UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(RULE
14a-101)
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. _____)
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Confidential,
for Use of the Commission Only (as permitted by Rule
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Definitive
Proxy Statement
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Definitive
Additional Materials
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o
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Soliciting
Material Pursuant to §240.14a-12
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Interface,
Inc.
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(Name
of Registrant as Specified In Its Charter)
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of Person(s) Filing Proxy Statement, if other than the
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Interface,
Inc.
2859
Paces Ferry Road, Suite 2000
Atlanta,
Georgia 30339
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
The
annual meeting of shareholders of Interface, Inc. (the “Company”) will be held
on Thursday, May 17, 2007, at 10:00 a.m., at the Company’s office located at
2859 Paces Ferry Road, Atlanta, Georgia. The purposes of the meeting are to
consider and vote upon:
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Item
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Recommended
Vote
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1.
The
election of eleven members of the Board of Directors, five directors
to be
elected by the
holders of the Company’s Class A Common Stock and six directors to
be elected by the holders of
the Company’s Class B Common Stock.
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FOR
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2.
The
ratification of the appointment of BDO Seidman, LLP as independent
auditors for 2007.
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FOR
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3.
Such
other matters as may properly come before the meeting and at any
adjournments of the
meeting.
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The
Board
of Directors set March 12, 2007 as the record date for the meeting. This means
that only shareholders of record at the close of business on March 12, 2007
will
be entitled to receive notice of and to vote at the meeting or any adjournments
of the meeting.
A
Proxy
Statement and Proxy solicited by the Board of Directors are enclosed with this
notice. Please date, sign and return the enclosed Proxy at your earliest
convenience. Returning your Proxy in a timely manner will assure your
representation at the annual meeting. You may, of course, change or withdraw
your Proxy at any time prior to the voting at the meeting.
Also
enclosed is a copy of the Company’s 2006 Annual Report to
Shareholders.
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By
order of the Board of Directors
 RAYMOND
S. WILLOCH
Secretary
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April
18,
2007
PLEASE
COMPLETE AND RETURN THE ENCLOSED PROXY PROMPTLY SO THAT YOUR VOTE MAY BE
RECORDED AT THE MEETING IF YOU DO NOT ATTEND PERSONALLY.
INTERFACE,
INC.
2859
Paces Ferry Road, Suite 2000
Atlanta,
Georgia 30339
_______________
PROXY
STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
_______________
GENERAL
INFORMATION
The
Board
of Directors of Interface, Inc. (the “Company”) is furnishing this Proxy
Statement to solicit Proxies for Class A Common Stock and Class B Common Stock
to be voted at the annual meeting of shareholders of the Company. The meeting
will be held on May 17, 2007. The Proxies also may be voted at any adjournments
of the meeting. It is anticipated that this Proxy Statement and the accompanying
Proxy card will first be mailed to shareholders on April 20, 2007.
The
record of shareholders entitled to vote at the annual meeting was taken as
of
the close of business on March 12, 2007. On that date, the Company had
outstanding and entitled to vote 54,475,063 shares of Class A Common Stock
and
6,742,650 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 by the shareholder in the Proxy. If no specification is made,
the
Proxy will be voted (i) for the election of the nominees (Class A or Class
B, as
the case may be) listed in this Proxy Statement under the caption “Nomination
and Election of Directors,” and (ii) for the ratification of the appointment of
BDO Seidman, LLP as independent auditors for 2007. A Proxy given pursuant to
this solicitation may be revoked by a shareholder who attends the meeting and
gives 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 for the purpose of establishing
a
quorum. A broker non-vote occurs when a broker or other nominee who holds shares
for a customer does not have authority to vote on certain non-routine matters
because its customer has not provided any voting instructions on the matter.
Abstentions are the equivalent of a non-vote since (i) directors are elected
by
a plurality of the votes cast, and (ii) other proposals are approved if 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.
If
your
shares of Common Stock are held by a broker, bank or other nominee (i.e., in
“street name”), you will receive instructions from your nominee, which you must
follow in order to have your shares voted—the instructions may appear on a
special proxy card provided to you by your nominee (also called a “voting
instruction form”). Your nominee may offer you different methods of voting, such
as by telephone or Internet. If you do hold your shares in “street name” and
plan on attending the annual meeting of shareholders, you should request a
proxy
from your broker or other nominee holding your shares in record name on your
behalf in order to attend the annual meeting and vote at that time (your broker
or other nominee may refer to it as a “legal” proxy).
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 employees of the
Company may solicit Proxies in person or by telephone, fax or e-mail. The
Company also has retained Georgeson Inc., a proxy solicitation firm, to assist
in soliciting Proxies from beneficial owners of shares of the Company’s Common
Stock. The fee paid by the Company for such assistance will be $7,500 (plus
expenses).
1
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 has
currently set the number of directors at 11 (although it temporarily reduced
the
number of directors from 11 to 10 for a portion of 2006 following the May 2006
retirement of Board member J. Smith Lanier). The holders of Class B Common
Stock
are entitled to elect a majority (six) 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
October 2006, the Board of Directors elected K. David Kohler as a Class A
director to fill a vacancy created due to Mr. Lanier’s retirement. In February
2007, the Board of Directors elected Harold M. Paisner as a Class B director
to
fill the vacancy created by the retirement of Clarinus C. Th. van Andel.
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 six nominees. Each
nominee is an incumbent director standing for re-election, and has consented
to
being named herein and to continue serving as a director if
re-elected.
Certain
information relating to each nominee proposed by the Board is set forth below.
Directors are required to submit an offer of resignation upon experiencing
a job
change.
CLASS
A NOMINEES
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Name
(Age)
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Information
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Dianne
Dillon-Ridgley
(55).............................................
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Ms.
Dillon-Ridgley was elected to the Board in February 1997.
Ms. Dillon-Ridgley has served as the U.N. Headquarters representative
for the World YWCA since 1997 and for the Center for International
Environmental Law since March 2005. From 1995 to 1998, she served
as
senior policy analyst with the Women’s Environment and Development
Organization, and from 1998 to 1999 she served as Executive Director
of
that organization. She was appointed by President Clinton to the
President’s Council on Sustainable Development in 1994 and served as
Co-Chair of the Council’s International and Population/Consumption Task
Forces until the Council’s dissolution in June 1999. Ms. Dillon-Ridgley
also serves on the boards of five nonprofit organizations and one
private
company.
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Dr.
June M. Henton
(67).................................................
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Dr.
Henton was elected as a director in February 1995. Since 1985, Dr.
Henton
has served as Dean of the College 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, 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.
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Christopher
G. Kennedy (43).........................................
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Mr.
Kennedy was elected as a director in May 2000. He became an Executive
Vice
President of Merchandise Mart Properties, Inc. (a subsidiary of Vornado
Realty Trust based in Chicago, Illinois) in 1994 and President in
October
2000. Since 1994, he has served on the Board of Trustees of Ariel
Mutual
Funds. From 1997 to 1999, Mr. Kennedy served as the Chairman of the
Chicago Convention and Tourism Bureau. Mr. Kennedy also serves on
the
boards of three nonprofit
organizations.
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2
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K.
David Kohler
(40).......................................................
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Mr.
Kohler was elected as a director in October 2006. Since 1999, he
has
served as Group President of the Kitchen and Bath Group for Kohler
Co., a
global leader in the manufacture of kitchen and bath products, tile,
cabinetry, engines and power generation systems, and an owner/operator
of
golf and spa destinations. Mr. Kohler was previously a chairman of
the
National Kitchen and Bath Association’s Board of Governors of
Manufacturing. He is currently a member of the board of Kohler Co.,
and
has previously served on the board of a privately-held
manufacturer.
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Thomas
R. Oliver
(66).....................................................
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Mr.
Oliver was elected as a director in July 1998. He served as Chairman
of
Six Continents Hotels (formerly Bass Hotels and Resorts), the hotel
business of Six Continents, PLC (formerly Bass PLC), from March 1997
until
his retirement in March 2003, and served as Chief Executive Officer
of Six
Continents Hotels from March 1997 to October 2002. Mr. Oliver currently
serves as a director of United Dominion Realty Trust.
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CLASS
B NOMINEES
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Name
(Age)
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Information
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Ray
C. Anderson
(72).....................................................
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Mr.
Anderson founded Interface in 1973 and served as Chairman and Chief
Executive Officer until his retirement as Chief Executive Officer
and
transition from day-to-day management on July 1, 2001, at which time
he
became Interface’s non-executive Chairman of the Board. He chairs the
Executive Committee of the Board and remains available for policy
level
consultation on substantially a full time basis. Mr. Anderson was
appointed by President Clinton to the President’s Council on Sustainable
Development in 1996 and served as Co-Chair until the Council’s
dissolution. He currently serves on the boards of one private company
and
six nonprofit organizations.
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Edward
C. Callaway
(52).................................................
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Mr.
Callaway was elected as a director in October 2003. Since November
2003,
Mr. Callaway has served as Chairman and Chief Executive Officer of
the Ida
Cason Callaway Foundation, a nonprofit organization that owns the
Callaway
Gardens Resort and has an environmental mission of conservation,
education
and land stewardship. From 1984 through the present, Mr. Callaway
has
served in various capacities at Crested Butte Mountain Resort and
successor companies, including the capacities of President and Chief
Executive Officer (1987-2003) and as Chairman (2003). Mr. Callaway
also
serves on the boards of two other nonprofit
organizations.
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Carl
I. Gable
(67)...............................................................
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Mr.
Gable, a director since March 1984, is a private investor. He was
an
attorney with the Atlanta-based law firm of Troutman Sanders LLP,
from
March 1996 until April 1998. Mr. Gable also served as a director
of
Fidelity Southern Corporation from July 2000 to November 2002. Mr.
Gable
currently serves as the lead independent director of the Board. He
also
serves as an officer and director of a nonprofit
organization.
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Daniel
T. Hendrix
(52).....................................................
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Mr.
Hendrix joined the Company in 1983 after having worked previously
for a
national accounting firm. He was promoted to Treasurer of the Company
in
1984, Chief Financial Officer in 1985, Vice President-Finance in
1986,
Senior Vice President-Finance in 1995, Executive Vice President in
October
2000, and President and Chief Executive Officer in July 2001. He
was
elected to the Board in October 1996. Mr. Hendrix has served as a
director
of Global Imaging Systems, Inc. since 2003 and as a director of American
Woodmark Corp. since May 2005.
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3
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James
B. Miller, Jr.
(66)...................................................
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Mr.
Miller was elected as a director in May 2000. Since 1979, Mr. Miller
has
served as Chairman and Chief Executive Officer of Fidelity Southern
Corporation, the holding company for Fidelity Bank. Since February
1998 he
has served as Chairman, since 1976 he has served as director, and
from
1977 to 1997 he served as Chief Executive Officer and President,
of
Fidelity Bank. Mr. Miller also has served as Chairman of LionMark
Insurance Company, a subsidiary of Fidelity Southern Corporation,
since
2004. Mr. Miller has served as a director of American Software, Inc.
since
May 2002. Mr. Miller has also served as Chairman of a private real
estate
company since 2003 and Chairman of a private auto sales company since
2005, and currently serves on the boards of two nonprofit
organizations.
|
|
Harold
M. Paisner
(67)....................................................
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Mr.
Paisner
was elected as a director in February 2007. Mr. Paisner is Senior
Partner
of the law firm Berwin Leighton Paisner, LLP in London, England.
He
currently is a member of the respective boards of directors of FIBI
Bank
(UK) plc and Think London (the official inward investment agency
of
London, England), and serves as a Governor of Ben Gurion University
of the
Negev and as a Trustee of the Institute of Jewish Policy Research.
Formerly, Mr. Paisner has served as a director of Courts plc, LINPAC
Group
Limited, and Estates & Agency Holdings plc.
|
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 six 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.
MEETINGS
AND COMMITTEES OF THE BOARD OF DIRECTORS
The
Board
of Directors held five meetings during 2006. All of the directors attended
at
least 75% of the total number of meetings of the Board and any committees of
which he or she was a member.
The
Board
of Directors has the following standing committees that assist the Board in
carrying out its duties: the Executive Committee, the Audit Committee, the
Compensation Committee, and the Nominating & Governance Committee. The
following table lists the members of each committee:
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Executive
Committee
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Audit
Committee
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Compensation
Committee
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Nominating
&
Governance
Committee
|
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Ray
C. Anderson (Chair)
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Carl
I. Gable (Chair)
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Thomas
R. Oliver (Chair)
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June
M. Henton (Chair)
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Carl
I. Gable
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Edward
C. Callaway
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K.
David Kohler
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Dianne
Dillon-Ridgley
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Daniel
T. Hendrix
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James
B. Miller, Jr.
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Harold
M. Paisner
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Christopher
G. Kennedy
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James
B. Miller, Jr.
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Thomas
R. Oliver
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Executive
Committee.
The
Executive Committee acted by unanimous written consent two times during 2006.
With certain limited exceptions, the Executive Committee may exercise all the
power and authority of the Board of Directors in the management of the business
and affairs of the Company.
4
Audit
Committee.
The
Audit
Committee met five times during 2006. The function of the Audit Committee is
to
(i) serve as an independent and objective party to review the Company’s
financial statements, financial reporting process and internal control system,
(ii) review and evaluate the performance of the Company’s independent auditors
and internal financial management, and (iii) provide an open avenue of
communication among the Company’s independent auditors, management (including
internal financial management) and the Board. The Board of Directors has
determined that all three members of the Audit Committee are “independent” in
accordance with applicable law, including the rules and regulations of the
Securities and Exchange Commission and the rules of the Nasdaq Stock Market,
and
that each of the three members of the Audit Committee is an “audit committee
financial expert” as defined by the rules and regulations of the Securities and
Exchange Commission. The Audit Committee operates pursuant to an Audit Committee
Charter that was adopted by the Board of Directors. The Audit Committee Charter
may be viewed on the Company’s website, www.interfaceinc.com/results/investor/.
Compensation
Committee.
The
Compensation Committee met four times during 2006. The function of the
Compensation Committee is to (i) evaluate the performance of the Company’s CEO
and other senior executives, (ii) determine compensation arrangements for such
executives, (iii) administer the Company’s stock and other incentive plans for
key employees, and (iv) review the administration of the Company’s employee
benefit plans. The Compensation Committee does not currently operate pursuant
to
a formal charter adopted by the Board of Directors, although a proposed charter
is currently under consideration by the Committee. The Board of Directors has
determined that each member of the Compensation Committee is “independent” in
accordance with the rules and regulations of the Securities and Exchange
Commission and the rules of the Nasdaq Stock Market. The Compensation
Committee’s policies and philosophy are described in more detail below in this
Proxy Statement under the heading “Compensation Discussion and
Analysis.”
Nominating
Committee.
The
Nominating Committee met four times during 2006 prior to its merger with the
Company’s former ad hoc committee on corporate governance matters to form the
Nominating & Governance Committee (see discussion below). The function of
the Nominating Committee was to assist the Board in establishing qualifications
for Board membership and in identifying, evaluating and selecting qualified
candidates to be nominated for election to the Board. In the event of a vacancy
on the Board, the Nominating Committee developed a pool of potential director
candidates for consideration. The Nominating Committee sought candidates for
election and appointment with excellent decision-making ability, valuable and
varied business experience and knowledge, impeccable personal integrity and
reputation, and diversity of background and experience. The Nominating Committee
considered whether candidates were free of restraints or conflicts which might
have interfered with the exercise of independent judgment regarding the types
of
matters likely to come before the Board, and had the time required for
preparation, participation and attendance at Board and committee meetings.
Other
factors considered by the Nominating Committee in identifying and selecting
candidates included the needs of the Company and the range of talent and
experience already represented on the Board. The Nominating Committee solicited
suggestions
from other members of the Board regarding persons to be considered as possible
nominees. The
Nominating Committee also was charged with considering recommendations (if
any)
for director candidates submitted by shareholders in
accordance with the process outlined below and, in addition, may have
obtained
advice or opinions from search firms or other internal or outside advisors.
Nominating
& Governance Committee.
The
Nominating & Governance Committee met two times in 2006 after it assumed the
duties of the Company’s former ad hoc committee on corporate governance matters
(which did not meet in 2006 prior to its dissolution). In addition to performing
the functions of the former Nominating Committee, the Nominating &
Governance Committee assists the Board in reviewing and analyzing, and makes
recommendations regarding, corporate governance matters. Shareholders who wish
the Nominating & Governance Committee to consider their recommendations for
director candidates should submit their recommendations in writing to the
Nominating & Governance Committee in care of the office of the Chairman of
the Board, Interface, Inc., 2859 Paces Ferry Road, Suite 2000, Atlanta, GA
30339. Recommendations should include the information which would be required
for a “Shareholder Proposal” as set forth in Article II, Section 9 of the
Company’s Bylaws. Director candidates that are recommended by shareholders in
accordance with these procedures will be evaluated by the Nominating &
Governance Committee in the same manner as director candidates recommended
by
the Company’s directors. In October 2006, the Nominating & Governance
Committee recommended K. David Kohler to fill a vacancy created due to the
retirement of Board member J. Smith Lanier. The Board subsequently elected
Mr.
Kohler as a Class A director. In February 2007, the Nominating and Governance
Committee recommended Harold M. Paisner to fill a vacancy created by the
retirement of Mr. van Andel. The Board subsequently elected Mr. Paisner as
a
Class B director.
5
The
Board
of Directors has determined that each member of the Nominating & Governance
Committee is “independent” in accordance with applicable law, including the
rules and regulations of the Securities and Exchange Commission and the rules
of
the Nasdaq Stock Market. The Nominating & Governance Committee currently
operates pursuant to the Nominating Committee Charter adopted by the Board
of
Directors prior to the merger of the Company’s Nominating and ad hoc corporate
governance committees in 2006, and a new Nominating & Governance Committee
charter is currently under consideration by the Committee. The Nominating
Committee Charter may be viewed on the Company’s website, www.interfaceinc.com/results/investor/.
PRINCIPAL
SHAREHOLDERS AND MANAGEMENT STOCK OWNERSHIP
The
following table sets forth, as of February 1, 2007 (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 director, (iii) the Company’s Principal Executive Officer, Principal
Financial Officer, and next three most highly compensated executive officers
(the “Named Executive Officers”), and (iv) all executive officers and directors
of the Company as a group.
|
Beneficial
Owner (and Business Address of 5% Owners)
|
Title
of
Class
|
Amount
and
Nature
of Beneficial
Ownership(1)
|
Percent
of
Class(1)
|
Percent
of
Class
A
After
Conversion(2)
|
||||
|
|
||||||||
|
Ray
C. Anderson
|
Class
A
|
15,000(3)
|
*
|
6.1%
|
||||
|
2859
Paces Ferry Road, Suite 2000
Atlanta,
Georgia 30339
|
Class
B
|
3,520,792(3)
|
|
50.4%
|
||||
|
Ariel
Capital Management, Inc.
200
E. Randolph Drive, Suite 2900
Chicago,
Illinois 60601
|
Class
A
|
6,736,669(4)(5)
|
12.5%
|
|||||
|
|
||||||||
|
Dimensional
Fund Advisors LP
1299
Ocean Avenue, 11th Floor
Santa
Monica, California 90401
|
Class
A
|
1,112,450(4)(6)
|
2.1%
|
|||||
|
FMR
Corp., Edward C. Johnson III,
and
Abigail P. Johnson
82
Devonshire Street
Boston,
Massachusetts 02109
|
Class
A
|
5,799,602(4)(7)
|
10.7%
|
|||||
|
Edward
C. Callaway
|
Class
A
|
10,000
|
*
|
*
|
||||
|
Class
B
|
24,000(8)
|
*
|
||||||
|
Dianne
Dillon-Ridgley
|
Class
A
|
100
|
*
|
*
|
||||
|
Class
B
|
27,000(9)
|
*
|
||||||
|
Carl
I. Gable
|
Class
A
|
10,140(10)
|
*
|
*
|
||||
|
Class
B
|
88,244(10)
|
1.3%
|
||||||
|
Daniel
T. Hendrix
|
Class
A
|
104,868
|
*
|
1.6%
|
||||
|
Class
B
|
798,979(11)
|
11.1%
|
||||||
|
June
M. Henton
|
Class
A
|
2,000
|
*
|
*
|
||||
|
Class
B
|
36,600(12)
|
*
|
||||||
|
Christopher
G. Kennedy
|
Class
A
|
30,223(13)
|
*
|
*
|
||||
|
Class
B
|
37,000(13)
|
*
|
||||||
6
|
K.
David Kohler
|
Class
A
|
0
|
*
|
*
|
||||
|
Class
B
|
23,000(14)
|
|
*
|
|||||
|
|
|
|||||||
|
Patrick
C. Lynch
|
Class
A
|
35,250
|
*
|
*
|
||||
|
Class
B
|
159,017(15)
|
2.3%
|
||||||
|
|
||||||||
|
James
B. Miller, Jr.
|
Class
A
|
22,000
|
*
|
*
|
||||
|
Class
B
|
37,000(16)
|
*
|
||||||
|
Thomas
R. Oliver
|
Class
A
|
120,000
|
*
|
*
|
||||
|
Class
B
|
67,000(17)
|
1.0%
|
||||||
|
Harold
M. Paisner
|
Class
A
|
0
|
*
|
*
|
||||
|
Class
B
|
0(18)
|
*
|
||||||
|
Lindsey
K. Parnell
|
Class
A
|
43,440
|
*
|
*
|
||||
|
Class
B
|
95,510(19)
|
1.4%
|
||||||
|
John
R. Wells
|
Class
A
|
115,761
|
*
|
1.0%
|
||||
|
Class
B
|
433,451(20)
|
6.1%
|
||||||
|
Raymond
S. Willoch
|
Class
A
|
35,883
|
*
|
*
|
||||
|
Class
B
|
150,445(21)
|
2.2%
|
||||||
|
All
executive officers and directors
|
Class
A
|
636,988
|
1.2%
|
10.9%
|
||||
|
as
a group (19 persons)
|
Class
B
|
5,894,613(22)
|
75.1%
|
__________
|
*
|
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.
Percent of Class is calculated assuming that the beneficial owner
has
exercised any conversion rights, options or other rights to subscribe
held
by such beneficial owner that are exercisable within 60 days (not
including Class A shares that could be acquired upon conversion of
Class B
shares), and that no other conversion rights, options or rights to
subscribe have been exercised by anyone else.
|
|
(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)
|
Represents
15,000 Class A shares held by Mr. Anderson’s wife, although Mr. Anderson
disclaims beneficial ownership of such shares. Also includes 42,000
Class
B shares that may be acquired by Mr. Anderson pursuant to exercisable
stock options, and 23,529 Class B shares that Mr. Anderson beneficially
owns through the Company’s 401(k) plan.
|
|
(4)
|
Based
upon information included in statements as of December 31, 2006 provided
to the Company and filed with the SEC by such beneficial
owners.
|
|
(5)
|
All
such shares are held by Ariel Capital Management, Inc. (“Ariel”) for the
accounts of investment advisory clients. Ariel, in its capacity as
investment adviser, has sole voting power with respect to 3,574,724
of
such shares and sole dispositive power with respect to 6,723,674
of such
shares.
|
|
(6)
|
All
such shares are held by Dimensional Fund Advisors LP (“Dimensional”) as an
investment adviser registered under Section 203 of the Investment
Advisers
Act of 1940. Dimensional disclaims beneficial ownership of all such
shares. Dimensional, in its capacity as investment adviser, has sole
voting and dispositive power with respect to all such
shares.
|
|
(7)
|
FMR
Corp. is a parent holding company. Fidelity Management & Research
Company (“Fidelity”), which is a wholly-owned subsidiary of FMR Corp. and
is a registered investment advisor, beneficially owns 5,799,602 shares
of
Class A Common Stock. Mr. Johnson, FMR Corp. (through its control
of
Fidelity) and the Fidelity funds state that each has sole power to
dispose
of those 5,799,602 shares; however, none of them has sole power to
vote or
direct the voting of the shares, which power resides with the Boards
of
Trustees of the funds.
|
|
(8)
|
Includes
9,000 restricted Class B shares, and 12,000 Class B shares that may
be
acquired by Mr. Callaway pursuant to exercisable stock
options.
|
7
|
(9)
|
Includes
7,500 restricted Class B shares, and 15,000 Class B shares that may
be
acquired by Ms. Dillon-Ridgley pursuant to exercisable stock
options.
|
|
(10)
|
Includes
140 Class A shares held by Mr. Gable as custodian for his son. Includes
9,000 restricted Class B shares, and 15,000 Class B shares that may
be
acquired by Mr. Gable pursuant to exercisable stock
options.
|
|
(11)
|
Includes
372,613 restricted Class B shares, and 267,204 Class B shares that
may be
acquired by Mr. Hendrix pursuant to exercisable stock options. Also
includes 4,242 Class B shares beneficially owned by Mr. Hendrix pursuant
to the Company’s 401(k) plan.
|
|
(12)
|
Includes
9,000 restricted Class B shares, and 15,000 Class B shares that may
be
acquired by Dr. Henton pursuant to exercisable stock
options.
|
|
(13)
|
Includes
9,000 restricted Class B shares, and 25,000 Class B shares that may
be
acquired by Mr. Kennedy pursuant to exercisable stock options. Mr.
Kennedy
serves on the Board of Trustees of Ariel Mutual Funds, for which
Ariel
Capital Management, Inc. serves as investment advisor and performs
services which include buying and selling securities on behalf of
the
Ariel Mutual Funds. Mr. Kennedy disclaims beneficial ownership of all
Class A shares held by Ariel Capital Management, Inc. as investment
advisor for Ariel Mutual Funds.
|
|
(14)
|
Includes
3,000 restricted Class B shares, and 20,000 Class B shares that may
be
acquired by Mr. Kohler pursuant to exercisable stock
options.
|
|
(15)
|
Includes
79,017 restricted Class B shares, and 80,000 Class B shares that
may be
acquired by Mr. Lynch pursuant to exercisable stock
options.
|
|
(16)
|
Includes
9,000 restricted Class B shares, and 25,000 Class B shares that may
be
acquired by Mr. Miller pursuant to exercisable stock
options.
|
|
(17)
|
Includes
9,000 restricted Class B shares, and 55,000 Class B shares that may
be
acquired by Mr. Oliver pursuant to exercisable stock
options.
|
|
(18)
|
As
of February 1, 2007, Mr. Paisner did not own any Class A or Class
B
shares. Mr. Paisner was elected to the Board on February 21, 2007.
As of
April 1, 2007, Mr. Paisner beneficially owns 3,000 restricted Class
B
shares, and 20,000 Class B shares that may be acquired pursuant to
exercisable stock options.
|
|
(19)
|
Includes
94,010 restricted Class B shares, and 1,500 Class B shares that may
be
acquired by Mr. Parnell pursuant to exercisable stock
options.
|
|
(20)
|
Includes
218,111 restricted Class B shares, and 194,682 Class B shares that
may be
acquired by Mr. Wells pursuant to exercisable stock options. Also
includes
10,285 Class B shares beneficially owned by Mr. Wells pursuant to
the
Company’s 401(k) plan.
|
|
(21)
|
Includes
141,515 restricted Class B shares, and 8,931 Class B shares that
may be
acquired by Mr. Willoch pursuant to exercisable stock
options.
|
|
(22)
|
Includes
1,213,892 restricted Class B shares, and 896,317 Class B shares that
may
be acquired by all executive officers and directors as a group pursuant
to
exercisable stock options. Also includes 44,003 Class B shares that
are
beneficially owned through the Company’s 401(k)
plan.
|
8
COMPENSATION
DISCUSSION AND ANALYSIS
Overall
Philosophy and Objectives
The
Company’s compensation program is designed in a manner intended to both attract
and retain a highly qualified, motivated and engaged executive management team
whose focus is on enhancing shareholder value. The Company believes a
straightforward program that is readily understood and endorsed by its
participants best serves these goals, and has constructed a program that
contains (1) multiple financial elements, (2) clear and definitive targets,
(3)
challenging but attainable objectives, and (4) specified performance metrics.
Specifically, the objectives of the Company’s executive compensation program
include:
| · |
Establishing
strong links between the Company’s performance and total compensation
earned — i.e., “paying for
performance”;
|
| · |
Providing
incentives for executives to achieve specific performance
objectives;
|
| · |
Promoting
and facilitating executive officer stock ownership, and thereby motivating
executives to think and act as
owners;
|
| · |
Emphasizing
the Company’s mid and long-term performance, thus enhancing shareholder
value; and
|
| · |
Offering
market competitive total compensation opportunities to attract and
retain
talented executives.
|
Program
Design and Adminisration
The
Compensation Committee of the Board of Directors has developed and administers
the Company’s pay program so as to provide compensation commensurate with the
level of financial performance achieved, the responsibilities undertaken by
the
executives, and the compensation packages offered by comparable companies.
The
program currently consists of three principal components, each of which is
designed to drive a specific behavioral focus, which in turn helps to provide
specific benefits to the Company:
|
Program
Component
|
Behavioral
Focus
|
Ultimate
Benefit to Company
|
|||
|
Competitive
base salary
|
Rewards
individual competencies,
performance
and level of experience
|
Assists
with attraction and retention of
highly-qualified
executives, and promotes
management
stability
|
|||
|
Annual
cash bonuses based on
achievement
of established goals
|
Rewards
individual performance and
operational
results of specific business
units
and Company as a whole
|
Aligns
individual interests with overall
short
term objectives, and reinforces “pay
for
performance” program goals
|
|||
|
Long-term
incentives
|
Rewards
engagement, longevity,
sustained
performance and actions
designed
to enhance overall
shareholder
value
|
Aligns
individual interests with the long-
term
investment interests of shareholders,
and
assists with retention of highly-
qualified
executives
|
The
Company strives for each of these three program components to receive
substantial weighting each year so that a large portion of executive
compensation is directly linked to advancing the Company’s financial performance
and the interests of shareholders. In addition, the Committee on occasion
provides special incentive opportunities to executives for the accomplishment
of
specific performance objectives.
The
Committee, which is composed entirely of independent directors, establishes
base
salaries for the executive officers, including the Named Executive Officers
listed in the “Summary Compensation Table” included in this Proxy Statement. The
Committee also administers the annual bonus program, the long-term incentive
program, and, when applicable, special incentive programs. In fulfilling
its
responsibilities, the Committee regularly seeks input from a
nationally-recognized, independent compensation consultant, retained directly
by
the Committee, and periodically seeks input from appropriate Company executives.
Furthermore, the policies and programs described below 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.
9
Discussion
of Principal Elements of Compensation Program
Base
Salaries
The
Committee generally strives to set base salaries at the market median
(50th
percentile) of salaries offered by other employers in our industry and other
publicly traded companies with characteristics similar to the Company (size,
growth rate, etc.), based on information provided by an independent compensation
consultant. Some of the companies considered from time to time are included
in
the list of companies comprising the “self-determined peer group” index used to
create the stock performance graph included in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2006. The Company’s current
self-determined peer group is comprised of the following companies: Actuant
Corp.; Acuity Brands, Inc.; Albany International Corp.; BE Aerospace, Inc.;
The
Dixie Group, Inc.; Herman Miller, Inc.; HNI Corporation; Kimball International,
Inc.; Knoll, Inc.; Mohawk Industries, Inc.; Steelcase, Inc.; Unifi, Inc.; and
USG Corp.
In
addition, the Committee may consider other factors when setting individual
salary levels, which may result in salaries somewhat above or below the targeted
amount. These factors include the executive’s level of responsibility,
achievement of goals and objectives, tenure with the Company, and specific
background or experience, as well as external factors such as the availability
of talent, the recruiting requirements of the particular situation, internal
equalization policies of the Company, and general economic
conditions.
Base
salary adjustments for executive officers generally are made (if at all)
annually and are dependent on the factors described above. Based on the
foregoing considerations, in December 2005, the Committee approved 2006 base
salary increases for the Named Executive Officers in an aggregate amount of
$56,231 for the group of five executives (an average increase of 3.4% per
executive). The Committee determined the raises were warranted based, in part,
on improvements in the Company’s performance in fiscal year 2005, which included
(1) a 12% increase in net sales to $985.8 million, (2) a 35% increase in
operating income to $82.0 million, and (3) an almost three-fold increase in
both
income from continuing operations and earnings per share.
Please
see the “Summary Compensation Table” included in this Proxy Statement for the
base salaries of the Named Executive Officers in 2006.
Annual
Bonuses
The
Committee administers the shareholder-approved Executive Bonus Plan, which
provides quarterly and annual bonus opportunities for Company executives. The
bonus opportunities provide an incentive for executives to earn compensation
based on the achievement of important corporate or business unit (division
or
subsidiary) financial performance and individual performance goals. In
determining the appropriate bonus opportunities, the Committee seeks to
establish potential awards that, when combined with annual salary, place the
total overall cash compensation for the Company’s executives in the third
quartile (between the market 50th percentile
and the market 75th
percentile) for comparable companies, provided that the performance objectives
are substantially achieved.
10
Each
executive officer of the Company, including the Chief Executive Officer,
is
assigned a bonus potential (typically ranging between 70% and 110% of base
salary), and a personalized set of quarterly and annual financial objectives
and, in the case of certain staff positions, non-financial objectives. Actual
awards can range from 0% to 125% of the bonus potential, depending on the
degree
to which the established financial and non-financial objectives are achieved,
and are paid on a quarterly and annual basis in the following
manner:
|
Achievement
of Objectives
|
Percentage
of Bonus
Opportunity Payable
|
Timing
of Payment to Employee Participant
|
||
|
First
Quarter Objectives Achieved
|
15%
|
Approximately
45 days following end of fiscal first quarter
|
||
|
Second
Quarter Objectives Achieved
|
15%
|
Approximately
45 days following end of fiscal second quarter
|
||
|
Third
Quarter Objectives Achieved
|
15%
|
Approximately
45 days following end of fiscal third quarter
|
||
|
Fourth
Quarter Objectives Achieved
|
15%
|
Approximately
60 days following end of fiscal year
|
||
|
Fiscal
Year Objectives Achieved
|
40%
|
Approximately
60 days following end of fiscal
year
|
In
2006,
100% of the bonus potential for the Chief Executive Officer and each of the
executive officers who were directly accountable for the profitability of a
business unit (including Messrs. Wells and Parnell) was based on measurable
financial objectives, which consisted of growth in operating income, cash flow,
revenue and earnings per share. Relative weights assigned to these financial
objectives were 40%, 30%, 20% and 10%, respectively. For executives who were
not
directly accountable for the profitability of a business unit (including Messrs.
Lynch and Willoch), 80% of their bonus potential was based on these same
financial objectives (relative weights assigned to the financial objectives
were
30%, 25%, 15% and 10%, respectively), with the remaining 20% based on
non-financial objectives. Evaluation of non-financial objectives is, inherently,
somewhat subjective, and equal weight typically is assigned to each of these
objectives.
For
2006,
each of the Named Executive Officers received a bonus, which appears in the
“Summary Compensation Table” included in this Proxy Statement, as their
respective performance objectives were determined to have been achieved, in
part, for the year. The achievements included:
| · |
On
a consolidated basis (applicable to Messrs. Hendrix, Lynch and Willoch),
the Company experienced 23% growth in operating income from continuing
operations (to $97 million) and 9% growth in revenue (to $1,075.8
million)
in 2006;
|
| · |
Americas
floorcoverings (managed by Mr. Wells) experienced double-digit
(percentage) growth in both operating income and revenue in 2006;
and
|
| · |
Europe
floorcoverings (managed by Mr. Parnell) experienced double-digit
growth in
both operating income and revenue in
2006.
|
Long-Term
Incentives
The
Committee administers the shareholder-approved Interface, Inc. Omnibus Stock
Incentive Plan (the “Omnibus Stock Plan”), which is an equity-based plan that
allows for long-term incentive awards such as restricted stock and stock
options. The Omnibus Stock Plan provides for the grant to key employees and
directors of the Company and its subsidiaries of restricted stock, incentive
stock options (which qualify for certain favorable tax treatment), nonqualified
stock options, stock appreciation rights, deferred shares, performance shares
and performance units.
11
Long-term
incentives are intended to attract and retain outstanding executive talent,
create a direct link between shareholder and executive interests by focusing
executive attention on increasing shareholder value, and motivate executives
to
achieve specific performance objectives. For instance, stock options (when
granted) 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 stock options only
have value if the market price of the Company’s stock rises after the grant
date. Additionally, restricted stock awards generally vest, in whole or in
part,
over a period of multiple years (five years for the 2006 awards), giving the
executive an incentive to remain employed with the Company for a significant
time period to vest in an award. Moreover, awards of restricted stock may vest
earlier if specific performance criteria are met, and these performance criteria
are designed to drive shareholder value. (In fact, 50% of the 2006 awards are
forfeited altogether if performance criteria are not met.) For the executive
officers directly accountable for the profitability of a business unit, the
accelerated vesting criteria for the 2006 awards is based on improvement in
the
applicable business unit’s operating income. For the Chief Executive Officer,
and each of the staff executives not directly accountable for the profitability
of a business unit, the accelerated vesting criteria for the 2006 awards is
based on improvement in the Company’s consolidated operating
income.
The
size
of the awards made to individual officers is based on an evaluation of several
factors, including the officer’s level of responsibility, the officer’s base
salary and the Company’s overall compensation objectives. The amount and nature
of prior equity incentive awards are generally considered in determining new
Omnibus Stock Plan awards for executive officers. Consistent with prevailing
practices in the marketplace, the Committee currently intends to make long-term
incentive awards to executives and non-employee directors each fiscal
year.
Description
of Available Awards
Restricted
Shares
Awards
of
restricted shares under the Omnibus Stock Plan generally vest over a period
of
multiple years following the date of award, and may vest earlier if specified
performance criteria established by the Committee are satisfied. Unvested awards
are also subject to forfeiture under certain circumstances. All restricted
shares awarded to date have been made without consideration from the participant
(although the Omnibus Stock Plan authorizes the Committee, in connection with
any award, to require payment by the participant of consideration, which can
be
less than the fair market value of the award on the date of grant). Awards
of
restricted stock generally will not be transferable by the participant other
than by will or applicable laws of descent and distribution, although the
Committee, in its discretion, may permit limited transfers of awards to family
members or for estate planning purposes.
Stock
Options
Options
granted under the Omnibus Stock Plan may be incentive stock options (as defined
in Section 422 of the Internal Revenue Code of 1986, as amended), nonqualified
stock options or a combination of the foregoing, although only employees are
eligible to receive incentive stock options. All options under the Omnibus
Stock
Plan will be granted at an exercise price per share equal to not less than
100%
of the fair market value of the Common Stock on the date the option is granted.
Options granted under the Omnibus Stock Plan expire following a pre-determined
period of time after the date of grant (which may not be more than 10 years
after the grant date), and generally will terminate on the date three months
following the date that a participant’s employment with the Company
terminates.
The
Company receives no consideration upon the granting of an option. Full payment
of the option exercise price must be made when an option is exercised. The
exercise price may be paid in cash or in such other form as the Company may
approve, including shares of Common Stock valued at their fair market value
on
the date of option exercise. Options generally will not be transferable by
the
holder thereof other than by will or applicable laws of descent and
distribution, although the Compensation Committee, in its discretion, may permit
limited transfers of options to family members or for estate planning
purposes.
12
Other
Potential Awards
The
Omnibus Stock Plan also provides for the award of stock appreciation rights,
deferred shares, performance shares and performance units. To date, the
Committee has not granted any of these types of awards.
2006
Omnibus Stock Plan Awards to Named Executive Officers
The
long-term incentive awards made under the Omnibus Stock Plan during 2006 to
Company executives consisted of restricted stock grants with performance-based
vesting acceleration features. No stock options were granted to Company
executives in 2006. Please see the “Summary Compensation Table” included in this
Proxy Statement for the Omnibus Stock Plan awards made to the Named Executive
Officers in 2006.
Other
Elements of Compensation Program
In
addition to the principal compensation program elements described above, the
Company has adopted a number of other elements to further its compensation
program goals, including those related to strengthening the alignment of our
executive officers’ interests with shareholder long-term interests. They are as
follows:
|
·
|
Retirement
Benefits
|
·
|
Stock
Ownership and Retention Guidelines
|
|
·
|
Elective
Deferred Compensation Program
|
·
|
Severance
Agreements
|
|
·
|
Pension/Salary
Continuation Programs
|
·
|
Perquisites
|
|
·
|
Special
Incentive Programs
|
Retirement
Benefits
The
Company maintains the Interface, Inc. Savings and Investment Plan (the “401(k)
Plan”), a tax-qualified 401(k) plan which provides its U.S.-based employees a
convenient and tax-advantaged opportunity to save for retirement. The Company’s
Named Executive Officers who are based in the United States are eligible to
participate in the 401(k) Plan on the same terms as other executive and
non-executive employees based in the United States, and receive the same
benefits afforded all other participants.
Under
the
401(k) Plan, all participating employees are eligible to receive matching
contributions that are subject to vesting over time. The Company periodically
evaluates the level of matching contributions afforded participant employees
to
ensure competitiveness in the marketplace. In 2006, the Company increased the
matching contribution under the 401(k) Plan from 50% of the first 4% contributed
by employees, to 50% of the first 6% contributed by employees.
Elective
Deferred Compensation Program
The
Company maintains the Interface, Inc. Nonqualified Savings Plan and Interface,
Inc. Nonqualified Savings Plan II (collectively, the “Nonqualified Plan”) for
certain U.S.-based “highly compensated employees” (as such term is defined in
applicable IRS regulations), including the Named Executive Officers who are
based in the United States. As with the Company’s 401(k) Plan, the Named
Executive Officers who are based in the United States are eligible to
participate in the Nonqualified Plan on the same terms as other executive and
non-executive employees based in the United States, and receive the same
benefits afforded all other participants. Under the Nonqualified Plan, all
eligible employees can elect to defer, on a pre-tax basis, a portion of their
salary and/or annual bonus compensation. (Up to 80% of base salary and 100%
of
annual bonus compensation can be deferred.) All participating employees are
eligible to receive matching contributions that are subject to vesting over
time. The Nonqualified Plan also contains a “Key Employee Retirement Savings
Benefit” feature to permit discretionary contributions to certain key employees’
accounts to enhance retirement savings and to couple such contributions with
vesting structures that will promote the retention of such key employees. To
date, no such contributions have been made.
Please
see the “2006 Non-Qualified Deferred Compensation” table included in this Proxy
Statement for further details regarding the Nonqualified Plan, as well as the
Company’s Named Executive Officers’ contributions, earnings and account balances
applicable to the Nonqualified Plan for fiscal year 2006.
13
Pension/Salary
Continuation Programs
Foreign
Defined Benefit Plans
The
Company has trustee-administered defined benefit retirement plans (“Pension
Plans”) which cover certain of its overseas employees. The benefits are
generally based on years of service and the employee’s average monthly
compensation. As determined by their respective trustees, the investment
objectives of the Pension Plans are to maximize the return on the investments
without exceeding the limits of prudent pension fund investment, to ensure
that
the assets would be sufficient to exceed minimum funding requirements, and
to
achieve a favorable return against the performance expectation based on historic
and projected rates of return over the short term. The goal is to optimize
the
long-term return on plan assets at a moderate level of risk, by balancing
higher-returning assets, such as equity securities, with less volatile assets,
such as fixed income securities. The assets are managed by professional
investment firms and performance is evaluated periodically against specific
benchmarks. The Pension Plans’ net assets did not include any shares of the
Company’s own stock at December 31, 2006.
Named
Executive Officer Mr. Parnell, based in Europe, is a participant in a Pension
Plan. Please see the “2006 Pension Benefits” table included in this Proxy
Statement for information about the pension benefits applicable to Mr.
Parnell.
Salary
Continuation Plan
The
Company maintains a nonqualified Salary Continuation Plan which is designed
to
induce selected employees 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 other benefit programs. The
Salary Continuation Plan entitles participants to (i) retirement benefits upon
normal retirement from the Company at age 65 (or early retirement as early
as
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 (or,
if elected by a participant, a reduced benefit is payable for the remainder
of
the participant’s life and any surviving spouse’s life) 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 (or, if elected by a surviving spouse that is the designated
beneficiary, a reduced benefit is payable for the remainder of such surviving
spouse’s life). 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) of the
Company.
Each
of
Named Executive Officers Messrs. Hendrix, Wells and Willoch has entered into
a
Salary Continuation Agreement with the Company pursuant to the Salary
Continuation Plan. Please see the “2006 Pension Benefits” table included in this
Proxy Statement for information about the Salary Continuation Plan benefits
applicable to Messrs. Hendrix, Wells and Willoch.
Special
Incentive Programs
From
time
to time, the Committee may implement special incentive programs which provide
executives an opportunity to earn additional compensation if specific
performance objectives are met. The time period for achievement of the
objectives may vary from less than a year to a multiple year period. In each
case, the performance objectives are designed to represent challenging but
achievable targets that will serve to align the interests of executives with
the
interests of shareholders, and encourage executives to think and act as owners.
14
2005-2006
Special Incentive Program
The
Committee implemented a special incentive program for executive officers of
the
Company (8 executives) effective during fiscal years 2005-2006. Awards under
this special incentive program were tied to a substantial reduction in Company
debt and/or a substantial increase in the Company’s cash balances by December
31, 2006. (The baseline was the fiscal 2004 year-end balance sheet.) The
potential payout to each executive officer for the achievement of the
performance objective was 50% of the officer’s base salary (at the time of
achievement). This program was designed to align the interests of executives
with the interests of shareholders on this important effort to significantly
reduce the net debt of the Company. After the conclusion of fiscal 2006, the
Committee determined that the specified performance objective had been
substantially satisfied, and authorized an award to each executive officer
in an
amount equal to 75% of the potential payout. The specific amount received by
each Named Executive Officer under the program is reflected in the “Non-Equity
Incentive Plan Compensation” column of the “Summary Compensation Table” included
in this Proxy Statement, and is further discussed in the accompanying
footnotes.
Monies
paid under the 2005-2006 special incentive program are excluded from any
potential severance benefits (except in the case of a change in control of
the
Company), and also are excluded from the final average earnings formulas of
all
applicable retirement and Pension Plans.
2007
Special Incentive Program
The
Committee implemented an additional special incentive program for 9 executive
officers of the Company effective during fiscal year 2007. Awards under this
special incentive program are tied to the Company stock price appreciating
to a
specified target level per share on or before December 30, 2007. Successful
performance would result in the payment to each designated executive officer
of
the Company of a cash amount equaling 75% of the officer’s base salary (at the
time of achievement). As of market close on December 14, 2005 (the date the
Committee approved this special incentive program), the Company’s stock traded
at $8.79 per share. Should the Company’s stock appreciate to the applicable
target price, such increase would increase shareholder value/market
capitalization by a very substantial amount (more than 100%) from program
inception. The attendant payout to participating management, based on current
salaries, would be approximately $2.3 million.
Any
monies paid under the 2007 special incentive program would be excluded from
any
potential severance benefits (except in the case of a change in control of
the
Company), and also would be excluded from the final average earnings formulas
of
all applicable retirement and Pension Plans. To date, the stock price
appreciation objective has not been achieved, and no payments have been made
to
any of the Named Executive Officers under this program.
Stock
Ownership and Retention Guidelines
To
further tie the financial interests of Company executives to those of
shareholders, the Committee has established stock ownership and retention
guidelines. Under these guidelines, executive officers are expected to
accumulate a number of shares (unrestricted) of the Company’s common stock
having a value equaling 1.5 times base salary in the case of the Chief Executive
Officer and 1 times base salary in the case of the other executive officers
(based on salaries and the stock price at the time the guidelines were adopted
in 2004). The expectation is for executives to reach this ownership level by
January 2009. To facilitate accomplishing the ownership targets, executive
officers generally are expected to retain at least one-half of the net after-tax
shares (i.e., the net shares remaining after first selling sufficient shares
to
cover the anticipated tax liability and, in the case of stock options, the
exercise price) obtained upon the vesting of restricted stock and the exercise
of stock options.
Non-employee
directors also are subject to stock ownership requirements. They are expected
to
retain during their tenure all of the net after-tax shares obtained upon the
vesting of restricted stock and at least one-half of the net after-tax shares
obtained upon the exercise of stock options.
Severance
Agreements
The
Company has entered into substantially similar employment agreements with
Messrs. Hendrix, Lynch, Wells and Willoch, and has entered into two employment
agreements with Mr. Parnell covering his activities (i) within and (ii) outside
of the United Kingdom. These agreements generally provide for certain benefits
(salary, bonus, benefits, etc.) in the event of a Named Executive Officer’s
termination of employment without “just cause” (as defined in the agreements),
as well as upon his resignation, death or disability. These agreements also
contain provisions placing restrictions on a Named Executive Officer’s ability
to compete with the Company, or solicit its customers or employees, for a
specified period of time following termination of employment.
The
Company has also entered into substantially similar change in control agreements
with Messrs. Hendrix, Lynch, Wells and Willoch (Mr. Parnell is not a party
to a
change in control agreement). These agreements provide for certain benefits
in
the event of a termination of employment in connection with a “Change in
Control” (as defined in the agreements) of the Company.
15
Please
see the further disclosure below in the “Potential Payments Upon Termination or
Change of Control” section of this Proxy Statement regarding the respective
employment and change in control agreements of the Company’s Named Executive
Officers.
Perquisites
In
order
to provide a market competitive total compensation package to certain of the
Company’s executive officers, including the Named Executive Officers, the
Company provides those limited perquisites that it believes enable its Named
Executive Officers to perform their responsibilities efficiently and with
minimal distractions. In 2006, the Company provided the following perquisites
to
one or more of the Named Executive Officers:
|
·
|
Company-provided
automobile/allowance
|
·
|
Company-provided
telephone
|
|
·
|
Health
club dues
|
·
|
Long-term
care insurance
|
|
·
|
Tax
return preparation services
|
·
|
Split
dollar insurance agreements
|
Please
see the “Summary Compensation Table” included in this Proxy Statement (and the
notes thereto) for a more detailed discussion of these perquisites and their
valuation.
Compensation
Deductibility
An
income
tax deduction under federal law will be generally available for annual
compensation in excess of $1 million paid to the chief executive officer and
the
named executive officers of a public corporation only if that compensation
is
“performance-based” and complies with certain other tax law requirements.
Executive compensation under the Company’s Executive Bonus Plan, described
above, meets these requirements and therefore qualifies for an income tax
deduction under federal law.
Although
the Committee considers deductibility issues when approving executive
compensation elements, the Company
and the Committee believe that other compensation objectives, such as
attracting, retaining and providing incentives to qualified managers, are
important and may supersede the goal of maintaining deductibility. Consequently,
the Company and the Committee may make compensation decisions without regard
to
deductibility when it is deemed to be in the best interests of the Company
and
its shareholders to do so.
REPORT
OF THE COMPENSATION COMMITTEE
The
Compensation Committee of the Board of Directors has reviewed and discussed
the
Compensation Discussion and Analysis required by Item 402(b) of Regulation
S-K
with management. Based on such review and discussions, the Compensation
Committee recommended to the Board of Directors that the Compensation Discussion
and Analysis be included in this 2007 Proxy Statement and incorporated by
reference into the Company’s Annual Report on Form 10-K for the year ended
December 31, 2006, filed with the Securities and Exchange
Commission.
|
THE
COMPENSATION COMMITTEE
|
|
|
Thomas
R. Oliver (Chair)
|
|
|
K.
David Kohler
|
|
|
Harold
M. Paisner
|
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None
of
the executive officers of the Company served as either (1) a member of the
Compensation Committee or (2) a director of any entity of which any member
of
the Compensation Committee is an executive officer. In addition, none of the
executive officers of the Company served as a member of the compensation
committee of any entity of which any member of the Board of Directors is an
executive officer.
16
EXECUTIVE
COMPENSATION AND RELATED ITEMS
2006
Summary Compensation Table
The
following table provides information about the compensation paid by the Company
and its subsidiaries to the Company’s Named Executive Officers for 2006.
|
Name
and Principal
Position
(a)
|
Year
(b)
|
Salary
($)
(c)
|
Bonus
($)
(d)(1)
|
Stock
Awards
($)
(e)(2)
|
Option
Awards
($)
(f)(3)
|
Non-Equity
Incentive
Plan
Compensation
($)
(g)(4)
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
(h)(5)
|
All
Other
Compensation
($)
(i)(6)
|
Total
($)
(j)
|
|||||||||
|
Daniel
T. Hendrix,
President
and Chief Executive Officer
|
2006
|
$
725,000
|
--
|
$
676,641
|
$
28,460
|
$
954,535
|
$
698,239
|
$
99,030
|
$
3,181,905
|
|||||||||
|
Patrick
C. Lynch,
Vice
President and Chief Financial Officer
|
2006
|
300,000
|
--
|
194,639
|
17,460
|
349,695
|
--
|
28,325
|
890,119
|
|||||||||
|
John
R. Wells,
Senior
Vice President (Division President)
|
2006
|
490,000
|
--
|
374,175
|
11,384
|
676,288
|
274,091
|
38,966
|
1,864,904
|
|||||||||
|
Lindsey
K. Parnell,
Vice President
(Division President)(*)
|
2006
|
342,363
|
--
|
201,561
|
3,240
|
488,732
|
96,752
|
63,206
|
1,195,854
|
|||||||||
|
Raymond
S. Willoch,
Senior
Vice President and General Counsel
|
2006
|
347,500
|
--
|
264,898
|
8,639
|
405,063
|
211,941
|
33,265
|
1,271,306
|
______
|
*
|
Mr.
Parnell, as a European-based employee, is paid in British pounds
sterling.
In calculating the U.S. dollar equivalent for disclosure purposes,
the
Company has converted each payment into dollars based on the exchange
rate
in effect as of December 31, 2006 (the close of the Company’s most recent
fiscal year).
|
|
(1)
|
The
Company paid no discretionary bonus, or bonuses based on performance
metrics that were not pre-established and communicated to the Named
Executive Officers, for 2006. All cash bonus awards for 2006 were
performance-based. These payments, which were made under the Company’s
Executive Bonus Plan, are reported in the “Non-Equity Incentive Plan
Compensation” column (column (g)).
|
|
(2)
|
The
amounts reported in the “Stock Awards” column include the compensation
cost for 2006 related to restricted stock awards granted in 2006
and in
prior years, computed in accordance with Statement of Financial Accounting
Standard No. 123 (Revised 2004), “Share-Based Payment” (“FAS 123(R)”). See
the Note entitled “Shareholder’s Equity” to the Consolidated Financial
Statements in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2006, regarding assumptions underlying valuation of
equity
awards. See the “Grants of Plan-Based Awards for 2006” table included in
this Proxy Statement for information about equity awards granted
for 2006,
and the “Outstanding Equity Awards at 2006 Fiscal Year-End” table included
in this Proxy Statement for information with respect to awards outstanding
at year-end. The ultimate payout value may be significantly more
or less
than the amounts shown, and possibly zero, depending on the Company’s
financial performance or the price of the Company’s stock at the end of
the performance or restricted period. For a description of the performance
criteria, please see the discussion contained in the Compensation
Discussion and Analysis herein.
|
|
(3)
|
The
amounts reported in the “Option Awards” column include the compensation
cost for 2006 related to stock option awards granted in years prior
to
2006 (no options were granted to the Named Executive Officers during
2006), computed in accordance with FAS 123(R). See the Note entitled
“Shareholder’s Equity” to the Consolidated Financial Statements in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2006,
regarding assumptions underlying valuation of equity awards. See
the
“Grants of Plan-Based Awards for 2006” table included in this Proxy
Statement for information about equity awards granted for 2006, and
the
“Outstanding Equity Awards at 2006 Fiscal Year-End” table included in this
Proxy Statement for information with respect to awards outstanding
at year
end. The ultimate payout value may be significantly more or less
than the
amounts shown, and possibly zero, depending the price of the Company’s
stock during the term of the option
award.
|
17
|
(4)
|
The
amounts reported in the “Non-Equity Incentive Plan Compensation” column
reflect the amounts earned by and paid to each Named Executive Officer
for
2006 under the Company’s Executive Bonus Plan ($682,660, $237,195,
$492,538, $362,305 and $274,750 for Messrs. Hendrix, Lynch, Wells,
Parnell
and Willoch, respectively), as well as the 2005-2006 Special Incentive
Program adopted by the Compensation Committee ($271,875, $112,500,
$183,750, $126,427 and $130,313 for Messrs. Hendrix, Lynch, Wells,
Parnell
and Willoch, respectively). The material provisions of the Executive
Bonus
Plan and the 2005-2006 Special Incentive Program are more fully described
in the Compensation Discussion and Analysis included
herein.
|
|
(5)
|
The
amounts reported in the “Change in Pension Value and Nonqualified Deferred
Compensation Earnings” column represent aggregate changes in the actuarial
present value of the Named Executive Officers’ accumulated benefit under
our Pension Plans (for Mr. Parnell) and the Company’s Salary Continuation
Plan (for Messrs. Hendrix, Wells and Willoch). Mr. Lynch does not
participate in a Pension Plan or the Salary Continuation Plan. The
Company
does not pay any above-market interest (or any guaranteed interest
rate)
on its Nonqualified Deferred Compensation Plan. See the “2006 Pension
Benefits” table of this Proxy Statement for information about these
benefits afforded each of the Company’s Named Executive
Officers.
|
|
(6)
|
The
amounts reported in the “All Other Compensation” column reflect, for each
Named Executive Officer, the sum of (i) the incremental cost to the
Company of all perquisites and other personal benefits (including
the
dollar value of life and long-term care insurance premiums paid by
the
Company), and (ii) amounts contributed by the Company to the 401(k)
Plan,
the Nonqualified Plan, and the Interface Europe Pension Scheme
(collectively, the “Company Retirement Plans”). Amounts contributed to the
Company Retirement Plans are calculated on the same basis for all
participants in the relevant plan, including the Named Executive
Officers.
The material provisions of the Company Retirement Plans are contained
in
the Compensation Discussion and Analysis
herein.
|
The
following table outlines those perquisites and all other compensation required
by SEC rules to be separately quantified that were provided to the Company’s
Named Executive Officers during 2006.
|
Name
|
Automobile
|
Health
Club
Dues
|
Tax
Return
Preparation
Services
|
Telephone
|
Long-Term
Care Insurance
Premiums
|
Split
Dollar
Insurance
Premiums
|
Company
Contributions
to Retirement Plans
|
|||||||
|
Daniel
T. Hendrix
|
$
10,260
|
$
1,685
|
$
2,250
|
$
2,934
|
$
5,469
|
$
72,032
|
$
4,400
|
|||||||
|
Patrick
C. Lynch
|
9,953
|
911
|
1,700
|
626
|
4,481
|
--
|
10,654
|
|||||||
|
John
R. Wells
|
11,453
|
--
|
1,400
|
3,026
|
5,421
|
--
|
17,666
|
|||||||
|
Lindsey
K. Parnell
|
23,994
|
--
|
--
|
15,871
|
--
|
--
|
23,341
|
|||||||
|
Raymond
S. Willoch
|
10,872
|
1,836
|
2,760
|
228
|
5,019
|
--
|
12,550
|
Perquisites
18
Telephone.
The
Company paid certain fees associated with the Named Executive Officers’ use of
company-provided cellular telephones. In addition, certain fees associated
with
landline telephone and facsimile services were paid on Mr. Parnell’s
behalf.
Long-Term
Care Insurance.
The
Company paid certain premiums associated with long-term care insurance policies
covering Messrs. Hendrix, Lynch, Wells and Willoch. As a European-based
employee, Mr. Parnell was not eligible for coverage under these long-term care
policies.
Split
Dollar Insurance Agreement with Daniel T. Hendrix. The
Company is a party to a “Split Dollar” insurance agreement with Mr. Hendrix (the
“Split Dollar Agreement”). Pursuant to the Split Dollar Agreement, the Company
has purchased an insurance policy on the lives of Mr. Hendrix and his spouse,
and it pays the premiums on such policy as an additional employment benefit
for
Mr. Hendrix. The annual premium is $72,032. The Company is the owner of the
policy, and has endorsed to Mr. Hendrix the right to name a beneficiary of
a
portion of the death benefit that is approximately equal to the full death
benefit minus the greater of (1) the total amount of the premiums paid by the
Company with respect to the policy, and (2) the cash value of the policy. Upon
the death of the last to die of Mr. Hendrix and his spouse, the Company will
receive a portion of the death benefit that is approximately equal to the
greater of (1) the total amount of the premiums paid by the Company with respect
to the policy, and (2) the cash value of the policy.
Contributions
to Retirement Plans.
The
Company makes matching contributions on the same terms and using the same
formulas as other participating employees to each U.S.-based Named Executive
Officer’s account under the 401(k) Plan and the Nonqualified Plan, as
applicable.
The
amounts reflected above represent the following contributions by the Company
during 2006:
| · |
for
Mr. Hendrix, $4,400 to the 401(k) Plan;
|
| · |
for
Mr. Lynch, $4,400 to the 401(k) Plan and $6,254 to the Nonqualified
Plan;
|
| · |
for
Mr. Wells, $4,400 to the 401(k) Plan and $13,266 to the Nonqualified
Plan;
and
|
| · |
for
Mr. Willoch, $4,400 to the 401(k) Plan and $8,150 to the Nonqualified
Plan.
|
As
a
European-based employee, Mr. Parnell is ineligible to participate in the 401(k)
Plan and the Nonqualified Plan. Mr. Parnell is eligible to participate in the
Interface Europe Pension Scheme (the “Europe Pension Scheme”). Under the terms
of the Europe Pension Scheme, the Company contribution amount is based on a
percentage of pensionable earnings, with the rate applied depending on the
category of membership. Mr. Parnell’s specific category of membership entitles
him to a Company contribution rate of 11.3% (subject to a maximum yearly
contribution). The amount referenced above represents the total amount of the
Company’s contributions during 2006 (see note “*” above regarding conversion to
U.S. dollars).
19
Grants
of Plan-Based Awards for 2006
The
following table provides information about awards granted to the Company’s Named
Executive Officers in 2006, as well as potential future payments associated
therewith. None of the following amounts were earned or paid during
2006.
|
Estimated
Future Payouts
Under
Non-Equity Incentive
Plan
Awards (1)
|
Estimated
Future Payouts
Under
Equity Incentive
Plan
Awards
|
Grant
Date
Fair
Value
of
Stock
and
Option
Awards
($)
(l)(4)
|
|||||||||||||
|
Name
(a)
|
Grant
Date
(b)
|
Threshold
($)
(c)
|
Target
($)
(d)(2)
|
Maximum
($)
(e)(2)
|
Threshold
(#)
(f)
|
Target
(#)
(g)(3)
|
Maximum
(#)
(h)
|
||||||||
|
Daniel
T. Hendrix
|
12-13-06
|
0
|
825,000
|
1,031,250
|
--
|
--
|
--
|
--
|
|||||||
|
01-06-06
|
--
|
--
|
--
|
--
|
72,500
|
--
|
626,400
|
||||||||
|
Patrick
C. Lynch
|
12-13-06
|
0
|
292,500
|
365,625
|
--
|
--
|
--
|
--
|
|||||||
|
01-06-06
|
--
|
--
|
--
|
--
|
28,600
|
--
|
247,104
|
||||||||
|
John
R. Wells
|
12-13-06
|
0
|
441,000
|
551,250
|
--
|
--
|
--
|
--
|
|||||||
|
01-06-06
|
--
|
--
|
--
|
47,500
|
--
|
410,400
|
|||||||||
|
Lindsey
K. Parnell (*)
|
12-13-06
|
0
|
302,135
|
377,668
|
--
|
--
|
--
|
--
|
|||||||
|
01-06-06
|
--
|
--
|
--
|
--
|
29,460
|
--
|
254,534
|
||||||||
|
Raymond
S. Willoch
|
12-13-06
|
0
|
324,000
|
405,000
|
--
|
--
|
--
|
--
|
|||||||
|
01-06-06
|
--
|
--
|
--
|
--
|
33,500
|
--
|
289,440
|
||||||||
_______________
|
*
|
Estimated
potential payments are converted to U.S. dollars based on exchange
rates
as of the end of fiscal year 2006.
|
|
(1)
|
The
payment amounts reflected in columns (c), (d) and (e) above represent
amounts associated with bonus awards potentially earned for fiscal
year
2007 by the Company’s Named Executive Officers under the Company’s
Executive Bonus Plan (the “Bonus Plan”). The total bonus opportunity under
the Bonus Plan (expressed as a percentage of 2007 base salary) for
each of
the Named Executive Officers is as follows: Mr. Hendrix, 110%, Mr.
Lynch,
90%, Mr. Wells, 90%, Mr. Parnell, 85%, and Mr. Willoch, 90%. As reflected
in column (c), no bonus is paid to a participant under any individual
Bonus Plan element (operating income, cash flow, gross billings,
earnings
per share or, in the case of Messrs. Lynch and Willoch, non-financial
objectives), unless a designated financial threshold (operating income)
is
exceeded. As reflected in column (d), the estimated 2007 payout under
the
Bonus Plan for each of the Named Executive Officers assumes 100%
achievement of all Company financial goals and, in the case of Messrs.
Lynch and Willoch, their achievement of all individual non-financial
objectives. As reflected in column (e), the estimated 2007 payout
under
the Bonus Plan for each of the Named Executive Officers assumes 125%
or
greater achievement of all Company financial goals. Certain additional
material provisions of the Bonus Plan are more fully described in
the
Compensation Discussion and Analysis included herein.
|
| (2) |
The
amounts reflected in columns (d) and (e) do not include potential
cash
awards available to the Named Executive Officers under the 2007 Special
Incentive Program adopted by the Compensation Committee of the Board
of
Directors in December 2005. The following table sets forth, for each
of
the Named Executive Officers, the total potential bonus under the
2007
Special Incentive Program. For further information regarding the
2007
Special Incentive Program, please see the discussion contained in
the
Compensation Discussion and Analysis
herein.
|
|
Name
|
Total
Amount of Potential Bonus
Under
Special Incentive Program
|
Performance
Period
|
Estimated
Potential Payout if
Performance
Objective is Met
|
|||
|
Daniel
T. Hendrix
|
75%
of Base Salary (at achievement)
|
01/01/07
to 12/30/07
|
$562,500
|
|||
|
Patrick
C. Lynch
|
75%
of Base Salary (at achievement)
|
01/01/07
to 12/30/07
|
$243,750
|
|||
|
John
R. Wells
|
75%
of Base Salary (at achievement)
|
01/01/07
to 12/30/07
|
$367,500
|
|||
|
Lindsey
K. Parnell
|
75%
of Base Salary (at achievement)
|
01/01/07
to 12/30/07
|
$266,590(*)
|
|||
|
Raymond.
S. Willoch
|
75%
of Base Salary (at achievement)
|
01/01/07
to 12/30/07
|
$270,000
|
_________________
|
*
|
Estimated
potential payment has been converted to U.S. dollars based on exchange
rates as of December 31,
2006.
|
20
|
(3)
|
The
awards reflected in column (g) represent the number of shares of
restricted stock granted to each of the Named Executive Officers
on
January 6, 2006 under the Omnibus Stock Plan. The 2006 awards vest
in two
increments (one-half each) no earlier than the first and second
anniversaries, respectively, of the grant date and only if a
pre-determined performance target has been met on or after such
anniversary (for Messrs. Hendrix, Lynch and Willoch, the performance
target is based on an increase in the Company’s operating income, and, for
Messrs. Wells and Parnell, the performance target is based on increases
in
operating income of their respective business units). Fifty percent
(50%)
of any and all unvested 2006 awards (i.e., all award shares not vested
previously under the performance criteria) will vest on the fifth
anniversary of the grant date. The amounts recognized for financial
reporting purposes under FAS 123(R) of these shares of restricted
stock
are included in the Stock Awards column (column (e)) of the Summary
Compensation Table.
|
|
(4)
|
The
amounts reflected in column (l) represent the dollar value of restricted
stock awarded on January 6, 2006 to the Named Executive Officer calculated
by multiplying the number of shares awarded by $8.64, the closing
price of
the Company’s Class A Common Stock as reported by the Nasdaq Stock Market
on the date of grant. No options were awarded to any of the Named
Executive Officers in 2006.
|
Outstanding
Equity Awards at 2006 Fiscal Year-End
The
following table provides information about the number of shares covered by
exercisable and unexercisable options and vested and unvested restricted stock
awards granted to the Company’s Named Executive Officers as of December 31,
2006.
|
Option
Awards
|
Stock
Awards
|
|||||||||||||||||
|
Name
(a)
|
Number
of Securities Underlying Unexercised Options
(#)
Exercisable
(b)
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(c)
|
Equity
Incentive
Plan Awards:
Number
of Securities Underlying Unexercised Unearned
Options
(#)
(d)
|
Option
Exercise
Price
($)
(e)
|
Option
Expiration
Date
(f)
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)
(g)(1)
|
Market
Value
of Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
(h)(2)
|
Equity
Incentive
Plan
Awards: Number of Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
(#)
(i)
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares,
Units or
Other Rights That Have Not Vested
($)
(j)
|
|||||||||
|
Daniel
T. Hendrix
|
9,900
17,535
140,000
87,669
12,000
|
--
--
--
--
10,000
|
--
|
9.56
9.00
7.13
8.45
5.60
|
01-20-07
01-14-09
10-25-10
01-16-11
01-02-12
|
378,979
|
5,389,081
|
--
|
--
|
|||||||||
|
Patrick
C. Lynch
|
5,000
10,000
20,000
25,000
20,000
|
--
--
--
--
--
|
--
|
9.00
4.81
6.07
4.75
5.53
|
01-14-09
01-04-10
07-24-11
01-26-11
01-02-09
|
69,017
|
981,422
|
--
|
--
|
|||||||||
|
John
R. Wells
|
31,652
26,090
40,000
45,000
33,592
16,000
30,000
|
--
--
--
--
--
4,000
--
|
--
|
9.56
9.00
4.25
4.81
8.45
5.60
5.53
|
01-20-07
01-14-09
12-07-09
01-04-10
01-16-11
01-02-12
01-02-09
|
201,272
|
2,862,088
|
--
|
--
|
|||||||||
|
Lindsey
K. Parnell
|
1,500
|
--
|
--
|
4.75
|
11-26-11
|
94,010
|
1,336,822
|
--
|
--
|
|||||||||
|
Raymond
S. Willoch
|
8,931
|
--
|
--
|
9.00
|
01-14-09
|
136,988
|
1,947,969
|
--
|
--
|
|||||||||
________________
|
(1)
|
Restricted
stock awards that have not yet vested are subject to forfeiture by
the
Named Executive Officers under certain circumstances. For a description
of
the related performance criteria, please see the discussion contained
in
the Compensation Discussion and Analysis herein.
|
|
(2)
|
The
market value referenced above is based on the closing price of $14.22
of
the Company’s common stock on December 29, 2006 (the last trading day of
the Company’s 2006 fiscal year), as reported by the Nasdaq Stock
Market.
|
21
Option
Exercises and Stock Vested
The
following table provides information about the number and corresponding value
realized during 2006 with respect to (i) the exercise of stock options, and
(ii)
the vesting of restricted stock for each of the Company’s Named Executive
Officers.
|
Option
Awards
|
Stock
Awards
|
|||||||
|
Name
(a)
|
Number
of
Shares
Acquired
on
Exercise
(#)
(b)
|
Value
Realized
on
Exercise
($)
(c)(1)
|
Number
of
Shares
Acquired
on
Vesting
(#)
(d)
|
Value
Realized
on
Vesting
($)
(e)(2)
|
||||
|
Daniel
T. Hendrix
|
132,900
|
890,164
|
150,234
|
1,374,155
|
||||
|
Patrick
C. Lynch
|
25,000
|
150,000
|
40,416
|
384,823
|
||||
|
John
R. Wells
|
8,500
|
52,445
|
83,315
|
788,793
|
||||
|
Lindsey
K. Parnell
|
30,500
|
225,725
|
14,450
|
144,159
|
||||
|
Raymond
S. Willoch
|
121,404
|
537,288
|
55,863
|
516,496
|
||||
_____________________
|
(1)
|
These
amounts represent the difference at date of exercise between the
exercise
price of the stock option and the closing price of the Company’s common
stock on the Nasdaq Stock Market, multiplied by the number of shares
underlying the option exercised. The stock options exercised by Mr.
Hendrix had exercise prices ranging from $4.81 to $9.56 per share,
and
included options granted between 1997 and 2004. The stock options
exercised by Mr. Lynch had an exercise price of $2.71 per share and
were
granted in 2003. The stock options exercised by Mr. Wells had an
exercise
price of $2.71 per share and were granted in 2003. The stock options
exercised by Mr. Parnell had exercises prices ranging from $4.00
to $8.88
per share, and included options granted between 1999 and 2004. The
stock
options exercised by Mr. Willoch had exercise prices ranging from
$4.75 to
$9.56 per share, and included options granted between 1996 and
2004.
|
|
(2)
|
These
amounts represent the product of the number of shares vested and
the
closing price of the Company’s common stock on the Nasdaq Stock Market on
the vesting date.
|
2006
Pension Benefits
The
following table provides information about the pension benefits for each of
the
Company’s Named Executive Officers.
|
Name
(a)
|
Plan
Name
(b)(1)
|
Number
of
Years
Credited
Service
(#)
(c)
|
Present
Value of
Accumulated
Benefit
($)
(d)
|
Payments
During
Last
Fiscal
Year
($)
(e)
|
||||
|
Daniel
T. Hendrix
|
Salary
Continuation Plan
|
15
|
3,682,375
|
--
|
||||
|
Patrick
C. Lynch(2)
|
--
|
--
|
--
|
--
|
||||
|
John
R. Wells(3)
|
Salary
Continuation Plan
|
13
|
1,612,202
|
--
|
||||
|
Lindsey
K. Parnell
|
Europe
Pension Scheme
|
10
|
476,114
|
--
|
||||
|
Raymond
S. Willoch
|
Salary
Continuation Plan
|
15
|
1,341,754
|
--
|
_____________________
|
(1)
|
The
benefits under the Salary Continuation Plan vest upon 15 years of
service
and attainment of the age of 55, with maximum benefit accruing at
age 65.
None of the Named Executive Officers participating in the Salary
Continuation Plan have reached age 55. The above values assume
commencement of payment of the maximum benefit at age 65. All other
assumptions are the same as are used for financial reporting purposes
under generally accepted accounting principles.
|
|
(2)
|
Mr.
Lynch does not participate in a Pension Plan or the Salary Continuation
Plan.
|
|
(3)
|
Mr.
Wells has not yet attained the requisite 15 years of service under
the
Salary Continuation Plan. The amount reflected above assumes that
he will
attain the requisite 15 years of service and that his benefits under
the
Salary Continuation Plan will fully vest.
|
22
2006
Non-Qualified Deferred Compensation
The
following table provides information about the contributions, earnings and
account balances of the Company’s applicable deferred compensation plans for
each of the Company’s Named Executive Officers.
|
Name
(a)(1)
|
Executive
Contributions
in
Last FY
($)
(b)
|
Company
Contributions
in
Last FY
($)
(c)(2)
|
Aggregate
Earnings
in
Last FY
($)
(d)
|
Aggregate
Withdrawals/
Distributions
($)
(e)
|
Aggregate
Balance
at
Last FYE
($)
(f)(3)
|
|||||
|
Daniel
T. Hendrix
|
49,349
|
--
|
26,747
|
--
|
459,451
|
|||||
|
Patrick
C. Lynch
|
48,515
|
6,254
|
31,809
|
--
|
242,276
|
|||||
|
John
R. Wells
|
273,964
|
13,266
|
115,356
|
--
|
1,409,749
|
|||||
|
Lindsey
K. Parnell
|
--
|
--
|
--
|
--
|
--
|
|||||
|
Raymond
S. Willoch
|
33,249
|
8,150
|
1,720
|
453,383
|
41,295
|
_______________
|
(1)
|
The
Company maintains the Interface, Inc. Nonqualified Savings Plan and
Interface, Inc. Nonqualified Savings Plan II (collectively, the
“Nonqualified Plan”) for certain U.S.-based “highly compensated employees”
(as such term is defined in applicable IRS regulations), including
the
Named Executive Officers who are based in the United States (Messrs.
Hendrix, Lynch, Wells and Willoch). As with the Company’s 401(k) Plan,
Messrs. Hendrix, Lynch, Wells and Willoch are eligible to participate
in
the Nonqualified Plan on the same terms as other executive and
non-executive employees based in the United States, and receive the
same
benefits afforded all other participants.
|
|
Under
the Nonqualified Plan, all eligible employees can elect to defer,
on a
pre-tax basis, a portion of their salary and/or annual bonus compensation.
(Up to 80% of base salary and 100% of annual bonus compensation can
be
deferred.) Each participant elects when he or she will be paid out,
which
can be during or after employment, subject to the provisions of Section
409A of the Internal Revenue Code. The employee earns a deferred
return
based on deemed investments in mutual funds selected by the employee
from
a list provided by the Company. The investment risk is borne entirely
by
the employee participant. Gains and losses are credited based on
the
participant’s election of a variety of deemed investment choices.
Participants’ accounts may or may not appreciate, and may even depreciate,
depending on the performance of their deemed investment choices.
None of
the deemed investment choices provide interest at above-market rates
(or
any guaranteed interest rate). The Company has established a Rabbi
Trust
to hold, invest and reinvest deferrals and contributions under the
Nonqualified Plan, and all deferrals are paid out in cash upon
distribution.
|
|
|
The
Nonqualified Plan also contains a “Key Employee Retirement Savings
Benefit” feature applicable to certain designated key employees of the
Company. The purpose of this plan benefit is to permit discretionary
contributions to certain key employees’ accounts to enhance retirement
savings and to couple such contributions with vesting structures
that will
promote the retention of such key employees. To date, no such
contributions have been made.
|
|
|
(2)
|
The
amounts reported in column (c) reflect, for each Named Executive
Officer
(as applicable), the actual amounts contributed by the Company to
the
Nonqualified Plan during fiscal year 2006, and reflect Company matching
contributions associated with compensation deferrals that occurred
during
fiscal year 2005. These amounts are included in column (i) of the
Summary
Compensation Table herein. Mr. Hendrix did not participate in the
Nonqualified Plan during 2005, and thus received no Company contributions
during the 2006 fiscal year when 2005 plan year contributions were
made.
|
|
(3)
|
The
amounts reported in column (f) were not reported as compensation
to the
Named Executive Officers in the Company’s Summary Compensation Table for
fiscal years prior to 2006. However, the Company’s matching contributions
during previous fiscal years were included in the “All Other Compensation”
column of the Company’s Summary Compensation Tables for previous
years.
|
23
Compensation
of Directors
The
following table provides information about the compensation paid to the
Company’s directors in 2006 (excluding Company President and Chief Executive
Officer Daniel T. Hendrix, a Named Executive Officer, whose 2006 compensation
is
presented in the Summary Compensation Table included herein).
|
Name
(a)
|
Fees
Earned
or
Paid
in
Cash
($)
(b)
|
Stock
Awards
($)
(c)(1)
|
Option
Awards
($)
(d)(2)
|
Non-Equity
Incentive
Plan
Compensation
($)
(e)
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
(f)(3)
|
All
Other
Compensation
($)
(g)
|
Total
($)
(h)
|
||||||||
|
Ray
C. Anderson (4)
|
$
625,000
|
$ --
|
$
2,163
|
$
428,000
|
$
174,361
|
$
208,360
|
$
1,437,884
|
||||||||
|
Edward
C. Callaway (5)
|
44,000
|
26,377
|
12,360
|
--
|
--
|
--
|
82,737
|
||||||||
|
Diane
Dillon-Ridgley (5)
|
41,000
|
26,377
|
2,163
|
--
|
--
|
--
|
69,540
|
||||||||
|
Carl
I. Gable (5)
|
56,500
|
26,377
|
2,163
|
--
|
--
|
--
|
85,040
|
||||||||
|
June
M. Henton (5)
|
47,000
|
26,377
|
2,163
|
--
|
--
|
--
|
75,540
|
||||||||
|
Christopher
G. Kennedy (5)
|
43,000
|
26,377
|
2,163
|
--
|
--
|
--
|
71,540
|
||||||||
|
K.
David Kohler (5)(6)
|
--
|
--
|
10,717
|
--
|
--
|
--
|
10,717
|
||||||||
|
J.
Smith Lanier (5)(7)
|
17,000
|
17,737
|
2,163
|
--
|
--
|
--
|
36,900
|
||||||||
|
James
B. Miller, Jr. (5)
|
44,000
|
26,377
|
2,163
|
--
|
--
|
--
|
72,540
|
||||||||
|
Thomas
R. Oliver (5)
|
45,000
|
26,377
|
2,163
|
--
|
--
|
--
|
73,540
|
||||||||
|
Harold
M. Paisner (5)(8)
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
||||||||
|
Clarinus
C. Th. van Andel (5)(9)
|
17,000
|
26,377
|
2,163
|
--
|
--
|
--
|
45,540
|
||||||||
_______________
|
(1)
|
The
amounts reported in the “Stock Awards” column include the compensation
cost for 2006 related to restricted stock awards granted in 2006
and in
prior years, computed in accordance with FAS 123(R). See the Note
entitled
“Shareholder’s Equity” to the Consolidated Financial Statements in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2006,
regarding assumptions underlying valuation of equity awards. The
ultimate
payout value may be significantly more or less than the amounts shown,
and
possibly zero, depending on the outcome of the performance and the
price
of the Company’s stock at the end of the performance or restricted
period.
|
|
(2)
|
The
amounts reported in the “Option Awards” column include the compensation
cost for 2006 related to option awards granted in 2006 and in prior
years,
computed in accordance with FAS 123(R). See the Note entitled
“Shareholder’s Equity” to Consolidated Financial Statements in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2006,
regarding assumptions underlying valuation of equity awards. The
ultimate
payout value may be significantly more or less than the amounts shown,
and
possibly zero, depending the price of the Company’s stock during the term
of the option award.
|
|
(3)
|
The
amounts reported in the “Change in Pension Value and Nonqualified Deferred
Compensation Earnings” column represent aggregate changes in the actuarial
present value of Mr. Anderson’s accumulated benefit under the Company’s
Salary Continuation Plan.
|
|
(4)
|
Ray
C. Anderson, who serves as Chairman of the Board and Chairman of
the
Executive Committee of the Board, remains an employee of the Company.
Mr.
Anderson is the Company’s primary spokesperson in support of its
environmental sustainability initiative, giving 115 speeches,
webcasts and interviews during 2006, reaching a total estimated
audience in excess of 25 million people. In his capacity as an
employee, Mr. Anderson was compensated during 2006 in the amounts
reflected in the table above. The amounts reported in the “Non-Equity
Incentive Plan Compensation” column reflect the amounts earned by and paid
to Mr. Anderson for 2006 under the Company’s Executive Bonus Plan. The
material provisions of the Executive Bonus Plan are more fully described
in the Compensation Discussion and Analysis included herein. In addition,
as an employee of the Company, Mr. Anderson also was covered by certain
of
the Company’s benefits programs, such as medical and dental insurance
plans. Mr. Anderson entered into an Employment Agreement and a Change
in
Control Agreement with the Company in April 1997, each of which is
substantially similar to those described above for Messrs. Hendrix,
Lynch,
Wells and Willoch (except that each of Mr. Anderson’s agreements is for a
fixed, two-year term that expires upon his reaching age 74).
|
24
|
Mr.
Anderson also has entered into a Salary Continuation Agreement with
the
Company pursuant to the Salary Continuation Plan described in the
Compensation Discussion and Analysis herein. In connection with Mr.
Anderson’s transition from Chief Executive Officer to non-executive
Chairman in 2001, his future retirement benefit under the salary
continuation agreement was set at $480,060 per year (subsequently
reduced
to $449,605 due to Mr. Anderson’s election of a spousal survivor annuity
benefit).
|
|
|
The
amount reported in column (g) for Mr. Anderson reflects the sum of
(i) the
incremental cost to the Company of all perquisites and other personal
benefits (including the dollar value of split dollar life insurance
premiums paid by the Company), and (ii) amounts contributed (if any)
by
the Company to the 401(k) Plan and the Nonqualified Plan. The material
provisions of the 401(k) Plan and the Nonqualified Plan are contained
in
the Compensation Discussion and Analysis herein.
|
|
|
The
following table outlines those perquisites and all other compensation
required by SEC rules to be separately quantified that were provided
to
Mr. Anderson during 2006.
|
|
Name
|
Automobile
|
Health
Club
Dues
|
Financial,
Legal
and
Tax
Planning
|
Telephone
|
Split
Dollar
Insurance
Premiums
|
Company
Contributions
to
Retirement
Plans
|
||||||
|
Ray
C. Anderson
|
$
6,588
|
$
1,549
|
$
27,223
|
$
--
|
$
173,000
|
$
--
|
Perquisites
Automobile/Automobile
Allowance. Mr.
Anderson was provided with use of a company-provided automobile. He was taxed
on
a pro-rata portion of the costs associated with any personal use thereof. The
Company does not provide any tax reimbursement in connection with the personal
use of any automobile.
Health
Club Dues. Certain
health club membership dues were paid on behalf of Mr. Anderson. He was taxed
on
a pro-rata portion of the dues associated with any personal use of the health
club. The Company does not provide any tax reimbursement in connection with
the
personal use of the club.
Financial,
Legal and Tax Planning. The
Company paid certain fees associated with Mr. Anderson’s use of certain
financial, legal and tax planning services, which included tax preparation
and
estate planning services.
Telephone.
The
Company did not provide Mr. Anderson use of a company-provided telephone during
2006.
Split
Dollar Insurance Agreement with Ray C. Anderson and Mary Anne
Lanier.
The
Company is a party to a “Split Dollar” insurance agreement (the “Anderson Split
Dollar Agreement”) with Company Chairman Ray C. Anderson and Mary Anne Anderson
Lanier, as Trustee of the Ray Christie Anderson Family Trust (the “Trust”).
Pursuant to the Anderson Split Dollar Agreement, the Company has purchased
an
insurance policy on the lives of Mr. Anderson and his spouse, and it pays the
premiums on such policy as an additional employment benefit for Mr. Anderson.
The annual premium is $173,000. The Company is the owner of the policy, and
has
endorsed to the Trust the right to name a beneficiary of a portion of the death
benefit that is approximately equal to the full death benefit minus the greater
of (1) the total amount of the premiums paid by the Company with respect to
the
policy, and (2) the cash value of the policy. Upon the death of the last to
die
of Mr. Anderson and his spouse, the Company will receive a portion of the death
benefit that is approximately equal to the greater of (1) the total amount
of
the premiums paid by the Company with respect to the policy, and (2) the cash
value of the policy.
25
All
Other Compensation
Contributions
to Retirement Plans.
The
Company did not contribute to the 401(k) Plan or the Nonqualified Plan on Mr.
Anderson’s behalf during 2006.
|
(5)
|
The
Company’s non-employee directors (“outside directors”) are paid an annual
director’s fee of $30,000, plus $1,000 for each Board or Board committee
meeting attended. Outside directors who serve on the Audit Committee
or
the Compensation Committee are paid an additional $5,000 per year,
except
that the Chairperson of the Audit Committee and the Chairperson of
the
Compensation Committee are paid an additional $10,000 per year (rather
than $5,000). In addition, the lead independent director of the Board
is
paid an incremental $10,000 per year. Directors also are reimbursed
for
expenses in connection with attending Board and Committee
meetings.
|
|
In
2006, each outside director (except for Messrs. Kohler, Lanier and
Paisner, see below) was awarded 3,000 restricted shares of Company
stock.
The awards of restricted stock vest in two increments of one-half
each, no
earlier than the first and second anniversaries, respectively, of
the
grant date of the award and only if the Company’s operating income has
risen to a specified target level. All unvested shares will vest
on the
third anniversary of the grant date. Mr. Kohler also received a grant
of
20,000 stock options in 2006 upon his election to the
Board.
|
|
|
(6)
|
In
October 2006, the Board of Directors elected Mr. Kohler as a Class
A
director to fill a vacancy created due to the retirement of J. Smith
Lanier.
|
|
(7)
|
Mr.
Lanier retired from the Board in May 2006.
|
|
(8)
|
In
February 2007, the Board of Directors elected Harold M. Paisner as
a Class
B director to fill the vacancy created by the retirement of Clarinus
C.
Th. van Andel.
|
|
(9)
|
Mr.
van Andel retired from the Board in February
2007.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The
Board
of Directors of the Company recognizes that transactions with related persons
can present a heightened risk of conflict of interests and/or improper valuation
(or the perception thereof). Accordingly, as a general matter it is the
Company’s preference to avoid transactions with related persons. Nevertheless,
there are circumstances where the Company may obtain products or services (i)
of
a nature, quantity or quality that are not readily available from alternative
sources, (ii) on terms comparable to those provided by other, unrelated parties,
or (iii) when the Company provides products or services on an arm’s length basis
on terms comparable to those provided to unrelated third parties or on terms
provided to employees generally.
Policy
Regarding Review, Approval or Ratification of Transactions
Involving Related Persons
The
Company has adopted a written policy (the “Related Transactions Policy”) with
respect to the review, approval or ratification of transactions with related
persons involving the Company (or its subsidiaries or controlled affiliates).
In
evaluating potential transactions with related persons, the Related Transactions
Policy incorporates and applies the contents of Item 404(a) of Regulation S-K
(including but not limited to the definitions of “related persons” and
“transaction”, as well as the threshold for “direct or indirect material
interest” contained therein).
Prior
to
entering into a transaction with a related person, the related person is
required to advise a Company-designated “Compliance Officer” (currently the
Company’s General Counsel), who shall determine whether the proposed transaction
is a transaction with a related person under this policy. If the Compliance
Officer determines that the proposed transaction is a transaction with a related
person, the transaction is required to be submitted to the Audit Committee
of
the Board of Directors for consideration at its next meeting or, in those
instances in which it is not practicable or desirable for the Company to wait
until the next Audit Committee meeting, to the Chair of the Audit Committee
(who
possesses delegated authority to act between committee meetings). The Audit
Committee (or where submitted to the Chair, the Chair) shall consider all of
the
available relevant facts and circumstances, including (if applicable) but not
limited to: (i) the benefits to the Company; (ii) the impact on a director’s
independence in the event the Related Person is a director, an immediate family
member of a director, or an entity in which the director is a partner, equity
holder or executive officer; (iii) the availability of other sources for
comparable products or services; (iv) the terms of the transaction; and (v)
the
terms available to or from unrelated third parties or employees generally,
as
the case may be. After review, the Audit Committee either approves or
disapproves the proposed transaction and advises the Compliance Officer, who
in
turn conveys the decision to the appropriate persons within the Company. No
member of the Audit Committee is permitted to participate in any review,
consideration, or approval of any potential transaction with a related person
with respect to which such member or any of his or her immediate family members
is a related person.
26
The
Related Transactions Policy also provides for the review of (i) transactions
involving related persons entered into by the Company not previously approved
or
ratified under this policy, as well as (ii) any previously approved or ratified
transactions with related persons that remain ongoing and have a remaining
term
of more than six months or remaining amounts payable to or receivable from
the
Company of more than $120,000. The policy also explicitly requires disclosure
of
all transactions that are required to be disclosed under the Securities Act
of
1933, the Securities Exchange Act of 1934 and related rules and
regulations.
Transactions
Involving Related Persons
A
wholly-owned subsidiary of the Company employs James A. Lanier, Jr., son-in-law
of Company non-executive Chairman Ray C. Anderson, as its Director of Sales
for
Colleges & Universities. In 2006, Mr. Lanier earned salary and bonus of
$212,600 and participated in certain of the Company’s benefit programs generally
available to employees in the U.S.
DIRECTOR
INDEPENDENCE
For
each
director, the Board makes a determination of whether the director is
“independent” under the criteria established by the Nasdaq Stock Market and
other governing laws and regulations. In its review of director independence,
the Board considers all commercial, banking, consulting, legal, accounting,
charitable or other business relationships any director may have with the
Company. The current directors are Ray C. Anderson, Edward C. Callaway, Dianne
Dillon-Ridgley, Carl I. Gable, Daniel T. Hendrix, June M. Henton, Christopher
G.
Kennedy, K. David Kohler, James B. Miller, Jr., Thomas R. Oliver and Harold
M.
Paisner.
As
a
result of its review, the Board has determined that all of the current
directors, with the exception of Ray C. Anderson and Daniel T. Hendrix (who
are
employees), are independent.
The
independent directors meet in regularly scheduled executive sessions without
Messrs. Anderson and Hendrix or other members of management present. In 2006,
the independent directors met five times in executive session.
EQUITY
COMPENSATION PLAN INFORMATION
The
following table sets forth information concerning the Company’s equity
compensation plans as of December 31, 2006.
|
Plan
Category
|
Number
of Securities to
be
Issued upon Exercise
of
Outstanding Options,
Warrants
and Rights
|
Weighted-Average
Exercise
Price
of Outstanding Options,
Warrants
and Rights
|
Number
of Securities
Remaining
Available for
Future
Issuance under
Equity
Compensation Plans
(Excluding
Securities
Reflected
in Column
|
|||
|
(a)
|
(b)
|
(a))
(c)
|
||||
|
Equity
Compensation Plan
Approved
by Security Holders:
|
||||||
|
Interface,
Inc. Omnibus Stock
Incentive
Plan
|
1,743,284
|
$6.06
|
4,185,000(1)
|
|||
|
Equity
Compensation Plan Not
Approved
by Security Holders:
|
||||||
|
Individual
Compensation
Arrangements(2)
|
32,000
|
$7.00
|
0
|
___________________
|
(1)
|
Each
share issued under the Interface, Inc. Omnibus Stock Incentive Plan
(the
“Omnibus Stock Plan”) pursuant to an award other than a stock option will
reduce the number of remaining shares available by two
shares.
|
|
(2)
|
As
of December 31, 2006, the Company maintained stock option agreements
outside the Omnibus Stock Plan with one non-employee individual (a
Company
consultant) with respect to a total of 32,000 shares at $7.00 per
share.
The agreements provide for a five-year vesting period (all options
under
the agreements have now vested) and a ten-year
term.
|
27
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The
Company is generally obligated to provide its Named Executive Officers with
certain payments or other forms of compensation when their employment with
the
Company is terminated. The actual amount of compensation due each of the Named
Executive Officers, as well as the duration of any periodic payments, depends
on
both the circumstances surrounding the termination, as well as the particulars
of any employment-related agreements to which the Company and the Named
Executive Officer are party. The Company has executed Employment Agreements
with
Messrs. Hendrix, Lynch, Wells, Parnell and Willoch, as well as separate Change
in Control Agreements with Messrs. Hendrix, Lynch, Wells and Willoch, which
generally describe the benefits payable at, following, or in connection with
various termination scenarios. These are summarized as follows:
Employment
Agreements
In
April
1997, the Company entered into substantially similar employment agreements
with
Messrs. Hendrix, Wells and Willoch. In October 2005, the Company entered into
a
substantially similar employment agreement with Mr. Lynch. Each of their
agreements is for a rolling two-year term, such that the remaining term is
always two years (until such time as the executive reaches the age of 63, at
which time the term is fixed for an additional two years and then expires upon
the executive reaching age 65). The Company may terminate any of such agreements
upon two years’ notice, and each executive is permitted to voluntarily terminate
his respective agreement upon 90 days notice. The employment agreements also
contain provisions placing restrictions on the executives’ ability to compete
with the Company, or solicit its customers or employees, for a two year period
following the termination of employment.
In
March
2007, the Company entered into two separate employment agreements with Named
Executive Officer Mr. Parnell (one agreement applies to Mr. Parnell’s activities
performed on the Company’s behalf within the United Kingdom; the other applies
to his activities outside of the U.K.). Both agreements contain substantially
similar terms, except that the specified compensation in each agreement
correlates to the estimated amount of time Mr. Parnell anticipates spending
within and outside of the U.K. The agreements remain in effect until such time
as the Company provides Mr. Parnell with twelve months’ notice (or pay in lieu
of notice) of its intention to terminate Mr. Parnell’s employment relationship.
The employment agreements also contain provisions placing restrictions on Mr.
Parnell’s ability to compete with the Company for a six month period following
the termination of employment, as well as solicit its customers or employees
for
a twelve month period following the termination of employment.
Change
in Control Agreements
In
April
1997, each of Messrs. Hendrix, Wells and Willoch entered into substantially
similar change in control agreements with the Company. In October 2005, the
Company entered into a substantially similar change in control agreement with
Mr. Lynch. Mr. Parnell is not party to a change in control agreement. Each
of
the agreements for Messrs. Hendrix, Lynch, Wells and Willoch is for a rolling
two-year term, such that the remaining term is always two years (until such
time
as the executive reaches the age of 63, at which time the term is fixed for
an
additional two years and then expires upon the executive reaching age 65).
The
Company generally may terminate any of such agreements upon two years’ notice.
The agreements provide for certain benefits in the event of a termination of
employment under certain circumstances in connection with a “Change in Control”
(as defined in the agreements) 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 specified coercive tactics) occurring within 24
months after or six months prior to the date of a Change in Control. The
agreements also entitle Messrs. Hendrix, Lynch, Wells and Willoch to receive
tax
“gross-up” payments to cover the amount of any excise taxes imposed on the
benefits payable following a “Change in Control” under Sections 4999 and 280G of
the Internal Revenue Code.
28
Payments
to Named Executive Officers Upon Termination or Change in
Control
In
the
event that any of the Named Executive Officers (i) retire, (ii) die or suffer
a
disability, (iii) resign, or (iv) are terminated by the Company (x) with
“just
cause” (“summary dismissal” in the case of Mr. Parnell), (y) without “just
cause” or (z) in connection with a “change in control” (as applicable, and as
such terms are defined in the respective agreements), they will be entitled
to
receive the following types of payments and benefits, and will be subject
to the
various restrictive covenants, described below.
Upon
Retirement:
|
Payment,
Benefit or
Restrictive
Covenant
|
Entitled
to Receive
|
|
Base
Salary
|
Executive
would be entitled to receive his base salary (then-current amount)
through
the effective date of retirement.
|
|
Bonus
|
Executive
would be entitled to receive a prorated portion of his annual bonus
opportunity calculated based on the date of retirement (e.g., a June
30
retirement would entitle executive to 50% of the bonus otherwise
payable).
|
|
Stock
Options
|
Executive
would forfeit any unvested stock options; all previously-vested options
would terminate three months following retirement.
|
|
Restricted
Stock
|
Executive
would immediately vest in a percentage of all unvested restricted
stock
awards, as specified in the applicable restricted stock agreement(s)
(assuming retirement at age 65).
|
|
Salary
Continuation
Plan/Europe
Pension Plan
|
Salary
Continuation Plan participant would receive full benefits upon retirement
at age 65 after completing at least 15 years of service, payable
for the
remainder of his life (or, if elected, a reduced benefit for the
remainder
of the his life and any surviving spouse’s life). A reduced benefit is
available to participant beginning at age 55. Participant is prohibited
from competing with the Company while receiving benefits. Europe
Pension
Plan participant Mr. Parnell would receive full pension benefits
per the
terms of the Pension Plan documents assuming retirement at the “normal
retirement date” (as defined in the Pension Plan
documents).
|
|
Other
Employee
Retirement
Plans
|
No
additional benefit beyond those to which the executive would be normally
entitled under the Company’s 401(k) Plan and Nonqualified Plan following
termination of employment.
|
|
Health,
Life and Other
Insurance
Coverages
|
No
additional benefit beyond those to which the executive would be normally
entitled under the terms of the respective medical and/or insurance
plans.
Mr. Hendrix would acquire right to have his Split Dollar Insurance
Policy
transferred to him following a payment to the Company in exchange
for its
interest therein.
|
|
Restrictive
Covenants
|
Executive
would be prohibited from competing with the Company, or soliciting
its
customers or employees, for a two year period following
retirement.
|
Upon
Death/Disability:
|
Payment,
Benefit or
Restrictive
Covenant
|
Entitled
to Receive
|
|
Base
Salary
|
Executive
would be entitled to receive his base salary (then-current amount)
through
the date of death/disability.
|
|
Bonus
|
Executive
would be entitled to receive a prorated portion of his annual bonus
opportunity calculated based on the date of death/disability (e.g.,
a June
30 death/disability would entitle executive to 50% of the bonus otherwise
payable).
|
29
|
Stock
Options
|
Executive
would forfeit any unvested stock options; all previously-vested options
would terminate 12 months following termination due to disability,
and 24
months following termination due to death.
|
|
Restricted
Stock
|
Executive
would immediately vest in a percentage of all unvested restricted
stock
awards, as specified in the applicable restricted stock
agreement(s).
|
|
Salary
Continuation
Plan/Europe
Pension Plan
|
Upon
Salary Continuation Plan participant’s death, he would receive a 10 year
certain payout of an annual benefit level as if he were eligible
for full
benefits (e.g., age 65) (with a reduced benefit available in connection
with an election of a spousal survivor annuity). Upon a participant’s
disability, he will receive a payout at an annual benefit level as
if the
participant was eligible for full benefits, but reduced to a percentage
of
the participant’s compensation at the time of commencement of disability
which, combined with all other Company-sponsored disability security
payments being paid, equals 66 2/3% of the total payable compensation.
Participant is prohibited from competing with the Company while receiving
benefits. Europe Pension Plan participant Mr. Parnell receives full
pension benefits per the terms of the Plan as if Mr. Parnell remained
employed until the “normal retirement date” (as defined in the Pension
Plan documents).
|
|
Other
Employee
Retirement
Plans
|
No
additional benefit beyond those to which the executive would be normally
entitled under the Company’s 401(k) Plan and Nonqualified Plan following
termination of employment.
|
|
Health,
Life and Other
Insurance
Coverages
|
No
additional benefit beyond those to which the executive would be normally
entitled under the terms of the respective medical and/or insurance
plans/policies. Upon his disability, Mr. Hendrix would acquire the
right
to have his Split Dollar Insurance Policy transferred to him following
a
payment to the Company in exchange for its interest therein (upon
his
death, the policy would pay out pursuant to its terms).
|
|
Restrictive
Covenants
|
Executive
would be prohibited from competing with the Company, or soliciting
its
customers or employees, for a two year period following any
disability.
|
Upon
Resignation:
|
Payment,
Benefit
or
Restrictive Covenant
|
Entitled
to Receive
|
|
Base
Salary
|
Executive
would be entitled to receive his base salary (then-current amount)
through
the effective date of resignation.
|
|
Bonus
|
Executive
would be entitled to receive a prorated portion of his annual
bonus
opportunity calculated based on the date of resignation (e.g.,
a June 30
resignation would entitle executive to 50% of the bonus otherwise
payable).
|
|
Stock
Options
|
Executive
would forfeit any unvested stock options; all previously-vested
options
would terminate three months following resignation.
|
|
Restricted
Stock
|
Executive
would forfeit any unvested restricted stock awards.
|
|
Salary
Continuation
Plan/Europe
Pension Plan
|
Salary
Continuation Plan participants would receive no benefit. Europe
Pension
Plan participant Mr. Parnell would be entitled to receive “deferred
benefits”, a reduced pension amount as compared to the benefits for which
he would have received if Mr. Parnell remained employed until
the “normal
retirement date” (as defined in the Pension Plan
documents).
|
30
|
Other
Employee
Retirement
Plans
|
No
additional benefit beyond those to which the executive would be normally
entitled under the Company’s 401(k) Plan and Nonqualified Plan following
termination of employment.
|
|
Health,
Life and Other
Insurance
Coverages
|
No
additional benefit beyond those to which the executive would be normally
entitled under the terms of the respective medical and/or insurance
plans/policies. Mr. Hendrix would acquire right to have his Split
Dollar
Insurance Policy transferred to him following a payment to the Company
in
exchange for its interest therein.
|
|
Restrictive
Covenants
|
Executive
would be prohibited from competing with the Company, or soliciting
its
customers or employees, for a two year period following
resignation.
|
Upon
Termination With “Just Cause”/”Summary Dismissal”:
|
Payment,
Benefit or
Restrictive
Covenant
|
Entitled
to Receive
|
|
Base
Salary
|
Executive
would be entitled to receive his base salary (then-current amount)
through
the effective date of termination.
|
|
Bonus
|
No
benefit.
|
|
Stock
Options
|
Executive
would forfeit any unvested stock options; all previously-vested options
would terminate three months following termination.
|
|
Restricted
Stock
|
Executive
would forfeit any unvested restricted stock awards.
|
|
Salary
Continuation
Plan/Europe
Pension Plan
|
Salary
Continuation Plan participants would receive no benefit. Europe Pension
Plan participant Mr. Parnell would be entitled to receive “deferred
benefits”, a reduced pension amount as compared to the benefits for which
he would have received if Mr. Parnell remained employed until the
“normal
retirement date” (as defined in the Pension Plan documents), and upon
attaining age 50, would receive full pension benefits per the terms
of the
Pension Plan documents.
|
|
Other
Employee
Retirement
Plans
|
No
additional benefit beyond those to which the executive would be normally
entitled under the Company’s 401(k) Plan and Nonqualified Plan following
termination of employment.
|
|
Health,
Life and Other
Insurance
Coverages
|
No
additional benefit beyond those to which the executive would be normally
entitled under the terms of the respective medical and/or insurance
plans/policies. Mr. Hendrix would acquire right to have his Split
Dollar
Insurance Policy transferred to him following a payment to the Company
in
exchange for its interest therein.
|
|
Restrictive
Covenants
|
Executive
would be prohibited from competing with the Company, or soliciting
its
customers or employees, for a two year period following
termination.
|
Upon
Termination Without “Just Cause”:
|
Payment,
Benefit
or
Restrictive Covenant
|
Entitled
to Receive
|
|
Base
Salary
|
Executive
would be entitled to receive his base salary in its then-current
amount
for remaining term of employment agreement (typically two years,
or, in
the case of Mr. Parnell, 12 months).
|
|
Bonus
|
Executive
would be entitled to receive bonus payments for remaining term
of
employment agreement (typically two years) in an amount equal to
the
bonuses received by the executive during the two years prior to
the
effective termination date, as well as a prorated bonus for the
year in
which employment terminates. Mr. Parnell would be entitled to receive
bonus payments equal to the amount of bonus he would have received
had he
remained employed for the remaining
term.
|
31
|
Stock
Options
|
Executive
would immediately vest in all unvested options. The options could
be
subsequently exercised over the period of time specified in the applicable
stock option agreements.
|
|
Restricted
Stock
|
Executive
would immediately vest in a percentage of all unvested restricted
stock
awards, as specified in the applicable restricted stock
agreement(s).
|
|
Salary
Continuation
Plan/Europe
Pension Plan
|
Salary
Continuation Plan participant would remain eligible for participation
in
the Plan as if he were to remain employed, and thus would receive
full
benefits at age 65 after completing at least 15 years of service,
payable
for the remainder of his life, or a reduced benefit beginning as
early as
age 55 (or, if elected, a reduced benefit for the remainder of his
and any
surviving spouse’s life). Participant is prohibited from competing with
the Company while receiving benefits. Europe Pension Plan participant
Mr.
Parnell would be entitled to receive “deferred benefits”, a reduced
pension amount as compared to the benefits for which he would have
received if Mr. Parnell remained employed until the “normal retirement
date”. Upon attaining age 50, he would be entitled to receive full pension
benefits per the terms of the Pension Plan documents.
|
|
Other
Employee
Retirement
Plans
|
Executive
would be entitled to continue to participate for remaining term of
employment agreement (typically two years, or, in the case of Mr.
Parnell,
12 months).
|
|
Health,
Life and Other
Insurance
Coverages
|
Executive
would be entitled to continue coverages for remaining term of employment
agreement (typically two years, or, in the case of Mr. Parnell, 12
months).
|
|
Restrictive
Covenants
|
Executive
would be prohibited from competing with the Company, or soliciting
its
customers or employees, for a two year period following
termination.
|
Upon
Termination Following “Change in Control”(1):
|
Payment,
Benefit or
Restrictive
Covenant
|
Entitled
to Receive
|
|
Base
Salary
|
Executive
would be entitled to receive his base salary in its then-current
amount
for remaining term of employment agreement (typically two years).
Such
amount would be paid in a lump sum, discounted to present
value.
|
|
Bonus
|
Executive
would receive bonus payments for remaining term of employment agreement
(typically two years) in an amount equal to the bonuses received
by the
executive during the two years prior to the effective termination
date, as
well as a prorated bonus for the year in which employment terminates.
Such
amount would be paid in a lump sum, discounted to present
value.
|
|
Stock
Options
|
Executive
would immediately vest in all unvested options. The options could
be
subsequently exercised over the period of time specified in the applicable
stock option agreements.
|
|
Restricted
Stock
|
Executive
would immediately vest in all unvested restricted stock
awards.
|
|
Salary
Continuation
Plan/Europe
Pension Plan
|
Salary
Continuation Plan participant would remain eligible for participation
in
the Plan as if he were to remain employed, and thus would receive
full
benefits at age 65 after completing at least 15 years of service,
payable
for the remainder of his life, or a reduced benefit beginning as
early as
age 55 (or, if elected, a reduced benefit for the remainder of his
and any
surviving spouse’s life). Participant would also receive the benefit of a
cost of living adjustment calculated with reference to a specified
consumer price index on each participant’s annual benefit amount (such
adjustment accruing from the date of termination until such date
that the
participant begins to receive benefits, and not thereafter). Participant
is prohibited from competing with the Company while receiving benefits.
|
32
|
Other
Employee
Retirement
Plans
|
Executive
would be entitled to continue to participate for remaining term of
employment agreement (typically two years).
|
|
Health,
Life and Other
Insurance
Coverages
|
Executive
will be entitled to continue coverages for remaining term of employment
agreement (typically two years).
|
|
Restrictive
Covenants
|
Executive
would be prohibited from competing with the Company, or soliciting
its
customers or employees, for a two year period following
termination.
|
_______________
| (1) |
Mr.
Parnell is not party to a change in control agreement, and
thus does not
receive any materially different benefits and/or payments upon
a “Change
in Control” as compared to the Termination
Without “Just Cause”
scenario described above.
|
The
following tables summarize the benefits payable to each of Named Executive
Officers under his employment and (as applicable) change in control agreement.
The tables do not include amounts payable under employee benefit plans in
which
Company associates are eligible to participate on a non-discriminatory basis.
The amounts shown in the tables below assume that a Named Executive Officer’s
employment terminated as of December 31, 2006, and that the price per share
of
the Company’s stock was $14.22.
Daniel
T. Hendrix
|
Retirement
|
Death/
Disability
|
Resignation
|
Termination
with
Just
Cause
|
Termination
without
Just
Cause
|
Termination
Following
Change
in
Control(1)(2)
|
|||||||
|
Compensation:
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
||||||
|
Base
salary
|
--
|
--
|
--
|
--
|
1,450,000
|
1,450,000
|
||||||
|
Bonus
|
--
|
--
|
--
|
--
|
1,574,375
|
1,574,375
|
||||||
|
Stock
options(3)
|
--
|
--
|
--
|
--
|
86,200
|
86,200
|
||||||
|
Restricted
stock(4)
|
--
|
3,104,795
|
--
|
--
|
3,104,795
|
4,758,055
|
||||||
|
Benefits
and Perquisites:
|
||||||||||||
|
Salary
continuation(5)
|
--
|
643,750
/ 858,248
|
--
|
--
|
--
|
--(8)
|
||||||
|
Retirement
plans(6)
|
--
|
--
|
--
|
--
|
60,350
|
60,350
|
||||||
|
Health,
life and other
insurance(7)
|
--
|
--
|
--
|
--
|
34,410
|
34,410
|
||||||
|
Excise
tax gross-up
|
--
|
--
|
--
|
--
|
--
|
4,779,215(9)
|
||||||
Patrick
C. Lynch
|
Retirement
|
Death/
Disability
|
Resignation
|
Termination
with
Just
Cause
|
Termination
without
Just
Cause
|
Termination
Following
Change
in
Control(1)(2)
|
|||||||
|
Compensation:
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
||||||
|
Base
salary
|
--
|
--
|
--
|
--
|
600,000
|
600,000
|
||||||
|
Bonus
|
--
|
--
|
--
|
--
|
499,097
|
499,097
|
||||||
|
Stock
options(3)
|
--
|
--
|
--
|
--
|
--
|
--
|
||||||
|
Restricted
stock(4)
|
--
|
336,957
|
--
|
--
|
336,957
|
729,173
|
||||||
|
Benefits
and Perquisites:
|
||||||||||||
|
Salary
continuation
|
--
|
--
|
--
|
--
|
--
|
--
|
||||||
|
Retirement
plans(6)
|
--
|
--
|
--
|
--
|
23,708
|
23,708
|
||||||
|
Health,
life and other
insurance(7)
|
--
|
--
|
--
|
--
|
32,435
|
32,435
|
||||||
|
Excise
tax gross-up
|
--
|
--
|
--
|
--
|
--
|
623,560(9)
|
||||||
33
John
R. Wells
|
Retirement
|
Death/
Disability
|
Resignation
|
Termination
with
Just
Cause
|
Termination
without
Just
Cause
|
Termination
Following
Change
in
Control(1)(2)
|
|||||||
|
Compensation:
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
||||||
|
Base
salary
|
--
|
--
|
--
|
--
|
980,000
|
980,000
|
||||||
|
Bonus
|
--
|
--
|
--
|
--
|
753,964
|
753,964
|
||||||
|
Stock
options(3)
|
--
|
--
|
--
|
--
|
34,480
|
34,480
|
||||||
|
Restricted
stock(4)
|
--
|
1,571,921
|
--
|
--
|
1,571,921
|
2,453,277
|
||||||
|
Benefits
and Perquisites:
|
||||||||||||
|
Salary
continuation(5)
|
--
|
406,920
/ 542,505
|
--
|
--
|
--
|
--(8)
|
||||||
|
Retirement
plans(6)
|
--
|
--
|
--
|
--
|
36,350
|
36,350
|
||||||
|
Health,
life and other
insurance(7)
|
--
|
--
|
--
|
--
|
34,313
|
34,313
|
||||||
|
Excise
tax gross-up
|
--
|
--
|
--
|
--
|
--
|
2,537,525(9)
|
||||||
Lindsey
K. Parnell
|
Retirement
|
Death/
Disability
|
Resignation
|
Termination
with
Just
Cause
|
Termination
without
Just
Cause
|
Termination
Following
Change
in
Control(1)
|
|||||||
|
Compensation:
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
||||||
|
Base
salary
|
--
|
--
|
--
|
--
|
342,363
|
--
|
||||||
|
Bonus
|
--
|
--
|
--
|
--
|
488,732
|
--
|
||||||
|
Stock
options(3)
|
--
|
--
|
--
|
--
|
--
|
--
|
||||||
|
Restricted
stock(4)
|
--
|
520,381
|
--
|
--
|
520,381
|
--
|
||||||
|
Benefits
and Perquisites:
|
||||||||||||
|
Salary
continuation
|
--
|
--
|
--
|
--
|
--
|
--
|
||||||
|
Retirement
plans(6)
|
93,938
|
93,938
|
37,760
|
37,760
until
age
50,
then
93,938
|
37,760
until
age
50,
then
93,938
|
--
|
||||||
|
Health,
life and other
insurance(7)
|
--
|
--
|
--
|
--
|
10,237
|
--
|
||||||
|
Excise
tax gross-up
|
--
|
--
|
--
|
--
|
--
|
--
|
||||||
Raymond
S. Willoch
|
Retirement
|
Death/Disability
|
Resignation
|
Termination
with
Just
Cause
|
Termination
without
Just
Cause
|
Termination
Following
Change
in
Control(1)(2)
|
|||||||
|
Compensation:
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
||||||
|
Base
salary
|
--
|
--
|
--
|
--
|
695,000
|
695,000
|
||||||
|
Bonus
|
--
|
--
|
--
|
--
|
587,174
|
587,174
|
||||||
|
Stock
options(3)
|
--
|
--
|
--
|
--
|
--
|
--
|
||||||
|
Restricted
stock(4)
|
--
|
1,028,476
|
--
|
--
|
1,028,476
|
1,655,578
|
||||||
|
Benefits
and Perquisites:
|
||||||||||||
|
Salary
continuation(5)
|
--
|
286,797
/ 382,358
|
--
|
--
|
--
|
--(8)
|
||||||
|
Retirement
plans(6)
|
--
|
--
|
--
|
--
|
27,564
|
27,564
|
||||||
|
Health,
life and other
insurance(7)
|
--
|
--
|
--
|
--
|
33,510
|
33,510
|
||||||
|
Excise
tax gross-up
|
--
|
--
|
--
|
--
|
--
|
1,892,009(9)
|
34
____________
|
(1)
|
All
benefits paid to Messrs. Hendrix, Lynch, Wells and Willoch upon
a
termination following a “Change in Control” will be reduced by the
compensation and benefits, if any, paid to the officer pursuant
to his
Employment Agreement with the Company. Mr. Parnell is not party
to a
change in control agreement, and thus does not receive any materially
different benefits and/or payments upon a “Change in Control” as compared
to those presented in the Termination
without Just Cause column.
|
|
(2)
|
Unlike
a number of publicly-traded companies, the Company does not utilize
a
“single trigger” concept for severance payments in its employment and
change in control agreements. The “Change in Control” (as defined in the
applicable agreements) does not, by itself, provide the Named
Executive
Officer with any right to resign and receive a severance benefit.
Instead,
for severance benefits to be payable, there must be a “second trigger” of
either (i) a termination without “just cause” or (ii) a “voluntary
termination” (essentially, resignation in the face of specified coercive
tactics) that occurs within 24 months after or six months prior
to the
date of a Change in Control. The amounts included in this column
thus
assume that both a “Change in Control” and a subsequent termination (as
described immediately above) occurred as of December 31, 2006.
If a
related termination did not in fact occur, no severance payments
would be
payable.
|
|
(3)
|
These
amounts assume each Named Executive Officer both exercised and sold
all
newly vested stock options immediately upon termination of
employment.
|
|
(4)
|
These
amounts assume each Named Executive Officer sold all newly vested
shares
of restricted stock immediately upon termination of
employment.
|
|
(5)
|
The
amounts included in the “Death/Disability” column represent the
annual
payments
to which Messrs. Hendrix, Wells and Willoch would be entitled under
the
Salary Continuation Plan following their death or disability as of
December 31, 2006. The annual benefit amount following a participant’s
death would be paid for 10 years, after which time it would permanently
cease. In the event of a participant’s disability, the annual benefit
amount would continue for as long as the participant continued to
suffer
the disability.
|
|
(6)
|
The
amounts noted for Messrs. Hendrix, Lynch, Wells and Willoch represent
contributions required to be made by the Company on behalf of each
executive following termination, and assume each executive chose
to
maintain his respective current level of contribution to the 401(k)
Plan,
as well as his deferral election under the Nonqualified Plan. The
amounts
contained in Mr. Parnell’s table above reflect the annual
payments to which he would be entitled under the terms of the Europe
Pension Plan.
|
|
(7)
|
These
amounts represent premiums paid by the Company on behalf of each
Named
Executive Officer following termination, and assume each Named Executive
Officer chose to maintain his current coverages under the various
medical
and/or insurance plans in which he was a
participant.
|
|
(8)
|
If
a Salary Continuation Plan participant was terminated on December
31, 2006
following a “Change in Control”, he would not be entitled to any
accelerated vesting and/or immediate payment of Plan benefits. Instead,
the participant would remain eligible for participation in the Plan
as if
he remained employed, and thus would receive full benefits at age
65 after
completing at least 15 years of service, payable for the remainder
of his
life, or a reduced benefit beginning as early as age 55 (or, if elected,
a
reduced benefit for the remainder of his and any surviving spouse’s life).
However, the excise tax calculations performed pursuant to Sections
4999
and 280G of the Internal Revenue Code require, for purposes of this
presentation and the resulting excise tax “gross-up” set forth herein for
each executive, that the full lifetime
benefit amount ultimately payable to each Plan participant (reduced
to a
net present value) be included. The aggregate actuarial lifetime
benefit
amounts payable, reduced to a present value and assuming Plan benefits
are
paid beginning at age 61, are $5,181,625, $2,688,676 and $2,080,213
for
Messrs. Hendrix, Wells and Willoch, respectively.
|
Each
Plan
participant would, however, in the case of a termination following a Change
in
Control, receive the benefit of a cost of living adjustment calculated with
reference to a specified consumer price index on each participant’s annual Plan
benefit amount (such adjustment accruing from the date of termination until
such
date that the participant actually begins to receive benefits, and not
thereafter). The aggregate actuarial lifetime
value of
the cost of living adjustment, reduced to a present value and assuming Plan
benefits are paid beginning at age 55, are $371,313, $575,382 and $316,774
for
Messrs. Hendrix, Wells and Willoch, respectively.
|
(9)
|
As
discussed in Footnote 8, these amounts are calculated assuming (as
applicable) the inclusion of the full lifetime
benefit amount ultimately payable to each Salary Continuation Plan
participant (reduced to a net present value) in connection with a
termination following a Change in Control. To the extent that the
cost of
living adjustment amounts referenced in Footnote 8, rather than the
full
lifetime benefit amounts, were instead included in the 280G excise
tax
calculations, the amounts shown as excise tax “gross-up” benefits payable
to Messrs. Hendrix, Wells and Willoch in connection with a termination
following a Change-in-Control would be $2,309,222, $1,452,393 and
$986,520
(respectively). The excise tax “gross-up” amounts presented further assume
that none of the payments in the event of a termination following
a Change
in Control would be categorized as “reasonable compensation” (such as, for
example, payments associated with non-compete and other restrictive
covenants) for purposes of the Section 280G excise tax calculation.
The
Company believes that a substantial amount of the payments could
be deemed
“reasonable compensation” for purposes of Section 280G, which could
substantially reduce the excise tax “gross-up” payable hereunder.
|
35
RATIFICATION
OF APPOINTMENT OF INDEPENDENT AUDITORS
(ITEM
2)
Information
Concerning the Company’s Accountants
BDO
Seidman, LLP acted as the Company’s independent auditors during the past fiscal
year. The Audit Committee has again appointed BDO Seidman, LLP to examine the
accounts and other records of the Company for the fiscal year 2007. The Board
of
Directors will present to the annual meeting a proposal that such appointment
be
ratified. Should the shareholders fail to ratify the appointment, the Audit
Committee will reconsider its selection. BDO Seidman, LLP has no financial
interest, direct or indirect, in the Company or any subsidiary.
A
representative of BDO Seidman, LLP is expected to be present at the annual
meeting to make a statement if he or she desires to do so and to respond to
appropriate questions.
Audit
and Non-Audit Fees
The
following table shows the fees billed to the Company for professional audit
and
other services provided by BDO Seidman, LLP for fiscal years 2006 and 2005.
|
2006
|
2005
|
||||||
|
Audit
Fees (1)
|
$
|
2,212,000
|
$
|
2,568,000
|
|||
|
Audit-Related
Fees (2)
|
41,000
|
14,000
|
|||||
|
Tax
Fees (3)
|
29,000
|
257,000
|
|||||
|
All
Other Fees (4)
|
0
|
0
|
|||||
|
Total
|
$
|
2,582,000
|
$
|
2,839,000
|
|||
_________________
|
(1)
|
“Audit
Fees” consist of fees billed for professional services rendered for the
audit of the Company’s annual financial statements, audit of the Company’s
internal control over financial reporting, review of the interim
financial
statements included in quarterly reports, and services that are normally
provided by BDO Seidman, LLP in connection with statutory and regulatory
filings.
|
|
(2)
|
“Audit-Related
Fees” consist of fees billed primarily for employee benefit plan audits
and other attestation services. In 2006, this category included $125,000
of fees related to the Company’s public offering of 5,750,000 shares of
Common Stock.
|
|
(3)
|
“Tax
Fees” consist of fees billed for professional services rendered for tax
compliance, tax advice and tax planning, both domestic and
international.
|
|
(4)
|
“All
Other Fees” consist of fees billed for those services not captured in the
audit, audit-related and tax categories. The Company generally does
not
request such services from the independent
auditors.
|
Policy
on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services
of
Independent Auditors
Consistent
with the Securities and Exchange Commission policies regarding auditor
independence, the Audit Committee has responsibility for appointing, setting
compensation and overseeing the work of the Company’s independent auditors. In
recognition of this responsibility, the Audit Committee has established a policy
to pre-approve all audit and non-audit services provided by the independent
auditors.
These
services may include audit services, audit-related services, tax services and
other services. Pre-approval is generally provided for and detailed as to the
particular services or category of services and is generally subject to a
specific budget. None of the services rendered by the independent auditors
under
the categories “Audit-Related Fees”, “Tax Fees” and “All Other Fees” described
above were approved by the Audit Committee after services were rendered pursuant
to the de minimis exception established by the Commission.
36
Vote
Required and Recommendation of the Board
Under
the
Company’s Bylaws, the proposal to ratify the appointment of BDO Seidman, LLP to
act as the Company’s independent auditors for fiscal year 2007 is approved if
the affirmative votes cast by the Company’s outstanding shares of Common Stock
entitled to vote and represented (in person or by proxy) at the meeting exceed
the negative votes. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE
PROPOSAL, AND THE ENCLOSED PROXY WILL BE VOTED IN THIS 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 Securities Exchange Act of 1934 requires the Company’s directors
and executive officers, and persons who own more than 10% of a registered class
of the Company’s equity securities, to file with the Securities and Exchange
Commission and the Nasdaq Stock Market reports of ownership and changes in
ownership of Common Stock and other equity securities of the Company. Directors,
executive officers and greater than 10% shareholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
Based
solely upon a 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 2006 all filing requirements applicable to its
directors, executive officers and greater than 10% beneficial owners were met
except that (1) Daniel T. Hendrix, the President and Chief Executive Officer
of
the Company, filed a late Form 4 with respect to the exercise of 89,708 stock
options and sale of 50,000 of the shares acquired thereunder; (2) John R. Wells,
a Senior Vice President of the Company, filed a late Form 4 with respect to
the
sale of 20,000 shares; and (3) Robert A. Coombs, a Vice President of the
Company, filed a late Form 4 with respect to the sale of 42,000 shares and
with
respect to the exercise of 38,000 stock options.
AUDIT
COMMITTEE REPORT
The
Audit
Committee operates pursuant to an Audit Committee Charter that was adopted
by
the Board of Directors. (A copy of the Audit Committee Charter may be viewed
on
the Company’s website, www.interfaceinc.com/results/investor/.)
The
Company’s management is responsible for its internal accounting controls and the
financial reporting process. The Company’s independent accountants, BDO Seidman,
LLP, are responsible for performing an audit of the Company’s consolidated
financial statements in accordance with auditing standards generally accepted
in
the United States. The independent accountants also are responsible for
expressing opinions on the conformity of the Company’s audited financial
statements with generally accepted accounting principles, on management’s
assessment of the Company’s internal control over financial reporting, and on
the effectiveness of the Company’s internal control over financial reporting.
The Audit Committee’s responsibility is to monitor and oversee these
processes.
In
keeping with that responsibility, the Audit Committee has reviewed and discussed
the Company’s audited consolidated financial statements with management and BDO
Seidman, LLP. In addition, the Audit Committee has discussed with BDO Seidman,
LLP the matters required to be discussed by Statement on Auditing Standards
No.
61, “Communications with Audit Committee,” as currently in effect. In addition,
the Audit Committee has received the written disclosures from BDO Seidman,
LLP
required by Independence Standards Board Standard No. 1, “Independence
Discussions with Audit Committees,” and has discussed with the independent
accountants their independence. The Audit Committee has also considered whether
the provision of any services discussed above in Item 2 under the caption
“Ratification of Appointment of Independent Auditors -- All Other Fees” by BDO
Seidman, LLP is compatible with maintaining BDO Seidman, LLP’s
independence.
The
Board
of Directors, in its business judgment, has determined that all three members
of
the Audit Committee are “independent,” as required by applicable listing
standards of the Nasdaq Stock Market as currently in effect. Although the
members of the Audit Committee are not professionally engaged in the practice
of
auditing or accounting and are not experts in the fields of auditing or
accounting (including in respect of auditor independence), the Board of
Directors determined that each member does qualify as an “audit committee
financial expert” as defined by Item 407(d)(5) of Regulation S-K. Members of the
Audit Committee rely, without independent verification, on the information
provided to them and on the representations made by management and BDO Seidman,
LLP. Accordingly, the Audit Committee’s oversight does not provide an
independent basis to determine that management has followed appropriate
accounting and financial reporting principles or maintained appropriate internal
controls and procedures designed to assure compliance with accounting standards
and applicable laws and regulations. Furthermore, the Audit Committee’s
considerations and discussions referred to above do not assure that the audit
of
the Company’s financial statements has been carried out in accordance with
generally accepted auditing standards, that the financial statements are
presented in accordance with generally accepted accounting principles or that
the Company’s auditors are “independent.”
37
Based
on
the reports and discussions described in this report, and subject to the
limitations on the role and responsibilities of the Audit Committee referred
to
above and in the Audit Committee Charter, the Audit Committee recommended to
the
Board of Directors that the audited consolidated financial statements of the
Company be included in the Company’s annual report on Form 10-K for the year
ended December 31, 2006 for filing with the Securities and Exchange
Commission.
|
THE
AUDIT COMMITTEE
Carl
I. Gable (Chair)
Edward
C. Callaway
James
B. Miller, Jr.
|
SHAREHOLDER
PROPOSALS
Proposals
of shareholders intended to be presented at the Company’s 2008 annual meeting
must be received by the Company no later than December 23, 2007, in order to
be
eligible for inclusion in the Company’s Proxy Statement and form of Proxy for
that meeting. In addition, in accordance with Article II, Section 9, of the
Bylaws of the Company, proposals of shareholders intended to be presented at
the
Company’s 2008 annual meeting must be presented to the Board of Directors by no
later than 90 days prior to that annual meeting, with such deadline for
presentation of proposals estimated to be February 15, 2008.
COMMUNICATING
WITH THE BOARD
Shareholders
wishing to communicate with the Board of Directors may send communications
via
U.S. mail to the following address:
Chairman
of the Board
Interface,
Inc.
2859
Paces Ferry Road
Suite
2000
Atlanta,
GA 30339
From
time
to time, the Board may change the process by which shareholders may communicate
with the Board or its members. The Company’s website, www.interfaceinc.com,
will
reflect any changes to the process.
Attendance
of Board members at annual meetings is left to the discretion of each individual
Board member. Six Board members attended the 2006 annual meeting (either in
person or by telephone).
“HOUSEHOLDING”
OF PROXY MATERIALS
The
Securities and Exchange Commission has adopted rules that permit companies
and
intermediaries such as brokers to satisfy delivery requirements for proxy
statements with respect to two or more shareholders sharing the same address
by
delivering a single proxy statement addressed to those shareholders. This
process, which is commonly referred to as “householding,” potentially provides
extra convenience for shareholders and cost savings for companies. The Company
and some brokers household proxy materials, delivering a single proxy statement
to multiple shareholders sharing an address unless contrary instructions have
been received from the affected shareholders. Once you have received notice
from
your broker or us that they or we will be householding materials to your
address, householding will continue until you are notified otherwise or until
you revoke your consent. If, at any time, you no longer wish to participate
in
householding and would prefer to receive a separate proxy statement, please
notify your broker if your shares are held in a brokerage account or us if
you
hold shares as the registered holder. You can notify us by sending a written
request to Interface, Inc., Attn: Secretary, 2859 Paces Ferry Road, Suite 2000,
Atlanta, Georgia 30339.
38
OTHER
MATTERS THAT MAY COME BEFORE THE MEETING
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
RAYMOND
S. WILLOCH
Secretary
|
April
18,
2007
39
|
Using
a black
ink
pen, mark your votes with an X as shown in
this
example. Please do not write outside the designated areas.
|
x |
|
Annual
Meeting Proxy Card
|
CLASS
A COMMON
STOCK
|
▼PLEASE
FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED
ENVELOPE.▼
A
Proposals
— The Board of Directors recommends a vote FOR all the nominees listed
and
FOR Proposal 2.
|
1.
Election of Directors:
|
For
|
Withhold
|
For
|
Withhold
|
For
|
Withhold
|
|||
|
01
- Dianne Dillon-Ridgley
|
o
|
o
|
02
- June M. Henton
|
o
|
o
|
3
-
Christopher G. Kennedy
|
o
|
o
|
|
|
04
- K. David Kohler
|
o
|
o
|
05
- Thomas R. Oliver
|
o
|
o
|
|
|
|
For
|
Against
|
Abstain
|
||
|
2.
Ratification of the appointment of BDO Seidman, LLP as
independent auditors for 2007.
|
o
|
o
|
o
|
3.
In accordance with their best judgment, with respect to any
other matters that may properly come before the
meeting.
|
B
Non-Voting
Items
Change of Address—Please print new address below.
Change of Address—Please print new address below.
|
|
C
Authorized
Signatures — This section must be completed for your instructions to be
executed.
Please
be
sure to sign and date this Proxy. Please sign and date this Proxy exactly
as
name appears. 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.
|
Date
(mm/dd/yyyy) — Please print date below.
|
Signature
1 — Please keep signature within the box.
|
Signature
2 — Please keep signature within the box.
|
||
|
/
/
|
▼PLEASE
FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED
ENVELOPE.▼
Proxy
— Interface, Inc.
CLASS
A COMMON STOCK
THIS
PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR
THE
2007 ANNUAL MEETING OF SHAREHOLDERS
The
undersigned hereby appoints Ray C. Anderson and Daniel T. Hendrix, or either
of
them, with the 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 17, 2007, and any adjournment
thereof.
THE
BOARD
OF DIRECTORS FAVORS A VOTE “FOR” PROPOSALS 1 AND 2 AND, UNLESS INSTRUCTIONS TO
THE CONTRARY ARE INDICATED IN THE SPACES PROVIDED, THIS PROXYWILL BE SO
VOTED.
PLEASE
VOTE, DATE AND SIGN ON THE REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
|
Using
a black
ink
pen, mark your votes with an X as shown in
this
example. Please do not write outside the designated areas.
|
x |
|
Annual
Meeting Proxy Card
|
CLASS B
COMMON
STOCK
|
▼PLEASE
FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE
ENCLOSED
ENVELOPE.▼
A
Proposals
— The Board of Directors recommends a vote FOR all the nominees listed
and
FOR Proposal 2.
|
1.
Election of Directors:
|
For
|
Withhold
|
For
|
Withhold
|
For
|
Withhold
|
|||
|
o
|
o
|
|
o
|
o
|
03
- Carl I. Gable
|
o
|
o
|
|
|
o
|
o
|
05
- James B. Miller, Jr.
|
o
|
o
|
06
- Harold M. Paisner
|
o
|
o
|
|
For
|
Against
|
Abstain
|
||
|
2.
Ratification of the appointment of BDO Seidman, LLP as
independent auditors for 2007.
|
o
|
o
|
o
|
3.
In accordance with their best judgment, with respect to any
other matters that may properly come before the
meeting.
|
B
Non-Voting
Items
Change of Address—Please print new address below.
Change of Address—Please print new address below.
|
|
C
Authorized
Signatures — This section must be completed for your instructions to be
executed.
Please
be
sure to sign and date this Proxy. Please sign and date this Proxy exactly
as
name appears. 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.
|
Date
(mm/dd/yyyy) — Please print date below.
|
Signature
1 — Please keep signature within the box.
|
Signature
2 — Please keep signature within the box.
|
||
|
/
/
|
▼PLEASE
FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE
ENCLOSED
ENVELOPE.▼
Proxy
— Interface, Inc.
CLASS
B COMMON STOCK
THIS
PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR
THE
2007 ANNUAL MEETING OF SHAREHOLDERS
The
undersigned hereby appoints Ray C. Anderson and Daniel T. Hendrix, or either
of
them, with the 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 17, 2007, and any adjournment
thereof.
THE
BOARD
OF DIRECTORS FAVORS A VOTE “FOR” PROPOSALS 1 AND 2 AND, UNLESS INSTRUCTIONS TO
THE CONTRARY ARE INDICATED IN THE SPACES PROVIDED, THIS PROXYWILL BE SO
VOTED.
PLEASE
VOTE, DATE AND SIGN ON THE REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.