> 13
hold", consignment, "sale on approval", conditional sale or
similar arrangement;
(14) in which the Purchaser shall, upon the Purchase
of an Ownership Interest therein, acquire good and marketable
title to the Ownership Interest therein, free and clear of all
liens, security interests and encumbrances (other than
Permitted Liens);
(15) that is the legal, valid and binding payment
obligation of the Obligor thereon;
(16) that represents the sales price of merchandise,
insurance or services, within the meaning of Section 3(c)(5)
of the Investment Company Act of 1940, as amended;
(17) which does not contravene any applicable law,
rule or regulation in any material respect (including, without
limitation, laws, rules and regulations relating to truth in
lending, fair credit billing, fair credit reporting, equal
credit opportunity, fair debt collection practices and
privacy);
(18) which is not subject to any restrictions on the
transfer, assignability or sale thereof;
(19) which has been generated in accordance with the
terms and conditions of, and otherwise satisfies, the
applicable Credit and Collection Policy;
(20) other than to the extent any portion thereof is
payable on account of sales taxes;
(21) which was generated in the ordinary course of
business of the applicable Originator;
(22) in respect of which no cash deposit or other
advance payment shall have been received by the applicable
Originator or any other Person thereon or in respect thereof;
and
(23) which shall have been purchased by the Seller
from an Originator for reasonably equivalent value (other than
by the extinguishment or reduction of antecedent debt)
pursuant to a Transfer Agreement
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<PAGE> 14
and all rights of the Seller, as transferee thereunder, are
fully assignable to the Purchaser without any restriction on
such assignment.
"ERISA" means the Employee Retirement Income Security Act of 1974 and the
rules and regulations thereunder, as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer with the Seller under
Section 414 of the Code.
"Event of Termination" shall have the meaning assigned to that term in
Section 12.1.
"fiscal" means, when used in respect of any period, such fiscal period of
Interface.
"Facility Limit" means $65,000,000, as such amount may be reduced pursuant
to Section 6.2(d).
"Guilford" means Guilford of Maine, Inc., a Delaware corporation.
"Incremental Purchase" means any Purchase (other than the Initial
Purchase) which causes the amount of the Investment to increase.
"Initial Purchase" means the first Purchase under this Agreement.
"Interface" means Interface, Inc., a Georgia corporation.
"Interface Credit Agreement" means that certain Amended and Restated
Credit Agreement dated as of June 30, 1995 among Interface, certain Affiliates
thereof, certain lenders, Trust Company Bank and The First National Bank of
Chicago, as "Co-Agents", and Trust Company Bank, as "Collateral Agent", as the
same may from time to time be amended, restated, supplemented or otherwise
modified. If at any time the Interface Credit Agreement shall be terminated or
shall otherwise cease to be in effect, for purposes of Section 12.1(k)(i), an
Event of Termination shall exist hereunder, at any time following such
termination or cessation, upon the occurrence of any event or circumstance that
would, but for such termination or cessation, have constituted an "Event of
Default" under the Interface Credit
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<PAGE> 15
Agreement (as amended, restated, supplemented or otherwise modified prior to
the date of such termination or cessation) by reason of the failure of any
Person to comply with any of the following provisions of the Interface Credit
Agreement: Sections 8.09 ["Financial Covenants"], 8.10 ["Notices Under Certain
Other Indebtedness"], 9.03 ["Mergers, Acquisitions, Sales, Etc."], 10.09
["Money Judgment"] and 10.11 ["Change in Control of Interface"], such
provisions to survive the termination or cessation of the Interface Credit
Agreement and to be deemed incorporated herein by this reference thereto upon
any such termination or cessation.
"Interface Flooring" means Interface Flooring Systems, Inc., a Georgia
corporation.
"Investment" means the sum of:
(1) the aggregate amount of cash paid by the
Purchaser to the Seller for the Initial Purchase and all
Incremental Purchases, less the amount of all Collections
received and applied pursuant to Sections 6.2(c) or Section
7.2.2(b)(ii)(A) and of all payments made by the Seller and
applied under Sections 3.3 and 7.3; and
(2) any amounts owed by the Seller to the Purchaser
under Article XI.
"Liquidity Facilities" means each of the committed loan facilities, lines
of credit and other financial accommodations available to the Purchaser to
provide liquidity in support of the Purchaser's commercial paper notes and
medium-term notes.
"Lock-Box" means any lock-box(es) or account(s) to which the Obligors
remit Collections or into which Collections are otherwise deposited upon
receipt by a Lock Box Bank.
"Lock-Box Bank" means any institution at which a Lock-Box is kept or by
which a Lock-Box is maintained.
"Loss Reserve Ratio" means, as of any date, a percentage equal to the
following:
LRR = 2.25 x ARR x S
where: LRR = the Loss Reserve Ratio;
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ARR = the highest average, determined for each of twelve
consecutive full fiscal months immediately preceding (or
ending on) such date of determination, of the Aged
Receivables Ratio for three full consecutive fiscal
months during such period;
S = a fraction, expressed as a percentage, the numerator of
which is the aggregate amount of net sales of the
Originators during the three full fiscal months then most
recently ended (or ending on such date of determination),
and the denominator of which is the aggregate unpaid
balance of all Eligible Receivables originated by the
Originators and outstanding as of the last day of the
fiscal month then most recently ended (or ending on such
date of determination).
"Maximum Ownership Interest" means 100%.
"Moody's" means Moody's Investors Service, Inc.
"Obligor" means any Person which is obligated to make payment on a
Receivable.
"Operating Expense Fee" means the percentage used to determine the fee
payable by the Seller to the Purchaser, as described in Section 5.2.4.
"Originator" means any of Bentley, Guilford and Interface Flooring, and
"Originators" means all of such Persons collectively.
"Originator Entity shall have the meaning assigned to that term in Section
10.4.
"Ownership Interest" means, at any time, an undivided percentage ownership
interest of the Purchaser in the Receivables, the related Collections and the
Related Rights, as described in Section 3.1(a).
"Parallel Sale Agreement" means that certain Receivables Sale Agreement of
even date herewith among the Seller, certain financial institutions parties
thereto, Trust Company Bank and The First National Bank of Chicago, as
co-agents for such financial institutions, Trust Company Bank, as
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<PAGE> 17
"Administrative Agent", and The First National Bank of Chicago, as
"Documentation and Collateral Agent", as the same may from time to time be
amended, restated, supplemented or otherwise modified in accordance with the
terms of this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
thereto.
"Permitted Liens" means any lien, claim or encumbrance (i) arising under
this Agreement in favor of the Purchaser or under the Parallel Sale Agreement
in favor of the PSA Agent, for the benefit of the PSA Purchasers, (ii) in
respect of taxes that are not delinquent or (iii) constituting a Permitted Tax
Lien.
"Permitted Tax Lien" means at any time any lien, claim or encumbrance in
respect of taxes the payment of which is being contested by the Seller or
Interface in good faith and in respect of which adequate reserves shall have
been set aside; provided that any such lien, claim or encumbrance shall cease
to be a Permitted Tax Lien if a material risk of loss or forfeiture of any
Receivable by reason of such lien, claim or encumbrance shall then exist.
"Person" means an individual, partnership, corporation business trust,
joint stock company, trust, unincorporated association, joint venture or other
entity, or a government or any political subdivision or agency thereof.
"Plan" means each employee benefit plan (as defined in Section 3(3) of
ERISA) currently sponsored, maintained or contributed to by any Transaction
Party or any ERISA Affiliate or with respect to which any Transaction Party or
any ERISA Affiliate has any liability.
"PSA Agent" means, collectively or individually, The First National Bank
of Chicago, in its capacity as "Documentation and Collateral Agent" for the PSA
Purchasers under the Parallel Sale Agreement, or Trust Company Bank, in its
capacity as "Administrative Agent" for the PSA Purchasers under the Parallel
Sale Agreement, and any successor thereto in such capacity.
"PSA Purchasers" means the financial institutions from time to time
parties to the Parallel Sale Agreement.
"Purchase" means any purchase by the Purchaser of an Ownership Interest
from the Seller under this Agreement, and
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includes the Initial Purchase, any Incremental Purchase and any Reinvestment
Purchase.
"Purchase Discount" has the meaning assigned to such term in Section
5.2.1.
"Purchase Premium" has the meaning assigned to such term in Section 5.2.2.
"Purchaser" means Special Purpose Accounts Receivable Cooperative
Corporation and its successors and assigns.
"Receivable" means the obligation of an Obligor to pay for merchandise
sold or services rendered by an Originator, and includes the rights in
connection therewith to payment of any interest or finance charges and in the
merchandise (including returned goods) and contracts relating to such
Receivable, all security interests, guaranties and property securing or
supporting payment of such Receivable, all books and records relating to the
Receivables and all proceeds of the foregoing.
"Receivables Activity Report" means the report in the form of Exhibit F
hereto to be provided by the Collection Agent in accordance with Section 7.4 of
this Agreement.
"Receivables Pool" means all Receivables that shall have been purchased by
the Seller from Originators.
"Reinvestment Purchase" means any Purchase made with Collections.
"Reinvestment Suspension Period" means a period beginning on the date that
Reinvestment Purchases shall cease for any reason (whether pursuant to Section
6.2, 6.5 or otherwise) and ending on the initial date thereafter (if any) on
which Reinvestment Purchases shall recommence.
"Related Rights" means all rights and remedies of the Seller under each
Transfer Agreement (or any instrument, document or agreement executed in
connection therewith) pursuant to which any Receivable shall have been
transferred by an Originator to the Seller.
"Reserve" means, as of any date, an amount equal to the Investment on such
date multiplied by the greater of (a) 10% and (b) the sum of the items set
forth below (each expressed as a percentage):
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(1) the higher of (i) the Loss Reserve Ratio as of
such date and (ii) the product of (x) the quotient, expressed
as a percentage, of the Standard Concentration Limit divided
by the aggregate outstanding balance of all Eligible
Receivables as of such date, multiplied by (y) five (5);
(2) 1%;
(3) the product of (a) the sum of (i) the 30-day
composite commercial paper rate for "AA"-rated issuers, as
published by the Board of Governors of the Federal Reserve
System in "Statistical Release H.15(519), Selected Interest
Rates" or any successor publication under the heading
"Commercial Paper" on the Business Day immediately preceding
such date, (ii) 4.08% and (iii) the Purchase Premium at such
time and (b) 120/360; and
(4) the Dilution Reserve as of such date.
In the event that any Permitted Tax Lien shall have attached to any Receivable
in the Receivables Pool, the Reserve shall be increased by an amount equal to
the related tax that is then being contested.
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies, Inc.
"Sale Documents" means this Agreement, the Parallel Sale Agreement, the
Transfer Agreements, the Exhibits hereto and thereto, and all other
certificates, agreements and documents executed from time to time by any
Transaction Party in favor of or otherwise for the benefit of the Purchaser,
the Servicing Agent, the PSA Purchasers, any PSA Agent or any Transaction Party
in connection with the transactions contemplated in any of the foregoing.
"Seller" means Interface Securitization Corporation, a Delaware
corporation, and its successors and permitted assigns.
"Servicing Agent" means Canadian Imperial Bank of Commerce, acting in such
capacity, and any replacement thereof under Section 8.1.1.
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"Settlement Date" means any date, as described in Section 7.1 of this
Agreement, on which the Collection Agent is required to remit specified
payments to the Purchaser.
"Settlement Period" means the period from (and including) a Settlement
Date (or, in the case of the initial Settlement Period under this Agreement,
from the date of the Initial Purchase) to (but excluding) the immediately
succeeding Settlement Date.
"Special Concentration Limit" means, with respect to any Obligor listed on
Schedule A (together with its Affiliates and subsidiaries), the amount
indicated opposite the name of such Obligor; provided that the Purchaser may,
at any time in its discretion but subject to Section 13.11, reduce or increase
the Special Concentration Limit for any such Obligor, or add the name of any
other Obligor to Schedule A, through the delivery by the Purchaser to the
Seller of an amended Schedule A.
"Standard Concentration Limit" means, with respect to all of the
Receivables owing from a single Obligor (except for an Obligor listed on
Schedule A), together with Receivables owing from its Affiliates or
subsidiaries, an amount equal to $1,800,000; provided that the Purchaser may,
at any time in its discretion but subject to Section 13.11, reduce or increase
the Standard Concentration Limit for any Obligor through the delivery of a
notice by the Purchaser to the Seller.
"Structuring Fee" has the meaning assigned to that term in Section 5.1.
"Subordinated Note" means a note executed by the Seller to the order of
Interface and evidencing advances made from time to time by Interface to the
Seller, as the same may be amended, restated, supplemented or otherwise
modified from time to time in accordance with the terms of this Agreement.
"Transaction Parties" means, collectively, the Seller, Interface and the
Originators.
"Transfer Agreement" means, in the case of any Originator, an agreement,
in substantially the form attached hereto as Exhibit H, between the Seller and
such Originator pursuant to which the Seller will purchase Receivables from
such Originator, as such agreement may be amended, modified, extended or waived
from time to time with the consent of the Purchaser and the Servicing Agent.
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"Unused Facility Fee" has the meaning assigned to such term in Section
5.2.3.
ARTICLE II: OFFERING FACILITY
SECTION 2.1. The Facility. This Agreement creates an offering facility
only and does not constitute a commitment on the part of the Seller to sell an
Ownership Interest in Receivables or on the Purchaser to make any Purchases.
The Seller may from time to time offer to sell an Ownership Interest in
Receivables to the Purchaser and the Purchaser may make Purchases, at its sole
discretion and on the terms described in this Agreement.
ARTICLE III: WHAT IS SOLD
SECTION 3.1. Determination of Ownership Interest.
(a) When the Purchaser accepts an offer from the Seller to purchase an
interest in Receivables and has paid the cash component of the purchase price
therefor in accordance with the terms of this Agreement, the Purchaser shall
have acquired, in exchange for the purchase price therefor, an undivided
percentage ownership interest in the Receivables Pool at such time, including
in all Receivables therein, any Collections relating to such Receivables and
all Related Rights with respect thereto. The undivided percentage interest of
the Purchaser in all Receivables covered by this Agreement and Collections and
Related Rights with respect thereto shall be referred to in this Agreement as
the "Ownership Interest". The Ownership Interest on any date, except as
provided in paragraph (b) below, shall be equal to a fraction (expressed as a
percentage) calculated in the following manner:
I + R
---------
ER
where: I = the Investment on such date;
R = the Reserve on such date;
ER = the outstanding balance of all Eligible Receivables on such
date in the Receivables Pool, minus the aggregate amount by
which the outstanding balance of Eligible Receivables
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of each Obligor in the Receivables Pool exceeds the
Standard Concentration Limit (or, if applicable, the
Special Concentration Limit for such Obligor).
The Ownership Interest will change from time to time, except as provided
in paragraphs (b) or (c) of this Section, whenever the Investment, Reserve,
Eligible Receivables, Standard Concentration Limit or Special Concentration
Limit with respect to any Obligor changes.
(b) During any Reinvestment Suspension Period, the Ownership Interest
will remain fixed at the percentage in effect as of the close of business on
the Business Day immediately preceding the commencement of that period.
(c) The Ownership Interest in the Receivables will be reduced to zero
when the Purchaser receives the following amounts:
(1) its Investment;
(2) the amounts payable pursuant to Section
7.2.2(b)(i);
(3) all accrued and unpaid Unused Facility Fee; and
(4) all other amounts payable to the Purchaser under
this Agreement.
When the Ownership Interest in the Receivables is reduced to zero, the
Purchaser shall not be entitled to receive any additional Collections from the
Receivables.
(d) Subject to the provisions of Section 8.2(d), upon the Purchaser's
purchase of the Ownership Interest, (i) the Collection Agent shall be entitled
to endorse all drafts, checks and other forms of payment on account of the
Receivables and to settle, adjust and forgive any amounts payable on the
Receivables and (ii) the Purchaser shall be entitled to exercise all other
incidences of ownership in the Receivables.
SECTION 3.2. Frequency of Determining Ownership Interest. The Collection
Agent shall determine or be deemed to determine the Ownership Interest daily
and report it to the Servicing Agent at the following times:
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(a) on the date of the Initial Purchase;
(b) on the last Business Day of each week;
(c) on each Settlement Date;
(d) on the date of an Incremental Purchase;
(e) on the Business Day immediately preceding any Reinvestment Suspension
Period;
(f) on the last Business Day of any Reinvestment Suspension Period;
(g) when the Collection Agent has reason to believe that the Maximum
Ownership Interest has been exceeded; and
(h) at the reasonable request of the Purchaser.
SECTION 3.3. Maximum Ownership Interest. If at any time the sum (the
"Aggregate Ownership Interest") of the Ownership Interest hereunder and the
aggregate "Ownership Interests" under and as defined in the Parallel Sale
Agreement shall exceed the Maximum Ownership Interest, the Seller shall
immediately make a payment to the Collection Agent in an aggregate amount
sufficient to reduce the Aggregate Ownership Interest to the Maximum Ownership
Interest, such payment to be applied ratably (determined on the basis of the
respective investments outstanding on the date of such payment) to the
Investment hereunder and the "Investment" under the Parallel Sale Agreement.
The calculation of such payment at any time shall take into account the
corresponding reduction in the Reserve hereunder and the reduction in the
"Reserve" under the Parallel Sale Agreement that shall occur at the time of the
reduction in Investment hereunder and under the Parallel Sale Agreement.
ARTICLE IV: PURCHASE PRICE
The purchase price payable by the Purchaser for its Ownership Interest in
the Receivables and any Collections shall be comprised of a cash component and
a deferred payment component.
SECTION 4.1. Determination of Cash Component of Purchase Price. When the
Purchaser accepts an offer from the
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Seller to make a Purchase, the Purchaser will pay the following amounts in cash
to the Seller:
(a) for Initial and Incremental Purchases, the amount specified in the
notice required to be delivered by the Seller under Section 6.2(a); or
(b) for a Reinvestment Purchase, the amount obtained by multiplying (i)
the dollar amount of the Collections received on the date of such Purchase by
(ii) the Ownership Interest on that date, and subtracting from such amount any
amounts then payable to the Servicing Agent under Section 7.2.2(b)(i);
provided that the payment of any amount described in (a) or (b) above would not
cause (and such amount shall be reduced so as not to cause) either:
(1) the Investment to exceed the Facility Limit; or
(2) the Ownership Interest to exceed the Maximum
Ownership Interest.
SECTION 4.2. Satisfaction of Deferred Payment Component of Purchase
Price. Upon and after the reduction of the Ownership Interest to zero as
described in Section 3.1(c), all Collections or other cash received by the
Purchaser on account of Receivables and the interest of the Purchaser therein
and all Receivables held by or on behalf of the Purchaser will be transmitted
in the form received by the Purchaser to the Seller. After the reduction of
the Ownership Interest to zero as described in Section 3.1(c), the Purchaser
will reassign to the Seller the Ownership Interest in the Receivables, without
recourse, representation or warranty (except as to the Purchaser's own title
thereto), by an assignment acceptable to the Seller and the Purchaser. Upon
such reassignment to the Seller, the deferred payment component of the purchase
price under this Article IV shall be deemed to be satisfied.
ARTICLE V: FEES AND EXPENSES
SECTION 5.1. Structuring Fee. On August 7, 1995, the Seller will pay a
structuring fee (the "Structuring Fee") to the Purchaser equal to the amount
set forth in that certain Fee Agreement of even date herewith among Interface,
the Seller, the Purchaser and the Servicing Agent.
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SECTION 5.2. Settlement Date Payments. On each Settlement Date, the
Seller will pay to the Purchaser the following, in accordance with, and in the
manner provided in, Section 7.2.2:
SECTION 5.2.1. Purchase Discount. A "Purchase Discount" equal to the
weighted average of the following:
(i) the weighted average of the discount rates on all commercial paper
notes of the Purchaser issued at a discount outstanding during the related
Settlement Period (other than commercial paper notes the proceeds of which are
used by the Purchaser to (x) purchase receivables, or extend financing secured
thereby, at a fixed interest rate or (y) conduct any arbitrage activities of
the Purchaser), converted to an annual yield-equivalent rate on the basis of a
360-day year;
(ii) the weighted average of the annual interest rates payable on all
interest-bearing commercial paper notes of the Purchaser outstanding during the
related Settlement Period (other than the commercial paper notes the proceeds
of which are used by the Purchaser for the purposes described in clauses (x)
and (y) of paragraph (i) above), on the basis of a 360-day year; and
(iii) the weighted average of the annual interest rates applicable to any
Liquidity Facilities under which the Purchaser has borrowed loans during the
related Settlement Period (which loans shall be borrowed only after a
determination by the Purchaser that financing its activities during such period
by issuing commercial paper notes would not be practicable or cost-efficient);
provided that, (x) to the extent that the Investment is funded by a specific
issuance of commercial paper notes or a specific borrowing under a Liquidity
Facility, the Purchase Discount shall equal the rate or weighted average of the
rates applicable to such issuance or the weighted average of the interest rates
and related finance costs in respect of such borrowing; and (y) if on any
Settlement Date during any period in which the Purchaser's Investment is being
reduced, the sum of (A) the aggregate amount of Receivables that cease to be
Eligible Receivables during such period and (B) all amounts pursuant to clauses
(2) and (3) of Section 3.1(c) which accrued and were unpaid during such period,
is equal to or greater than 75% of the aggregate Reserve as of the last
Business Day on which the Purchaser's Investment was not being reduced, then
the Purchase Discount shall equal 1.5% per annum in excess of the rate of
interest per annum published on such day (or, if not then published, on the
most recently
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preceding day) in The Wall Street Journal as the "Prime Rate. Changes in the
rate payable hereunder shall be effective on each day on which a change in the
"Prime Rate" is published.
SECTION 5.2.2. Purchase Premium. A "Purchase Premium" equal, as of any
date, to a rate per annum determined in accordance with the following table and
based upon the credit ratings then most recently publicly announced by S&P and
Moody's (or imputed in the manner described below) in respect of the senior,
unsecured, non-credit-enhanced debt of Interface (the "Senior Interface Debt"):
Credit Rating Purchase Premium
------------- ----------------
BBB- or better from S&P and 0.35
Baa3 or better from Moody's
BB+ or better from S&P and
Ba1 or better from Moody's, and 0.40
no other level applies
BB or better from S&P and
Ba2 or better from Moody's, and 0.45
no other level applies
All other cases 0.55
If either S&P or Moody's shall not then have publicly announced a credit rating
in respect of the Senior Interface Debt, the Servicing Agent shall, in its
reasonable determination, impute a rating by such rating agency for the Senior
Interface Debt in accordance with the following:
(i) if such rating agency shall have publicly announced an imputed
rating for the Senior Interface Debt, such imputed rating shall be used
for such rating agency;
(ii) if such rating agency shall not have publicly announced an
imputed rating for the Senior Interface Debt, but shall have publicly
announced a rating for Interface's subordinated, unsecured,
non-credit-enhanced debt ("Subordinated Interface Debt"), the imputed
rating by such rating agency in respect of the Senior Interface Debt
shall be deemed to be the rating by such rating agency that is two levels
above the publicly announced rating by such rating agency then in effect
with respect to the Subordinated Interface Debt;
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(iii) if such rating agency shall not have publicly announced an
imputed rating for the Senior Interface Debt or a rating for the
Subordinated Interface Debt, but the other rating agency shall have
publicly announced any such rating (or a rating on the Senior Interface
Debt), the imputed rating by such rating agency in respect of the Senior
Interface Debt shall be based upon the imputed rating of the other rating
agency therefor, as determined in the manner described in clause (i) or
(ii) above, as applicable; and
(iv) if the Servicing Agent shall for any reason not be capable of
determining an imputed rating based on the factors described in clause
(i), (ii) or (iii) above, then the Servicing Agent shall impute a rating
based upon such other ratings as may then be in effect and such other
factors as the Servicing Agent shall reasonably determine to be relevant
at such time.
SECTION 5.2.3. Unused Facility Fee. An Unused Facility Fee for the
period from the immediately preceding Settlement Date (or, in the case of the
initial payment of such fee, from the date hereof) to such Settlement Date
equal to (i) a rate per annum equal to the Purchase Premium in effect on such
date minus 0.05%, multiplied by (ii) an amount, if positive, equal to
$40,000,000 minus the average daily amount of the outstanding Investment during
such period. The Unused Facility Fee shall be calculated on the basis of a
year of 360 days for actual days elapsed, and shall be payable by the Seller
from sources other than Collections allocable to the Purchaser.
SECTION 5.2.4. Operating Expense Fee. An Operating Expense Fee to cover
routine operating expenses of the Purchaser incurred during the immediately
preceding Settlement Period, including fees payable to commercial paper
dealers, issuing and paying agents, rating agencies, printers and auditors.
The Operating Expense Fee shall not exceed (i) with respect to commercial paper
dealer commissions, a rate per annum equal to 0.05% and (ii) with respect to
issuing and paying agent fees, rating agency fees, printing and all other
routine operating expenses, a rate per annum equal to 0.03%.
SECTION 5.2.5. Collection Agent Fee. A Collection Agent Fee equal to
1.0% per annum, which fee shall be remitted by the Purchaser to the Collection
Agent in arrears on each Settlement Date. If Interface or the Seller is acting
as the
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Collection Agent, then the Collection Agent shall retain an amount equal to the
Collection Agent Fee (in full satisfaction of the payment of such fee to the
Collection Agent) out of amounts required to be remitted by the Collection
Agent in accordance with Section 7.2.2(b)(i).
SECTION 5.3. Legal Fees and Other Expenses. In addition to all other
amounts payable by the Seller under this Agreement, the Seller agrees to pay,
by no later than 30 days after presentation of a bill, (i) the actual and
reasonable fees and expenses of counsel for the Purchaser in connection with
the negotiation, preparation, execution, amendment and enforcement of the Sale
Documents and advice with respect to the Purchaser's rights and remedies
thereunder, (ii) the actual and reasonable costs and expenses incurred by the
Purchaser and the Servicing Agent in connection with a review after the date
hereof by two rating agencies to be selected by the Servicing Agent in respect
of the transactions contemplated in the Sale Documents, and (iii) all other
actual and reasonable out-of-pocket costs and expenses incurred by the
Purchaser or the Servicing Agent in connection with the administration
(including periodic auditing) of the Transaction Parties in connection with the
transactions contemplated in the Sale Documents.
SECTION 5.4. Interest on Unpaid Amounts. To the extent that the Seller
or Collection Agent fails to pay when due (without regard to any grace period
therefor permitted under Section 12.1) to the Purchaser or the Servicing Agent
any fee, expense or other amount payable hereunder or under any Sale Document,
interest shall be due and payable on such unpaid amount, for each day until
paid in full, at the rate of one and one-half percent (1.5%) in excess of the
rate of interest per annum published on such day (or, if not then published, on
the most recently preceding day) in The Wall Street Journal as the "Prime Rate"
(or the average of such rates if more than one such rate is published on such
day). Changes in the rate payable hereunder shall be effective on each date on
which a change in the "Prime Rate" is published.
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ARTICLE VI: PURCHASE PROCEDURES
SECTION 6.1. Types of Purchases. The three types of Purchases which can
be made under this Agreement are an Initial Purchase, an Incremental Purchase
and a Reinvestment Purchase. The first Purchase made by the Purchaser under
this Agreement is the Initial Purchase. Any Purchase (other than the Initial
Purchase) made by the Purchaser which causes the amount of the Investment to
increase is an Incremental Purchase. The minimum amount of each Incremental
Purchase shall be $1,000,000. Any Purchase made by the Purchaser with
Collections is a Reinvestment Purchase.
SECTION 6.2. Notice Requirements.
(a) In the case of the Initial Purchase or an Incremental Purchase, the
Seller will give the Purchaser three Business Days' prior written notice of its
offer to sell an Ownership Interest in Receivables to the Purchaser. The
notice will be in the form of Exhibit A, and will include the amount of the new
Investment requested and the Business Day on which the Purchase will be made.
The Purchaser will notify the Seller within one Business Day after the receipt
of such notice from the Seller whether it intends to accept or reject the
offer.
(b) Either party hereto may elect not to make Reinvestment Purchases by
notifying the other party to such effect. Such notice shall be given by no
later than 1:00 P.M., New York time, on the third Business Day preceding the
date on which the Reinvestment Purchase was contemplated to be made. The
notice will be in the form of Exhibit B-1, and will specify (i) the date on
which Reinvestment Purchases shall cease and (ii) the amount to which the
Investment shall be reduced before Reinvestment Purchases will recommence.
(c) Upon notice to the Purchaser in the form of Exhibit B-2 (by no later
than 1:00 P.M., New York time, on the third Business Day preceding a Settlement
Date), the Seller may, on such Settlement Date, reduce the dollar amount of the
Investment in addition to the reduction which would take place by the
application of Collections in the amount determined in accordance with the
provisions of Section 6.2(b) above by paying to the Purchaser, by 3:00 P.M.,
New York time, on the Settlement Date, the dollar amount by which the
Investment is to be reduced, after giving effect to the application of
Collections received
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and applied to the reduction of the Investment on such Settlement Date.
(d) On not less than five Business Days' prior written notice, the Seller
may irrevocably from time to time reduce the unused portion of the Facility
Limit, provided that each such reduction shall be in the amount of $1,000,000
or an integral multiple thereof.
SECTION 6.3. Conditions Precedent to Initial Purchase. The following
conditions must be satisfied before the Purchaser will consider making the
Initial Purchase:
SECTION 6.3.1. Membership in the Purchaser. The Seller will have joined
the Purchaser as a member by delivering to the Purchaser an executed Membership
Agreement in the form of Exhibit C, together with the sum of $10,000 as an
investment in the Purchaser. Such investment will be refunded by the Purchaser
to the Seller when the Ownership Interest is reduced to zero as described in
Section 3.1(c) and no further Purchases are to be made.
SECTION 6.3.2. Structuring Fee. The Purchaser will have received the
Structuring Fee.
SECTION 6.3.3. Absence of Liens. The Servicing Agent will have received
evidence acceptable to it (including Uniform Commercial Code search reports)
that all Receivables and all proceeds thereof are free and clear of liens,
security interests, claims and encumbrances other than Permitted Liens.
SECTION 6.3.4. Financing Statements. The Servicing Agent will have
received acknowledgment copies of UCC-1 financing statements, and all other
documents reasonably requested by the Servicing Agent, to perfect, evidence and
protect (i) the Purchaser's Ownership Interest in the Receivables, and (ii) the
Seller's ownership interest in the Receivables purchased by it from the
Originators.
SECTION 6.3.5. Lock-Box Agreements. The Servicing Agent will have
received original Lock-Box Agreements in the form of Exhibit E executed (unless
otherwise indicated on Exhibit E) by the appropriate Transaction Parties, the
Purchaser and each of the Lock-Box Banks.
SECTION 6.3.6. Receivables Activity Report and Calculation of Ownership
Interest. The Servicing Agent will have
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received (i) a Receivables Activity Report covering the fiscal month ending
most recently prior to the date on which this Agreement is executed and (ii) a
report setting forth the calculation of the Ownership Interest upon giving
effect to the Initial Purchase.
SECTION 6.3.7. Resolutions. (i) The Servicing Agent will have received a
certificate of the Seller's secretary or assistant secretary attesting to: (a)
resolutions of the Seller's Board of Directors authorizing the execution by the
Seller of the Sale Documents to be executed by the Seller; (b) the names and
signatures of the officers of the Seller authorized to execute the Sale
Documents to be executed by the Seller; and (c) the completeness and
correctness of the attached articles or certificate of incorporation (certified
by the appropriate Secretary of State) and by-laws of the Seller.
(ii) The Servicing Agent will have received a certificate of the
secretary or assistant secretary of each of Interface and each Originator
attesting to: (a) resolutions of such Transaction Party's Board of Directors
(or a duly authorized committee thereof) authorizing the execution by such
Transaction Party of the Sale Documents to be executed by it; (b) the names and
signatures of the officers of such Transaction Party authorized to execute the
Sale Documents to be executed by it; and (c) the completeness and correctness
of the attached articles or certificate of incorporation (certified by the
appropriate Secretary of State) and by-laws of such Transaction Party.
SECTION 6.3.8. Legal Opinion of Seller's Counsel. The Servicing Agent
will have received opinions from counsel for the Transaction Parties,
substantially in the respective forms attached hereto as Exhibit G, and
covering such other matters as (i) that the transfers under each Transfer
Agreement constitute "true sales", (ii) that the Seller should not be
substantively consolidated with Interface or any other Transaction Party in any
bankruptcy or insolvency proceeding involving the Seller, Interface or such
Transaction Party, (iii) general corporate matters relating to the execution,
delivery and performance by the Transaction Parties of the Sale Documents and
(iv) the perfection of the Ownership Interest, together with such other matters
as the Servicing Agent or the Purchaser may reasonably request.
SECTION 6.3.9. Good Standing Certificates. The Servicing Agent will have
received certificates of recent date issued by the Secretary of State of the
States of each
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Transaction Party's jurisdiction of incorporation as to the legal existence and
good standing of such Transaction Party.
SECTION 6.3.10. Subordinated Note. The Servicing Agent will have
received a copy of the Subordinated Note, which note shall provide for the
subordination of the indebtedness evidenced thereby to the obligations and
liabilities of the Seller hereunder on such terms as shall be satisfactory to
the Purchaser and the Servicing Agent.
SECTION 6.3.11. Other Agreements. The Servicing Agent shall have
received an executed Transfer Agreement and Consent and Acknowledgment between
the Seller and each Originator, respectively.
SECTION 6.4. Condition Precedent to all Incremental Purchases. Before
the Purchaser will consider making an Incremental Purchase, the Servicing Agent
will have received a Receivables Activity Report covering the period from the
date on which the last such report was delivered under Section 7.4 to the
Business Day preceding the date of the Incremental Purchase.
SECTION 6.5. Conditions Precedent to All Purchases. The following
conditions must be satisfied before the Purchaser will consider making any
Purchase:
SECTION 6.5.1. Representations and Covenants. On and as of the date of
such Purchase (i) the representations of the Seller, Interface and the
Collection Agent in Article IX shall be true and correct in all material
respects with the same effect as if made on such date, (ii) the Seller,
Interface and the Collection Agent shall be in compliance with the covenants
set forth in this Agreement, (iii) the representations of each Originator set
forth in the applicable Transfer Agreement and the Consent and Acknowledgment
shall be true and correct in all material respects with the same effect as if
made on such date and (iv) each Originator shall be in compliance with the
covenants set forth in each of the Sale Documents executed by it. No Event of
Termination shall have occurred and then be continuing.
SECTION 6.5.2. Other Documents. Each Transfer Agreement and the related
Consent and Acknowledgment shall be in full force and effect, and the Servicing
Agent and the Purchaser will have received such additional opinions,
certificates and agreements as the Purchaser or the Servicing Agent shall have
reasonably requested.
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ARTICLE VII: SETTLEMENT PROCEDURES
SECTION 7.1. Settlement Dates. Each of the following shall constitute a
Settlement Date:
(a) each date (or, if any such date is not a Business Day, the first
Business Day following such date) set forth on Schedule F hereto;
(b) during any Reinvestment Suspension Period, the first Business Day of
each week;
(c) following the occurrence of an Event of Termination, each day
designated as a Settlement Date by the Purchaser;
(d) each Business Day on which the Purchaser's Investment is reduced in
accordance with Section 6.2(c);
(e) any date on which a reduction in the Investment is required to
prevent the Ownership Interest from exceeding the Maximum Ownership Interest;
and
(f) each date on which any payment due to the Purchaser from the Seller
under Article XI has not been made.
SECTION 7.2. Application of Collections. The Collection Agent will apply
the Collections as provided in Sections 7.2.1 and 7.2.2, as applicable.
SECTION 7.2.1. Application of Collections on Days That Are Not Settlement
Dates.
(a) The Collection Agent will, on any Business Day (other than a
Settlement Date), from Collections received on such day:
(i) first, remit to the Seller or its designee (for the account of
the Seller and any interests that may then exist under the Parallel
Sale Agreement) an amount equal to the product of (1) 100% minus the
Ownership Interest and (2) total Collections; and
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(ii) second, pay to the Seller for a Reinvestment
Purchase an amount equal to the product of (1) the Ownership
Interest and (2) total Collections less the amounts described
in Section 7.2.2(b)(i).
(b) Notwithstanding paragraph (ii) of subsection (a) above, if
Reinvestment Purchases have ceased in accordance with Section 6.2(b), the
Collection Agent will set aside and hold in trust for the benefit of the
Purchaser prior to application as provided in Section 7.2.2 the amount which
would otherwise have been paid to the Seller pursuant to paragraph (ii) of
subsection (a) above.
SECTION 7.2.2. Application of Collections on Settlement Dates. The
Collection Agent will, by 3:00 P.M. (New York time) on each Settlement Date:
(a) first, remit to the Seller or its designee (for
the account of the Seller and any interests that may then
exist under the Parallel Sale Agreement) an amount equal to
the product of (i) 100% minus the Ownership Interest and (ii)
total Collections; and
(b) second, from the Purchaser's Ownership Interest
in the Collections, pay:
(i) first, to the Servicing Agent for the
account of the Purchaser an amount equal to:
DSP
(PD + PP + OEF + CAF) X --- X AI
360
where PD = Purchase Discount
PP = Purchase Premium
OEF = Operating Expense Fee
CAF = Collection Agent Fee
DSP = the number of days in the Settlement Period
preceding such Settlement Date
AI = the average daily Purchaser's Investment for
the Settlement
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Period preceding such Settlement Date
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(ii) second,
(A) if a Reinvestment Suspension Period
shall then be in effect, then all remaining Collections
will be paid to the Purchaser as a return of its
Investment; or
(B) if a Reinvestment Suspension Period
shall not then be in effect, then all remaining
Collections shall be paid to the Seller for a
Reinvestment Purchase.
SECTION 7.3. Adjustments due to Dilution, Etc. If on any day, with
respect to any Receivable in which the Purchaser has an Ownership Interest, (i)
the representation and warranty contained in Section 9.1(f) is no longer true,
(ii) the outstanding balance thereof is reduced, adjusted or cancelled as a
result of defective, rejected or returned merchandise or services or in
connection with a claim, dispute or offset asserted against such Receivable by
an Obligor, (iii) the Seller, the Collection Agent or any Originator shall
otherwise amend, modify or waive any term or condition of such Receivable or
(iv) the Seller, the Collection Agent or any Originator shall otherwise suffer
any Dilution to occur, then in each such case (x) the Seller shall be deemed to
have received on such day a Collection of the outstanding balance (before
giving effect to the related dilution event) of such Receivable and (y) the
Ownership Interest shall thereupon be automatically adjusted by decreasing "ER"
in the denominator of the fraction described in Section 3.1(a) by the amount of
such deemed Collection.
SECTION 7.4. Receivables Activity Report. The Collection Agent will
provide the Purchaser with a Receivables Activity Report covering the most
recently completed Settlement Period no later than 15 days following the
related Settlement Date.
SECTION 7.5. Payments Generally. Notwithstanding anything herein to the
contrary, no reduction in Investment shall be considered effected, and no
amount of Purchase Discount, Purchase Premium, Operating Expense Fee,
Collection Agent Fee or other amount due hereunder shall be considered paid by
any distribution to the extent that at any time all or a portion of such
distribution is rescinded or must otherwise be returned for any reason.
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ARTICLE VIII: SERVICING AGENT AND COLLECTION AGENT
SECTION 8.1. Appointment of Servicing Agent. The Purchaser has appointed
Canadian Imperial Bank of Commerce as its Servicing Agent. The Servicing Agent
is responsible for administering and enforcing this Agreement and fulfilling
all other duties expressly assigned to it in this Agreement. The Purchaser has
granted the Servicing Agent the authority to take all actions necessary to
assure the Seller's compliance with the terms of this Agreement and to take all
actions required or permitted to be performed by the Purchaser under this
Agreement.
SECTION 8.1.1. Replacement of Servicing Agent. The Purchaser may, at any
time in its discretion, remove a Servicing Agent and appoint a new Servicing
Agent, which shall have the duties described in Section 8.1.
SECTION 8.2. Appointment of Collection Agent.
(a) The Purchaser appoints Interface as its Collection Agent and the
Collection Agent accepts such appointment. The Collection Agent shall be
responsible for collecting the Receivables, tracking, holding and remitting the
Collections and fulfilling all other duties expressly assigned to it in this
Agreement. The Collection Agent shall hold all documents, instruments and
records relating to the Receivables for the benefit of the Purchaser and the
Servicing Agent, to the extent of their respective interests therein.
Interface may delegate its duties under this Agreement as Collection Agent in
respect of any Receivables to the Originator of such Receivables and, to the
extent such delegation occurs, references to the Collection Agent shall be
deemed to include references to such Originator. The delegation by Interface
of its duties as Collection Agent shall not relieve Interface of any of its
obligations as Collection Agent hereunder.
(b) The Collection Agent shall, on each day on which Collections are
received by it, set aside and hold in trust for the Purchaser, segregated from
other funds of the Collection Agent, the Purchaser's share of such Collections.
(c) The Purchaser grants the Collection Agent the authority necessary to
carry out its duties under this Agreement for so long as it is acting as
Collection Agent.
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(d) The Purchaser grants, to the extent it has authority to make such
grant, to the Collection Agent, for so long as it is acting in that capacity,
an irrevocable power of attorney to endorse all drafts, checks and other forms
of payment made out in any Transaction Party's name and to settle, adjust and
forgive any Receivable, subject to the provisions of Section 10.3(b) hereof.
Upon any replacement of the Collection Agent, such power of attorney in favor
of the replaced Collection Agent will terminate and have no further force or
effect.
(e) The Collection Agent shall exercise reasonable care in the
performance of its duties under this Agreement and shall use the same degree of
care and skill which it applies to its own property. If and to the extent that
any Originator is performing functions of the Collection Agent, Interface
agrees to cause such Originator to exercise substantially the same degree of
care and skill which Interface is required to apply hereunder.
SECTION 8.2.1. Replacement of Collection Agent;
Notification of Obligors.
(a) The Purchaser may, in its sole discretion at any time following the
occurrence of an Event of Termination, remove Interface as its Collection Agent
(whereupon all authority delegated by Interface to any Originator in respect of
the responsibilities of the Collection Agent shall immediately terminate),
appoint a new Collection Agent, take control of the Lock-Boxes (by delivering
to the Lock-Box Banks notice in substantially the form of Exhibit D), notify
Obligors of its Ownership Interest in the Receivables and exercise all other
incidences of ownership in the Receivables.
(b) If Interface is removed as Collection Agent, Interface and the Seller
shall (i) transfer to the Purchaser or any successor servicer designated by the
Purchaser all records, correspondence and documents relating to the collection,
administration or monitoring of the Receivables that may from time to time be
requested by the Purchaser or such successor and (ii) permit such Persons to
have access to, and to copy, all software used by Interface or the Seller in
the collection, administration or monitoring of the Receivables. Interface and
the Seller each hereby grant to the Purchaser, for use by any Collection Agent
that may be designated by the Purchaser following the removal of Interface as
Collection Agent, a non-exclusive license to use all computer software now or
hereafter being utilized by it in connection with the collection,
administration or monitoring of the Receivables; provided that
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use by any such successor Collection Agent of such computer software shall be
limited to that reasonably necessary to collect, administer or monitor the
Receivables. Such license shall expire upon the later to occur of the
reduction to zero of the Ownership Interest and the termination of this
Agreement. In the case of software that is licensed by, or otherwise made
available to, Interface or the Seller from or by any third party, Interface or
the Seller, as applicable, shall have obtained such consents and otherwise
taken all actions necessary in order to enable any Collection Agent hereunder
to succeed to all rights of Interface and the Seller to the quiet use and
enjoyment of such software for the purpose of discharging its obligations under
or in connection with the Sale Documents.
ARTICLE IX: REPRESENTATIONS AND WARRANTIES
SECTION 9.1. Representations and Warranties of the Seller and the
Collection Agent. The Seller makes, and where applicable the Collection Agent
(with respect to itself) makes, the following representations and warranties to
the Purchaser on the date hereof and on the date of each Purchase hereunder:
(a) Each of the Seller and the Collection Agent is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and is duly qualified in good standing as a
foreign corporation in each jurisdiction where the failure to be so qualified
could materially adversely affect its ability to perform its obligations
hereunder.
(b) The execution, delivery and performance by the Seller and the
Collection Agent of the Sale Documents, and the Seller's use of the proceeds of
the Purchases, are within the Seller's and the Collection Agent's respective
corporate powers, have been duly authorized by all necessary corporate action,
do not contravene (i) the Seller's or the Collection Agent's respective
charters or by-laws or (ii) law or any contractual restriction binding on or
affecting the Seller or the Collection Agent, and do not result in or require
the creation of any lien (other than pursuant hereto) upon or with respect to
any of its properties; and no transaction contemplated hereby requires
compliance with any bulk sales act or similar law.
(c) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for (i)
the due execution, delivery and performance by the Seller or the Collection
Agent of the Sale
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Documents, (ii) the perfection, or the exercise by the Purchaser, of the
Purchaser's rights and remedies under the Sale Documents, or (iii) the
perfection, or the exercise by the Seller, of the Seller's rights and remedies
under any Transfer Agreement or the related Consent and Acknowledgment, except
in each case for the filing of the financing statements referred to in Section
6.3.4.
(d) The Sale Documents, when executed and delivered by each Transaction
Party that is named as party thereto, will be the legal, valid and binding
obligations of each such Transaction Party, enforceable in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency or other similar laws or by general principles of
equity.
(e) There is no pending or threatened action or proceeding affecting the
Seller or the Collection Agent or any of their respective subsidiaries before
any court, governmental agency or arbitrator which may materially adversely
affect (i) the financial condition or operations of the Seller or (ii) the
ability of the Seller or the Collection Agent to perform its obligations under
the Sale Documents, or which could affect the legality, validity or
enforceability of any Sale Document or of the Ownership Interest.
(f) The Seller is the legal and beneficial owner of the Receivables free
and clear of any lien, security interest, claim or encumbrance, except
Permitted Liens; upon each Purchase, the Purchaser will acquire a valid and
perfected first priority ownership interest (or, if applicable as contemplated
in Section 13.7 or Section 13.8, a valid and perfected first priority security
interest) in the Receivables then existing or thereafter arising and in the
Related Rights and the Collections with respect thereto, free and clear of any
lien, security interest, claim or encumbrance, except Permitted Liens.
(g) The information provided by the Seller to the Collection Agent for
use in each Receivables Activity Report prepared under Section 7.4 and all
information and Sale Documents furnished or to be furnished at any time by the
Seller or the Collection Agent to the Servicing Agent in connection with this
Agreement is or will be accurate in all material respects as of its date, and
no such document will contain any untrue statement of a material fact or will
omit to state a material fact.
(h) Each Receivables Activity Report prepared by the Collection Agent
under Section 7.4 will be accurate in all
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material respects as of its date, and no such document will contain any untrue
statement of a material fact or will omit to state a material fact.
(i) The chief place of business and chief executive office of each
Transaction Party and the office where each Transaction Party keeps its records
concerning the Receivables are located at the respective addresses specified on
Schedule D hereto.
(j) A complete and accurate list of the names and addresses of the
Lock-Box Banks, together with the account numbers of the Lock-Boxes, is set
forth in Schedule C hereto (with such additions after the date hereof of other
Lock-Box Banks and/or with such other Lock-Boxes as have been notified to the
Servicing Agent and in respect of which, in each case, a Lock-Box Agreement in
the form of Exhibit E shall have been duly executed (unless otherwise indicated
on Exhibit E) by each of the appropriate Transaction Party, the Purchaser and
such Lock-Box Bank).
(k) The balance sheets of the Collection Agent and its subsidiaries as at
December 31, 1994, and the related statements of income and retained earnings
of the Collection Agent and its subsidiaries for the fiscal year then ended,
copies of which have been furnished to the Servicing Agent, fairly present the
financial condition of the Collection Agent and its subsidiaries as at such
date and the results of the operations of the Collection Agent and its
subsidiaries for the period ended on such date, all in accordance with
generally accepted accounting principles consistently applied, and since
December 31, 1994, there has been no material adverse change in such conditions
or operations. The Seller further represents that since December 31, 1994,
there has been no material adverse change in the collectibility of the
Receivables taken as a whole.
(l) The Seller is treating the conveyance of the Ownership Interest in
the Receivables, the Related Rights and the Collections under this Agreement as
a sale for purposes of generally accepted accounting principles.
(m) The Seller does not sponsor, maintain or contribute to any Plan.
Each Plan is in compliance with all of the applicable material provisions of
ERISA and each Plan intended to be qualified under Section 401(a) of the Code
is so qualified. No Plan has incurred an "accumulated funding deficiency"
(within the meaning of Section 302 of ERISA or
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Section 412 of the Code) whether or not waived. Neither the Collection Agent
nor any ERISA Affiliate (i) has incurred or expects to incur any liability
under Title IV of ERISA, with respect to any Plan, which could give rise to a
lien in favor of the PBGC, other than liability for the payment of premiums,
all of which have been timely paid when due in accordance with Section 4007 of
ERISA, (ii) has incurred or expects to incur any withdrawal liability, within
the meaning of Section 4201 of ERISA, (iii) is subject to any lien under
Section 412(n) of the Code or Sections 302(f) or 4068 of ERISA or arising out
of any action brought under Sections 4070 or 4301 of ERISA, or (iv) is required
to provide security to a Plan under Section 401(a)(29) of the Code. The PBGC
has not instituted proceedings to terminate any Plan or to appoint a trustee or
administrator of any such Plan and no circumstances exist that constitute
grounds under Section 4042 of ERISA to commence any such proceedings.
(n) Prior to each transfer pursuant to any Transfer Agreement, the
applicable Originator thereunder shall be the legal and beneficial owner of the
Receivables sold by it to the Seller thereunder, free and clear of any lien,
security interest or encumbrance, and such Transfer Agreement is effective to,
and shall, transfer to the Seller (and the Seller shall acquire) from such
Originator all right, title and interest of such Originator in each such
Receivable, and all Related Rights and Collections with respect thereto, free
and clear of any lien, security interest or encumbrance.
(o) With respect to each Receivable sold or purported to be sold by an
Originator under any Transfer Agreement, the Seller shall have given to such
Originator at the time of such sale reasonably equivalent value in
consideration of the transfer of such Receivable, and each such transfer shall
not have been made for or on account of an antecedent debt owed by such
Originator to the Seller and no such transfer is or may be voidable under any
Section of the Bankruptcy Code. Each Originator under a Transfer Agreement is
treating the conveyance of receivables thereunder as a sale for purposes of
generally accepted accounting principles.
(p) Except as described in Schedule E, no Transaction Party has any trade
name, fictitious name, assumed name or "doing business as" name.
(q) Neither the Seller nor any other Transaction Party is (i) an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended from time to time, or
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any successor statute, or (ii) a "holding company" or a "subsidiary company" or
an "affiliate" of a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended from time to time, or any successor
statute.
(r) The Seller and each Originator, both prior to and after giving effect
to the Initial Purchase hereunder, and after giving effect to each Purchase, as
well as each transfer under any Transfer Agreement, (i) is not "insolvent" (as
such term is defined in Section 101(31)(A) of the Bankruptcy Code); (ii) is
able to pay its debts as they become due; and (iii) does not have unreasonably
small capital for the business in which it is engaged or for any business or
transaction in which it is about to engage.
(s) All Obligors have been instructed to remit payments for Receivables
to a Lock-Box in respect of which a Lock-Box Agreement in the form of Exhibit E
has been duly executed and delivered (unless otherwise indicated on Exhibit E).
(t) A true, accurate and complete copy of the Credit and Collection
Policy of each Originator as of the date of this Agreement is attached hereto
in Schedule B, and in each case such Credit and Collection Policy has not been
amended, restated, supplemented or otherwise modified since such respective
date without the prior written consent of the Purchaser and the Servicing
Agent.
(u) All of the outstanding capital stock of the Seller and each
Originator is directly or indirectly owned of record by Interface, all of which
capital stock is fully paid and nonassessable.
(v) At all times from and after the Initial Purchase hereunder, the
Seller has a net worth, as determined in accordance with generally accepted
accounting principles, in an amount not less than three percent (3%) of the
outstanding balance of the Receivables Pool.
SECTION 9.2. Representations and Warranties of Interface. In support of
the obligations of Interface under Section 10.4, and the other covenants of
Interface set forth in Section 10.5, Interface makes, with respect to itself,
the following representations and warranties to the Purchaser on the date
hereof and on the date of each Purchase hereunder:
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(a) It is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its materially adversely affect
its ability to perform its obligations hereunder.
(b) The execution, delivery and performance by Interface of this
Agreement are within the Interface's corporate powers, have been duly
authorized by all necessary corporate action, and do not contravene (i)
Interface's charter or by-laws or (ii) law or any contractual restriction
binding on or affecting Interface.
(c) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by Interface of this Agreement.
(d) This Agreement, when executed and delivered by Interface, will be the
legal, valid and binding obligation of Interface, enforceable in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency or other similar laws or by general principles of
equity.
(e) There is no pending or threatened action or proceeding affecting
Interface or any of its subsidiaries before any court, governmental agency or
arbitrator which may materially adversely affect its ability to perform its
obligations under this Agreement, or which could affect the legality, validity
or enforceability of this Agreement as against Interface.
(f) Interface is not (i) an "investment company" within the meaning of
the Investment Company Act of 1940, as amended from time to time, or any
successor statute, or (ii) a "holding company" or a "subsidiary company" or an
"affiliate" of a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended from time to time, or any successor
statute.
ARTICLE X: COVENANTS
SECTION 10.1. Affirmative Covenants of the Seller and the Collection
Agent. Until the Ownership Interest is reduced to zero as described in Section
3.1(c) and no further Purchases are to be made, the Seller will, and the
Collection Agent (with respect to itself) will, unless the Purchaser has
otherwise consented in writing:
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(a) Comply with all applicable laws, rules, regulations and orders with
respect to it, its business and properties and all Receivables, the Related
Rights and Collections the failure to comply with which may materially
adversely affect its financial condition or operations, or its ability to
perform its obligations under the Sale Documents, or which may affect the
legality, validity or enforceability of any Sale Document or of the Ownership
Interest.
(b) Maintain its corporate existence in the jurisdiction of its
incorporation, and qualify and remain qualified in good standing as a foreign
corporation in each jurisdiction where the failure to be so qualified could
materially adversely affect its ability to perform its obligations hereunder.
(c) At any reasonable time, upon prior notice to such Person, permit the
Purchaser, the Servicing Agent and any lender or other financial institution
party to any Credit Facility or their respective agents or representatives to
visit and inspect any of its properties, to examine its books of account and
other records and files relating to Receivables (including, without limitation,
computer tapes and disks) and to discuss its affairs, business, finances and
accounts with its officers and employees.
(d) Maintain and implement administrative and operating procedures
(including, without limitation, an ability to recreate records evidencing
Receivables in the event of the destruction of the originals thereof), and keep
and maintain all records and other information, reasonably necessary, or in any
material respect advisable, for the collection of Receivables (including,
without limitation, records reasonably adequate to permit the daily
identification of Receivables and all Collections and adjustments to
Receivables).
(e) At its expense timely and fully perform and comply with all material
provisions and covenants required to be observed by the Seller under the
contracts related to the Receivables.
(f) Keep its place of business or chief executive office (if it has more
than one place of business) and the office where it keeps the originals of its
records concerning the Receivables at the address therefor listed in Schedule D
or, upon 30 days' prior written notice to the Purchaser, at any other location
in a jurisdiction where all UCC financing or continuation statements, or
amendments thereto, and such other
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instruments and documents, that may be necessary or desirable, or that the
Purchaser or the Servicing Agent may reasonably request, to perfect, protect or
evidence the Purchaser's Ownership Interest have been filed.
(g) Comply in all material respects with the applicable Credit and
Collection Policy in regard to each Receivable and any contract related to such
Receivable.
(h) Instruct all Obligors to cause all Collections to be deposited
directly into a Lock-Box.
(i) File and maintain in effect all filings, and take all such other
actions, as may be necessary to protect the validity and perfection of (i) the
Ownership Interest and (ii) the ownership interest of each Originator under a
Transfer Agreement in the receivables purportedly transferred thereunder.
(j) Cause each Plan to comply in all material respects with all
applicable provisions of ERISA.
(k) Treat the conveyance of the Ownership Interest in the Receivables,
the Related Rights and the Collections under this Agreement as a sale for
purposes of generally accepted accounting principles.
(l) In the case of the Seller, at all times from and after the Initial
Purchase hereunder, have a net worth, as determined in accordance with
generally accepted accounting principles, in an amount not less than three
percent (3%) of the outstanding balance of the Receivables Pool at such time.
(m) In the case of the Seller, give to each transferor under each
Transfer Agreement to which it is a party reasonably equivalent value in
consideration of the transfer of each Receivable thereunder.
(n) In the case of the Seller, require each transferor under a Transfer
Agreement to hold in trust and promptly turn over to the Collection Agent any
Collections received by such transferor on the Seller's behalf.
(o) In the case of the Seller, assign to the Purchaser, consistent with
the Consent and Acknowledgment, all rights of the Seller under each Transfer
Agreement and agree that (i) the Purchaser shall be a third party beneficiary
of the Seller's rights under such Transfer Agreement, (ii) the Seller
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will enforce its rights as transferee under such Transfer Agreement on behalf
of the Purchaser and (iii) the Purchaser shall be entitled to enforce such
rights against the applicable transferor as if the Purchaser had been party to
such Transfer Agreement.
SECTION 10.2. Reporting Requirements of the Seller and the Collection
Agent. Until the Ownership Interest is reduced to zero as described in Section
3.1(c) and no further Purchases are to be made, the Seller and the Collection
Agent will, unless the Purchaser shall otherwise consent in writing, furnish to
the Purchaser (or, in the case of (e) below, assist the Collection Agent in
furnishing to the Purchaser):
(a) as soon as available and in any event within 60 days after the end of
each of the first three quarters of each fiscal year of Interface, balance
sheets of Interface and its subsidiaries as of the end of such quarter and
statements of income and retained earnings of Interface and its subsidiaries
for the period commencing at the end of the previous fiscal year and ending
with the end of such quarter, certified by the chief financial officer of
Interface and prepared on a consolidated and a "line of business" basis;
(b) as soon as available and in any event within 120 days after the end
of each fiscal year of Interface, a copy of the annual report for such year for
Interface and its subsidiaries, containing audited financial statements for
such year certified in a manner acceptable to the Purchaser by BDO Seidman or
other independent public accountants acceptable to the Purchaser and prepared
on a consolidated and a "line of business" basis;
(c) promptly after the sending or filing thereof, copies of all reports
which Interface sends to the holders, as such, of any of its securities (as a
class), and copies of all regular or periodic reports (including all reports
filed on Form 10-K, 10-Q and 8-K and all other reports required to be filed
under Section 13 or Section 15(d) of the Securities Exchange Act of 1934) and
all registration statements (without exhibits) which Interface or any
subsidiary files with the Securities and Exchange Commission or any national
securities exchange;
(d) (i) promptly and in any event within 30 Business Days after Interface
or any ERISA Affiliate knows or has reason to know that a "reportable event"
(as defined in Section 4043 of ERISA) has occurred with respect to any Plan, a
statement of the
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chief financial officer of Interface setting forth details as to such
reportable event and the action that Interface or an ERISA Affiliate proposes
to take with respect thereto, together with a copy of the notice of such
reportable event, if any, given to the PBGC, the Internal Revenue Service or
the Department of Labor; (ii) promptly and in any event within 10 Business Days
after receipt thereof, a copy of any notice Interface or any ERISA Affiliate
may receive from the PBGC relating to the intention of the PBGC to terminate
any Plan or to appoint a trustee to administer any such Plan; (iii) promptly
and in any event within 10 Business Days after a filing with the PBGC pursuant
to Section 412(n) of the Code of a notice of failure to make a required
installment or other payment with respect to a Plan, a statement of the chief
financial officer of Interface setting forth details as to such failure and the
action that Interface or an ERISA Affiliate proposes to take with respect
thereto, together with a copy of such notice given to the PBGC; and (iv)
promptly and in any event within 30 Business Days after receipt thereof by
Interface or any ERISA Affiliate from the sponsor of a multiemployer plan (as
defined in Section 3(37) of ERISA), a copy of each notice received by Interface
or any ERISA Affiliate concerning the imposition of withdrawal liability or a
determination that a multiemployer plan is, or is expected to be, terminated or
reorganized;
(e) the Receivables Activity Report as required under Section 7.4;
(f) forthwith upon the occurrence of any of the following, notice of (i)
the occurrence of any Event of Termination, (ii) any change in the credit
rating assigned by S&P or Moody's to any indebtedness of any Transaction Party,
and (iii) any change in any Credit and Collection Policy; and
(g) such other information, documents, records or reports respecting the
Receivables or the condition or operations, financial or otherwise, of the
Seller, the Collection Agent, the Originators or any of their respective
subsidiaries as the Purchaser or the Servicing Agent may from time to time
reasonably request.
SECTION 10.3. Negative Covenants of the Seller and the Collection Agent.
Until the Ownership Interest is reduced to zero as described in Section 3.1(c)
and no further Purchases are to be made, neither the Seller nor the Collection
Agent will, unless the Purchaser has otherwise consented in writing:
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(a) Except as provided herein, sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist any security
interest, lien or encumbrance (other than any Permitted Lien) upon or with
respect to, (i) in the case of the Seller, any of its assets, properties or
interests in property, including, without limitation, any of the Receivables,
the Related Rights, the Collections, or any Lock-Box, or assign any right to
receive income in respect thereof; provided that this Section 10.3(a) shall not
restrict the ability of the Seller to sell "Ownership Interests" in the
Receivables, the Related Rights and the Collections under (and as defined in)
the Parallel Sale Agreement, and (ii) in the case of the Collection Agent, any
of the Receivables, the Related Rights, the Collections or any Lock-Box, or
assign any right to receive income in respect thereof.
(b) Amend or otherwise modify the terms of any Receivable that is (or
shall have been at any time) an Eligible Receivable, or amend, modify or waive
any term or condition of any contract related thereto, except in a manner
consistent with the applicable Credit and Collection Policy and other ordinary
course practices in effect on the date hereof.
(c) Make any change in the character of the business of the Seller, any
material change in the character of the business of the Collection Agent, or
any change in any Credit and Collection Policy which change in any of the
foregoing cases would be reasonably likely to materially impair the
collectibility of any Receivable.
(d) Add or terminate any bank as a Lock-Box Bank from those listed on
Schedule C hereto, or make any change in its instructions to Obligors regarding
payments to be made on any Receivable or payments to be made to any Lock-Box
Bank, unless the Purchaser shall have received notice of such addition,
termination or change and, with respect to the addition of any Lock-Box Bank, a
Lock-Box Bank Agreement in substantially the form of Exhibit E executed by the
Seller, the applicable Originator, the Purchaser and such Lock-Box Bank shall
have been delivered to the Servicing Agent.
(e) Deposit or otherwise credit, or cause or permit to be so deposited or
credited, to any Lock-Box cash or cash proceeds other than Collections or other
proceeds of Receivables; provided, it is understood that from time to time an
obligor may mistakenly cause a remittance that is not a Collection to be
directed to a Lock-Box, and in such case the Seller shall,
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promptly following its becoming aware of such mistake, so advise the Collection
Agent.
(f) (i) In the case of the Seller or the Collection Agent, permit any
accumulated funding deficiency (as defined in Section 302 of ERISA or Section
412 of the Code) to exist with respect to any Plan, whether or not waived, (ii)
fail, or permit any ERISA Affiliate to fail, to pay any required installment or
any other payment required under Section 412 of the Code with respect to any
Plan on or before the due date for such installment or other payment, (iii)
terminate, or permit any ERISA Affiliate to terminate, any Plan which would
result in any liability of the Collection Agent or any ERISA Affiliate under
Title IV of ERISA, (iv) take any action or fail to take any action, or permit
any ERISA Affiliate to take any action or fail to take any action, with respect
to any multiemployer plan (as defined in Section 3(37) of ERISA) that will
result in withdrawal liability of the Seller or any ERISA Affiliate, or (v)
amend, or permit any ERISA Affiliate to amend, a Plan resulting in an increase
in liabilities such that the Seller or any ERISA Affiliate is required to
provide security to such Plan under Section 401(a)(29) of the Code.
(g) In the case of the Seller, (i) enter into or be a party to any
agreement or instrument other than this Agreement, the other Sale Documents and
the Subordinated Note, and such other agreements ("Operating Agreements") in
the ordinary course of its limited business affairs as shall be necessary to
effect the purposes of Section 10.4), (ii) amend, modify or waive any provision
in any Sale Document, the Subordinated Note or (if any Affiliate of the Seller
shall be party thereto) any Operating Agreement, or give any approval or
consent of permission provided for in any thereof; provided that, in the case
of the Parallel Sale Agreement, the Seller may agree to amend or modify such
agreement without the prior written consent of the Purchaser to the extent that
such amendment or modification (x) corresponds and conforms to an amendment
then being made to a term or provision contained in this Agreement, (y) relates
to any reduction of the pricing applicable to the Seller thereunder or (z)
permits or consents to the assignment by any financial institution party
thereto of all or any portion of its interest thereunder, or (iii) unless
thirty (30) days' prior written notice thereof shall have been given by the
Seller to the Purchaser and the Servicing Agent, amend, modify or waive any
provision in any other Operating Agreement; provided that, upon any such
notice, the Purchaser or the Servicing Agent may require that, prior to giving
effect to any such amendment, modification
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or waiver, the Seller shall have provided to the Purchaser and the Servicing
Agent (x) an opinion of counsel affirming that such action shall not adversely
affect the conclusions set forth in the opinion required to be delivered under
Section 6.3.8(ii) and (y) a certificate of a senior officer of the Seller
certifying that, after giving effect to such action, no Event of Termination
shall have occurred and then be continuing.
(h) In the case of the Seller, engage in any business or enterprise or
enter into any transaction other than as contemplated by this Agreement and the
other Sale Documents.
(i) Amend the Certificate of Incorporation or By-Laws of the Seller.
(j) In the case of the Seller, create, incur, guarantee, assume or suffer
to exist any indebtedness or other liabilities, whether direct or contingent,
other than (i) as a result of the indorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business, (ii) the incurrence of obligations under this Agreement, the Parallel
Sale Agreement, the Subordinated Note and the Transfer Agreements, (iii) the
incurrence of operating expenses in the ordinary course of business of the type
otherwise contemplated in this Agreement and (iv) the issuance of a guaranty in
favor of the transferees of interests in receivables originated by Interface
Europe Ltd. and transferred to such transferees by a special purpose
corporation ("UKSPC"), provided that such guaranty (A) is issued
contemporaneously with the issuance by the UKSPC of a guaranty in favor of the
Purchaser and the PSA Purchasers, (B) may not be drawn upon at any time prior
to the reduction to zero of the Ownership Interest and the termination of this
Agreement, and (C) is limited in the amount of guaranteed obligations and
subordinated on terms and conditions satisfactory to the Servicing Agent.
(k) In the case of the Seller, merge or consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions, and except as otherwise contemplated herein) all
or substantially all of its assets (whether now owned or hereafter acquired)
to, or acquire all or substantially all of the assets of, any Person.
(l) In the case of the Seller, permit the principal amount evidenced by
the Subordinated Note to exceed an amount equal to the sum of (i) the Reserve
at such time, (ii) the "Reserve" then in affect under the Parallel Sale
Agreement, and
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(iii) the aggregate face amount of all Receivables then outstanding that are
neither Defaulted Receivables nor Eligible Receivables.
SECTION 10.4. Covenants of the Seller and Interface Relating to Separate
Legal Identity. The Seller and Interface hereby acknowledge that the Purchaser
is entering into the transactions contemplated by this Agreement in reliance
upon the Seller's identity as a separate legal entity from Interface, each
Originator and each Originator Entity (as defined below). Therefore, from and
after the date of execution and delivery of this Agreement and so long as this
Agreement is in effect, the Seller and Interface shall take all reasonable
steps including, without limitation, all steps that the Purchaser may from time
to time reasonably request to maintain the Seller's identity as a separate
legal entity and to make it manifest to third parties that the Seller is an
entity with assets and liabilities distinct from those of Interface, each
Originator and any Affiliates (other than the Seller) thereof (each of
Interface, each Originator and each of their respective Affiliates (other than
the Seller) shall be referred to herein as an "Originator Entity"), and not
just a division of any Originator Entity. Without limiting the generality of
the foregoing and in addition to and consistent with the covenant set forth in
Section 10.1(b) above, the Seller shall (and Interface shall take all actions
necessary to permit or enable the Seller to):
(i) conduct its own business in its own name and require that all
full-time employees of the Seller identify themselves as such and not as
employees of any Originator Entity (including, without limitation, by
means of providing such employees with business or identification cards
identifying such employees as the Seller's employees);
(ii) compensate all employees, consultants and agents directly,
from the Seller's bank accounts, for services provided to the Seller by
such employees, consultants and agents and, to the extent any employee,
consultant or agent of the Seller is also an employee, consultant or
agent of any Originator Entity, allocate the compensation of such
employee, consultant or agent between the Seller and such Originator
Entity on a basis which reflects the services rendered to the Seller and
such Originator Entity;
(iii) clearly identify its offices (by signage or otherwise) as its
offices, and all such offices will occupy space that is separate and
distinct from any space occupied
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by any Originator Entity even if such office space is leased or subleased
from, or is on or near premises occupied by any Originator Entity;
(iv) have a separate telephone number, which will be answered only
in its name and separate checks in its own name;
(v) conduct all transactions with any Originator Entity strictly on
an arm's-length basis, allocate all overhead expenses (including, without
limitation, telephone and other utility charges) for items shared between
the Seller and any Originator Entity on the basis of actual use to the
extent practicable and, to the extent such allocation is not practicable,
on a basis reasonably related to actual use;
(vi) at all times have at least one member of its Board of
Directors who is not (A) a director, officer or employee of any
Originator Entity, (B) a person related to any officer or director of any
Originator Entity, (C) a holder (directly or indirectly) of more than 5%
of any voting securities of any Originator Entity, or (D) a person
related to a holder (directly or indirectly) of more than 5% of any
voting securities of any Originator Entity;
(vii) observe all corporate formalities as a distinct entity, and
ensure that all corporate actions are duly authorized by unanimous vote
of its Board of Directors;
(viii) maintain the Seller's books and records separate from those
of any Originator Entity;
(ix) prepare its financial statements separately from those of
other Originator Entities and insure that any consolidated financial
statements of any Originator Entity that include the Seller have detailed
notes clearly stating that the Seller is a separate corporate entity and
that its assets will be available first and foremost to satisfy the
claims of its creditors;
(x) except as herein specifically otherwise provided, not commingle
funds or other assets of the Seller with those of any Originator Entity
and not maintain bank accounts or other depository accounts to which any
Originator Entity is an account party, into which any Originator Entity
makes
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deposits or from which any Originator Entity has the power to make
withdrawals;
(xi) not permit any Originator Entity to pay any of the Seller's
operating expenses (except pursuant to allocation arrangements that
comply with the requirements of subparagraph (v) above; and
(xii) take such other actions as are necessary on its part to
ensure that the facts and assumptions set forth in the opinion letter of
even date herewith issued by Kilpatrick & Cody relating to substantive
consolidation, or set forth in any certificate relied upon by Kilpatrick
& Cody in issuing such opinion letter, remain true and correct in all
material respects at all times.
SECTION 10.5. Covenants of Interface. Until the Ownership Interest is
reduced to zero as described in Section 3.1(c) and no further Purchases are to
be made, Interface, in support of its obligations set forth in Section 10.4,
will, unless the Purchaser has otherwise consented in writing:
(a) Comply with all applicable laws, rules, regulations and orders with
respect to it, its business and properties, the failure to comply with which
may materially adversely affect its ability to perform its obligations under
this Agreement, or which may affect the legality, validity or enforceability of
this Agreement as against Interface.
(b) Maintain its corporate existence in the jurisdiction of its
incorporation, and qualify and remain qualified in good standing as a foreign
corporation in each jurisdiction where the failure to be so qualified could
materially adversely affect its ability to perform its obligations hereunder.
(c) At any reasonable time, upon prior notice to Interface, permit the
Purchaser, the Servicing Agent and any lender or other financial institution
party to any Credit Facility or their respective agents or representatives to
visit and inspect any of its properties, to examine its books of account and
other records and files relating to this Agreement (including, without
limitation, computer tapes and disks) and to discuss its affairs, business,
finances and accounts with its officers and employees.
(d) Forthwith upon the occurrence thereof, provide notice to the
Servicing Agent of the occurrence of any Event of
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Termination relating to the performance by Interface of its obligations under
this Agreement.
(e) Not amend the Certificate of Incorporation or By-Laws of the Seller.
(f) Not permit the principal amount evidenced by Subordinated Note to
exceed at any time an amount equal to the sum of (i) the Reserve at such time,
(ii) the "Reserve" then in effect under the Parallel Sale Agreement, and (iii)
the aggregate face amount of all Receivables then outstanding that are neither
Defaulted Receivables nor Eligible Receivables.
ARTICLE XI: INDEMNIFICATIONS; INCREASED COSTS
SECTION 11.1. Indemnification by the Seller of the Purchaser, etc.
Without limiting any other rights which the Purchaser, the Servicing Agent and
their respective officers, directors, employees, agents and Affiliates may have
hereunder or under applicable law, the Seller hereby indemnifies such parties
and holds them harmless from and against any and all damages, losses, claims,
liabilities and related costs and expenses (including attorneys' fees and
disbursements) incurred by any of them arising out of or resulting from this
Agreement or the purchase by the Purchaser of any Ownership Interest in
Receivables, including, without limitation:
(a) the reliance by the Servicing Agent or the Purchaser on any
representation or warranty made by the Seller, Interface or any Originator (or
any of their respective officers) under or in connection with this Agreement or
any Sale Document, which was incorrect when made (it being understood that the
Purchaser and the Servicing Agent shall, for purposes of this Section 11.1, be
entitled to rely on the truth, accuracy and completeness of each representation
and warranty made under this Agreement at the time of each Purchase, without
regard to any qualifying language in the limited context of a condition
precedent to the effect that any representation or warranty shall be true and
correct "in all material respects" or words of like import);
(b) the failure by the Seller, Interface or the Collection Agent (or any
Person to whom the Collection Agent may have delegated any of its duties or
responsibilities as Collection Agent) to comply with any covenant set forth in
this Agreement (including, without limitation, any covenant relating to the
payment, remittance or deposit of any amount hereunder)
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or the failure by any party to any Transfer Agreement to comply with any
obligation or covenant on its part to be performed thereunder or under the
related Consent and Acknowledgment;
(c) the failure to vest and maintain in the Purchaser, or to transfer to
the Purchaser, legal and equitable title to, and ownership of, an undivided
percentage ownership interest (to the extent of the Ownership Interest) in the
Receivables, free and clear of any security interest, lien, claim or
encumbrance;
(d) the transfer by the Seller of an undivided percentage ownership
interest in any Receivables other than the Ownership Interest hereunder and the
"Ownership Interests" under the Parallel Sale Agreement;
(e) the Seller or any Originator's use of proceeds of the Purchases;
(f) the failure by the Seller or the Collection Agent timely to file
financing statements or other similar instruments or documents under the
Uniform Commercial Code (or other applicable law relating to the transfer of
interests in the Receivables) of any applicable jurisdiction or other
applicable laws with respect to any Receivables, whether at the time of a
Purchase or otherwise;
(g) the return or transfer by the Collection Agent of any portion of
Collections to the Seller or any other person for any reason whatsoever, other
than as authorized in Section 7.2.1 or 7.2.2;
(h) any dispute, claim, offset or defense of any obligor to the payment
of any Receivable (including a defense based on such Receivable's or the
related contract's not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms but excluding any
discharge (as distinguished from avoidance) in bankruptcy or any similar
insolvency proceeding of any Obligor due to the financial inability of such
Obligor to pay its debts as they mature), or any other claim resulting from the
sale, use, operation or ownership of or defects in or breaches of warranties
with respect to, the merchandise or services relating to such Receivable or the
furnishing or failure to furnish such merchandise or services;
(i) the Seller's, Interface's or any Originator's failure to pay when due
any taxes (including sales, excise or
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personal property taxes) payable by such Person in connection with the
Receivables;
(j) the commingling of Collections with other funds of the Seller, the
Collection Agent or any Originator Entity;
(k) the failure by the Seller, the Collection Agent or any Originator to
comply with any applicable law, rule or regulation with respect to any
Receivable, or the nonconformity of any Receivable with any such applicable
law, rule or regulation;
(l) the failure to vest all right, title and interest in the Seller in
the Receivables purchased by the Seller from any Originator under a Transfer
Agreement, free and clear of any security interest, lien, claim or encumbrance;
(m) any failure of the Seller to give reasonably equivalent value to any
Originator under any Transfer Agreement in consideration of the transfer by
such Originator to the Seller of any Receivables, or any attempt by any Person
to void any such transfer under statutory provisions or common law or equitable
action, including, without limitation, any provision of the Bankruptcy Code; or
(n) any information provided by the Seller, Interface, any Originator or
the Collection Agent or any Sale Document furnished to the Purchaser or the
Servicing Agent in connection with this Agreement which shall have been
incorrect in any respect or which shall have omitted any material fact.
Notwithstanding anything herein to the contrary, however, the Seller shall not
be obligated under this Section 11.1 to indemnify any Person against or hold
any Person harmless from any damage, loss, claim, liability, cost or expense to
the extent that the same arises out of or results from (i) such Person's own
gross negligence or wilful misconduct, (ii) the negligence or wilful misconduct
of the Collection Agent (if other than Interface or any Affiliate thereof), or
(iii) the fact that any Receivable proves to be uncollectible (unless the
Seller is otherwise expressly liable therefor under the terms of this Agreement
or any other Sale Document). If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Seller hereby agrees to
make the maximum contribution to the payment of the amounts indemnified against
in this Section which is permissible under applicable law. To the extent that
any claim arises against the Seller under this Section 11.1 in
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respect of any action taken or omitted to be taken by the Collection Agent in
its capacity as Collection Agent, the Collection Agent agrees that (i) it shall
be jointly and severally liable to the Purchaser in respect of such claim and
(ii) the Seller shall have a corresponding claim against the Collection Agent
for any payments made by the Seller to any indemnified party hereunder.
SECTION 11.2. Indemnification Due to Failure to Consummate Purchase. The
Seller will indemnify the Purchaser on demand and hold it harmless against all
costs (including, without limitation, breakage costs) and expenses resulting
from any failure by the Seller (i) to consummate a Purchase after the Purchaser
has accepted an offer from the Seller to make such Purchase or (ii) to fulfill
its obligations pursuant to Section 6.2, and the Purchaser will indemnify the
Seller on demand and hold it harmless against all costs (including, without
limitation, breakage costs) and expenses resulting from any failure by the
Purchaser (i) to pay the required purchase price after it has accepted an offer
to Purchase from the Seller or (ii) to fulfill its purchase obligations
pursuant to Section 6.2.
SECTION 11.3. Increased Costs under Liquidity Facilities and Credit
Facilities. If the Purchaser becomes obligated to compensate the lenders under
any of its Liquidity Facilities or Credit Facilities for a reduction in the
rate of return on their capital due to the adoption of any law or regulation,
or any change in or phase-in of any law or regulation or in the interpretation
or administration thereof, as more specifically provided in the documents
relating to such Facilities, and such obligation to compensate is reasonably
attributable to this Agreement and the transactions contemplated hereby, then
the Seller shall, on demand, reimburse the Purchaser for the amount of any such
compensation.
SECTION 11.4. Notices. The Purchaser agrees to notify the Seller upon
its knowledge of a claim for which it intends to seek indemnification under
Section 11.1 or reimbursement under Section 11.3 from the Seller. The Seller
agrees to assist the parties indemnified under Section 11.1, to the extent
requested by them, in any action, suit or proceeding brought by or against them
in connection with the indemnification granted herein.
ARTICLE XII: EVENTS OF TERMINATION
SECTION 12.1. Events of Termination. Each of the following shall
constitute an "Event of Termination":
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(a) The Collection Agent (if Interface or any of its Affiliates) shall
fail to (i) perform or observe any term, covenant or agreement hereunder (other
than as referred to in clause (ii) of this Section 12.1(a)) and such failure
shall remain unremedied for three Business Days or (ii) make any payment or
deposit to be made by it hereunder when due (and, in the case of any failure to
make a timely payment or deposit solely by reason of any mechanical delay in or
malfunction of the Fedwire system, such failure shall remain unremedied for one
Business Day); or
(b) The Seller shall fail to (i) make any payment when due under Section
3.3, Section 7.3 or otherwise hereunder (and, in the case of any failure to
make a timely payment solely by reason of any mechanical delay in or
malfunction of the Fedwire system, such failure shall remain unremedied for one
Business Day) or (ii) perform or observe any term, covenant or agreement
contained in Section 10.1(f) or (l), or Section 10.3(a), (g)(ii), (i), (j), (k)
or (l); or
(c) Any representation or warranty or statement made by the Seller or any
other Transaction Party (or any of their respective officers) under or in
connection with this Agreement or any other Sale Document shall prove to have
been incorrect in any material respect when made (other than any representation
or warranty made by an Originator under Section 5(f) of any Transfer Agreement
which is subsequently cured in accordance with the terms of the proviso set
forth therein); or
(d) The Seller, Interface, the Collection Agent or any other Transaction
Party shall fail to perform or observe any other term, covenant or agreement
contained in this Agreement or any other Sale Document on its part to be
performed or observed and any such failure shall remain unremedied for 10 days
after any Transaction Party first becoming aware of such failure; or
(e) Any Purchase shall for any reason (other than pursuant to the terms
hereof) cease to create, or the Ownership Interest shall for any reason cease
to be, a valid and perfected first priority undivided percentage ownership or
security interest to the extent contemplated herein in each Receivable, and in
the Related Rights and Collections with respect thereto; or
(f) The Seller, Interface, the Collection Agent or any Originator shall
generally not pay its debts as such debts become
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due, or shall admit in writing its inability to pay its debts generally, or
shall make a general assignment for the benefit of creditors; or any proceeding
shall be instituted by or against the Seller, Interface, the Collection Agent
or any Originator seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its property; or the
Seller, Interface, the Collection Agent or any Originator shall take any
corporate action to authorize any of the actions set forth above in this clause
(f); or
(g) The aggregate outstanding balance of Receivables that are more than
60 days past due (from the respective due dates thereof) shall at any time
exceed an amount equal to 11% of the aggregate outstanding balance of all
Receivables at such time; or
(h) The aggregate outstanding balance of Defaulted Receivables during any
monthly period shall at any time exceed an amount equal to 0.75% of the
aggregate outstanding balance of all Receivables as of the last day of such
period; or
(i) The aggregate Dilutions during any monthly period shall at any time
exceed an amount equal to 6.0% of the aggregate outstanding balance of Eligible
Receivables as of the last day of such period; or
(j) The "Portfolio Turnover" (as required to be set forth in, and as
computed in accordance with, any Receivables Activity Report) shall at any time
exceed 90 days; or
(k) (i) Any "Event of Default" shall occur under (and as defined
in) the Interface Credit Agreement; or
(ii) Interface shall fail to pay any principal of or premium or
interest on any indebtedness for borrowed money which is outstanding in a
principal amount of at least $2,500,000 in the aggregate when the same
becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in the
agreement or instrument relating to such indebtedness; or any other event
shall occur or default
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condition shall exist under any agreement or instrument relating to any
such indebtedness and shall continue after the applicable grace period,
if any, specified in such agreement or instrument, if the effect of such
event or default condition is to accelerate, or to permit the
acceleration of, the maturity of such indebtedness; or any such
indebtedness shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment),
redeemed, purchased or defeased, or an offer to prepay, redeem, purchase
or defease such indebtedness shall be required to be made, in each case
prior to the stated maturity thereof or the scheduled due date therefor;
or
(iii) the Seller shall fail to pay any principal of or premium or
interest on the Subordinated Note or on any other indebtedness for
borrowed money when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or
otherwise but, in the case of the indebtedness evidenced by the
Subordinated Note, other than by reason of the operation of the
subordination provisions therein), and such failure shall continue after
the applicable grace period, if any, specified in the agreement or
instrument relating to such indebtedness; or any other event shall occur
or default condition shall exist under any agreement or instrument
relating to any such indebtedness and shall continue after the applicable
grace period, if any, specified in such agreement or instrument, if the
effect of such event or default condition is to accelerate, or to permit
the acceleration of, the maturity of such indebtedness; or any such
indebtedness shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment),
redeemed, purchased or defeased, or an offer to prepay, redeem, purchase
or defease such indebtedness shall be required to be made, in each case
prior to the stated maturity thereof or the scheduled due date therefor;
or
(l) any "Event of Termination" shall occur under, and as defined in, the
Parallel Sale Agreement; or
(m) The senior, long-term, unsecured, non-credit enhanced debt of
Interface shall at any time have a credit rating by S&P of less than BB- or a
credit rating by Moody's of less than Ba3 or, in the event that neither S&P nor
Moody's shall then be rating such debt, the imputed equivalent of such ratings
as determined by the Servicing Agent; or
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(n) Interface shall at any time cease to own and hold, or cease to
control all voting rights in respect of, all of the issued and outstanding
capital stock of the Seller.
(o) Interface shall for any reason (other than the removal thereof by the
Purchaser or the Servicing Agent in accordance with the terms of this
Agreement) cease to be or to serve as Collection Agent hereunder.
SECTION 12.2. Remedies. Upon the occurrence of any Event of Termination,
the Purchaser or the Servicing Agent may, at any time on notice to the Seller,
take any or all of the following actions: (i) remove the Person then acting as
Collection Agent hereunder from its rights and responsibilities as Collection
Agent and may designate any other Person (which may be the Purchaser or the
Servicing Agent) to be Collection Agent hereunder, (ii) take control of the
Lock-Boxes (by delivering to the Lock-Box Banks notice in substantially the
form of Exhibit D), and (iii) notify Obligors of its Ownership Interest in the
Receivables. The Purchaser and the Servicing Agent shall have, in addition to
all other rights and remedies under this Agreement or otherwise, all other
rights and remedies provided under the Uniform Commercial Code of the
applicable jurisdiction and other applicable laws, which rights shall be
cumulative.
ARTICLE XIII: MISCELLANEOUS
SECTION 13.1. Amendments, Etc. No amendment or waiver of, or consent to
the Seller's, Interface's or the Collection Agent's or departure from, any
provision of this Agreement shall be effective unless it is in writing and
signed by the parties hereto and then such amendment, waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which it was given.
SECTION 13.2. Notices, Etc. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile, telegraphic, telex or cable communication) and shall be
given to the applicable party at its address or applicable facsimile,
telegraphic, telex or cable number or address set forth on the signature pages
hereto or such other address or number as shall be designated by such party in
a written notice to the other parties hereto. Each such notice or other
communication shall be effective (i) if given by telex, when such telex is
transmitted to the telex number specified in this Section and the appropriate
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answerback is received, (ii) if given by mail, 72 hours after such
communication is deposited in the mails with first-class postage prepaid,
addressed as aforesaid, (iii) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified in this Section and the
appropriate confirmation is received, or (iv) if given by any other means
(including, without limitation, by air courier), when delivered or received at
the address specified in this Section, except that notices and communications
to the Purchaser pursuant to Section 6.2, Section 7.4 and Section 10.2(f) shall
only be effective when received by the Purchaser.
SECTION 13.3. Payments Net of Taxes. All payments by the Seller payable
under this Agreement shall be made free and clear of, and without deduction
for, any present or future income, stamp or other taxes, fees, duties,
withholdings or other charges imposed by any taxing authority, excluding taxes
imposed on or measured by the Purchaser's net income or franchise taxes or
branch profit taxes imposed in each case on the Purchaser by the jurisdiction
under the laws of which the Purchaser is organized or any political subdivision
thereof. If any withholding or deduction from any payment by the Seller is
required to be made on account of any of the non-excluded taxes, then the
Seller will:
(a) pay to the relevant authority the full amount required to be withheld
or deducted;
(b) promptly forward to the Purchaser an official receipt or other
satisfactory documentation evidencing such payment to such authority; and
(c) pay to the Purchaser any additional amounts necessary to ensure that
the net amount actually received by the Purchaser will equal the full amount it
would have received had no such withholding or deduction been required.
If at any time the Purchaser assigns any portion of its interest hereunder
to a Person that is organized outside of the United States, the Purchaser shall
cause such Person at the time of such assignment to deliver to the Seller and
the Collection Agent either (x) two properly executed United States Internal
Revenue Forms 1001 showing complete exemption from tax or (y) two properly
executed United States Internal Revenue Service Forms 4224 and the Purchaser
shall take all actions reasonably necessary to keep such forms current in
accordance with such applicable laws, rules and regulations.
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SECTION 13.4. No Waiver; Remedies. No failure on the part of the
Purchaser to exercise, and no delay in exercising, any right hereunder or under
any Sale Document shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 13.5. Binding Effect; Assignability; Continuing Obligation. (a)
This Agreement shall be binding upon and inure to the benefit of the Seller,
Interface, the Purchaser and their respective successors and assigns, except
that neither the Seller nor Interface shall have the right to assign any
interest herein without the prior written consent of the Purchaser and the
Servicing Agent. The Purchaser shall have the right, without the consent of
the Seller or Interface, to assign all or any portion of its interests
hereunder to any Person, including, without limitation, any party to the
Parallel Sale Agreement, any Person party to the Liquidity Facilities or Credit
Facilities, any other financial institution and any special purpose entity in
respect of which the Servicing Agent is then acting as servicing or
administrative agent; provided that the Purchaser shall not, without the prior
written consent of the Seller, assign any of its interests hereunder to any
Person that is in the same line of business as Interface or any Originator.
(b) This Agreement shall create and constitute the continuing obligation
of the parties hereto in accordance with its terms, and shall remain in full
force and effect until such time as the Ownership Interest is reduced to zero
as described in Section 3.1(c) and no further Purchases are to be made
hereunder, at which time this Agreement shall terminate; provided, however,
that rights and remedies of the Purchaser under Article XI and Section 5.3 and
the provisions of Section 13.12 shall survive any termination of this
Agreement. Notwithstanding the foregoing, to the extent that the Seller or the
Collection Agent makes a payment, deposit or remittance to the Purchaser or the
Servicing Agent, or the Purchaser or the Servicing Agent receives any proceeds
of the Receivables or Collections, which payment, deposit, remittance or any
part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to the Seller or the
Collection Agent, or any other Person, or their respective estates, trustees,
receivers or any other Person, under any bankruptcy law, state or federal law,
common law or equitable cause, then to the extent of such payment the
obligation or part thereof which
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has been paid, reduced or satisfied by such amount (and the corresponding
Ownership Interest) shall be reinstated and continued in full force and effect
as of the time immediately preceding such initial payment, reduction or
satisfaction and this Agreement shall continue in full force and effect with
respect thereto.
SECTION 13.6. Governing Law. THIS AGREEMENT AND THE SALE DOCUMENTS SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
SECTION 13.7. Security Interest. The Seller hereby grants to the
Purchaser a continuing security interest in the Seller's right, title and
interest in and to the Receivables and Collections to secure the obligations of
the Seller to the Purchaser hereunder, which security interest shall continue
in effect until termination of this Agreement (and be subject to reinstatement)
in accordance with Section 13.5.
SECTION 13.8. Construction of the Agreement. The parties hereto intend
that the conveyance of Ownership Interests in Receivables by the Seller to the
Purchaser shall be treated as sales for all purposes. If, despite such
intention, a determination is made that such transactions shall not be treated
as sales, then this Agreement shall be interpreted to constitute a security
agreement and the transactions effected hereby shall be deemed to constitute a
secured loan by the Purchaser to the Seller under applicable law. For such
purpose, the Seller hereby grants to the Purchaser a continuing security
interest in the Receivables and Collections to secure the repayment of the
Investment and the payment and performance of the obligations of the Seller to
the Purchaser hereunder.
SECTION 13.9. No Proceedings. The Seller, Interface, the Servicing Agent
and the Collection Agent each hereby agrees that it will not institute against
the Purchaser any bankruptcy, reorganization, insolvency or similar proceeding
until the date which is one year and one day since the last day on which any
commercial paper notes or medium-term notes issued by the Purchaser shall have
matured.
SECTION 13.10. Confidentiality. The Purchaser agrees to maintain the
confidentiality of any information regarding the Seller or Interface obtained
in accordance with the terms of this Agreement which is not publicly available,
but the Purchaser may reveal such information (a) to applicable rating
agencies, liquidity providers and credit enhancement providers, (b) as
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<PAGE> 66
necessary or appropriate in connection with the administration or enforcement
of this Agreement or its funding of Purchases under this Agreement, (c) as
required by law, government regulation, court proceeding or subpoena or (d) to
bank regulatory agencies and examiners.
SECTION 13.11. Purchaser Determinations on Concentration Limits. The
Purchaser is granted certain authority hereunder to reduce the Special
Concentration Limit or Standard Concentration Limit for any Obligor (each such
reduction being a "Redesignation"). Any act of Redesignation by the Purchaser
shall be based upon a determination by the Purchaser that either (i) in the
exercise of its reasonable credit judgment, such Redesignation is appropriate,
based upon such factors as such Purchaser has determined to be relevant,
including, without limitation, any of the following factors: any change in, or
change in the credit analysis by the Purchaser as to, the nature, business,
prospects, condition (financial or other), operations, properties or management
of an Obligor or the Seller or the applicable Originator; any lack of sufficient
and reliable information with respect to any of the foregoing; any change in, or
change in the credit analysis by the Purchaser as to, the credit or collateral
support for any Receivable or any class of Receivables; the Purchaser's
aggregate portfolio exposure to such Obligors or Receivables of such type; or
any change in the credit or collection policy of the Seller or the applicable
Originator, or (ii) compliance with any law or regulation or any guideline,
directive or request from any central bank or other governmental authority
(whether or not having the force of law), or that compliance with any guideline,
directive or request of any rating agency, requires such Redesignation.
SECTION 13.12. Replacement of Credit Facility Provider. In the event
that the Purchaser at any time elects to replace any Person then providing a
Credit Facility to the Purchaser for purposes of this Agreement with another
Person, whether under the same Credit Facility or under a replacement Credit
Facility, the Purchaser shall so notify the Seller and the Collection Agent in
writing within ninety (90) days following such replacement, and in any event
prior to the date on which such replacement credit provider proposes to
exercise its rights of inspection under Section 10.1(c).
SECTION 13.13. Not a Joint Venture. The Seller shall become a member of
the Purchaser pursuant to the terms of the Membership Agreement described in
Section 6.3.1. Notwithstanding such membership, nothing contained in this
Agreement or in any
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other Sale Document, and no action taken by the Purchaser or the Collection
Agent pursuant hereto or thereto, shall be deemed to constitute the Seller (or
any other Transaction Party) and the Purchaser a partnership, association,
joint venture or other entity.
SECTION 13.14. Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement.
SECTION 13.15. Submission to Jurisdiction, Appointment of Agent to Accept
Service of Process.
(a) THE SELLER, INTERFACE AND THE COLLECTION AGENT HEREBY SUBMIT TO THE
NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL COURT LOCATED IN THE SOUTHERN
DISTRICT OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE SELLER,
INTERFACE AND THE COLLECTION AGENT IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH PROCEEDING AND ANY CLAIM THAT ANY
SUCH PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(b) Each of the Seller, Interface and the Collection Agent has
irrevocably appointed CT Corporation as its agent to receive, accept and
acknowledge for and on its behalf, service of any and all legal process,
summons, notices and documents which may be served in any such proceeding
brought in any such court which may be made on such agent. If for any reason
such agent shall cease to be available to act as such, each of the Seller,
Interface and the Collection Agent agrees to designate a new agent in The City
of New York on the terms and for the purposes of this Section 13.15
satisfactory to the Purchaser.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their duly authorized officers as of the date set forth on the cover page of
this Agreement.
INTERFACE SECURITIZATION CORPORATION,
as Seller
By
---------------------------------
Name:
Title:
Address: 100 Chastain Center Boulevard
Suite 165
Kennesaw, Georgia 30144
Facsimile: (404) -
--- ----
INTERFACE, INC., individually and as
initial Collection Agent
By
---------------------------------
Name:
Title:
Address: 2859 Paces Ferry Road
Suite 2000
Atlanta, Georgia 30339
Facsimile: (404) -
--- ----
SPECIAL PURPOSE ACCOUNTS RECEIVABLE
COOPERATIVE CORPORATION, as
Purchaser
By
---------------------------------
Authorized Signatory
Address:
425 Lexington Avenue
New York, New York 10017
Attention: President
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<PAGE> 69
Telephone: (212) 856-3671
Facsimile: (212) 856-3643
CANADIAN IMPERIAL BANK OF COMMERCE,
as Servicing Agent
By
---------------------------------
Name:
Title:
Address:
425 Lexington Avenue
New York, New York 10017
Attention: Bryan Wickware
Telephone: (212) 856-3866
Facsimile: (212) 856-3643
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<PAGE> 1
EXHIBIT 10.27
RECEIVABLES SALE AGREEMENT
among
INTERFACE SECURITIZATION CORPORATION
as Seller
INTERFACE, INC.
as Collection Agent
CERTAIN FINANCIAL INSTITUTIONS
as Bank Purchasers
TRUST COMPANY BANK
and
THE FIRST NATIONAL BANK OF CHICAGO
as Co-Agents
TRUST COMPANY BANK
as Administrative Agent
and
THE FIRST NATIONAL BANK OF CHICAGO
as Documentation and Collateral Agent
Dated as of August 4, 1995
<PAGE> 2
TABLE OF CONTENTS
Page
<TABLE>
<S> <C>
ARTICLE I: DEFINITIONS ............................................... 1
SECTION 1.1 ....................................................... 1
ARTICLE II: THE FACILITY ............................................. 27
ARTICLE III: WHAT IS SOLD ............................................ 28
SECTION 3.1. Determination of Ownership Interest.................. 28
SECTION 3.2. Frequency of Determining Ownership
Interest ........................................... 29
SECTION 3.3. Maximum Ownership Interest and
Investment ......................................... 30
SECTION 3.4. Reduction of Commitments............................. 30
SECTION 3.5. Extension of the Stated Termination Date............. 31
ARTICLE IV: PURCHASE PRICE............................................ 32
SECTION 4.1. Determination of Cash Component of
Purchase Price..................................... 32
SECTION 4.2. Satisfaction of Deferred Payment
Component of Purchase Price........................ 32
SECTION 4.3. Several Obligations.................................. 33
ARTICLE V: FEES AND EXPENSES.......................................... 34
SECTION 5.1. Upfront Fee .......................................... 34
SECTION 5.2. Settlement Date Payments.............................. 34
SECTION 5.2.1. Purchase Discount.................................. 34
SECTION 5.2.2. Purchase Premium................................... 35
SECTION 5.2.3. Commitment Fee..................................... 35
SECTION 5.2.4. Collection Agent Fee .............................. 35
SECTION 5.3. Legal Fees and Other Expenses........................ 36
SECTION 5.4. Interest on Unpaid Amounts........................... 36
ARTICLE VI: PURCHASE PROCEDURES ...................................... 36
SECTION 6.1. Types of Purchases .................................. 36
SECTION 6.2. Notice Requirements.................................. 37
SECTION 6.3. Selection of Tranche Periods and Discount Rates...... 40
SECTION 6.4. Conditions Precedent to Initial Purchase............. 40
SECTION 6.5. Condition Precedent to all Incremental
Purchases............................................. 43
SECTION 6.6. Conditions Precedent to All Purchases................ 43
ARTICLE VII: SETTLEMENT PROCEDURES.................................... 44
SECTION 7.1. Settlement Dates..................................... 44
SECTION 7.2. Application of Collections........................... 44
SECTION 7.2.1. Application of Collections on Days That
Are Not Settlement Dates......................... 44
SECTION 7.2.2. Application of Collections on
Settlement Dates................................. 45
SECTION 7.3. Adjustments due to Dilution, Etc..................... 47
SECTION 7.4. Receivables Activity Report.......................... 47
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VIII: ADMINISTRATIVE AGENT, DOCUMENTATION AND
COLLATERAL AGENT, CO-AGENTS AND COLLECTION
AGENT................................................... 48
SECTION 8.1. Appointment of Administrative Agent and
Documentation and Collateral Agent; Co-Agents........ 48
SECTION 8.2. Appointment of Collection Agent........................ 46
SECTION 8.2.1. Replacement of Collection Agent;
Notification of Obligors........................... 47
ARTICLE IX: REPRESENTATIONS AND WARRANTIES............................... 48
SECTION 9.1. Representations and Warranties of the
Seller and the Collection Agent........................ 48
SECTION 9.2. Representations and Warranties of Interface. ............ 52
ARTICLE X: COVENANTS...................................................... 53
SECTION 10.1. Affirmative Covenants of the Seller and
the Collection Agent.................................. 53
SECTION 10.2. Reporting Requirements of the Seller and
Interface............................................. 55
SECTION 10.3. Negative Covenants of the Seller and the
Collection Agent...................................... 57
SECTION 10.4. Covenants of the Seller and Interface................... 60
SECTION 10.5. Covenants of Interface. ................................ 62
ARTICLE XI: INDEMNIFICATIONS; INCREASED COSTS............................. 63
SECTION 11.1. Indemnification by the Seller of the
Bank Purchasers, etc.................................. 63
SECTION 11.2. Indemnification Due to Failure to
Consummate Purchase or Certain
Reductions in Investment............................. 65
SECTION 11.4. Notices................................................. 68
SECTION 11.5. Purchasing Offices...................................... 68
SECTION 11.6. Limitations on Certain Payment
Obligations........................................... 68
ARTICLE XII: EVENTS OF TERMINATION......................................... 69
SECTION 12.1. Events of Termination.................................... 69
SECTION 12.2. Remedies................................................. 73
ARTICLE XIII: MISCELLANEOUS................................................ 74
SECTION 13.1. Amendments, Etc.......................................... 74
SECTION 13.2. Notices, Etc............................................. 75
SECTION 13.3. Payments Net of Taxes.................................... 75
SECTION 13.4. No Waiver; Remedies...................................... 79
SECTION 13.5. Binding Effect; Assignability; Continuing
Obligation............................................... 79
SECTION 13.6. Governing Law............................................ 82
SECTION 13.7. Security Interest........................................ 82
SECTION 13.8. Construction of the Agreement............................ 82
SECTION 13.9. Confidentiality.......................................... 82
SECTION 13.10. Agent Determinations on Concentration
Limits................................................. 83
SECTION 13.12. Execution in Counterparts................................ 83
SECTION 13.13. Submission to Jurisdiction, Appointment
of Agent to Accept Service of Process................... 84
SECTION 13.14. Change in Accounting Principles, Fiscal
Year or Tax Laws......................................... 84
</TABLE>
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<PAGE> 4
Schedules
<TABLE>
<S> <C>
Schedule A - Special Concentration Limits
Schedule B - Credit and Collection Policy
Schedule C - List of Lock-Box Banks
Schedule D - List of Addresses of the Transaction Parties
Schedule E - List of Assumed Names
Schedule F - Existing Shareholder Group
Schedule G - Fiscal Month Closing Dates
</TABLE>
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<PAGE> 5
Exhibits
<TABLE>
<S> <C>
Exhibit A - Form of Notice for Initial and Incremental Purchases
Exhibit B - Form of Notice of Election Not to Make Reinvestment Purchases
Exhibit C - Form of Notice of Payment to Reduce Investment
Exhibit D - Form of Notice to Lock-Box Bank
Exhibit E - Form of Lock-Box Agreement
Exhibit F - Form of Receivables Activity Report
Exhibit G - Form of Legal Opinion of Counsel for the Transaction Parties
Exhibit H - Form of Transfer Agreement
Exhibit I - Form of Consent and Acknowledgment
</TABLE>
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<PAGE> 6
RECEIVABLES SALE AGREEMENT dated as of August 4, 1995 among:
(i) INTERFACE SECURITIZATION CORPORATION, a Delaware corporation
(the "Seller"),
(ii) INTERFACE, INC., a Georgia corporation ("Interface"), as the
initial "Collection Agent,"
(iii) CERTAIN FINANCIAL INSTITUTIONS PARTIES HERETO (each, a "Bank
Purchaser"),
(iv) TRUST COMPANY BANK and THE FIRST NATIONAL BANK OF CHICAGO, as
co-agents (the "Co-Agents") for the Bank Purchasers,
(v) TRUST COMPANY BANK, as administrative agent (the
"Administrative Agent") for the Bank Purchasers and
(vi) THE FIRST NATIONAL BANK OF CHICAGO, as documentation and
collateral agent (the "Documentation and Collateral Agent") for
the Bank Purchasers
ARTICLE I: DEFINITIONS
SECTION 1.1 Definitions. In addition to any other terms defined herein,
the following terms used herein shall have the meanings herein specified (to be
equally applicable to both the singular and plural forms of the terms defined):
"Accrued Finance Charges" means, with respect to the Investment allocated
to any Tranche Period on any date of determination, an amount calculated in the
manner set forth below:
AFC = (PD + PP + CAF) X DSP X AI
---
360
where AFC = Accrued Finance Charges
PD = Purchase Discount in respect of
such Tranche Period
PP = Purchase Premium in respect of such
Tranche Period
CAF = Collection Agent Fee
<PAGE> 7
DSP = the number of days in the Tranche
Period preceding such date of
determination
AI = such Investment (or if such
Investment allocated to such
Tranche Period has changed during
such Tranche Period, the average
daily Investment allocated to such
Tranche Period)
"Adjusted LIBO Rate" means, with respect to each Tranche Period in respect
of which the Purchase Discount and the related Yield Reserve for the Investment
allocated thereto is to be calculated in reference to LIBOR, a rate per annum
equal to the rate obtained by dividing (a) LIBOR for such Tranche Period by (b)
a percentage equal to 1 minus the then stated maximum rate (stated as a
decimal) of all reserves requirements (including, without limitation, any
marginal, emergency, supplemental, special or other reserves) applicable to any
member bank of the Federal Reserve System in respect of Eurocurrency
liabilities as defined in Regulation D (or against any successor category of
liabilities as defined in Regulation D).
"Administrative Agent" means Trust Company Bank, acting in such capacity,
and any replacement thereof under Section 8.1.
"Affiliate" means, with respect to any Person, a Person: (i) that
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such Person; (ii) that
beneficially owns or holds 10% or more of any class of the voting stock (or, in
the case of a Person that is not a corporation, 10% or more of the equity
interest) of such Person; or (iii) 10% or more of the voting stock (or, in the
case of a Person that is not a corporation, 10% or more of the equity interest)
of which is beneficially owned or held, directly or indirectly, by such Person.
The term "control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting stock or an equity interest, by
contract or otherwise.
"Aged Receivables Ratio" means, as of any date of determination, a
fraction, expressed as a percentage, (i) the numerator of which is the
aggregate unpaid balance of Receivables that were either (a) past due (from the
original due date) 61 days to 90 days as of the end of the fiscal month then
most
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<PAGE> 8
recently ended (or ending on such date of determination), or (b) were less than
91 days past due (from the original due date) as of such date but which were
Defaulted Receivables as of such date and (ii) the denominator of which is the
aggregate amount of net sales of the Originators during the third full fiscal
month prior to such fiscal month.
"Agent" means either the Administrative Agent or the Documentation and
Collateral Agent, and "Agents" means both of such Persons.
"Aggregate Ownership Interest" means, at any time, a percentage equal to
the sum at such time of the Bank Group Ownership Interest hereunder and the
"Ownership Interest" under and as defined in the Parallel Sale Agreement.
"Agreement" means this Receivables Sale Agreement, as it may be amended,
restated, supplemented or otherwise modified from time to time.
"Applicable Margin" means, during any fiscal quarter of Interface, the
percentage determined for such fiscal quarter from the chart set forth below
based on Interface's Interest Coverage Ratio and Leverage Ratio determined as
of the last day of the second fiscal quarter immediately preceding the then
current fiscal quarter:
Interest Coverage Ratio
<TABLE>
<S> <C> <C> <C>
Less Than Greater Than Greater Than
or Equal 3.0:1.00 and Less or Equal
Leverage Ratio to 3.0:1.0 Than 5.0:1.0 to 5.0:1.0
- -------------- ---------- ----------------- ------------
Greater than or
equal to 50% 1.000% 0.875% 0.750%
Greater than 35%
and less than
50% 0.875% 0.750% 0.500%
Less than or
equal to 35% 0.750% 0.500% 0.375%
</TABLE>
provided, however, if Interface fails to deliver its financial statements, for
such second preceding fiscal quarter pursuant to Section 10.2 prior to the
first day of the then-current fiscal
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<PAGE> 9
quarter, the Applicable Margin during such current fiscal quarter shall be
1.000%.
"Bank Group Ownership Interest" means, at any time, a percentage equal to
the aggregate Ownership Interests then held by the Bank Purchasers hereunder.
"Bank Purchaser" means any financial institution party hereto as of the
date hereof and identified as being a "Bank Purchaser" on the signature pages
hereto, and any successor or assign thereof.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978 (11 U.S.C.
Section Section 101 et seq.), as amended.
"Base Rate" means the average of the following two rates (with any change
in the Base Rate to be effective as of the date of change of either of the
following rates):
(i) the higher of (a) the rate which the Documentation and
Collateral Agent publicly announces from time to time as its corporate
base rate, as in effect from time to time, and (b) the Federal Funds
Rate, as in effect from time to time, plus one-half of one percent
(0.50%) per annum. The Documentation and Collateral Agent's corporate
base rate is a reference rate and does not necessarily represent the
lowest or best rate actually charged to any customer; the Documentation
and Collateral Agent may make commercial loans or other loans at rates of
interest at, above or below its corporate base rate; and
(ii) the higher of (a) the rate which the Administrative Agent
publicly announces from time to time to be its prime lending rate, as in
effect from time to time, and (b) the Federal Funds Rate, as in effect
from time to time, plus one-half of one percent (0.50%) per annum. The
Administrative Agent's prime lending rate is a reference rate and does
not necessarily represent the lowest or best rage charged to customers;
the Administrative Agent may make commercial loans or other loans at
rates of interest at, above or below its prime lending rate.
"Bentley" means Bentley Mills, Inc., a Delaware corporation.
"Business Day" means any day on which banks are not authorized or required
to close in Chicago, Illinois, New York,
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<PAGE> 10
New York or Atlanta, Georgia and, if the applicable Business Day relates to a
Tranche Period in respect of which the Discount Rate is the Adjusted LIBO Rate,
on which trading is carried on by and between banks in the London interbank
market.
"Certificate of Deposit Rate" means, with respect to each Tranche Period
in respect of which the Purchase Discount and the related Yield Reserve for the
Investment allocated thereto is to be calculated in reference to the
Certificate of Deposit Rate, the rate (rounded, if necessary, to the next
higher 1/16 of 1.0%, if the rate is not such a multiple), as determined by the
Administrative Agent at approximately 9:00 A.M. (local time for the
Administrative Agent) on the first day of such Tranche Period and identified on
Telerate as the consensus bid rate for secondary certificates of deposit in an
amount approximately comparable to the Pro Rata Share of the Administrative
Agent (as a Bank Purchaser) in the aggregate Investment allocated to such
Tranche Period and with a maturity equal to such Tranche Period. As of the
date of the execution of this Agreement, such consensus bid rate appears on
page 5 of Telerate. If the foregoing rate is unavailable on Telerate for any
reason, then such rate shall be determined by the Administrative Agent from the
comparable rate quoted on another interest rate reporting service of recognized
standing as designated by the Administrative Agent to the Collection Agent, the
Seller, the Documentation and Collateral Agent and the Bank Purchasers.
"Change in Control Provision" means any term or provision contained in any
indenture, debenture, note, or other agreement or document evidencing or
governing Interface Control Debt which requires, or permits the holder(s) of
such Interface Control Debt to require, that such Interface Control Debt be
redeemed, repurchased, defeased, prepaid or repaid, either in whole or in part,
or the maturity of such Interface Control Debt to be accelerated in any
respect, as a result of a change in ownership of the capital stock of Interface
or voting rights with respect thereto.
"CIBC" means Canadian Imperial Bank of Commerce, and its successors and
assigns.
"Class B Shareholders' Agreement" means 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
-5-
<PAGE> 11
to direct the voting of the shares of Class B common stock subject thereto.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collection" means any amount paid by an Obligor or any other party with
respect to a Receivable.
"Collection Agent" means Interface or any replacement thereof under
Section 8.2.1.
"Collection Agent Fee" means the percentage used to determine the fee
payable by the Bank Purchasers to the Collection Agent, as described in Section
5.2.4.
"Commitment" means, in respect of any Bank Purchaser, the amount set
opposite such Bank Purchaser's name on the signature pages hereto, as such
amount may be reduced from time to time in accordance with Section 3.4 or
modified in accordance with Section 13.1 or 13.5.
"Commitment Fee" has the meaning assigned to such term in Section 5.2.3.
"Commitment Termination Date" means the earliest to occur of (i) any
Business Day designated by the Seller as the Commitment Termination Date on not
less than three Business Days' prior written notice given by the Seller to the
Administrative Agent, (ii) the Business Day on which the Commitments of the
Bank Purchasers shall be reduced to zero in accordance with the terms of
Section 3.4, (iii) the date on which any Agent shall declare the Commitment
Termination Date to have occurred pursuant to Section 12.2, (iv) the date of
the occurrence of a Termination Event of the type described in Section 12.1(f)
or (v) the Stated Termination Date.
"Consent and Acknowledgment" means a letter agreement dated as of the date
hereof made by an Originator in favor of the Bank Purchasers pursuant to which,
among other things, such Originator consents to, and acknowledges, the
transactions contemplated hereby, in substantially the form attached hereto as
Exhibit I, as such letter agreement may be amended, restated, supplemented or
otherwise modified from time to time.
"Consolidated Companies" means, collectively, Interface and all of its
Subsidiaries.
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<PAGE> 12
"Consolidated EBITA" means, for any fiscal period of Interface, an amount
equal to (A) the sum for such fiscal period of Consolidated Net Income (Loss)
plus, to the extent subtracted in determining such Consolidated Net Income
(Loss), provisions for taxes based on income, Consolidated Interest Expense,
and amortization of goodwill and deferred financing costs, minus (B) any items
of gain (or plus any items of loss) which were included in determining such
Consolidated Net Income (Loss) and were (x) not realized in the ordinary course
of business or (y) the result of any sale of assets.
"Consolidated Interest Expense" means, for any fiscal period of Interface,
total interest expense of the Consolidated Companies (including without
limitation, interest expense attributable to capitalized leases in accordance
with GAAP, all capitalized interest, all commissions, discounts and other fees
and charges owed with respect to bankers acceptance financing, and total
interest expense (whether shown as interest expense, or as loss and expenses on
sale of receivables) under a receivables purchase facility) determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income (Loss)" means, for any fiscal period of
Interface, the net income (or loss) of the Consolidated Companies on a
consolidated basis for such period (taken as a single accounting period)
determined in conformity with GAAP, but excluding therefrom (to the extent
otherwise included therein) (i) any gains or losses, together with any related
provision for taxes, realized upon any sale of assets other than in the
ordinary course of business, (ii) any income or loss of any Person accrued
prior to the date such Person becomes a Subsidiary of Interface or is merged
into or consolidated with any Consolidated Company or all of substantially all
of such Person's assets are acquired by any Consolidated Company, and (iii) the
income of any Consolidated Company to the extent that the declaration or
payment of dividends or similar distributions by such Consolidated Company of
that income is not at the time permitted by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation.
"Consolidated Net Worth" means, as of any date of determination,
Shareholders' Equity of Interface, excluding (i) the effects of foreign
currency translation adjustments under Financial Accounting Standards Board
Statement No. 52 as in effect on the date hereof, and (ii) after-tax gains on
the sales
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<PAGE> 13
of assets outside the ordinary course of business of the Consolidated Companies
and any after-tax gains with respect to pension reversions, in any case with
respect to (i) and (ii) above, as much adjustments or gains occur subsequent to
December 29, 1991.
"Convertible Preferred Stock" means Interface's Series A Cumulative
Convertible Preferred Stock having an aggregate liquidation value of
$25,000,000 and 7.0% cumulative dividend, being convertible into shares of
Interface's Class A common stock at the rate of one share of Class A common
stock for each $14.7875 of "conversion value" of such Preferred Stock (as
defined in the Articles of Amendment of Interface executed with respect to such
Preferred Stock and subject to adjustments as provided therein), and being
subject to redemption at the option of the holders thereof not earlier than
June 1, 2003, on the terms and conditions set forth in such Articles of
Amendment.
"Credit and Collection Policy" means, in the case of any Originator, the
written credit and collection policy utilized by such Originator as of the date
hereof, a copy of which is attached hereto in Schedule B, as the same may be
amended or otherwise modified in strict compliance with this Agreement.
"Currency Contracts" means any forward contracts, futures contracts,
foreign exchange contracts, currency swap agreements, and other similar
agreements and arrangements entered into by any Consolidated Company designed
to protect any Consolidated Company against fluctuations in foreign exchange
rates.
"Defaulted Receivable" means any Receivable which:
(1) has been or should have been charged-off in
conformity with the applicable Credit and Collection Policy;
or
(2) is owed by an Obligor who is in bankruptcy,
reorganization, insolvency or similar proceedings.
"Dilution Horizon" means, as of any date of determination, a fraction,
expressed as a percentage, the numerator of which shall be the aggregate net
sales by all of the Originators during the fiscal month then most recently
ended (or ending on such date of determination) and the denominator of which
shall be the aggregate Eligible Receivables originated by
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<PAGE> 14
Originators and outstanding as of the last day of such fiscal month.
"Dilution Ratio" means, as of any date of determination, a fraction,
expressed as a percentage, the numerator of which is the aggregate amount of
Dilutions in respect of Receivables for the fiscal month then most recently
completed (or ending on such date of determination) and the denominator of
which is the aggregate amount of net sales by all of the Originators occurring
during the fiscal month prior to such fiscal month then most recently completed
(or then ending).
"Dilution Reserve" means, as of any date of determination, a percentage
equal to the following:
DPR = (2.25 x DH x ADP) + ((HDP - ADP) x HDP/ADP)
where: DPR = the Dilution Reserve;
DH = the Dilution Horizon;
ADP = the average Dilution Ratio during the period
of twelve consecutive full fiscal months
immediately preceding (or ending on) such
date of determination; and
HDP = the highest Dilution Ratio during the twelve
consecutive full fiscal months immediately
preceding (or ending on) such date of
determination.
"Dilutions" means the aggregate amount of any reductions and cancellations
of Receivables which have been reduced or cancelled, respectively, for any
reason other than that (1) the Obligors have made payments thereon or (2) the
Seller has charged-off such Receivables in accordance with the applicable
Credit and Collection Policy. The term "Dilutions" shall include, without
limitation, credits, rebates, freight charges, cash discounts, volume
discounts, cooperative advertising expenses, royalty payments, warranties,
allowances, disputes, chargebacks, returned or repossessed goods, and
allowances for early payments.
"Discount Rate" means, in the case of any Tranche Period, the Adjusted
LIBO Rate, the Base Rate or the Fixed CD Rate, as applicable.
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<PAGE> 15
"Dollars" or "$" means, unless another currency is expressly identified,
the lawful currency of the United States.
"Eligible Receivable" means any Receivable:
(1) which is not unpaid for more than 60 days past
the date on which it was due;
(2) which is required to be paid in full within 31
days of the invoice date; provided that a Receivable that
meets the criteria set forth in this definition but for this
clause (2) may nonetheless constitute an "Eligible Receivable"
if (a) such Receivable is required to be paid in full within
61 days of the invoice date and (b) the outstanding balance of
such Receivable, together with the aggregate outstanding
balance of all other Receivables that constitute "Eligible
Receivables" by reason of this proviso, does not at any time
exceed an amount equal to 30% of the aggregate outstanding
balance of all Receivables that constitute Eligible
Receivables at such time (including Receivables that are
Eligible Receivables by reason of this proviso);
(3) which is denominated in, and payable only in,
U.S. Dollars;
(4) which is not a Defaulted Receivable;
(5) the Obligor of which has had no Defaulted
Receivable at any time during the immediately preceding
twelve-month period;
(6) the Obligor of which does not then have more than
10% of its total Receivables unpaid for more than 120 days
past the dates on which they were due;
(7) the Obligor of which is not an Affiliate of any
of the Transaction Parties, any of the Bank Purchasers or any
of the Agents;
(8) the Obligor of which is not a government or
subdivision or agency of a government; provided that a
Receivable that meets the criteria set forth in this
definition but for this clause (8) may nonetheless constitute
an "Eligible
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<PAGE> 16
Receivable" if (a) the Obligor thereon is a governmental
entity acceptable to the Agents and (b) the outstanding
balance of such Receivable, together with the aggregate
outstanding balance of all other Receivables that constitute
"Eligible Receivables" by reason of this proviso, does not at
any time exceed an amount equal to 8% of the aggregate
Investment of all Bank Purchasers hereunder (net of the
aggregate amount, if any, owed by the Seller to one or more
of the Bank Purchasers under Article XI) at such time;
(9) the Obligor of which is a resident of the United
States; provided that a Receivable that meets the criteria set
forth in this definition but for this clause (9) may
nonetheless constitute an "Eligible Receivable" if:
(a) the outstanding balance of such Receivable,
together with the aggregate outstanding balance of all
other Receivables that constitute "Eligible
Receivables" by reason of this proviso, does not exceed
an amount equal to that portion of the aggregate
Reserve at such time representing the components
described in clauses (1) and (3) of the definition of
"Reserve";
(b) in addition to the restrictions set forth in
clause (a): in the case of any Receivable owing by an
Obligor that is located in a country in respect of
which the "sovereign rating" assigned by S&P is
"investment grade", the outstanding balance thereof,
together with the aggregate outstanding balance of all
other Receivables that constitute "Eligible
Receivables" by reason of this proviso and that are
owed by Obligors in such countries, does not exceed a
sublimit equal to that portion of the aggregate Reserve
at such time representing the component described in
clause (1) of the definition of "Reserve";
(c) in addition to the restrictions set forth in
clause (a): in the case of any Receivable owing by an
Obligor that is
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<PAGE> 17
located in a country in respect of which the "sovereign
rating" assigned by S&P is less than "investment grade"
(or in respect of which S&P has not assigned a
"sovereign rating"), the outstanding balance thereof,
together with the aggregate outstanding balance of all
other Receivables that constitute "Eligible
Receivables" by reason of this proviso and that are
owed by Obligors in such countries, does not exceed a
sublimit equal to the Standard Concentration Limit then
in effect; and
(d) the Seller is in compliance with the terms of
Section 3.3 at such time;
(10) which is not (i) subject to any dispute, claim,
defense or offset and which has not been compromised, adjusted
or modified (including by extension of time for payment or the
granting of any discounts, allowances or credits) or (ii)
evidenced by any note or other instrument;
(11) which arises out of a "current transaction", and
the purchase of which with the proceeds of notes having a
maturity at the time of issuance not exceeding 270 days would
constitute a "current transaction", as such term is defined in
Section 3(a)(3) of the Securities Act of 1933, as amended;
(12) which is an "account" within the meaning of the
Uniform Commercial Code of the State in which is located the
Seller's principal place of business or, if the Seller has
more than one place of business, its chief executive office;
(13) which arose from a bona fide sale of merchandise
or insurance or the rendering of services accepted by the
Obligor of that Receivable, the performance and delivery of
which has been completed by the applicable Originator and by
all parties other than the Obligor; without limiting the
generality of the foregoing, such sale is not a "bill and
hold", consignment, "sale on approval", conditional sale or
similar arrangement;
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<PAGE> 18
(14) in which each Bank Purchaser shall, upon the Purchase by it
of an Ownership Interest therein, acquire good and marketable
title to such Ownership Interest therein, free and clear of
all liens, security interests and encumbrances (other than
Permitted Liens);
(15) that is the legal, valid and binding payment obligation of
the Obligor thereon;
(16) that represents the sales price of merchandise, insurance or
services, within the meaning of Section 3(c)(5) of the
Investment Company Act of 1940, as amended;
(17) which does not contravene any applicable law, rule or
regulation in any material respect (including, without
limitation, laws, rules and regulations relating to truth in
lending, fair credit billing, fair credit reporting, equal
credit opportunity, fair debt collection practices and
privacy);
(18) which is not subject to any restrictions on the transfer,
assignability or sale thereof;
(19) which has been generated in accordance with the terms and
conditions of, and otherwise satisfies, the applicable Credit
and Collection Policy;
(20) other than to the extent any portion thereof is payable on
account of sales taxes;
(21) which was generated in the ordinary course of business of
the applicable Originator;
(22) in respect of which no cash deposit or other advance payment
shall have been received by the applicable Originator or any
other Person thereon or in respect thereof; and
(23) which shall have been purchased by the Seller from an
Originator for reasonably equivalent value (other than by the
extinguishment or reduction of antecedent debt) pursuant to a
Transfer Agreement and all rights of the Seller, as transferee
thereunder, are fully assignable to the Bank Pur
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<PAGE> 19
chasers without any restriction on such assignment.
"ERISA" means the Employee Retirement Income Security Act of 1974 and the
rules and regulations thereunder, as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer with the Seller under
Section 414 of the Code.
"Event of Termination" shall have the meaning assigned to that term in
Section 12.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute thereto.
"Excluded Taxes" has the meaning assigned to such term in Section 13.3.
"Existing Shareholder Group" 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
Shareholders' Agreement, David Milton, Daniel T. Hendrix, Charles R. Eitel,
Royce R. Renfroe, Brian L. DeMoura, and David W. Porter, and (ii) at all times
thereafter, the individuals listed on Schedule F; provided that in the case of
each individual referred to in the preceding clauses (i) and (ii), for 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.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight Federal funds transactions with member banks of the Federal
Reserve System arranged by Federal funds brokers, as published for such day
(or, if such day is not a Business Day, for the next preceding Business Day) by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for such day on
such transactions received by the Administrative Agent from three
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<PAGE> 20
Federal funds brokers of recognized standing selected by the Administrative
Agent.
"fiscal" means, when used in respect of any period, such fiscal period of
Interface.
"Fixed CD Rate" means, with respect to any Tranche Period, a rate per
annum equal to the sum of (i) the rate obtained by dividing (x) the Certificate
of Deposit Rate for such Tranche Period by (y) a percentage equal to 1 minus
the stated maximum rate (stated as a decimal) of all reserve requirements as
specified in Regulation D (including, without limitation, any marginal,
emergency, supplemental, special or other reserves) applicable during such
Tranche Period to new nonpersonal time deposits in the United States in and
amount equal to or in excess of $100,000 with a maturity comparable to such
Tranche Period of any member bank of the Federal Reserve System, plus (ii) the
then daily net annual assessment rate as estimated by the Administrative Agent
for determining the then current annual assessment payable to the Federal
Deposit Insurance Corporation for insuring time deposits of the Administrative
Agent in the United States.
"Foreign Subsidiary" shall mean each Consolidated Company that is
organized under the laws of a jurisdiction other than the United States of
America or any state thereof.
"Funded Debt" means all Indebtedness for money borrowed, Indebtedness
evidenced or secured by purchase money Liens, capitalized leases, conditional
sales contracts and similar title retention debt instruments, and Indebtedness
evidenced by bonds, debentures, notes or other similar instruments, including
all current maturities of such Indebtedness. The calculation of Funded Debt
shall include all Funded Debt of the Consolidated Companies, plus (i) all
Funded Debt of other Persons to the extent guaranteed by a Consolidated
Company, to the extent supported by a letter of credit issued for the account
of a Consolidated Company, or as to which and to the extent which a
Consolidated Company or its assets otherwise have become liable for payment
thereof, (ii) the aggregate "Investment" from time to time outstanding under,
and as defined in, the Parallel Sale Agreement, (iii) the aggregate Investment
from time to time outstanding hereunder plus (iv) any other amounts due and
owing to the Bank Purchasers hereunder.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting
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<PAGE> 21
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, which are applicable to the circumstances
as of the date of determination.
"Guaranty" means any contractual obligation, contingent or otherwise, of a
Person with respect to any Indebtedness or other obligation or liability of
another Person, including without limitation, any such Indebtedness, obligation
or liability directly or indirectly guaranteed, endorsed, co-made or discounted
or sold with recourse by that Person, or in respect of which that Person is
otherwise directly or indirectly liable, including contractual obligations
(contingent or otherwise) arising through any agreement to purchase,
repurchase, or otherwise acquire such Indebtedness, obligation or liability or
any security therefor, or any agreement to provide funds for the payment or
discharge thereof (whether in the form of loans, advances, stock purchases,
capital contributions or otherwise), or to maintain solvency, assets, level of
income, or other financial condition, or to make any payment other than for
value received. The amount of any Guaranty shall be deemed to be an amount
equal to the stated or determinable amount of the primary obligation in respect
of which guaranty is made or, if not so stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Guilford" means Guilford of Maine, Inc., a Delaware corporation.
"Incremental Purchase" means any Purchase (other than the Initial
Purchase) which causes the amount of the Investment of any Bank Purchaser, or
the aggregate Investment of all Bank Purchasers, to increase.
"Indebtedness" of any Person means, without duplication (i) all
obligations of such Person which in accordance with GAAP would be shown on the
balance sheet of such Person as a liability (including, without limitation,
obligations for borrowed money and for the deferred purchase price of property
or services, and obligations evidenced by bonds, debentures, notes or other
similar instruments); (ii) all rental obligations under leases required to be
capitalized under GAAP; (iii) all Guaranties of such Person (including
contingent reimbursement obligations under undrawn letters of credit); (iv)
Indebtedness of others secured
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<PAGE> 22
by any Lien upon property owned by such Person, whether or not assumed; and (v)
obligations or other liabilities under Currency Contracts, Interest Rate
Contracts, or similar agreements or combinations thereof.
"Initial Purchase" means the first Purchase made under this Agreement.
"Interest Coverage Ratio" means the ratio of Consolidated EBITA to
Consolidated Interest Expense.
"Interest Rate Contracts" means any forward contracts, futures contracts,
interest rate exchange agreements, interest rate cap agreements, interest rate
collar agreements, and other similar agreements and arrangements entered into
by any Consolidated Company designed to protect any Consolidated Company
against fluctuations in interest rates.
"Interface" means Interface, Inc., a Georgia corporation.
"Interface Control Debt" means, at any time, debt of Interface for
borrowed money in an aggregate principal amount outstanding at such time in
excess of $10,000,000 which is subject to Change in Control Provisions,
excluding debt of Interface arising under (i) the Interface Credit Agreement or
(ii) any Guaranty or any security or collateral document of Interface delivered
pursuant to the Interface Credit Agreement and guaranteeing or securing the
"Obligations" under the Interface Credit Agreement.
"Interface Credit Agreement" means that certain Amended and Restated
Credit Agreement dated as of June 30, 1995 among Interface, certain Affiliates
thereof, certain lenders, Trust Company Bank and The First National Bank of
Chicago, as "Co-Agents", and Trust Company Bank, as "Collateral Agent", as the
same may from time to time be amended, restated, supplemented or otherwise
modified. If at any time the Interface Credit Agreement shall be terminated or
shall otherwise cease to be in effect,
(i) the term "Interface Credit Agreement" shall mean, for purposes
of the definition herein of "Interface Control Debt", any revolving
credit agreement or similar credit facility that shall have been used to
refinance the indebtedness under, or otherwise replace, the Interface
Credit Agreement;
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<PAGE> 23
(ii) for purposes of Section 12.2(k)(i), an Event of Termination
shall exist hereunder, at any time following such termination or
cessation, upon the occurrence of any event or circumstance that would,
but for such termination or cessation, have constituted an "Event of
Default" under the Interface Credit Agreement (as amended, restated,
supplemented or otherwise modified prior to the date of such termination
or cessation) by reason of the failure of any Person to comply with any
of the following provisions of the Interface Credit Agreement: Section
8.09 ["Financial Covenants"], 8.10 ["Notices Under Certain Other
Indebtedness"] or 9.03 ["Mergers, Acquisitions, Sales, Etc."], or by
reason of Section 10.09 ["Money Judgment"] of the Interface Credit
Agreement; it being understood that (A) each such provision shall,
following such termination or cessation, be deemed to survive such
termination or cessation and be incorporated herein by this reference
thereto and (B) to the extent any notice shall be required to be given by
any co-agent or lender under the Interface Credit Agreement in order for
an "Event of Default" thereunder to exist, such notice may be given by
any Agent or Bank Purchaser hereunder;
(iii) for purposes of Section 13.5(d), Section 8.05 of the Interface
Credit Agreement (as amended, restated, supplemented or otherwise
modified prior to the date of such termination or cessation) shall
survive the termination or cessation of the Interface Credit Agreement
and shall be deemed incorporated herein by this reference thereto upon
any such termination or cessation, and
(iv) for purposes of Section 13.5(b), clause (ii) of the proviso
thereof shall cease to have effect.
"Interface Flooring" means Interface Flooring Systems, Inc., a Georgia
corporation.
"Investment" means, in respect of any Bank Purchaser at any time, the sum
of:
(1) the aggregate amount of cash paid by such Bank
Purchaser to the Seller for its Initial Purchase (if
applicable) and all Incremental Purchases, less the amount of
all Collections received and applied to such Bank Purchaser's
Investment pursuant to Sections 6.2(c) or Section
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<PAGE> 24
7.2.2(c)(ii)(A) and of all payments made by the Seller and
applied to such Bank Purchaser's Investment under Sections
3.3 and 7.3; and
(2) any amounts owed by the Seller to such Bank
Purchaser under Article XI.
"Leverage Ratio" means the ratio, expressed as a percentage, of Funded
Debt to Total Capitalization for the Consolidated Companies.
"LIBOR" means, for any Tranche Period, the offered rate for deposits in
Dollars, for a period comparable to such Tranche Period and in an amount
comparable to the Pro Rata Share of the Administrative Agent (as a Bank
Purchaser) in the aggregate Investment allocated to such Tranche Period and
appearing on the Reuters Screen LIBO Page as of 11:00 A.M. (London, England
time) on the day that is two Business Days prior to the first day of such
Tranche Period. If two or more of such rates appear on the Reuters Screen LIBO
Page, the rate shall be the arithmetic mean of such rates. If the foregoing
rate is unavailable from the Reuters Screen for any reason, then such rate
shall be determined by the Administrative Agent from Telerate Page 3750 or, if
such rate is also unavailable on such service, then on any other interest rate
reporting service of recognized standing designated in writing by the
Administrative Agent to the Collection Agent, the Seller, the Documentation and
Collateral Agent and the Bank Purchasers. In each case such rate shall be
rounded, if necessary, to the next higher 1/16 of 1.0%, if the rate is not such
a multiple.
"Lien" means any mortgage, pledge, security interest, lien, charge,
hypothecation, assignment, deposit arrangement, title retention, preferential
right, trust or other arrangement having the practical effect of the foregoing
and shall include the interest of a vendor or lessor under any conditional sale
agreement, capitalized lease or other title retention agreement.
"Lock-Box" means any lock-box(es) or account(s) to which the Obligors
remit Collections or into which Collections are otherwise deposited upon
receipt by a Lock Box Bank.
"Lock-Box Bank" means any institution at which a Lock-Box is kept or by
which a Lock-Box is maintained.
"Loss Reserve Ratio" means, as of any date, a percentage equal to the
following:
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<PAGE> 25
LRR = 2.25 x ARR x S
where: LRR = the Loss Reserve Ratio;
ARR = the highest average, determined for each of twelve consecutive
full fiscal months immediately preceding (or ending on) such
date of determination, of the Aged Receivables Ratio for three
full consecutive fiscal months during such period;
S = a fraction, expressed as a percentage, the numerator of which is
the aggregate amount of net sales of the Originators during the
three full fiscal months then most recently ended (or ending on
such date of determination), and the denominator of which is the
aggregate unpaid balance of all Eligible Receivables originated
by the Originators and outstanding as of the last day of the
fiscal month then most recently ended (or ending on such date of
determination).
"Majority Bank Purchasers" means Bank Purchasers at any time holding at
least 66-2/3% of the then aggregate outstanding Investment hereunder or, if no
Investment is then outstanding, Bank Purchasers having at least 66-2/3% of the
Commitments at such time.
"Maximum Ownership Interest" means 100%.
"Monthly Settlement Date" means each date (or, if any such date is not a
Business Day, the first Business Day following such date) set forth on Schedule
G hereto.
"Moody's" means Moody's Investors Service, Inc.
"Obligor" means any Person which is obligated to make payment on a
Receivable.
"Originator" means any of Bentley, Guilford and Interface Flooring, and
"Originators" means all of such Persons collectively.
"Originator Entity shall have the meaning assigned to that term in Section
10.4.
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<PAGE> 26
"Ownership Interest" means, at any time, an undivided percentage ownership
interest of a Bank Purchaser in the Receivables, the related Collections and
the Related Rights, as described in Section 3.1(a).
"Parallel Sale Agreement" means that certain Receivables Sale Agreement of
even date herewith among the Seller, Interface, SPARC and CIBC, as "Servicing
Agent" thereunder, as the same may from time to time be amended, restated,
supplemented or otherwise modified in accordance with the terms of this
Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
thereto.
"Permitted Liens" means any lien, claim or encumbrance (i) arising under
this Agreement in favor of the Documentation and Collateral Agent, for the
benefit of the Bank Purchasers, or under the Parallel Sale Agreement in favor
of the PSA Agent, for the benefit of SPARC, (ii) in respect of taxes that are
not delinquent or (iii) constituting a Permitted Tax Lien.
"Permitted Tax Lien" means at any time any lien, claim or encumbrance in
respect of taxes the payment of which is being contested by the Seller or
Interface in good faith and in respect of which adequate reserves shall have
been set aside; provided that any such lien, claim or encumbrance shall cease
to be a Permitted Tax Lien if a material risk of loss or forfeiture of any
Receivable by reason of such lien, claim or encumbrance shall then exist.
"Person" means an individual, partnership, corporation business trust,
joint stock company, trust, unincorporated association, joint venture or other
entity, or a government or any political subdivision or agency thereof.
"Plan" means each employee benefit plan (as defined in Section 3(3) of
ERISA) currently sponsored, maintained or contributed to by any Transaction
Party or any ERISA Affiliate or with respect to which any Transaction Party or
any ERISA Affiliate has any liability.
"Pro Rata Share" means, with respect to any Bank Purchaser at any time, a
fraction (expressed as a percentage) the numerator of which shall be the
Commitment of such Bank Purchaser at such time and the denominator of which
shall be the aggregate
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<PAGE> 27
Commitments at such time. In the event the Commitments shall have been
terminated, the Pro Rata Share of each Bank Purchaser at any time shall be (i)
if any Ownership Interests shall then be outstanding, a fraction (expressed as
a percentage) the numerator of which shall be the Ownership Interest of such
Bank Purchaser at such time and the denominator of which shall be the aggregate
Ownership Interests hereunder at such time and (ii) if no Ownership Interests
shall then be outstanding, the Pro Rata Share of such Bank Purchaser
immediately prior to the termination of the Commitments.
"PSA Agent" means CIBC, in its capacity as "Servicing Agent" under the
Parallel Sale Agreement, and any successor thereto in such capacity.
"Purchase" means any purchase by any Bank Purchaser of an Ownership
Interest from the Seller under this Agreement, and includes its participation
in the Initial Purchase, any Incremental Purchase and any Reinvestment
Purchase. The terms "Purchase", "Initial Purchase", "Incremental Purchase" and
"Reinvestment Purchase" shall generally refer to the collective action of the
Bank Purchasers in effecting purchases of (or increases in) Ownership Interests
at the same time and in an amount corresponding to their respective Pro Rata
Shares at such time. When used with respect to any Bank Purchaser, such term
shall mean such Bank Purchaser's participation in such Purchase.
"Purchase Discount" has the meaning assigned to such term in Section
5.2.1.
"Purchase Premium" has the meaning assigned to such term in Section 5.2.2.
"Purchasing Office" shall mean, for each Bank Purchaser, the office such
Bank Purchaser may designate in writing from time to time to the Seller and the
Agents for purposes of all allocations of such Bank Purchaser's Investment to a
Discount Rate of a particular type.
"Receivable" means the obligation of an Obligor to pay for merchandise
sold or services rendered by an Originator, and includes the rights in
connection therewith to payment of any interest or finance charges and in the
merchandise (including returned goods) and contracts relating to such
Receivable, all security interests, guaranties and property securing or
supporting payment of such Receivable, all books and records relating to the
Receivables and all proceeds of the foregoing.
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"Receivables Activity Report" means the report in the form of Exhibit F
hereto to be provided by the Collection Agent in accordance with Section 7.4 of
this Agreement.
"Receivables Pool" means all Receivables that shall have been purchased by
the Seller from Originators.
"Reinvestment Purchase" means any Purchase made with Collections.
"Reinvestment Suspension Period" means a period beginning on, as
applicable, the Commitment Termination Date or the date that Reinvestment
Purchases shall cease for any other reason (whether pursuant to Section 6.2(b),
6.6 or otherwise) and ending on the initial date thereafter (if any) on which
Reinvestment Purchases shall recommence.
"Related Rights" means all rights and remedies of the Seller under each
Transfer Agreement (or any instrument, document or agreement executed in
connection therewith) pursuant to which any Receivable shall have been
transferred by an Originator to the Seller.
"Reserve" means, as of any date, an amount equal to the aggregate
Investment on such date multiplied by the greater of (a) 10% and (b) the sum of
the items set forth below (each expressed as a percentage):
(1) the higher of (i) the Loss Reserve Ratio as of
such date and (ii) the product of (x) the quotient, expressed
as a percentage, of the Standard Concentration Limit divided
by the aggregate outstanding balance of all Eligible
Receivables as of such date, multiplied by (y) five (5);
(2) 1%;
(3) Yield Reserve as of such date and
(4) the Dilution Reserve as of such date.
In the event that any Permitted Tax Lien shall have attached to any Receivable
in the Receivables Pool, the Reserve shall be increased by an amount equal to
the related tax that is then being contested.
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"Reuters Screen" means, when used in connection with any designated page
and LIBOR, the display page so designated on the Reuters Monitor Money Rates
Service (or such other page as may replace that page on that service for the
purpose of displaying rates comparable to LIBOR).
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies, Inc.
"Sale Documents" means this Agreement, the Parallel Sale Agreement, the
Transfer Agreements, the Exhibits hereto and thereto and all other
certificates, agreements and documents executed from time to time by any
Transaction Party in favor of or otherwise for the benefit of the Bank
Purchasers, either of the Agents, SPARC, the PSA Agent or any Transaction Party
in connection with the transactions contemplated in any of the foregoing.
"Seller" means Interface Securitization Corporation, a Delaware
corporation, and its successors and permitted assigns.
"Settlement Date" means any date, as described in Section 7.1 of this
Agreement, on which the Collection Agent is required to remit specified
payments to the Bank Purchasers.
"Shareholders' Equity" means, with respect to any Person as at any date of
determination, shareholders' equity of such Person determined on a consolidated
basis in conformity with GAAP.
"SPARC" means Special Purpose Accounts Receivable Cooperative Corporation,
a California cooperative corporation, and its successors and assigns.
"Special Concentration Limit" means, with respect to any Obligor listed on
Schedule A (together with its Affiliates and subsidiaries), the amount
indicated opposite the name of such Obligor; provided that the Documentation
and Collateral Agent may, at any time in its discretion but subject to Section
13.10, reduce or increase the Special Concentration Limit for any such Obligor,
or add the name of any other Obligor to Schedule A, through the delivery by the
Documentation and Collateral Agent to the Seller of an amended Schedule A;
provided that, in the event any increase in a Special Concentration Limit would
cause such limit to exceed the Standard Concentration Limit then in effect,
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the consent of the Majority Bank Purchasers shall be required prior to giving
effect to such increase.
"Standard Concentration Limit" means, with respect to all of the
Receivables owing from a single Obligor (except for an Obligor listed on
Schedule A), together with Receivables owing from its Affiliates or
subsidiaries, an amount equal to $1,800,000; provided that (i) the Agents may,
at any time in their discretion but subject to Section 13.10, reduce the
Standard Concentration Limit for any Obligor through the delivery of a notice
by the Agents to the Seller, and (ii) the Agents may, at any time on the
direction of the Majority Bank Purchasers, increase the Standard Concentration
Limit for any Obligor through the delivery of a notice by the Agents to the
Seller.
"Stated Termination Date" means August 2, 1996 or such later date
determined in accordance with Section 3.5.
"Subordinated Note" means a note executed by the Seller to the order of
Interface and evidencing advances made from time to time by Interface to the
Seller, as the same may be amended, restated, supplemented or otherwise
modified from time to time in accordance with the terms of this Agreement.
"Subsidiary" means, with respect to any Person, any corporation or other
entity (including, without limitation, partnerships, joint ventures, and
associations) regardless of its jurisdiction of organization or formation, at
least a majority of the total combined voting power of all classes of voting
stock or other ownership interests of which shall, at the time as of which any
determination is being made, be owned by such Person, either directly or
indirectly through one or more other Subsidiaries.
"Taxes" has the meaning assigned to such term in Section 13.3.
"Telerate" means, when used in connection with any designated page and the
Certificate of Deposit Rate or LIBOR, the display page so designated on the Dow
Jones Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying rates comparable to the Certificate of
Deposit Rate or LIBOR).
"Total Capitalization" means the sum of Funded Debt and Consolidated Net
Worth for the Consolidated Companies.
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"Tranche Period" means, with respect to any allocation of Investment for
which the Discount Rate shall be: (a) the Base Rate, a period of days not to
exceed 30 days; (b) the Adjusted LIBO Rate, a period of one, two, three or six
months, with such Tranche Period ending on the day in the applicable succeeding
calendar month which corresponds numerically to the beginning day of such
Tranche Period; provided, however, that if there is no such numerically
corresponding day in such succeeding month, such Tranche Period shall end on
the last Business Day of such succeeding month; and (c) the Fixed CD Rate, a
period of 30, 60, 90 or 180 days commencing on a Business Day selected by the
Seller; provided that:
(i) The initial Tranche Period for any new Investment (whether in
connection with the Initial Purchase or any Incremental Purchase) shall
commence on the date of the applicable Purchase and each Tranche Period
occurring thereafter in respect of such Investment shall commence on the
day on which the next preceding Tranche Period expires.
(ii) If any Tranche Period would end on a day which is not a
Business Day, such Tranche Period shall end on the next succeeding
Business Day; provided, however, that in the case of Tranche Periods in
respect of which the Adjusted LIBO Rate shall apply, if such next
succeeding Business Day falls in a new month, such Tranche Period shall
end on the immediately preceding Business Day.
(iii) In the case of any Tranche Period which commences before the
Commitment Termination Date and would otherwise end on a date occurring
after the Commitment Termination Date, such Tranche Period shall end on
the Termination Date. The duration of each Tranche Period which
commences after the Commitment Termination Date shall be of such duration
as shall be selected by the Administrative Agent.
"Transaction Parties" means, collectively, the Seller, Interface and the
Originators.
"Transfer Agreement" means, in the case of any Originator, an agreement,
in substantially the form attached hereto as Exhibit H, between the Seller and
such Originator pursuant to which the Seller will purchase Receivables from
such Originator, as such agreement may be amended, modified, extended or waived
from time to time with the consent of the Majority Bank Purchasers and the
Documentation and Collateral Agent.
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"Upfront Fee" has the meaning assigned to that term in Section 5.1.
"Yield Reserve" means, as of any date of determination, (i) the product of
(a) the sum of the then highest Discount Rate and Applicable Margin and (b)
120/360 plus (ii) all unpaid Accrued Finance Charges as of such date.
SECTION 1.2 Accounting Terms and Determination. Unless otherwise defined
or specified herein, all accounting terms shall be construed herein, all
accounting determinations hereunder shall be made, all financial statements
required to be delivered hereunder shall be prepared, and all financial records
required hereunder shall be maintained in accordance with GAAP, except that
financial records of Foreign Subsidiaries may be maintained in accordance with
generally accepted accounting principles in effect from time to time in the
jurisdiction of organization of such Foreign Subsidiary; provided, however,
that any financial covenant calculations made for the purpose of determining
the "Applicable Margin" hereunder shall be made in accordance with GAAP and
such generally accepted accounting principles in such foreign jurisdictions, as
the case may be, as in effect on the date of this Agreement and applied on a
basis consistent with the preparation of the financial statements referred to
in Section 9.1(k) unless and until the parties enter into an agreement with
respect thereto in accordance with Section 13.14; and provided further, that
for purpose of such calculations, the Convertible Preferred Stock shall be
considered as capital stock of Interface and not as Funded Debt.
ARTICLE II: THE FACILITY
Prior to the Commitment Termination Date, the Seller may from time to
time, in its sole discretion, offer to sell Ownership Interests in the
Receivables Pool to the Bank Purchasers, and may from time to time thereafter
offer to increase such Ownership Interests. Each Bank Purchaser severally
agrees, subject to the terms and conditions of this Agreement, to purchase an
Ownership Interest and from time to time to increase such Ownership Interest.
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ARTICLE III: WHAT IS SOLD
SECTION 3.1. Determination of Ownership Interest.
(a) A Bank Purchaser shall acquire, upon payment of the cash component of
the purchase price in respect of any Purchase hereunder, an undivided
percentage ownership interest in the Receivables Pool at such time, including
in all Receivables therein, any Collections relating to such Receivables and
all Related Rights with respect thereto. The undivided percentage interest of
any Bank Purchaser in the Receivables Pool covered by this Agreement and
Collections and Related Rights with respect thereto shall be referred to in
this Agreement as the "Ownership Interest" of such Bank Purchaser. The
Ownership Interest of any Bank Purchaser on any date, except as provided in
paragraph (b) below, shall be equal to a fraction (expressed as a percentage)
calculated in the following manner:
I + R
-----------
ER
where: I = the Investment of such Bank Purchaser as of such date;
R = the Reserve in respect of the Investment of such Bank
Purchaser on such date;
ER = the outstanding balance of all Eligible Receivables on such
date in the Receivables Pool, minus the aggregate amount by
which the outstanding balance of Eligible Receivables of each
Obligor in the Receivables Pool exceeds the Standard
Concentration Limit (or, if applicable, the Special
Concentration Limit for such Obligor).
The Ownership Interest in respect of any Bank Purchaser will change from
time to time, except as provided in paragraphs (b) or (c) of this Section,
whenever the Investment of such Bank Purchaser, the related Reserve, the
Eligible Receivables, or the Standard Concentration Limit or Special
Concentration Limit with respect to any Obligor changes.
(b) During any Reinvestment Suspension Period, the Ownership Interest of
each Bank Purchaser will remain fixed at the percentage in effect as of the
close of business on the
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Business Day immediately preceding the commencement of that period.
(c) The Ownership Interest of each Bank Purchaser in the Receivables will
be reduced to zero when such Bank Purchaser receives the following amounts:
(1) its Investment;
(2) the amounts payable to such Bank Purchaser
pursuant to Section 7.2.2(b);
(3) all accrued and unpaid Commitment Fee in respect
of such Bank Purchaser; and
(4) all other amounts payable to such Bank Purchaser
under this Agreement.
When the Ownership Interest in respect of any Bank Purchaser is reduced to
zero, such Bank Purchaser shall not be entitled to receive any additional
Collections from the Receivables.
(d) Subject to the provisions of Section 8.2(d), upon any Bank
Purchaser's purchase of an Ownership Interest, (i) the Collection Agent shall
be entitled to endorse all drafts, checks and other forms of payment on account
of the Receivables and to settle, adjust and forgive any amounts payable on the
Receivables and (ii) the Bank Purchasers (and the Agents on their behalf) shall
be entitled to exercise all other incidences of ownership in the Receivables.
SECTION 3.2. Frequency of Determining Ownership Interest. The Collection
Agent shall determine or be deemed to determine each Ownership Interest daily
and report it to the Administrative Agent at the following times:
(a) on the date of the Initial Purchase;
(b) on the last Business Day of each week;
(c) on each Settlement Date;
(d) on the date of an Incremental Purchase;
(e) on the Business Day immediately preceding any Reinvestmen
Suspension Period;
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(f) on the last Business Day of any Reinvestment Suspension Period;
(g) when any Agent has reason to believe that the Maximum Ownership
Interest has been exceeded; and
(h) at the reasonable request of any Bank Purchaser.
SECTION 3.3. Maximum Ownership Interest and Investment. (a) If at
any time the Aggregate Ownership Interest exceeds the Maximum Ownership
Interest, the Seller shall immediately make a payment to the Collection Agent
in an aggregate amount sufficient to reduce the Aggregate Ownership Interest to
Maximum Ownership Interest, such payment to be applied ratably (determined on
the basis of the respective investments outstanding on the date of such
payment) to the Investment hereunder and the "Investment" under the Parallel
Sale Agreement. The calculation of such payment at any time shall take into
account the corresponding reduction in the Reserve hereunder and the reduction
in the "Reserve" under the Parallel Sale Agreement that shall occur at the time
of the reduction in Investment hereunder and under the Parallel Sale Agreement.
(b) If at any time (i) the Investment of any Bank Purchaser
exceeds the Commitment then in effect with respect to such Bank Purchaser or
(ii) the aggregate Investment hereunder exceeds the aggregate Commitments then
in effect hereunder, the Seller shall immediately make a payment to the
Administrative Agent in an amount sufficient to reduce the aggregate Investment
or Bank Purchaser's Investment, as applicable, to the extent necessary to cause
such condition to cease to exist. Any such payment to the Administrative Agent
will be used to reduce the Investment of the Bank Purchasers, ratably in
accordance with their respective Commitments (in the case of a reduction by
reason of the circumstances described in clause (ii) above), or such Bank
Purchaser (in the case of a reduction by reason of the circumstances described
in clause (i) above).
SECTION 3.4. Reduction of Commitments. The Seller may at any time
elect to terminate in whole or reduce in part the unused portion of the
Commitments by giving the Agents not less than three Business Days' written
notice; provided, however, that each partial reduction shall be in an amount
equal to $5,000,000 or an integral multiple of $1,000,000 in excess thereof; and
provided further that any partial reduction shall be applied ratably to the
Commitments of all of the Bank Purchasers in accordance with their respective
Pro Rata Shares at such time.
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SECTION 3.5. Extension of the Stated Termination Date. On or
prior to the date (an "Extension Request Date") occurring sixty days prior to
the Stated Termination Date then in effect, the Seller may, by written notice
thereof to the Agents, request that the Bank Purchasers agree to extend the
Stated Termination Date. Each Bank Purchaser, in its sole discretion, shall
determine for itself whether to extend the Stated Termination Date in respect
of its Commitment and shall advise the Administrative Agent of its
determination. In the event that all of the Bank Purchasers shall elect to
extend the Stated Termination Date, the Administrative Agent shall so advise
the Seller by not later than the Stated Termination Date otherwise then in
effect. In the event the Administrative Agent shall fail to advise the Seller
(or any Bank Purchaser shall fail to notify the Administrative Agent) in
response to any extension request, such extension request shall be deemed to
have been denied. Upon issuance by the Administrative Agent of notice to the
Seller of the consent on the part of all of the Bank Purchasers to any
extension request, the "Stated Termination Date" shall thereupon become the
date which is 364 days following the date of such notice from the
Administrative Agent.
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ARTICLE IV: PURCHASE PRICE
The purchase price payable by each Bank Purchaser for its Ownership
Interest in the Receivables and any Collections shall be comprised of a cash
component and a deferred payment component.
SECTION 4.1. Determination of Cash Component of Purchase Price. Upon
satisfaction of the conditions precedent to the making of a Purchase hereunder,
each Bank Purchaser shall accept an offer from the Seller to make a Purchase,
and in connection therewith such Bank Purchaser will pay the following amounts
in cash to the Seller:
(a) for Initial and Incremental Purchases, its Pro Rata Share of the
amount specified in the notice required to be delivered by the Seller under
Section 6.2(a); or
(b) for a Reinvestment Purchase, the amount obtained by multiplying
(i) the dollar amount of the Collections received on the date of such Purchase
by (ii) the Ownership Interest of such Bank Purchaser on that date, and
subtracting from such amount any amounts required to be set aside in accordance
with Section 7.2.1(a)(ii) or then payable to the Administrative Agent for the
account of such Bank Purchaser under Section 7.2.2(b);
provided that the payment of any amount described in (a) or (b) above would not
cause (and such amount shall be reduced so as not to cause) any of the
following to occur:
(1) the Investment of such Bank Purchaser to exceed
the Commitment of such Bank Purchaser; or
(2) the aggregate Investment of all Bank Purchasers
to exceed the aggregate Commitments hereunder; or
(3) the Aggregate Ownership Interest to exceed the
Maximum Ownership Interest.
SECTION 4.2. Satisfaction of Deferred Payment Component of Purchase
Price. Upon and after the reduction of the Ownership Interest of any Bank
Purchaser to zero as described in Section 3.1(c), all Collections or other cash
received by such Bank Purchaser on account of Receivables and the interest of
such Bank Purchaser therein and all Receivables held by or on behalf of such
Bank Purchaser will be transmitted in the form received by such Bank Purchaser
to the Seller. After the reduction of the
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<PAGE> 38
(c) If any Bank Purchaser shall obtain any payment or reduction
(including, without limitation, any amounts received as adequate protection of
a deposit treated as cash collateral under the Bankruptcy Code) of its
Investment or of any obligation of the Seller or the Collection Agent hereunder
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) in excess of its Pro Rata Share of payments or reductions on
account of the aggregate Investment or on account of such obligations obtained
by all the Bank Purchasers, such Bank Purchaser shall forthwith (i) notify each
of the other Bank Purchasers and the Agents of such receipt, and (ii) purchase
from the other Bank Purchasers such participations in the affected Investment
or obligations as shall be necessary to cause such purchasing Bank Purchaser to
share the excess payment or reduction, net of costs incurred in connection
therewith, ratably with each of them, provided that if all or any portion of
such excess payment or reduction is thereafter recovered from such purchasing
Bank Purchaser or additional costs are incurred, the purchase shall be
rescinded and the purchase price restored to the extent of such recovery or
such additional costs, but without interest unless the Bank Purchaser obligated
to return such funds is required to pay interest on such funds. The Seller
agrees that any Bank Purchaser so purchasing a participation from another Bank
Purchaser may, to the fullest extent permitted by law, exercise all its rights
of payment (including the right of set-off) with respect to such participation
as fully as if such Bank Purchaser were the initial holder of the underlying
Investment or obligation.
ARTICLE V: FEES AND EXPENSES
SECTION 5.1. Upfront Fee. On August 7, 1995, the Seller will pay a fee
(the "Upfront Fee") for the account of each Bank Purchaser in an amount equal
to 0.05% of such Bank Purchaser's Commitment on the date this Agreement is
executed.
SECTION 5.2. Settlement Date Payments. On each Settlement Date, the
Seller will pay to the Administrative Agent, for the account of the Bank
Purchasers, the following, in accordance with, and in the manner provided in,
Section 7.2.2:
SECTION 5.2.1. Purchase Discount. A "Purchase Discount" equal to,
in the case of the aggregate Investment allocated to any Tranche Period, a rate
per annum equal to the Discount Rate selected for such Tranche Period in
accordance with Section 6.3; provided, that no provision of this Agreement
shall
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require the payment or permit the collection of Purchase Discount in excess of
the maximum permitted by applicable law; [provided, further, that if on any
Settlement Date during any period in which the Investment of any Bank Purchaser
is being reduced, the sum of (A) the aggregate amount of Receivables that cease
to be Eligible Receivables during such period and (B) all amounts pursuant to
clauses (2) and (3) of Section 3.1(c) which accrued and were unpaid during such
period, is equal to or greater than 75% of the aggregate Reserve as of the last
Business Day on which such Bank Purchaser's Investment was not being reduced,
then the Purchase Discount shall equal 1.5% per annum in excess of the Base
Rate. Changes in the rate payable hereunder shall be effective on each day on
which a change in the applicable Discount Rate occurs.]
SECTION 5.2.2. Purchase Premium. A "Purchase Premium" equal to, in
the case of the aggregate Investment allocated to any Tranche Period, (i) if the
Discount Rate selected therefor shall be the Adjusted LIBOR Rate or the Fixed
CD Rate, the Applicable Margin, and (ii) if the Discount Rate selected therefor
shall be the Base Rate, zero.
SECTION 5.2.3. Commitment Fee. If such Settlement Date is a Monthly
Settlement Date, a "Commitment Fee" for the period from the immediately
preceding Settlement Date (or, in the case of the initial payment of such fee,
from the date hereof) to such Monthly Settlement Date equal to, in respect of
each Bank Purchaser, (i) a rate per annum equal 0.20%, multiplied by (ii) an
amount equal to (A) the average daily Commitment of such Bank Purchaser during
such period minus (B) the average daily outstanding Investment of such Bank
Purchaser during such period. The Commitment Fee shall be calculated on the
basis of a year of 360 days for actual days elapsed, and shall be payable by
the Seller from sources other than Collections allocable to the Bank
Purchasers.
SECTION 5.2.4. Collection Agent Fee. A Collection Agent Fee equal to
1.0% per annum, which fee shall be remitted by the Administrative Agent (for
the account of the Bank Purchasers) to the Collection Agent in arrears on each
Settlement Date. If Interface or the Seller is acting as the Collection Agent,
the Collection Agent shall retain an amount equal to the Collection Agent Fee
(in full satisfaction of the payment of such fee to the Collection Agent) out
of amounts required to be remitted by the Collection Agent in accordance with
Section 7.2.2(b).
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SECTION 5.3. Legal Fees and Other Expenses. In addition to all other
amounts payable by the Seller under this Agreement, the Seller agrees to pay,
by no later than 30 days after presentation of a bill, (i) the actual and
reasonable fees and expenses of counsel for the Agents in connection with the
negotiation, preparation, execution, amendment and enforcement of the Sale
Documents and advice with respect to the rights and remedies of the Agents and
the Bank Purchasers thereunder, (ii) all other actual and reasonable
out-of-pocket costs and expenses incurred by any Agent in connection with the
administration of the Sale Documents (including periodic auditing of the
Transaction Parties in connection with the transactions contemplated in the
Sale Documents), and (iii) from and after the occurrence of an Event of
Termination, the actual and reasonable fees and expenses of counsel for each
Bank Purchaser in connection with the enforcement of the Sale Documents and
advice with respect to the rights and remedies of such Bank Purchaser
thereunder.
SECTION 5.4. Interest on Unpaid Amounts. To the extent that the
Seller or Collection Agent fails to pay when due (without regard to any grace
period therefor permitted under Section 12.1) to any Agent or any Bank
Purchaser any fee, expense or other amount payable hereunder or under any Sale
Document, interest shall be due and payable on such unpaid amount, for each day
until paid in full, at the rate of one and one-half percent (1.5%) in excess of
the Base Rate. Changes in the rate payable hereunder shall be effective on each
date on which a change in the Base Rate occurs.
ARTICLE VI: PURCHASE PROCEDURES
SECTION 6.1. Types of Purchases. The three types of Purchases which
can be made under this Agreement are the Initial Purchase, an Incremental
Purchase and a Reinvestment Purchase. The aggregate amount of the Initial
Purchase and each Incremental Purchase made by the Bank Purchasers at the same
time shall be not less than $4,000,000 or an integral multiple of $100,000 in
excess thereof.
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SECTION 6.2. Notice Requirements.
(a) In the case of the Initial Purchase or an Incremental Purchase,
the Seller will give the Administrative Agent three Business Days' prior written
notice of its offer to sell Ownership Interests in Receivables to the Bank
Purchasers. The notice will be in the form of Exhibit A, and will include the
amount of the aggregate new Investment requested and the Business Day on which
the Purchase will be made. The Administrative Agent shall, promptly following
its receipt of any such notice, notify the Bank Purchasers and the
Documentation and Collateral Agent thereof.
(b) The Seller may elect to have Reinvestment Purchases cease by
notifying the Administrative Agent to such effect. Such notice shall be given
by no later than 1:00 P.M. (local time for the Administrative Agent) on the
third Business Day preceding the date on which the Reinvestment Purchase was
contemplated to be made. The notice will be in the form of Exhibit B, and will
specify (i) the date on which Reinvestment Purchases shall cease and (ii) the
amount to which the Investment shall be reduced before Reinvestment Purchases
will recommence. The Administrative Agent shall, promptly following its
receipt of any such notice, notify the Bank Purchasers and the Documentation
and Collateral Agent thereof.
(c) Upon notice to the Administrative Agent in the form of Exhibit C
(by no later than 1:00 P.M. (local time for the Administrative Agent) on the
third Business Day preceding a Settlement Date), the Seller may, on such
Settlement Date, reduce the dollar amount of the aggregate Investment hereunder
in addition to the reduction which would take place by the application of
Collections in the amount determined in accordance with the provisions of
Section 6.2(b) above by paying to the Administrative Agent, for the ratable
distribution thereof to the Bank Purchasers, by 3:00 P.M. (local time for the
Administrative Agent) on the Settlement Date, the dollar amount by which the
aggregate Investment is to be reduced, after giving effect to the application
of Collections received and applied to the reduction of the aggregate
Investment on such Settlement Date.
SECTION 6.3. Selection of Tranche Periods and Discount Rates. (a)
The Investment with respect to each Ownership Interest shall at all times be
allocated to one or more Tranche Periods, each of which Tranche Periods shall
have an associated Discount Rate. In any notice issued under Section 6.2(a)
and
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requesting the Initial Purchase or any Incremental Purchase, the Seller shall
specify the initial Tranche Period or Periods for the Investment then being
requested and a Discount Rate for each such Tranche Period. Thereafter, the
Seller shall by 11:00 a.m. (local time for the Administrative Agent):
(i) at least three Business Days prior to the expiration of any then
existing Tranche Period, in the event that the Adjusted LIBO Rate is
being requested as the Discount Rate for the next following Tranche
Period,
(ii) at least two Business Days prior to the expiration of any then
existing Tranche Period, in the event that the Fixed CD Rate is being
requested as the Discount Rate for the next following Tranche Period and
(iii) at least one Business Day prior to the expiration of any then
existing Tranche Period, in the event that the Base Rate is being
requested as the Discount Rate for the next following Tranche Period,
give the Administrative Agent irrevocable notice of the duration of the Tranche
Period that shall commence on the expiration of the then applicable existing
Tranche Period and the Discount Rate for the Investment allocated to such
Tranche Period. In the event that the Seller shall for any reason fail to
provide notice to the Administrative Agent prior to 11:00 a.m. (local time for
the Administrative Agent) one Business Day prior to the expiration of any then
existing Tranche Period, the Tranche Period commencing upon such expiration
shall have a duration of 3 Business Days and the Discount Rate with respect
thereto shall be the Base Rate.
(b) Each Tranche Period shall have allocated to it Investment from
each Bank Purchaser in an amount corresponding to the respective Pro Rata Share
of such Bank Purchaser. In the case of any Tranche Period in respect of which
the Adjusted LIBO Rate or the Fixed CD Rate shall apply, the aggregate
Investment of all Bank Purchasers allocated thereto shall be an amount not less
than $4,000,000 or an integral multiple of $100,000 in excess thereof.
(c) So long as any Event of Termination (or other event which, with the
giving of notice or passage of time or both, would constitute an Event of
Termination) shall have occurred and be continuing, the Seller may only select
the Base Rate as the Discount Rate for all new Tranche Periods.
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(d) In the event that the Administrative Agent shall have determined
(which determination shall be made in good faith and, absent manifest error,
shall be final, conclusive and binding upon all parties) that, on any date for
determining the Adjusted LIBO Rate or the Fixed CD Rate for any Tranche Period,
by reason of any changes arising after the date of this Agreement affecting the
London interbank market or the United States secondary certificate of deposit
market, as the case may be, or the Administrative Agent's position in such
markets, adequate and fair means do not exist for ascertaining such rate on the
basis provided for in the definition of Adjusted LIBO Rate or Fixed CD Rate, as
the case may be, then, and in any such event, the Administrative Agent shall
forthwith give notice (by telephone confirmed in writing) to the Seller and the
Bank Purchasers of such determination and a summary of the basis for such
determination. Until the Administrative Agent notifies the Seller that the
circumstances giving rise to the suspension described herein no longer exist,
the right of the Seller hereunder to select or continue to use the Adjusted
LIBO Rate or the Fixed CD Rate (as the case may be) as the Discount Rate for
current or future Tranche Periods shall be suspended and the Base Rate instead
shall be used as the Discount Rate for such current or future Tranche Periods.
(e) If any Bank Purchaser shall advise the Administrative Agent that at
any time, because of any circumstances described in clause (x) or (y) of
Section 11.3(a) or any other circumstances beyond such Bank Purchaser's
reasonable control arising after the date of this Agreement and affecting such
Bank Purchaser or the London interbank market or the United States secondary
certificate of deposit market or such Bank Purchaser's position in such
markets, the Adjusted LIBO Rate or Fixed CD Rate (as the case may be) as
determined by the Administrative Agent will not adequately and fairly reflect
the cost to such Lender of funding its portion of the aggregate Investment
allocated to any Tranche Period at the Adjusted LIBO Rate or the Fixed CD Rate
(as the case may be), then, and in any such event: (i) the Administrative Agent
shall forthwith give notice (by telephone confirmed in writing) to the Seller
and the other Bank Purchasers of such advice; and (ii) the Seller's right to
allocate any portion of such Bank Purchaser's Investment to any Tranche Period
at the Adjusted LIBO Rate or the Fixed CD Rate (as the case may be) shall be
immediately suspended and such Bank Purchaser's Investment thereafter shall be
allocated to an unaffected type of Discount Rate, and if any affected Tranche
Period is then outstanding, the Seller shall immediately allocate
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(b) Upfront Fee. The Administrative Agent will have received
from the Seller the fee in respect of, and for the account of, each Bank
Purchaser described in Section 5.1.
(c) Absence of Liens. The Documentation and Collateral Agent
will have received evidence acceptable to it (including Uniform Commercial
Code search reports) that all Receivables and all proceeds thereof are
free and clear of liens, security interests, claims and encumbrances,
except for Permitted Liens.
(d) Financing Statements. The Documentation and Collateral Agent
will have received acknowledgment copies of UCC-1 financing statements,
and all other documents reasonably requested by the Documentation and
Collateral Agent, to perfect, evidence and protect (i) the Ownership
Interest of the Bank Purchasers in the Receivables, and (ii) the Seller's
ownership interest in the Receivables purchased by it from the
Originators.
(e) Lock-Box Agreements. The Documentation and Collateral Agent
will have received original Lock-Box Agreements in the form of Exhibit E
executed (unless otherwise indicated on Exhibit E) by the appropriate
Transaction Parties and each of the Lock-Box Banks.
(f) Receivables Activity Report and Calculation of Ownership
Interests. The Documentation and Collateral Agent will have received (i)
a Receivables Activity Report covering (A) the fiscal month ending most
recently prior to the date on which this Agreement is executed and (B)
the period thereafter to the date that is two days prior to the date on
which the initial Purchase hereunder is proposed to occur, and (ii) a
report setting forth the calculation of each Bank Purchaser's Ownership
Interest upon giving effect to the Initial Purchase.
(g) Resolutions. The Documentation and Collateral Agent will have
received:
(i) a certificate of the Seller's secretary or assistant
secretary attesting to: (A) resolutions of the Seller's Board of
Directors authorizing the execution by the Seller of the Sale
Documents to be executed by the Seller; (B) the names and
signatures of the officers of the Seller authorized to execute the
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Sale Documents to be executed by the Seller; and (C) the
completeness and correctness of the attached articles or
certificate of incorporation (certified by the appropriate
Secretary of State) and by-laws of the Seller; and
(ii) a certificate of the secretary or assistant secretary of
each of Interface and each Originator attesting to: (A)
resolutions of such Transaction Party's Board of Directors (or a
duly authorized committee thereof) authorizing the execution by
such Transaction Party of the Sale Documents to be executed by it;
(B) the names and signatures of the officers of such Transaction
Party authorized to execute the Sale Documents to be executed by
it; and (C) the completeness and correctness of the attached
articles or certificate of incorporation (certified by the
appropriate Secretary of State) and by-laws of such Transaction
Party.
(h) Legal Opinion of Seller's Counsel. The Documentation and
Collateral Agent will have received opinions from counsel for the
Transaction Parties, substantially in the respective forms attached
hereto as Exhibit G, and covering such other matters as (i) that the
transfers under each Transfer Agreement constitute "true sales", (ii)
that the Seller should not be substantively consolidated with Interface
or any other Transaction Party in any bankruptcy or insolvency proceeding
involving the Seller, Interface or such Transaction Party, (iii) general
corporate matters relating to the execution, delivery and performance by
the Transaction Parties of the Sale Documents and (iv) the perfection of
the Ownership Interest of each Bank Purchaser, together with such other
matters as the either Agent or any Bank Purchaser may reasonably request.
(i) Good Standing Certificates. The Documentation and Collateral
Agent will have received certificates of recent date issued by the
Secretary of State of the States of each Transaction Party's jurisdiction
of incorporation as to the legal existence and good standing of such
Transaction Party.
(j) Subordinated Note. The Documentation and Collateral Agent will
have received a copy of the Subordinated Note, which note shall provide
for the subordination of the indebtedness evidenced thereby to the
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obligations and liabilities of the Seller hereunder on such terms as
shall be satisfactory to the Bank Purchasers and the Agents.
(k) Other Agreements. The Documentation and Collateral Agent
shall have received an executed Transfer Agreement and Consent and
Acknowledgment between the Seller and each Originator, respectively.
SECTION 6.5. Condition Precedent to all Incremental Purchases.
Before any Bank Purchaser will make an Incremental Purchase, the Documentation
and Collateral Agent will have received a Receivables Activity Report covering
the period from the date on which the last such report was delivered under
Section 7.4 to the Business Day preceding the date of such Incremental Purchase.
SECTION 6.6. Conditions Precedent to All Purchases. The following
conditions must be satisfied before any Bank Purchaser will make any Purchase:
(a) Representations and Covenants. On and as of the date of
such Purchase (i) the representations of the Seller, Interface and the
Collection Agent in Article IX shall be true and correct in all material
respects with the same effect as if made on such date, (ii) the Seller,
Interface and the Collection Agent shall be in compliance with the
covenants set forth in this Agreement, (iii) the representations of each
Originator set forth in the applicable Transfer Agreement and the Consent
and Acknowledgment shall be true and correct in all material respects
with the same effect as if made on such date and (iv) each Originator
shall be in compliance with the covenants set forth in each of the Sale
Documents executed by it. No Event of Termination or event which, with
the passage of time or the giving of notice or both, would constitute an
Event of Termination shall have occurred and then be continuing.
(b) Other Documents. Each Transfer Agreement and the related
Consent and Acknowledgment shall be in full force and effect, and the
Agents and the Bank Purchasers will have received such additional
opinions, certificates and agreements as any Agent or Bank Purchaser
shall have reasonably requested.
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ARTICLE VII: SETTLEMENT PROCEDURES
SECTION 7.1. Settlement Dates. Each of the following shall constitute
a Settlement Date:
(a) each Monthly Settlement Date;
(b) during any Reinvestment Suspension Period, the first Business Day
of each week;
(c) following the occurrence of an Event of Termination, each day
designated as a Settlement Date by the Agents;
(d) each Business Day on which any Bank Purchaser's Investment is
reduced in accordance with Section 6.2(c);
(e) any date on which a reduction in the aggregate Investment of the
Bank Purchasers is required to prevent the Aggregate Ownership Interest from
exceeding the Maximum Ownership Interest;
(f) each date on which any payment due to any Bank Purchaser or Agent
from the Seller under Article XI has not been made; and
(g) the last day of each Tranche Period.
SECTION 7.2. Application of Collections. The Collection Agent will
apply the Collections as provided in Sections 7.2.1 and 7.2.2, as applicable.
SECTION 7.2.1. Application of Collections on Days That Are Not
Settlement Dates.
(a) The Collection Agent will, on any Business Day (other than a
Settlement Date), from Collections received on such day:
(i) first, remit to the Seller or its designee (for
the account of the Seller and any interests that may then
exist under the Parallel Sale Agreement) an aggregate amount
equal to the product of (1) 100% minus the Bank Group
Ownership Interest and (2) total Collections; and
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(ii) second, pay to the Seller for a Reinvestment Purchase an amount
equal to the product of (1) the Bank Group Ownership Interest
and (2) an amount equal to (A) total Collections less (B) the
aggregate amount, calculated in reference to each Tranche
Period, respectively, necessary to cause the total amount then
set aside in accordance with this paragraph (ii) in respect of
each Tranche Period to be equal to the Accrued Finance Charges
in respect of such Tranche Period for the period from the
beginning of such Tranche Period through the date of such
determination. That portion of the Collections described in
subparagraph (ii)(B) in respect of Accrued Finance Charges for
each Tranche Period shall be set aside and held in trust by the
Collection Agent for the benefit of the Bank Purchasers until,
in the case of each Tranche Period, the last day of such
Tranche Period and disbursement in accordance with
Section 7.2.2(b) below.
(b) Notwithstanding paragraph (ii) of subsection (a) above, if
Reinvestment Purchases have ceased in accordance with Section 6.2(b), the
Collection Agent will set aside and hold in trust for the benefit of the Bank
Purchasers prior to application as provided in Section 7.2.2 the amount which
would otherwise have been paid to the Seller pursuant to paragraph (ii) of
subsection (a) above.
SECTION 7.2.2. Application of Collections on Settlement Dates.
The Collection Agent will, by 11:00 A.M. (local time for the Administrative
Agent) on each Settlement Date:
(a) first, remit to the Seller or its designee (for
the account of the Seller and any interests that may then
exist under the Parallel Sale Agreement) an amount equal to
the product of (i) 100% minus the Bank Group Ownership
Interest and (ii) total Collections; and
(b) second, from the amounts set aside in accordance
with Section 7.2.1(a)(ii) or 7.2.1(b) above with respect
to any such Tranche Period (as supplemented, to the extent
necessary, by amounts available from the Bank Group
Ownership Interest in the Collections), pay to the
Administrative
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Agent, for the account of each Bank Purchaser in respect
of each Tranche Period then ending, an amount equal to the
Accrued Finance Charges for such Tranche Period; and
(c) third, from the remaining Bank Group Ownership
Interest in the Collections,
(i) set aside and hold in trust, for the benefit of each
Bank Purchaser in respect of each Tranche Period
that is not then ending, an amount necessary to
cause the total amount then set aside for such
Tranche Period in accordance with Section 7.2.1(a)
(ii) to be equal to the Accrued Finance Charges in
respect of such Tranche Period for the period from
the beginning of such Tranche Period through such
Settlement Date, and
(ii) then,
(A) if a Reinvestment
Suspension Period shall then be in effect, all
remaining Collections will be paid to the Bank
Purchasers as a return of Investment; or
(B) if a Reinvestment
Suspension Period shall not then be in effect,
all remaining Collections shall be paid to the
Seller for Reinvestment Purchases.
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SECTION 7.3. Adjustments due to Dilution, Etc. If on any day, with
respect to any Receivable in which any Bank Purchaser has an Ownership
Interest, (i) the representation and warranty contained in Section 9.1(f) is no
longer true, (ii) the outstanding balance thereof is reduced, adjusted or
cancelled as a result of defective, rejected or returned merchandise or
services or in connection with a claim, dispute or offset asserted against such
Receivable by an Obligor, (iii) the Seller, the Collection Agent or any
Originator shall otherwise amend, modify or waive any term or condition of such
Receivable or (iv) the Seller, the Collection Agent or any Originator shall
otherwise suffer any Dilution to occur, then in each such case (x) the Seller
shall be deemed to have received on such day a Collection of the outstanding
balance (before giving effect to the related dilution event) of such Receivable
and (y) the Ownership Interest of each Bank Purchaser shall thereupon be
automatically adjusted by decreasing "ER" in the denominator of the fraction
described in Section 3.1(a) by the amount of such deemed Collection.
SECTION 7.4. Receivables Activity Report. The Collection Agent will
provide the Documentation and Collateral Agent (in sufficient copies for
distribution to each Bank Purchaser) with a Receivables Activity Report
covering the most recently completed Tranche Period no later than 15 days
following each Monthly Settlement Date; provided that, the Documentation and
Collateral Agent may at any time request, and the Collection Agent shall
thereafter provide, a Receivables Activity Report (i) on a weekly basis during
any Reinvestment Suspension Period, and (ii) promptly following each Settlement
Date if an Event of Termination shall have occurred and then be continuing.
SECTION 7.5. Payments Generally. Notwithstanding anything herein to
the contrary, no reduction in Investment shall be considered effected, and no
amount of Purchase Discount, Purchase Premium, Upfront Fee, Collection Agent
Fee or other amount due hereunder shall be considered paid by any distribution
to the extent that at any time all or a portion of such distribution is
rescinded or must otherwise be returned for any reason.
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ARTICLE VIII: ADMINISTRATIVE AGENT, DOCUMENTATION AND COLLATERAL
AGENT, CO-AGENTS AND COLLECTION AGENT
SECTION 8.1. Appointment of Administrative Agent and Documentation and
Collateral Agent; Co-Agents. (a) Each Bank Purchaser hereby appoints and
authorizes (i) Trust Company Bank as its Administrative Agent and (ii) The
First National Bank of Chicago as its Documentation and Collateral Agent, in
each case such Person to take such action as agent on behalf of such Bank
Purchaser and to exercise such powers under this Agreement and any of the other
Sale Documents as are delegated to such agent by the terms hereof or thereof,
together with such powers as are reasonably incidental thereto. The
Administrative Agent is responsible for fulfilling all duties expressly
assigned to it in this Agreement or any of the other Sale Documents. The
Documentation and Collateral Agent shall serve as nominee "secured party", for
the benefit of each of the Bank Purchasers and the Agents hereunder, on all
Uniform Commercial Code and similar filings and related collateral
documentation and is otherwise responsible for fulfilling all other duties
expressly assigned to it in this Agreement or any of the other Sale Documents.
Each Bank Purchaser has granted to each of the Administrative Agent and the
Documentation and Collateral Agent the authority to take all actions necessary
to assure the Seller's compliance with the terms of this Agreement and to take
all actions required or permitted to be performed by such Bank Purchaser under
this Agreement. Any Agent may, prior to taking any action hereunder or
exercising any discretion hereunder, request instructions from the Majority
Bank Purchasers (or, if applicable, all Bank Purchasers) with respect thereto
and such Agent shall be entitled to refrain from taking such action or
exercising such discretion until such Agent shall have received instructions
from such Bank Purchasers, and such Agent shall not incur any liability to any
Person by reason of so refraining. As to any matters not expressly provided
for by this Agreement, no Agent shall be required to exercise any discretion or
take any action, but shall be fully protected in so acting or refraining from
acting upon the instructions of the Majority Bank Purchasers and such
instructions shall be binding upon all Bank Purchasers. Without limiting the
generality of the foregoing, no Person shall have any right of action
whatsoever against any Agent as a result of such Agent acting or refraining
from acting hereunder in accordance with the instructions of the Majority Bank
Purchasers (or, where the context expressly requires, all Bank Purchasers). No
Agent shall be required to take any action hereunder or in connection herewith
which exposes such Agent to personal liability or which is contrary to this
Agreement or applicable law. Each Agent agrees to give to each Bank Purchaser
prompt notice of each notice given to it by the Seller, the
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Collection Agent or Interface pursuant to the terms of this Agreement.
(b) Neither Agent, nor any of its directors, officers, agents or
employees, shall be liable for any action taken or omitted to be taken by it or
them under or in connection with this Agreement, except for its or their own
gross negligence or willful misconduct. Without limitation of the generality
of the foregoing, (i) each Agent may treat the payee in respect of any
Ownership Interest as the holder thereof until such Agent receives advice
satisfactory to it that such Ownership Interest has been assigned to another
payee; (ii) each Agent may consult with legal counsel (including counsel for
the Seller or Interface), independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) neither Agent makes any warranty or
representation to any Bank Purchaser, and neither Agent shall be responsible to
any Bank Purchaser for any statements, warranties or representations (whether
written or oral) made in or in connection with this Agreement; (iv) neither
Agent shall have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement or
any other Sale Document on the part of the Seller or the Collection Agent or to
inspect the property (including the books and records) of the Seller; (v)
neither Agent shall be responsible to any Bank Purchaser for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement, any other Sale Document or any other instrument or document
furnished pursuant hereto or in connection herewith; and (vi) neither Agent
shall incur any liability under or in respect of this Agreement or any other
Sale Document by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telecopier, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
(c) With respect to its Commitment, the Investment made by it and the
Ownership Interest held by it, each Bank Purchaser that is acting as an Agent
hereunder shall have the same rights and powers under this Agreement as any
other Bank Purchaser and may exercise the same as though it were not such
Agent; and the term "Bank Purchaser" and "Bank Purchasers" shall, unless
otherwise expressly indicated, include each such Person in its individual
capacity. Each Bank Purchaser that is then acting as an Agent hereunder, and
its affiliates, may accept deposits from, lend money to, act as trustee under
indentures of, and
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generally engage in any kind of business with, the Seller, Interface or any of
their subsidiaries, all as if such Person were not an Agent and without any
duty to account therefor to the Bank Purchasers.
(d) Each Bank Purchaser acknowledges that it has, independently and
without reliance upon either Agent or any other Bank Purchaser and based on
such documents and information as it has deemed appropriate, made its own
purchase analysis and decision to enter into this Agreement. Each Bank
Purchaser also acknowledges that it will, independently and without reliance
upon any Agent or any other Bank Purchaser and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
decisions in taking or not taking action under this Agreement.
(e) The Bank Purchasers agree to indemnify each Agent (to the extent
not reimbursed by the Seller) according to the Bank Purchasers' respective Pro
Rata Shares from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against such Agent in any way relating to or arising out of this
Agreement or any other Sale Document or any action taken or omitted by such
Agent under this Agreement, provided that no Bank Purchaser shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from such
Agent's gross negligence or willful misconduct. Without limitation of the
foregoing, each Bank Purchaser agrees to reimburse each Agent promptly upon
demand for its Pro Rata Share of any out-of-pocket expenses (including counsel
fees) incurred by such Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, to the extent that
such Agent is not reimbursed for such expenses by the Seller.
(f) Any Agent may resign at any time by giving written notice thereof
to the Bank Purchasers and the Seller and may be removed at any time with or
without cause by the Majority Bank Purchasers. Upon any such resignation or
removal, the Majority Bank Purchasers shall have the right to appoint a
successor for such Agent. If no successor for such Agent shall have been so
appointed by the Majority Bank Purchasers, and shall have
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accepted such appointment, within 30 days after the retiring Agent's giving of
notice of resignation or the Majority Bank Purchasers' removal of the retiring
Agent, then the retiring Agent may, on behalf of the Bank Purchasers, appoint a
successor for such Agent, which shall be a commercial bank organized under the
laws of the United States of America or of any State thereof and having a
combined capital and surplus of at least $50,000,000. Upon the acceptance of
any appointment as an Agent hereunder by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this Agreement. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Section 8.1 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was an Agent under this Agreement.
(g) The designation of "Co-Agent" is solely for titular purposes. No
Co-Agent shall have any rights or obligations hereunder in such capacity or
otherwise by reason of such designation.
SECTION 8.2. Appointment of Collection Agent.
(a) The Bank Purchasers severally and collectively appoint Interface
a their Collection Agent and the Collection Agent accepts such appointment. The
Collection Agent shall be responsible for collecting the Receivables, tracking,
holding and remitting the Collections and fulfilling all other duties expressly
assigned to it in this Agreement. The Collection Agent shall hold all
documents, instruments and records relating to the Receivables for the benefit
of the Bank Purchasers and the Agents, to the extent of their respective
interests therein. Interface may delegate its duties under this Agreement as
Collection Agent in respect of any Receivables to the Originator of such
Receivables and, to the extent such delegation occurs, references to the
Collection Agent shall be deemed to include references to such Originator. The
delegation by Interface of its duties as Collection Agent shall not relieve
Interface of any of its obligations as Collection Agent hereunder.
(b) The Collection Agent shall, on each day on which Collections are
received by it, set aside and hold in trust for the Bank Purchasers, segregated
from other funds of the Collection Agent, the Bank Purchasers' share of such
Collections.
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(c) The Bank Purchasers severally and collectively grant the
Collection Agent the authority necessary to carry out its duties under this
Agreement for so long as it is acting as Collection Agent.
(d) The Bank Purchasers severally and collectively grant, to the
extent each Bank Purchaser has authority to make such grant, to the Collection
Agent, for so long as it is acting in that capacity, an irrevocable power of
attorney to endorse all drafts, checks and other forms of payment made out in
any Transaction Party's name and to settle, adjust and forgive any Receivable,
subject to the provisions of Section 10.3(b) hereof. Upon any replacement of
the Collection Agent, such power of attorney in favor of the replaced
Collection Agent will terminate and have no further force or effect.
(e) The Collection Agent shall exercise reasonable care in the
performance of its duties under this Agreement and shall use the same degree of
care and skill which it applies to its own property. If and to the extent that
any Originator is performing functions of the Collection Agent, Interface
agrees to cause such Originator to exercise substantially the same degree of
care and skill which Interface is required to apply hereunder.
SECTION 8.2.1. Replacement of Collection Agent; Notification of
Obligors.
(a) At any time following the occurrence of an Event of Termination,
the Documentation and Collateral Agent, if directed to do so by the Majority
Bank Purchasers, may remove Interface (or any successor thereto in such
capacity) as the Collection Agent (whereupon all authority delegated by
Interface (or such successor) to any Originator or any other Person in respect
of the responsibilities of the Collection Agent shall immediately terminate),
appoint a new Collection Agent, take control of the Lock-Boxes (by delivering
to the Lock-Box Banks notice in substantially the form of Exhibit D), notify
Obligors of the Bank Group Ownership Interest in the Receivables and exercise
all other incidences of ownership in the Receivables.
(b) If Interface is removed as Collection Agent, Interface and the
Seller shall (i) transfer to the Documentation and Collateral Agent or any
successor servicer designated by either Agent all records, correspondence and
documents relating to the collection, administration or monitoring of the
Receivables that may from time to time be requested by either Agent or such
successor and (ii) permit such Persons to have
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access to, and to copy, all software used by Interface or the Seller in the
collection, administration or monitoring of the Receivables. Interface and the
Seller each hereby grant to the Bank Purchasers and the Agents, for use by any
Collection Agent that may be designated hereunder following the removal of
Interface as Collection Agent, a non-exclusive license to use all computer
software now or hereafter being utilized by it in connection with the
collection, administration or monitoring of the Receivables; provided that use
by any such successor Collection Agent of such computer software shall be
limited to that reasonably necessary to collect, administer or monitor the
Receivables. Such license shall expire upon the later to occur of the
reduction to zero of the Bank Group Ownership Interest and the termination of
this Agreement. In the case of software that is licensed by, or otherwise made
available to, Interface or the Seller from or by any third party, Interface or
the Seller, as applicable, shall have obtained such consents and otherwise
taken all actions necessary in order to enable any Collection Agent hereunder
to succeed to all rights of Interface and the Seller to the quiet use and
enjoyment of such software for the purpose of discharging its obligations under
or in connection with the Sale Documents.
ARTICLE IX: REPRESENTATIONS AND WARRANTIES
SECTION 9.1. Representations and Warranties of the Seller and the
Collection Agent. The Seller makes, and where applicable the Collection Agent
(with respect to itself) makes, the following representations and warranties to
the Bank Purchasers and the Agents on the date hereof and on the date of each
Purchase hereunder:
(a) Each of the Seller and the Collection Agent is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and is duly qualified in good standing as a
foreign corporation in each jurisdiction where the failure to be so qualified
could materially adversely affect its ability to perform its obligations
hereunder.
(b) The execution, delivery and performance by the Seller and the
Collection Agent of the Sale Documents, and the Seller's use of the proceeds of
the Purchases, are within the Seller's and the Collection Agent's respective
corporate powers, have been duly authorized by all necessary corporate action,
do not contravene (i) the Seller's or the Collection Agent's respective
charters or by-laws or (ii) law or any contractual
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restriction binding on or affecting the Seller or the Collection Agent, and do
not result in or require the creation of any lien (other than pursuant hereto)
upon or with respect to any of its properties; and no transaction contemplated
hereby requires compliance with any bulk sales act or similar law.
(c) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for (i)
the due execution, delivery and performance by the Seller or the Collection
Agent of the Sale Documents, (ii) the perfection, or the exercise by the Bank
Purchasers and the Agents, of their respective rights and remedies under the
Sale Documents, or (iii) the perfection, or the exercise by the Seller, of the
Seller's rights and remedies under any Transfer Agreement or the related
Consent and Acknowledgment, except in each case for the filing of the financing
statements referred to in Section 6.4.4.
(d) The Sale Documents, when executed and delivered by each Transaction
Party that is named as party thereto, will be the legal, valid and binding
obligations of each such Transaction Party, enforceable in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency or other similar laws or by general principles of
equity.
(e) There is no pending or threatened action or proceeding affecting the
Seller or the Collection Agent or any of their respective subsidiaries before
any court, governmental agency or arbitrator which may materially adversely
affect (i) the financial condition or operations of the Seller or (ii) the
ability of the Seller or the Collection Agent to perform its obligations under
the Sale Documents, or which could affect the legality, validity or
enforceability of any Sale Document or of the Ownership Interest of any Bank
Purchaser.
(f) The Seller is the legal and beneficial owner of the Receivables free
and clear of any lien, security interest, claim or encumbrance, except
Permitted Liens; upon each Purchase, each Bank Purchaser will acquire a valid
and perfected first priority ownership interest (or, if applicable as
contemplated in Section 13.7 or Section 13.8, a valid and perfected first
priority security interest) in the Receivables then existing or thereafter
arising and in the Related Rights and the Collections with respect thereto,
free and clear of any lien, security interest, claim or encumbrance, except
Permitted Liens.
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(g) The information provided by the Seller to the Collection Agent for
use in each Receivables Activity Report prepared under Section 7.4 and all
information and Sale Documents furnished or to be furnished at any time by the
Seller or the Collection Agent to any Agent or Bank Purchaser in connection
with this Agreement is or will be accurate in all material respects as of its
date, and no such document will contain any untrue statement of a material fact
or will omit to state a material fact.
(h) Each Receivables Activity Report prepared by the Collection Agent
under Section 7.4 will be accurate in all material respects as of its date, and
no such document will contain any untrue statement of a material fact or will
omit to state a material fact.
(i) The chief place of business and chief executive office of each
Transaction Party and the office where each Transaction Party keeps its records
concerning the Receivables are located at the respective addresses specified on
Schedule D hereto.
(j) A complete and accurate list of the names and addresses of the
Lock-Box Banks, together with the account numbers of the Lock-Boxes, is set
forth in Schedule C hereto (with such additions after the date hereof of other
Lock-Box Banks and/or with such other Lock-Boxes as have been notified to the
Documentation and Collateral Agent and in respect of which, in each case, a
Lock-Box Agreement in the form of Exhibit E shall have been duly executed
(unless otherwise indicated on Exhibit E) by each of the appropriate
Transaction Party and such Lock-Box Bank).
(k) The balance sheets of the Collection Agent and its subsidiaries as at
December 31, 1994, and the related statements of income and retained earnings
of the Collection Agent and its subsidiaries for the fiscal year then ended,
copies of which have been furnished to the Documentation and Collateral Agent,
fairly present the financial condition of the Collection Agent and its
subsidiaries as at such date and the results of the operations of the
Collection Agent and its subsidiaries for the period ended on such date, all in
accordance with generally accepted accounting principles consistently applied,
and since December 31, 1994, there has been no material adverse change in such
condition or operations. The Seller further represents that since December 31,
1994, there has been no material adverse change in the collectibility of the
Receivables taken as a whole.
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(l) The Seller is treating the conveyance of each Ownership Interest in
the Receivables, the Related Rights and the Collections under this Agreement as
a sale for purposes of generally accepted accounting principles.
(m) The Seller does not sponsor, maintain or contribute to any Plan.
Each Plan is in compliance with all of the applicable material provisions of
ERISA and each Plan intended to be qualified under Section 401(a) of the Code
is so qualified. No Plan has incurred an "accumulated funding deficiency"
(within the meaning of Section 302 of ERISA or Section 412 of the Code) whether
or not waived. Neither the Collection Agent nor any ERISA Affiliate (i) has
incurred or expects to incur any liability under Title IV of ERISA, with
respect to any Plan, which could give rise to a lien in favor of the PBGC,
other than liability for the payment of premiums, all of which have been timely
paid when due in accordance with Section 4007 of ERISA, (ii) has incurred or
expects to incur any withdrawal liability, within the meaning of Section 4201
of ERISA, (iii) is subject to any lien under Section 412(n) of the Code or
Sections 302(f) or 4068 of ERISA or arising out of any action brought under
Sections 4070 or 4301 of ERISA, or (iv) is required to provide security to a
Plan under Section 401(a)(29) of the Code. The PBGC has not instituted
proceedings to terminate any Plan or to appoint a trustee or administrator of
any such Plan and no circumstances exist that constitute grounds under Section
4042 of ERISA to commence any such proceedings.
(n) Prior to each transfer pursuant to any Transfer Agreement, the
applicable Originator thereunder shall be the legal and beneficial owner of the
Receivables sold by it to the Seller thereunder, free and clear of any lien,
security interest or encumbrance, and such Transfer Agreement is effective to,
and shall, transfer to the Seller (and the Seller shall acquire) from such
Originator all right, title and interest of such Originator in each such
Receivable, and all Related Rights and Collections with respect thereto, free
and clear of any lien, security interest or encumbrance.
(o) With respect to each Receivable sold or purported to be sold by an
Originator under any Transfer Agreement, the Seller shall have given to such
Originator at the time of such sale reasonably equivalent value in
consideration of the transfer of such Receivable, and each such transfer shall
not have been made for or on account of an antecedent debt owed by such
Originator to the Seller and no such transfer is or may be
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voidable under any Section of the Bankruptcy Code. Each Originator under a
Transfer Agreement is treating the conveyance of receivables thereunder as a
sale for purposes of generally accepted accounting principles.
(p) Except as described in Schedule E, no Transaction Party has any trade
name, fictitious name, assumed name or "doing business as" name.
(q) Neither the Seller nor any other Transaction Party is (i) an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended from time to time, or any successor statute, or (ii) a "holding
company" or a "subsidiary company" or an "affiliate" of a "holding company"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended from time to time, or any successor statute.
(r) The Seller and each Originator, both prior to and after giving effect
to the Initial Purchase hereunder, and after giving effect to each Purchase, as
well as each transfer under any Transfer Agreement, (i) is not "insolvent" (as
such term is defined in Section 101(31)(A) of the Bankruptcy Code); (ii) is
able to pay its debts as they become due; and (iii) does not have unreasonably
small capital for the business in which it is engaged or for any business or
transaction in which it is about to engage.
(s) All Obligors have been instructed to remit payments for Receivables
to a Lock-Box in respect of which a Lock-Box Agreement in the form of Exhibit E
has been duly executed and delivered (unless otherwise indicated on Exhibit E).
(t) A true, accurate and complete copy of the Credit and Collection
Policy of each Originator as of the date of this Agreement is attached hereto
in Schedule B, and in each case such Credit and Collection Policy has not been
amended, restated, supplemented or otherwise modified since such respective
date without the prior written consent of the Majority Bank Purchasers and the
Documentation and Collateral Agent.
(u) All of the outstanding capital stock of the Seller and each
Originator is directly or indirectly owned of record by Interface, all of which
capital stock is fully paid and nonassessable.
(v) At all times from and after the earlier to occur of the Initial
Purchase hereunder and the "Initial Purchase" under the Parallel Sale
Agreement, the Seller has a net worth, as
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determined in accordance with generally accepted accounting principles, in an
amount not less than three percent (3%) of the outstanding balance of the
Receivables Pool.
SECTION 9.2. Representations and Warranties of Interface. In support of
the obligations of Interface under Section 10.4, and the other covenants of
Interface set forth in Section 10.5, Interface makes, with respect to itself,
the following representations and warranties to the Bank Purchasers on the date
hereof and on the date of each Purchase hereunder:
(a) It is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and is duly
qualified in good standing as a foreign corporation in each jurisdiction where
the failure to be so qualified could materially adversely affect its ability to
perform its obligations hereunder.
(b) The execution, delivery and performance by Interface of this
Agreement are within the Interface's corporate powers, have been duly
authorized by all necessary corporate action, and do not contravene (i)
Interface's charter or by-laws or (ii) law or any contractual restriction
binding on or affecting Interface.
(c) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by Interface of this Agreement.
(d) This Agreement, when executed and delivered by Interface, will be the
legal, valid and binding obligation of Interface, enforceable in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency or other similar laws or by general principles of
equity.
(e) There is no pending or threatened action or proceeding affecting
Interface or any of its subsidiaries before any court, governmental agency or
arbitrator which may materially adversely affect its ability to perform its
obligations under this Agreement, or which could affect the legality, validity
or enforceability of this Agreement as against Interface.
(f) Interface is not (i) an "investment company" within the meaning of
the Investment Company Act of 1940, as amended from time to time, or any
successor statute, or (ii) a "holding company" or a "subsidiary company" or an
"affiliate" of a "holding company" within the meaning of the Public Utility
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Holding Company Act of 1935, as amended from time to time, or any successor
statute.
ARTICLE X: COVENANTS
SECTION 10.1. Affirmative Covenants of the Seller and the Collection
Agent. Until the Bank Group Ownership Interest is reduced to zero as described
in Section 3.1(c) and no further Purchases are to be made, the Seller will, and
the Collection Agent (with respect to itself) will, unless the Majority Bank
Purchasers have otherwise consented in writing:
(a) Comply with all applicable laws, rules, regulations and orders with
respect to it, its business and properties and all Receivables, the Related
Rights and Collections the failure to comply with which may materially
adversely affect its financial condition or operations, or its ability to
perform its obligations under the Sale Documents, or which may affect the
legality, validity or enforceability of any Sale Document or of any Ownership
Interest.
(b) Maintain its corporate existence in the jurisdiction of its
incorporation, and qualify and remain qualified in good standing as a foreign
corporation in each jurisdiction where the failure to be so qualified could
materially adversely affect its ability to perform its obligations hereunder.
(c) At any reasonable time, upon prior notice to such Person, permit any
Bank Purchaser or Agent or their respective agents or representatives to visit
and inspect any of its properties, to examine its books of account and other
records and files relating to Receivables (including, without limitation,
computer tapes and disks) and to discuss its affairs, business, finances and
accounts with its officers and employees.
(d) Maintain and implement administrative and operating procedures
(including, without limitation, an ability to recreate records evidencing
Receivables in the event of the destruction of the originals thereof), and keep
and maintain all records and other information, reasonably necessary, or in any
material respect advisable, for the collection of Receivables (including,
without limitation, records reasonably adequate to permit the daily
identification of Receivables and all Collections and adjustments to
Receivables).
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(e) At its expense timely and fully perform and comply with all material
provisions and covenants required to be observed by the Seller under the
contracts related to the Receivables.
(f) Keep its place of business or chief executive office (if it has more
than one place of business) and the office where it keeps the originals of its
records concerning the Receivables at the address therefor listed in Schedule D
or, upon 30 days' prior written notice to the Documentation and Collateral
Agent, at any other location in a jurisdiction where all UCC financing or
continuation statements, or amendments thereto, and such other instruments and
documents, that may be necessary or desirable, or that any Agent may reasonably
request, to perfect, protect or evidence the Ownership Interest of each Bank
Purchaser, have been filed.
(g) Comply in all material respects with the applicable Credit and
Collection Policy in regard to each Receivable and any contract related to such
Receivable.
(h) Instruct all Obligors to cause all Collections to be deposited
directly into a Lock-Box.
(i) File and maintain in effect all filings, and take all such other
actions, as may be necessary to protect the validity and perfection of (i) the
Ownership Interests of the Bank Purchasers and (ii) the ownership interest of
each Originator under a Transfer Agreement in the receivables purportedly
transferred thereunder.
(j) Cause each Plan to comply in all material respects with all
applicable provisions of ERISA.
(k) Treat the conveyance of each Ownership Interest
in the Receivables, the Related Rights and the Collections under this Agreement
as a sale for purposes of generally accepted accounting principles.
(l) In the case of the Seller, at all times from and after the earlier to
occur of the Initial Purchase hereunder and the "Initial Purchase" under the
Parallel Sale Agreement, have a net worth, as determined in accordance with
generally accepted accounting principles, in an amount not less than three
percent (3%) of the outstanding balance of the Receivables Pool at such time.
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(m) In the case of the Seller, give to each transferor under each
Transfer Agreement to which it is a party reasonably equivalent value in
consideration of the transfer of each Receivable thereunder.
(n) In the case of the Seller, require each transferor under a Transfer
Agreement to hold in trust and promptly turn over to the Collection Agent any
Collections received by such transferor on the Seller's behalf.
(o) In the case of the Seller, assign to the Bank Purchasers, consistent
with the Consent and Acknowledgment, all rights of the Seller under each
Transfer Agreement and the Seller agrees that (i) the Bank Purchasers shall be
a third party beneficiary of the Seller's rights under such Transfer Agreement,
(ii) the Seller will enforce its rights as transferee under such Transfer
Agreement on behalf of the Bank Purchasers and (iii) the Bank Purchasers shall
be entitled to enforce such rights against the applicable transferor as if the
Bank Purchasers had been party to such Transfer Agreement.
SECTION 10.2. Reporting Requirements of the Seller and the Collection
Agent. Until the Bank Group Ownership Interest is reduced to zero as described
in Section 3.1(c) and no further Purchases are to be made, the Seller and the
Collection Agent will, unless the Majority Bank Purchasers shall otherwise
consent in writing, furnish to the Agents (or, in the case of clause (e) below,
assist the Collection Agent in furnishing to the Agents) (in sufficient copies
for distribution by the Administrative Agent to the Bank Purchasers):
(a) as soon as available and in any event within 60 days after the end of
each of the first three quarters of each fiscal year of Interface, balance
sheets of Interface and its subsidiaries as of the end of such quarter and
statements of income and retained earnings of Interface and its subsidiaries
for the period commencing at the end of the previous fiscal year and ending
with the end of such quarter, certified by the chief financial officer of
Interface and prepared on a consolidated and a "line of business" basis;
(b) as soon as available and in any event within 120 days after the end
of each fiscal year of Interface, a copy of the annual report for such year for
Interface and its subsidiaries, containing audited financial statements for
such year certified in a manner acceptable to the Documentation and Collateral
Agent by BDO Seidman or other independent public
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accountants acceptable to the Agents and prepared on a consolidated and a "line
of business" basis;
(c) promptly after the sending or filing thereof, copies of all reports
which Interface sends to the holders, as such, of any of its securities (as a
class), and copies of all regular or periodic reports (including all reports
filed on Form 10-K, 10-Q and 8-K and all other reports required to be filed
under Section 13 or Section 15(d) of the Exchange Act) and all registration
statements (without exhibits) which Interface or any subsidiary files with the
Securities and Exchange Commission or any national securities exchange;
(d) (i) promptly and in any event within 30 Business Days after Interface
or any ERISA Affiliate knows or has reason to know that a "reportable event"
(as defined in Section 4043 of ERISA) has occurred with respect to any Plan, a
statement of the chief financial officer of Interface setting forth details as
to such reportable event and the action that Interface or an ERISA Affiliate
proposes to take with respect thereto, together with a copy of the notice of
such reportable event, if any, given to the PBGC, the Internal Revenue Service
or the Department of Labor; (ii) promptly and in any event within 10 Business
Days after receipt thereof, a copy of any notice Interface or any ERISA
Affiliate may receive from the PBGC relating to the intention of the PBGC to
terminate any Plan or to appoint a trustee to administer any such Plan; (iii)
promptly and in any event within 10 Business Days after a filing with the PBGC
pursuant to Section 412(n) of the Code of a notice of failure to make a
required installment or other payment with respect to a Plan, a statement of
the chief financial officer of Interface setting forth details as to such
failure and the action that Interface or an ERISA Affiliate proposes to take
with respect thereto, together with a copy of such notice given to the PBGC;
and (iv) promptly and in any event within 30 Business Days after receipt
thereof by Interface or any ERISA Affiliate from the sponsor of a multiemployer
plan (as defined in Section 3(37) of ERISA), a copy of each notice received by
Interface or any ERISA Affiliate concerning the imposition of withdrawal
liability or a determination that a multiemployer plan is, or is expected to
be, terminated or reorganized;
(e) the Receivables Activity Report as required under Section 7.4;
(f) forthwith upon the occurrence of any of the following, notice of (i)
the occurrence of any Event of
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Termination, (ii) any change in the credit rating assigned by S&P or Moody's to
any indebtedness of any Transaction Party, and (iii) any change in any Credit
and Collection Policy; and
(g) such other information, documents, records or reports respecting the
Receivables or the condition or operations, financial or otherwise, of the
Seller, the Collection Agent, the Originators or any of their respective
subsidiaries as any Bank Purchaser or Agent may from time to time reasonably
request.
SECTION 10.3. Negative Covenants of the Seller and the Collection Agent.
Until the Bank Group Ownership Interest is reduced to zero as described in
Section 3.1(c) and no further Purchases are to be made, neither the Seller nor
the Collection Agent will, unless the Majority Bank Purchasers otherwise
consent in writing:
(a) Except as provided herein, sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist any security
interest, lien or encumbrance (other than any Permitted Lien) upon or with
respect to, (i) in the case of the Seller, any of its assets, properties or
interests in property, including, without limitation, any of the Receivables,
the Related Rights, the Collections, or any Lock-Box, or assign any right to
receive income in respect thereof, and (ii) in the case of the Collection
Agent, any of the Receivables, the Related Rights, the Collections or any
Lock-Box, or assign any right to receive income in respect thereof.
(b) Amend or otherwise modify the terms of any Receivable that is (or
shall have been at any time) an Eligible Receivable, or amend, modify or waive
any term or condition of any contract related thereto, except in a manner
consistent with the applicable Credit and Collection Policy and other ordinary
course practices in effect on the date hereof.
(c) Make any change in the character of the business of the Seller, any
material change in the character of the business of the Collection Agent, or
any change in any Credit and Collection Policy which change in any of the
foregoing cases would be reasonably likely to materially impair the
collectibility of any Receivable.
(d) Add or terminate any bank as a Lock-Box Bank from those listed on
Schedule C hereto, or make any change in its instructions to Obligors regarding
payments to be made on any
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Receivable or payments to be made to any Lock-Box Bank, unless the
Documentation and Collateral Agent shall have received notice of such addition,
termination or change and, with respect to the addition of any Lock-Box Bank,
shall have received a Lock-Box Bank Agreement in substantially the form of
Exhibit E executed by the Seller, the applicable Originator, and such Lock-Box
Bank.
(e) Deposit or otherwise credit, or cause or permit to be so deposited or
credited, to any Lock-Box cash or cash proceeds other than Collections or other
proceeds of Receivables; provided, it is understood that from time to time an
obligor may mistakenly cause a remittance that is not a Collection to be
directed to a Lock-Box, and in such case the Seller shall, promptly following
its becoming aware of such mistake, so advise the Collection Agent.
(f) (i) In the case of the Seller or the Collection Agent, permit any
accumulated funding deficiency (as defined in Section 302 of ERISA or Section
412 of the Code) to exist with respect to any Plan, whether or not waived, (ii)
fail, or permit any ERISA Affiliate to fail, to pay any required installment or
any other payment required under Section 412 of the Code with respect to any
Plan on or before the due date for such installment or other payment, (iii)
terminate, or permit any ERISA Affiliate to terminate, any Plan which would
result in any liability of the Collection Agent or any ERISA Affiliate under
Title IV of ERISA, (iv) take any action or fail to take any action, or permit
any ERISA Affiliate to take any action or fail to take any action, with respect
to any multiemployer plan (as defined in Section 3(37) of ERISA) that will
result in withdrawal liability of the Seller or any ERISA Affiliate, or (v)
amend, or permit any ERISA Affiliate to amend, a Plan resulting in an increase
in liabilities such that the Seller or any ERISA Affiliate is required to
provide security to such Plan under Section 401(a)(29) of the Code.
(g) In the case of the Seller, (i) enter into or be a party to any
agreement or instrument other than this Agreement, the other Sale Documents and
the Subordinated Note, and such other agreements ("Operating Agreements") in
the ordinary course of its limited business affairs as shall be necessary to
effect the purposes of Section 10.4, (ii) amend, modify or waive any provision
in any Sale Document, the Subordinated Note or (if any Affiliate of the Seller
shall be party thereto) any Operating Agreement, or give any approval or
consent of permission provided for in any thereof; provided that, in the case
of the Parallel Sale Agreement, the Seller may agree to amend or modify such
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agreement without the prior written consent of any party hereto to the extent
that such amendment or modification (x) corresponds and conforms to an
amendment then being made to this Agreement, (y) relates to any reduction of
the pricing applicable to the Seller thereunder or (z) permits or consents to
the assignment by any financial institution party thereto of all or any portion
of its interest thereunder, or (iii) unless thirty (30) days' prior written
notice thereof shall have been given by the Seller to the Agents, amend, modify
or waive any provision in any other Operating Agreement; provided that, upon
any such notice, any Agent may require that, prior to giving effect to any such
amendment, modification or waiver, the Seller shall have provided to the Bank
Purchasers and the Agents (x) an opinion of counsel affirming that such action
shall not adversely affect the conclusions set forth in the opinion required to
be delivered under Section 6.4(h)(ii) and (y) a certificate of a senior officer
of the Seller certifying that, after giving effect to such action, no Event of
Termination shall have occurred and then be continuing.
(h) In the case of the Seller, engage in any business or enterprise or
enter into any transaction other than as contemplated by this Agreement and the
other Sale Documents.
(i) Amend the Certificate of Incorporation or By-Laws of the Seller.
(j) In the case of the Seller, create, incur, guarantee, assume or suffer
to exist any indebtedness or other liabilities, whether direct or contingent,
other than (i) as a result of the indorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business, (ii) the incurrence of obligations under this Agreement, the Parallel
Sale Agreement, the Subordinated Note and the Transfer Agreements, (iii) the
incurrence of operating expenses in the ordinary course of business of the type
otherwise contemplated in this Agreement and (iv) the issuance of a guaranty in
favor of the transferees of interests in receivables originated by Interface
Europe Ltd. and transferred to such transferees by a special purpose
corporation ("UKSPC"), provided that such guaranty (A) is issued
contemporaneously with the issuance by the UKSPC of a guaranty in favor of the
Bank Purchasers and SPARC, (B) may not be drawn upon at any time prior to the
reduction to zero of the Bank Group Ownership Interest and the termination of
this Agreement, and (C) is limited in the amount of guaranteed obligations and
subordinated on terms and conditions satisfactory to the Agents.
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(k) In the case of the Seller, merge or consolidate with any other
Person, or purchase, lease or otherwise acquire all or substantially all of the
property or assets of any Person.
(l) In the case of the Seller, permit the principal amount evidenced by
the Subordinated Note to exceed at any time an amount equal to the sum of (i)
the Reserve at such time, (ii) the "Reserve" then in effect under the Parallel
Sale Agreement, and (iii) the aggregate face amount of all Receivables then
outstanding that are neither Defaulted Receivables nor Eligible Receivables.
SECTION 10.4. Covenants of the Seller and Interface Relating to Separate
Legal Identity. The Seller and Interface hereby acknowledge that the Bank
Purchasers are entering into the transactions contemplated by this Agreement in
reliance upon the Seller's identity as a separate legal entity from Interface,
each Originator and each Originator Entity (as defined below). Therefore, from
and after the date of execution and delivery of this Agreement and so long as
this Agreement is in effect, the Seller and Interface shall take all reasonable
steps including, without limitation, all steps that any Agent may from time to
time reasonably request to maintain the Seller's identity as a separate legal
entity and to make it manifest to third parties that the Seller is an entity
with assets and liabilities distinct from those of Interface, each Originator
and any Affiliates (other than the Seller) thereof (each of Interface, each
Originator and each of their respective Affiliates (other than the Seller)
shall be referred to herein as an "Originator Entity"), and not just a division
of any Originator Entity. Without limiting the generality of the foregoing and
in addition to and consistent with the covenant set forth in Section 10.1(b)
above, the Seller shall (and Interface shall take all actions necessary to
permit or enable the Seller to):
(i) conduct its own business in its own name and require that all
full-time employees of the Seller identify themselves as such and not as
employees of any Originator Entity (including, without limitation, by
means of providing such employees with business or identification cards
identifying such employees as the Seller's employees);
(ii) compensate all employees, consultants and agents directly,
from the Seller's bank accounts, for services provided to the Seller by
such employees, consultants and agents and, to the extent any employee,
consultant or agent
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of the Seller is also an employee, consultant or agent of any Originator
Entity, allocate the compensation of such employee, consultant or agent
between the Seller and such Originator Entity on a basis which reflects
the services rendered to the Seller and such Originator Entity;
(iii) clearly identify its offices (by signage or otherwise) as its
offices, and all such offices will occupy space that is separate and
distinct from any space occupied by any Originator Entity even if such
office space is leased or subleased from, or is on or near premises
occupied by any Originator Entity;
(iv) have a separate telephone number, which will be answered only
in its name and separate checks in its own name;
(v) conduct all transactions with any Originator Entity strictly on
an arm's-length basis, allocate all overhead expenses (including, without
limitation, telephone and other utility charges) for items shared between
the Seller and any Originator Entity on the basis of actual use to the
extent practicable and, to the extent such allocation is not practicable,
on a basis reasonably related to actual use;
(vi) at all times have at least one member of its Board of
Directors who is not (A) a director, officer or employee of any
Originator Entity, (B) a person related to any officer or director of any
Originator Entity, (C) a holder (directly or indirectly) of more than 5%
of any voting securities of any Originator Entity, or (D) a person
related to a holder (directly or indirectly) of more than 5% of any
voting securities of any Originator Entity;
(vii) observe all corporate formalities as a distinct entity, and
ensure that all corporate actions are duly authorized by unanimous vote
of its Board of Directors;
(viii) maintain the Seller's books and records separate from those
of any Originator Entity;
(ix) prepare its financial statements separately from those of
other Originator Entities and insure that any consolidated financial
statements of any Originator Entity that include the Seller have detailed
notes clearly stating that the Seller is a separate corporate entity and
that its
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assets will be available first and foremost to satisfy the claims of its
creditors;
(x) except as herein specifically otherwise provided, not commingle
funds or other assets of the Seller with those of any Originator Entity
and not maintain bank accounts or other depository accounts to which any
Originator Entity is an account party, into which any Originator Entity
makes deposits or from which any Originator Entity has the power to make
withdrawals;
(xi) not permit any Originator Entity to pay any of the Seller's
operating expenses (except pursuant to allocation arrangements that
comply with the requirements of subparagraph (v) above; and
(xii) take such other actions as are necessary on its part to
ensure that the facts and assumptions set forth in the opinion letter of
even date herewith issued by Kilpatrick & Cody relating to substantive
consolidation, or set forth in any certificate relied upon by Kilpatrick
& Cody in issuing such opinion letter, remain true and correct in all
material respects at all times.
SECTION 10.5. Covenants of Interface. Until the Bank Group Ownership
Interest is reduced to zero as described in Section 3.1(c) and no further
Purchases are to be made, Interface, in support of its obligations set forth in
Section 10.4, will, unless the Majority Bank Purchasers have otherwise
consented in writing:
(a) Comply with all applicable laws, rules, regulations and orders with
respect to it, its business and properties, the failure to comply with which
may materially adversely affect its ability to perform its obligations under
this Agreement, or which may affect the legality, validity or enforceability of
this Agreement as against Interface.
(b) Maintain its corporate existence in the jurisdiction of its
incorporation, and qualify and remain qualified in good standing as a foreign
corporation in each jurisdiction where the failure to be so qualified could
materially adversely affect its ability to perform its obligations hereunder.
(c) At any reasonable time, upon prior notice to Interface, permit any
Bank Purchaser or Agent or their respective agents or representatives to visit
and inspect any of its
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properties, to examine its books of account and other records and files
relating to this Agreement (including, without limitation, computer tapes and
disks) and to discuss its affairs, business, finances and accounts with its
officers and employees.
(d) Forthwith upon the occurrence thereof, provide notice to the Agents
of the occurrence of any Event of Termination relating to the performance by
Interface of its obligations under this Agreement.
(e) Not amend the Certificate of Incorporation or By-Laws of the Seller.
(f) Not permit the principal amount evidenced by Subordinated Note to
exceed at any time an amount equal to the sum of (i) the Reserve at such time,
(ii) the "Reserve" then in effect under the Parallel Sale Agreement, and (iii)
the aggregate face amount of all Receivables then outstanding that are neither
Defaulted Receivables nor Eligible Receivables.
ARTICLE XI: INDEMNIFICATIONS; INCREASED COSTS
SECTION 11.1. Indemnification by the Seller of the Bank Purchasers, etc.
Without limiting any other rights which the Bank Purchasers, the Agents and
their respective officers, directors, employees, agents and Affiliates may have
hereunder or under applicable law, the Seller hereby indemnifies such parties
and holds them harmless from and against any and all damages, losses, claims,
liabilities and related costs and expenses (including attorneys' fees and
disbursements) incurred by any of them arising out of or resulting from this
Agreement or the purchase by any Bank Purchaser of any Ownership Interest in
Receivables, including, without limitation:
(a) the reliance by any Agent or Bank Purchaser on any representation or
warranty made by the Seller, Interface or any Originator (or any of their
respective officers) under or in connection with this Agreement or any Sale
Document, which was incorrect when made (it being understood that each Agent
and each Bank Purchaser shall, for purposes of this Section 11.1, be entitled
to rely on the truth, accuracy and completeness of each representation and
warranty made under this Agreement at the time of each Purchase, without regard
to any qualifying language in the limited context of a condition precedent to
the effect that any representation or warranty shall be true and correct "in
all material respects" or words of like import);
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(b) the failure by the Seller, Interface or the Collection Agent (or any
Person to whom the Collection Agent may have delegated any of its duties or
responsibilities as Collection Agent) to comply with any covenant set forth in
this Agreement (including, without limitation, any covenant relating to the
payment, remittance or deposit of any amount hereunder) or the failure by any
party to any Transfer Agreement to comply with any obligation or covenant on
its part to be performed thereunder or under the related Consent and
Acknowledgment;
(c) the failure to vest and maintain in any Bank Purchaser, or to
transfer to any Bank Purchaser, legal and equitable title to, and ownership of,
an undivided percentage ownership interest (to the extent of such Bank
Purchaser's Ownership Interest) in the Receivables, free and clear of any
security interest, lien, claim or encumbrance;
(d) the transfer by the Seller of an undivided percentage ownership
interest in any Receivables other than the Ownership Interest hereunder and the
"Ownership Interest" under the Parallel Sale Agreement;
(e) the Seller's or any Originator's use of proceeds of the Purchases;
(f) the failure by the Seller or the Collection Agent timely to file
financing statements or other similar instruments or documents under the
Uniform Commercial Code (or other applicable law relating to the transfer of
interests in the Receivables) of any applicable jurisdiction or other
applicable laws with respect to any Receivables, whether at the time of a
Purchase or otherwise;
(g) the return or transfer by the Collection Agent of any portion of
Collections to the Seller or any other person for any reason whatsoever, other
than as authorized in Section 7.2.1 or 7.2.2;
(h) any dispute, claim, offset or defense of any obligor to the payment
of any Receivable (including a defense based on such Receivable's or the
related contract's not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms but excluding any
discharge (as distinguished from avoidance) in bankruptcy or any similar
insolvency proceeding of any Obligor due to the financial inability of such
Obligor to pay its debts as they mature), or any other claim resulting from the
sale, use, operation or
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ownership of or defects in or breaches of warranties with respect to, the
merchandise or services relating to such Receivable or the furnishing or
failure to furnish such merchandise or services;
(i) the Seller's or any Originator's failure to pay when due any taxes
(including sales, excise or personal property taxes) payable by such Person in
connection with the Receivables;
(j) the commingling of Collections with other funds of the Seller, the
Collection Agent or any Originator Entity;
(k) the failure by the Seller, the Collection Agent or any Originator to
comply with any applicable law, rule or regulation with respect to any
Receivable, or the nonconformity of any Receivable with any such applicable
law, rule or regulation;
(l) the failure to vest all right, title and interest in the Seller in
the Receivables purchased by the Seller from any Originator under a Transfer
Agreement, in each case free and clear of any security interest, lien, claim or
encumbrance;
(m) any failure of the Seller to give reasonably equivalent value to any
Originator under any Transfer Agreement in consideration of the transfer by
such Originator to the Seller of any Receivables, or any attempt by any Person
to void any such transfer under statutory provisions or common law or equitable
action, including, without limitation, any provision of the Bankruptcy Code; or
(n) any information provided by the Seller, Interface, any Originator or
the Collection Agent or any Sale Document furnished to any Bank Purchaser or
any Agent in connection with this Agreement which shall have been incorrect in
any respect or which shall have omitted any material fact.
Notwithstanding anything herein to the contrary, however, the Seller shall not
be obligated under this Section 11.1 to indemnify any Person against or hold
any Person harmless from any damage, loss, claim, liability, cost or expense to
the extent that the same arises out of or results from (i) such Person's own
gross negligence or wilful misconduct, (ii) the negligence or wilful misconduct
of the Collection Agent (if other than Interface or any Affiliate thereof), or
(iii) the fact that any Receivable proves to be uncollectible (unless the
Seller is otherwise expressly liable therefor under the terms of this
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Agreement or any other Sale Document). If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Seller hereby agrees to
make the maximum contribution to the payment of the amounts indemnified against
in this Section which is permissible under applicable law. To the extent that
any claim arises against the Seller under this Section 11.1 in respect of any
action taken or omitted to be taken by the Collection Agent in its capacity as
Collection Agent, the Collection Agent agrees that (i) it shall be jointly and
severally liable to the Bank Purchasers and the Agent in respect of such claim
and (ii) the Seller shall have a corresponding claim against the Collection
Agent for any payments made by the Seller to any indemnified party hereunder.
SECTION 11.2. Indemnification Due to Failure to Consummate Purchase or
Certain Reductions in Investment. Each notice of an offer to sell given by the
Seller in accordance with Section 6.2(a) and each notice of election to reduce
the Investment given by the Seller in accordance with Section 6.2(c) shall be
irrevocable and binding on the Seller. The Seller shall indemnify each Bank
Purchaser against any loss, cost or expense incurred by such Bank Purchaser as
a result of (i) any failure to fulfill, on or before the date specified in any
notice given pursuant to Section 6.2(a), the applicable conditions precedent
for the making of the related Purchase, (ii) any failure of the Seller to make
the reduction in the aggregate Investment contemplated in any notice given
pursuant to Section 6.2(c) to the extent and on the date specified in such
notice, or (iii) any remittance by the Seller or the Collection Agent of any
Collections for application as a reduction of the aggregate Investment on any
date other than a Settlement Date or on any Settlement Date to the extent such
remittance exceeds the aggregate Investment allocated to Tranche Periods ending
on such Settlement Date, in each such case including, without limitation, any
loss (including loss of anticipated profits), cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired
by such Bank Purchaser to fund or maintain the affected or proposed Purchase or
Investment; provided, however, that in each such case the Seller's indemnity
obligations under this sentence shall apply only if and to the extent the
affected or proposed Purchase or Investment relates to a Tranche Period having
the Adjusted LIBO Rate or the Fixed CD Rate as its Discount Rate.
SECTION 11.3. Increased Costs; Capital Adequacy. (a) If, by reason of
(x) after the date hereof, the introduction of or any change (including,
without limitation, any change by way
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of imposition or increase of reserve requirements) in or in the interpretation
or administration of any law, rule or regulation, or (y) the compliance with
any guideline, request or directive from any central bank or other governmental
authority or quasi-governmental authority exercising control over banks or
financial institutions generally (whether or not having the force of law):
(i) any Bank Purchaser shall be subject to any tax, duty or other
charge or withholding with respect to its Investment hereunder or its
obligation to make Purchases hereunder or on or with respect to the
Receivables or its Ownership Interest hereunder, or the basis of taxation
of payments to any Bank Purchaser of any amount hereunder or its
obligation to make Purchases hereunder shall have changed (except for
changes in the tax on the overall net income of such Bank Purchaser
imposed by the jurisdiction in which such Bank Purchaser's principal
executive office or applicable Purchasing Office is located); or
(ii) any reserve (including, without limitation, any imposed by the
Board of Governors of the Federal Reserve System), assessment, insurance
charge, special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any Bank
Purchaser shall be imposed or deemed applicable or any other condition
affecting its Investment hereunder or its obligation to make Purchases
shall be imposed on any Bank Purchaser, its applicable Purchasing Office
or the London interbank market or the United States secondary certificate
of deposit market;
and as a result thereof there shall be any increase in the cost to such Bank
Purchaser of agreeing to make or making Purchases hereunder, or funding or
maintaining its Investment hereunder (except to the extent already included in
the determination of the applicable Fixed CD Rate or Adjusted LIBO Rate, if
applicable), or there shall be a reduction in the amount received or receivable
by such Bank Purchaser, then the Seller shall from time to time, upon written
notice from and demand by such Bank Purchaser to the Seller, pay to the
Administrative Agent for the account of such Bank Purchaser, within five
Business Days after the date of such notice and demand, additional amounts
sufficient to indemnify such Bank Purchaser against such increased cost;
provided, however, that the Seller's indemnity obligations, under this Section
shall apply only if and to the extent the affected Purchase or Investment
relates to a Tranche Period having the Adjusted LIBO Rate or the Fixed CD Rate
as its Discount Rate. A
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certificate as to the amount of such increased cost, submitted to the Seller by
such Bank Purchaser in good faith and accompanied by a statement prepared by
such Bank Purchaser describing in reasonable detail the basis for and
calculation of such increased cost, shall, except for manifest error, be final,
conclusive and binding for all purposes.
(b) Without limiting any other provision of this Agreement, in the event
that any Bank Purchaser shall have determined that any law, treaty,
governmental (or quasi-governmental) rule, regulation, guideline or order
regarding capital adequacy not currently in effect or fully applicable as of
the date hereof, or any change therein or in the interpretation or application
thereof, or compliance by such Bank Purchaser with any request or directive
regarding capital adequacy not currently in effect or fully applicable as of
the date hereof (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful) from a central bank or
governmental authority or body having jurisdiction, does or shall have the
effect or reducing the rate of return on such Bank Purchaser's capital as a
consequence of its obligations hereunder to a level below that which such Bank
Purchaser could have achieved but for such law, treaty, rule, regulation,
guideline or order, or such change or compliance (taking into consideration
such Bank Purchaser's policies with respect to capital adequacy) by an amount
deemed by such Bank Purchaser to be material, then within ten Business Days
after written notice and demand by such Bank Purchaser (with copies thereof to
the Agents), the Seller shall from time to time pay to such Bank Purchaser
additional amounts sufficient to compensate such Bank Purchaser for such
reduction. Each certificate as to the amount payable under this Section
11.3(b) (which certificate shall set forth the basis for requesting such
amounts in reasonable detail), submitted to the Seller by any Bank Purchaser in
good faith, shall, absent manifest error, be final, conclusive and binding for
all purposes.
SECTION 11.4. Notices. Each Bank Purchaser agrees to notify the Seller
and the Administrative Agent upon its knowledge of a claim for which it intends
to seek indemnification under Section 11.1 or reimbursement under Section 11.2
or 11.3 from the Seller. The Seller agrees to assist the parties indemnified
under Section 11.1, to the extent requested by them, in any action, suit or
proceeding brought by or against them in connection with the indemnification
granted herein.
SECTION 11.5. Purchasing Offices.
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(a) Each Bank Purchaser agrees that, if requested by the Seller, it will
use reasonable efforts (subject to overall policy considerations of such Bank
Purchaser) to designate an alternate Purchasing Office with respect to any of
its Purchases or Investments affected by the matters or circumstances described
in Section 6.3(e), Section 6.3(f) or Section 11.3 to reduce the liability of
the Seller or to avoid the results provided thereunder, so long as such
designation is not disadvantage to such Bank Purchaser as determined by such
Bank Purchaser, which determination, if made in good faith, shall be conclusive
and binding on all parties hereto. Nothing in this Section 11.15 shall affect
or postpone any of the obligations of the Seller or any right of any Bank
Purchaser provided hereunder.
(b) If any Bank Purchaser that is organized under the laws of a
jurisdiction other than the United States of America or any state or other
political subdivision thereof (including the District of Columbia) issues a
public announcement with respect to the closing of its offices in the United
States such that any withholdings or deductions and additional payments with
respect to Taxes may be required to be made by the Seller thereafter pursuant
to (and as the term "Taxes" is defined in) Section 13.3, such Bank Purchaser
shall use reasonable efforts to furnish the Seller and the Collection Agent
notice thereof as soon as practical thereafter; provided, however, that no
delay or failure to furnish such notice shall in any event release or discharge
the Seller from its obligations to such Bank Purchaser pursuant to Section 13.3
or otherwise result in any liability of such Bank Purchaser.
SECTION 11.6. Limitations on Certain Payment Obligations.
(a) Each Bank Purchaser or Agent shall make written demand on the Seller
for indemnification of compensation on account of any Taxes pursuant to (and as
such term is defined in) Section 13.3 no later than 90 days after the earlier
of (i) the date on which such Bank Purchaser or Agent makes payment of such
Taxes and (ii) the date on which the relevant taxing authority or other
governmental authority makes written demand upon such Bank Purchaser or Agent
for payment of such Taxes.
(b) Each Bank Purchaser or Agent shall make written demand on the Seller
for indemnification or compensation pursuant to Section 11.2 no later than 90
days after the event giving rise to indemnification or compensation occurs.
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(c) Each Bank Purchaser or Agent shall make written demand on the Seller
for indemnification or compensation pursuant to Section 11.3 no later than 90
days after such Bank Purchaser or Agent receives actual notice or obtains
actual knowledge of the promulgation of the relevant law, rule, order or
interpretation or occurrence of any other event giving rise to a claim pursuant
to such section.
(d) In the event that any Bank Purchaser or Agent (as the case may be)
fails to give the Seller notice within the applicable time limitation described
in paragraph (a) or (b) above (as the case may be), the Seller shall not have
any obligation to pay such claim for compensation or indemnification. In the
event that any Bank Purchaser or Agent fails to give the Seller notice within
the time limitation prescribed in paragraph (c) above, the Seller shall not
have any obligation to pay any amount with respect to claims accruing prior to
the 90th day preceding such written demand.
ARTICLE XII: EVENTS OF TERMINATION
SECTION 12.1. Events of Termination. Each of the following shall
constitute an "Event of Termination":
(a) The Collection Agent (if Interface or any of its Affiliates) shall
fail to (i) perform or observe any term, covenant or agreement hereunder (other
than as referred to in clause (ii) of this Section 12.1(a)) and such failure
shall remain unremedied for three Business Days or (ii) make any payment or
deposit to be made by it hereunder when due (and, in the case of any failure to
make a timely payment or deposit solely by reason of any mechanical delay in or
malfunction of the Fedwire system, such failure shall remain unremedied for one
Business Day); or
(b) The Seller shall fail to (i) make any payment when due under Section
3.3, Section 7.3 or otherwise hereunder (and, in the case of any failure to
make a timely payment solely by reason of any mechanical delay in or
malfunction of the Fedwire system, such failure shall remain unremedied for one
Business Day) or (ii) perform or observe any term, covenant or agreement
contained in Section 10.1(f) or (l) or Section 10.3(a), (g)(ii), (i), (j), (k)
or (l); or
(c) Any representation or warranty or statement made by the Seller or any
other Transaction Party (or any of their
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respective officers) under or in connection with this Agreement or any other
Sale Document shall prove to have been incorrect in any material respect when
made (other than any representation or warranty made by an Originator under
Section 5(f) of any Transfer Agreement which is subsequently cured in
accordance with the terms of the proviso set forth therein); or
(d) The Seller, Interface, the Collection Agent or any other Transaction
Party shall fail to perform or observe any other term, covenant or agreement
contained in this Agreement or any other Sale Document on its part to be
performed or observed and any such failure shall remain unremedied for 10 days
after any Transaction Party first becoming aware of such failure; or
(e) Any Purchase shall for any reason (other than pursuant to the terms
hereof) cease to create, or any Ownership Interest shall for any reason cease
to be, a valid and perfected first priority undivided percentage ownership or
security interest to the extent contemplated herein in each Receivable, and in
the Related Rights and Collections with respect thereto; or
(f) The Seller, Interface, the Collection Agent or any Originator shall
generally not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general assignment
for the benefit of creditors; or any proceeding shall be instituted by or
against the Seller, Interface, the Collection Agent or any Originator seeking
to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, custodian or other similar
official for it or for any substantial part of its property; or the Seller,
Interface, the Collection Agent or any Originator shall take any corporate
action to authorize any of the actions set forth above in this clause (f); or
(g) The aggregate outstanding balance of Receivables that are more than
60 days past due (from the respective due dates thereof) shall at any time
exceed an amount equal to 11% of the aggregate outstanding balance of all
Receivables at such time; or
(h) The aggregate outstanding balance of Defaulted Receivables during any
monthly period shall at any time exceed an
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amount equal to 0.75% of the aggregate outstanding balance of all Receivables
as of the last day of such period; or
(i) The aggregate Dilutions during any monthly period shall at any time
exceed an amount equal to 6.0% of the aggregate outstanding balance of Eligible
Receivables as of the last day of such period; or
(j) The "Portfolio Turnover" (as required to be set forth in, and as
computed in accordance with, any Receivables Activity Report) shall at any time
exceed 90 days; or
(k) (i) Any "Event of Default" shall occur under (and
as defined in) the Interface Credit Agreement; or
(ii) Interface shall fail to pay any principal of or premium or
interest on any indebtedness for borrowed money which is outstanding in a
principal amount of at least $2,500,000 in the aggregate when the same
becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in the
agreement or instrument relating to such indebtedness; or any other event
shall occur or default condition shall exist under any agreement or
instrument relating to any such indebtedness and shall continue after the
applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or default condition is to
accelerate, or to permit the acceleration of, the maturity of such
indebtedness; or any such indebtedness shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), redeemed, purchased or defeased, or an offer to
prepay, redeem, purchase or defease such indebtedness shall be required
to be made, in each case prior to the stated maturity thereof or the
scheduled due date therefor; or
(iii) the Seller shall fail to pay any principal of or premium or
interest on the Subordinated Note or on any other indebtedness for
borrowed money when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or
otherwise but, in the case of the indebtedness evidenced by the
Subordinated Note, other than by reason of the operation of the
subordination provisions therein), and such failure shall continue after
the applicable grace period, if any, specified in the
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agreement or instrument relating to such indebtedness; or any other event
shall occur or default condition shall exist under any agreement or
instrument relating to any such indebtedness and shall continue after the
applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or default condition is to
accelerate, or to permit the acceleration of, the maturity of such
indebtedness; or any such indebtedness shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), redeemed, purchased or defeased, or an offer to
prepay, redeem, purchase or defease such indebtedness shall be required
to be made, in each case prior to the stated maturity thereof or the
scheduled due date therefor; or
(l) any "Event of Termination" shall occur under, and as defined in, the
Parallel Sale Agreement; or
(m) The senior, long-term, unsecured, non-credit enhanced debt of
Interface shall at any time have a credit rating by S&P of less than BB- or a
credit rating by Moody's of less than Ba3 or, in the event that neither S&P nor
Moody's shall then be rating such debt, the imputed equivalent of such ratings
as determined by the Agents; or
(n) (i) So long as the holders of Interface's Class B common stock are
entitled to elect a majority of Interface's board of directors, the Existing
Shareholder Group shall at any time fail to be the "beneficial owners" (as
defined in Rule 13d-3 under the Exchange Act) of a majority of the issued and
outstanding shares of Interface's Class B common stock; or (ii) at any time
during which the holders of Interface's Class B common stock have ceased to be
entitled to elect a majority of Interface's board of Directors (A) any "person"
or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange
Act), other than the Existing Shareholder Group, shall become the "beneficial
owner(s)" (as defined in said Rule 13d-3) of sufficient shares of the then
outstanding common stock of Interface entitled to vote for members of
Interface's board of directors so as to possess effective control (as such term
is defined in the second sentence of the definition of "Affiliate" in Article
I) of Interface, or (B) during any period of twenty-four (24) consecutive
calendar months, individuals who at the beginning of such period constituted
Interface's board of directors (together with any new directors whose election
by Interface's board of directors or whose nomination for election by
Interface's shareholders was approved by a vote of at least
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two-thirds of the directors then still in office who either were 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
directors then in office; or (iii) any event or condition shall occur or exist
which, pursuant to the terms of any Change in Control Provision, requires or
permits the holder(s) of Interface Control Debt to require that such Interface
Control Debt be redeemed, repurchased, defeased, prepaid or repaid, in whole or
in part, or the maturity of such Interface Control Debt to be accelerated in
any respect; provided, however, that no Event of Termination hereunder shall be
deemed to exist upon the occurrence of any event or condition described in the
foregoing clauses (i), (ii) or (iii) of this subsection (n) until ninety (90)
days after the first occurrence or existence of such event or condition; or
(o) Interface shall at any time cease to own and hold, or cease to
control all voting rights in respect of, all of the issued and outstanding
capital stock of the Seller; or
(p) Interface shall for any reason (other than the removal thereof by the
Bank Purchasers in accordance with the terms of this Agreement) cease to be or
to serve as Collection Agent hereunder.
SECTION 12.2. Remedies. Upon the occurrence of any Event of Termination,
(a) the Agents may at any time (and, upon the direction at any time of the
Majority Bank Purchasers, the Agents shall) declare the Commitment Termination
Date to have occurred, whereupon the commitment of each Bank Purchaser to make
any further Purchases of any type hereunder shall terminate without further
notice to or demand upon the Seller or any other Person, all of which are
hereby waived by the Seller; provided that upon the occurrence of any of the
events described in clause (f) in respect of the Seller or the Collection
Agent, the Commitment Termination Date shall thereupon automatically occur
without notice, and the commitment of each Bank Purchaser to make further
Purchases of any type hereunder shall thereupon terminate automatically; and
(b) the Agents, upon the direction of the Majority Bank Purchasers, may (i)
remove the Person then acting as Collection Agent hereunder from its rights and
responsibilities as Collection Agent and may designate any other Person
(including, without limitation, any Agent or Bank Purchaser) to be Collection
Agent hereunder, (ii) take control of the Lock-Boxes (by delivering to the
Lock-Box Banks notice in substantially the form of Exhibit D), and (iii) notify
Obligors
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of the Bank Group Ownership Interest in the Receivables. The Bank Purchasers
and the Agents shall have, in addition to all other rights and remedies under
this Agreement or otherwise, all other rights and remedies provided under the
Uniform Commercial Code of the applicable jurisdiction and other applicable
laws, which rights shall be cumulative.
ARTICLE XIII: MISCELLANEOUS
SECTION 13.1. Amendments, Etc. No amendment or waiver of, or consent to
the Seller's, Interface's or the Collection Agent's departure from, any
provision of this Agreement shall be effective unless it is in writing in
accordance with this Section 13.1, and then such amendment, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which it was given. The Seller, the Collection Agent and the Documentation
and Collateral Agent, at the direction of the Majority Bank Purchasers and
following consultation with the Administrative Agent, may enter into written
modifications or waivers of any provisions of this Agreement; provided,
however, that no such modification or waiver shall:
(i) without the consent of each affected Bank Purchaser, (a) extend
the Commitment Termination Date or the date of any payment or deposit of
Collections by the Seller or the Collection Agent, (b) reduce the rate or
extend the time of payment of any amount due under Article V or Article
VII (or any component thereof), (c) reduce any fee payable to any Agent
for the benefit of the Bank Purchasers, (d) except as expressly
contemplated herein, change the amount of the Investment, Pro Rata Share
or Commitment of any Bank Purchaser, (e) amend, modify or waive any
provision of the definition of "Majority Bank Purchasers" or this Section
13.1, (f) consent to or permit the assignment or transfer by the Seller
or the Collection Agent of any of its rights or obligations under this
Agreement, (g) change the definition of "Dilution Reserve," "Eligible
Receivable," "Loss Reserve Ratio," "Ownership Interest," "Reserve" or
"Yield Reserve," or (h) amend or modify any defined term (or any defined
term used directly or indirectly in such defined term) used in clauses
(a) through (h) above in a manner which would circumvent the intention of
the restrictions set forth in such clauses; or
(ii) without the written consent of the then Administrative Agent,
amend, modify or waive any provision
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of this Agreement if the effect thereof is to affect the rights or duties
of such Agent; or
(iii) without the written consent of the then Documentation and
Collateral Agent, amend, modify or waive any provision of this Agreement
if the effect thereof is to affect the rights or duties of such Agent; or
(iii) without the written consent of such Co-Agent, amend, modify or
waive any provision of this Agreement if the effect thereof is to affect
the rights or duties of any Co-Agent.
Notwithstanding the foregoing, the Agents may, without the consent of the Bank
Purchasers or the Majority Bank Purchasers, enter into amendments, consents or
waivers with the Seller and the Collection Agent that are, in the judgment of
the Agents, ministerial or administrative in nature. Any modification or
waiver made in accordance with this Section 13.1 shall apply to each of the
Bank Purchasers equally and shall be binding upon the Seller, the Collection
Agent, the Bank Purchasers and the Agents.
SECTION 13.2. Notices, Etc. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile, telegraphic, telex or cable communication) and shall be
given to the applicable party at its address or applicable facsimile,
telegraphic, telex or cable number or address set forth on the signature pages
hereto or such other address or number as shall be designated by such party in
a written notice to the other parties hereto. Each such notice or other
communication shall be effective (i) if given by telex, when such telex is
transmitted to the telex number specified in this Section and the appropriate
answerback is received, (ii) if given by mail, 72 hours after such
communication is deposited in the mails with first-class postage prepaid,
addressed as aforesaid, (iii) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified in this Section and the
appropriate confirmation is received, or (iv) if given by any other means
(including, without limitation, by air courier), when delivered or received at
the address specified in this Section, except that notices and communications
to the any Agent pursuant to Section 6.2, Section 7.4 and Section 10.2(f) shall
only be effective when received by the applicable Agent.
SECTION 13.3. Payments Net of Taxes.
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(a) All payments by the Seller payable under this Agreement shall be made
free and clear of and without deduction for any present or future income, stamp
or other taxes, fees, levies, imposts, deductions, duties, withholdings or
other charges imposed by any taxing authority, and all liabilities with respect
thereto, excluding, in the case of each Bank Purchaser, taxes imposed on or
measured by its net income, and franchise taxes and branch profit taxes,
imposed on it (i) by the jurisdiction under the laws of which such Bank
Purchaser is organized or any political subdivision thereof and, in the case of
each Bank Purchaser, taxes imposed on or measured by its net income, and
franchise taxes and branch profit taxes imposed on it, by the jurisdiction of
such Bank Purchaser's appropriate Purchasing Office or any political
subdivision thereof, and (ii) by a jurisdiction in which any payments are to be
made by the Seller hereunder, other than the United States of America, the
United Kingdom, or The Netherlands, or any political subdivision of any
thereof, and that would not have been imposed but for the existence of a
connection between such Bank Purchaser and the jurisdiction imposing such taxes
(other than a connection arising as a result of this Agreement or the
transactions contemplated by this Agreement), except in the case of taxes
described in this clause (ii) to the extent such taxes are imposed as a result
of a change in the law or regulations of any jurisdiction or any applicable
treaty or regulations or in the official interpretation of any such law, treaty
or regulations by any governmental authority charged with the interpretation or
administration thereof after the date of this Agreement (all such excluded net
income taxes, franchise taxes and branch profit taxes being herein collectively
referred to as the "Excluded Taxes"; all such non-excluded taxes, fees, levies,
imposts, deductions, duties, withholdings or other charges or liabilities being
herein collectively referred to as "Taxes"). If the Seller shall be required
by law to deduct any Taxes from or in respect of any sum payable hereunder to
any Bank Purchaser or Agent, (x) the sum so payable shall be increased by such
amount (the "Gross-up Amount") as may be necessary so that after making all
required deductions (including deductions with respect to Taxes owed by such
Bank Purchaser or Agent on any Gross-up Amount payable under this Section 13.3)
such Bank Purchaser or Agent receives an amount equal to the sum it would have
received had no such deductions been made, (y) the Seller shall make such
deductions and (z) the Seller shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law.
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(b) The Seller will indemnify each Bank Purchaser and Agent for the full
amount of Taxes (together with any Taxes or Excluded Taxes owed by such Bank
Purchaser or Agent applicable to any Gross-up Amount or on the indemnification
payments made by the Seller under this Section 13.3(b), but without duplication
thereof), and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto, whether or not such Taxes or
Excluded Taxes were correctly or legally asserted so as to compensate such Bank
Purchaser or Agent for any loss, cost, expense or liability incurred as a
consequence of any such Taxes. Payment pursuant to such indemnification shall
be made within ten (10) Business Days from the date such Bank Purchaser or
Agent makes written demand therefor on the Seller.
(c) Within thirty (30) days after the date of the Seller's payment of
Taxes, the Seller will furnish the relevant Bank Purchaser, at its appropriate
Purchasing Office, with the original or a certified copy of a receipt
evidencing payment thereof.
(d) Each Bank Purchaser that is a foreign Person (that is, a Person other
than a United States Person as defined in the Internal Revenue Code of 1986, as
amended) hereby agrees that:
(i) Such Bank Purchaser shall, prior to the time it becomes a Bank
Purchaser hereunder, deliver to the Seller: (x) for each Purchasing
Office of such Bank Purchaser located in the United States of America
three (3) accurate and complete signed originals of Internal Revenue
Service Form 4224 or any successor thereto ("Form 4224"), and/or
(y) for each Purchasing Office of such Bank Purchaser located outside
the United States of America, three (3) accurate and complete signed
originals of Internal Revenue service form 1001 or any successor
thereto ("Form 1001"); in each case indicating that such Bank
Purchaser, on the date of delivery thereof, is entitled to receive
payments for the account of such Purchasing Office under this
Agreement free from withholding of United States federal income tax;
provided, that if the Form 4224 or Form 1001, as the case may be,
supplied by a Bank Purchaser fails to establish a complete exemption
from United States withholding tax as of the date such Bank Purchaser
becomes a Bank Purchaser, such Bank Purchaser shall, within 15 days
after a written request from the Seller
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deliver to the requesting party the forms or other documents
necessary to establish a complete exemption from United
States withholding tax as of such date;
(ii) If at any time such Bank Purchaser changes its
Purchasing Office or selects an additional Purchasing Office,
it shall, at the same time or reasonably promptly thereafter
(but only to the extent the forms previously delivered by it
hereunder are no longer effective) deliver to the Seller in
replacement for the forms previously delivered by it
hereunder: (x) for each changed or additional Purchasing
Office located in the United States of America, three (3)
accurate and complete signed originals of Form 4224; or (y)
otherwise, three (3) accurate and complete signed originals of
Form 1001; in each case indicating that such Bank Purchaser is
on the date of delivery thereof entitled to receive payments
for the account of such changed or additional Purchasing
Office under this Agreement free from withholding of United
States Federal income tax.
(e) In addition to the documents to be furnished pursuant to Section
13.3(d) above, each Bank Purchaser shall, promptly upon the reasonable request
of the Seller to that effect, deliver to the requesting party such other
accurate and complete forms or similar documentation as such Bank Purchaser is
legally able to provide and as may be required from time to time by any
applicable law, treaty, rule or regulation of any jurisdiction in order to
establish such Bank Purchaser's tax status for withholding purposes or as may
otherwise be appropriate to eliminate or minimize any Taxes on payments under
this Agreement. Each Bank Purchaser furnishing forms to the Seller or
Interface pursuant to the requirements of Section 13.3(d) or this subsection
(e), shall furnish copies of such forms to the Administrative Agent at the same
time delivery of such forms is made to the Seller.
(f) The Seller shall not be required to pay any amounts pursuant to
Section 13.3(a) or (b) above to any Bank Purchaser for the account of any
Purchasing Office of such Bank Purchaser in respect of any United States
withholding taxes payable hereunder (and the Seller, if required by law to do
so, shall be entitled to withhold such amounts and pay such amount to the
United States government) if the obligation to pay such
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amounts would not have arisen but for a failure by such Bank Purchaser to
comply with its obligations under Section 13.3(d), and if such Bank Purchaser
shall not be entitled to exemption from deduction or withholding of United
States Federal income tax in respect of the payment of such sum by the Seller
hereunder for the account of such Purchasing Office for, in each such case, any
reason other than a change in United States law or regulations or any
applicable tax treaty or regulations or in the official interpretation of any
such law, treaty or regulations by any governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
law) after the date such Bank Purchaser became a Bank Purchaser hereunder.
(g) Within sixty (60) days of the written request of the Seller, each Bank
Purchaser shall execute and deliver such certificates, forms and other
documents, which can be reasonably furnished consistent with the facts and
which are reasonably necessary to assist the Seller in applying for refunds of
Taxes remitted by the Seller hereunder.
(h) Each Bank Purchaser shall use reasonable efforts to avoid or minimize
any amounts which might otherwise be payable by the Seller pursuant to this
Section 13.3, except to the extent that a Bank Purchaser determines that such
efforts would be disadvantageous to such Bank Purchaser, as determined by such
Bank Purchaser and which determination, if made in good faith, shall be binding
and conclusive on all parties hereto.
(i) To the extent that the payment of any Bank Purchaser's Taxes by the
Seller hereunder gives rise from time to time to a Tax Benefit (as hereinafter
defined) to such Bank Purchaser in any jurisdiction other than the jurisdiction
which imposed such Taxes, such Bank Purchaser shall pay to the Seller the
amount of each such Tax Benefit so recognized or received. The amount of each
Tax Benefit and, therefore, payment to the Seller will be determined from time
to time by the relevant Bank Purchaser in its sole discretion, which
determination shall be binding and conclusive on all parties hereto. Each such
payment will be due and payable by such Bank Purchaser to the Seller within a
reasonable time after the filing of the income tax return in which such Tax
Benefit is recognized or, in the case of any tax refund, after the refund is
received; provided, however, if at any time thereafter such Bank Purchaser is
required to rescind such Tax Benefit or such Tax Benefit is otherwise
disallowed or nullified, the Seller shall promptly, after notice thereof from
such Bank Purchaser, repay to such Bank Purchaser
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the amount of such Tax Benefit previously paid to it and rescinded, disallowed
or nullified. For purposes of this subsection, the term "Tax Benefit" shall
mean the amount by which any Bank Purchaser's income tax liability for the
taxable period in question is reduced below that which would have been payable
had the Seller not been required to pay the Bank Purchaser's Taxes. In case of
any dispute with respect to the amount of any payment due by any Bank Purchaser
to the Seller under this subsection (i), the Seller shall not have any right to
any offset or withholding with respect to future payments due to such Bank
Purchaser under this Agreement.
(j) Without prejudice to the survival of any other agreements of the
parties hereunder, the agreements and obligations of the Seller and the Bank
Purchasers contained in this Section 13.3 shall survive the termination of this
Agreement and the payment in full of the Investments and all other amounts
owing by the Seller to the Bank Purchasers or the Agents hereunder.
SECTION 13.4. No Waiver; Remedies. No failure on the part of any Agent
or any Bank Purchaser to exercise, and no delay in exercising, any right
hereunder or under any Sale Document shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude any other
or further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
SECTION 13.5. Binding Effect; Assignability; Continuing Obligation. (a)
This Agreement shall be binding upon and inure to the benefit of the Seller,
Interface, each Bank Purchaser, each Agent and their respective successors and
assigns, except that neither the Seller nor Interface shall have the right to
assign any interest herein without the prior written consent of the Majority
Bank Purchasers and the Agents.
(b) Each Bank Purchaser may assign all or any portion of its interests,
rights and obligations under this Agreement (including all or a portion of any
of its Commitment, its Investment and its Ownership Interest at the time held
by it); provided, however, that (i) in the case of any proposed assignment by
a Bank Purchaser of its Commitment or Investment hereunder, the Agents,
Interface and the Seller must give their prior written consent to such
assignment (which consent shall not be unreasonably withheld), and (ii) without
the prior written consent of the Seller and Interface, a Bank Purchaser shall
not
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assign all or any portion of its Commitment hereunder to any assignee unless,
at the same time, the Bank is then assigning to such assignee a ratable portion
of its "Commitment" under the Interface Credit Agreement.
(c) Each Bank Purchaser may, without the consent of the Seller, Interface
or any Agent, sell participations to one or more banks or other entities in all
or a portion of its rights and obligations under this Agreement (including all
or a portion of its Commitment, its Investment or its Ownership Interest);
provided, however, that (i) no Bank Purchaser may sell a participation in its
Commitment (after giving effect to any permitted assignment hereof) in an
amount in excess of fifty percent (50%) of such aggregate Commitment, except
that no such maximum amount shall be applicable to any such participation sold
at any time there exists an Event of Termination hereunder, (ii) such Bank
Purchaser's obligations under this Agreement shall remain unchanged, (iii) such
Bank Purchaser shall remain solely responsible to the other parties hereto for
the performance of such obligations, and (iv) the participating bank or other
entity shall not be entitled to the benefit (except through its selling Bank
Purchaser) of the cost protection provisions contained in Section 11.3 of this
Agreement, and (v) the Seller and the Agents and other Bank Purchasers shall
continue to deal solely and directly with such Bank Purchaser in connection
with such Bank Purchaser's rights and obligations under this Agreement and the
other Sale Documents, and such Bank Purchaser shall retain the sole right to
enforce the obligations of the Seller and Interface relating to its Investment
and Ownership Interest, and to approve any amendment, modification or waiver of
any provisions of this Agreement.
(d) Any Bank Purchaser or participant may, in connection with the
assignment or participation or proposed assignment or participation, pursuant
to this Section, disclose to the assignee or participant or proposed assignee
or participant any information relating to the Seller, Interface or the other
Consolidated Companies furnished to such Bank Purchaser by or on behalf of the
Seller, Interface or any other Consolidated Company; provided that, prior to
any such disclosure of information designated by the Seller or Interface as
confidential, the Bank Purchaser proposing to make such assignment or sell such
participation shall obtain from such prospective assignee or participant an
agreement whereby such prospective assignee or participant shall agree to
preserve the confidentiality of such confidential information consistent with
the provisions of Section 8.05 of the Interface Credit Agreement.
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(e) Any Bank Purchaser may at any time assign all or any portion of its
rights in this Agreement to a Federal Reserve Bank; provided that no such
assignment shall release the Bank Purchaser from any of its obligations
hereunder.
(f) If (i) any Taxes referred to in Section 13.3 have been levied or
imposed so as to require withholding or deductions by the Seller or Interface
(as the case may be) and payment by the Seller or Interface (as the case may
be) of additional amounts to any Bank Purchaser or any Agent as a result
thereof, (ii) any Bank Purchaser or Agent shall make demand for payment of any
material additional amounts as compensation for its increased costs or for its
reduced rate of return pursuant to Section 11.3 hereof, or (iii) any Bank
Purchaser shall decline to consent to a modification or waiver of the terms of
this Agreement or any other Sale Document requested by the Seller, then and in
such event, upon request from the Seller delivered to such Bank Purchaser and
the Agents, such Bank Purchaser shall assign, in accordance with the provisions
of Section 13.5(b), all of its rights and obligations under this Agreement and
the other Sale Documents to such assignee as may be selected by the Seller and
may be acceptable to the Agents, in consideration for the payment by such
assignee to the affected Bank Purchaser of the amount of the outstanding
Investment together with all Accrued Finance Charges thereon owing to such Bank
Purchaser through the date of such assignment, and the assumption of the
affected Bank Purchaser's commitment hereunder, together with any and all other
amounts owing to such Bank Purchaser under any provisions of this Agreement or
the other Sale Documents accrued to the date of such assignment.
(g) This Agreement shall create and constitute the continuing obligation
of the parties hereto in accordance with its terms, and shall remain in full
force and effect until such time as the Ownership Interest of each Bank
Purchaser is reduced to zero as described in Section 3.1(c) and no further
Purchases are committed to be made hereunder, at which time this Agreement
shall terminate; provided, however, that rights and remedies of each Bank
Purchaser and Agent under Article XI and Section 5.3 and the provisions of
Section 13.12 shall survive any termination of this Agreement. Notwithstanding
the foregoing, to the extent that the Seller or the Collection Agent makes a
payment, deposit or remittance to any Bank Purchaser or Agent, or any Bank
Purchaser or Agent receives any proceeds of the Receivables or Collections,
which payment, deposit, remittance or any part thereof is subsequently
invalidated, declared to be fraudulent or
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preferential, set aside and/or required to be repaid to the Seller or the
Collection Agent, or any other Person, or their respective estates, trustees,
receivers or any other Person, under any bankruptcy law, state or federal law,
common law or equitable cause, then to the extent of such payment the
obligation or part thereof which has been paid, reduced or satisfied by such
amount (and the corresponding Ownership Interest) shall be reinstated and
continued in full force and effect as of the time immediately preceding such
initial payment, reduction or satisfaction and this Agreement shall continue in
full force and effect with respect thereto.
SECTION 13.6. Governing Law. THIS AGREEMENT AND THE SALE DOCUMENTS SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
ILLINOIS.
SECTION 13.7. Security Interest. The Seller hereby grants to the
Documentation and Collateral Agent, for the benefit of the Bank Purchasers, a
continuing security interest in the Seller's right, title and interest in and
to the Receivables and Collections to secure the obligations of the Seller to
the Bank Purchasers hereunder, which security interest shall continue in effect
until termination of this Agreement (and be subject to reinstatement) in
accordance with Section 13.5.
SECTION 13.8. Construction of the Agreement. The parties hereto intend
that the conveyance of Ownership Interests in Receivables by the Seller to the
Bank Purchasers shall be treated as sales for all purposes. If, despite such
intention, a determination is made that such transactions shall not be treated
as sales, then this Agreement shall be interpreted to constitute a security
agreement and the transactions effected hereby shall be deemed to constitute
secured loans by the Bank Purchasers to the Seller under applicable law. For
such purpose, the Seller hereby grants to the Documentation and Collateral
Agent, for the benefit of the Bank Purchasers, a continuing security interest
in the Receivables and Collections to secure the repayment of the Investment of
each Bank Purchaser and the payment and performance of the obligations of the
Seller to each Bank Purchaser hereunder.
SECTION 13.9. Confidentiality. Each Agent and Bank Purchaser agrees to
maintain the confidentiality of any information regarding the Seller or
Interface obtained in accordance with the terms of this Agreement which is not
publicly available, but such Agent or Bank Purchaser may reveal such
information (a) to applicable rating agencies, liquidity
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providers and credit providers, (b) as necessary or appropriate in connection
with the administration or enforcement of this Agreement or the funding of
Purchases under this Agreement, (c) as required by law, government regulation,
court proceeding or subpoena or (d) to bank regulatory agencies and examiners.
SECTION 13.10. Agent Determinations on Concentration Limits. The Agents
are granted certain authority hereunder to reduce the Special Concentration
Limit or Standard Concentration Limit for any Obligor (each such reduction
being a "Redesignation"). Any act of Redesignation by any Agent shall be based
upon a determination by such Agent or the Majority Bank Purchasers that either
(i) in the exercise of its reasonable credit judgment, such Redesignation is
appropriate, based upon such factors as such Agent has, or the Majority Bank
Purchasers have, determined to be relevant, including, without limitation, any
of the following factors: any change in, or change in the credit analysis as
to, the nature, business, prospects, condition (financial or other),
operations, properties or management of an Obligor or the Seller or the
applicable Originator; any lack of sufficient and reliable information with
respect to any of the foregoing; any change in, or change in the credit
analysis as to, the credit or collateral support for any Receivable or any
class of Receivables; the aggregate portfolio exposure of any Agent or Bank
Purchaser to such Obligors or Receivables of such type; or any change in the
credit or collection policy of the Seller or the applicable Originator, or (ii)
compliance with any law or regulation or any guideline, directive or request
from any central bank or other governmental authority (whether or not having
the force of law), or that compliance with any guideline, directive or request
of any rating agency, requires such Redesignation.
SECTION 13.11. Not a Joint Venture. Nothing contained in this Agreement
or in any other Sale Document, and no action taken by any Bank Purchaser, any
Agent or the Collection Agent pursuant hereto or thereto, shall be deemed to
constitute the Seller (or any other Transaction Party) and the Bank Purchasers
a partnership, association, joint venture or other entity.
SECTION 13.12. Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement.
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SECTION 13.13. Submission to Jurisdiction, Appointment of Agent to Accept
Service of Process.
(a) THE SELLER, INTERFACE AND THE COLLECTION AGENT HEREBY SUBMIT TO THE
NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL COURT LOCATED IN THE NORTHERN
DISTRICT OF ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE SELLER,
INTERFACE AND THE COLLECTION AGENT IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH PROCEEDING AND ANY CLAIM THAT ANY
SUCH PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(b) Each of the Seller, Interface and the Collection Agent has
irrevocably appointed CT Corporation as its agent to receive, accept and
acknowledge for and on its behalf, service of any and all legal process,
summons, notices and documents which may be served in any such proceeding
brought in any such court which may be made on such agent. If for any reason
such agent shall cease to be available to act as such, each of the Seller,
Interface and the Collection Agent agrees to designate a new agent in The City
of Chicago on the terms and for the purposes of this Section 13.13 satisfactory
to the Purchaser.
SECTION 13.14. Change in Accounting Principles, Fiscal Year or Tax Laws.
If (i) any preparation of the financial statements referred to in Section 10.2
hereafter occasioned by the promulgation of rules, regulations, pronouncements
and opinions by or required by the Financial Accounting Standards Board or the
American Institute of Certified Public Accountants (or successors thereto or
agencies with similar functions) result in a material change in the method of
calculation of financial covenants, standards or terms found in this Agreement,
(ii) if there is any change in Interface's fiscal quarter of fiscal year, or
(iii) there is a material change in federal tax laws which materially affects
the Seller's ability to comply with the financial covenants, standards or terms
found in this Agreement, the parties agree to enter into negotiations in order
to amend such provisions so as to equitably reflect such changes with the
desired result that the criteria for evaluating financial condition shall be
the same after such changes as if such changes had not been made. Unless and
until such provisions have been so amended, the provision of this Agreement
shall govern.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their duly authorized officers as of the date set forth on the cover page of
this Agreement.
INTERFACE SECURITIZATION CORPORATION,
as Seller
By
-----------------------------------
Name:
Title:
Address: 100 Chastain Center Boulevard
Suite 165
Kennesaw, Georgia 30144
Facsimile: (404)[ - ]
---- ----
INTERFACE, INC., individually and as
initial Collection Agent
By
-----------------------------------
Name:
Title:
Address: 2859 Paces Ferry Road
Suite 2000
Atlanta, Georgia 30339
Facsimile: (404) -
--- ----
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<PAGE> 97
AGENTS
TRUST COMPANY BANK,
as Administrative Agent
By:
-------------------------------------
Title:
By:
-------------------------------------
Title:
One Park Place, N.E.
Atlanta, Georgia 30303
Attn: John K. Shoffner
Telecopy: (404) 588-8833
THE FIRST NATIONAL BANK OF CHICAGO,
as Documentation and Collateral Agent
By:
-------------------------------------
Title:
Mail Suite 0597
One First National Plaza
Chicago, Illinois 60670
Attn: Carol A. Oliver
Asset-Backed Finance
Telecopy: (312) 732-4487
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<PAGE> 98
Commitment Bank Purchasers
- ---------- ---------------
$4,275,000 TRUST COMPANY BANK
As Administrative Agent
By:
---------------------------------
Title:
---------------------------------
One Park Place, N.E.
Atlanta, Georgia 30303
Attn: John K. Shoffner
Telecopy: (404) 588-8833
$4,275,000 THE FIRST NATIONAL BANK OF CHICAGO
By:
------------------------------------
Title:
---------------------------------
Mail Suite 0597
One First National Plaza
Chicago, Illinois 60670-0374
Attn: Carol A. Oliver
Asset-Backed Finance
Telecopy: (312) 732-4487
$3,990,000 FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By:
-------------------------------------
Title:
----------------------------------
One First Union Center
Charlotte, North Carolina 28288-0600
Attn: William A. Shirley, Jr.
Telecopy: (704) 383-3694
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<PAGE> 99
Commitment Bank Purchasers
- ---------- ---------------
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<PAGE> 100
Commitment Bank Purchasers
COMMITMENT
- ----------
$3,990,000 ABN AMRO BANK N.V.- ATLANTA
By:
-------------------------------------
Title:
----------------------------------
Suite 1200, One Ravinia Drive
Atlanta, Georgia 30346
Attn: Patrick Thom
Telecopy: (404) 395-9188
$3,990,000 CIBC, INC.
By:
-------------------------------------
Title:
----------------------------------
Two Paces Ferry Road
2727 Paces Ferry Road
Suite 1200
Atlanta, Georgia 30339
Attn: William C. Humphries
Telecopy: (404) 319-4950
$3,990,000 NATIONSBANK, N.A. (CAROLINAS)
(Formerly known as NationsBank
of North Carolina, N.A.)
By:
------------------------------------
Title:
---------------------------------
100 North Tryon Street
Mail Code NC1-007-08-11
Charlotte, North Carolina 28255
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<PAGE> 101
Commitment Bank Purchasers
Attn: Lance Walton
Telecopy: (704) 386-1270
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<PAGE> 102
Commitment Bank Purchasers
COMMITMENT
- ----------
$3,990,000 WACHOVIA BANK OF GEORGIA, N.A.
By:
-----------------------------------
Title:
--------------------------------
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attn: Douglas W. Strickland
Telecopy: (404) 332-1382
$3,800,000 CREDITANSTALT CORPORATE FINANCE, INC.
By:
-----------------------------------
Title:
--------------------------------
By:
-----------------------------------
Title:
--------------------------------
2 Ravinia Drive, Suite 1680
Atlanta, Georgia 30346
Attention: Daniel D. Lensgraf
Telecopy: (404) 390-1851
$3,800,000 BANK SOUTH, N.A.
By:
-----------------------------------
Title:
--------------------------------
55 Marietta Street, MC71
Atlanta, Georgia 30303
Attn: George Hodges
Telecopy: (404) 521-7309
-99-
<PAGE> 103
Commitment Bank Purchasers
- ---------- ---------------
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<PAGE> 104
Commitment Bank Purchasers
COMMITMENT
- ----------
$3,040,000 THE DAIWA BANK, LIMITED
By:
------------------------------------
Title:
---------------------------------
By:
------------------------------------
Title:
---------------------------------
303 Peachtree Street
Suite 4420
Atlanta, Georgia 30308
Attn: E.B. Buchanan
Telecopy: (404) 523-7983
$3,040,000 THE BANK OF TOKYO LTD.,
ATLANTA AGENCY
By:
------------------------------------
Title:
---------------------------------
133 Peachtree Street, N.E., Suite 5050
Atlanta, Georgia 30303
Attn: Richard S. Davis
Telecopy: (404) 577-1155
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<PAGE> 105
Commitment Bank Purchasers
COMMITMENT
- ----------
$3,040,000 CREDIT LYONNAIS NEW YORK BRANCH
By:
------------------------------------
Title:
---------------------------------
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, New York 10019
Attn: David Fink
Telecopy: (212) 459-3258
$2,280,000 FLEET BANK OF MAINE
By:
------------------------------------
Title:
---------------------------------
80 Exchange Street
P. O. Box 923
Bangor, Maine 04402
Attn: Neil C. Buitenhuys
Telecopy: (207) 941-6023
- ---------------------------
$47,500,000 TOTAL COMMITMENTS
-102-
<PAGE> 1
EXHIBIT 13
Interface, Inc. and Subsidiaries
Consolidated Financial Statements
1
<PAGE> 2
INTERFACE INC. AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
(IN THOUSANDS,
EXCEPT SHARE DATA) 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- -------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ANNUAL OPERATING
DATA
Net sales $802,066 $725,283 $625,067 $594,078 $581,786 $623,467 $581,756 $396,651 $267,008 $137,410
Cost of sales 551,643 504,098 427,321 404,130 393,733 410,652 382,455 263,508 176,813 87,783
Selling, general,
and administrative
expenses 188,880 170,375 151,576 149,509 150,100 153,317 135,468 87,445 56,884 36,186
Other expense
(income) 29,867 25,097 24,806 21,878 23,623 21,818 23,202 11,587 7,589 (2,122)
Income before taxes
on income and
extraordinary item 31,676 25,713 21,304 18,561 14,330 37,680 40,631 34,111 25,722 16,823
Taxes on income 11,336 9,257 7,455 6,311 5,409 14,078 16,084 13,926 11,742 6,315
Income before
extraordinary item 20,340 16,456 13,849 12,250 8,921 23,602 24,547 20,185 13,700 8,576
Net income 16,828 16,456 13,849 12,250 8,921 23,602 24,547 20,185 13,700 8,576
Earnings per common
share before
extraordinary item
Primary 1.02 .82 .75 .71 .52 1.37 1.43 1.18 .87 .68
Fully diluted * * * * * 1.24 1.27 1.15 N/A N/A
Earnings per common
share
Primary .83 .82 .75 .71 .52 1.37 1.43 1.18 .87 .68
Fully diluted * * * * * 1.24 1.27 1.15 N/A N/A
Dividends
Cash dividends paid
(A) 6,132 6,073 5,063 4,142 4,136 4,133 3,600 2,649 2,081 1,404
Cash dividends per
common share .24 .24 .24 .24 .24 .24 .21 .16 .13 .11
Property additions
(B) 48,929 24,376 28,829 14,476 15,375 23,705 25,333 49,261 14,152 40,941
Depreciation and
amortization 28,944 28,180 24,512 22,257 19,723 21,570 17,243 11,621 8,270 3,187
WEIGHTED AVERAGE
SHARES OUTSTANDING
Primary 18,255 18,013 17,302 17,253 17,230 17,214 17,146 17,109 15,740 12,561
Fully diluted 19,946 25,848 24,352 23,398 23,375 23,359 23,291 18,726 N/A N/A
AT YEAR END
Working capital 159,031 174,620 140,575 138,834 150,541 156,638 131,953 127,328 55,586 44,720
Current ratio 2.4 2.5 2.1 2.5 2.3 2.4 2.2 2.3 2.2 2.3
Net property and
equipment 183,299 152,874 145,125 137,605 139,406 141,125 126,917 119,006 72,818 63,490
Total assets 714,351 683,408 642,319 534,120 569,438 582,371 525,814 493,371 233,165 197,263
Total long term
debt 325,582 314,441 291,637 235,488 240,137 254,578 244,158 249,136 62,949 96,468
Redeemable
preferred stock 25,000 25,000 25,000 -- -- -- -- -- -- --
COMMON SHAREHOLDERS'
EQUITY 231,914 214,090 181,884 186,349 198,977 198,409 157,001 135,985 115,990 51,731
Book value per
common share 12.58 11.89 10.42 10.79 11.55 11.52 9.14 7.94 6.80 4.21
</TABLE>
- ---------------
* For fiscal years 1995, 1994, 1993, 1992 and 1991, fully diluted earnings per
common share were antidilutive.
(A) Includes preferred stock dividends of $1,750,000 in 1995 and 1994, and
$913,000 in 1993.
(B) Includes property and equipment obtained in acquisitions of businesses.
<TABLE>
<S> <C> <C>
FORM 10-K ANNUAL MEETING Number of Shareholders of Record
A copy of the Company's Annual The annual meeting of at March 20, 1996
Report on Form 10-K, filed each shareholders will be at 10:00 Class A 463
year with the Securities and a.m. on May 21, 1996 at the Class B 48
Exchange Commission, may be Company's office located at:
obtained by shareholders without Orchard Hill Road CHANGE OF ADDRESS
charge by writing to: LaGrange, Georgia 30240 Please direct all changes of
address or inquiries as to how
Mr. Raymond S. Willoch TRANSFER AGENT your account is listed to:
Vice President DIVIDEND DISBURSING AGENT Registrar
Interface, Inc. Wachovia Bank and Trust Company, Wachovia Bank and Trust Company,
2859 Paces Ferry Road N.A. N.A.
Suite 2000 Corporate Trust Department P.O. Box 3001
Atlanta, Georgia 30339 P.O. Box 3001 Winston-Salem, NC 27102
Winston-Salem, NC 27102
INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS
BDO Seidman, LLP
Atlanta, Georgia
LEGAL COUNSEL
Kilpatrick & Cody
Atlanta, Georgia
CORPORATE ADDRESS
Interface, Inc.
2859 Paces Ferry Road
Suite 2000
Atlanta, Georgia 30339
Tel. (770) 437-6800
</TABLE>
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company's revenues are derived from sales of commercial carpet (modular
and broadloom, (interior fabrics, and chemicals and specialty products. Sales
of commercial carper and interior fabrics accounted for approximately 82% and
15%, respectively, of total net sales for fiscal 1995. The Company's 1995
revenues were $802 million as compared to $725 million in fiscal 1994. The
revenue increase of 10.6% is 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, Asia and Australia (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 high-lighted by an economic
recession in Europe, (iii) increased competition particularly in the U.S.
carpet tile market 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. 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. These programs have assisted
the Company in achieving substantial growth in sales and in operating income,
particularly in 1995 when the Company achieved sales and operating income
increases of 10.6% and 21.1%, respectively, over 1994.
During fiscal 1995, 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.
RESULTS OF OPERATIONS
For fiscal 1995, the Company reported the highest net sales in the
Company's history. This was achieved through sales growth in all divisions
(floorcoverings, interior fabrics, chemicals and specialty surfaces), the
acquisition of Toltec Fabrics, Inc. in June 1995, and the positive impact of
strengthening currencies in several of the Company's major markets compared with
the U.S. dollar, the Company's reporting currency. The sales increase was
achieved despite a recessionary climate in certain markets in Europe, where
modest sales growth was achieved, and in Japan and Australia, where the Company
experienced a decline in sales volume.
During 1995, the Company experienced a decrease in cost of sales as a
percentage of sales due to the reduction of manufacturing costs in the Company's
carpet operations (particularly the U.S. carpet tile manufacturing facility) as
the Company implemented a make-to-order ("mass customization") production
strategy and "war-on-waste" initiative, leading to increased manufacturing
efficiencies, and an attendant shift in product mix to higher margin products.
The Company's interior fabrics business also decreased manufacturing costs as a
result of improved manufacturing efficiencies through the implementation of a
similar waste reduction program. These factors more than offset the impact of
raw material price increases experienced in the interior fabrics and chemical
operations.
The Company's capital expenditures program will continue to focus on (i)
new and expanded manufacturing facilities worldwide and (ii) product innovation
and development, which has been designed to address the market requirement for
increased product flexibility while also reducing product cost through
simplification.
41
<PAGE> 4
<TABLE>
<CAPTION>
Fiscal Year Ended
(in thousands, except share data) 12/31/95 1/1/95 1/2/94
- ------------------------------------ -------- ------ ------
<S> <C> <C> <C>
NET SALES 100.0% 100.0% 100.0%
Cost of sales 68.8 69.5 68.4
----- ----- -----
Gross profit on sales 31.2 30.5 31.6
Selling general and administrative expense 23.6 23.5 24.2
----- ----- -----
OPERATING INCOME 7.6 7.0 7.4
Other expense, net 3.7 3.5 4.0
----- ----- -----
INCOME BEFORE TAXES AND EXTRAORDINARY ITEM 3.9 3.5 3.4
Taxes on income 1.4 1.2 1.2
----- ----- -----
INCOME BEFORE EXTRAORDINARY ITEM 2.5 2.3 2.2
Extraordinary loss on early
extinguishment of debt (net of tax) 0.4 0.0 0.0
----- ----- -----
NET INCOME 2.1 2.3 2.2
Preferred dividends 0.2 0.3 0.1
----- ----- -----
NET INCOME APPLICABLE TO COMMON SHAREHOLDERS 1.9% 2.0% 2.1%
===== ===== =====
</TABLE>
The table above shows, as a percentage of net sales, certain items included
in the Company's consolidated statements of income for each of the three years
through the period ended December 31, 1995.
FISCAL 1995 COMPARED WITH FISCAL 1994
In fiscal 1995, the Company's net sales increased $77 million (10.6%)
compared with fiscal 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, 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, Japan and certain markets within
Europe.
Cost of sales decreased as a percentage of net sales to 68.8% in 1995
compared with 69.5% in 1994. The decrease was due primarily to (i) a reduction
of manufacturing costs in the Company's carpet operations (particularly the U.S.
carpet tile 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 achieved through waste reduction efforts. 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 net sales,
remained constant in fiscal 1995 as compared to fiscal 1994. Selling, general
and administrative expenses did not decrease with the increase in volume due
primarily to the increase in design and sampling costs associated with the mass
customization initiative for which the full impact of the increased sales has
not yet been realized.
Other expense increased $4.8 million in fiscal 1995, due, by and large, to
an increase in the Company's interest expense associated with an increase in
bank debt and higher interest rates. As a result of the redemption of the
Company's 8% Convertible Subordinated Debentures in December 1995 and the
issuance of $125 million in aggregate principal amount of 9.5% Senior
Subordinated Notes, the Company anticipates an increase in interest expense
during 1996. The Convertible Debentures were redeemed to avoid the potentially
42
<PAGE> 5
dilutive effect of approximately 6.1 million shares, which would have been
issued had full conversion taken place.
The effective income tax rate was 35.8% for fiscal 1995, compared to 36.0%
in fiscal 1994. The decrease in the effective income tax rate is due to the
release of certain valuation allowances associated with the Company's Dutch and
Australian operations.
Income before extraordinary items increased 23.6% to $20.3 million for
fiscal 1995, compared to $16.5 million for fiscal 1994, due to the factors
discussed above. The Company recognized an extraordinary charge of $3.5 million
(net of applicable taxes) in the fourth quarter of fiscal 1995. The charge was
attributed to the early extinguishment of the Company's Convertible Debentures
which were redeemed in December 1995.
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, 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.
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.
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 1995, operating activities generated $76.5 million of cash
compared with $33.4 million and $40.6 million in 1994 and 1993, respectively.
The increase in 1995 operating cash flows compared with 1994 was caused
primarily by a decrease in accounts receivable through the sale of $33.9
million of domestic receivables under a securitization program, along with a
reduction in inventory levels. The inventory decrease at the end of 1995
(excluding acquisitions) was the result of the implementation of the Company's
mass customization program and other initiatives. The primary uses of cash
during the three fiscal years ended December 31, 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 $84.1 million, while the acquisitions of
businesses required $44.2 million and dividends required $17.3 million.
Management believes these capital investments will result in an expanded market
presence and improved efficiency in the Company's production and distribution.
In February 1996, the Company amended its existing revolving credit
facilities. The amendment, among other things, increased the existing domestic
revolving credit facility by $50 million to fund the implementation of the
Company's planned new distribution network. In January 1996, the Company
announced a nationwide initiative to strengthen and streamline the distribution
channels for its commercial carpet products. Under this program, the Company
intends to acquire approximately 15 strategically located commercial
floorcovering contractors, and form preferred distributor alliances with a
significantly higher number of select dealers throughout the United States. The
Company anticipates that 50-60% of the consideration paid to acquire these
dealers will be in the form of the Company's Common Stock. The program's
primary goals are to (i) increase sales of Company products as dealers in the
network seek to supply Company products on a preferred basis, (ii) enhance
customer satisfaction by providing hassel-free service throughout the process
of selecting, purchasing, installing and
43
<PAGE> 6
maintaining carpet products, and (iii) improve operating margins for owned
dealers, as well as for the Company, by consolidating administrative functions
of dealers and coordinating and streamlining sales efforts by Company and
Dealer sales personnel. The Company expects to complete the majority of its
planned acquisitions in the second and third quarters of 1996.
In November 1995, the Company issued, through a private placement to
institutional investors, $125 million in aggregate principal amount of 9.5%
Senior Subordinated Notes due 2005 (the "Notes"), of which the Company received
proceeds of approximately $122 million which were used for the redemption of the
Company's Convertible Debentures. In December 1995, the Company redeemed the
outstanding Convertible Debentures by issuing 145,034 shares of the Company's
common stock (to the holders who converted $2.453 million of debentures) and
cash of approximately $106 million. The debentures were redeemed at 102.4% of
the principal amount plus accrued interest to the date of redemption. The
remainder of the proceeds from the Notes offering were used to reduce amounts
outstanding under the Company's Credit Agreement and for other general corporate
purposes.
In August 1995, the Company commenced an accounts receivable securitization
program that provides the Company up to $65 million of funding from the sale of
trade accounts receivable generated by certain of its operating subsidiaries.
Fees paid by the Company under this agreement are based on certain variable
market rate indices and are recorded as Other Expense. The Company had received
approximately $33.9 million under the arrangement at year-end.
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 (discussed above) of up to $100.0 million
(currently limited to $65.0 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 to provide certain pricing and administrative
enhancements.
At the end of fiscal 1995, the Company estimated capital expenditure
requirements of approximately $30 million for 1996, and had purchase commitments
of $10 million. 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.
The Company recognized a $3.7 million increase in its foreign currency
translation adjustment account during the year ended December 31, 1995, because
of the strengthening of the Dutch guilder against the U.S. dollar.
The Company utilizes foreign hedging contracts in order to match
anticipated cash flows from foreign operations with local currency debt
obligations. the Company employs a variety of off-balance sheet financial
instruments to reduce its exposure to adverse fluctuations in interest and
foreign currency exchange rates, including foreign currency swap agreements and
foreign currency exchange contracts. At December 31, 1995, the Company had
approximately $68.4 million (notional amount) of foreign currency hedge
contracts outstanding, consisting principally of currency swap contracts. These
contracts serve to hedge firmly committed Dutch guilder and Japanese yen
currency revenues. At December 31, 1995, the Company utilized interest rate
swap agreements to effectively convert approximately $73 million of variable
rate debt to fixed rate debt. At December 31, 1995, the weighted average rate
on borrowings was 6.9%. The interest rate swap agreements have maturity dates
ranging from nine to 24 months.
IMPACT OF INFLATION
Petroleum-based products comprise approximately 90% of the cost of raw
materials used by the Company in manufacturing. The Company historically has
been able to offset at least some portion of these increases in the cost of such
petroleum-based products with finished product price increases. During 1995, the
Company experienced raw material price increases in the interior fabrics and
chemical operations which could not be entirely offset with finished product
price increases. Management cannot predict with certainty the extent to which it
will be able to pass through any future cost increases.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards (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 certain long-lived
assets. This statement requires that long-lived assets and certain identifiable
intangibles and goodwill be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable, and that the asset be reported at the lower of carrying amount or
fair value less cost to sell. This statement, when adopted by the Company during
1996, is not expected to have a material impact on operating results.
44
<PAGE> 7
The FASB has also issued SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), which the Company is required to adopt in 1996.
SFAS No. 123 requires companies to estimate the value of all stock-based
compensation using a recognized pricing model. Companies have the option of
recognizing this value as an expense or disclosing its effects on net income.
The Company's management has not yet determined its method of adoption or the
financial statement impact of adopting SFAS No. 123.
SECURITIES LITIGATION REFORM ACT
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995: Except for the historical information contained herein, the matters
discussed in this annual report are forward-looking statements that involve risk
and uncertainties, including but not limited to (i) economic, competitive,
governmental and technological factors affecting the Company's operations,
markets, products, services and prices, and (ii) other factors discussed in the
Company's filings with the Securities and Exchange Commission.
(GRAPH)
(GRAPH)
(GRAPH)
45
<PAGE> 8
INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
December 31, January 1, January 2,
1995 1995 1994
------------ ------------ -------------
(in thousands, except share data)
<S> <C> <C> <C>
Net sales........................................... $802,066 $725,283 $625,067
Cost of sales....................................... 551,643 504,098 427,321
-------- -------- --------
Gross profit on sales.............................. 250,423 221,185 197,746
Selling, general and administrative expenses........ 188,880 170,375 151,576
-------- -------- --------
Operating income................................... 61,543 50,810 46,170
-------- -------- --------
Other expense
Interest expense................................... 26,753 24,094 22,840
Other.............................................. 3,114 1,003 2,026
-------- -------- --------
Total other expense............................... 29,867 25,097 24,866
-------- -------- --------
Income before taxes on income and extraordinary
item .............................................. 31,676 25,713 21,304
Taxes on income..................................... 11,336 9,257 7,455
-------- -------- --------
Income before extraordinary item.................... 20,340 16,456 13,849
Extraordinary loss on early extinguishment of debt
(net of tax)....................................... 3,512 - -
-------- -------- --------
Net income......................................... 16,828 16,456 13,849
Preferred stock dividends........................... 1,750 1,750 913
-------- -------- --------
Net income applicable to common shareholders....... $ 15,078 $ 14,706 12,936
======== ======== --------
Primary earnings per common share
Income before extraordinary item................... $ 1.02 $ 0.82 $ 0.75
Extraordinary loss on early extinguishment of debt
(net of tax)....................................... 0.19 - -
-------- -------- --------
Net income.......................................... $ 0.83 $ 0.82 $ 0.75
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 9
INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, January 1,
Assets 1995 1995
-----------------------------------
(in thousands, except share data)
<S> <C> <C>
Current
Cash and cash equivalents........................... $ 8,750 $ 4,389
Escrowed and restricted funds....................... - 2,663
Accounts receivable................................. 111,386 133,536
Inventories......................................... 134,504 132,650
Prepaid expenses.................................... 15,748 15,110
Deferred income taxes............................... 3,998 3,767
-------- --------
Total current assets............................... 274,386 292,115
-------- --------
Property and equipment, less accumulated
depreciation........................................ 183,299 152,874
Miscellaneous........................................ 30,980 31,895
Deferred income taxes................................ 6,861 3,672
Excess of cost over net assets....................... 218,825 202,852
-------- --------
$714,351 $683,408
======== ========
Liabilities and Common Shareholders Equity
Current liabilities
Notes payable....................................... $ 8,546 $ 5,501
Accounts payable.................................... 55,101 54,201
Accrued expenses.................................... 50,148 56,940
Current maturities of long-term debt................ 1,560 853
-------- --------
Total current liabilities.......................... 115,355 117,495
-------- --------
Long-term debt, less current maturities.............. 199,022 209,663
Senior subordinated notes............................ 125,000 -
Convertible subordinated debentures.................. - 103,925
Deferred income taxes................................ 18,060 13,235
-------- --------
Total liabilities.................................. 457,437 444,318
Redeemable preferred stock........................... 25,000 25,000
Common stock......................................... 2,203 2,179
Additional paid-in capital........................... 96,863 93,450
Retained earnings.................................... 147,039 136,343
Foreign currency translation adjustment.............. 3,555 (136)
Treasury stock, 3,600,000 Class A shares, at cost.... (17,746) (17,746)
-------- --------
$714,351 $683,408
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 10
INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
December 31, January 1, January 2,
1995 1995 1994
------------ -------------- ----------
(in thousands)
<S> <C> <C> <C>
Operating activities
Net income............................................. $16,828 $16,456 $13,849
Adjustments to reconcile net income to cash provided by
operating activities
Depreciation and amortization.......................... 28,944 28,180 24,512
Extraordinary loss on early extinguishment of debt
(net of tax).......................................... 3,512 - -
Deferred income taxes.................................. 1,431 (1,994) (5,853)
Cash provided by (used for)
Accounts receivable.................................... 25,978 (2,788) (1,569)
Inventories............................................ 5,979 (6,849) 3,147
Prepaid expenses and other............................. 8 (1,671) (6,374)
Accounts payable and accrued expenses.................. (6,132) 2,061 12,870
--------- -------- --------
76,548 33,395 40,582
--------- -------- --------
Investing activities
Capital expenditures................................... (42,123) (21,315) (20,639)
Acquisitions of businesses............................. (27,554) (1,409) (15,209)
Changes in escrowed and restricted funds............... 2,663 1,352 404
Other.................................................. (5,145) (5,030) (7,039)
--------- -------- --------
(72,159) (26,402) (42,483)
--------- -------- --------
Financing activities
Principal borrowings (payments) on long-term debt...... (11,935) 75,011 (11,500)
Proceeds from issuance of subordinated notes........... 121,543 - -
Extinguishment of convertible subordinated debentures.. (106,419) - -
Net borrowing (payments) under lines of credit......... 1,965 (75,233) 15,572
Proceeds from issuance of common stock................. 984 678 1,898
Dividends paid......................................... (6,132) (6,073) (5,063)
Other.................................................. - (2,026) -
--------- -------- --------
6 (7,643) 907
--------- -------- --------
Net cash provided by (used for) operating, investing,
and financing activities............................... 4,395 (650) (994)
Effect of exchange rate changes on cash................ (34) 365 (156)
--------- -------- --------
Cash and cash equivalents..............................
Net increase (decrease)................................ 4,361 (285) (1,150)
Balance, beginning of year............................. 4,389 4,674 5,824
--------- -------- --------
Balance, end of year................................... $8,750 $4,389 $4,674
========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 11
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.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could vary from these estimates.
Inventories
Inventories are valued at the lower of cost (standards which
approximate actual cost on a first-in, first-out basis) or market..
Inventories include the cost of raw materials, labor and manufacturing
overhead. The Company makes provisions for obsolete or slow moving inventories
as necessary to properly reflect inventory value.
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. Interest costs for the construction of certain
long-term assets are capitalized and amortized over the related assets'
estimated useful lives. The Company capitalized interest costs of
approximately $1.4 million and $0.3 million for the years ended December 31,
1995 and January 1, 1995, respectively. Depreciation expense amounted to
approximately $18.2 million, $20.8 million and $17.6 million for the years
ended December 31, 1995, January 1, 1995 and January 2, 1994, respectively.
The Company plans to adopt Statement of Financial Accounting Standards No. 121
"Accounting for Impairment of Long-Term Assets and for Long-Lived Assets to Be
Disposed Of". After adoption, the operational policy of the Company will be to
evaluate long-lived assets and certain identifiable intangibles and goodwill
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. This statement, when adopted by the
Company during 1996 is not expected to have a material impact on operating
results.
Goodwill
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 $33.2 million and $27.1
million at December 31, 1995 and January 1, 1995, 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.
5
<PAGE> 12
Taxes on Income
The Company accounts for income taxes under an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Company's financial Statements or tax returns. In estimating future tax
consequences, the Company generally considers all expected future events other
than enactments of changes in the tax laws or rates.
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 Redeemable
Preferred Stock is not considered to be a common stock equivalent. In computing
primary earnings per common share, the Preferred Stock dividend reduces net
income applicable to common shareholders. Primary earnings per common share are
based upon 18,254,965 shares, 18,012,722 shares and 17,302,000 shares for the
years ended December 31, 1995, January 1, 1995, and January 2, 1994,
respectively. For fiscal 1995, 1994, and 1993 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).
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. 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.
Foreign currency translation gains and losses are 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 December 31, 1995, January 1, 1995 and January 2, 1994 each
comprised 52 weeks.
Reclassifications
Certain reclassifications have been made to the 1994 and 1993 financial
statements to conform to the 1995 presentation.
Note 2 - Business Acquisitions
In December 1995, the Company acquired substantially all of the assets of the
Intek division of Springs Industries for approximately $13.9 million. Intek,
based in North Carolina, manufactures and markets panel fabrics. The
transaction was accounted for as a purchase. The excess of the purchase price
over the fair value of the net assets acquired was approximately $5.1 million
and is being amortized over 40 years. The results of operations of Intek since
the acquisition date have been included within the consolidated financial
statements.
6
<PAGE> 13
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In June 1995, the Company acquired substantially all of the assets of Toltec
Fabrics, Inc. a manufacturer of panel fabrics based in North Carolina, for
approximately $13.3 million, which was comprised of $7.7 million in cash and
$5.6 million in notes. The transaction was accounted for as a purchase. The
excess of the purchase price over the fair value of the net assets acquired was
approximately $6.9 million and is being amortized over 40 years. The results
of operations of Toltec since the acquisition date have been included within
the consolidated financial statements.
In March 1994, the Company acquired 100% of the outstanding capital
stock of Prince Street Technologies, Ltd. , a manufacturer of broadloom carpet.
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 assumed was approximately $9.9 million and
is being amortized over 40 years. The results of the operations of Prince
Street since the acquisition date have been included within the consolidated
financial statements.
The Company, through a series of stock purchases in June 1993, acquired 100% of
the outstanding capital stock of Bentley Mills, Inc., a manufacturer 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 since the acquisition date have been included
within the consolidated financial statements.
In February 1993, the Company acquired the assets of the fabric division of
Stevens Linen Associates, Inc., based in Massachusetts, for approximately $4.9
million.
Note 3 - Cash and Cash Equivalents
Cash and cash equivalents consisted of the following:
December 31, January 1,
1995 1995
------------------ ------------------
Cash.............. $7,261 $3,496
Cash equivalents.. 1,489 893
------------------ ------------------
$8,750 $4,389
================== ==================
Cash equivalents, carried at cost 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. The Company has classified all its securities as "available for
sale". Fair value of these securities, comprised primarily of repurchase
agreements with commercial banks, approximates cost. 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 December 31, 1995
and January 1, 1995, checks not yet presented to the bank totaled
approximately $7.7 million and $6.3 million, respectively. Prior to December
1995, in accordance with a workers' compensation self-insurance arrangement in
the State of Maine, the Company was required by state law to maintain a trust
account to pay workers' compensation claims. At January 1, 1995, the trust
account had a balance of approximately $2.4 million, and was segregated from
cash and cash equivalents and reflected as escrowed and restricted funds. In
December 1995, the Company received a refund of all previously escrowed funds
in exchange for obtaining a $4.4 million irrevocable letter of credit. Cash
payments for interest amounted to approximately $27.9 million, $24.0 million
and $23.4 million for the years ended December 31, 1995, January 1, 1995, and
January 2, 1994, respectively. Income tax payments amounted to approximately
$8.2 million, $6.5 million and $16.3 million, respectively, for the years ended
December 31, 1995, January 1, 1995, and January 2, 1994.
7
<PAGE> 14
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Receivables
In August 1995, the Company commenced an Accounts Receivable 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 December 31, 1995, the Company had sold accounts
receivable under this agreement for which proceeds of approximately $33.9
million were received. As of December 31, 1995 and January 1, 1995, the
allowance for bad debts amounted to approximately $5.9 million and $6.5 million
respectively for all accounts receivable of the Company.
Note 5 - Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
December 31, January 1,
1995 1995
----------- ----------
(in thousands)
<S> <C> <C>
Finished goods.......... $ 76,407 $ 74,542
Work-in-process......... 26,168 20,250
Raw materials........... 31,929 37,858
-------- --------
$134,504 $132,650
======== ========
</TABLE>
Note 6 - Property and Equipment
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
December 31, January 1,
1995 1995
----------- ----------
(in thousands)
<S> <C> <C>
Land.................... $ 11,109 $ 8,623
Buildings............... 82,189 71,752
Equipment............... 200,312 200,937
Construction-in-process. 41,635 6,283
--------- ---------
335,245 287,595
Accumulated depreciation. (151,946) (134,721)
--------- ---------
$ 183,299 $ 152,874
========= =========
</TABLE>
The estimated cost to complete construction-in-process for which the
Company was committed at December 31, 1995 was approximately $10.0 million.
8
<PAGE> 15
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 - Accrued Expenses
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
December 31, January 1,
1995 1995
------------ ----------
(in thousands)
<S> <C> <C>
Taxes...................... $10,130 $17,989
Compensation............... 13,692 12,312
Interest................... 2,229 3,200
Other...................... 24,097 23,439
------- -------
$50,148 $56,940
======= =======
</TABLE>
Note 8 - Long-Term Debt
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
December 31, January 1,
1995 1995
------------ ----------
(in thousands)
<S> <C> <C>
Secured term loans......... $ 50,000 $ 50,000
Revolving credit
agreements................. 143,209 156,165
Other...................... 7,373 4,351
-------- --------
Total long-term debt....... 200,582 210,516
Less current maturities.... (1,560) (853)
-------- --------
$199,022 $209,663
======== ========
</TABLE>
During February 1996, the Company entered into an agreement to amend and
restate its revolving credit and term loan facilities. The amendment provides
for an increase in the revolving credit facilities by $50 million to fund the
implementation of the Company's planned new distribution network.
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 is 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
December 31, 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 and limit the payment
of dividends. At December 31, 1995, approximately $18.2 million of the Company's
retained earnings were unrestricted and available for payment of dividends under
the most restrictive terms of the agreement.
9
<PAGE> 16
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Future maturities of long-term debt and senior subordinated notes (Note
9), 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 (in thousands):
<TABLE>
<S> <C>
Fiscal Year
- -----------
1996................... $ 1,560
1997................... 1,563
1998................... 1,550
1999................... 144,759
2000................... 26,150
Thereafter............. 150,000
--------
$325,582
========
</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 or LIBOR. The weighted average
interest rate on borrowings outstanding at December 31, 1995 for the year was
approximately 6.4%. Approximately $8.5 million and $5.5 million was
outstanding under these lines at December 31, 1995 and January 1, 1995,
respectively.
Note 9 - Senior Subordinated Notes
In November 1995, the Company issued $125 million in 9 1/2% Senior
Subordinated Notes due 2005 (the "Notes"). Interest is payable semi-annually
on May 15 and November 15, commencing May 15, 1996. Cash proceeds of
approximately $121.5 million (after underwriting discount of approximately $3.5
million) from the issuance were used to retire $101.5 million aggregate
principal amount of 8% Convertible Subordinated Debentures. The remaining
proceeds were used to reduce outstanding borrowings under revolving credit
agreements.
The Notes are 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, Ltd.
and several other smaller domestic subsidiaries.
The Notes are redeemable for cash at any time on or after November 15,
2000 at the Company's option, in whole or in part, initially at a redemption
price equal to 104.75% 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. The fair value of these obligations approximates
their carrying value.
Note 10 - Convertible Subordinated Debentures
The Company previously had outstanding $103.9 million aggregate
principal amount of Convertible Subordinated Debentures ("Debentures") maturing
in 2013, which were sold in a public offering. The Debentures were unsecured
obligations of the Company with interest at 8%. They were convertible into
shares of the Company's Class A Common Stock at a conversion price of
approximately $16.92 per share. Sinking fund payments starting in 1999, were
required to retire 70% of the Debentures prior to maturity. The Debentures
were redeemable, at the option of the Company, at a price of 102.4% during
fiscal 1995.
Approximately $101.5 million aggregate principal amount of the Debentures
was extinguished with the proceeds from the issuance of the Notes (See Note 9).
Approximately $2.5 million aggregate principal amount of the Debentures was
converted into 145,034 shares of Class A Common Stock. This extinguishment
was a non-cash transaction and, accordingly is not included in the statement of
cash flows. The Company recorded an extraordinary loss of approximately
$3.5 million ($0.19 per common share), net of income taxes of approximately
$2.2 million, consisting of redemption premiums and the write-off of deferred
financing costs, related to the early extinguishment of this debt.
10
<PAGE> 17
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 - Redeemable Preferred Stock
The Company is authorized to issue 5.0 million shares of $1.00 par value
Preferred Stock and to fix the terms of such preferred stock without any vote
or action by the shareholders. The issuance of any series of preferred stock
may have an adverse effect on the rights of holders of common stock, and could
decrease the amount of earnings and assets available for distribution to
holders of common stock. In addition, any issuance of preferred stock could
have the effect of delaying, deferring or preventing a change in control of the
Company.
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 December 31, 1995, the Series A
Preferred Stock and accrued dividends thereon were 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. Until May 31,1996, such
redemption is allowable if the market price of Class A Common Stock exceeds
approximately $17.75 for ten consecutive trading days. 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 cash equal to the
face value of outstanding Series A Preferred Stock plus the amount of accrued
but unpaid dividends accumulated thereon, 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 accrued
dividends. The Company is not required to establish any sinking or retirement
fund with respect to the Series A Preferred Stock. During the year ended
December 31, 1995, the Company paid cash dividends of approximately $7.00 per
preferred share.
Note 12 - 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 8 for discussion of restrictions on the
payment of dividends). Cash dividends on Common Stock were $.24 per share for
each of the years ended December 31, 1995, January 1, 1995, and January 2,
1994.
11
<PAGE> 18
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Changes in common shareholders' equity were (in thousands):
<TABLE>
<CAPTION>
Foreign
Class A Class B Additional Currency
------------------ ------------------ Paid-In Retained Translation
Shares Amount Shares Amount Capital Earnings Adjustment
-------- ------ -------- -------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
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)
Net income.......... - - - - - 16,828 -
Conversion of common
stock............... 88 8 (88) (8) - - -
Issuance of common
stock............... 241 24 - - 3,413 - -
Cash dividends paid. - - - - - (6,132) -
Foreign currency
translation
adjustment.......... - - - - - - 3,691
------ ------ ----- ---- ------- -------- ------
Balance,
December 31, 1995 19,044 $1,903 2,989 $300 $96,863 $147,039 $3,555
====== ====== ===== ==== ======= ======== ======
</TABLE>
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 generally become 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.
12
<PAGE> 19
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes 1995 activity on all stock options:
<TABLE>
<CAPTION>
Outstanding Options Exercisable Options
Shares Option Price Shares Option Price
------------------------------ --------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995 1,808,000 $6.50 - $18.63 731,000 $6.50 - $18.63
Granted 360,000 12.25 - 16.25 - - - -
Became exercisable - - - - - 339,000 9.00 - 18.63
Exercised (96,000) 6.50 - 16.50 (96,000) 6.50 - 16.50
Forfeited or cancelled (125,000) 11.00 - 18.63 (125,000) 11.00 - 18.63
---------- ----- ------ -------- ----- ------
Balance, December 31, 1995 1,947,000 $9.00 - $18.63 849,000 $9.00 - $18.63
========== ===== ====== ======== ===== ======
</TABLE>
New Accounting Standard
In October 1995, the Financial Accounting Standards Board (FASB")
issued Statement of Financial Accounting Standards No. 123 "Accounting for
Stock-Based Compensation" ("SFAS No. 123"), which the Company is required to
adopt in 1996. SFAS No. 123 requires companies to estimate the value of all
stock-based compensation using a recognized pricing model. Companies have the
option of recognizing this value as an expense or disclosing its effects on
net income. The Company's management has not yet determined its method of
adoption or the financial statement impact of adopting SFAS No. 123.
Note 13 - Taxes on Income
Provisions for federal, foreign, and state income taxes in the
consolidated statements of income consisted of the following components:
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------
December 31, January 1, January 2,
1995 1995 1994
--------------------------------------------
(in thousands)
<S> <C> <C> <C>
Current:
Federal....................................................... $5,331 $ 4,878 $6,115
Foreign....................................................... 5,844 4,660 6,028
State......................................................... 1,592 1,713 1,165
-------- ------- -------
12,767 11,251 13,308
-------- ------- -------
Deferred (reduction):
Federal....................................................... 1,495 (445) (1,271)
Foreign....................................................... (1,189) (2,522) (4,757)
State......................................................... (316) (875) (242)
-------- ------- -------
(10) (3,842) (6,270)
-------- ------- -------
Increase (decrease) in valuation allowance (1,421) 1,848 417
-------- ------- -------
$11,336 $ 9,257 $ 7,455
======= ======= =======
</TABLE>
13
<PAGE> 20
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income before taxes on income consisted of the following:
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------------
December 31, January 1, January 2,
1995 1995 1994
-------------- --------------------- -----------
(in thousands)
<S> <C> <C> <C>
U.S. Operations.................................... $20,212 $18,072 $17,717
Foreign Operations................................. 11,464 7,641 3,587
------- ------- -------
$31,676 $25,713 $21,304
======= ======= =======
</TABLE>
Deferred income taxes for the years ended December 31, 1995 and January
1, 1995, 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 December 31, 1995 and January 1, 1995, are as
follows:
<TABLE>
<CAPTION>
December 31, 1995 January 1, 1995
------------------------------- ---------------------------
Assets Liabilities Assets Liabilities
------ ----------- ------ -----------
(in thousands)
<S> <C>
Basis difference of property and equipment.......... $ - $19,607 $ - $17,761
Net operating loss carryforwards.................... 8,015 - 12,720 -
Other basis difference of assets and
liabilities....................................... 4,391 - 4,252 -
Valuation allowance................................. - - (5,007) -
------- ------- ------- -------
$12,406 $19,607 $11,965 $17,761
======= ======= ======= =======
</TABLE>
During the year ended December 31, 1995, the valuation allowance
decreased approximately $5.0 million. Approximately $3.6 million of the
reduction was associated with the elimination of net operating loss
carryforwards upon the completion of the liquidation of one of the Company's
foreign subsidiaries. The Company also reduced the allowance approximately $1.4
million due to changes in foreign tax laws and changes in economic circumstances
which made the utilization of net operating loss carryforwards more likely than
not in certain foreign countries. For the year ended January 1, 1995, the
valuation allowance increased approximately $1.8 million. At December 31, 1995,
the Company's foreign subsidiaries had approximately $18.4 million in net
operating losses available for carryforward. Of this amount, $17.1 million is
available for an unlimited period while $1.3 million expires at various times
through 1999. Additionally, the Company had approximately $39.4 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: Year Ended December 31, 1995
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------
December 31, January 1, January 2,
1995 1995 1994
------------- ------------------ ------------
(in thousands)
<S> <C> <C> <C>
Taxes on income at U.S. statutory rate.......................... 35.0% 35.0% 35.0%
Increase (reduction) in taxes resulting from:
State income taxes, net of federal benefit.................... 2.6 2.2 2.8
Amortization of excess of cost over net assets acquired
and related purchase accounting adjustments................. 3.6 4.5 3.9
Foreign and U.S. tax effects attributable to
foreign operations.......................................... (0.1) (6.9) (5.4)
Valuation allowance........................................... (4.5) 2.2 0.2
Other......................................................... (1.0) (1.0) (1.5)
----- ----- -----
Taxes on income at effective rates.............................. 35.8% 36.0% 35.0%
===== ===== =====
</TABLE>
14
<PAGE> 21
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $45.9 million at December 31, 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 $3.1 million would
be payable upon remittance of all previously unremitted earnings at December 31,
1995.
Note 14 - 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
fluctuations in values of the underlying exposures being hedged. The Company
does not hold or issue derivative financial instruments for trading purposes.
The Company monitors the use of these derivative financial instruments through
the use of 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. 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.
At December 31, 1995, the Company utilized interest rate swap agreements
to effectively convert approximately $73 million of variable rate debt to fixed
rate debt. The weighted average rate on borrowings was 6.9% at December 31,
1995. The interest rate swap agreements have maturity dates ranging from nine
to 24 months.
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 gains and
losses are deferred and recognized in income 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 December 31, 1995. 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 contracts and options generally have maturity dates of
six to nine months.
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 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 currency
exchange rates.
16
<PAGE> 22
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table represents the aggregate notional amounts, fair
values, and maturities of the Company's derivative financial instruments. The
liability amounts shown within the table under Foreign Currency Management
represent contracts under which the Company is required to deliver Japanese yen
and Dutch guilder currency at dates in the future.
<TABLE>
<CAPTION>
December 31, 1995 January 1, 1995
--------------------------------------------------
Notional Fair Notional Fair
Amounts Values Values Values
--------- --------- -------- ---------
(in thousands)
<S> <C> <C> <C> <C>
Interest Rate Management
Swap agreements:
Liabilities................ $73,000 $ (426) $23,000 $ (17)
Foreign Currency Management
Forward contracts:
Assets..................... - - 6,499 (367)
Liabilities................ 3,427 102 23,423 (29)
Swap agreement:
Liabilities................ 65,000 (7,328) 35,000 (5,504)
</TABLE>
Note 15 - Commitments and Contingencies
The Company leases certain marketing locations, distribution
facilities, and equipment. At December 31, 1995, aggregate minimum commitments
under operating leases with initial or remaining terms of one year or more
consisted of the following (in thousands):
<TABLE>
<CAPTION>
Fiscal year
- -----------
<S> <C>
1996............................................. $ 5,102
1997............................................. 4,920
1998............................................. 1,281
1999............................................. 928
2000............................................. 613
Thereafter....................................... 251
-------
$13,095
=======
</TABLE>
Rental expense amounted to approximately $9.3 million, $11.8 million
and $10.2 million for the fiscal years ended December 31, 1995, January 1,
1995, and January 2, 1994, respectively.
Note 16 - 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 a 401(k) retirement investment plan. The
benefits are generally based on years of service and the employee's average
monthly compensation. Pension expense was $1.1 million, $0.8 million, and $1.5
million for the years ended December 31, 1995, January 1, 1995, and January 2,
1994, respectively.
17
<PAGE> 23
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The ranges of assumptions used for the actuarial determinations reflect
the different economic environments within the various countries where the
Plans exist. In fiscal 1995, the weighted average rate of return on Plan
assets was 7.7% and the measurement of the projected benefit obligation was
based on an assumed weighted average discount rate of 8.0% and long-term
rate of compensation increases of 4.7%. During fiscal 1994, 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 1994, the assumed weighted average rate of return on Plan
assets was 8.7% and the measurement of the projected benefit obligation was
based on an assumed weighted average discount rate of 8.9% and long-term rate
of compensation increases of 6.3%.
The Company has 401(k) retirement investment 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 approximately
$560,000, $557,000 and $492,000 for the years ended December 31, 1995, January
1, 1995, and January 2, 1994, respectively.
The table presented below sets forth the funded status of the Company's
significant domestic and foreign defined benefit plans and amounts recognized
in the consolidated financial statements.
18
<PAGE> 24
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
December 31, 1995 January 1, 1995
-------------------- --------------------
(in thousands)
<S> <C> <C>
Plan assets at fair value, primarily equity and
fixed income securities .......... ............ $66,392 $ 53,838
------- --------
Actuarial present value of benefit obligations:
Vested benefits................................ 52,339 37,681
Nonvested benefits............................. 1,124 987
------- --------
Accumulated benefit obligation................... 53,463 38,668
Effect of projected future salary increases.... 4,082 3,813
------- --------
Projected benefit obligation..................... 57,545 42,481
------- --------
Plan assets in excess of projected
benefit obligation............................. 8,847 11,357
Unrecognized net gain from past experience
different from that assumed.................... (8,645) (10,594)
Unrecognized prior service cost.................. 362 427
Unrecognized net asset existing at the date of
initial application of SFAS 87................. 1,733 1,670
------- --------
Prepaid pension cost............................. $ 2,297 $ 2,860
======= ========
Net pension cost included the following
components:
Service cost - benefits earned during
the period................................... $ 1,780 $ 1,524
Interest cost on projected benefit obligation.. 4,315 3,821
Actual return on plan assets................... (9,568) 1,887
Net amortization and deferral.................... 4,611 (6,435)
------- --------
Net pension cost................................. $ 1,138 $ 797
======= ========
</TABLE>
19
<PAGE> 25
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 17 - Business and Foreign Operations
The Company and its subsidiaries are engaged predominantly in the
manufacture and sale of commercial and institutional interior finishing.
Financial information by geographic area for the years ended December 31, 1995,
January 1, 1995 and January 2, 1994 is as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------------
December 31, January 1, January 2,
1995 1995 1994
-------------- ------------------- -------------
(in thousands)
<S> <C> <C> <C>
Sales to unaffiliated customers (by source operation)
United States...................................... $440,715 $394,605 $308,367
Americas, excluding the United States.............. 23,165 22,325 20,027
Europe............................................. 267,116 246,376 235,643
Asia-Pacific......................................... 71,070 61,977 61,030
-------- -------- --------
$802,066 $725,283 $625,067
======== ======== ========
Operating income
United States...................................... $ 40,608 $ 34,111 $ 34,411
Americas, excluding the United States.............. 1,170 522 (259)
Europe............................................. 26,046 20,707 13,638
Asia-Pacific....................................... 134 185 1,747
Corporate expenses................................. (6,415) (4,715) (3,367)
-------- -------- --------
$ 61,543 $ 50,810 $ 46,170
======== ======== ========
Identifiable assets
United States...................................... $366,128 $332,653 $322,379
Americas, excluding the United States.............. 8,313 7,951 9,262
Europe............................................. 290,486 304,894 274,928
Asia-Pacific....................................... 49,424 37,910 35,750
-------- -------- --------
$714,351 $683,408 $642,319
======== ======== ========
</TABLE>
20
<PAGE> 26
INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 18- 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>
First Year Ended December 31, 1995
Net sales................................. $191,327 $202,818 $203,269 $204,652
Gross profit.............................. 58,355 62,728 63,695 65,645
Income before extraordinary item.......... 4,016 5,075 5,327 5,922
Net income................................ 4,016 5,075 5,327 2,410
Net income applicable to common
shareholders............................ 3,579 4,638 4,889 1,972
Primary earnings per common share before
extraordinary item...................... 0.20 0.25 0.27 0.30
Fully diluted earnings per common share
before extraordinary item............... 0.20 0.25 0.26 0.30
Primary earnings per common share......... 0.20 0.25 0.27 0.11
Fully diluted earnings per common share... 0.20 0.25 0.26 0.11
Share prices:
High...................................... 15 1/8 15 1/8 18 17 3/8
Low....................................... 11 5/8 11 7/8 12 1/4 15
Dividends per common share.................. 0.06 0.06 0.06 0.06
Fiscal Year Ended January 1, 1995
Net sales................................. $160,219 $181,665 $184,959 $198,440
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
* For the year ended January 1, 1995, earnings per share on a fully diluted basis were antidilutive.
</TABLE>
21
<PAGE> 27
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 December 31, 1995 and January 1, 1995, and the
related consolidated statements of income and cash flows for each of the three
years in the period ended December 31, 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Interface, Inc.
and subsidiaries as of December 31, 1995 and January 1, 1995, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
/S/ BDO SEIDMAN, LLP
- --------------------
BDO SEIDMAN, LLP
Atlanta, Georgia
February 27, 1996
22
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF INTERFACE, INC.
JURISDICTION OF
SUBSIDIARY ORGANIZATION
----------------------------------------- ----------------------
Interface Americas, Inc. Georgia (USA)
Interface Flooring Systems, Inc. Georgia (USA)
Interface Research Corporation Georgia (USA)
Rockland React-Rite, Inc. Georgia (USA)
Pandel, Inc. Georgia (USA)
Interface Asia-Pacific, Inc.(1) Georgia (USA)
Prince Street Technologies, Ltd. Georgia (USA)
Re: Source Americas Enterprises, Inc. Georgia (USA)
Toltec Fabrics, Inc. Georgia (USA)
Interface Yarns, Inc. Georgia (USA)
Interface Leasing, Inc. Georgia (USA)
Interface Architectural Resources, Inc. Georgia (USA)
Intek, Inc. Georgia (USA)
Bentley Mills, Inc. Delaware (USA)
Interface Europe, Inc. Delaware (USA)
Guilford of Maine, Inc.(2) Delaware (USA)
Guilford (Delaware), Inc. Delaware (USA)
Interface Securitization Corporation Delaware (USA)
Renovisions, Inc. Pennsylvania (USA)
C-Tec, Inc Michigan (USA)
Interface International (Barbados), Inc. Barbados
Interface Flooring Systems (Canada), Inc. Canada
Interface Europe, Ltd.(3) United Kingdom
Interface Europe B.V.(4) Netherlands
- -----------------------
(1) Interface Asia-Pacific, Inc. is the parent of six subsidiaries organized
and operating in Australia, Japan, Hong Kong, Singapore and Thailand.
(2) Guilford of Maine, Inc. is the parent of two subsidiaries organized and
operating in Canada and the United States. Another fabric subsidiary
operating in the United Kingdom, Guilford of Maine (U.K.) Ltd., is now
grouped as a subsidiary of Interface Europe, Ltd.
(3) Interface Europe, Ltd. (formerly Interface Flooring Systems, Ltd.) is the
parent of four subsidiaries organized and operating in the United Kingdom
and Hong Kong.
(4) Interface Europe B.V. (formerly Interface Heuga B.V.) is the parent of
six subsidiaries organized and operating in the Netherlands, and 12
subsidiaries organized and operating outside of the Netherlands (none of
which are organized or operating in the United States).
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Interface, Inc.
Atlanta, Georgia
We hereby consent to the incorporation by reference in the Prospectuses
constituting a part of the Company's Registration Statements on Form S-8 (File
Numbers 33-28305 and 33-28307) of our reports dated February 27, 1996, relating
to the consolidated financial statements and schedules of Interface, Inc.
appearing in the Company's Form 10-K for the year ended December 31, 1995.
We also consent to the reference to us under the caption "Experts" in the
Prospectuses.
BDO SEIDMAN, LLP
Atlanta, Georgia
March 29, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 8,750
<SECURITIES> 0
<RECEIVABLES> 117,256
<ALLOWANCES> 5,870
<INVENTORY> 134,504
<CURRENT-ASSETS> 274,386
<PP&E> 370,486
<DEPRECIATION> 187,187
<TOTAL-ASSETS> 714,351
<CURRENT-LIABILITIES> 115,355
<BONDS> 324,022
25,000
0
<COMMON> 2,203
<OTHER-SE> 229,711
<TOTAL-LIABILITY-AND-EQUITY> 714,351
<SALES> 802,066
<TOTAL-REVENUES> 802,066
<CGS> 551,643
<TOTAL-COSTS> 740,523
<OTHER-EXPENSES> 3,114
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,753
<INCOME-PRETAX> 31,676
<INCOME-TAX> 11,336
<INCOME-CONTINUING> 20,340
<DISCONTINUED> 0
<EXTRAORDINARY> (3,512)
<CHANGES> 0
<NET-INCOME> 16,828
<EPS-PRIMARY> 0.83<F1>
<EPS-DILUTED> 0.83<F1>
<FN>
<F1>EARNINGS PER SHARE REPRESENTS EARNINGS AFTER THE EXTRAORDINARY LOSS OF $3,512.
THE FOLLOWING CALCULATION DEPICTS THE BREAKDOWN:
EARNINGS PER SHARE BEFORE EXTRAORDINARY ITEMS $1.02
EXTRAORDINARY LOSS (NET OF TAX) -0.19
-----
NET INCOME $0.83
=====
</FN>
</TABLE>
