File No. 333-______
As filed with the Securities and Exchange Commission on February 20, 1998.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT
OF 1933
------------------
INTERFACE, INC.
--------------------------------------------------
(Exact name of issuer as specified in its charter)
Georgia 58-1451243
------------------------------ ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2859 Paces Ferry Road, Suite 2000, Atlanta, Georgia 30339, (770) 437-6800
- --------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code,
of issuer's principal executive offices)
Raymond S. Willoch, Esquire
Vice President, General Counsel and Secretary
INTERFACE, INC.
2859 Paces Ferry Road, Suite 2000, Atlanta, Georgia 30339
(770) 437-6800
------------------------------------------------------------------------
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
Copies to:
W. RANDY EADDY, ESQ. ARTHUR JAY SCHWARTZ, ESQ.
KILPATRICK STOCKTON LLP SMITH, GAMBRELL & RUSSELL, LLP
Suite 2800 Suite 3100
1100 Peachtree Street, Atlanta, 1230 Peachtree Street, Atlanta,
Georgia 30309-4530 Georgia 30309
(404) 815-6500 (404) 815-3500
------------------
Approximate date of commencement of proposed sale to the
public: As soon as practicable after this Registration
Statement becomes effective.
If the only securities being registered on this form are being
offered pursuant to dividend or interest reinvestment plans,
please check the following box. ___
If any of the securities being registered on this form are to
be offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, other than securities offered
only in connection with dividend or interest reinvestment plans,
check the following box. /X/
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check
the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. ___ ____________
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
___ _______________
If delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box. / /
<TABLE>
CALCULATION OF REGISTRATION FEE
===============================================================================================================================
Amount to be Proposed Maximum Proposed Maximum Amount of
Registered Offering Price per Aggregate Offering Registration
Title of Each Class of Securities to be <F2> Unit <F2><F3> Price <F2><F3> Fee<F2>
Registered<F1>
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt Securities - 100% <F4> $300,000,000 $88,500
- -------------------------------------------------------------------------------------------------------------------------------
Preferred Stock, par value $1.00 per - - - -
share
- -------------------------------------------------------------------------------------------------------------------------------
Depositary Shares <F5> - - - -
- -------------------------------------------------------------------------------------------------------------------------------
Class A Common Stock, par value $.10 per - - - -
share
================================================================================================================================
<FN>
<F1> Securities registered hereunder (the "Securities") may
be sold separately, together or as units with other Securities
registered hereunder. The Securities registered hereunder
include such indeterminate number of shares of Common Stock or
Preferred Stock which may be issued upon conversion of
convertible Debt Securities or convertible Preferred Stock.
<F2> Pursuant to Rule 457(o) under the Securities Act of
1933, as amended (the "Securities Act"), which permits the
registration fee to be calculated on the basis of the maximum
offering price of all the securities registered, the table does
not specify by each class information as to the amount to be
registered, proposed maximum offering price per unit or the
proposed maximum aggregate offering price.
<F3> Estimated in accordance with Rule 457(o) under the
Securities Act, solely for the purpose of determining the
registration fee.
<F4> Or, in the event of the issuance of original issue
discount securities, such higher principal amount as may be sold
for an initial public offering price of up to $300,000,000.
<F5> There are also being registered hereunder an
indeterminate number of Depositary Shares to be evidenced by
Depositary Receipts issued pursuant to a Deposit Agreement. If
fractional interests in shares of the Preferred Stock registered
hereunder are offered, Depositary Receipts may be distributed to
those persons purchasing such fractional interests and the shares
of Preferred Stock will be deposited with the Depositary under
the Deposit Agreement.
</FN>
</TABLE>
THE COMPANY HEREBY AMENDS THIS REGISTRATION STATEMENT ON
SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE COMPANY SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.<PAGE>
PROSPECTUS SUBJECT TO COMPLETION, DATED _______, 1998
[logo]
INTERFACE
$300,000,000
Debt Securities
Preferred Stock
Class A Common Stock
___________________________________
Interface, Inc. ("Interface" or the "Company") intends to
issue from time to time, in one or more series, up to
$300,000,000 aggregate offering price of its (i) unsecured debt
securities ("Debt Securities"), which may be either senior debt
securities ("Senior Debt Securities") or subordinated debt
securities ("Subordinated Debt Securities"), (ii) preferred
shares, par value $1.00 per share ("Preferred Shares"), which may
be issued in whole or in a fraction of a Preferred Share in the
form of depositary shares evidenced by depositary receipts
("Depositary Shares") and (iii) shares of Class A Common Stock,
par value $.10 per share ("Class A Common Stock"); the Debt
Securities, Preferred Shares, Depositary Shares and Class A
Common Stock are referred to collectively as the "Securities".
The Securities offered hereby (the "Offered Securities") may be
offered separately or together, in separate series, in amounts,
at prices, and on terms to be determined at the time of sale and
to be set forth in a supplement to this Prospectus (a "Prospectus
Supplement").
The specific terms of the Offered Securities in respect of
which this Prospectus is being delivered, such as, where
applicable, (i) in the case of Debt Securities, the specific
designation (including whether senior or subordinated), aggregate
principal amount, denomination, maturity, premium, if any,
priority, interest rate (which may be variable or fixed), time of
payment of any premium and any interest, terms for optional
redemption or repayment or for sinking fund payments, if any, and
terms for conversion into or exchange for other Offered
Securities; (ii) in the case of Preferred Shares, the specific
title and stated value, number of shares or fractional interests
therein, the dividend, liquidation, redemption, conversion,
voting and other rights, and whether interests in the Preferred
Shares will be represented by Depositary Shares; and (iii) in the
case of all Offered Securities, any initial offering price, will
be set forth in the applicable Prospectus Supplement. The
Prospectus Supplement will also contain information, where
applicable, about material United States federal income tax
considerations relating to, and any listing on a securities
exchange of, the Offered Securities offered thereby.
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE OFFERED
SECURITIES.
The Offered Securities may be offered directly through
underwriters or dealers or through such firms or other firms
acting alone or through dealers. The Offered Securities may also
be sold directly by the Company or through agents to investors.
The names of any agents, dealers or managing underwriters, and of
any underwriters involved in the sale of the Offered Securities
in respect of which this Prospectus is being delivered, the
applicable agents' commission, dealers' purchase price or
underwriters' discounts and commissions, and the net proceeds to
the Company from such sale, will be set forth in the applicable
Prospectus Supplement. See "Plan of Distribution".
___________________________________
This Prospectus may not be used to consummate the sale of
the Securities unless accompanied by a Prospectus Supplement.
___________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is ____________, 1998<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be
sold nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be
any sale of these securities in any state in which such offer,
solicitation or sale would beunlawful prior to registration or
qualification under the securities laws of any such state.<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT
CONSTITUTES AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH
IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY SUCH SECURITIES TO ANY PERSON IN ANY JURISDICTION TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, files reports, proxy
statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements,
and other information, may be inspected and copied at prescribed
rates at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices
located at Seven World Trade Center, 13th Floor, New York, New
York 10048, and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. In addition, the Commission maintains a site on
the World Wide Web portion of the Internet, which contains
reports, proxy and information statements and other information
regarding registrants (such as the Company) that file
electronically with the Commission, at http://www.sec.gov.
The Company has filed with the Commission a Registration
Statement on Form S-3 (including all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act
of 1933, as amended (the "Securities Act"). This Prospectus,
which is part of the Registration Statement, does not contain all
of the information set forth or incorporated by reference in the
Registration Statement and the exhibits and schedules thereto.
For further information with respect to the Company and the
Securities offered hereby, reference is hereby made to the
Registration Statement and such exhibits and schedules which may
be inspected and copied in the manner and at the locations
described above. Statements contained herein concerning the
provisions of any document are not necessarily complete and, in
each instance, reference is made to the copy of the document
filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each statement is qualified in its
entirety by such reference.
2<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents heretofore filed by the Company with
the Commission are hereby incorporated by reference: (i) the
Company's Annual Report on Form 10-K for the year ended December 29,
1996; (ii) the Company's quarterly reports on Form 10-Q for
the quarters ended March 30, 1997, June 29, 1997, and September
28, 1997; and (iii) the description of the Company's capital
stock contained in the Company's Registration of Securities on
Form 8-A filed on April 30, 1984, as amended by Form 8 filed on
August 19, 1988, including all amendments or reports filed for
the purpose of updating such description.
All reports and other documents filed by the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the
termination of the offering of the Securities offered hereby
shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the date of filing of the
reports and documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference in this
Prospectus or any Prospectus Supplement shall be deemed to be
modified or superseded for purposes of this Prospectus or any
Prospectus Supplement to the extent that a statement contained
herein, therein or in any other subsequently filed documents
which also is or is deemed to be incorporated by reference in
this Prospectus or in any Prospectus Supplement modifies or
supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus or any
Prospectus Supplement.
The Company will provide without charge to each person to
whom this Prospectus is delivered, on the written or oral request
of such person, a copy (without exhibits other than exhibits
specifically incorporated by reference) of any or all documents
incorporated by reference into this Prospectus. Written or oral
requests for such copies should be directed to: Interface, Inc.,
2859 Paces Ferry Road, Suite 2000, Atlanta, Georgia 30339,
Attention: Corporate Secretary (telephone: 770-437-6800).
3<PAGE>
THE COMPANY
Interface is a global manufacturer, marketer, installer and
servicer of products for the commercial and institutional
interiors market. With a 40% market share, the Company is the
worldwide leader in the modular carpet segment, which includes
both carpet tile and six-foot roll goods. The Company's Bentley
Mills, Prince Street and Firth brands are leaders in the high
quality, designer-oriented sector of the broadloom segment. The
Company provides carpet installation and maintenance services
through its domestic dealer network, Re:Source Americas, and
provides specialized carpet replacement services through its
Renovisions, Inc. ("Renovisions") subsidiary. The Company's
Interior Fabrics Group includes 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 specialty
products operations produce raised/access flooring systems,
antimicrobial additives, adhesives and various other chemical
compounds and products. These complementary product offerings,
together with an integrated marketing philosophy, enable
Interface to take a "total interior solution" approach to serving
the diverse needs of its customers around the world.
The Company markets products in over 100 countries around
the world under such established brand names as Interface and
Heuga in modular carpet; Bentley Mills, Prince Street and Firth
in broadloom carpets; Guilford of Maine, Stevens Linen, Camborne,
Toltec and Intek in interior fabrics and upholstery products;
Intersept in chemicals; and C-Tec, Intercell and Interstitial
Systems in raised/access flooring systems. The Company utilizes
an internal marketing and sales force of over 1,100 experienced
personnel (the largest in the commercial floorcovering industry),
stationed at over 100 locations in over 35 countries, to market
the Company's carpet products and services in person to its
customers. The Company's principal geographic markets are North
America (68% of 1996 sales), the United Kingdom and Western
Europe (25% of 1996 sales), and Japan and Australia (4% of 1996
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.
While the Company's revenues from U.S. operations have
historically been derived primarily from the renovation market,
Interface believes that the recovery in the U.S. commercial
office market, which began in the mid 1990's, will drive growth
in the new construction market over the next several years. From
a high of nearly 24% in 1986, suburban office vacancy rates
dropped to a decade low of 10.3% as of June 1997. In addition,
30 out of 54 major metropolitan areas were below the 10% vacancy
level (versus three out of 54 three years ago). The Company
believes that a 10% vacancy level is a critical threshold which
drives new construction. Given the decade-long downturn in the
office market, the Company believes the recovery should continue
for a significant number of years. The Company expects that all
of its domestic operations will benefit from these industry
developments. In its international markets, the Company expects
to benefit from both increased use and acceptance of its products
as well as recoveries in the commercial office markets,
particularly in Europe. The Company also believes that, within
4<PAGE>
the overall floorcovering market, the demand for modular carpet
is increasing worldwide as more customers recognize its
advantages in terms of greater design options and flexibility,
longer average life, and ease of access to sub-floor wiring.
During 1996, the Company had revenues and net income of $1.0
billion and $26.4 million, respectively, the highest in the
Company's history. Revenues were driven by carpet sales ($804
million), fabric sales ($149 million) and chemical and specialty
product sales ($48 million), accounting for 80%, 15% and 5% of
total sales, respectively. The Company has experienced a
compound annual growth rate in its revenues and net income of 14%
and 21%, respectively, over the five-year period from 1992 to
1996. In the first nine months of 1997, the Company reported
revenues and net income of $826,443 and $24,824, representing
increases of 15.1% and 43.4%, respectively, over the first nine
months of 1996.
RECENT DEVELOPMENTS
On December 30, 1997, the Company completed the acquisition
of the European carpet businesses of Readicut International plc
("Readicut"), for $50.3 million. After the planned divestiture
of certain assets of Readicut, including its Network Flooring
dealer division and Joseph, Hamilton & Seaton Ltd., the Company's
final investment for the retained Readicut businesses will be
less than $15 million. The retained businesses will include
Firth Carpets Ltd., based in Brighouse, West Yorkshire, a leading
manufacturer of high quality woven and tufted carpet primarily
for the contract markets; and Vebe Floorcoverings BV, located in
the Netherlands, a leading manufacturer of needlepunch carpet.
Annual revenues from those retained businesses were approximately
$100 million in 1997. Firth Carpets is located in close
proximity to the Company's Camborne Fabrics facility and its
Shelf, England modular carpet facility, which is expected to
allow Interface to realize significant synergies with these
existing operations.
______________________
The Company was incorporated under the laws of the State of
Georgia in 1973. The Company's principal executive offices are
located at 2859 Paces Ferry Road, Suite 2000, Atlanta, Georgia
30339, and its telephone number is (770) 437-6800.
5<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE
FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN
INVESTMENT IN THE OFFERED SECURITIES. THIS PROSPECTUS AND THE
ACCOMPANYING PROSPECTUS SUPPLEMENT CONTAIN "FORWARD-LOOKING"
STATEMENTS AS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995, THAT ARE BASED ON CURRENT EXPECTATIONS, ESTIMATES
AND PROJECTIONS. STATEMENTS THAT ARE NOT HISTORICAL FACTS,
INCLUDING STATEMENTS ABOUT THE COMPANY'S BELIEFS AND
EXPECTATIONS, ARE FORWARD-LOOKING STATEMENTS. THESE STATEMENTS
CONTAIN POTENTIAL RISKS AND UNCERTAINTIES; THEREFORE, ACTUAL
RESULTS MAY DIFFER MATERIALLY. THE COMPANY UNDERTAKES NO
OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS,
WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR
OTHERWISE. IMPORTANT FACTORS THAT MAY AFFECT SUCH STATEMENTS
INCLUDE, BUT ARE NOT LIMITED TO, THOSE SET FORTH BELOW.
STRONG COMPETITION
The commercial floorcovering industry is highly competitive.
Globally, the Company competes for sales 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, with a global market
share over 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.
CYCLICAL NATURE OF INDUSTRYY
Sales of the Company's principal products are related to the
construction and renovation of commercial and institutional
buildings. Such activity is cyclical and can be affected by the
strength of a country's general economy, prevailing interest
rates and other factors that lead to cost control measures by
businesses and other users of commercial or institutional space.
The effects of such cyclicality upon the new construction sector
of the market tend to be more pronounced than its effects upon
the renovation sector. Although the predominant portion of the
Company's sales are generated from the renovation sector, any
such adverse cycle, in either sector of the market, would lessen
the overall demand for commercial interiors products, which could
impair the Company's growth.
RELIANCE ON KEY PERSONNEL
The Company believes that its continued success will depend
to a significant extent upon the efforts and abilities of its
senior management executives, particularly Ray C. Anderson,
Chairman of the Board and Chief Executive Officer; Charles R.
Eitel, President and Chief Operating Officer; and Gordon D.
Whitener, Senior Vice President. Each of Messrs. Anderson, Eitel
and Whitener have entered into employment agreements with
the Company containing certain covenants of non-competition, and
the Company currently maintains key-man insurance on each of
Messrs. Anderson and Eitel. In addition, the Company relies
6<PAGE>
significantly on the leadership of its design staff by David
Oakey of David Oakey Designs, Inc., which provides product
design/production engineering services to the Company under
an exclusive consulting contract that contains certain covenants
of non-competition. The loss of all or some of such personnel
could have an adverse impact on the Company.
RISKS OF FOREIGN OPERATIONS
The Company has substantial international operations. In
fiscal 1996, approximately 35% of the Company's revenues and a
significant portion of the Company's production were outside the
United States, primarily in Europe, and the Company's corporate
strategy includes the expansion of its international business on
a worldwide basis. As a result, the Company's operations are
subject to various political, economic and other uncertainties,
including risks of restrictive taxation policies, foreign
exchange restrictions, changing political conditions and
governmental regulations. The Company also receives a
substantial portion of its revenues in currencies other than U.S.
dollars, which makes it subject to the risks inherent in currency
translations. The Company's ability to manufacture and ship
products from facilities in several foreign countries reduces the
risks of foreign currency fluctuations it might otherwise
experience, and the Company also engages from time to time in
hedging programs intended to further reduce those risks. Despite
this, the scope and volume of the Company's global operations
make it impossible to eliminate completely all foreign currency
translation risks as an influence on the Company's financial
results.
CONTROL OF ELECTION OF A MAJORITY OF BOARD
The Company's Chairman and Chief Executive Officer, Ray C.
Anderson, beneficially owns approximately 60% of the Company's
outstanding Class B Common Stock, and has entered into a voting
agreement, which expires in April 1998, with certain other
holders of Class B Common Stock pursuant to which such other
holders have irrevocably appointed Mr. Anderson their proxy and
attorney-in-fact to vote their shares. The holders of the Class
B Common Stock are entitled, as a class, to elect a majority of
the Board of Directors of the Company, which means that Mr.
Anderson has sufficient voting power to elect a majority of the
Board of Directors. The holders of the Class B Common Stock
generally vote together as a single class with the holders of the
Class A Common Stock on all other matters submitted to the
shareholders for a vote, however, and Mr. Anderson's beneficial
ownership of the outstanding Class A and Class B Common Stock
combined is less than 10%. See "Description of Capital Stock --
Class B Stock Voting Agreement".
RELIANCE ON PETROLEUM-BASED RAW MATERIALS
Petroleum-based products comprise the predominant portion of
the cost of raw materials used by the Company in manufacturing.
While the Company generally attempts to match cost increases with
corresponding price increases, large increases in the cost of
such petroleum-based raw materials could adversely affect the
Company if the Company were unable to pass through to its
customers such increases in raw material costs.
7
<PAGE>
RELIANCE ON THIRD PARTY FOR SUPPLY OF FIBER
E. I. DuPont de Nemours and Company ("DuPont") currently
supplies a significant percentage of the Company's requirements
for synthetic fiber, the principal raw material used in the
Company's carpet products. DuPont also competes with the
Company's Re:Source Americas network through DuPont's own
distribution channel and aligned carpet mills. While the Company
believes that there are adequate alternative sources of supply
from which it could fulfill its synthetic fiber requirements, the
unanticipated termination or interruption of the supply
arrangement with DuPont could have a material adverse effect on
the Company because of the cost and delay associated with
shifting more business to another supplier.
RESTRICTIONS DUE TO SUBSTANTIAL INDEBTEDNESS
The Company's indebtedness is substantial in relation to its
shareholders' equity. As of September 28, 1997, the Company's
long-term debt (net of current portion) totaled $426.4 million or
approximately 57.9% of its total capitalization. As a
consequence of its level of indebtedness a substantial portion of
the Company's cash flow from operations must be dedicated to debt
service requirements. The terms of the Company's outstanding
indebtedness also restrict the ability of the Company and its
subsidiaries to, among other things, incur additional
indebtedness, pay dividends or make certain other restricted
payments or investments in certain situations, consummate certain
asset sales, enter into certain transactions with affiliates,
incur liens, or merge or consolidate with any other person or
sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of their assets. They also require the
Company to meet certain financial tests and comply with certain
other reporting, affirmative and negative covenants.
YEAR 2000 RISK
The "year 2000 issue" arises from the widespread use of
computer programs that rely on two-digit date codes to perform
computations or decision-making functions. Many of these
programs may fail due to an inability to properly interpret date
codes beginning January 1, 2000. For example, such programs may
misinterpret "00" as the year 1900 rather than 2000. In
addition, some equipment, being controlled by microprocessor
chips, may not deal appropriately with the year "00". The
Company is evaluating its computer systems with the help of
outside consultants to determine which modifications and
expenditures will be necessary to make its systems compatible
with year 2000 requirements. The Company believes that its
systems will be year 2000-compliant upon implementation of such
modifications.
The Company currently estimates the total cost of such
modifications to be at least $17 million, although it could be
significantly more. Of the total project cost, approximately
$10 million is attributable to the cost of new hardware and
software which will be capitalized in connection with
the consolidation globally of the Company's management and financial
accounting systems. The remaining $7 million will be expensed
as incurred over the next two years. However, there can be no
assurance that all necessary modifications will be identified
and corrected or that unforeseen difficulties or costs will
not arise. In addition, there can be no assurance that the
systems of other companies on which the company's systems
8<PAGE>
rely will be modified on a timely basis, or that the
failure by another company to properly modify its systems will
not negatively impact the Company's systems or operations.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus
Supplement, the Company intends to use the net proceeds from the
sale of the Securities for general corporate purposes, including
working capital, the repayment or refinancing of previously
outstanding indebtedness, future acquisitions and capital
expenditures. Pending application of the net proceeds for
specific purposes, proceeds may be invested in short-term or
marketable securities.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical consolidated
ratios of earnings to fixed charges for the Company for the
periods indicated. The ratio of earnings to fixed charges is
determined by dividing net earnings before interest expense,
taxes on income, amortization of debt expense, and a portion of
rent expense representative of the interest component by the sum
of interest expense, amortization of debt expense and the portion
of rent expense representative of the interest component.
<TABLE>
<CAPTION>
Nine Months Ended Fiscal Year Ended
--------------------------- --------------------------------------------------------------
September 29, September 28, December 31, December 1, January 1, January 2, January 3,
1997 1996 1996 1995 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <S> <C> <S> <C> <S> <C> <S> <C> <S> <C> <S> <C>
2.5 2.1 2.3 2.1 2.0 1.9 1.8
</TABLE>
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt
Securities sets forth certain general terms and provisions of the
Debt Securities to which any Prospectus Supplement may relate.
The particular terms of the Debt Securities offered by any
Prospectus Supplement (the "Offered Debt Securities") and the
extent, if any, to which such general provisions may not apply
thereto will be described in the Prospectus Supplement relating
to such Offered Debt Securities.
The Debt Securities may be issued from time to time, in one
or more series, and will constitute either Senior Debt Securities
or Subordinated Debt Securities. Senior Debt Securities will be
issued under an Indenture (the "Senior Indenture"), between the
Company and First Union National Bank, N.A., as Trustee (the
"Senior Trustee"). The Subordinated Debt Securities will be
issued under an Indenture (the "Subordinated Indenture"), between
the Company and a trustee to be named prior to the offering of
any Subordinated Debt Securities, as Trustee (the "Subordinated
Trustee"). The Senior Indenture and the Subordinated Indenture
are referred to herein individually as an "Indenture" and,
collectively, as the "Indentures," and the Senior Trustee and the
Subordinated Trustee are referred to herein individually as the
"Trustee" and collectively as the "Trustees".
9<PAGE>
The following summaries of certain provisions of the Debt
Securities and the Indentures do not purport to be complete and
are subject to, and are qualified in their entirety by reference
to, all of the provisions of the Indentures, including the
definitions therein of certain terms. Certain capitalized terms
used herein are defined in the Indentures. The Indentures are
substantially identical, except for certain covenants of the
Company and provisions relating to subordination.
GENERAL
The Indentures do not limit the amount of debt securities
that can be issued thereunder and provide that debt securities of
any series may be issued thereunder up to the aggregate principal
amount which may be authorized from time to time by the Company.
The Indentures do not limit the amount of other Indebtedness or
securities, other than certain secured Indebtedness as described
below, that may be issued by the Company or its Subsidiaries. All
Senior Debt Securities will be unsecured and will rank on a
parity with all other unsecured and unsubordinated Indebtedness
of the Company. All Subordinated Debt Securities will be
unsecured and will be subordinated in right of payment to the
prior payment in full of Senior Indebtedness (which term includes
the Senior Debt Securities) of the Company as described below
under "Provisions Applicable Solely to Subordinated Debt
Securities--Subordination." In addition, creditors of
Subsidiaries of the Company are entitled to a claim on the assets
of such Subsidiaries. Consequently, in the event of a liquidation
or reorganization of any Subsidiary, creditors of the Subsidiary
are likely to be paid in full before any distribution is made to
the Company and holders of Senior Debt Securities or Subordinated
Debt Securities, except to the extent that the Company is itself
recognized as a creditor of such Subsidiary, in which case the
claims of the Company would still be subordinate to any security
interests in the assets of such Subsidiary and any Indebtedness
of such Subsidiary senior to that held by the Company.
Reference is made to the Prospectus Supplement for the
following terms thereof: (i) the title of the Offered Debt
Securities and classification as Senior Debt Securities or
Subordinated Debt Securities; (ii) any limit upon the aggregate
principal amount of the Offered Debt Securities; (iii) if other
than 100% of the principal amount, the percentage of the
principal amount at which the Offered Debt Securities will be
offered; (iv) the date or dates on which the principal of the
Offered Debt Securities will be payable (or method of
determination thereof); (v) the rate or rates (which may be fixed
or variable) at which the Offered Debt Securities will bear
interest (or method of determination thereof), if any, the date
or dates from which any such interest will accrue and on which
such interest will be payable, and the record dates for the
determination of the holders to whom interest is payable; (vi) if
other than U.S. dollars, the currency or units based on or
relating to currencies in which the Offered Debt Securities are
denominated and which the principal of, interest on and any
Additional Amounts (as defined below) will or may be payable;
(vii) if other than as set forth herein, the place or places
where the principal of, interest on and any Additional Amounts
payable in respect of the Offered Debt Securities will be
payable; (viii) the price or prices at which, the period or
periods within which, and the terms and conditions upon which
Offered Debt Securities may be redeemed, in whole or in part, at
10<PAGE>
the option of the Company; (ix) whether the Offered Debt
Securities are convertible into Class A Common Stock and, if so,
the terms and conditions upon which such conversion will be
effected, including the initial conversion price or conversion
rate, the conversion period and other conversion provisions in
addition to or in lieu of those described in the applicable
Indenture; (x) the obligation, if any, of the Company to redeem,
repurchase or repay Offered Debt Securities, whether pursuant to
any sinking fund or analogous provisions or pursuant to other
provisions set forth therein or at the option of a holder
thereof; (xi) whether the Offered Debt Securities will be
represented in whole or in part by one or more global notes
registered in the name of a depository or its nominee; (xii)
whether and under what circumstances the Company will pay
Additional Amounts in respect of certain taxes imposed on certain
holders of Offered Debt Securities or as otherwise provided; and
(xiii) any other terms or conditions not inconsistent with the
provisions of the Indenture upon which the Offered Debt
Securities will be offered. "Principal" when used herein
includes, when appropriate, the premium, if any, on the Debt
Securities. For a description of the terms of the Offered Debt
Securities, reference must be made to both the Prospectus
Supplement relating thereto and to the description of Debt
Securities set forth herein.
Unless otherwise provided in the Prospectus Supplement,
principal, interest and Additional Amounts, if any, will be
payable, and the Debt Securities will be transferable or, if
applicable, convertible at the office or offices or agency
maintained by the Company for such purposes; provided that
payment of interest on registered Debt Securities may be made by
check mailed to the persons entitled thereto at the addresses of
such persons appearing on the Debt Security register. In the case
of registered Debt Securities, interest on the Debt Securities
will be payable on any interest payment date to the persons in
whose name the Debt Securities are registered at the close of
business on the record date with respect to such interest payment
date.
Unless otherwise specified in the applicable Prospectus
Supplement, Debt Securities will be issued only in fully
registered form, without coupons, in minimum denominations of
$1,000 and any integral multiple thereof. The Debt Securities
may be represented in whole or in part by one or more global
notes registered in the name of a depository or its nominee and,
if so represented, interests in such global note will be shown
on, and transfers thereof will be effected only through, records
maintained by the designated depository and its participants as
described below. Where Debt Securities of any series are issued
in bearer form, the special restrictions and considerations,
including special offering restrictions and special Federal
income tax considerations, applicable to any such Debt Securities
and to payment on and transfer and exchange of such Debt
Securities will be described in the applicable Prospectus
Supplement.
Some of the Debt Securities may be issued as discounted Debt
Securities (bearing no interest or bearing interest at a rate
that, at the time of issuance, is below market rates) to be sold
at a substantial discount below their stated principal amount
("Original Issue Discount Securities"). Federal income tax
consequences and other special considerations applicable to any
11<PAGE>
such Original Issue Discount Securities will be described in the
Prospectus Supplement relating thereto.
If the purchase price of any Debt Securities is payable in
one or more foreign currencies or currency units, or if any Debt
Securities are denominated in one or more foreign currencies or
currency units, or if the principal of or interest, if any, on
any Debt Securities is payable in one or more foreign currencies
or currency units, the restrictions, elections, certain Federal
income tax considerations, specific terms and other information
with respect to such issue of Debt Securities and such foreign
currency or currency units will be set forth in the applicable
Prospectus Supplement.
Debt Securities may be presented for exchange, and
registered Debt Securities may be presented for transfer, in the
manner, at the places and subject to the restrictions set forth
in the applicable Indenture, the Debt Securities and the
Prospectus Supplement relating thereto. Debt Securities in bearer
form and the coupons, if any, appertaining thereto will be
transferable by delivery. No service charge will be made for any
transfer or exchange of Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
The Indentures require the annual filing by the Company with
the Trustee of a certificate as to compliance with certain
covenants contained in the Indentures.
The Company will comply with Section 14(e) under the
Exchange Act, and any other tender offer rules under the Exchange
Act that may then be applicable, in connection with any
obligation of the Company to purchase Debt Securities at the
option of the holders thereof. Any such obligation applicable to
a series of Debt Securities will be described in the Prospectus
Supplement relating thereto.
Unless otherwise described in a Prospectus Supplement
relating to any Offered Debt Securities, the Indentures do not
contain any provisions that would limit the ability of the
Company to incur indebtedness or that would afford holders of
Debt Securities protection in the event of a sudden and
significant decline in the credit quality of the Company or a
takeover, recapitalization or highly leveraged or similar
transaction involving the Company. Accordingly, the Company could
in the future enter into transactions that could increase the
amount of Indebtedness outstanding at that time or otherwise
affect the Company's capital structure or credit rating.
Reference is made to the Prospectus Supplement relating to the
particular series of Debt Securities offered thereby for
information with respect to any deletions from, modifications of
or addition to the Events of Default described below or covenants
of the Company contained in the Indentures, including any
addition of a covenant or other provision providing event risk or
similar protection.
12<PAGE>
BOOK-ENTRY DEBT SECURITIES
The Debt Securities may be issued in whole or in part in the
form of one or more temporary or permanent global securities (the
"Global Securities") that will be deposited with, or on behalf
of, a bank or trust company selected by the Company having its
principal office in the United States and having a combined
capital and surplus of at least $50,000,000 ("Depositary") or its
nominee identified in the applicable Prospectus Supplement. In
such a case, one or more Global Securities will be issued in a
denomination or aggregate denomination equal to the portion of
the aggregate principal amount of outstanding Debt Securities of
the series to be represented by such Global Security or Global
Securities. Unless and until it is exchanged in whole or in part
for Debt Securities in registered form, a Global Security may not
be registered for transfer or exchange except as a whole by the
Depositary for such Global Security to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary
or another nominee of such Depositary or by such Depositary or
any nominee to a successor Depositary or a nominee of such
successor Depositary and except in the circumstances described in
the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with
respect to any portion of a series of Debt Securities to be
represented by a Global Security will be described in the
applicable Prospectus Supplement. The Company expects that the
following provisions will apply to depositary arrangements.
Unless otherwise specified in the applicable Prospectus
Supplement, Debt Securities which are to be represented by a
Global Security to be deposited with or on behalf of a Depositary
will be represented by a Global Security registered in the name
of such Depositary or its nominee. Upon the issuance of such
Global Security, and the deposit of such Global Security with or
on behalf of the Depositary of such Global Security, the
Depositary will credit, on its book-entry registration and
transfer system, the respective principal amounts of the Debt
Securities represented by such Global Security to the accounts of
institutions that have accounts with such Depositary or its
nominee ("participants"). The accounts to be credited will be
designated by the underwriters or agents of such Debt Securities
or, if such Debt Securities are offered and sold directly by the
Company, by the Company. Ownership of beneficial interests in
such Global Security will be limited to participants or Persons
that may hold interests through participants. Ownership of
beneficial interests by participants in such Global Security will
be shown on, and the transfer of that ownership interest will be
effected only through, records maintained by the Depositary or
its nominee for such Global Security. Ownership of beneficial
interests in such Global Security by Persons that hold through
participants will be shown on, and the transfer of that ownership
interest within such participant will be effected only through,
records maintained by such participant. The laws of some
jurisdictions require that certain purchasers of securities take
physical delivery of such securities in certificated form. The
foregoing limitations and such laws may impair the ability to
transfer beneficial interests in such Global Securities.
13<PAGE>
So long as the Depositary for a Global Security, or its
nominee, is the registered owner of such Global Security, such
Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Debt Securities
represented by such Global Security for all purposes under the
applicable Indenture. Unless otherwise specified in the
applicable Prospectus Supplement, owners of beneficial interests
in such Global Security will not be entitled to have Debt
Securities of the series represented by such Global Security
registered in their names, will not receive or be entitled to
receive physical delivery of Debt Securities of such series in
certificated form and will not be considered the holders thereof
for any purposes under the applicable Indenture. Accordingly,
each Person owning a beneficial interest in such Global Security
must rely on the procedures of the Depositary and, if such Person
is not a participant, on the procedures of the participant
through which such Person owns its interest, to exercise any
rights of a holder under the applicable Indenture. The Company
understands that under existing industry practices, if the
Company requests any action of holders or an owner of a
beneficial interest in such Global Security desires to give any
notice to take any action a holder is entitled to give or take
under the applicable Indenture, the Depositary would authorize
the participants to give such notice or take such action, and
participants would authorize beneficial owners owning through
such participants to give such notice or take such action or
would otherwise act upon the instructions of beneficial owners
owning through them.
Principal of and any premium and interest on a Global
Security will be payable in the manner described in the
applicable Prospectus Supplement.
CONVERSION
The Indentures contain certain general provisions regarding
the possible conversion of Debt Securities into Class A Common
Stock (or cash in lieu thereof). The specific terms applicable to
any series of Convertible Debt Securities that is then being
offered, including the initial conversion price or conversion
rate, any adjustments to such conversion price or conversion rate
and the conversion period, as well as the conditions upon which
such conversion will be effected, will be set forth in the
Prospectus Supplement relating thereto.
EVENTS OF DEFAULT AND REMEDIES
An Event of Default with respect to the Debt Securities of
any series is defined in each Indenture as: (i) default in the
payment of any installment of interest on or any Additional
Amounts payable in respect of any of the Debt Securities of such
series as and when the same shall become due and payable, and
continuance of such default for a period of 30 days; (ii) default
in the payment of all or any part of the principal of any of the
Debt Securities of such series as and when the same shall become
due and payable either at maturity, upon any redemption, or
otherwise; (iii) the failure by the Company to perform or observe
any of its other covenants, conditions or agreements contained in
the Debt Securities of such series or set forth in the applicable
Indenture and continuance of such failure for a period of 30 days
after due notice by the applicable Trustee or by the holders of
at least 25% in principal amount of the Debt Securities of that
14<PAGE>
series then outstanding; (iv) default in the payment of any
scheduled payment of principal of or interest on any Indebtedness
of the Company or any Subsidiary of the Company (other than the
Debt Securities of such series) aggregating more than $25 million
in principal amount, when due after giving effect to any
applicable grace period, that results in such Indebtedness
becoming due and payable prior to the date on which it would
otherwise become due and payable, and such acceleration shall not
have been rescinded or annulled, or such Indebtedness shall not
have been discharged; or (v) certain events of bankruptcy,
insolvency or reorganization involving the Company or its
Subsidiaries as more fully described in the Indentures.
Additional Events of Default may be added for the benefit of
holders of certain series of Debt Securities which, if added,
will be described in the Prospectus Supplement relating to such
Debt Securities. The Indentures provide that the Trustee shall
notify the holders of Debt Securities of each series of any
continuing default known to the Trustee which has occurred with
respect to that series within 60 days after the occurrence
thereof. The Indentures provide that notwithstanding the
foregoing, except in the case of default in the payment of the
principal of, interest on or any Additional Amounts payable in
respect of any of the Debt Securities of such series the Trustee
may withhold such notice if the Trustee in good faith determines
that the withholding of such notice is in the interests of the
holders of Debt Securities of such series.
If an Event of Default of the type described in clause (v)
above shall happen and be continuing, then the principal of (or,
with respect to a series of Original Issue Discount Securities,
such portion of the principal amount as may be specified in the
terms of such series), accrued and unpaid interest on, and any
Additional Amounts payable in respect of the Debt Securities will
become immediately due and payable. If one or more Events of
Default of the type described in clauses (i) through (iv) with
respect to any series of Debt Securities at the time outstanding
shall happen and be continuing, then either the Trustee or the
holders of not less than 51% of the principal amount of that
series of the Debt Securities then outstanding may declare the
principal (or, with respect to a series of Original Issue
Discount Securities, such portion of the principal amount as may
be specified in the terms of such series), accrued and unpaid
interest on and any Additional Amounts payable in respect of the
Debt Securities of that series due and payable immediately. This
provision is subject to the condition that if, after any
declaration of acceleration and before Stated Maturity of the
principal with respect to the Debt Securities of any series, all
arrears of interest and any Additional Amounts and the expenses
of the Trustee, its agents or attorneys shall be paid by or for
the account of the Company, and all Defaults (other than the
payment of principal that has been declared due and payable) have
been cured to the satisfaction of the Trustee, then the Trustee
shall, upon the written request of the holders of a majority in
principal amount of the Debt Securities of the applicable series,
waive such Default and rescind or annul the declaration of
acceleration; but no such waiver, rescission or annulment shall
extend to or affect any subsequent Default or impair any right
consequent thereon.
15<PAGE>
No holder of any Debt Security of any series will have the
right to pursue a remedy under the applicable Indenture or the
Debt Securities, unless (i) such holder gives the Trustee notice
of a continuing Default with respect to the Debt Securities of
that series, (ii) the holders of at least a majority of the Debt
Securities of the applicable series make a request to the Trustee
to pursue the remedy, (iii) such holder or holders offered the
Trustee security or indemnity satisfactory to the Trustee against
any loss, liability or expense and (iv) the Trustee does not
comply with the request within 10 days after the receipt of the
request and the offer of security or indemnity. However, nothing
contained in the Indentures shall affect or impair the right of
any holder of Debt Securities to institute suit to enforce
payment of the principal of, interest on and any Additional
Amounts payable in respect of such holder's Debt Securities on or
after the due dates expressed in such Debt Securities.
The Company must furnish to the Trustee a statement,
detailing any Defaults of which it is aware, within 30 days of
becoming aware of the occurrence of any Default.
REPORTS
The Indentures provide that the Company will file with the
Trustee copies of the annual reports and other information,
documents and reports that the Company is required to file with
the Commission pursuant to the Exchange Act. If the Company is
not required to file such reports and other information, the
Indentures provide that the Company shall file with the Trustee
and cause to be mailed to the holders of Debt Securities (i)
annual reports containing the information required to be
contained in an annual report on Form 10-K, (ii) quarterly
reports containing the information required to be contained in a
quarterly report on Form 10-Q and (iii) promptly after the
occurrence of an event required to be therein reported, such
other reports containing information required to be contained in
a current report on Form 8-K. The Company shall also comply with
the requirements of Section 314(a) of the Trust Indenture Act.
SUCCESSOR COMPANY
The Indentures provide that the Company will not consolidate
or merge with or into, or sell, lease, convey or otherwise
dispose of all or substantially all of its assets, or assign any
of its obligations under the Debt Securities or applicable
Indenture, unless (i) the entity formed by or surviving any such
consolidation or merger (if other than the Company), or to which
such sale, lease, conveyance or other disposition shall have been
made (the "Surviving Entity"), is a corporation organized and
existing under the laws of the United States, any state thereof,
or the District of Columbia; (ii) the Surviving Entity assumes by
supplemental indenture all of the obligations of the Company
under the Debt Securities and the applicable Indenture; and (iii)
immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing. With
respect to the sale of assets, the phrase "all or substantially
all" as used in the Indentures varies according to the facts and
circumstances of the subject transaction, has no clearly
established meaning under applicable law and is subject to
judicial interpretation. Accordingly, in certain circumstances
there may be a degree of uncertainty in ascertaining whether a
16<PAGE>
particular transaction would involve a disposition of "all or
substantially all" of the assets of a person, and therefore it
may be unclear as to whether a disposition of assets comes within
the terms of this provision.
DISCHARGE
Each Indenture provides that it will cease to be of further
effect (except that certain obligations will survive) with
respect to a series of Debt Securities when all outstanding Debt
Securities of such series authenticated and issued have been
delivered (other than destroyed, lost or stolen Debt Securities
that have been replaced or paid) to the Trustee for cancellation
and the Company has paid all sums payable under such Indenture
with respect to such series of Debt Securities.
MODIFICATION OF THE INDENTURES
Each Indenture contains provisions permitting the Company
and the applicable Trustee, with the consent of the holders of
not less than a majority in principal amount of the Debt
Securities of each series at the time outstanding under such
Indenture, to enter into supplemental indentures to amend any of
the provisions of that Indenture or any supplemental indenture
with respect to the Debt Securities of such series; provided
that, unless consented to by each holder of Debt Securities of
such series, no such supplemental indenture may (i) reduce the
amount of Debt Securities whose holders must consent to an
amendment or a waiver; (ii) reduce the rate of or change the time
for payment of interest or Additional Amounts, including default
interest on any Debt Security; (iii) reduce the principal of or
change the Stated Maturity of any Debt Security or alter the
provisions with respect to redemption; (iv) make any Debt
Security payable in money other than that stated in the Debt
Security; (v) make any change in the types of amendment that need
the approval of every affected holder of Debt Securities; (vi)
with respect to the Senior Indenture, affect the ranking of the
Debt Securities; or (vi) waive a Default in the payment of
principal of, any Additional Amounts payable in respect of or
interest on, or with respect to, any Debt Security.
The applicable Trustee and the Company may enter into
supplemental indentures which amend the applicable Indenture and
the Debt Securities with respect to a particular series without
the consent of any holder of Debt Securities in order to: (i)
cure any ambiguity, omission, defect or inconsistency; (ii)
comply with such Indenture concerning the substitution of
successor corporations pursuant to a merger or consolidation;
(iii) comply with any requirements of the Commission in
connection with the qualification of such Indenture under the
Trust Indenture Act; (iv) provide for uncertificated securities;
(v) make any change that does not materially adversely affect the
legal rights of any holder of Debt Securities under the
applicable Indenture as then in effect; (vi) secure the Debt
Securities and make intercreditor arrangements with respect to
any such Debt Securities (unless prohibited by such Indenture);
(vii) provide for a replacement Trustee; or (viii) add to the
covenants and agreements of the Company for the benefit of all
the holders of all of the Debt Securities with respect to a
series or surrender any right or power reserved for the Company
in such Indenture.
17<PAGE>
DEFEASANCE AND COVENANT DEFEASANCE
Each Indenture provides that the Company may elect either
(i) to terminate (and be deemed to have satisfied) all its
obligations with respect to the Debt Securities outstanding under
such Indenture (except for the obligations to register the
transfer or exchange of such Debt Securities, to replace
mutilated, destroyed, lost or stolen Debt Securities, to maintain
an office or agency in respect of the Debt Securities, to
compensate and indemnify the applicable Trustee and to punctually
pay or cause to be paid the principal of, interest on and any
Additional Amounts payable in respect of all Debt Securities of
such series when due) ("defeasance") or (ii) to be released from
its obligations with respect to certain covenants ("covenant
defeasance"), in either case upon the deposit with the Trustee,
in trust for such purpose, of money (and/or U.S. Government
Obligations (as defined in the Indentures) which through the
payment of principal and interest in accordance with their terms
will provide money) in an amount sufficient (in the opinion of a
nationally recognized firm of independent public accountants) to
pay the principal of, interest on and any Additional Amounts
payable in respect of the outstanding Debt Securities of such
series, and any mandatory sinking fund or analogous payments
thereon, on the scheduled due dates therefor. Such a trust may be
established only if, among other things, the Company has
delivered to the Trustee an opinion of counsel (as specified in
such Indenture) with regard to certain matters, including an
opinion to the effect that the holders of such Debt Securities
will not recognize income, gain or loss for Federal income tax
purposes as a result of such deposit and discharge and will be
subject to Federal income tax on the same amounts and in the same
manner and at the same times as would have been the case if such
deposit and defeasance or covenant defeasance, as the case may
be, had not occurred. The applicable Prospectus Supplement may
further describe these or other provisions, if any, permitting
defeasance or covenant defeasance with respect to the Debt
Securities of any series.
PROVISIONS APPLICABLE SOLELY TO SUBORDINATED DEBT SECURITIES
SUBORDINATION. The Subordinated Debt Securities will be
subordinate and junior in right of payment, to the extent set
forth in the Subordinated Indenture, to all Senior Indebtedness
(as defined below) of the Company. If the Company should default
in the payment of any principal of, interest on or any Additional
Amounts payable in respect of any Senior Indebtedness when the
same becomes due and payable, whether at maturity or at a date
fixed for prepayment or by declaration or otherwise, then, upon
written notice of such default to the Company by the holders of
such Senior Indebtedness or any trustee therefor and subject to
certain rights of the Company to dispute such default and subject
to proper notification of the Trustee, unless and until such
default shall have been cured or waived or shall have ceased to
exist, no direct or indirect payment (in cash, property,
securities, by set-off or otherwise) will be made or agreed to be
made for principal of, interest on or any Additional Amounts
payable in respect of the Subordinated Debt Securities, or in
respect of any redemption, retirement, purchase or other
acquisition of the Subordinated Debt Securities, other than those
made in capital stock of the Company (or cash in lieu of
18<PAGE>
fractional shares thereof) pursuant to any conversion right of
the Subordinated Debt Securities or otherwise.
The term "Senior Indebtedness" is defined to mean
Indebtedness (including the Senior Debt Securities) of the
Company outstanding at any time except (a) any Indebtedness as to
which, by the terms of the instrument creating or evidencing the
same, it is provided that such Indebtedness is not senior in
right of payment to the Subordinated Debt Securities, (b) the
Subordinated Debt Securities, (c) any Indebtedness of the Company
to a wholly-owned Subsidiary of the Company, (d) interest
accruing after the filing of a petition initiating certain events
of bankruptcy or insolvency unless such interest is an allowed
claim enforceable against the Company in a proceeding under
federal or state bankruptcy laws and (e) trade payables.
If (i) without the consent of the Company, a court shall
enter an order for relief with respect to the Company under the
United States federal bankruptcy laws or a judgment, order or
decree adjudging the Company a bankrupt or insolvent, or enter an
order for relief for reorganization, arrangement, adjustment or
composition of or in respect of the Company under the United
States federal or state bankruptcy or insolvency laws or (ii) the
Company shall institute proceedings for the entry of an order for
relief with respect to the Company under the United States
federal bankruptcy laws or for an adjudication of insolvency, or
shall consent to the institution of bankruptcy or insolvency
proceedings against it, or shall file a petition seeking, or seek
or consent to reorganization, arrangement, composition or similar
relief under any applicable law, or shall consent to the filing
of such petition or to the appointment of a receiver, custodian,
liquidator, assignee, trustee, sequestrator or similar official
in respect of the Company or of substantially all of its
property, or the Company shall make a general assignment for the
benefit of creditors, then all Senior Indebtedness (including any
interest thereon accruing after the commencement of any such
proceedings and any Additional Amounts payable in respect
thereof) will first be paid in full before any payment or
distribution, whether in cash, securities or other property, is
made on account of the principal of, interest on or any
Additional Amounts payable in respect of the Subordinated Debt
Securities. In such event, any payment or distribution on account
of the principal of, interest on or any Additional Amounts
payable in respect of Subordinated Debt Securities, whether in
cash, securities or other property (other than securities of the
Company or any other corporation provided for by a plan of
reorganization or readjustment, the payment of which is
subordinate, at least to the extent provided in the subordination
provisions with respect to the Subordinated Debt Securities, to
the payment of all Senior Indebtedness then outstanding and to
any securities issued in respect thereof under any such plan of
reorganization or readjustment), which would otherwise (but for
the subordination provisions) be payable or deliverable in
respect of the Subordinated Debt Securities will be paid or
delivered directly to the holders of Senior Indebtedness in
accordance with the priorities then existing among such holders
until all Senior Indebtedness (including any interest thereon
accruing after the commencement of any such proceedings and any
Additional Amounts payable in respect thereof) has been paid in
full. If any payment or distribution on account of the principal
of, interest on or any Additional Amounts payable in respect of
the Subordinated Debt Securities of any character, whether in
19<PAGE>
cash, securities or other property (other than securities of the
Company or any other corporation provided for by a plan of
reorganization or readjustment, the payment of which is
subordinate, at least to the extent provided in the subordination
provisions with respect to the Subordinated Debt Securities, to
the payment of all Senior Indebtedness then outstanding and to
any securities issued in respect thereof under any such plan of
reorganization or readjustment), shall be received by any holder
of any Subordinated Debt Securities in contravention of any of
the terms of the Subordinated Indenture and before all the Senior
Indebtedness shall have been paid in full, such payment or
distribution of securities will be received in trust for the
benefit of, and will be paid over or delivered and transferred
to, the holders of the Senior Indebtedness then outstanding in
accordance with the priorities then existing among such holders
for application to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay all such Senior
Indebtedness remaining unpaid to the extent necessary to pay all
such Senior Indebtedness in full. In the event of any such
proceeding, after payment in full of all sums owing with respect
to Senior Indebtedness, the holders of Subordinated Debt
Securities, together with the holders of any obligations of the
Company ranking on a parity with the Subordinated Debt
Securities, will be entitled to be repaid from the remaining
assets of the Company the amounts at that time due and owing on
account of unpaid principal of, interest on and any Additional
Amounts payable in respect of the Subordinated Debt Securities
and such other obligations before any payment or other
distribution, whether in cash, property or otherwise, shall be
made on account of any capital stock or obligations of the
Company ranking junior to the Subordinated Debt Securities and
such other obligations.
By reason of such subordination, in the event of the
insolvency of the Company, holders of Senior Indebtedness may
receive more, ratably, than holders of the Subordinated Debt
Securities. In addition, other creditors of the Company who are
not holders of Subordinated Debt Securities or holders of Senior
Indebtedness may recover less, ratably, than holders of Senior
Indebtedness and may recover more, ratably, than holders of
Subordinated Debt Securities. Such subordination will not prevent
the occurrence of an Event of Default or limit the right of
acceleration in respect of the Subordinated Debt Securities.
CERTAIN DEFINITIONS
"ADDITIONAL AMOUNTS" shall mean any additional amounts that
are required by a Debt Security, under circumstances specified
therein, to be paid by the Company in respect of certain taxes
imposed on certain holders of such Debt Securities, or as
otherwise specified in the terms of such Debt Security, and that
are owing to such holders.
"CAPITALIZED LEASE OBLIGATION" means any obligation under a
lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be
classified and accounted for as a capital lease obligation under
GAAP, and, for the purpose of the Indentures, the amount of such
obligation at any date shall be the capitalized amount thereof at
such date, determined in accordance with GAAP.
"DEFAULT" shall mean any event that is, or after notice or
passage of time or both would be, an Event of Default.
20<PAGE>
"INDEBTEDNESS" means, with respect to any person, without
duplication, (a) all liabilities of such person for borrowed
money or for the deferred purchase price of property or services,
excluding any trade payables and other accrued current
liabilities incurred in the ordinary course of business and which
are not overdue by more than 90 days, but including, without
limitation, all obligations, contingent or otherwise, of such
person in connection with any letters of credit, banker's
acceptance or other similar credit transaction, (b) all
obligations of such person evidenced by bonds, notes, debentures
or other similar instruments, (c) all indebtedness created or
arising under any conditional sale or other title retention
agreement with respect to property acquired by such person (even
if the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or
sale of such property), but excluding trade accounts payable
arising in the ordinary course of business, (d) all obligations
of such person arising under Capitalized Lease Obligations, (e)
all Indebtedness referred to in the preceding clauses of other
persons and all dividends of other persons, the payment of which
is secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any
Lien upon property (including, without limitation, accounts and
contract rights) owned by such person, even though such person
has not assumed or become liable for the payment of such
Indebtedness (the amount of such obligation being deemed to be
the lesser of the value of such property or asset or the amount
of the obligation so secured), (f) all guarantees of Indebtedness
referred to in this definition by such person, (g) all Redeemable
Capital Stock of such person valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus
accrued dividends, (h) all obligations under or in respect of
Currency Agreements and Interest Rate Protection Obligations of
such person (as such capitalized terms are defined in the
Indentures), and (i) any amendment, supplement, modification,
deferral, renewal, extension or refunding of any liability of the
types referred to in clauses (a) through (h) above. For purposes
hereof, the "maximum fixed repurchase price" of any Redeemable
Capital Stock which does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Redeemable
Capital Stock as if such Redeemable Capital Stock were purchased
on any date on which Indebtedness shall be required to be
determined pursuant to the Indentures, and if such price is based
upon, or measured by, the fair market value of such Redeemable
Capital Stock, such fair market value shall be determined in good
faith by the board of directors of the issuer of such Redeemable
Capital Stock.
"ISSUE DATE" shall mean, with respect to an Indenture, the
first date on which a Debt Security is authenticated by the
applicable Trustee pursuant to such Indenture.
"LIEN" shall mean any mortgage, pledge, security interest,
encumbrance, lien, charge or adverse claim affecting title or
resulting in an encumbrance against real or personal property or
a security interest of any kind (including, without limitation,
any conditional sale or other title retention agreement or lease
in the nature thereof or any filing or agreement to file a
financing statement as debtor under the Uniform Commercial Code
or any similar statute other than to reflect ownership by a third
party or property leased to the Company or any of its
21<PAGE>
Subsidiaries under a lease that is not in the nature of a
conditional sale or title retention agreement).
"PERSON" shall mean any individual, corporation,
partnership, limited partnership, joint venture, association,
joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof, or any
other entity.
"PROPERTY" of any Person means all types of real, personal,
tangible, intangible or mixed property owned by such Person
whether or not included in the most recent consolidated financial
statements of the Company and its Subsidiaries under GAAP.
"REDEEMABLE CAPITAL STOCK" means any shares of any class or
series of capital stock, that, either by the terms thereof, by
the terms of any security into which it is convertible or
exchangeable or by contract or otherwise, is or upon the
happening of an event or passage of time would be, required to be
redeemed prior to the Stated Maturity with respect to the
principal of any Note or is redeemable at the option of the
holder thereof at any time prior to any such Stated Maturity, or
is convertible into or exchangeable for debt securities at any
time prior to any such Stated Maturity.
"STATED MATURITY", when used with respect to any security or
any installment of interest thereon, shall mean the date
specified in such security as the fixed date on which the
principal of such security or such installment of interest is due
and payable.
"SUBSIDIARY" of any Person shall mean (i) any Person of
which more than 50% of the total voting power of shares of
Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more of the Subsidiaries of
that Person or a combination thereof, and (ii) any partnership,
joint venture or other Person in which such Person or one or more
of the Subsidiaries of that Person or a combination thereof has
the power to control by contract or otherwise the board of
directors or equivalent governing body or otherwise controls such
entity.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized by its Articles of Incorporation,
as amended (the "Articles of Incorporation"), to issue 40,000,000
shares of Class A Common Stock, par value $.10 per share (the
"Class A Common Stock"); 40,000,000 shares of Class B Common
Stock, par value $.10 per share (the "Class B Common Stock"); and
5,000,000 shares of Preferred Stock, par value $1.00 per share
(the "Preferred Stock"). On December 28, 1997, the Company had
issued and outstanding 21,374,396 shares of Class A Common Stock,
2,769,470 shares of Class B Common Stock and no shares of
Preferred Stock.
Shareholders' rights and related matters are governed by the
Georgia Business Corporation Code, the Company's Articles of
Incorporation, and its Bylaws, as amended (the "Bylaws").
Certain provisions of the Articles of Incorporation and Bylaws of
22<PAGE>
the Company are summarized below and could have the effect of
preventing a change in control of the Company. The cumulative
effect of these provisions could make it more difficult for any
person or entity to acquire or exercise control of the Company
and to effect changes in management. The following summary is
qualified in its entirety by reference to the Company's Articles
of Incorporation and Bylaws.
CLASS A AND CLASS B COMMON STOCK
VOTING. The Class A Common Stock and Class B Common Stock
have one vote per share on all matters submitted to the Company's
shareholders. The holders of the Class B Common Stock have the
right to elect the smallest number of directors that constitutes
a majority of the entire Board of Directors; the holders of the
Class A Common Stock elect the remaining directors. The holders
of shares of both classes vote together as a class on all other
matters submitted to the shareholders for a vote, except as
otherwise required by law.
CONVERSION. Shares of Class B Common Stock are convertible
on a one-for-one basis into Class A Common Stock at any time at
the option of the holder, and at other times upon the transfer of
Class B shares to an ineligible shareholder. If the outstanding
shares of Class B Common Stock fall below 10% of the aggregate
outstanding shares of Class A and Class B Common Stock, then,
immediately upon the occurrence of such event, all the
outstanding Class B Common Stock will be automatically converted
into Class A Common Stock, on a share-for-share basis.
DIVIDENDS. Holders of Class A Common Stock are entitled to
receive cash dividends on at least an equal per share basis as
holders of Class B Common Stock if and when such dividends are
declared by the Board of Directors of the Company from funds
legally available therefor. In the case of any dividend paid in
stock, holders of Class A Common Stock are entitled to receive
the same percentage dividend (payable in shares of Class A Common
Stock) as the holders of Class B Common Stock receive (payable in
shares of Class B Common Stock).
LIQUIDATION. Holders of Class A and Class B Common Stock
share with each other on a ratable basis as a single class in the
net assets of the Company available for distribution in respect
of Class A and Class B Common Stock in the event of liquidation.
OTHER TERMS. The holders of the Class A Common Stock and
Class B Common Stock do not have preemptive rights enabling them
to subscribe for or receive shares of any class of stock of the
Company or any other securities convertible into shares of any
class of stock of the Company. Except as otherwise summarized
above, the holders of shares of both classes of Common Stock, as
such, have the same rights and are subject to the same
limitations.
CLASS B STOCK VOTING AGREEMENT
Certain holders of Class B Common Stock of the Company have
entered into a voting agreement (the "Voting Agreement")
providing for certain of their Class B shares to be voted as a
block in the manner determined by the record owners of a majority
of the shares subject to the Voting Agreement. The Voting
Agreement expires on April 13, 1998. The shares of Class B Common
23<PAGE>
Stock subject to the Voting Agreement exceed a majority of the
outstanding shares of Class B Common Stock. Ray C. Anderson owns
a majority of the shares subject to the Voting Agreement, and
thus can direct the voting of the entire block. (The Voting
Agreement also gives Mr. Anderson the right of first refusal to
purchase any shares subject to the Voting Agreement that are
proposed to be sold in the public market or in a private
transaction.) Under the terms of the Class B Common Stock, its
special voting rights to elect a majority of the Board members
would terminate irrevocably if the total outstanding shares of
Class B Common Stock ever comprises less than ten percent (10%)
of the Company's total issued and outstanding shares of Class A
and Class B Common Stock. On December 28, 1997, the outstanding
Class B shares constituted approximately 11.5% of the total
outstanding shares of Class A and Class B Common Stock.
PREFERRED STOCK
GENERAL. Under the Articles of Incorporation, the Company's
Board of Directors is authorized to create and issue up to
5,000,000 shares of Preferred Stock in one or more series and to
determine the rights and preferences of each series, to the
extent permitted by the Articles of Incorporation. As of the
date of this Prospectus, no shares of Preferred Stock are
outstanding.
Reference is made to the applicable Prospectus Supplement
relating to the series of any shares of Preferred Stock offered
thereby and to the applicable amendment to the Articles of
Incorporation establishing such series of Preferred Stock for
specific terms, including: (i) the title and stated value of
such Preferred Stock; (ii) the number of shares of such Preferred
Stock offered, the liquidation preference per share and the
initial offering price of such Preferred Stock; (iii) the
dividend rate(s), period(s) and/or payment date(s) or method(s)
of calculation thereof applicable to such Preferred Stock; (iv)
the date from which dividends on such Preferred Stock shall
accumulate, if applicable; (v) the procedures for any auction and
remarketing, if any, for such Preferred Stock; (vi) the
provisions for a sinking fund, if any, for such Preferred Stock;
(vii) the provisions for redemption, if applicable, of such
Preferred Stock; (viii) any listing of such Preferred Stock on
any public trading market; (ix) the terms and conditions, if
applicable, upon which such Preferred Stock will be convertible
into Class A or Class B Common Stock of the Company, including
the conversion price (or manner of calculation thereof); (x) a
discussion of any material Federal income tax considerations
applicable to such Preferred Stock; (xi) the relative ranking and
preferences of such Preferred Stock as to dividend rights and
rights upon liquidation, dissolution or winding up of the affairs
of the Company; (xii) any limitations on issuance of any series
of Preferred Stock ranking senior to or on a parity with such
series of Preferred Stock as to dividend rights and rights upon
liquidation, dissolution or winding up of the affairs of the
Company; and (xiii) any other specific terms, preferences, rights
(including, without limitation, voting rights), limitations or
restrictions of such Preferred Stock.
LIQUIDATION PREFERENCE. Unless otherwise specified in the
applicable Prospectus Supplement, upon any liquidation,
dissolution or winding up of the Company, whether voluntary or
24<PAGE>
involuntary, the holders of any series of Preferred Stock in
respect of which this Prospectus is being delivered will have
preference and priority over Class A or Class B Common Stock, and
any other class of stock or series of a class of stock of the
Company ranking on liquidation junior to such series of Preferred
Stock, for payment out of the assets of the Company or proceeds
thereof, whether from capital or surplus, in the amount set forth
in the applicable Prospectus Supplement. After such payment, the
holders of such series of Preferred Stock will be entitled to no
other payments. If, in the case of any such liquidation,
dissolution or winding up of the Company, the assets of the
Company or proceeds thereof shall be insufficient to make the
full liquidation payment in respect of such series of Preferred
Stock and liquidating payments on any other series of Preferred
Stock ranking as to liquidation on a parity with such series,
then those assets and proceeds will be distributed among the
holders of such series of Preferred Stock and any such other
series of Preferred Stock ratably in accordance with the
respective amounts that would be payable on such shares of such
series of Preferred Stock and such other series of Preferred
Stock if all amounts thereon were paid in full. A sale of all or
substantially all of the Company's assets or a consolidation or
merger of the Company with one or more corporations shall not be
deemed to be a liquidation, dissolution or winding up of the
Company.
DEPOSITARY SHARES
GENERAL. The Company may, at its option, elect to issue
fractional shares of Preferred Stock, rather than full shares of
Preferred Stock. If such option is exercised, the Company may
elect to have a Depositary issue receipts for Depositary Shares,
each receipt representing a fraction (to be set forth in the
Prospectus Supplement relating to a particular series of
Preferred Stock) of a share of a particular series of Preferred
Stock as described below. The shares of any series of Preferred
Stock represented by Depositary Shares will be deposited under a
Deposit Agreement ("Deposit Agreement") between the Company and a
Depositary. Subject to the terms of the Deposit Agreement, each
owner of a Depositary Share will be entitled, in proportion to
the applicable fraction of a share of Preferred Stock represented
by such Depositary Share, to all the rights and preferences of
the Preferred Stock represented thereby (including dividend,
voting, redemption and liquidation rights).
The Depositary Shares will be evidenced by depositary
receipts issued pursuant to the Deposit Agreement ("Depositary
Receipts"). Depositary Receipts will be distributed to those
persons purchasing the fractional shares of Preferred Stock in
accordance with the terms of an offering of the Preferred Stock.
In connection with the issuance of any series of Preferred Stock
represented by Depositary Shares, the forms of Deposit Agreement
and Depositary Receipt will be filed as exhibits to the
Registration Statement of which this Prospectus is a part, and
the following summary is qualified in its entirety by reference
to such exhibits.
Pending the preparation of definitive engraved Depositary
Receipts, the Depositary may, upon the written order of the
Company, issue temporary Depositary Receipts substantially
identical to (and entitling the holders thereof to all the rights
pertaining to) the definitive Depositary Receipts but not in
25<PAGE>
definitive form. Definitive Depositary Receipts will be prepared
thereafter without unreasonable delay, and temporary Depositary
Receipts will be exchangeable for definitive Depositary Receipts
at the Company's expense.
Upon surrender of Depositary Receipts at the office of the
Depositary and upon payment of the charges provided in the
Deposit Agreement and subject to the terms thereof, a holder of
Depositary Receipts is entitled to have the Depositary deliver to
such holder the whole shares of Preferred Stock relating to the
surrendered Depositary Receipts. Holders of Depositary Shares
will be entitled to receive whole shares of the related series of
Preferred Stock on the basis set forth in the related Prospectus
Supplement for such series of Preferred Stock, but holders of
such whole shares will not thereafter be entitled to receive
Depositary Shares therefor. If the Depositary Receipts delivered
by the holder evidence a number of Depositary Shares in excess of
the number of Depositary Shares representing the number of whole
shares of the related series of Preferred Stock to be withdrawn,
the Depositary will deliver to such holder at the same time a new
Depositary Receipt evidencing such excess number of Depositary
Shares.
DIVIDENDS AND OTHER DISTRIBUTIONS. The Depositary will
distribute all cash dividends or other cash distributions
received in respect of the Preferred Stock to the record holders
of Depositary Shares relating to such Preferred Stock in
proportion to the numbers of such Depositary Shares owned by such
holders.
In the event of a distribution other than in cash, the
Depositary will distribute property received by it to the record
holders of Depositary Shares entitled thereto, unless the
Depositary determines that it is not feasible to make such
distribution, in which case the Depositary may, with the approval
of the Company, sell such property and distribute the net
proceeds from such sale to such holders.
REDEMPTION OF DEPOSITARY SHARES. If a series of Preferred
Stock represented by Depositary Shares is subject to redemption,
the Depositary Shares will be redeemed from the proceeds received
by the Depositary resulting from the redemption, in whole or in
part, of such series of Preferred Stock held by the Depositary.
The redemption price per Depositary Share will be equal to the
applicable fraction of the redemption price per share payable
with respect to such series of the Preferred Stock. Whenever the
Company redeems shares of Preferred Stock held by the Depositary,
the Depositary will redeem as of the same redemption date the
number of Depositary Shares representing shares of Preferred
Stock so redeemed. If less than all the Depositary Shares are to
be redeemed, the Depositary Shares to be redeemed will be
selected by lot or ratably as may be determined by the
Depositary.
VOTING THE PREFERRED SHARES. Upon receipt of notice of any
meeting at which the holders of the Preferred Stock are entitled
to vote, the Depositary will mail the information contained in
such notice of meeting to the record holders of the Depositary
Shares relating to such Preferred Stock. Each record holder of
such Depositary Shares on the record date (which will be the same
date as the record date for the Preferred Stock) will be entitled
to instruct the Depositary as to the exercise of the voting
26<PAGE>
rights pertaining to the amount of the Preferred Stock
represented by such holder's Depositary Shares. The Depositary
will endeavor, insofar as practicable, to vote the amount of the
Preferred Stock represented by such Depositary Shares in
accordance with such instructions, and the Company will agree to
take all action which may be deemed necessary by the Depositary
in order to enable the Depositary to do so. The Depositary will
abstain from voting shares of the Preferred Stock to the extent
it does not receive specific instructions from the holders of
Depositary Shares representing such Preferred Stock.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT. The
form of Depositary Receipt evidencing the Depositary Shares and
any provision of the Deposit Agreement may at any time be amended
by agreement between the Company and the Depositary. However, any
amendment which materially and adversely alters the rights of the
holders of Depositary Shares will not be effective unless such
amendment has been approved by the holders of at least a majority
of the Depositary Shares then outstanding. The Deposit Agreement
may be terminated by the Company or the Depositary only if (i)
all outstanding Depositary Shares have been redeemed or (ii)
there has been a final distribution in respect to the Preferred
Stock in connection with any liquidation, dissolution or winding
up of the Company and such distribution has been distributed to
the holders of Depositary Receipts.
CHARGES OF DEPOSITARY. The Company will pay all transfer
and other taxes and governmental charges arising solely from the
existence of the depositary arrangements. The Company will pay
charges of the Depositary in connection with the initial deposit
of the Preferred Stock and any redemption of the Preferred Stock.
Holders of Depositary Receipts will pay other transfer and other
taxes and governmental charges and such other charges as are
expressly provided in the Deposit Agreement to be for their
accounts.
MISCELLANEOUS. The Depositary will forward to the record
holders of the Depositary Shares relating to such Preferred Stock
all reports and communications from the Company which are
delivered to the Depositary.
Neither the Depositary nor the Company will be liable if it
is prevented or delayed by law or any circumstance beyond its
control in performing its obligations under the Deposit
Agreement. The obligations of the Company and the Depositary
under the Deposit Agreement will be limited to performance in
good faith of their duties thereunder, and they will not be
obligated to prosecute or defend any legal proceeding in respect
of any Depositary Shares or Preferred Stock unless satisfactory
indemnity is furnished. They may rely upon written advice of
counsel or accountants, or information provided by persons
presenting Preferred Stock for deposit, holders of Depositary
Receipts or other persons believed to be competent and on
documents believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY. The Depositary may
resign at any time by delivering to the Company notice of its
election to do so, and the Company may at any time remove the
Depositary, any such resignation or removal to take effect upon
the appointment of a successor Depositary and its acceptance of
such appointment. Such successor Depositary must be appointed
within 60 days after delivery of the notice of resignation or
removal and must be a bank or trust company having its principal
27<PAGE>
office in the United States and having a combined capital and
surplus of at least $50,000,000.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION
The Company's Articles of Incorporation eliminate, to the
extent permitted under Georgia law, the liability of directors to
the Company or its shareholders or any other person for monetary
damages for breach of any duty as a director, whether as a
fiduciary or otherwise. Georgia law provides that no provision
in a corporation's articles of incorporation or bylaws shall
eliminate or limit the liability of a director for (i) any
appropriation, in violation of the director's duties, of any
business opportunity of the corporation, (ii) acts or omissions
which involve intentional misconduct or a knowing violation of
law, (iii) unlawful corporate distributions or (iv) any
transaction from which the director received an improper benefit.
Liability for monetary damages would remain unaffected by the
Articles of Incorporation if liability is based on any of these
grounds. This provision of the Articles of Incorporation will
limit the remedies available to a shareholder dissatisfied with a
Board decision that is protected by this provision, and a
shareholder's only remedy in such a circumstance may be to bring
a suit to prevent the Board's action. In many situations, this
remedy may not be effective, for example, when shareholders are
not aware of a transaction or an event until it is too late to
prevent it. In these cases, the shareholders and the Company
could be injured by a Board decision and have no effective
remedy.
TRANSFER AGENT
The transfer agent for the Company's Common Stock is
Wachovia Bank, N.A.
28<PAGE>
PLAN OF DISTRIBUTION
GENERAL
The Company may sell the Securities (i) through underwriters
or dealers; (ii) directly to one or more other purchasers; (iii)
through agents; or (iv) to both investors and dealers through a
specific bidding or auction process or otherwise. The Prospectus
Supplement with respect to the Offered Securities will set forth
the terms of the offering of such Offered Securities, including
the name or names of any underwriters, dealers or agents, the
purchase price of such Offered Securities and the proceeds to the
Company from such sale, any underwriting discounts and other
items constituting underwriters' compensation, any initial public
offering price and any discounts, commissions or concessions
allowed or reallowed or paid to dealers, and any bidding or
auction process. Any initial offering price and any discounts,
commissions or concessions allowed or reallowed or paid to
dealers may be changed from time to time.
If underwriters are used in an offering, the Offered
Securities will be acquired by the underwriters for their own
account. The Offered Securities may be sold from time to time in
one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at
the time of sale. The Offered Securities may be offered to the
public either through underwriting syndicates represented by one
or more managing underwriters or directly by one or more of such
firms. The specific managing underwriter or underwriters, if
any, will be set forth in the Prospectus Supplement relating to
the Offered Securities, together with the members of the
underwriting syndicate, if any. Unless otherwise set forth in
the Prospectus Supplement, the obligations of the underwriters to
purchase the Offered Securities will be subject to certain
conditions precedent, and the underwriters will be obligated to
purchase all such Offered Securities if any are purchased.
Offered Securities may be sold directly by the Company or
through agents designated by the Company from time to time. The
Prospectus Supplement will set forth the name of any agent
involved in the offer or sale of the Offered Securities in
respect of which the Prospectus Supplement is delivered as well
as any commissions or other compensation payable by the Company
to such agent. Unless otherwise indicated in the Prospectus
Supplement, any such agent is acting on a best efforts basis for
the period of its appointment.
Any underwriters, dealers or agents participating in the
distribution of the Offered Securities may be deemed to be
underwriters and any discounts or commissions received by them on
the sale or resale of the Offered Securities may be deemed to be
underwriting discounts and commissions under the Securities Act.
Agents, dealers or underwriters may be entitled, under agreements
entered into with the Company, to indemnification by the Company
against certain liabilities, including liabilities under the
Securities Act, and to contribution with respect to payments that
the agents, dealers or underwriters may be required to make in
respect thereof. Agents, dealers and underwriters may engage in
transactions with or perform services for the Company in the
ordinary course of business.
29<PAGE>
The Offered Securities, other than any Common Stock, will be
a new issue or issues of securities with no established trading
market. Any Common Stock issued by the Company pursuant to this
Registration Statement will be quoted on The Nasdaq Stock Market.
Unless otherwise indicated in a Prospectus Supplement, the
Company does not currently intend to list any Offered Debt
Securities on any securities exchange or other public trading
market. No assurance can be given that the underwriters, dealers
or agents, if any, involved in the sale of the Offered Securities
will make a market in such Offered Securities. Whether or not
any of the Offered Securities are listed on a national securities
exchange or other public trading market, or the underwriters,
dealers or agents, if any, involved in the sale of the Offered
Securities make a market in such Offered Securities, no assurance
can be given as to the liquidity of the trading market for such
Offered Securities.
DELAYED DELIVERY ARRANGEMENTS
If so indicated in the Prospectus Supplement, the Company
may authorize underwriters or other persons acting as the
Company's agents to solicit offers by certain institutions to
purchase Offered Securities from the Company pursuant to
contracts providing for payment and delivery on a future date.
Institutions with whom such contracts may be made include
commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and
others, but in all cases will be subject to the approval of the
Company. The obligations of any purchaser under any such
contract will be subject to the condition that the purchase of
the Offered Securities shall not at the time of delivery be
prohibited under the laws of the jurisdiction to which such
purchaser is subject. The underwriters and such agents will not
have any responsibility in respect of the validity or performance
of such contracts.
LEGAL MATTERS
Certain legal matters regarding the validity of the
Securities offered hereby will be passed upon for the Company by
Kilpatrick Stockton LLP, Atlanta, Georgia. Certain legal matters
relating to this offering will be passed upon for the
underwriters, if any, by Smith, Gambrell & Russell, LLP, Atlanta,
Georgia, or such other firm as may be identified in an applicable
Prospectus Supplement. As of December 31, 1997, attorneys at
Kilpatrick Stockton LLP who worked on the preparation of the
Prospectus beneficially owned in the aggregate 5,000 shares of
the Company's outstanding Class A and Class B Common Stock.
EXPERTS
The consolidated financial statements and schedule
incorporated by reference in this Prospectus have been audited by
BDO Seidman, LLP, independent certified public accountants, to
the extent and for the periods set forth in their reports
incorporated hereby by reference, and are incorporated herein in
reliance upon such reports given upon the authority of said firm
as experts in auditing and accounting.
30<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND REGISTRATION.
The expenses of the Registrant in connection with the
registration and distribution of the securities being registered
are set forth in the following table. All of the amounts shown
are estimated except for the registration fees of the Securities
and Exchange Commission (the "Commission") and the NASD filing
fee:
Securities and Exchange Commission Registration Fee ... $ 88,500
NASD Filing Fee ....................................... *
Legal Fees and Expenses ............................... *
Accountants' Fees and Expenses ........................ *
Blue Sky Fees and Expenses ............................ *
Printing Expenses ..................................... *
Transfer Agent and Registrar Fees ..................... *
-------
Miscellaneous ......................................... *
Total ............................................ $ *
-------
__________________
* To be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As provided under Georgia law, the Registrant's Articles of
Incorporation, as amended (the "Articles of Incorporation")
provide that a director shall not be personally liable to the
Registrant or its shareholders for monetary damages for breach of
duty of care or any other duty owed to the Registrant as a
director, except that such provision shall not eliminate or limit
the liability of a director (a) for any appropriation, in
violation of his duties, of any business opportunity of the
Registrant, (b) for acts or omissions which involve intentional
misconduct or a knowing violation of law, (c) for unlawful
corporate distributions, or (d) for any transaction from which
the director received an improper benefit.
Under Article VII of the Registrant's Bylaws, as amended
(the "Bylaws"), the Registrant is authorized to indemnify its
officers and directors for any liability and expense incurred by
them in connection with or resulting from any threatened, pending
or completed legal action or other proceeding or investigation by
reason of his being or having been an officer or director. An
officer or director may only be indemnified if he acted in good
faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Registrant, and, with
respect to a criminal matter, he did not have reasonable cause to
believe that his conduct was unlawful. No officer or director
who has been adjudged liable for the improper receipt of a
personal benefit is entitled to indemnification.
Any officer or director who has been wholly successful on
the merits or otherwise in an action or proceeding in his
official capacity is entitled to indemnification as to expenses
by the Registrant. All other determinations in respect of
II-1<PAGE>
indemnification shall be made by either: (i) a majority vote of
a quorum of disinterested directors; (ii) independent legal
counsel selected in accordance with the Bylaws and at the request
of the Board; or (iii) the holders of a majority of the
Registrant's stock who at such time are entitled to vote for the
election of directors.
The provisions of the Registrant's Bylaws on indemnification
are consistent in all material respects with the laws of the
State of Georgia, which authorize indemnification of corporate
officers and directors.
The Registrant's directors and officers are insured against
losses arising from any claim against them as such for wrongful
acts or omissions, subject to certain limitations.
Item 16. Exhibits.
The following exhibits are filed as part of this Registration Statement:
Exhibit
Number Description of Exhibit
1.1 Form of Underwriting agreement for Debt Securities.*
1.2 Form of Underwriting Agreement for Preferred Stock. **
1.3 Form of Underwriting Agreement for Common Stock.**
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 "1993 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 Form of Indenture for senior debt securities.*
4.2 Form of Indenture for subordinated debt securities.*
4.3 Form of Articles of Amendment to Articles of
Incorporation setting forth the designation of
rights and preferences for the Preferred Stock.**
4.4 Form of Deposit Agreement and Depositary Receipt.**
5 Opinion of Kilpatrick Stockton LLP.*
12 Statement on the Computation of Ratio of Earnings
to Fixed Charges.
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of Kilpatrick Stockton LLP (included
in Exhibit 5).
II-2<PAGE>
24 Power of Attorney (set forth on signature page).
25 Statement of eligibility and qualification of
First Union National Bank Trustee.*
___________________________
* To be filed by Amendment to this Registration Statement.
** To be filed as an exhibit to Form 8-K in reference to
the specific offering of Securities, if any, to which
it relates.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the
"Securities Act");
(ii) To reflect in the Prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in
the Registration Statement or any material change to such
information in the registration statement; provided, however,
that paragraphs (1)(i) and (1)(ii) do not apply if the
Registration Statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
that are incorporated by reference in the registration statement.
2. That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-3
<PAGE>
3. To remove from registration by means of a post-
effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes:
1. To use its best efforts to distribute prior to the
opening of bids, to prospective bidders, underwriters and
dealers, a reasonable number of copies of a prospectus which at
that time meets the requirements of Section 10(a) of the
Securities Act, and relating to the securities offered at
competitive bidding, as contained in the Registration Statement,
together with any supplements thereto.
2. To file an amendment to the Registration Statement
reflecting the results of bidding, the terms of the reoffering
and related matters to the extent required by Form S-3, not later
than the first use, authorized by the Registrant after the
opening of bids, of a prospectus relating to the securities
offered at competitive bidding, unless no further public offering
of such securities by the Registrant and no reoffering of such
securities by the purchasers is proposed to be made.
(c) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act,
each filing of the Registrant's annual report pursuant to Section
13(a) or 15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions
of the Articles of Incorporation or Bylaws or otherwise, the
Registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication
of such issue.
(e) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this registration statement as of the time it was declared
effective.
II-4
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE
offering thereof.
(f) The undersigned Registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act
under subsection 9a) of Section 310 of the Trust Indenture Act in
accordance with the rules and regulations presecribed by the Commission
under Section 305(b)(2) of the Act.
II-5<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended, the Registrant certifies that it has reasonable
grounds to believe that it meets all of the requirements for
filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Atlanta, State of
Georgia, on February 18, 1998.
INTERFACE, INC.
By: /s/ Ray C. Anderson
Ray C. Anderson, Chairman of the Board
and Chief Executive Officer
Each person whose signature appears below hereby constitutes
and appoints Ray C. Anderson and Daniel T. Hendrix, and either of
them, his true and lawful attorneys-in-fact with full power of
substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this
Registration Statement and to cause the same to be filed, with
all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby granting to
said attorneys-in-fact and agents, full power and authority to do
and perform each and every act and thing whatsoever requisite and
desirable to be done in and about the premises, as fully to all
intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things that
said attorneys-in-fact and agents, or their substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following
persons, in the capacities indicated, on the 18th day of
February, 1998.
Signature Title
--------- -----
/s/Ray C. Anderson Chairman of the Board and Chief
Ray C. Anderson Executive Officer
(Principal Executive Officer)
/s/ Daniel T. Hendrix Senior Vice President, Chief
Daniel T. Hendrix Financial Officer and Director
(Principal Financial and
Accounting Officer)
/s/ Brian L. DeMoura Director
Brian L. DeMoura
/s/ Charles R. Eitel Director
Charles R. Eitel
<PAGE>
/s/ Donald E. Russell Director
Donald E. Russell
_____________________________ Director
John H. Walker
/s/ Gordon D. Whitener Director
Gordon D. Whitener
_____________________________ Director
Dianne Dillon-Ridgley
/s/ Carl I. Gable Director
Carl I. Gable
_____________________________ Director
June M. Henton
/s/ J. Smith Lanier, II Director
J. Smith Lanier, II
_____________________________ Director
Leonard G. Saulter
_____________________________ Director
Clarinus C. Th. van Andel
Exhibit 12
<TABLE>
<CAPTION>
(in thousands) RATIO OF EARNINGS (UNAUDITED) TO FIXED CHARGES
- --------------- -------------------------------------------------------------------
Nine Months Ended Fiscal Year Ended
---------------------------- -------------------------------------------------------------
September 29, September 29, January 3, January 2, January 1, December 31, December 29,
1997 1996 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Pre-Tax Earnings 40,720 28,467 18,561 21,304 25,713 31,676 43,427
Add Back:
Interest Expense 26,303 25,602 21,894 22,840 24,094 26,753 32,772
Amortization of debt expense 595 595 243 243 243 243 794
Rent expense representative of the
interest component 493 488 721 714 826 651 658
------ ------ ------ ------ ------ ------ ------
Fixed Charge 27,391 26,685 22,858 23,797 25,163 27,647 34,224
------ ------ ------ ------ ------ ------ ------
Earnings 68,111 55,152 41,419 45,101 50,876 59,323 77,651
====== ====== ====== ====== ====== ====== ======
Ratio of Earnings to Fixed Charges 2.5 2.1 1.8 1.9 2.0 2.1 2.3
======= ====== ====== ======= ======= ====== ======
</TABLE>
Exhibit 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Inferface, Inc.
Atlanta, Georgia
We hereby consent to the incorporation by reference in the
Prospectus constituting a part of this Registration Statement of
our reports dated February 20, 1997, relating to the consolidated
financial statements and schedule of Interface, Inc. and
subsidiaries appearing in the Company's Annual Report on Form 10-
K for the year ended December 29, 1996.
We also consent to the reference to us under the caption
"Experts" in the Prospectus.
/s/ BDO SEIDMAN, LLP
Atlanta, Georgia
February 20, 1998
