<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section240.14a-12
INTERFACE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
INTERFACE, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
INTERFACE, INC.
2859 PACES FERRY ROAD, SUITE 2000
ATLANTA, GEORGIA 30339
---------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 19, 1998
---------------
The annual meeting of shareholders of Interface, Inc. (the "Company") will
be held on Tuesday, May 19, 1998, at 10:00 a.m., at the Wyndham Garden Hotel
located at 2857 Paces Ferry Road, Atlanta, Georgia, for the purpose of
considering and voting upon:
1. The election of 12 members of the Board of Directors, five directors to
be elected by the holders of the Company's Class A Common Stock and seven
directors to be elected by the holders of the Company's Class B Common
Stock.
2. A proposal to approve an amendment to the Company's Articles of
Incorporation, as amended ("Articles of Incorporation"), which would
increase the number of shares of Class A Common Stock that the Company is
authorized to issue from 40,000,000 shares to 80,000,000 shares.
3. Such other matters as may properly come before the meeting or any
adjournment thereof.
Only shareholders of record at the close of business on March 25, 1998 will
be entitled to notice of and to vote at the meeting or any adjournment thereof.
A Proxy Statement and Proxy solicited by the Board of Directors are enclosed
herewith. Please complete, sign and date the Proxy, and return it promptly in
the enclosed business reply envelope. If you attend the meeting, you may, if you
wish, withdraw your Proxy and vote in person.
Also enclosed is a copy of the Company's 1997 Annual Report to Shareholders.
By order of the Board of Directors
/s/ Raymond S. Willoch
RAYMOND S. WILLOCH
SECRETARY
April 17, 1998
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY PROMPTLY SO THAT YOUR VOTE MAY BE
RECORDED AT THE MEETING IF YOU DO NOT ATTEND PERSONALLY.
<PAGE>
INTERFACE, INC.
2859 PACES FERRY ROAD, SUITE 2000
ATLANTA, GEORGIA 30339
---------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
---------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
Proxies for Class A Common Stock and Class B Common Stock by the Board of
Directors of Interface, Inc. (the "Company") for use at the annual meeting of
shareholders of the Company to be held on May 19, 1998, and any adjournment
thereof, for the purposes set forth in the accompanying notice of the meeting.
It is anticipated that this Proxy Statement and the accompanying Proxy will
first be mailed to shareholders on April 20, 1998.
The record of shareholders entitled to vote at the annual meeting was taken
as of the close of business on March 25, 1998. On that date, the Company had
outstanding and entitled to vote 21,483,096 shares of Class A Common Stock and
2,790,083 shares of Class B Common Stock. Except for (i) the election and
removal of directors, and (ii) class votes as required by law or the Company's
Articles of Incorporation, holders of both classes of Common Stock vote as a
single class. In all cases, holders of Common Stock (of either class) are
entitled to cast one vote per share.
Each Proxy for Class A Common Stock ("Class A Proxy") or Class B Common
Stock ("Class B Proxy") that is properly executed and returned by a shareholder
will be voted as specified thereon by the shareholder. If no specification is
made, the Proxy will be voted for the election of the nominees (Class A or Class
B, as the case may be) listed below under the caption "Nomination and Election
of Directors", and for the proposal relating to the amendment of the Articles of
Incorporation, as described in this Proxy Statement. A Proxy given pursuant to
this solicitation may be revoked by a shareholder who attends the meeting and
gives oral notice of his or her election to vote in person, without compliance
with any other formalities. In addition, a Proxy given pursuant to this
solicitation may be revoked prior to the meeting by delivering to the Secretary
of the Company either an instrument revoking it or a duly executed Proxy for the
same shares bearing a later date.
An automated system administered by the Company's transfer agent tabulates
the votes. Abstentions and broker non-votes are included in the determination of
the number of shares present and entitled to vote (to establish a quorum).
Abstentions are the equivalent of a non-vote since (i) directors are elected by
a plurality of the votes cast, and (ii) the proposal concerning the amendment to
the Articles of Incorporation would be approved if, within each voting group,
the affirmative votes cast exceed the negative votes cast. Broker non-votes are
not counted for purposes of determining whether a proposal has been approved.
The expense of this solicitation, including the cost of preparing and
mailing this Proxy Statement, will be paid by the Company. Copies of
solicitation material may be furnished to banks, brokerage houses and other
custodians, nominees and fiduciaries for forwarding to the beneficial owners of
shares of the Company's Common Stock, and normal handling charges may be paid
for the forwarding service. In addition to solicitations by mail, directors and
regular employees of the Company may solicit Proxies in person or by telephone
or telegraph. The Company also has retained Georgeson & Company, Inc., a proxy
solicitation firm, to assist in soliciting Proxies from beneficial owners of
shares of the Company's Common Stock. The fee for such assistance will be $6,500
(plus expenses).
The closing price of the Company's Class A Common Stock as reported on the
Nasdaq National Market on April 14, 1998 was $44.4375 per share. There is no
public market for the Class B Common Stock (but Class B shares are convertible
on a share-for-share basis into Class A shares).
<PAGE>
NOMINATION AND ELECTION OF DIRECTORS
(ITEM 1)
The Bylaws of the Company provide that the Board of Directors shall consist
of a maximum of 15 directors, the exact number of directors being established by
action of the Board taken from time to time. The Board of Directors recently
reduced the number of directors from 13 to 12 (however the Nominating Committee
of the Board is currently interviewing candidates in anticipation of adding,
subsequent to the annual meeting of shareholders, an independent (non-executive)
director as a potential thirteenth director). The holders of Class B Common
Stock are entitled to elect a majority (seven) of the Board members. The holders
of Class A Common Stock are entitled to elect the remaining (five) directors.
The term of office for each director continues until the next annual meeting of
shareholders and until his or her successor, if there is to be one, has been
elected and has qualified.
In the event that any nominee for director withdraws or for any reason is
not able to serve as a director, each Proxy that is properly executed and
returned will be voted for such other person as may be designated as a
substitute nominee by the Board of Directors, but in no event will any Class A
Proxy be voted for more than five nominees or Class B Proxy be voted for more
than seven nominees. All of the nominees are currently directors of the Company,
and management of the Company has no reason to believe that any nominee will not
serve if elected.
Certain information relating to each nominee proposed by the Board,
including his or her principal occupation during the past five years, is set
forth below.
CLASS A NOMINEES
<TABLE>
<CAPTION>
NAME (AGE) INFORMATION
- ----------------------------------------- -----------------------------------------------------------------------
<S> <C>
Dianne Dillon-Ridgley (46)............... Ms. Dillon-Ridgley was elected to the Board in February 1997. Since
1994, Ms. Dillon-Ridgley has served as president of Zero Population
Growth, the nation's largest grassroots organization concerned with the
impacts of rapid population growth. She has also served as a senior
policy analyst with the Women's Environment and Development
Organization since 1993, and as an associate with the Kettering
Foundation in Dayton, Ohio since 1991. In 1994, she was appointed by
President Clinton to the President's Council on Sustainable Development
where she serves as Co-Chair of the Council's Population and
Consumption Task Force.
Carl I. Gable (58)....................... Mr. Gable, a director since March 1984, is an attorney-at-law with the
Atlanta based law firm of Troutman Sanders LLP. From September 1992
until joining Troutman Sanders in March 1996, he was a member of
another Atlanta law firm, Booth Owens & Jospin (formerly Booth, Wade &
Campbell). Mr. Gable serves on the Boards of numerous nonprofit
organizations.
Dr. June M. Henton (58).................. Dr. Henton was elected as a director in February 1995. Since 1985, Dr.
Henton has served as Dean of the School of Human Sciences at Auburn
University, which includes a program in interior environments. Dr.
Henton, who received her Ph.D. from the University of Minnesota, is an
accomplished author and lecturer on child and family issues. She has
provided leadership for a wide variety of professional, policy and
civic organizations. As a charter member of the Operating Board of the
National Textile Center, Dr. Henton has significant expertise in the
integration of academic and research programs within the textile
industry.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NAME (AGE) INFORMATION
- ----------------------------------------- -----------------------------------------------------------------------
J. Smith Lanier, II (70)................. Mr. Lanier has been a director since 1973. He is Chairman and Chief
Executive Officer of J. Smith Lanier & Co., a general insurance agency
based in West Point, Georgia. Mr. Lanier also serves as a director of
National Vision Associates, Ltd., a Lawrenceville, Georgia based
operator of retail optical centers. He also serves on the Boards of
numerous nonprofit organizations.
<S> <C>
Clarinus C.Th. van Andel (68)............ Mr. van Andel, who has been a director since October 1988, was a
partner in the law firm of Schut & Grosheide, Amsterdam, until his
retirement in January 1996. He served as Chairman of the supervisory
board of Interface Europe, B.V. (formerly Interface Heuga, B.V. and
Heuga Holding, B.V.), the Company's modular carpet subsidiary based in
the Netherlands, from 1984 until 1996, when the supervisory board was
dissolved.
</TABLE>
CLASS B NOMINEES
<TABLE>
<CAPTION>
NAME (AGE) INFORMATION
- ----------------------------------------- -----------------------------------------------------------------------
<S> <C>
Ray C. Anderson (63)..................... Mr. Anderson has served as Chairman and Chief Executive Officer of the
Company since its founding in 1973. Mr. Anderson was appointed by
President Clinton to the President's Council on Sustainable Development
in 1996 and currently serves as Co-Chair. Mr. Anderson is a member of
the Board of Directors of NationsBank Corporation. He also serves on
the Boards of numerous nonprofit organizations.
Brian L. DeMoura (52).................... Mr. DeMoura joined the Company in March 1994 as President and Chief
Executive Officer of Guilford of Maine, Inc. (now Interface Interior
Fabrics, Inc.) ("Interface Fabrics"), the Company's principal interior
fabrics subsidiary, and as a Senior Vice President of the Company. In
May 1994, he was elected to the Company's Board of Directors. He is
currently responsible for the entire Interior Fabrics Group, which
includes Interface Fabrics, Toltec Fabrics, Inc., Intek, Inc. and
Camborne Holdings, Ltd. From August 1990 until joining the Company, Mr.
DeMoura served as President and CEO of Fashion Fabrics of America,
Inc., an Orangeburg, South Carolina based producer of fabrics for the
upscale men's and women's apparel markets.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
NAME (AGE) INFORMATION
- ----------------------------------------- -----------------------------------------------------------------------
<S> <C>
Charles R. Eitel (48).................... Mr. Eitel joined the Company in November 1993 as President of Interface
Flooring Systems, Inc. (the Company's principal U.S. modular carpet
subsidiary, based in LaGrange, Georgia) and Interface Americas, Inc. (a
wholly-owned U.S. holding company), with responsibility for the
Company's modular carpet operations throughout the Americas. He was
elected as a director in February 1994. In October 1994, Mr. Eitel was
promoted to Executive Vice President of the Company and President and
Chief Executive Officer of the Floorcoverings Group, thereby assuming
overall responsibility for the Company's worldwide carpet business. In
February 1997, Mr. Eitel was promoted to President and Chief Operating
Officer of the Company. From July 1987 until joining the Company, Mr.
Eitel served as President of the Floorcoverings Division (based in
Dalton, Georgia) of Collins & Aikman Corporation, a diversified textile
producer headquartered in North Carolina. Mr. Eitel also serves as a
director of Weeks Corporation, an industrial real estate company based
in Atlanta, and Ladd Furniture, Inc., a North Carolina based furniture
manufacturer.
Daniel T. Hendrix (43)................... Mr. Hendrix, who previously was with a national accounting firm, joined
the Company in 1983. He became Treasurer of the Company in 1984, Chief
Financial Officer in 1985, Vice President-Finance in 1986 and Senior
Vice President-Finance in October 1995. He was elected to the Board in
October 1996.
Leonard G. Saulter (71).................. Mr. Saulter has been a director since July 1987. He served as a Senior
Vice President of the Company from October 1987 until June 1991. He
served as President of Guilford of Maine, Inc. (now Interface Fabrics)
until January 1990, and as Interface Fabrics' Chairman from January
1990 until his retirement in June 1991. In October 1993, Mr. Saulter
resumed the position of President of Interface Fabrics on an interim
basis, serving until March 1994.
John H. Walker (53)...................... Mr. Walker was elected to the Board in October 1996. He began his
career with the Company as Financial Controller of the U.K. Division of
Heuga Holding, B.V. (now Interface Europe, B.V.), a Netherlands based
carpet tile manufacturer, which was acquired by the Company in 1988. He
later served as Vice President-Sales & Marketing of Interface Europe,
B.V. and in July 1995 was promoted to the position of Senior Vice
President of the Company and President and Chief Executive Officer of
Interface Europe, Inc. In his current position, he has responsibility
for the Company's floorcovering operations in both Europe and the Asia-
Pacific region.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
NAME (AGE) INFORMATION
- ----------------------------------------- -----------------------------------------------------------------------
<S> <C>
Gordon D. Whitener (35).................. Mr. Whitener joined the Company in November 1993 as Senior Vice
President-Sales & Marketing of Interface Flooring Systems, Inc. In
October 1994, he became a Senior Vice President of the Company and
President and Chief Executive Officer of Interface Americas, Inc.,
assuming responsibility for both the Company's modular carpet
operations throughout the Americas and Prince Street Technologies,
Ltd., the Company's commercial broadloom carpet operation based in
Cartersville, Georgia. In July 1995, Mr. Whitener also assumed
corporate responsibility for Bentley Mills, Inc., the Company's
California based subsidiary which produces broadloom and modular carpet
for commercial and institutional applications, at which time he became
a director of the Company. In April 1997, he assumed corporate
responsibility for the Specialty Products Group, composed of the
Company's chemical and specialty surface subsidiaries (Rockland
React-Rite, Inc. and Pandel, Inc.), Intersept antimicrobial sales and
licensing program, and Interface Architectural Resources business unit.
He is thus responsible for all of the Company's manufacturing
businesses in the Americas, except the Interior Fabrics Group. From
April 1988 until joining the Company, Mr. Whitener served in various
sales management capacities with Collins & Aikman (Floorcoverings
Division), including Vice President-Marketing. Mr. Whitener also serves
as a director of The Carpet & Rug Institute, a national trade
association, headquartered in Dalton, Georgia, representing the carpet
and rug industry, and Aviation Group, Inc., a Texas based provider of
products and services to airline companies and other aviation firms.
</TABLE>
VOTE REQUIRED AND RECOMMENDATION OF BOARD
Under the Company's Bylaws, election of each of the five Class A nominees
requires a plurality of the votes cast by the Company's outstanding Class A
Common Stock entitled to vote and represented (in person or by proxy) at the
meeting. Election of each of the seven Class B nominees requires a plurality of
the votes cast by the Company's outstanding Class B Common Stock entitled to
vote and represented (in person or by proxy) at the meeting. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE CLASS A NOMINEES AND
CLASS B NOMINEES LISTED ABOVE, AND PROXIES EXECUTED AND RETURNED WILL BE VOTED
FOR EACH OF THE NOMINEES (CLASS A OR CLASS B, AS APPLICABLE) UNLESS CONTRARY
INSTRUCTIONS ARE INDICATED THEREON.
PRINCIPAL SHAREHOLDERS AND MANAGEMENT STOCK OWNERSHIP
The following table sets forth, as of February 1, 1998 (unless otherwise
indicated), beneficial ownership of each class of the Company's Common Stock by:
(i) each person, including any "group" as that term is used in Section 13(d)(3)
of the Securities Exchange Act of 1934, known by the Company to be the
beneficial owner of more than 5% of any class of the Company's voting
securities, (ii) each nominee for
5
<PAGE>
director, (iii) the Company's Chief Executive Officer and four other most highly
compensated executive officers, and (iv) all executive officers and directors of
the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
BENEFICIAL OWNER TITLE NATURE OF PERCENT CLASS A
(AND BUSINESS ADDRESS OF OF BENEFICIAL OF AFTER
5% OWNERS) CLASS OWNERSHIP(1) CLASS(1) CONVERSION(2)
- --------------------------------------------------------------------------------- ------- ------------ -------- -------------
<S> <C> <C> <C> <C>
Ray C. Anderson.................................................................. Class A 5,182(3) * 7.0%
2859 Paces Ferry Road, Suite 2000 Class B 1,609,363(4) 57.6%
Atlanta, Georgia 30339
Ariel Capital Management, Inc.................................................... Class A 2,844,420(5)(6) 13.3%
307 N. Michigan Avenue
Chicago, Illinois 60601
ICM Asset Management, Inc........................................................ Class A 1,211,063(5)(7) 5.7%
601 W. Main Avenue, Suite 600
Spokane, Washington 99201
Brian L. DeMoura................................................................. Class B 35,825(8) 1.3% *
Dianne Dillon-Ridgley............................................................ Class B 4,000(9) * *
Charles R. Eitel................................................................. Class A 141(10) * *
Class B 119,060(11) 4.1%
Carl I. Gable.................................................................... Class A 70(12) * *
Class B 32,622(12) 1.2%
Daniel T. Hendrix................................................................ Class A 10,830(13) * *
Class B 16,980(13) *
June M. Henton................................................................... Class B 12,000(14) * *
J. Smith Lanier, II.............................................................. Class A 10,500(15) * *
300 West Tenth Street Class B 160,824(15) 5.8%
West Point, Georgia 31033
Leonard G. Saulter............................................................... Class A 2,000(16) * *
Class B 12,000(16) *
Clarinus C.Th. van Andel......................................................... Class B 37,000(17) 1.3% *
John H. Walker................................................................... Class A 1,500 * *
Class B 29,165(18) 1.0%
Gordon D. Whitener............................................................... Class A 141(19) 1.0% *
Class B 29,980(19)
All executive officers and directors as a group.................................. Class A 40,809(20) * 9.5%
(18 persons) Class B 2,195,697(20) 69.6%
</TABLE>
- ------------------------
* Less than 1%.
(1) Shares of Class B Common Stock are convertible, on a share-for-share basis,
into shares of Class A Common Stock. The number of Class A shares indicated
as beneficially owned by each person or group does not include Class A
shares such person or group could acquire upon conversion of Class B shares.
The Percent of Class is calculated assuming that the beneficial owner has
exercised any conversion rights, options or other rights to subscribe held
by such beneficial owner that are
6
<PAGE>
exercisable within 60 days (not including Class A shares that could be
acquired upon conversion of Class B shares), and that no other conversion
rights, options or rights to subscribe have been exercised by anyone else.
All information concerning the Company's Savings and Investment Plan is as
of December 31, 1997.
(2) Represents the percent of Class A shares the named person or group would
beneficially own if such person or group, and only such person or group,
converted all Class B shares beneficially owned by such person or group into
Class A shares.
(3) Includes 4,000 shares held by Mr. Anderson's wife, although Mr. Anderson
disclaims beneficial ownership of such shares. Includes 1,182 shares that
Mr. Anderson beneficially owns through the Company's Savings and Investment
Plan.
(4) Includes 12,000 shares that Mr. Anderson has the right to acquire pursuant
to exercisable stock options.
(5) Based upon information included in statements provided to the Company by
such beneficial owners. Information with respect to ICM Asset Management is
as of December 31, 1997.
(6) All such shares are held by Ariel Capital Management, Inc. ("Ariel") for the
accounts of clients. Ariel disclaims beneficial ownership of all such
shares. Ariel, in its capacity as investment adviser, has sole voting power
with respect to 2,628,270 shares and shared voting power with respect to
42,400 shares. Ariel has sole investment power with respect to all such
shares. (John W. Rogers, Jr., President and a controlling person of Ariel,
may be deemed to beneficially own all such shares, but he disclaims such
beneficial ownership.)
(7) All such shares are held by ICM Asset Management, Inc. ("ICM"), an
investment adviser registered under Section 203 of the Investment Advisers
Act of 1940. ICM, in its capacity as investment adviser, has sole voting
power with respect to 919,163 of such shares and sole investment power with
respect to all such shares.
(8) All such shares may be acquired by Mr. DeMoura pursuant to exercisable stock
options.
(9) All such shares may be acquired by Ms. Dillon-Ridgley pursuant to
exercisable stock options.
(10) All such shares are beneficially owned by Mr. Eitel pursuant to the
Company's Savings and Investment Plan.
(11) Includes 109,060 shares that Mr. Eitel has the right to acquire pursuant to
exercisable stock options.
(12) All such Class A shares are held by Mr. Gable as custodian for his son.
Includes 12,000 Class B shares that Mr. Gable has the right to acquire
pursuant to exercisable stock options.
(13) Includes 10,000 Class A shares and 1,980 Class B shares that Mr. Hendrix
has the right to acquire pursuant to exercisable stock options. Includes 830
Class A shares that Mr. Hendrix beneficially owns through the Company's
Savings and Investment Plan.
(14) All such shares may be acquired by Dr. Henton pursuant to exercisable stock
options.
(15) Includes 200 Class A shares and 78,502 Class B shares held by Mr. Lanier's
wife, and 12,000 Class B shares Mr. Lanier has the right to acquire pursuant
to exercisable stock options. Mr. Lanier disclaims beneficial ownership of
the shares owned by his wife.
(16) All such Class A shares are held by Mr. Saulter's wife, and Mr. Saulter
disclaims beneficial ownership of such shares. All such Class B shares may
be acquired by Mr. Saulter pursuant to exercisable stock options.
(17) Includes 12,000 shares that may be acquired by Mr. van Andel pursuant to
exercisable stock options.
(18) All such shares may be acquired by Mr. Walker pursuant to exercisable stock
options.
(19) All such Class A shares are beneficially owned by Mr. Whitener pursuant to
the Company's Savings and Investment Plan. All such Class B shares may be
acquired by Mr. Whitener pursuant to exercisable stock options.
(20) Includes an aggregate of 18,000 Class A shares and 373,888 Class B shares
that all executive officers and directors as a group have the right to
acquire pursuant to exercisable stock options.
7
<PAGE>
EXECUTIVE COMPENSATION AND RELATED ITEMS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth certain information for each of the last
three fiscal years of the Company concerning compensation paid by the Company
and its subsidiaries to the Company's Chief Executive Officer and each of the
four other most highly compensated executive officers of the Company, based on
salary/bonus earned in fiscal 1997 (referred to herein as the "named executive
officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
OTHER RESTRICTED SECURITIES ALL
ANNUAL STOCK UNDERLYING OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
POSITION YEAR ($) ($) ($) ($)(1) (#) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Ray C. Anderson......... 1997 472,500 484,924 N/A(2) 0 0 6,205(3)
Chairman and Chief 1996 377,500 364,282 N/A(2) 0 0 1,900(3)
Executive Officer 1995 335,833 318,691 N/A(2) 0 0 1,848(3)
Charles R. Eitel........ 1997 407,500 742,665(4) N/A(2) 877,838 15,300 6,610(3)
President and Chief 1996 359,218 375,029 N/A(2) 0 40,000 1,900(3)
Operating Officer 1995 333,333 330,509 N/A(2) 0 0 1,848(3)
Gordon D. Whitener...... 1997 312,500 442,562(4) N/A(2) 568,013 9,900 5,350(3)
Senior Vice President 1996 268,750 282,033 N/A(2) 0 0 1,900(3)
(Subsidiary President) 1995 225,000 237,993 N/A(2) 0 0 1,848(3)
Daniel T. Hendrix....... 1997 253,750 385,761(4) N/A(2) 568,013 9,900 5,610(3)
Senior Vice President 1996 232,500 199,924 N/A(2) 0 0 1,900(3)
and Chief Financial 1995 204,167 153,125 N/A(2) 0 0 1,848(3)
Officer
John H. Walker.......... 1997 246,960(5) 256,460(5) N/A(2) 302,634 15,826 0
Senior Vice President 1996 204,048(5) 289,613(5) N/A(2) 0 0 0
(Subsidiary President) 1995 139,280(5) 126,453(5) N/A(2) 0 25,000 0
</TABLE>
(1) Represents the dollar value of restricted stock awarded to the named
executive officer (calculated by multiplying the number of shares awarded,
by the closing price of the Company's Class A Common Stock as reported by
the Nasdaq National Market on the date of grant). As of December 28, 1997
(the Company's 1997 fiscal year end), an aggregate of 212,396 shares of
restricted stock were held by various executive officers of the Company and
its subsidiaries, with an aggregate value of $6,119,660 (based on the
closing price of the Company's Class A Common Stock as reported on the
Nasdaq National Market on such date). If the price of the Company's Class A
Common Stock has appreciated 15% per annum as of the second anniversary of
the grant date, one-third of each award of restricted stock disclosed in the
above Summary Compensation Table (an aggregate of 40,375 shares) will vest
as of such date. Dividends will not be paid on any award of restricted stock
until such time, if any, as the award has vested.
(2) Amount does not exceed the lesser of $50,000 or 10% of the salary/bonus paid
to such individual.
(3) Represents the Company's matching contribution under the Company's Savings
and Investment Plan and, for 1997 only, the dollar value to the named
executive officer of certain split-dollar life insurance policies acquired
by the Company, as follows: Mr. Anderson ($1,455), Mr. Eitel ($1,860), Mr.
Whitener ($600) and Mr. Hendrix ($860).
(4) Includes an extraordinary bonus in the amount of $300,000 for Mr. Eitel and
$100,000 for each of Messrs. Whitener and Hendrix. See "Employment
Agreements" below.
8
<PAGE>
(5) Mr. Walker's salary and bonus are paid in British pound sterling. These
amounts represent the U.S. dollar value of Mr. Walker's salary and bonus,
based on the average annual exchange rates in effect during the last three
fiscal years.
COMPENSATION PURSUANT TO CERTAIN PLANS
PENSION PLANS. The Company maintains a tax-qualified, noncontributory
pension plan (the "U.S. Pension Plan") for the benefit of its employees and the
employees of all U.S. subsidiaries except Interface Fabrics and Bentley Mills,
Inc. The U.S. Pension Plan provides for the payment of a fixed monthly payment
upon an employee's normal retirement at age 65, or early retirement at age 57.
The monthly amount payable under the U.S. Pension Plan is based on the
participant's final average earnings, covered compensation under Social Security
and years of participation in the U.S. Pension Plan. Final average earnings
means the average annual earnings (salary and bonus) for the five consecutive
years of highest compensation in the 10 years prior to retirement or other
termination of employment. All U.S. based employees of the Company and adopting
subsidiaries are entitled to participate in the U.S. Pension Plan after serving
one year and attaining age 21.
Effective November 1, 1997, further benefit accruals under the U.S. Pension
Plan ceased and all actively employed participants became 100% vested in their
benefits. The Company currently anticipates that the U.S. Pension Plan will be
terminated and benefits will be distributed to participants in either 1998 or
1999.
The table set forth below illustrates the estimated annual benefits payable
upon retirement under the U.S. Pension Plan to persons in specified final
average earnings and years-of-participation categories. The benefits shown are
straight-life annuities and are based upon an assumed retirement on July 31,
1997. The benefits are not subject to any deduction for Social Security
compensation or other offsets. Credited years of participation for each of the
named executive officers (with the exception of Mr. Walker) are as follows: Mr.
Anderson -- 25 years, Mr. Hendrix -- 15 years, Messrs. Eitel and Whitener -- 4
years.
9
<PAGE>
U.S. PENSION PLAN TABLE
<TABLE>
<S> <C> <C> <C> <C> <C>
YEARS OF PARTICIPATION IN PLAN
<CAPTION>
FINAL AVERAGE EARNINGS ($)(1) 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
150,000....................................... 30,000 30,000 34,650 41,580 48,150
200,000....................................... 40,000 40,000 47,150 56,580 66,010
250,000....................................... 45,168 45,168 56,110 67,332 78,554
300,000....................................... 45,168 45,168 56,110 67,332 78,554
350,000....................................... 45,168 45,168 56,110 67,332 78,554
400,000....................................... 45,168 45,168 56,110 67,332 78,554
450,000....................................... 45,168 45,168 56,110 67,332 78,554
500,000....................................... 45,168 45,168 56,110 67,332 78,554
550,000....................................... 45,168 45,168 56,110 67,332 78,554
600,000....................................... 45,168 45,168 56,110 67,332 78,554
650,000....................................... 45,168 45,168 56,110 67,332 78,554
700,000....................................... 45,168 45,168 56,110 67,332 78,554
</TABLE>
(1) For the plan year beginning in 1997, only the first $160,000 of compensation
is considered for plan purposes. Further, the annual benefit cannot exceed
$125,000 for 1997.
Mr. Walker participates in the Company's Interface Europe Pension Scheme
(the "U.K. Pension Plan"). The U.K. Pension Plan provides for the payment of a
fixed monthly payment upon an employee's normal retirement at age 65, or early
retirement no earlier than age 55 (although benefits are reduced in the event of
early retirement). The monthly amount payable under the U.K. Pension Plan is
based on the participant's final average pensionable salary and years of
participation in the U.K. Pension Plan. Final average pensionable salary means
the average annual earnings (base salary and bonus, capped at 35% of base
salary) for the three consecutive years of highest compensation in the 10 years
prior to retirement or other termination of employment. The maximum number of
years of participation that a participant can be credited with is 40. Mr. Walker
currently has 25 credited years of participation.
The table set forth below illustrates the estimated annual benefits payable
upon retirement under the U.K. Pension Plan to persons in specified final
average pensionable salary and years-of-participation categories. The benefits
shown are straight-life annuities and are based upon an assumed normal
retirement during 1997 at age 65. The benefits are not subject to any deduction
for compensation pursuant to government-sponsored retirement programs or other
offsets.
10
<PAGE>
U.K. PENSION PLAN TABLE
<TABLE>
<S> <C> <C> <C> <C> <C>
YEARS OF PARTICIPATION IN PLAN
FINAL AVERAGE PENSIONABLE SALARY ($)(1) 15 20 25 30 35
125,000....................................... 31,250 41,667 52,083 62,500 72,917
150,000....................................... 37,500 50,000 62,500 75,000 87,500
175,000....................................... 43,750 58,333 72,917 87,500 102,083
200,000....................................... 50,000 66,667 83,333 100,000 116,667
225,000....................................... 56,250 75,000 93,750 112,500 131,250
250,000....................................... 62,500 83,333 104,167 125,000 145,833
300,000....................................... 75,000 100,000 125,000 150,000 175,000
350,000....................................... 87,500 116,667 145,833 175,000 204,167
</TABLE>
(1) Both Mr. Walker's compensation and benefits under the U.K. Pension Plan are
paid in British pounds sterling. The amounts disclosed in the table
represent the U.S. dollar value of benefits payable. Mr. Walker's
pensionable salary for 1997 was approximately $325,000.
SALARY CONTINUATION PLAN. The Company maintains a nonqualified salary
continuation plan (the "Salary Continuation Plan") which is designed to induce
selected officers of the Company to remain in the employ of the Company by
providing them with retirement, disability and death benefits in addition to
those which they may receive under the Company's pension plans and other benefit
programs. The Salary Continuation Plan entitles participants to (i) retirement
benefits upon retirement at age 65 (or early retirement at age 55) after
completing at least 15 years of service with the Company (unless otherwise
provided in the plan), payable for the remainder of their lives and in no event
for less than 10 years under the death benefit feature; (ii) disability benefits
payable for the period of any pre-retirement total disability; and (iii) death
benefits payable to the designated beneficiary of the participant for a period
of up to 10 years. Benefits are determined according to one of three formulas
contained in the Salary Continuation Plan. The Salary Continuation Plan is
administered by the Compensation Committee, which has full discretion in
choosing participants and the benefit formula applicable to each. The Company's
obligations under the Salary Continuation Plan are currently unfunded (although
the Company uses insurance instruments to hedge its exposure thereunder);
however, the Company is required to contribute the present value of its
obligations thereunder to an irrevocable grantor trust in the event of a "Change
in Control" (as such term is defined in the Salary Continuation Plan).
STOCK OPTION GRANTS
The following table sets forth information with respect to options granted
to the named executive officers during fiscal 1997.
11
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
INDIVIDUAL GRANTS
<CAPTION>
POTENTIAL
REALIZABLE VALE AT
ASSUMED ANNUAL
RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION (2)
NAME GRANTED (1) 1997 (PER SHARE) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Ray C. Anderson............ 0 -- -- -- -- --
Charles R. Eitel........... 15,300 5.6% $19.125 1/20/07 $184,022 $466,349
Gordon D. Whitener......... 9,900 3.6% $19.125 1/20/07 $119,073 $301,755
Daniel T. Hendrix.......... 9,900 3.6% $19.125 1/20/07 $119,073 $301,755
John H. Walker............. 15,826 5.8% $19.125 1/20/07 $190,349 $482,382
</TABLE>
(1) All options were granted at an exercise price equal to the fair market value
of the Class A Common Stock on the date of grant. These options vest ratably
over a period of five years.
(2) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the Class A Common Stock and overall market conditions. The
amounts reflected in this table may not necessarily be achieved.
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth, for each of the named executive officers,
(i) the number of shares of Common Stock received upon exercise of options, (ii)
the aggregate dollar value received upon exercise, (iii) the number of options
held at fiscal year-end, and (iv) the value of such options at fiscal year-end.
OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
SHARES AT FISCAL AT FISCAL
ACQUIRED YEAR-END (#) YEAR-END ($)
ON VALUE
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Ray C. Anderson...................... -- -- 12,000/8,000 209,250/139,500(1)
Charles R. Eitel..................... 10,000 180,000 98,000/47,300 1,729,625/654,219(1)
Gordon D. Whitener................... -- -- 28,000/21,900 438,750/294,656(1)
Daniel T. Hendrix.................... -- -- 10,000/9,900 125,625/95,906(1)
John H. Walker....................... -- -- 25,000/30,826 367,813/366,127(1)
</TABLE>
(1) Aggregate market value of the shares issuable upon exercise of the options
(based on December 26, 1997 closing price for Class A Common Stock of
$28.125 per share), less the aggregate exercise price payable by the named
executive officer.
12
<PAGE>
EMPLOYMENT AGREEMENTS
In April 1997, the Company entered into employment agreements with each of
the named executive officers and certain other executive officers of the
Company, appointing them to their current respective positions. (The employment
agreements amend and restate the prior employment agreements of executive
officers who had previously entered into an employment agreement with the
Company.) The agreements are substantially similar, except for such differences
as are noted below. Each of Messrs. Eitel's, Whitener's and Hendrix's agreement
runs for an initial term of five years and thereafter for a rolling two year
term, such that the remaining term is always two years; provided, that, each
agreement automatically terminates on the officer's 65th birthday. Each of
Messrs. Anderson's and Walker's agreement is for a rolling two year term such
that the remaining term is always two years; provided, that, each agreement
automatically terminates on the officer's 65th birthday. The Company may
terminate any of such agreements upon two years' notice, except that, in the
case of Messrs. Eitel, Whitener and Hendrix, such notice may only be given after
the third anniversary of the date of the agreement. Each of Messrs. Eitel,
Whitener and Hendrix are entitled under their agreement to receive an
extraordinary annual bonus of up to $300,000, $100,000 and $100,000,
respectively, in each of the initial five years of the employment agreements if
certain performance criteria and targets are achieved.
In the event that the Company terminates an officer's employment without
just cause, the officer will be entitled to continue to receive his salary and
bonus, and participate in certain employee benefit plans or receive comparable
benefits, for the remainder of the term of the agreement. The officer will also
immediately vest in all unvested employee stock options, and a percentage of
unvested restricted stock awards (as specified in the applicable restricted
stock agreement). The foregoing benefits are subject to reduction by the amount
of any compensation earned from subsequent employment during the remainder of
the term, but only under certain limited circumstances specified in the
agreements. The employment agreements also contain provisions placing
restrictions on the officer's ability to compete with the Company following the
termination of employment.
CHANGE IN CONTROL AGREEMENTS
In April 1997, each of the named executive officers and certain other
executive officers of the Company entered into substantially similar "change in
control agreements" with the Company. (The agreements amend and restate the
prior agreements of executive officers who had previously entered into a change
in control agreement with the Company.) Pursuant to the agreements, the officer
will immediately vest in all unvested employee stock options and restricted
stock awards in the event of a "Change in Control" (as defined in the
agreements). The agreements also provide for certain benefits in the event of a
termination of employment under certain circumstances in connection with a
Change in Control of the Company. In general, each agreement provides benefits
to the officer upon an "Involuntary Termination" (essentially, termination
without cause) or a "Voluntary Termination" (essentially, resignation in the
face of coercive tactics) occurring within 24 months after or six months prior
to the date of a change in control. Upon any such termination, the officer will
be entitled to receive the following benefits: (i) the officer's then-current
salary, for the balance of the term, paid in a lump sum discounted to present
value; (ii) bonus payments for the balance of the term, paid in a lump sum
discounted to present value and based upon the bonuses received during the two
years prior to the termination, as well as a prorated bonus for the year in
which employment is terminated; (iii) continuation of health and life insurance
coverage for the balance of the term and (iv) continuation of eligibility to
participate in Company retirement plans for the balance of the term, or the
provision of comparable benefits. Benefits paid under the change in control
agreements will be reduced by the compensation and benefits, if any, paid to an
officer pursuant to his employment agreement with the Company. Each of Messrs.
Eitel's, Whitener's and Hendrix's agreement runs for an initial term of five
years and thereafter for a rolling two year term, such that the remaining term
is always two years; provided, that, each agreement automatically terminates on
the officer's 65th birthday. Each of Messrs. Anderson's and Walker's agreement
is for a rolling two year term such that the remaining term is
13
<PAGE>
always two years; provided, that, each agreement automatically terminates on the
officer's 65th birthday. The Company generally may terminate any of such
agreements upon two years' notice, except that, in the case of Messrs. Eitel,
Whitener and Hendrix, such notice may only be given after the third anniversary
of the date of the agreement.
COMPENSATION OF DIRECTORS
The Company has a policy pursuant to which non-employee directors ("outside
directors") are paid annual directors' fees of $25,000, plus $1,000 for each
Board or committee meeting attended.
The Company has agreed to pay Leonard G. Saulter, who previously served as
an executive officer of the Company, $45,000 per year for a five year period
ending in 1998, and $15,000 per year beginning in 1999 for the remainder of his
life. The Company made the required payment during 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following persons served on the Compensation Committee of the Board of
Directors during fiscal 1997: Ray C. Anderson, Carl I. Gable and J. Smith
Lanier, II. Mr. Anderson is the Chairman and Chief Executive Officer of the
Company. Mr. Gable served as President of the Company from March 1984 until June
1985.
During 1997, the Company paid premiums to J. Smith Lanier & Co., an
insurance agency, of approximately $4,050,000 in connection with insurance
policies purchased on behalf of the Company. J. Smith Lanier, II has a
substantial ownership interest in this insurance agency. Management of the
Company believes that the insurance brokerage transaction was effected on terms
at least as favorable to the Company as could have been obtained from other
sources or unrelated parties in view of the nature of the transaction and the
services rendered.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The law firm with which Carl I. Gable, a director of the Company, is
associated rendered certain legal services to the Company during fiscal 1997.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation awards, and achievement criteria, for the Company's senior
management are recommended annually by the Company's Chief Executive Officer,
and reviewed and approved by the Compensation Committee of the Board of
Directors. During 1997, the Committee was composed of three members, Ray C.
Anderson, the Company's Chairman and Chief Executive Officer, Carl I. Gable and
J. Smith Lanier II. Messrs. Gable and Lanier are outside directors.
The Company's compensation program is designed to enable the Company to
attract, motivate and retain outstanding senior management. The program consists
of three principal components: (i) competitive base salaries, (ii) annual,
variable cash bonuses based on the achievement of established financial and
nonfinancial objectives, and (iii) long-term stock option and restricted stock
incentives. Under the program, a substantial portion of an executive's
compensation is directly linked to the Company's financial performance and the
interests of shareholders. The Committee strives to administer the program to
present total compensation opportunities for senior executives of the Company
that are commensurate with the responsibilities undertaken by the executives,
and that are competitive with those offered by employers of comparable size in
the Company's industry. (Information concerning compensation offered by other
employers in the industry is gathered informally, at irregular intervals, and
serves only as a general benchmark; the Committee, for fiscal 1997, made no
determination to set the compensation levels of the Company's executives to
correspond to the high, median or low end of such comparative data.
14
<PAGE>
Certain of the competitors considered from time to time are included in the
companies comprising the "industry group" index used in the performance graph
below.)
BASE SALARY. Base salary compensation is based on a variety of factors,
including the executive's level of responsibility, time with the Company,
geographical cost-of-living considerations and individual contribution and
performance, as well as internal equalization policies of the Company,
comparison to executive pay outside of the Company, and general economic
conditions. (Evaluation of certain of these factors is subjective, and no fixed,
relative weights are assigned to the criteria considered.) The senior executives
of the Company (including the Chief Executive Officer) received raises in base
salary in fiscal 1997 averaging 12.6%. These 1997 increases were deemed
appropriate in light of the Company's strong financial performance in recent
years (a compound annual growth rate in revenues and net income of 14% and 21%,
respectively, over the five-year period from 1992 to 1996, including increases
of 25% and 53%, respectively, in 1996).
BONUSES. The Company's incentive compensation program is tied to Company,
business unit (subsidiary) and individual performance. Each executive officer of
the Company (including the Chief Executive Officer) is assigned a range of bonus
potential (expressed as a percentage of base salary), and a personalized set of
financial and nonfinancial objectives for the year. Evaluation of nonfinancial
objectives is, inherently, somewhat subjective, and equal weight is assigned to
each of these objectives. For fiscal 1997, 65% to 90% of each executive
officer's bonus potential was based on measurable financial performance. Typical
relative weights assigned to financial objectives are indicated below. The
amount of bonus earned is determined by the degree to which the financial and
nonfinancial objectives have been achieved.
For the senior executives of the Company who are directly accountable for
the profitability of subsidiaries or business groups, financial objectives for
1997 focused on: (i) operating income for operations managed, (ii) cash flow for
operations managed, (iii) reduction of off-quality and waste (under the
Company's "war on waste" program initiated in January 1995) for operations
managed, and (iv) earnings per share. Typical relative weights assigned to these
financial objectives were 50%, 15%, 15% and 10%, respectively. Nonfinancial
objectives for such senior executives are tailored to their respective markets
and geographic regions, but consistently focus on sales and competitive
strategies, strategic acquisitions, investments and alliances, synergistic
cooperation with affiliated companies, technological advancements, quality
control measures and employee relations.
Mr. Anderson's financial objectives for 1997 (90% weight) were based on: (i)
operating income, (ii) cash flow, (iii) reduction of off-quality and waste for
operations, and (iv) earnings per share. Relative weights assigned to such
financial objectives were 50%, 15%, 15% and 10%, respectively. Mr. Anderson's
nonfinancial objectives for 1997 (10% weight) focused on defining and advancing
overall corporate strategy (including strategic acquisitions and investments,
the Company's environmental and ecological initiatives, and senior management
changes and succession), and also were linked to the nonfinancial objectives of
the executive officers who report to him.
On an aggregate basis (giving effect to relative weights), Mr. Anderson
achieved 100% of target levels for his financial objectives in 1997. Mr.
Anderson also achieved slightly in excess of 100% of target levels for his
nonfinancial objectives.
STOCK OPTIONS AND RESTRICTED STOCK. The Company also utilizes grants of
stock options and restricted stock awards to its executives to strengthen the
mutuality of interests between the Company's senior management and shareholders.
The Company consulted with a nationally recognized consulting firm in
implementing a new incentive stock program in January 1997. Stock options and
restricted stock awards help to retain and motivate executives. Options granted
under the Company's stock option plans typically have an exercise price equal to
at least 100% of the market price of the underlying Common Stock on the date of
grant; thus, the options only have value if the market price of the Company's
stock rises. Moreover,
15
<PAGE>
options granted under such plans typically vest incrementally over a five year
period, compelling an executive to remain with the Company for a significant
time period before being able to fully recognize the value of the options. The
five year vesting schedule also serves to focus executives on the long-term
objectives of the Company. Similarly, restricted stock awards increase in value
as the market price of the Company's stock rises. Such awards also vest over a
period of multiple years; the executive generally must remain employed with the
Company for a period of nine years from the date of grant to completely vest in
an award. The Committee believes stability of quality management and a proper
focus on long-term Company objectives provide for enduring shareholder value.
Each of the named executive officers holds stock options and restricted stock.
Information concerning awards of stock options and restricted stock to the named
executive officers in 1997 is shown in the Summary Compensation Table and the
"Option Grants in Last Fiscal Year" table above.
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to publicly held corporations for compensation in excess of $1,000,000
in any taxable year that is paid to the corporation's chief executive officer or
any of the four other most highly compensated executive officers. Certain
performance-based compensation, however, is not subject to the limit on
deductibility imposed by Section 162(m). In 1997, with the exception of Mr.
Eitel, no executive officer of the Company received more than $1,000,000 in
compensation. The Compensation Committee currently is considering the Company's
alternatives with respect to qualifying executive compensation for deductibility
in the future.
The foregoing policies and programs are subject to change as the Committee
deems necessary from time to time to respond to economic conditions, meet
competitive standards and serve the objectives of the Company and its
shareholders.
THE COMPENSATION COMMITTEE
Ray C. Anderson
Carl I. Gable
J. Smith Lanier, II
16
<PAGE>
PERFORMANCE GRAPH
The following graph compares, for the five year period ended December 28,
1997, the Company's total return to shareholders (stock price increase plus
dividends, divided by beginning stock price) with that of (i) all U.S. companies
listed on Nasdaq and (ii) an industry group comprised of Nasdaq-listed companies
(U.S. and foreign) producing textile products.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS ($)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DATE
<S> <C> <C> <C>
Interface,
Inc. Nasdaq Stock NASDAQ Stocks (U.S. & Foreign)
Market (U.S. Companies) Textile mill products
1/3/93 100.0 100.0 100.0
1/2/94 125.8 114.9 142.5
1/1/95 104.0 112.2 101.4
12/31/95 145.2 158.7 117.4
12/29/96 167.2 195.4 154.6
12/28/97 252.9 230.6 221.0
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1/3/93 1/2/94 1/1/95 12/31/95 12/29/96 12/28/97
Interface, Inc. 100.0 125.8 104.0 145.2 167.2 252.9
Nasdaq Stock Market (U.S. Companies) 100.0 114.8 112.2 158.7 195.4 230.6
NASDAQ Stocks (U.S. + Foreign) - Textile mill
products 100.0 142.5 101.4 117.4 154.6 221.0
</TABLE>
- ------------------------
NOTES:
A. The lines represent annual index levels derived from compounded daily returns
that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the annual interval, based on the fiscal year-end, is not a trading day,
the preceding trading day is used.
D. The index level for all series was set to $100.0 on 1/3/93.
E. The Company's fiscal year ends on the Sunday nearest to December 31.
17
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held four meetings during 1997. All of the incumbent
directors attended at least 75% of the meetings of the Board and of each
committee of the Board on which they served that were held during the periods
that they served.
The Board of Directors has an Executive Committee currently composed of Ray
C. Anderson, Carl I. Gable and J. Smith Lanier, II. The Executive Committee met
13 times during 1997. In 1997, Messrs. Anderson, Gable and Lanier also served as
the members of the Board's Compensation Committee. The Compensation Committee
met four times during 1997. The function of the Compensation Committee is to
review and determine compensation for executives of the Company and to
administer the Company's stock incentive and employee benefit plans. (See
"Executive Compensation and Related Items" above.)
The Board of Directors also has an Audit Committee, currently composed of
Mr. Gable, Dr. June M. Henton and Leonard G. Saulter. The Audit Committee met
three times during 1997. The function of the Audit Committee is to (i) recommend
annually to the Board whether the Company's independent auditors should be
retained, (ii) review with the independent auditors the auditors' report or
opinion on the Company's financial statements and related notes, and (iii)
review the Company's internal financial reporting procedures and any
transactions between the Company and its directors.
The Board of Directors also has a Nominating Committee, currently composed
of Mr. Anderson, Mr. Gable, Dr. Henton and Charles R. Eitel. The Nominating
Committee met once in 1997. The function of the Nominating Committee is to
review the qualifications of potential candidates, and to nominate candidates to
fill vacancies on the Board. The Nominating Committee will consider candidates
recommended by shareholders. Shareholder recommendations must comply with the
procedures for shareholder proposals set forth in Article II, Section 9 of the
Company's Bylaws.
PROPOSAL TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF CLASS A COMMON STOCK
(ITEM 2)
The Board of Directors, by unanimous vote, has recommended that the
shareholders approve an amendment to the Articles of Incorporation to increase
the number of authorized shares of Class A Common Stock from 40,000,000 shares
to 80,000,000 shares. As of April 8, 1998, the Company had outstanding
23,237,096 shares of Class A Common Stock (excluding 3,600,000 shares deemed to
be treasury shares). The language in Article V, Section A, of the Articles of
Incorporation would be amended to read as follows:
"The total number of shares of capital stock which the Corporation shall
have authority to issue is 125,000,000 shares, consisting of 80,000,000
shares of Class A Common Stock of $0.10 par value per share, 40,000,000
shares of Class B Common Stock of $0.10 par value per share (the Class A
Common Stock and the Class B Common Stock hereinafter sometimes referred to
collectively as the "Common Stock"), and 5,000,000 shares of Preferred Stock
of $1.00 par value per share."
The primary purpose of the proposed amendment is to permit the Company to
effect a contemplated two-for-one stock split of its Common Stock. The stock
split may be voted upon by the Company's Board of Directors as early as May
1998, subject to shareholder approval of the proposed amendment to the Articles
of Incorporation. Additionally, in the opinion of the Board, approval of the
amendment to the Articles of Incorporation will enhance the Company's
flexibility by increasing the number of shares of Class A Common Stock that can
be issued without the necessity for further shareholder approval. The Board
believes that the increased flexibility provided by the amendment to the
Articles of Incorporation will enable the Company to respond promptly and
appropriately to potential acquisitions, financing needs, additional stock
splits and other business opportunities.
18
<PAGE>
Although the Board will authorize the issuance of additional shares of Class
A Common Stock only when it considers doing so to be in the best interests of
the shareholders of the Company, the issuance of additional shares of the Class
A Common Stock could, among other things, have a dilutive effect on the earnings
and equity per share of Common Stock and on the voting rights of holders of
shares of Class A Common Stock. The increase in the authorized number of shares
of Class A Common Stock pursuant to the amendment to the Articles of
Incorporation also could be viewed as having anti-takeover effects. Although the
Board has no current plants to do so, shares of the Class A Common Stock could
be issued in various transactions that would make a change in control of the
Company more difficult or costly and therefore less likely. For example, shares
of the Class A Common Stock could be privately sold to purchasers supporting the
Board in opposing a change in control or to dilute the stock ownership of a
person seeking to obtain control. The Company is not aware of any effort to
accumulate shares of the Class A Common Stock or to obtain control of the
Company by tender offer, proxy contest or otherwise, and the Company has no
present intention to use the increased shares of authorized Class A Common Stock
for anti-takeover purposes.
The current Articles of Incorporation and the Company's Bylaws contain other
provisions that may be viewed as having possible anti-takeover effects. Pursuant
to the Articles of Incorporation, holders of the Company's Class B Common Stock
are entitled to elect a majority of the Company's Board of Directors. Also,
under the Bylaws, only holders of Class B Common Stock may remove Class B
directors from office. A majority of shares of the Class B Common Stock is held
by the Company's Chairman and Chief Executive Officer and by certain other
officers and employees of the Company. In addition, the Bylaws provide that, in
certain situations, the affirmative vote of two-thirds of the Board is required
to approve certain business transactions (such as mergers or sales of assets)
involving an entity that beneficially owns 10% or more of the outstanding voting
securities of the Company. The Bylaws also require that shareholder proposals
satisfy certain procedural requirements in order to be considered at a meeting
of shareholders. Finally, the current Articles of Incorporation authorize the
Company to issue one or more series of preferred stock with such voting rights,
if any, to be determined at the time of establishment of such series. Under
certain circumstances, each of the foregoing provisions could make an
acquisition of the Company more difficult.
On February 24, 1998, the Company adopted a ten year Shareholder Rights Plan
("Rights Plan"). Under the terms of the Rights Plan, all shareholders of record
on March 16, 1998 were issued one preferred stock purchase right (a "Right") on
each share of Common Stock. Initially, the Rights are not exercisable and they
automatically attach to and trade in tandem with the Common Stock. The Rights
detach and become exercisable ten days after a person or group (an "Acquiring
Person") acquires 15% or more of the Common Stock, or ten business days after a
person or group starts a tender or exchange offer for 15% or more of the Common
Stock. If the Rights become exercisable, their holders (other than the Acquiring
Person and its affiliates and associates, whose Rights become void) will be
entitled to buy one one-hundredth (1/100) of a share of Series B Participating
Cumulative Preferred Stock ("Series B Preferred"). Upon an announcement that any
person or group has become an Acquiring Person, each Right will entitle all
other holders to purchase $360 worth of Series B Preferred for the exercise
price of $180. Further, if after the time an Acquiring Person were to acquire
15% or more of the Common Stock, the Company were to be acquired in a merger or
other business combination, generally each holder of a Right will be entitled to
purchase $360 worth of the acquiring company's common stock at the $180 exercise
price. The issuance of Series B Preferred pursuant to the Rights Plan, as well
as various other provisions in the Rights Plan, could also make an acquisition
of the Company more difficult or costly and therefore less likely.
VOTE REQUIRED AND RECOMMENDATION OF BOARD
Under the Company's Bylaws and Section 14-2-1004 of the Georgia Business
Corporation Code, the proposal to amend the Company's Articles of Incorporation
to increase the number of authorized shares
19
<PAGE>
of Class A Common Stock will be approved if: (i) the affirmative votes cast by
the Company's outstanding shares of Class A Common Stock entitled to vote and
represented (in person or by proxy) at the meeting exceed the negative votes
cast; and (ii) the affirmative votes cast by the Company's outstanding shares of
Class B Common Stock entitled to vote and represented (in person or by proxy) at
the meeting exceed the negative votes cast. THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR THE PROPOSAL, AND THE ENCLOSED PROXY WILL BE VOTED IN THAT MANNER
UNLESS THE SHAREHOLDER EXECUTING THE PROXY SPECIFICALLY VOTES TO THE CONTRARY
(OR ABSTAINS).
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act requires the Company's directors and executive
officers, and persons who own more than ten percent of a registered class of the
Company's equity securities, to file with the Securities and Exchange Commission
and the Nasdaq National Market reports of ownership and changes in ownership of
Common Stock and other equity securities of the Company. Directors, executive
officers and greater than ten percent shareholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on review of the copies of such reports furnished to the
Company or written representations that no other reports were required, the
Company believes that during fiscal 1997, all filing requirements applicable to
its directors, executive officers and greater than ten percent beneficial owners
were complied with, except that Michael D. Bertolucci, Senior Vice President,
Daniel T. Hendrix, Senior Vice President, and Clarinus C.Th. van Andel,
Director, each failed to timely file a Form 4 on a single occasion, and Jeffrey
A. Goldberg, Vice President, failed to timely file a Form 3 on a single
occasion. (Mr. Hendrix's filing related to the exchange of Class B shares for
Class A shares, and Mr. Goldberg's filing related to the inadvertent failure to
disclose certain shares beneficially owned by a family member.)
INFORMATION CONCERNING THE COMPANY'S ACCOUNTANTS
BDO Seidman, LLP served as the principal independent auditors for the
Company during fiscal 1997. Management of the Company anticipates that BDO
Seidman will be the independent auditors for the current fiscal year, but the
Board of Directors has not yet considered the selection of public accountants
for the current year. Representatives of BDO Seidman are expected to be present
at the annual meeting and will have the opportunity to make a statement, if they
desire to do so, and to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the Company's 1999
annual meeting must be received by the Company no later than December 18, 1998,
in order to be eligible for inclusion in the Company's Proxy Statement and form
of Proxy for that meeting.
20
<PAGE>
OTHER MATTERS THAT MAY COME BEFORE THE MEETING
Management of the Company knows of no matters other than those stated above
that are to be brought before the meeting. However, if any other matter should
be properly presented for consideration and voting, it is the intention of the
persons named as proxies in the enclosed Proxy to vote the Proxy in accordance
with their judgment of what is in the best interest of the Company.
By order of the Board of Directors
/s/ Raymond S. Willoch
RAYMOND S. WILLOCH
SECRETARY
April 17, 1998
21
<PAGE>
CLASS A COMMON STOCK
INTERFACE, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
1998 ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Ray C. Anderson and J. Smith Lanier, II, or
either of them, with power of substitution to each, the proxies of the
undersigned to vote the Class A Common Stock of the undersigned at the Annual
Meeting of Shareholders of interface, inc. to be held on May 19, 1998, and any
adjournment thereof.
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" PROPOSAL 1 AND PROPOSAL 2, AND,
UNLESS INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN THE SPACE PROVIDED, THIS
PROXY WILL BE SO VOTED.
<PAGE>
<TABLE>
<S> <C> <C> <C>
/X/ PLEASE MARK VOTES AS IN
THIS EXAMPLE
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR"
CLASS A COMMON STOCK THE ELECTION OF THE LISTED NOMINEES.
INTERFACE, INC.
1. Election of Directors. FOR all nominees WITHHOLD
for directors AUTHORITY
DIANNE DILLON-RIDGLEY; CARL I. GABLE; listed to vote for all
JUNE M. HENTON; J. SMITH LANIER, II; (except as nominees
AND CLARINUS C.TH. VAN ANDEL. marked to the listed
contrary)
(INSTRUCTION: To withhold authority to
vote for any individual nominee, / / / /
strike through that nominee's name.)
RECORD DATE SHARES: THE BOARD OF DIRECTORS FAVORS A VOTE FOR AGAINST ABSTAIN
"FOR" PROPOSAL 2.
2. Proposal to amend the Company's
Articles of Incorporation to increase
the number of authorized shares of / / / / / /
Class A Common Stock.
3. In accordance with their best judgment, with respect to any other
matters that may properly come before the meeting.
Please be sure to sign Please date and sign this Proxy exactly as name appears.
and date this Proxy. Date
- ------------------------------------------------- NOTE: When signing as an attorney, trustee, administrator or guardian,
please give your title as such. In the case of joint tenants, each joint
owner must sign.
- -------------------------------------------------
Shareholder sign here Co-owner sign here
- -------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CLASS B COMMON STOCK
INTERFACE, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
1998 ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Ray C. Anderson and J. Smith Lanier, II, or
either of them, with power of substitution to each, the proxies of the
undersigned to vote the Class B Common Stock of the undersigned at the Annual
Meeting of Shareholders of INTERFACE, INC. to be held on May 19, 1998, and any
adjournment thereof.
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" PROPOSAL 1 AND PROPOSAL 2, AND,
UNLESS INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN THE SPACE PROVIDED, THIS
PROXY WILL BE SO VOTED.
<PAGE>
<TABLE>
<S> <C> <C> <C>
/X/ PLEASE MARK VOTES AS IN
THIS EXAMPLE
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR"
CLASS B COMMON STOCK THE ELECTION OF THE LISTED NOMINEES.
INTERFACE, INC.
1. Election of Directors. FOR all nominees WITHHOLD
for directors AUTHORITY
RAY C. ANDERSON, BRIAN L. DEMOURA, listed to vote for all
CHARLES R. EITEL, DANIEL T. HENDRIX, (except as nominees
LEONARD G. SAULTER, JOHN H. WALKER AND marked to the listed
GORDON D. WHITENER contrary)
(INSTRUCTION: To withhold authority to
vote for any individual nominee, / / / /
strike through that nominee's name.)
RECORD DATE SHARES: THE BOARD OF DIRECTORS FAVORS A VOTE FOR AGAINST ABSTAIN
"FOR" PROPOSAL 2.
2. Proposal to amend the Company's
Articles of Incorporation to increase
the number of authorized shares of / / / / / /
Class A Common Stock.
3. In accordance with their best judgment, with respect to any other
matters that may properly come before the meeting.
Please be sure to sign Please date and sign this Proxy exactly as name appears.
and date this Proxy. Date
- ------------------------------------------------- NOTE: When signing as an attorney, trustee, administrator or guardian,
please give your title as such. In the case of joint tenants, each joint
owner must sign.
- -------------------------------------------------
Shareholder sign here Co-owner sign here
- -------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
