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AMENDED AND RESTATED

EMPLOYMENT AND CHANGE IN CONTROL AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AND CHANGE IN CONTROL AGREEMENT (this “Agreement”) is made and entered into as of the 1st day of January, 2008, by and between Interface, Inc. , a corporation organized under the laws of the State of Georgia, U.S.A. (the “Company”), and Daniel T. Hendrix , a resident of Atlanta, Georgia (“Executive”).

W I T N E S S E T H:

WHEREAS, on April 1, 1997, desiring to set forth in writing the terms of Executive’s employment with the Company, the parties entered into an Employment Agreement, which was subsequently amended by the parties as of January 6, 1998, January 14, 1999 and January 31, 2003; and

WHEREAS, to assure both itself and its key employees of continuity of management and objective judgment in the event of a change in control of the Company, and to induce its key employees to remain employed by the Company, the Company has entered into change in control agreements with certain key employees, including a Change in Control Agreement with Executive, dated April 1, 1997, detailing Executive’s compensation and benefits upon a change in control of the Company, which was subsequently amended by the parties as of January 6, 1998 and January 14, 1999; and

WHEREAS, the parties desire to amend and restate such Employment Agreement and such Change in Control Agreement (the “Prior Agreements”) and to combine the Prior Agreements and bring the combined Prior Agreements into compliance with Section 409A of the Internal Revenue Code of 1986, as amended (“Code Section 409A”);

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.            Employment .  Subject to the terms and conditions of this Agreement, Executive shall be employed by the Company as President and Chief Executive Officer of the Company, and shall perform such duties and functions for the Company and its subsidiaries and affiliates as shall be specified from time to time by the Board of Directors (the “Board”) of the Company.  Executive accepts such employment and agrees to perform such executive duties as may be assigned to Executive. Executive may be relocated (prior to a Change in Control), Executive’s titles and duties may be changed, and Executive may be promoted to a higher position within the Company, but Executive will not be demoted or given lesser titles.

 

2.            Duties .  Executive shall devote his full business-related time and best efforts to accomplishing such executive duties at such locations as may be requested by the Board.

 

 

3.            Avoidance of Conflict of Interest .  While employed by the Company, Executive shall not engage in any other business enterprise without the prior written consent of the Company.  Without limiting the foregoing, Executive shall not serve as a principal, partner, employee, officer or director of, or consultant to, any other business or entity conducting business for profit without the prior written approval of the Company.  In addition, under no circumstances will Executive have any financial interest in any competitor of the Company; provided, however, Executive may invest in no more than one percent of the outstanding stock or securities of any competitor, the stock or securities of which are traded on a national stock exchange of any country.

 

4.            Term .  Subject to the terms of Section 5 hereof, the duration of this Agreement (the “term”) shall be for a rolling, two-year term commencing on the date first set forth above, and shall be deemed automatically (without further action by either the Company or Executive) to extend each day for an additional day such that the remaining term of this Agreement shall continue to be two years; provided, however, that on Executive’s 63rd birthday, this Agreement shall cease to extend automatically and, on such date, the remaining term of this Agreement shall be two years.

 

5.            Termination .  Executive’s employment with the Company may be terminated as provided in this Section 5:

 

(a)            Definitions .  In addition to the terms defined elsewhere in this Agreement, the following terms shall have the meanings ascribed to them below.

 

      (i)      “ Cause ” shall mean, for purposes of this Agreement (except with respect to a Section 409A Separation from Service following a Change in Control, which is addressed in Section 7(a)(i) hereof):  (A) Executive’s fraud, dishonesty, gross negligence, or willful misconduct with respect to business affairs of the Company (including its subsidiaries and affiliated companies), (B) Executive’s refusal or repeated failure to follow the established lawful policies of the Company applicable to persons occupying the same or similar positions, (C) Executive’s material breach of this Agreement, or (D) Executive’s conviction of a felony or other crime involving moral turpitude.  A termination of Executive for Cause based on clause (A), (B) or (C) of the preceding sentence shall take effect 30 days after Executive receives from the Company written notice of intent to terminate and the Company’s description of the alleged Cause, unless Executive shall, during such 30-day period, remedy the events or circumstances constituting Cause; provided, however, such termination shall take effect immediately upon the giving of written notice of termination for Cause under any of such clauses if the Company shall have determined in good faith that such events or circumstances are not remediable (which determination shall be stated in such notice).

 

(ii)            “ Section 409A Separation from Service ” shall mean a separation from service with the Company and affiliated entities, as defined in Code Section 409A and guidance issued thereunder.  As a general overview, under Code Section 409A, an employee will separate from service if the employee dies, retires, or otherwise has a termination of employment determined in accordance with the following:

(A)            Leaves of Absence .  The employment relationship is treated as continuing intact while Executive is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or, if longer, so long as Executive retains a right to reemployment with the Company under an applicable statute or by contract.  A leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that Executive will return to perform services for the Company.  If the period of leave exceeds six months and Executive does not retain a right to reemployment under an applicable statute or by contract, the employment relationship is deemed to terminate on the first day immediately following such six-month period.

 

(B)            Status Change .  Generally, if Executive performs services both as an employee and an independent contractor, Executive must separate from service both as an employee and as an independent contractor, pursuant to standards set forth in the applicable regulations promulgated by the Secretary of Treasury under Code Section 409A (“Treasury Regulations”), to be treated as having a separation from service.  However, if Executive provides services to the Company as an employee and as a member of the Board, the services provided as a director are not taken into account in determining whether Executive has a separation from service as an employee for purposes of this Agreement.

 

(C)            Termination of Employment .  Whether a termination of employment has occurred is determined based on whether the facts and circumstances indicate that the Company and Executive reasonably anticipate that no further services would be performed after a certain date or that the level of bona fide services Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than 49 percent of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services to the Company if Executive has been providing services to the Company less than 36 months).  Facts and circumstances to be considered in making this determination include, but are not limited to, whether Executive continues to be treated as an employee for other purposes (such as continuation of salary and participation in employee benefit programs), and whether similarly situated service providers have been treated consistently.  For periods during which Executive is on a paid bona fide leave of absence and has not otherwise terminated employment as described in subsection (A) above, for purposes of this subsection (C), Executive is treated as providing bona fide services at a level equal to the level of services that Executive would have been required to perform to receive the compensation paid with respect to such leave of absence.  Periods during which Executive is on an unpaid bona fide leave of absence and has not otherwise terminated employment are disregarded for purposes of this clause (C) (including for purposes of determining the applicable 36-month (or shorter) period).

 

 

The Company and Executive reasonably anticipate, as of the date of this Agreement, that the level of Executive’s post-employment services for the Company, if any, will be no more than 49% of the historical level of services (as described hereinabove) that Executive has provided (such that he will have a Section 409A Separation from Service as of the date of his termination of employment).  Notwithstanding the foregoing, the parties acknowledge that they should reassess the anticipated level of services as of the date of Executive’s termination of employment to confirm that it is sufficiently limited so that such termination date will be the date of Executive’s Section 409A Separation from Service.  While it is anticipated Executive’s Section 409A Separation from Service will occur on the date that his employment terminates, this Agreement is drafted to take into account the chance that it will not.

(D)            Service with Affiliates .  For purposes of determining whether a separation from service has occurred under the above provisions, the “Company” shall include the Company and all entities that would be treated as a single employer with the Company under Section 414(b) or (c) of the Internal Revenue Code of 1986, as amended (the “Code”), but substituting “at least 50 percent” instead of “at least 80 percent” each place it appears in applying such rules.

 

(b)            Termination by the Company After Notice of Resignation .  Executive may voluntarily terminate his employment hereunder at any time, effective 90 days after delivery to the Company of Executive’s signed, written resignation.  The Company may accept said resignation and, at its option, terminate Executive’s employment before the end of such 90-day period; provided, if Executive has given such 90 days notice, then the Company shall pay Executive, in lieu of waiting for passage of the notice period and in addition to the amounts payable to Executive pursuant to Section 6 below, an amount equal to the salary that would have been paid to Executive through the end of the notice period had his actual employment continued.  Any such amount payable by the Company (in lieu of waiting for the passage of the notice period) for the period after Executive’s actual termination of employment shall be paid in a single lump-sum cash payment within 30 days after the date of Executive’s actual termination of employment.

 

(c)            Termination by the Company .  Subject to the terms of Section 5(d) below, the Company may terminate Executive’s employment hereunder, in its sole discretion, whether with or without Cause, at any time upon written notice to Executive.

 

 

(d)            Termination Without Cause .  If, prior to the end of the term of this Agreement, the Company terminates Executive’s employment with the Company without Cause, Executive shall be entitled to receive, as damages payable as a result of, and arising from, the Company’s breach of this Agreement, the compensation and benefits set forth in clauses (i) through (vi) below.  The time periods for which compensation and benefits will be provided with respect to clauses (i) through (v) below is referred to herein as the “Continuation Period,” which means the time period remaining from the date of Executive’s termination of employment to the end of the remaining term of this Agreement as provided in Section 4 above.  Executive shall have no duty to mitigate any of the damages payable hereunder. The fact that Executive is eligible for retirement, including early retirement, under applicable retirement plans or agreements at the time of Executive’s termination shall not make Executive ineligible to receive benefits under this Section 5(d).

 

(i)            Salary .  Executive will continue to receive an amount equal to his current salary (the “Continued Salary Payments”), subject to the withholding of all applicable taxes, for the Continuation Period.  For purposes hereof, Executive’s “current salary” shall be the highest rate in effect during the six-month period prior to Executive’s termination of employment.  Executive will receive the Continued Salary Payments on a semi-monthly basis, payable on the fifteenth day and last day of each calendar month, in substantially equal installments, beginning on the earliest such payment date following the date of Executive’s termination of employment.  Notwithstanding the foregoing, the payment of any portion of the Continued Salary Payments that (A) is not exempt from Code Section 409A, and (B) is payable (based on the payment schedule hereinabove) before, or within the six-month period immediately following, the date of Executive’s Section 409A Separation from Service, will be delayed and will be made in a single lump-sum cash payment upon the day after the six-month anniversary of Executive’s Section 409A Separation from Service.

 

(ii)            Bonuses and Incentives .  Executive shall receive cash bonus payments from the Company for each calendar month during the Continuation Period in an amount equal to one-twelfth of the average of the bonuses paid to Executive under the executive bonus program(s) for the two calendar years immediately preceding the year in which his termination of employment occurs (“Average Bonus”).  Executive will receive these payments (the “Average Bonus Payments”) on a semi-monthly basis, payable on the fifteenth day and the last day of each calendar month, in substantially equal installments, beginning on the earliest such payment date following the date of Executive’s termination of employment.  Notwithstanding the foregoing, the payment of any portion of the Average Bonus Payments that (A) is not exempt from Code Section 409A, and (B) is payable (based on the payment schedule hereinabove) before, or within the six-month period immediately following, the date of Executive’s Section 409A Separation from Service, will be delayed and will be made in a single lump-sum cash payment upon the day after the six-month anniversary of Executive’s Section 409A Separation from Service.

 

 

Executive also shall receive a prorated bonus for the year in which Executive’s employment terminates.  Such bonus shall be equal to (A) the Average Bonus multiplied by the number of days Executive worked in the year of his employment termination, (B) divided by 365 days (“Prorated Bonus”).  The Prorated Bonus shall be paid in a lump sum in cash within 30 days after the date of Executive’s termination of employment.  Notwithstanding the foregoing, if the Prorated Bonus (or any portion thereof) is not exempt from Code Section 409A, the Prorated Bonus (or such portion) will be paid in a single lump-sum cash payment upon the day after the six-month anniversary of Executive’s Section 409A Separation from Service.

Any bonus amounts that Executive had previously earned from the Company but which may not yet have been paid as of the date of termination shall not be affected by this provision; provided, however, if the amount of the bonus for such prior year has not yet been determined, the bonus shall be an amount not less than the Average Bonus.

(iii)            Health Insurance Coverages .  The health insurance benefit coverages, whether self insured or commercially insured by the Company (including any executive medical plans), provided to Executive at Executive’s date of termination shall be continued for and during the Continuation Period by the Company at the same level and in the same manner as if Executive’s employment had not terminated (subject to the customary changes in such coverages upon Executive’s retirement, reaching age 65 or similar events).  Any additional health benefit coverages Executive had at termination, including spousal and/or dependent coverage, will also be continued for and during the Continuation Period on the same terms, to the extent permitted by the applicable policies or contracts.  The expense of all such health insurance benefit coverages shall be paid by the Company and/or Executive in the same respective amounts as each would pay if Executive’s employment had not terminated.  Executive shall pay his portion of such expenses by separate check payable to the Company each month in advance (or in such other manner, such as withholding a portion of monthly payments otherwise payable to Executive hereunder, as the Company may agree).  If the terms of any benefit plan referred to in this subsection do not permit continued participation by Executive, then the Company will arrange for other coverage at its expense providing substantially similar benefits.  Unless Executive has satisfied the eligibility requirements for retiree health coverage under the Company’s retiree medical plan (if any) as of the date of his termination of employment (and enrolled within 30 days after such termination date), the coverages provided for in this subsection shall be applied against and reduce the period for which COBRA benefits will be provided.

 

 

(iv)            Life and Long-Term Care Insurance Coverages .  The life and long-term care insurance benefit coverages (including any executive life and long-term care insurance plans) provided to Executive at Executive’s date of termination shall be continued for and during the Continuation Period by the Company at the same level and in the same manner as if Executive’s employment had not terminated (subject to the customary changes in such coverages upon Executive’s retirement, reaching age 65 or similar events).  Any additional life and long-term care coverages Executive had at termination, including spousal and/or dependent coverage, will also be continued for and during the Continuation Period on the same terms, to the extent permitted by the applicable policies or contracts.  The expense of all such life and long-term care benefit coverages shall be paid by the Company and/or Executive in the same respective amounts as each would pay if Executive’s employment had not terminated.  Executive shall pay his portion of such expenses by separate check payable to the Company each month in advance (or in such other manner, such as withholding a portion of monthly payments otherwise payable to Executive hereunder, as the Company may agree).  If the terms of any benefit plan referred to in this subsection do not permit continued participation by Executive, then the Company will arrange for other coverage at its expense providing substantially similar benefits.  If Executive is covered by a split-dollar or similar life insurance program as of the date of termination, Executive shall have the option, in Executive’s sole discretion, to have such policy transferred to Executive upon termination, provided that, except as may otherwise be provided in a separate agreement, the Company is paid for its interest (i.e., the cash surrender value) in the policy upon such transfer.

 

(v)            Employee Retirement Plans .  Upon the termination of Executive’s employment, Executive shall no longer actively participate in the tax-qualified employee retirement plans maintained by the Company.   However, with respect to any such plans, the Company shall pay to Executive the following amounts:

 

(A)            Savings Plan Company Match .  The Company shall pay to Executive an amount equal to the dollar amount of matching contributions, if any, that would have been made to Executive’s account(s) under the Interface, Inc. Savings and Investment Plan or any successor Code Section 401(k) plan (the “Savings Plan”) if Executive had continued to actively participate in the Savings Plan and had made deferrals at the maximum permissible level (in effect on the date of his termination of employment) throughout the Continuation Period.

 

(B)            Savings Plan Vesting .  To the extent that Executive is not fully vested under the Savings Plan on the date of his termination of employment, the Company shall pay to him an amount equal to (1) the value of his Savings Plan account on the date of his termination of employment had he been fully vested on such date, minus (2) the actual value of his vested Savings Plan account on such date.

 

 

(C)            Retirement Plan .  If, at the time of his employment termination, Executive participates in a tax-qualified defined benefit pension plan, the Company shall pay to Executive an amount equal to the present value on the date of termination of employment (calculated as provided in such tax-qualified pension plan) of the excess of (1) the benefit Executive would have been paid under such plan if Executive had continued to be covered for the Continuation Period (less any amounts Executive would have been required to contribute) and had been fully vested, over (2) the benefit actually payable under such plan.  Such amount shall be calculated, for the period after Executive’s employment termination, on the basis of the compensation payable to Executive under subsections (d)(i) and (ii) above.

 

(D)            Timing of Payment .  All amounts payable pursuant to this clause (v) shall be paid to Executive, or, if applicable, Executive’s spouse, estate or other beneficiary, in one lump-sum cash payment within 30 days after the date of Executive’s termination of employment, with any portion of such amount that is not exempt from Code Section 409A to be paid upon the day after the six-month anniversary of Executive’s Section 409A Separation from Service.

 

(E)            Salary Continuation Agreement .  For the avoidance of doubt, from and after Executive’s date of termination, Executive shall continue to be covered by, and entitled to the benefits under, Executive’s Salary Continuation Agreement dated as of January 1, 2008, payable in accordance with the terms of said agreement.

(vi)            Stock Awards.

 

(A)            Stock Options .  As of Executive’s date of termination, all outstanding stock options granted to Executive under the Interface, Inc. Omnibus Stock Incentive Plan (Amended and Restated effective February 22, 2006), the Interface, Inc. Omnibus Stock Incentive Plan (dated January 20, 1997), and the Interface, Inc. Key Employee Stock Option Plan (1993), and any similar plan(s) in effect at the time of Executive’s termination of employment   (collectively, the “Stock Plans”), shall become 100% vested and thus immediately exercisable.  To the extent inconsistent with this immediate vesting requirement, the provisions of this clause (vi) shall constitute an amendment of Executive’s stock option agreements under the Stock Plans.

 

(B)            Restricted Stock, etc .  In addition, but only to the extent expressly provided in any restricted stock or other award agreement associated with a Stock Plan, restrictions on all shares of restricted stock (and other performance shares, performance units or deferred shares) awarded to Executive under the Stock Plans shall lapse, and the affected shares shall become 100% vested.

 

 

(vii)            Cessation Upon Death .  The continuation benefits payable or to be provided under clauses (i), (ii), (iii), (iv) and (v) of this Section 5(d) shall cease in the event of Executive’s death.  (The foregoing shall not operate or be construed to negate the benefits payable to Executive and Executive’s estate under the plans and policies referenced in clauses (iii), (iv) and (v) of this Section 5(d) or under any other plans and policies referenced in this Agreement.  Furthermore, in the event of Executive’s death following a Change in Control, the provisions of Section 7(c)(iv) shall govern.)

 

(viii)                       Additional Consideration .  To be entitled to receive the foregoing compensation, Executive shall sign such additional release of claims, confidentiality agreements and other documents the Company may reasonably request of Executive at the time of payment; and, for so long as Executive is entitled to the benefits of such compensation, Executive shall cooperate fully with and devote Executive’s reasonable best efforts to providing assistance requested by the Company.  Such assistance shall not require Executive to be active in the Company’s day-to-day activities or engage in any substantial travel, and Executive shall be reimbursed for all reasonable and necessary out-of-pocket business expenses incurred in providing such assistance. Any reimbursements made pursuant to the preceding sentence shall be made as soon as practicable, but not later than 30 days after Executive submits evidence of such expenses to the Company.

 

6.            Effect of Other Termination Events .  If Executive is terminated for Cause prior to the end of the term of this Agreement, then Executive shall be entitled to no payment or compensation whatsoever from the Company under this Agreement, other than such salary, reimbursable expenses  and other amounts as may properly be due Executive through Executive’s last day of employment.  If Executive voluntarily resigns from employment (other than a Separation from Service for Good Reason, as defined in Section 7(a)(iv) below), then Executive shall be entitled to an amount equal to: (a) Executive’s salary, reimbursable expenses and other amounts as may be due Executive through the last day of Executive’s employment, and (b) the annual bonus for the calendar year in which Executive’s employment terminates, prorated through the last day of Executive’s employment (the amount of such bonus to be determined by the Company based on the audited year-end financial results of the Company).  If Executive’s employment is terminated due to Executive’s disability (as defined in the Company’s long-term disability plan or insurance policy) or death, Executive shall be entitled to the amounts described in the preceding sentence, as well as any amounts that may be due under the Company’s short and long-term disability plans or, in the case of death, the Company’s life insurance payment policy or plan in effect for executives of Executive’s level or pursuant to the terms of any separate agreement concerning split-dollar or similar life insurance; provided, Executive or Executive’s estate, as the case may be, shall not by operation of this provision forfeit any rights in which Executive is vested (or becomes vested) at the time of Executive’s disability or death (including, without limitation, the rights and benefits provided under the Stock Plans, Executive’s Salary Continuation Agreement or other applicable retirement plans).

Executive or, if appropriate, Executive’s spouse, estate or other beneficiary (as applicable) shall receive the amounts due under the first sentence of this Section 6 and clause (a) of the second sentence of this Section 6 in a single lump-sum cash payment within 30 days after the date of Executive’s termination of employment.

Executive or, if appropriate, Executive’s spouse, estate or other beneficiary, shall receive the amounts due under clause (b) of the second sentence of this Section 6 in a single lump-sum cash payment between January 1 and March 15, inclusive, of the calendar year immediately following the calendar year in which his employment terminates under this Section 6.

7.            Change in Control.

 

(a)            Definitions .  In addition to the terms defined elsewhere in this Agreement, the following terms shall have the meanings ascribed to them below.

 

(i)            “ Cause ” shall mean, with respect to any Section 409A Separation from Service following a Change in Control:  (A) an act that constitutes, on the part of Executive, fraud, dishonesty, gross negligence or willful misconduct and which directly results in injury to the Company, or (B) Executive’s conviction of a felony or other crime involving moral turpitude.  A termination of Executive for Cause based on clause (A) of the preceding sentence shall take effect 30 days after the Company gives written notice of such termination to Executive specifying the conduct deemed to qualify as Cause, unless Executive shall, during such 30-day period, remedy the events or circumstances constituting Cause to the reasonable satisfaction of the Company.  A termination for Cause based on clause (B) above shall take effect immediately upon the Company’s delivery of the termination notice.

 

(ii)            “ Change in Control ” shall mean a change of ownership or effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company, all within the meaning of Code Section 409A and guidance issued thereunder.  As a general overview, Code Section 409A defines “change in control” as any of the following:

 

 

(A)            Change in the Ownership of the Company .  A change in ownership of the Company occurs on the date that any one person, or more than one person acting as a group, acquires ownership of stock of the Company that, together with stock then held by such person or group constitutes more than 50 percent of the total fair market value or total voting power of the stock of the Company.  However, if any one person, or more than one person acting as a group, is considered to own more than 50 percent of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same person or persons is not considered to cause a change in the ownership of the Company or to cause a change in the effective control of the Company.  An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the Company acquires its stock in exchange for property will be treated as an acquisition of stock for purposes of this clause (A).  This clause (A) applies only when there is a transfer of stock of the Company (or issuance of stock of the Company) and stock in the Company   remains outstanding after the transaction.

 

(B)            Change in the Effective Control of the Company .  A change in the effective control of the Company will occur on either of the following dates:

 

(1)            The date any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 30 percent or more of the total voting power of the stock of the Company; or

 

(2)            The date a majority of members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board before the date of the appointment or election.

 

(C)            Change in the Ownership of a Substantial Portion of the Company’s Assets .  A change in the ownership of a substantial portion of the Company’s assets occurs on the date that any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions.

 

 

(iii)            “ Involuntary Separation from Service ” (and “Involuntarily Separated from Service” and other similar terms) shall mean a Section 409A Separation from Service brought about as a direct result of the independent exercise of the unilateral authority of the Company to terminate Executive’s services (other than at Executive’s request) at a time when Executive is willing and able to continue services, for any reason other than for Cause.

 

(iv)            “ Separation from Service for Good Reason ” (and “Separates from Service for Good Reason” and other similar terms) shall mean a Section 409A Separation from Service that is voluntary on the part of Executive and that occurs within two years after the initial existence of one or more of the following conditions that occur without Executive’s consent, to the extent that there is, or would be if not corrected, a material negative change in Executive’s employment relationship with the Company:

 

(A)            A material reduction of Executive’s responsibilities, title or status resulting from a formal change in such title or status, or from the assignment to Executive of any duties inconsistent with Executive’s title, duties or responsibilities in effect within the year prior to the Change in Control;

 

(B)            A material reduction in Executive’s compensation or benefits (a reduction in value of five percent or more will be deemed material, however, whether a reduction of less than five percent is or is not material will be determined at the time of such reduction based on all of the facts and circumstances at that time); or

 

(C)            A Company-required, material, involuntary relocation of Executive’s place of residence or a material increase in Executive’s travel requirements (such a relocation outside of the city of Atlanta and the five core counties (Fulton, Dekalb, Gwinnett, Cobb and Clayton) comprising the metropolitan Atlanta, Georgia area will be deemed material, however, whether such a relocation within the metropolitan Atlanta area (as described above) is or is not material will be determined at the time of such relocation based on all of the facts and circumstances at that time).

 

In order to Separate from Service for Good Reason hereunder, Executive must provide notice to the Company of the existence of one of the above conditions within 90 days of the initial existence of the condition, and such termination for Good Reason shall not take effect unless the Company does not cure the condition within 30 days of such notice.

(b)            Vesting Upon Change in Control .  Upon the occurrence of a Change in Control during the term of this Agreement, (i) all outstanding stock options (and stock appreciation rights, if any) granted to Executive under the Stock Plans shall become 100% vested and thus immediately exercisable, and (ii) all restrictions on, and vesting requirements for, all shares of restricted stock (or other performance shares, performance units or deferred shares) awarded to Executive under the Stock Plans shall lapse, and such shares and awards shall become 100% vested and immediately payable to Executive.  To the extent inconsistent with this immediate vesting requirement, the provisions of this subsection (b) shall constitute an amendment of Executive’s stock option agreements, restricted stock agreements and other award agreements issued under the Stock Plans.

 

(c)               Certain Separations from Service within 24 Months Following a Change in Control .  If a Change in Control occurs during the term of this Agreement and, within 24 months following the date of such Change in Control, Executive is Involuntarily Separated from Service or Separates from Service for Good Reason, Executive shall be entitled to all of the benefits described in clauses (i) through (v) of Section 5(d) of this Agreement, for a period of 24 months following Executive’s termination of employment, with the following modifications:

 

(i)            Salary .  Instead of the Continued Salary Payments described in Section 5(d)(i) of this Agreement, Executive shall receive an amount equal to (A) the amount of such Continued Salary Payments payable during each month (B) multiplied by 24.  Such amount shall be paid to Executive in a lump-sum payment in cash (without discounting or any other adjustment for the time value of money) within 30 days after the date of Executive’s Section 409A Separation from Service.

 

(ii)            Bonuses and Incentives .  Instead of the Average Bonus Payments described in Section 5(d)(ii) of this Agreement, Executive shall receive an amount equal to (A) the amount of such Average Bonus Payments payable each month (B) multiplied by 24.  Such amount shall be paid to Executive in a lump-sum payment in cash (without discounting or any other adjustment for the time value of money) within 30 days after the date of Executive’s Section 409A Separation from Service.  This Section 7(c)(ii) shall not affect any other provision of Section 5(d)(ii), including, without limitation, the terms of such provision relating to the Prorated Bonus.

 

 

(iii)            Payments to Cover Excise Taxes.

 

(A)            Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined (as hereafter provided) that any payment or distribution to or for Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or pursuant to or by reason of any other agreement, policy, plan, program or arrangement (including, without limitation, any Stock Plan or salary continuation agreement), or similar right (a “Payment” or “Payment(s)”), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provisions thereto), or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereafter collectively referred to as the “Excise Tax”), then Executive shall be entitled to receive an additional payment or payments (a “Gross-Up Payment”) from the Company.  The total amount of the Gross-Up Payment shall be an amount such that, after payment by (or on behalf of) Executive of any Excise Tax and all federal, state and other taxes (including any interest or penalties imposed with respect to such taxes) imposed upon the Gross-Up Payment, the remaining amount of the Gross-Up Payment is equal to the Excise Tax imposed upon the Payment(s).  For purposes of clarity, the amount of the Gross-Up Payment shall be that amount necessary to pay the Excise Tax in full and all taxes assessed upon the Gross-Up Payment.

 

(B)            An initial determination as to whether a Gross-Up Payment is required pursuant to this subsection (c)(iii) and the amount of such Gross-Up Payment shall be made by an accounting firm selected by the Company, and reasonably acceptable to Executive, which is then designated as one of the four largest accounting firms in the United States (the “Accounting Firm”).  The Company shall cause the Accounting Firm to provide its determination (the “Determination”), together with detailed supporting calculations and documentation to the Company and Executive, as promptly as practicable after such calculation is requested by the Company or by Executive with respect to any Payment(s), and if the Accounting Firm determines that no Excise Tax is payable by Executive with respect to such Payment(s), the Company shall cause it to furnish Executive with an opinion reasonably acceptable to Executive that no Excise Tax will be imposed with respect to any such Payment(s).  Within 15 days of the delivery of the Determination to Executive, Executive shall have the right to dispute the Determination (the “Dispute”).  The Gross-Up Payment, if any, as determined pursuant to this subsection (c)(iii) shall be paid by the Company to Executive within 15 days of the receipt of the Accounting Firm’s Determination.   The existence of the Dispute shall not in any way affect the right of Executive to receive the Gross-Up Payment in accordance with the Determination.  If there is no Dispute, the Determination shall be binding, final and conclusive upon the Company and Executive, subject to the application of Section 7(c)(iii)(C).

 

 

(C)            As a result of the uncertainty in the application of Sections 4999 and 280G of the Code, it is possible that a Gross-Up Payment (or a portion thereof) will be paid which should not have been paid (an “Excess Payment”) or a Gross-Up Payment (or a portion thereof) which should have been paid will not have been paid (an “Underpayment”).  An Underpayment shall be deemed to have occurred upon the earliest to occur of the following events:  (1) upon notice (formal or informal) to Executive from any governmental taxing authority that the tax liability of Executive (whether in respect of the then current taxable year of Executive or in respect of any prior taxable year of Executive) may be increased by reason of the imposition of the Excise Tax on any Payment(s) with respect to which the Company has failed to make a sufficient Gross-Up Payment, (2) upon a determination by a court, (3) by reason of a determination by the Company (which shall include the position taken by the Company, or its consolidated group, on its federal income tax return), or (4) upon the resolution to the satisfaction of Executive of his Dispute.  If any Underpayment occurs, Executive shall promptly notify the Company, and the Company shall pay to Executive within 15 days of the date the Underpayment is deemed to have occurred under clauses (1), (2), (3) or (4) above, but in no event less than five days prior to the date on which the applicable government taxing authority has requested payment, an additional Gross-Up Payment equal to the amount of the Underpayment plus any interest and penalties imposed on the Underpayment.

 

An Excess Payment shall be deemed to have occurred upon a “Final  Determination” (as hereinafter defined) that the Excise Tax shall not be imposed upon any Payment(s) (or portion of a Payment) with respect to which Executive had previously received a Gross-Up Payment.  A Final  Determination shall be deemed to have occurred when Executive has received from the applicable governmental taxing authority a refund of taxes or other reduction in his tax liability by reason of the Excess Payment and upon either (1) the date a determination is made by, or an agreement is entered into with, the applicable governmental taxing authority which finally and conclusively binds Executive and such taxing authority, or in the event that a claim is brought before a court of competent jurisdiction, the date upon which a final determination has been made by such court and either all appeals have been taken and finally resolved or the time for all appeals has expired, or (2) the statute of limitations with respect to Executive’s applicable tax return has expired.  If an Excess Payment is determined to have been made, the amount of the Excess Payment shall be treated as a loan by the Company to Executive, and Executive shall pay to the Company within 15 days following demand (but not less than 30 days after the determination of such Excess Payment) the amount of the Excess Payment plus interest at an annual rate equal to the rate provided for in Section 1274(b)(2)(B) of the Code from the date the Gross-Up Payment (to which the Excess Payment relates) was paid to Executive until the date of repayment to the Company.

(D)            Notwithstanding anything contained in this Agreement to the contrary, in the event that, according to the Determination, an Excise Tax will be imposed on any Payment(s), the Company shall pay to the applicable government taxing authorities, as Excise Tax withholding, the amount of any Excise Tax that the Company has actually withheld from the Payment(s); provided, that the Company’s payment of withheld Excise Tax shall not alter the Company’s obligation to pay the Gross-Up Payment required under this subsection (c)(iii).

 

(E)            Executive and the Company shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the Determination contemplated by subsection (c)(iii)(B) hereof.

 

(F)            The fees and expenses of the Accounting Firm for its services in connection with the Determination and calculations contemplated by subsection (c)(iii)(B) hereof shall be paid by the Company. Any payments made pursuant to the preceding sentence shall be made as soon as practicable, but not later than 30 days after Executive submits evidence of such expenses to the Company.

 

(iv)            Executive’s Death .  In the event Executive shall die within 24 months following a Change in Control, all amounts and benefits which would have been payable or due to Executive if Executive had continued to live (including, in the event Executive dies after being Involuntarily Separated from Service or after having Separated from Service for Good Reason, the amounts and benefits described in Section 7 hereof) shall be paid and provided in accordance with the terms of this Agreement to the executors, administrators, heirs or personal representatives of Executive’s estate.

 

8.            Compensation and Benefits .  During the term of Executive’s employment with the Company hereunder:

 

(a)               Continuity . Executive’s salary, current perquisites (including, but not limited to, company car) and bonus opportunity (currently expressed as a percentage of Executive’s base salary) may be increased from time to time as determined by the Board (or Committee of the Board), but shall not be reduced or eliminated.

 

(b)               Other Benefits .  Executive shall be entitled to vacation with pay, life insurance, health insurance, long-term care insurance, and such other employee benefits as Executive may be eligible to receive in accordance with the established plans and policies of the Company, as in effect from time to time.  In addition, the Company shall provide Executive with a split-dollar insurance policy (death benefit of $2 million), governed under the terms of a separate agreement related to such policy.

 

 

(c)            Short-Term Disability Benefits .  For purposes of this subsection (c), “Disability” and “Disabled” shall mean Executive’s inability, as a result of physical or mental incapacity, to substantially perform Executive’s duties for the Company on a full-time basis for a continuous period of six months.  Upon the Company being made aware of Executive’s Disability, Executive shall be entitled to receive, for a period of six months (the “Short-Term Disability Period”), the following:

 

(i)            Salary Continuation .  An amount equal to his current salary (subject to withholding of all applicable taxes) for the shorter of (A) his Short-Term Disability Period, or (B) the period he remains Disabled.  For purposes hereof, Executive’s “current salary” shall be the rate in effect on the day immediately prior to the date upon which the Company is made aware of Executive’s Disability.  Executive will receive such salary payments in accordance with the Company’s normal executive payroll processes.

(ii)            Bonus and Incentives .  Executive shall continue to participate in each applicable bonus and incentive plan of the Company during the Short-Term Disability Period.  Executive will receive bonus and incentive payments, if any, in accordance with the normal processes and timing for payment of such amounts to executives who are actively at work.

(d)               Tax Equalization .  In the event of Executive’s relocation, the Company and Executive will cooperate in good faith to agree on such adjustments to Executive’s compensation and benefits package as are appropriate to provide consistent after-tax income to Executive equivalent to that of a person receiving Executive’s pay and benefits taxable under the terms of the Code, while also acting in the best interests of the Company.

 

9.            Restrictive Covenants.

 

(a)            Definitions   In addition to the terms defined elsewhere in this Agreement, the following terms shall have the meanings ascribed to them as set forth below.

 

(i)            “ Company ” shall mean, for the purposes of, and as used in, this Section 9, Interface, Inc. and its direct and indirect subsidiaries and affiliated entities throughout the world.

 

 

(ii)            “ Confidential Information ” shall mean information relating to the Company’s customers, operations, finances, and business in any form that derives value from not being generally known to other persons or entities, including, but not limited to, technical or nontechnical data, formulas, patterns (including future carpet patterns), customer purchasing practices and preferences, compilations (including compilations of customer information), programs (including computer programs and models), devices (including carpet manufacturing equipment), methods (including aesthetic and functional design and manufacturing methods), techniques (including style and design technology and plans), drawings (including product or equipment drawings), processes, financial data (including sales forecasts, sales histories, business plans, budgets and other forecasts), or lists of actual or potential customers or suppliers (including identifying information about those customers), whether or not reduced to writing. Confidential Information subject to this Agreement may include information that is not a trade secret under applicable law, but such information not constituting a trade secret shall be treated as Confidential Information under this Agreement for only a two-year period after termination of Executive’s employment.

 

(iii)            “ Customers ” shall mean customers of the Company that Executive, during the two-year period before termination of Executive’s employment, (A) solicited or serviced or (B) about whom Executive had Confidential Information.  The parties acknowledge that a two-year period for defining Customers (as well as “Suppliers,” below) is reasonable based on the Company’s typical sales cycle, budgetary requirements and procurement procedures.

 

(iv)            “ Products ” shall mean carpet tile, modular carpet, broadloom carpet (whether 12-foot, six-foot or other competitive widths) and resilient textile flooring for contract, commercial, institutional (including, but not limited to, government and education), and residential markets and customers.

 

 

(v)            “ Services ” shall mean the services Executive shall provide as a Company executive, and that Executive shall be prohibited from providing (whether as an owner, partner, employee, consultant or in any other capacity) in competition with the Company, in accordance with the terms of this Agreement, which are to manage and supervise, and to have responsibility for, the conduct of the business of designing, developing, manufacturing, purchasing for resale, marketing, selling, distributing, installing, maintaining and reclaiming Products, including (A) development of overall business strategy, including strategy for financing the business through loans, sale of securities and other financing methods, (B) planning for expansion of the business, including expansion through mergers, acquisitions, joint ventures and other combinations, alliances and affiliations, (C) developing and maintaining relationships with principal Customers and Suppliers and with independent accountants, financial institutions, investment banks and the investment community and analysts, (D) providing supervision and oversight of the principal executives in charge of various components of the business, (E) having oversight and supervision of new product design and development and of manufacturing processes, and (F) serving as the representative and spokesman for the business with its various constituents, including employees, customers, suppliers, shareholders and the investment community.  Executive acknowledges that he has been informed of and had an opportunity to discuss with the Company the specific activities Executive will perform as Services and that Executive understands the scope of the activities constituting Services.

 

(vi)            “ Supplier ” shall mean a supplier of the Company that Executive, during the two-year period before termination of Executive’s employment, (A) had contact with on behalf of the Company, or (B) about whom Executive had Confidential Information.

 

(vii)            “ Territory ” shall mean North America, which is the geographic area where Executive performs Services for the Company and in which the Company continues to conduct business. Executive has been informed of and had an opportunity to discuss with the Company the specific territory in which Executive will perform Services.  Executive acknowledges that the market for the Company Products is worldwide, and that the Territory is the area in which Executive’s provision of Services in violation of this Agreement would cause harm to the Company.

 

(b)            Non-disclosure and Restricted Use .  Executive shall use best efforts to protect Confidential Information.  Furthermore, Executive will not use, except in connection with work for the Company, and will not disclose during or after Executive’s employment, the Company’s Confidential Information.

 

(c)            Return of Materials .  Upon the expiration of this Agreement or termination for any reason of Executive’s employment, or at any time upon the Company’s request, Executive will deliver promptly to the Company all materials, documents, plans, records, notes or other papers and any copies in Executive’s possession or control relating in any way to the Company’s business, which at all times shall be the property of the Company.

 

 

(d)            Non-solicitation of Customers .  During employment with the Company and for two years after the termination for any reason of Executive’s employment, Executive will not solicit Customers for the purpose of providing or selling any Products.

 

(e)            Non-solicitation of Suppliers .  During employment with the Company and for two years after the termination for any reason of Executive’s employment, Executive will not solicit any Supplier for the purpose of obtaining goods or services that the Company obtained from that Supplier and that are used in or relate to any Products.

 

(f)            Non-solicitation of Company Employees .  During employment with the Company and for two years after the termination for any reason of Executive’s employment, Executive will not solicit for employment with another person or entity, anyone who is, or was at any time during the year prior to such termination of Executive’s employment, a Company employee.

 

(g)            Limitations on Post-Termination Competition .  During employment with the Company and for two years after the termination for any reason of Executive’s employment, Executive will not provide any Services within the Territory to any person or entity developing, manufacturing, marketing, selling, distributing or installing any Products.

 

(h)            Disparagement .  Executive shall not at any time make false or misleading statements about the Company, including its Products, management, employees, Customers and Suppliers.

 

(i)            Future Employment Opportunities .  At any time before, and for two years after, the termination for any reason of Executive’s employment, Executive shall, before accepting employment with another employer, provide such prospective employer with a copy of this Agreement and, upon accepting any employment with another employer, provide the Company with such employer’s name and a description of the services Executive will provide to such employer.

 

 

(j)               Work For Hire Acknowledgment; Assignment .  Executive acknowledges that Executive’s work on and contributions to documents, programs, and other expressions in any tangible medium (collectively, “Works”) are within the scope of Executive’s employment and part of Executive’s duties and responsibilities.  Executive’s work on and contributions to the Works will be rendered and made by Executive for, at the instigation of, and under the overall direction of, the Company, and are and at all times shall be regarded, together with the Works, as “work made for hire” as that term is used in the United States Copyright Laws.  Without limiting this acknowledgment, Executive assigns, grants, and delivers exclusively to the Company all rights, titles, and interests in and to any such Works, and all copies and versions, including all copyrights and renewals.  Executive will execute and deliver to the Company, its successors and assigns, any assignments and documents the Company requests for the purpose of establishing, evidencing, and enforcing or defending its complete, exclusive, perpetual and worldwide ownership of all rights, titles and interests of every kind and nature, including all copyrights, in and to the Works, and Executive constitutes and appoints the Company as Executive’s agent to execute and deliver any assignments or related documents Executive fails or refuses promptly to execute and deliver, this power and agency being coupled with an interest and being irrevocable.

 

(k)            Inventions, Ideas and Patents .  Executive shall disclose promptly to the Company (which shall receive it in confidence), and only to the Company, any invention or idea of Executive (developed alone or with others) conceived or made during Executive’s employment by the Company or within six months of the date of expiration of this Agreement or termination of employment.  Executive assigns to the Company any such invention or idea in any way connected with Executive’s employment with the Company or related to the Company’s business, research or development, or demonstrably anticipated research or development, and will cooperate with the Company and sign all documents deemed necessary by the Company to enable it to obtain, maintain, protect and defend patents covering such inventions and ideas and to confirm the Company’s exclusive ownership of all rights in such inventions, ideas and patents. Executive irrevocably appoints the Company as Executive’s agent to execute and deliver any assignments or related documents Executive fails or refuses to execute and deliver promptly, this power and agency being coupled with an interest and being irrevocable. This constitutes the Company’s written notification that this assignment does not apply to an invention for which no equipment, supplies, facility or trade secret information of the Company was used and which was developed entirely on Executive’s own time, unless (i) the invention relates (A) directly to the business of the Company or (B) to the Company’s actual or demonstrably anticipated research or development, or (ii) the invention results from any work performed by Executive for the Company.

 

(l)            Survival of Provisions .  Upon termination of Executive’s employment for any reason whatsoever (whether voluntary on the part of Executive, for Cause, or other reasons), the obligations of Executive pursuant to this Section 9 shall survive and remain in effect.

 

 

(m)            Injunctive Relief .  Executive acknowledges that any breach of the terms of this Section 9 would result in material damage to the Company, although it might be difficult to establish the monetary value of the damage.  Executive therefore agrees that the Company, in addition to any other rights and remedies available to it, shall be entitled to obtain an immediate injunction (whether temporary or permanent) from any court of appropriate jurisdiction in the event of any such breach thereof by Executive, or threatened breach which the Company in good faith believes will or is likely to result in irreparable harm to the Company.

 

10.            Governing Law .  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Georgia and the federal laws of the United States of America, without regard to rules relating to the conflict of laws.  Executive hereby consents to the exclusive jurisdiction of the Superior Court of Cobb County, Georgia and the U.S. District Court in Atlanta, Georgia, and hereby waives any objection Executive might otherwise have to jurisdiction and venue in such courts in the event either court is requested to resolve a dispute between the parties.

 

11.            Dispute Resolution; Expenses .  All claims by Executive for any unpaid compensation and benefits under this Agreement shall be directed to the Board and shall be in writing. Any denial by the Board of a claim for compensation or benefits under this Agreement shall be delivered to Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon.  The Board shall afford a reasonable opportunity to Executive for a review of a decision denying a claim and shall further allow Executive to appeal to the Board a decision of the Board within 60 days after notification by the Board that Executive’s claim has been denied.  In the event Executive incurs legal fees and other expenses in seeking to obtain or to enforce any rights or benefits provided by this Agreement and is successful, in whole or in part, in obtaining or enforcing any such rights or benefits through litigation, settlement, arbitration, mediation or otherwise, the Company shall pay or reimburse Executive’s reasonable legal fees and expenses incurred in enforcing this Agreement.  Except to the extent provided in the preceding sentence, each party shall pay his or its own legal fees and other expenses associated with any dispute. Any of Executive’s legal fees or expenses to be paid by the Company shall be paid as soon as practicable, but not later than 30 days after Executive submits evidence of such expenses to the Company.

 

 

12.            Code Section 409A .  This Agreement is intended to comply with the requirements of Code Section 409A and shall be construed accordingly.  Any payments or distributions to be made to Executive under this Agreement upon a separation from service of amounts classified as “nonqualified deferred compensation” for purposes of Code Section 409A, and not exempt from Code Section 409A, shall in no event be made or commence until six months after Executive’s Section 409A Separation from Service.  Any reference to a payment being exempt (or not exempt) from Code Section 409A refers to any applicable exemption available under Section 409A, including, without limitation, the short-term deferral rule and severance pay exemptions as provided in Code Section 409A and the Treasury Regulations.  Each payment under this Agreement (whether of cash, property or benefits) shall be treated as a separate payment for purposes of Code Section 409A.  Where this Agreement provides that a payment will be made upon a specified date or during a specified period, such date or period, as required by Code Section 409(A), but in no way to detract from or excuse the payment deadlines set forth in the operative provisions above in this Agreement, will be the Code Section 409A “payment date” or “payment period”, and actual payment will be made no later than the latest date permitted under Code Section 409A and the regulations thereunder (generally, by the later of the end of the calendar year in which the payment date falls, or the fifteenth day of the third calendar month after the payment date occurs).  To the extent that any payments made pursuant to this Agreement are reimbursements exempt from Code Section 409A, the amount of such payments during any calendar year shall not affect the benefits provided in any other calendar year, and the right to any such payments shall not be subject to liquidation or exchange for another benefit or payment.  As required by Code Section 409A, but in no way to detract from or excuse the payment deadlines set forth in the operative provisions above in this Agreement, the payment date for any reimbursements shall in no event be later than the last day of the calendar year immediately following the calendar year in which the reimbursed expense was incurred or, for purposes of Sections 7(c)(iii)(B) and (C) above, the calendar year in which the Excise Tax must be remitted to the applicable governmental taxing authority.

 

13.            Notices .  All notices, consents and other communications required or authorized to be given by either party to the other under this Agreement shall be in writing and shall be deemed to have been given or submitted (a) upon actual receipt if delivered in person or by facsimile transmission with receipt confirmation, (b) upon the earlier of actual receipt or the expiration of two business days after sending by express courier (such as UPS or Federal Express), and (c) upon the earlier of actual receipt or the expiration of seven days after mailing if sent by registered or certified express mail, postage prepaid, to the parties at the following addresses:

 

To the Company:                                            Interface, Inc. 2859 Paces Ferry Road, Suite 2000 Atlanta, Georgia 30339 Fax No.: 770-437-6887 Attn: Chief Financial Officer

With a copy to:                                 Interface, Inc. 2859 Paces Ferry Road, Suite 2000 Atlanta, Georgia 30339 Fax No.: 770-319-6270 Attn: General Counsel

To Executive:                                            Daniel T. Hendrix at the last address and fax number shown on the records of the Company

Executive shall be responsible for providing the Company with a current address. Either party may change its address (and facsimile number) for purposes of notices under this Agreement by providing notice to the other party in the manner set forth above.

14.            Failure to Enforce .  The failure of either party hereto at any time, or for any period of time, to enforce any of the provisions of this Agreement shall not be construed as a waiver of such provision(s) or of the right of such party thereafter to enforce each and every such provision.

 

15.            Binding Effect; Assignment .  This Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns, and Executive and his heirs and personal representatives, but, except as hereinafter provided, neither this Agreement nor any right hereunder may be assigned or transferred by either party hereto (or by any beneficiary or any other person), nor shall this Agreement or any right hereunder be subject to alienation, anticipation, sale, pledge, encumbrance, execution, levy or other legal process of any kind against Executive, Executive’s beneficiary or any other person.  Notwithstanding the foregoing, any person or business entity succeeding to all or substantially all of the business of the Company by stock purchase, merger, consolidation, purchase of assets, or otherwise, shall be bound by and shall adopt and assume this Agreement, and the Company shall obtain the express assumption of this Agreement by such successor and provide evidence of same to Executive.

 

16.            Nature of Obligation .  The agreement of the Company (or its successor) to make payments to Executive hereunder shall represent the unsecured obligation of the Company (and its successor), except to the extent (a) the terms of any other agreement, plan or arrangement pertaining to the parties provide for funding, or (b) the Company (or its successor), in its sole discretion, elects in whole or in part to fund the Company’s obligations under this Agreement pursuant to a trust arrangement or otherwise.

 

17.            Entire Agreement .  This Agreement supersedes all prior discussions and agreements between the parties (including, without limitation, the Prior Agreements) and constitutes the sole and entire agreement between the Company and Executive with respect to the subject matter hereof.  This Agreement shall not be modified or amended except pursuant to a written document signed by the parties hereto, which makes specific reference to this Agreement and the fact that it is modifying or amending this Agreement.

 

 

18.            Preservation of Benefits .  Nothing in this Agreement shall limit or replace the compensation or benefits payable to Executive, or otherwise affect Executive’s rights, under any other benefit plan, program or agreement in which Executive participates or to which Executive is a party.

 

19.            Severability .  If any provision of this Agreement shall be held to be illegal, invalid or unenforceable by a court of competent jurisdiction, it is the intention of the parties that the remaining provisions shall constitute their agreement with respect to the subject matter hereof, and all such remaining provisions shall continue in full force and effect.

 

20.            Counterparts .  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its duly authorized officers, and Executive has hereunder set his hand, as of the date first above written.

	INTERFACE, INC.
	By:            /s/ Raymond S. Willoch
	Raymond S. Willoch
	Senior Vice President
	Attest:                       /s/ David B. Foshee
	David B. Foshee
	Assistant Secretary
	EXECUTIVE:
	/s/ Daniel T. Hendrix
	Daniel T. Hendrix

---

AMENDED AND RESTATED

EMPLOYMENT AND CHANGE IN CONTROL AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AND CHANGE IN CONTROL AGREEMENT (this “Agreement”) is made and entered into as of the 1st day of January, 2008, by and between Interface, Inc. , a corporation organized under the laws of the State of Georgia, U.S.A. (the “Company”), and John R. Wells , a resident of Atlanta, Georgia (“Executive”).

W I T N E S S E T H:

WHEREAS, on April 1, 1997, desiring to set forth in writing the terms of Executive’s employment with the Company, the parties entered into an Employment Agreement, which was subsequently amended by the parties as of January 6, 1998, January 14, 1999 and January 31, 2003; and

WHEREAS, to assure both itself and its key employees of continuity of management and objective judgment in the event of a change in control of the Company, and to induce its key employees to remain employed by the Company, the Company has entered into change in control agreements with certain key employees, including a Change in Control Agreement with Executive, dated April 1, 1997, detailing Executive’s compensation and benefits upon a change in control of the Company, which was subsequently amended by the parties as of January 6, 1998 and January 14, 1999; and

WHEREAS, the parties desire to amend and restate such Employment Agreement and such Change in Control Agreement (the “Prior Agreements”) and to combine the Prior Agreements and bring the combined Prior Agreements into compliance with Section 409A of the Internal Revenue Code of 1986, as amended (“Code Section 409A”);

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.            Employment.   Subject to the terms and conditions of this Agreement, Executive shall be employed by the Company as Senior Vice President of the Company (and as President and Chief Executive Officer of Interface Americas Holdings, LLC), and shall perform such duties and functions for the Company and its subsidiaries and affiliates as shall be specified from time to time by the Chief Executive Officer (“CEO”) or Board of Directors (the “Board”) of the Company.  Executive accepts such employment and agrees to perform such executive duties as may be assigned to Executive. Executive may be relocated (prior to a Change in Control), Executive’s titles and duties may be changed, and Executive may be promoted to a higher position within the Company, but Executive will not be demoted or given lesser titles.

 

2.            Duties .  Executive shall devote his full business-related time and best efforts to accomplishing such executive duties at such locations as may be requested by the CEO of the Company, acting under authorization from the Board.

 

3.            Avoidance of Conflict of Interest .  While employed by the Company, Executive shall not engage in any other business enterprise without the prior written consent of the Company.  Without limiting the foregoing, Executive shall not serve as a principal, partner, employee, officer or director of, or consultant to, any other business or entity conducting business for profit without the prior written approval of the Company.  In addition, under no circumstances will Executive have any financial interest in any competitor of the Company; provided, however, Executive may invest in no more than one percent of the outstanding stock or securities of any competitor, the stock or securities of which are traded on a national stock exchange of any country.

 

4.            Term.   Subject to the terms of Section 5 hereof, the duration of this Agreement (the “term”) shall be for a rolling, two-year term commencing on the date first set forth above, and shall be deemed automatically (without further action by either the Company or Executive) to extend each day for an additional day such that the remaining term of this Agreement shall continue to be two years; provided, however, that on Executive’s 63rd birthday, this Agreement shall cease to extend automatically and, on such date, the remaining term of this Agreement shall be two years.

 

5.            Termination .  Executive’s employment with the Company may be terminated as provided in this Section 5:

 

(a)            Definitions .  In addition to the terms defined elsewhere in this Agreement, the following terms shall have the meanings ascribed to them below.

 

(i)            “ Cause ” shall mean, for purposes of this Agreement (except with respect to a Section 409A Separation from Service following a Change in Control, which is addressed in Section 7(a)(i) hereof):  (A) Executive’s fraud, dishonesty, gross negligence, or willful misconduct with respect to business affairs of the Company (including its subsidiaries and affiliated companies), (B) Executive’s refusal or repeated failure to follow the established lawful policies of the Company applicable to persons occupying the same or similar positions, (C) Executive’s material breach of this Agreement, or (D) Executive’s conviction of a felony or other crime involving moral turpitude.  A termination of Executive for Cause based on clause (A), (B) or (C) of the preceding sentence shall take effect 30 days after Executive receives from the Company written notice of intent to terminate and the Company’s description of the alleged Cause, unless Executive shall, during such 30-day period, remedy the events or circumstances constituting Cause; provided, however, such termination shall take effect immediately upon the giving of written notice of termination for Cause under any of such clauses if the Company shall have determined in good faith that such events or circumstances are not remediable (which determination shall be stated in such notice).

 

(ii)            “ Section 409A Separation from Service ” shall mean a separation from service with the Company and affiliated entities, as defined in Code Section 409A and guidance issued thereunder.  As a general overview, under Code Section 409A, an employee will separate from service if the employee dies, retires, or otherwise has a termination of employment determined in accordance with the following:

(A)            Leaves of Absence .  The employment relationship is treated as continuing intact while Executive is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or, if longer, so long as Executive retains a right to reemployment with the Company under an applicable statute or by contract.  A leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that Executive will return to perform services for the Company.  If the period of leave exceeds six months and Executive does not retain a right to reemployment under an applicable statute or by contract, the employment relationship is deemed to terminate on the first day immediately following such six-month period.

 

(B)            Status Change .  Generally, if Executive performs services both as an employee and an independent contractor, Executive must separate from service both as an employee and as an independent contractor, pursuant to standards set forth in the applicable regulations promulgated by the Secretary of Treasury under Code Section 409A (“Treasury Regulations”), to be treated as having a separation from service.  However, if Executive provides services to the Company as an employee and as a member of the Board, the services provided as a director are not taken into account in determining whether Executive has a separation from service as an employee for purposes of this Agreement.

 

(C)            Termination of Employment .  Whether a termination of employment has occurred is determined based on whether the facts and circumstances indicate that the Company and Executive reasonably anticipate that no further services would be performed after a certain date or that the level of bona fide services Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than 49 percent of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services to the Company if Executive has been providing services to the Company less than 36 months).  Facts and circumstances to be considered in making this determination include, but are not limited to, whether Executive continues to be treated as an employee for other purposes (such as continuation of salary and participation in employee benefit programs), and whether similarly situated service providers have been treated consistently.  For periods during which Executive is on a paid bona fide leave of absence and has not otherwise terminated employment as described in subsection (A) above, for purposes of this subsection (C), Executive is treated as providing bona fide services at a level equal to the level of services that Executive would have been required to perform to receive the compensation paid with respect to such leave of absence.  Periods during which Executive is on an unpaid bona fide leave of absence and has not otherwise terminated employment are disregarded for purposes of this clause (C) (including for purposes of determining the applicable 36-month (or shorter) period).

 

 

The Company and Executive reasonably anticipate, as of the date of this Agreement, that the level of Executive’s post-employment services for the Company, if any, will be no more than 49% of the historical level of services (as described hereinabove) that Executive has provided (such that he will have a Section 409A Separation from Service as of the date of his termination of employment).  Notwithstanding the foregoing, the parties acknowledge that they should reassess the anticipated level of services as of the date of Executive’s termination of employment to confirm that it is sufficiently limited so that such termination date will be the date of Executive’s Section 409A Separation from Service.  While it is anticipated Executive’s Section 409A Separation from Service will occur on the date that his employment terminates, this Agreement is drafted to take into account the chance that it will not.

(D)            Service with Affiliates .  For purposes of determining whether a separation from service has occurred under the above provisions, the “Company” shall include the Company and all entities that would be treated as a single employer with the Company under Section 414(b) or (c) of the Internal Revenue Code of 1986, as amended (the “Code”), but substituting “at least 50 percent” instead of “at least 80 percent” each place it appears in applying such rules.

 

(b)            Termination by the Company After Notice of Resignation .  Executive may voluntarily terminate his employment hereunder at any time, effective 90 days after delivery to the Company of Executive’s signed, written resignation.  The Company may accept said resignation and, at its option, terminate Executive’s employment before the end of such 90-day period; provided, if Executive has given such 90 days notice, then the Company shall pay Executive, in lieu of waiting for passage of the notice period and in addition to the amounts payable to Executive pursuant to Section 6 below, an amount equal to the salary that would have been paid to Executive through the end of the notice period had his actual employment continued.  Any such amount payable by the Company (in lieu of waiting for the passage of the notice period) for the period after Executive’s actual termination of employment shall be paid in a single lump-sum cash payment within 30 days after the date of Executive’s actual termination of employment.

 

(c)            Termination by the Company .  Subject to the terms of Section 5(d) below, the Company may terminate Executive’s employment hereunder, in its sole discretion, whether with or without Cause, at any time upon written notice to Executive.

 

 

(d)            Termination Without Cause .  If, prior to the end of the term of this Agreement, the Company terminates Executive’s employment with the Company without Cause, Executive shall be entitled to receive, as damages payable as a result of, and arising from, the Company’s breach of this Agreement, the compensation and benefits set forth in clauses (i) through (vi) below.  The time periods for which compensation and benefits will be provided with respect to clauses (i) through (v) below is referred to herein as the “Continuation Period,” which means the time period remaining from the date of Executive’s termination of employment to the end of the remaining term of this Agreement as provided in Section 4 above.  Executive shall have no duty to mitigate any of the damages payable hereunder. The fact that Executive is eligible for retirement, including early retirement, under applicable retirement plans or agreements at the time of Executive’s termination shall not make Executive ineligible to receive benefits under this Section 5(d).

 

(i)            Salary .  Executive will continue to receive an amount equal to his current salary (the “Continued Salary Payments”), subject to the withholding of all applicable taxes, for the Continuation Period.  For purposes hereof, Executive’s “current salary” shall be the highest rate in effect during the six-month period prior to Executive’s termination of employment.  Executive will receive the Continued Salary Payments on a semi-monthly basis, payable on the fifteenth day and last day of each calendar month, in substantially equal installments, beginning on the earliest such payment date following the date of Executive’s termination of employment.  Notwithstanding the foregoing, the payment of any portion of the Continued Salary Payments that (A) is not exempt from Code Section 409A, and (B) is payable (based on the payment schedule hereinabove) before, or within the six-month period immediately following, the date of Executive’s Section 409A Separation from Service, will be delayed and will be made in a single lump-sum cash payment upon the day after the six-month anniversary of Executive’s Section 409A Separation from Service.

 

(ii)            Bonuses and Incentives .  Executive shall receive cash bonus payments from the Company for each calendar month during the Continuation Period in an amount equal to one-twelfth of the average of the bonuses paid to Executive under the executive bonus program(s) for the two calendar years immediately preceding the year in which his termination of employment occurs (“Average Bonus”).  Executive will receive these payments (the “Average Bonus Payments”) on a semi-monthly basis, payable on the fifteenth day and the last day of each calendar month, in substantially equal installments, beginning on the earliest such payment date following the date of Executive’s termination of employment.  Notwithstanding the foregoing, the payment of any portion of the Average Bonus Payments that (A) is not exempt from Code Section 409A, and (B) is payable (based on the payment schedule hereinabove) before, or within the six-month period immediately following, the date of Executive’s Section 409A Separation from Service, will be delayed and will be made in a single lump-sum cash payment upon the day after the six-month anniversary of Executive’s Section 409A Separation from Service.

 

 

Executive also shall receive a prorated bonus for the year in which Executive’s employment terminates.  Such bonus shall be equal to (A) the Average Bonus multiplied by the number of days Executive worked in the year of his employment termination, (B) divided by 365 days (“Prorated Bonus”).  The Prorated Bonus shall be paid in a lump sum in cash within 30 days after the date of Executive’s termination of employment.  Notwithstanding the foregoing, if the Prorated Bonus (or any portion thereof) is not exempt from Code Section 409A, the Prorated Bonus (or such portion) will be paid in a single lump-sum cash payment upon the day after the six-month anniversary of Executive’s Section 409A Separation from Service.

Any bonus amounts that Executive had previously earned from the Company but which may not yet have been paid as of the date of termination shall not be affected by this provision; provided, however, if the amount of the bonus for such prior year has not yet been determined, the bonus shall be an amount not less than the Average Bonus.

(iii)            Health Insurance Coverages .  The health insurance benefit coverages, whether self insured or commercially insured by the Company (including any executive medical plans), provided to Executive at Executive’s date of termination shall be continued for and during the Continuation Period by the Company at the same level and in the same manner as if Executive’s employment had not terminated (subject to the customary changes in such coverages upon Executive’s retirement, reaching age 65 or similar events).  Any additional health benefit coverages Executive had at termination, including spousal and/or dependent coverage, will also be continued for and during the Continuation Period on the same terms, to the extent permitted by the applicable policies or contracts.  The expense of all such health insurance benefit coverages shall be paid by the Company and/or Executive in the same respective amounts as each would pay if Executive’s employment had not terminated.  Executive shall pay his portion of such expenses by separate check payable to the Company each month in advance (or in such other manner, such as withholding a portion of monthly payments otherwise payable to Executive hereunder, as the Company may agree).  If the terms of any benefit plan referred to in this subsection do not permit continued participation by Executive, then the Company will arrange for other coverage at its expense providing substantially similar benefits.  Unless Executive has satisfied the eligibility requirements for retiree health coverage under the Company’s retiree medical plan (if any) as of the date of his termination of employment (and enrolled within 30 days after such termination date), the coverages provided for in this subsection shall be applied against and reduce the period for which COBRA benefits will be provided.

 

 

(iv)            Life and Long-Term Care Insurance Coverages .  The life and long-term care insurance benefit coverages (including any executive life and long-term care insurance plans) provided to Executive at Executive’s date of termination shall be continued for and during the Continuation Period by the Company at the same level and in the same manner as if Executive’s employment had not terminated (subject to the customary changes in such coverages upon Executive’s retirement, reaching age 65 or similar events).  Any additional life and long-term care coverages Executive had at termination, including spousal and/or dependent coverage, will also be continued for and during the Continuation Period on the same terms, to the extent permitted by the applicable policies or contracts.  The expense of all such life and long-term care benefit coverages shall be paid by the Company and/or Executive in the same respective amounts as each would pay if Executive’s employment had not terminated.  Executive shall pay his portion of such expenses by separate check payable to the Company each month in advance (or in such other manner, such as withholding a portion of monthly payments otherwise payable to Executive hereunder, as the Company may agree).  If the terms of any benefit plan referred to in this subsection do not permit continued participation by Executive, then the Company will arrange for other coverage at its expense providing substantially similar benefits.  If Executive is covered by a split-dollar or similar life insurance program as of the date of termination, Executive shall have the option, in Executive’s sole discretion, to have such policy transferred to Executive upon termination, provided that, except as may otherwise be provided in a separate agreement, the Company is paid for its interest (i.e., the cash surrender value) in the policy upon such transfer.

 

(v)            Employee Retirement Plans .  Upon the termination of Executive’s employment, Executive shall no longer actively participate in the tax-qualified employee retirement plans maintained by the Company.   However, with respect to any such plans, the Company shall pay to Executive the following amounts:

 

(A)            Savings Plan Company Match .  The Company shall pay to Executive an amount equal to the dollar amount of matching contributions, if any, that would have been made to Executive’s account(s) under the Interface, Inc. Savings and Investment Plan or any successor Code Section 401(k) plan (the “Savings Plan”) if Executive had continued to actively participate in the Savings Plan and had made deferrals at the maximum permissible level (in effect on the date of his termination of employment) throughout the Continuation Period.

 

(B)            Savings Plan Vesting .  To the extent that Executive is not fully vested under the Savings Plan on the date of his termination of employment, the Company shall pay to him an amount equal to (1) the value of his Savings Plan account on the date of his termination of employment had he been fully vested on such date, minus (2) the actual value of his vested Savings Plan account on such date.

 

(C)            Retirement Plan .  If, at the time of his employment termination, Executive participates in a tax-qualified defined benefit pension plan, the Company shall pay to Executive an amount equal to the present value on the date of termination of employment (calculated as provided in such tax-qualified pension plan) of the excess of (1) the benefit Executive would have been paid under such plan if Executive had continued to be covered for the Continuation Period (less any amounts Executive would have been required to contribute) and had been fully vested, over (2) the benefit actually payable under such plan.  Such amount shall be calculated, for the period after Executive’s employment termination, on the basis of the compensation payable to Executive under subsections (d)(i) and (ii) above.

 

(D)            Timing of Payment .  All amounts payable pursuant to this clause (v) shall be paid to Executive, or, if applicable, Executive’s spouse, estate or other beneficiary, in one lump-sum cash payment within 30 days after the date of Executive’s termination of employment, with any portion of such amount that is not exempt from Code Section 409A to be paid upon the day after the six-month anniversary of Executive’s Section 409A Separation from Service.

 

(E)            Salary Continuation Agreement .  For the avoidance of doubt, from and after Executive’s date of termination, Executive shall continue to be covered by, and entitled to the benefits under, Executive’s Salary Continuation Agreement dated as of January 1, 2008, payable in accordance with the terms of said agreement.

(vi)            Stock Awards.

 

(A)            Stock Options .  As of Executive’s date of termination, all outstanding stock options granted to Executive under the Interface, Inc. Omnibus Stock Incentive Plan (Amended and Restated effective February 22, 2006), the Interface, Inc. Omnibus Stock Incentive Plan (dated January 20, 1997), and the Interface, Inc. Key Employee Stock Option Plan (1993), and any similar plan(s) in effect at the time of Executive’s termination of employment   (collectively, the “Stock Plans”), shall become 100% vested and thus immediately exercisable.  To the extent inconsistent with this immediate vesting requirement, the provisions of this clause (vi) shall constitute an amendment of Executive’s stock option agreements under the Stock Plans.

 

(B)            Restricted Stock, etc .  In addition, but only to the extent expressly provided in any restricted stock or other award agreement associated with a Stock Plan, restrictions on all shares of restricted stock (and other performance shares, performance units or deferred shares) awarded to Executive under the Stock Plans shall lapse, and the affected shares shall become 100% vested.

 

 

(vii)            Cessation Upon Death .  The continuation benefits payable or to be provided under clauses (i), (ii), (iii), (iv) and (v) of this Section 5(d) shall cease in the event of Executive’s death.  (The foregoing shall not operate or be construed to negate the benefits payable to Executive and Executive’s estate under the plans and policies referenced in clauses (iii), (iv) and (v) of this Section 5(d) or under any other plans and policies referenced in this Agreement.  Furthermore, in the event of Executive’s death following a Change in Control, the provisions of Section 7(c)(iv) shall govern.)

 

(viii)                       Additional Consideration .  To be entitled to receive the foregoing compensation, Executive shall sign such additional release of claims, confidentiality agreements and other documents the Company may reasonably request of Executive at the time of payment; and, for so long as Executive is entitled to the benefits of such compensation, Executive shall cooperate fully with and devote Executive’s reasonable best efforts to providing assistance requested by the Company.  Such assistance shall not require Executive to be active in the Company’s day-to-day activities or engage in any substantial travel, and Executive shall be reimbursed for all reasonable and necessary out-of-pocket business expenses incurred in providing such assistance. Any reimbursements made pursuant to the preceding sentence shall be made as soon as practicable, but not later than 30 days after Executive submits evidence of such expenses to the Company.

 

6.            Effect of Other Termination Events .  If Executive is terminated for Cause prior to the end of the term of this Agreement, then Executive shall be entitled to no payment or compensation whatsoever from the Company under this Agreement, other than such salary, reimbursable expenses  and other amounts as may properly be due Executive through Executive’s last day of employment.  If Executive voluntarily resigns from employment (other than a Separation from Service for Good Reason, as defined in Section 7(a)(iv) below), then Executive shall be entitled to an amount equal to: (a) Executive’s salary, reimbursable expenses and other amounts as may be due Executive through the last day of Executive’s employment, and (b) the annual bonus for the calendar year in which Executive’s employment terminates, prorated through the last day of Executive’s employment (the amount of such bonus to be determined by the Company based on the audited year-end financial results of the Company).  If Executive’s employment is terminated due to Executive’s disability (as defined in the Company’s long-term disability plan or insurance policy) or death, Executive shall be entitled to the amounts described in the preceding sentence, as well as any amounts that may be due under the Company’s short and long-term disability plans or, in the case of death, the Company’s life insurance payment policy or plan in effect for executives of Executive’s level or pursuant to the terms of any separate agreement concerning split-dollar or similar life insurance; provided, Executive or Executive’s estate, as the case may be, shall not by operation of this provision forfeit any rights in which Executive is vested (or becomes vested) at the time of Executive’s disability or death (including, without limitation, the rights and benefits provided under the Stock Plans, Executive’s Salary Continuation Agreement or other applicable retirement plans).

 

Executive or, if appropriate, Executive’s spouse, estate or other beneficiary (as applicable) shall receive the amounts due under the first sentence of this Section 6 and clause (a) of the second sentence of this Section 6 in a single lump-sum cash payment within 30 days after the date of Executive’s termination of employment.

Executive or, if appropriate, Executive’s spouse, estate or other beneficiary, shall receive the amounts due under clause (b) of the second sentence of this Section 6 in a single lump-sum cash payment between January 1 and March 15, inclusive, of the calendar year immediately following the calendar year in which his employment terminates under this Section 6.

7.            Change in Control.

 

(a)            Definitions .  In addition to the terms defined elsewhere in this Agreement, the following terms shall have the meanings ascribed to them below.

 

(i)            “ Cause ” shall mean, with respect to any Section 409A Separation from Service following a Change in Control:  (A) an act that constitutes, on the part of Executive, fraud, dishonesty, gross negligence or willful misconduct and which directly results in injury to the Company, or (B) Executive’s conviction of a felony or other crime involving moral turpitude.  A termination of Executive for Cause based on clause (A) of the preceding sentence shall take effect 30 days after the Company gives written notice of such termination to Executive specifying the conduct deemed to qualify as Cause, unless Executive shall, during such 30-day period, remedy the events or circumstances constituting Cause to the reasonable satisfaction of the Company.  A termination for Cause based on clause (B) above shall take effect immediately upon the Company’s delivery of the termination notice.

 

(ii)            “ Change in Control ” shall mean a change of ownership or effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company, all within the meaning of Code Section 409A and guidance issued thereunder.  As a general overview, Code Section 409A defines “change in control” as any of the following:

 

 

(A)            Change in the Ownership of the Company .  A change in ownership of the Company occurs on the date that any one person, or more than one person acting as a group, acquires ownership of stock of the Company that, together with stock then held by such person or group constitutes more than 50 percent of the total fair market value or total voting power of the stock of the Company.  However, if any one person, or more than one person acting as a group, is considered to own more than 50 percent of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same person or persons is not considered to cause a change in the ownership of the Company or to cause a change in the effective control of the Company.  An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the Company acquires its stock in exchange for property will be treated as an acquisition of stock for purposes of this clause (A).  This clause (A) applies only when there is a transfer of stock of the Company (or issuance of stock of the Company) and stock in the Company   remains outstanding after the transaction.

 

(B)            Change in the Effective Control of the Company .  A change in the effective control of the Company will occur on either of the following dates:

 

(1)            The date any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 30 percent or more of the total voting power of the stock of the Company; or

 

(2)            The date a majority of members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board before the date of the appointment or election.

 

(C)            Change in the Ownership of a Substantial Portion of the Company’s Assets .  A change in the ownership of a substantial portion of the Company’s assets occurs on the date that any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions.

 

 

(iii)            “ Involuntary Separation from Service ” (and “Involuntarily Separated from Service” and other similar terms) shall mean a Section 409A Separation from Service brought about as a direct result of the independent exercise of the unilateral authority of the Company to terminate Executive’s services (other than at Executive’s request) at a time when Executive is willing and able to continue services, for any reason other than for Cause.

 

(iv)            “ Separation from Service for Good Reason ” (and “Separates from Service for Good Reason” and other similar terms) shall mean a Section 409A Separation from Service that is voluntary on the part of Executive and that occurs within two years after the initial existence of one or more of the following conditions that occur without Executive’s consent, to the extent that there is, or would be if not corrected, a material negative change in Executive’s employment relationship with the Company:

 

(A)            A material reduction of Executive’s responsibilities, title or status resulting from a formal change in such title or status, or from the assignment to Executive of any duties inconsistent with Executive’s title, duties or responsibilities in effect within the year prior to the Change in Control;

 

(B)            A material reduction in Executive’s compensation or benefits (a reduction in value of five percent or more will be deemed material, however, whether a reduction of less than five percent is or is not material will be determined at the time of such reduction based on all of the facts and circumstances at that time); or

 

(C)            A Company-required, material, involuntary relocation of Executive’s place of residence or a material increase in Executive’s travel requirements (such a relocation outside of the city of Atlanta and the five core counties (Fulton, Dekalb, Gwinnett, Cobb and Clayton) comprising the metropolitan Atlanta, Georgia area will be deemed material, however, whether such a relocation within the metropolitan Atlanta area (as described above) is or is not material will be determined at the time of such relocation based on all of the facts and circumstances at that time).

 

In order to Separate from Service for Good Reason hereunder, Executive must provide notice to the Company of the existence of one of the above conditions within 90 days of the initial existence of the condition, and such termination for Good Reason shall not take effect unless the Company does not cure the condition within 30 days of such notice.

(b)            Vesting Upon Change in Control .  Upon the occurrence of a Change in Control during the term of this Agreement, (i) all outstanding stock options (and stock appreciation rights, if any) granted to Executive under the Stock Plans shall become 100% vested and thus immediately exercisable, and (ii) all restrictions on, and vesting requirements for, all shares of restricted stock (or other performance shares, performance units or deferred shares) awarded to Executive under the Stock Plans shall lapse, and such shares and awards shall become 100% vested and immediately payable to Executive.  To the extent inconsistent with this immediate vesting requirement, the provisions of this subsection (b) shall constitute an amendment of Executive’s stock option agreements, restricted stock agreements and other award agreements issued under the Stock Plans.

 

(c)            Certain Separations from Service within 24 Months Following a Change in Control .  If a Change in Control occurs during the term of this Agreement and, within 24 months following the date of such Change in Control, Executive is Involuntarily Separated from Service or Separates from Service for Good Reason, Executive shall be entitled to all of the benefits described in clauses (i) through (v) of Section 5(d) of this Agreement, for a period of 24 months following Executive’s termination of employment, with the following modifications:

 

(i)            Salary .  Instead of the Continued Salary Payments described in Section 5(d)(i) of this Agreement, Executive shall receive an amount equal to (A) the amount of such Continued Salary Payments payable during each month (B) multiplied by 24.  Such amount shall be paid to Executive in a lump-sum payment in cash (without discounting or any other adjustment for the time value of money) within 30 days after the date of Executive’s Section 409A Separation from Service.

 

(ii)            Bonuses and Incentives .  Instead of the Average Bonus Payments described in Section 5(d)(ii) of this Agreement, Executive shall receive an amount equal to (A) the amount of such Average Bonus Payments payable each month (B) multiplied by 24.  Such amount shall be paid to Executive in a lump-sum payment in cash (without discounting or any other adjustment for the time value of money) within 30 days after the date of Executive’s Section 409A Separation from Service.  This Section 7(c)(ii) shall not affect any other provision of Section 5(d)(ii), including, without limitation, the terms of such provision relating to the Prorated Bonus.

 

(iii)            Payments to Cover Excise Taxes.

 

(A)            Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined (as hereafter provided) that any payment or distribution to or for Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or pursuant to or by reason of any other agreement, policy, plan, program or arrangement (including, without limitation, any Stock Plan or salary continuation agreement), or similar right (a “Payment” or “Payment(s)”), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provisions thereto), or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereafter collectively referred to as the “Excise Tax”), then Executive shall be entitled to receive an additional payment or payments (a “Gross-Up Payment”) from the Company.  The total amount of the Gross-Up Payment shall be an amount such that, after payment by (or on behalf of) Executive of any Excise Tax and all federal, state and other taxes (including any interest or penalties imposed with respect to such taxes) imposed upon the Gross-Up Payment, the remaining amount of the Gross-Up Payment is equal to the Excise Tax imposed upon the Payment(s).  For purposes of clarity, the amount of the Gross-Up Payment shall be that amount necessary to pay the Excise Tax in full and all taxes assessed upon the Gross-Up Payment.

 

(B)            An initial determination as to whether a Gross-Up Payment is required pursuant to this subsection (c)(iii) and the amount of such Gross-Up Payment shall be made by an accounting firm selected by the Company, and reasonably acceptable to Executive, which is then designated as one of the four largest accounting firms in the United States (the “Accounting Firm”).  The Company shall cause the Accounting Firm to provide its determination (the “Determination”), together with detailed supporting calculations and documentation to the Company and Executive, as promptly as practicable after such calculation is requested by the Company or by Executive with respect to any Payment(s), and if the Accounting Firm determines that no Excise Tax is payable by Executive with respect to such Payment(s), the Company shall cause it to furnish Executive with an opinion reasonably acceptable to Executive that no Excise Tax will be imposed with respect to any such Payment(s).  Within 15 days of the delivery of the Determination to Executive, Executive shall have the right to dispute the Determination (the “Dispute”).  The Gross-Up Payment, if any, as determined pursuant to this subsection (c)(iii) shall be paid by the Company to Executive within 15 days of the receipt of the Accounting Firm’s Determination.   The existence of the Dispute shall not in any way affect the right of Executive to receive the Gross-Up Payment in accordance with the Determination.  If there is no Dispute, the Determination shall be binding, final and conclusive upon the Company and Executive, subject to the application of Section 7(c)(iii)(C).

 

(C)            As a result of the uncertainty in the application of Sections 4999 and 280G of the Code, it is possible that a Gross-Up Payment (or a portion thereof) will be paid which should not have been paid (an “Excess Payment”) or a Gross-Up Payment (or a portion thereof) which should have been paid will not have been paid (an “Underpayment”).  An Underpayment shall be deemed to have occurred upon the earliest to occur of the following events:  (1) upon notice (formal or informal) to Executive from any governmental taxing authority that the tax liability of Executive (whether in respect of the then current taxable year of Executive or in respect of any prior taxable year of Executive) may be increased by reason of the imposition of the Excise Tax on any Payment(s) with respect to which the Company has failed to make a sufficient Gross-Up Payment, (2) upon a determination by a court, (3) by reason of a determination by the Company (which shall include the position taken by the Company, or its consolidated group, on its federal income tax return), or (4) upon the resolution to the satisfaction of Executive of his Dispute.  If any Underpayment occurs, Executive shall promptly notify the Company, and the Company shall pay to Executive within 15 days of the date the Underpayment is deemed to have occurred under clauses (1), (2), (3) or (4) above, but in no event less than five days prior to the date on which the applicable government taxing authority has requested payment, an additional Gross-Up Payment equal to the amount of the Underpayment plus any interest and penalties imposed on the Underpayment.

 

An Excess Payment shall be deemed to have occurred upon a “Final  Determination” (as hereinafter defined) that the Excise Tax shall not be imposed upon any Payment(s) (or portion of a Payment) with respect to which Executive had previously received a Gross-Up Payment.  A Final  Determination shall be deemed to have occurred when Executive has received from the applicable governmental taxing authority a refund of taxes or other reduction in his tax liability by reason of the Excess Payment and upon either (1) the date a determination is made by, or an agreement is entered into with, the applicable governmental taxing authority which finally and conclusively binds Executive and such taxing authority, or in the event that a claim is brought before a court of competent jurisdiction, the date upon which a final determination has been made by such court and either all appeals have been taken and finally resolved or the time for all appeals has expired, or (2) the statute of limitations with respect to Executive’s applicable tax return has expired.  If an Excess Payment is determined to have been made, the amount of the Excess Payment shall be treated as a loan by the Company to Executive, and Executive shall pay to the Company within 15 days following demand (but not less than 30 days after the determination of such Excess Payment) the amount of the Excess Payment plus interest at an annual rate equal to the rate provided for in Section 1274(b)(2)(B) of the Code from the date the Gross-Up Payment (to which the Excess Payment relates) was paid to Executive until the date of repayment to the Company.

(D)            Notwithstanding anything contained in this Agreement to the contrary, in the event that, according to the Determination, an Excise Tax will be imposed on any Payment(s), the Company shall pay to the applicable government taxing authorities, as Excise Tax withholding, the amount of any Excise Tax that the Company has actually withheld from the Payment(s); provided, that the Company’s payment of withheld Excise Tax shall not alter the Company’s obligation to pay the Gross-Up Payment required under this subsection (c)(iii).

 

(E)            Executive and the Company shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the Determination contemplated by subsection (c)(iii)(B) hereof.

 

(F)            The fees and expenses of the Accounting Firm for its services in connection with the Determination and calculations contemplated by subsection (c)(iii)(B) hereof shall be paid by the Company. Any payments made pursuant to the preceding sentence shall be made as soon as practicable, but not later than 30 days after Executive submits evidence of such expenses to the Company.

 

(iv)            Executive’s Death .  In the event Executive shall die within 24 months following a Change in Control, all amounts and benefits which would have been payable or due to Executive if Executive had continued to live (including, in the event Executive dies after being Involuntarily Separated from Service or after having Separated from Service for Good Reason, the amounts and benefits described in Section 7 hereof) shall be paid and provided in accordance with the terms of this Agreement to the executors, administrators, heirs or personal representatives of Executive’s estate.

 

8.            Compensation and Benefits .  During the term of Executive’s employment with the Company hereunder:

 

(a)            Continuity . Executive’s salary, current perquisites (including, but not limited to, company car) and bonus opportunity (currently expressed as a percentage of Executive’s base salary) may be increased from time to time as determined by the CEO or the Board (or Committee of the Board), but shall not be reduced or eliminated.

 

(b)            Other Benefits .  Executive shall be entitled to vacation with pay, life insurance, health insurance, long-term care insurance, and such other employee benefits as Executive may be eligible to receive in accordance with the established plans and policies of the Company, as in effect from time to time.

 

 

(c)            Short-Term Disability Benefits .  For purposes of this subsection (c), “Disability” and “Disabled” shall mean Executive’s inability, as a result of physical or mental incapacity, to substantially perform Executive’s duties for the Company on a full-time basis for a continuous period of six months.  Upon the Company being made aware of Executive’s Disability, Executive shall be entitled to receive, for a period of six months (the “Short-Term Disability Period”), the following:

 

(i)            Salary Continuation .  An amount equal to his current salary (subject to withholding of all applicable taxes) for the shorter of (A) his Short-Term Disability Period, or (B) the period he remains Disabled.  For purposes hereof, Executive’s “current salary” shall be the rate in effect on the day immediately prior to the date upon which the Company is made aware of Executive’s Disability.  Executive will receive such salary payments in accordance with the Company’s normal executive payroll processes.

(ii)            Bonus and Incentives .  Executive shall continue to participate in each applicable bonus and incentive plan of the Company during the Short-Term Disability Period.  Executive will receive bonus and incentive payments, if any, in accordance with the normal processes and timing for payment of such amounts to executives who are actively at work.

(d)            Tax Equalization .  In the event of Executive’s relocation, the Company and Executive will cooperate in good faith to agree on such adjustments to Executive’s compensation and benefits package as are appropriate to provide consistent after-tax income to Executive equivalent to that of a person receiving Executive’s pay and benefits taxable under the terms of the Code, while also acting in the best interests of the Company.

 

9.            Restrictive Covenants.

 

(a)            Definitions   In addition to the terms defined elsewhere in this Agreement, the following terms shall have the meanings ascribed to them as set forth below.

 

(i)            “ Company ” shall mean, for the purposes of, and as used in, this Section 9, Interface, Inc. and its direct and indirect subsidiaries and affiliated entities throughout the world.

 

(ii)            “ Confidential Information ” shall mean information relating to the Company’s customers, operations, finances, and business in any form that derives value from not being generally known to other persons or entities, including, but not limited to, technical or nontechnical data, formulas, patterns (including future carpet patterns), customer purchasing practices and preferences, compilations (including compilations of customer information), programs (including computer programs and models), devices (including carpet manufacturing equipment), methods (including aesthetic and functional design and manufacturing methods), techniques (including style and design technology and plans), drawings (including product or equipment drawings), processes, financial data (including sales forecasts, sales histories, business plans, budgets and other forecasts), or lists of actual or potential customers or suppliers (including identifying information about those customers), whether or not reduced to writing. Confidential Information subject to this Agreement may include information that is not a trade secret under applicable law, but such information not constituting a trade secret shall be treated as Confidential Information under this Agreement for only a two-year period after termination of Executive’s employment.

 

(iii)            “ Customers ” shall mean customers of the Company that Executive, during the two-year period before termination of Executive’s employment, (A) solicited or serviced or (B) about whom Executive had Confidential Information.  The parties acknowledge that a two-year period for defining Customers (as well as “Suppliers,” below) is reasonable based on the Company’s typical sales cycle, budgetary requirements and procurement procedures.

 

(iv)            “ Products ” shall mean carpet tile, modular carpet, broadloom carpet (whether 12-foot, six-foot or other competitive widths) and resilient textile flooring for contract, commercial, institutional (including, but not limited to, government and education), and residential markets and customers.

 

(v)            “ Services ” shall mean the services Executive shall provide as a Company executive, and that Executive shall be prohibited from providing (whether as an owner, partner, employee, consultant or in any other capacity) in competition with the Company, in accordance with the terms of this Agreement, which are to manage and supervise, and to have responsibility for, the conduct of the business of designing, developing, manufacturing, purchasing for resale, marketing, selling, distributing, installing, maintaining and reclaiming Products, including, but not limited to, (A) preparation of business plans, budgets and forecasts, (B) development of strategies for pricing of Products to customers, (C) supervision of marketing and sale of products and customer service, (D) development of overall strategy for such business, (E) design and development of Products, (F) development and maintenance of relationships with principal customers and suppliers, (G) employment and supervision of key executives and sales personnel, (H) development of plans for expansion of such business, including expansion through market segmentation strategies, merger, acquisition, joint venture and other combinations and affiliations, and (I) supervision and oversight of manufacturing operations and quality control for Products, including “mass customization” production strategy and methods for reducing waste in the production process.  Executive acknowledges that he has been informed of and had an opportunity to discuss with the Company the specific activities Executive will perform as Services and that Executive understands the scope of the activities constituting Services.

 

         (vi)            “ Supplier ” shall mean a supplier of the Company that Executive, during the two-year period before termination of Executive’s employment, (A) had contact with on behalf of the Company, or (B) about whom Executive had Confidential Information.

 

(vii)            “ Territory ” shall mean North America, which is the geographic area where Executive performs Services for the Company and in which the Company continues to conduct business. Executive has been informed of and had an opportunity to discuss with the Company the specific territory in which Executive will perform Services.  Executive acknowledges that the market for the Company Products is worldwide, and that the Territory is the area in which Executive’s provision of Services in violation of this Agreement would cause harm to the Company.

 

(b)            Non-disclosure and Restricted Use .  Executive shall use best efforts to protect Confidential Information.  Furthermore, Executive will not use, except in connection with work for the Company, and will not disclose during or after Executive’s employment, the Company’s Confidential Information.

 

(c)            Return of Materials .  Upon the expiration of this Agreement or termination for any reason of Executive’s employment, or at any time upon the Company’s request, Executive will deliver promptly to the Company all materials, documents, plans, records, notes or other papers and any copies in Executive’s possession or control relating in any way to the Company’s business, which at all times shall be the property of the Company.

 

(d)            Non-solicitation of Customers .  During employment with the Company and for two years after the termination for any reason of Executive’s employment, Executive will not solicit Customers for the purpose of providing or selling any Products.

 

 

(e)            Non-solicitation of Suppliers .  During employment with the Company and for two years after the termination for any reason of Executive’s employment, Executive will not solicit any Supplier for the purpose of obtaining goods or services that the Company obtained from that Supplier and that are used in or relate to any Products.

 

(f)            Non-solicitation of Company Employees .  During employment with the Company and for two years after the termination for any reason of Executive’s employment, Executive will not solicit for employment with another person or entity, anyone who is, or was at any time during the year prior to such termination of Executive’s employment, a Company employee.

 

(g)            Limitations on Post-Termination Competition .  During employment with the Company and for two years after the termination for any reason of Executive’s employment, Executive will not provide any Services within the Territory to any person or entity developing, manufacturing, marketing, selling, distributing or installing any Products.

 

(h)            Disparagement .  Executive shall not at any time make false or misleading statements about the Company, including its Products, management, employees, Customers and Suppliers.

 

(i)            Future Employment Opportunities .  At any time before, and for two years after, the termination for any reason of Executive’s employment, Executive shall, before accepting employment with another employer, provide such prospective employer with a copy of this Agreement and, upon accepting any employment with another employer, provide the Company with such employer’s name and a description of the services Executive will provide to such employer.

 

(j)            Work For Hire Acknowledgment; Assignment .  Executive acknowledges that Executive’s work on and contributions to documents, programs, and other expressions in any tangible medium (collectively, “Works”) are within the scope of Executive’s employment and part of Executive’s duties and responsibilities.  Executive’s work on and contributions to the Works will be rendered and made by Executive for, at the instigation of, and under the overall direction of, the Company, and are and at all times shall be regarded, together with the Works, as “work made for hire” as that term is used in the United States Copyright Laws.  Without limiting this acknowledgment, Executive assigns, grants, and delivers exclusively to the Company all rights, titles, and interests in and to any such Works, and all copies and versions, including all copyrights and renewals.  Executive will execute and deliver to the Company, its successors and assigns, any assignments and documents the Company requests for the purpose of establishing, evidencing, and enforcing or defending its complete, exclusive, perpetual and worldwide ownership of all rights, titles and interests of every kind and nature, including all copyrights, in and to the Works, and Executive constitutes and appoints the Company as Executive’s agent to execute and deliver any assignments or related documents Executive fails or refuses promptly to execute and deliver, this power and agency being coupled with an interest and being irrevocable.

 

(k)            Inventions, Ideas and Patents .  Executive shall disclose promptly to the Company (which shall receive it in confidence), and only to the Company, any invention or idea of Executive (developed alone or with others) conceived or made during Executive’s employment by the Company or within six months of the date of expiration of this Agreement or termination of employment.  Executive assigns to the Company any such invention or idea in any way connected with Executive’s employment with the Company or related to the Company’s business, research or development, or demonstrably anticipated research or development, and will cooperate with the Company and sign all documents deemed necessary by the Company to enable it to obtain, maintain, protect and defend patents covering such inventions and ideas and to confirm the Company’s exclusive ownership of all rights in such inventions, ideas and patents. Executive irrevocably appoints the Company as Executive’s agent to execute and deliver any assignments or related documents Executive fails or refuses to execute and deliver promptly, this power and agency being coupled with an interest and being irrevocable. This constitutes the Company’s written notification that this assignment does not apply to an invention for which no equipment, supplies, facility or trade secret information of the Company was used and which was developed entirely on Executive’s own time, unless (i) the invention relates (A) directly to the business of the Company or (B) to the Company’s actual or demonstrably anticipated research or development, or (ii) the invention results from any work performed by Executive for the Company.

 

(l)            Survival of Provisions .  Upon termination of Executive’s employment for any reason whatsoever (whether voluntary on the part of Executive, for Cause, or other reasons), the obligations of Executive pursuant to this Section 9 shall survive and remain in effect.

 

(m)            Injunctive Relief .  Executive acknowledges that any breach of the terms of this Section 9 would result in material damage to the Company, although it might be difficult to establish the monetary value of the damage.  Executive therefore agrees that the Company, in addition to any other rights and remedies available to it, shall be entitled to obtain an immediate injunction (whether temporary or permanent) from any court of appropriate jurisdiction in the event of any such breach thereof by Executive, or threatened breach which the Company in good faith believes will or is likely to result in irreparable harm to the Company.

 

10.            Governing Law .  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Georgia and the federal laws of the United States of America, without regard to rules relating to the conflict of laws.  Executive hereby consents to the exclusive jurisdiction of the Superior Court of Cobb County, Georgia and the U.S. District Court in Atlanta, Georgia, and hereby waives any objection Executive might otherwise have to jurisdiction and venue in such courts in the event either court is requested to resolve a dispute between the parties.

 

11.            Dispute Resolution; Expenses .  All claims by Executive for any unpaid compensation and benefits under this Agreement shall be directed to the Board and shall be in writing. Any denial by the Board of a claim for compensation or benefits under this Agreement shall be delivered to Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon.  The Board shall afford a reasonable opportunity to Executive for a review of a decision denying a claim and shall further allow Executive to appeal to the Board a decision of the Board within 60 days after notification by the Board that Executive’s claim has been denied.  In the event Executive incurs legal fees and other expenses in seeking to obtain or to enforce any rights or benefits provided by this Agreement and is successful, in whole or in part, in obtaining or enforcing any such rights or benefits through litigation, settlement, arbitration, mediation or otherwise, the Company shall pay or reimburse Executive’s reasonable legal fees and expenses incurred in enforcing this Agreement.  Except to the extent provided in the preceding sentence, each party shall pay his or its own legal fees and other expenses associated with any dispute. Any of Executive’s legal fees or expenses to be paid by the Company shall be paid as soon as practicable, but not later than 30 days after Executive submits evidence of such expenses to the Company.

 

12.            Code Section 409A .  This Agreement is intended to comply with the requirements of Code Section 409A and shall be construed accordingly.  Any payments or distributions to be made to Executive under this Agreement upon a separation from service of amounts classified as “nonqualified deferred compensation” for purposes of Code Section 409A, and not exempt from Code Section 409A, shall in no event be made or commence until six months after Executive’s Section 409A Separation from Service.  Any reference to a payment being exempt (or not exempt) from Code Section 409A refers to any applicable exemption available under Section 409A, including, without limitation, the short-term deferral rule and severance pay exemptions as provided in Code Section 409A and the Treasury Regulations.  Each payment under this Agreement (whether of cash, property or benefits) shall be treated as a separate payment for purposes of Code Section 409A.  Where this Agreement provides that a payment will be made upon a specified date or during a specified period, such date or period, as required by Code Section 409(A), but in no way to detract from or excuse the payment deadlines set forth in the operative provisions above in this Agreement, will be the Code Section 409A “payment date” or “payment period”, and actual payment will be made no later than the latest date permitted under Code Section 409A and the regulations thereunder (generally, by the later of the end of the calendar year in which the payment date falls, or the fifteenth day of the third calendar month after the payment date occurs).  To the extent that any payments made pursuant to this Agreement are reimbursements exempt from Code Section 409A, the amount of such payments during any calendar year shall not affect the benefits provided in any other calendar year, and the right to any such payments shall not be subject to liquidation or exchange for another benefit or payment.  As required by Code Section 409A, but in no way to detract from or excuse the payment deadlines set forth in the operative provisions above in this Agreement, the payment date for any reimbursements shall in no event be later than the last day of the calendar year immediately following the calendar year in which the reimbursed expense was incurred or, for purposes of Sections 7(c)(iii)(B) and (C) above, the calendar year in which the Excise Tax must be remitted to the applicable governmental taxing authority.

 

13.            Notices .  All notices, consents and other communications required or authorized to be given by either party to the other under this Agreement shall be in writing and shall be deemed to have been given or submitted (a) upon actual receipt if delivered in person or by facsimile transmission with receipt confirmation, (b) upon the earlier of actual receipt or the expiration of two business days after sending by express courier (such as UPS or Federal Express), and (c) upon the earlier of actual receipt or the expiration of seven days after mailing if sent by registered or certified express mail, postage prepaid, to the parties at the following addresses:

 

Executive shall be responsible for providing the Company with a current address. Either party may change its address (and facsimile number) for purposes of notices under this Agreement by providing notice to the other party in the manner set forth above.

14.            Failure to Enforce .  The failure of either party hereto at any time, or for any period of time, to enforce any of the provisions of this Agreement shall not be construed as a waiver of such provision(s) or of the right of such party thereafter to enforce each and every such provision.

 

15.            Binding Effect; Assignment .  This Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns, and Executive and his heirs and personal representatives, but, except as hereinafter provided, neither this Agreement nor any right hereunder may be assigned or transferred by either party hereto (or by any beneficiary or any other person), nor shall this Agreement or any right hereunder be subject to alienation, anticipation, sale, pledge, encumbrance, execution, levy or other legal process of any kind against Executive, Executive’s beneficiary or any other person.  Notwithstanding the foregoing, any person or business entity succeeding to all or substantially all of the business of the Company by stock purchase, merger, consolidation, purchase of assets, or otherwise, shall be bound by and shall adopt and assume this Agreement, and the Company shall obtain the express assumption of this Agreement by such successor and provide evidence of same to Executive.

 

16.            Nature of Obligation .  The agreement of the Company (or its successor) to make payments to Executive hereunder shall represent the unsecured obligation of the Company (and its successor), except to the extent (a) the terms of any other agreement, plan or arrangement pertaining to the parties provide for funding, or (b) the Company (or its successor), in its sole discretion, elects in whole or in part to fund the Company’s obligations under this Agreement pursuant to a trust arrangement or otherwise.

 

17.            Entire Agreement .  This Agreement supersedes all prior discussions and agreements between the parties (including, without limitation, the Prior Agreements) and constitutes the sole and entire agreement between the Company and Executive with respect to the subject matter hereof.  This Agreement shall not be modified or amended except pursuant to a written document signed by the parties hereto, which makes specific reference to this Agreement and the fact that it is modifying or amending this Agreement.

 

18.            Preservation of Benefits .  Nothing in this Agreement shall limit or replace the compensation or benefits payable to Executive, or otherwise affect Executive’s rights, under any other benefit plan, program or agreement in which Executive participates or to which Executive is a party.

 

19.            Severability .  If any provision of this Agreement shall be held to be illegal, invalid or unenforceable by a court of competent jurisdiction, it is the intention of the parties that the remaining provisions shall constitute their agreement with respect to the subject matter hereof, and all such remaining provisions shall continue in full force and effect.

 

20.            Counterparts .  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its duly authorized officers, and Executive has hereunder set his hand, as of the date first above written.

	INTERFACE, INC.
	By:            /s/ Daniel T. Hendrix
	Daniel T. Hendrix
	President and CEO
	Attest:                       /s/ Raymond S. Willoch
	Raymond S. Willoch
	Secretary
	EXECUTIVE:
	/s/ John R. Wells
	John R. Wells

---

AMENDED AND RESTATED

EMPLOYMENT AND CHANGE IN CONTROL AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AND CHANGE IN CONTROL AGREEMENT (this “Agreement”) is made and entered into as of the 1st day of January, 2008, by and between Interface, Inc. , a corporation organized under the laws of the State of Georgia, U.S.A. (the “Company”), and Raymond S. Willoch , a resident of Atlanta, Georgia (“Executive”).

W I T N E S S E T H:

WHEREAS, on April 1, 1997, desiring to set forth in writing the terms of Executive’s employment with the Company, the parties entered into an Employment Agreement, which was subsequently amended by the parties as of January 6, 1998, January 14, 1999 and January 31, 2003; and

WHEREAS, to assure both itself and its key employees of continuity of management and objective judgment in the event of a change in control of the Company, and to induce its key employees to remain employed by the Company, the Company has entered into change in control agreements with certain key employees, including a Change in Control Agreement with Executive, dated April 1, 1997, detailing Executive’s compensation and benefits upon a change in control of the Company, which was subsequently amended by the parties as of January 6, 1998 and January 14, 1999; and

WHEREAS, the parties desire to amend and restate such Employment Agreement and such Change in Control Agreement (the “Prior Agreements”) and to combine the Prior Agreements and bring the combined Prior Agreements into compliance with Section 409A of the Internal Revenue Code of 1986, as amended (“Code Section 409A”);

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.            Employment .  Subject to the terms and conditions of this Agreement, Executive shall be employed by the Company as Senior Vice President – Administration, General Counsel and Corporate Secretary of the Company, and shall perform such duties and functions for the Company and its subsidiaries and affiliates as shall be specified from time to time by the Chief Executive Officer (“CEO”) or Board of Directors (the “Board”) of the Company.  Executive accepts such employment and agrees to perform such executive duties as may be assigned to Executive. Executive may be relocated (prior to a Change in Control), Executive’s titles and duties may be changed, and Executive may be promoted to a higher position within the Company, but Executive will not be demoted or given lesser titles.

 

2.            Duties .  Executive shall devote his full business-related time and best efforts to accomplishing such executive duties at such locations as may be requested by the CEO of the Company, acting under authorization from the Board.

 

3.            Avoidance of Conflict of Interest .  While employed by the Company, Executive shall not engage in any other business enterprise without the prior written consent of the Company.  Without limiting the foregoing, Executive shall not serve as a principal, partner, employee, officer or director of, or consultant to, any other business or entity conducting business for profit (other than as a director of Georgia Duck & Cordage Mill) without the prior written approval of the Company.  In addition, under no circumstances will Executive have any financial interest in any competitor of the Company; provided, however, Executive may invest in no more than one percent of the outstanding stock or securities of any competitor, the stock or securities of which are traded on a national stock exchange of any country.

 

4.            Term .  Subject to the terms of Section 5 hereof, the duration of this Agreement (the “term”) shall be for a rolling, two-year term commencing on the date first set forth above, and shall be deemed automatically (without further action by either the Company or Executive) to extend each day for an additional day such that the remaining term of this Agreement shall continue to be two years; provided, however, that on Executive’s 63rd birthday, this Agreement shall cease to extend automatically and, on such date, the remaining term of this Agreement shall be two years.

 

5.            Termination .  Executive’s employment with the Company may be terminated as provided in this Section 5:

 

(a)            Definitions .  In addition to the terms defined elsewhere in this Agreement, the following terms shall have the meanings ascribed to them below.

 

      (i)            “ Cause ” shall mean, for purposes of this Agreement (except with respect to a Section 409A Separation from Service following a Change in Control, which is addressed in Section 7(a)(i) hereof):  (A) Executive’s fraud, dishonesty, gross negligence, or willful misconduct with respect to business affairs of the Company (including its subsidiaries and affiliated companies), (B) Executive’s refusal or repeated failure to follow the established lawful policies of the Company applicable to persons occupying the same or similar positions, (C) Executive’s material breach of this Agreement, or (D) Executive’s conviction of a felony or other crime involving moral turpitude.  A termination of Executive for Cause based on clause (A), (B) or (C) of the preceding sentence shall take effect 30 days after Executive receives from the Company written notice of intent to terminate and the Company’s description of the alleged Cause, unless Executive shall, during such 30-day period, remedy the events or circumstances constituting Cause; provided, however, such termination shall take effect immediately upon the giving of written notice of termination for Cause under any of such clauses if the Company shall have determined in good faith that such events or circumstances are not remediable (which determination shall be stated in such notice).

 

(ii)            “ Section 409A Separation from Service ” shall mean a separation from service with the Company and affiliated entities, as defined in Code Section 409A and guidance issued thereunder.  As a general overview, under Code Section 409A, an employee will separate from service if the employee dies, retires, or otherwise has a termination of employment determined in accordance with the following:

 

(A)            Leaves of Absence. The employment relationship is treated as continuing intact while Executive is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or, if longer, so long as Executive retains a right to reemployment with the Company under an applicable statute or by contract. A leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that Executive will return to perform services for the Company. If the period of leave exceeds six months and Executive does not retain a right to reemployment under an applicable statute or by contract, the employment relationship is deemed to terminate on the first day immediately following such six-month period.

(B)            Status Change .  Generally, if Executive performs services both as an employee and an independent contractor, Executive must separate from service both as an employee and as an independent contractor, pursuant to standards set forth in the applicable regulations promulgated by the Secretary of Treasury under Code Section 409A (“Treasury Regulations”), to be treated as having a separation from service.  However, if Executive provides services to the Company as an employee and as a member of the Board, the services provided as a director are not taken into account in determining whether Executive has a separation from service as an employee for purposes of this Agreement.

 

(C)            Termination of Employment .  Whether a termination of employment has occurred is determined based on whether the facts and circumstances indicate that the Company and Executive reasonably anticipate that no further services would be performed after a certain date or that the level of bona fide services Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than 49 percent of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services to the Company if Executive has been providing services to the Company less than 36 months).  Facts and circumstances to be considered in making this determination include, but are not limited to, whether Executive continues to be treated as an employee for other purposes (such as continuation of salary and participation in employee benefit programs), and whether similarly situated service providers have been treated consistently.  For periods during which Executive is on a paid bona fide leave of absence and has not otherwise terminated employment as described in subsection (A) above, for purposes of this subsection (C), Executive is treated as providing bona fide services at a level equal to the level of services that Executive would have been required to perform to receive the compensation paid with respect to such leave of absence.  Periods during which Executive is on an unpaid bona fide leave of absence and has not otherwise terminated employment are disregarded for purposes of this clause (C) (including for purposes of determining the applicable 36-month (or shorter) period).

 

The Company and Executive reasonably anticipate, as of the date of this Agreement, that the level of Executive’s post-employment services for the Company, if any, will be no more than 49% of the historical level of services (as described hereinabove) that Executive has provided (such that he will have a Section 409A Separation from Service as of the date of his termination of employment).  Notwithstanding the foregoing, the parties acknowledge that they should reassess the anticipated level of services as of the date of Executive’s termination of employment to confirm that it is sufficiently limited so that such termination date will be the date of Executive’s Section 409A Separation from Service.  While it is anticipated Executive’s Section 409A Separation from Service will occur on the date that his employment terminates, this Agreement is drafted to take into account the chance that it will not.

(D)            Service with Affiliates .  For purposes of determining whether a separation from service has occurred under the above provisions, the “Company” shall include the Company and all entities that would be treated as a single employer with the Company under Section 414(b) or (c) of the Internal Revenue Code of 1986, as amended (the “Code”), but substituting “at least 50 percent” instead of “at least 80 percent” each place it appears in applying such rules.

 

(b)            Termination by the Company After Notice of Resignation .  Executive may voluntarily terminate his employment hereunder at any time, effective 90 days after delivery to the Company of Executive’s signed, written resignation.  The Company may accept said resignation and, at its option, terminate Executive’s employment before the end of such 90-day period; provided, if Executive has given such 90 days notice, then the Company shall pay Executive, in lieu of waiting for passage of the notice period and in addition to the amounts payable to Executive pursuant to Section 6 below, an amount equal to the salary that would have been paid to Executive through the end of the notice period had his actual employment continued.  Any such amount payable by the Company (in lieu of waiting for the passage of the notice period) for the period after Executive’s actual termination of employment shall be paid in a single lump-sum cash payment within 30 days after the date of Executive’s actual termination of employment.

 

(c)            Termination by the Company .  Subject to the terms of Section 5(d) below, the Company may terminate Executive’s employment hereunder, in its sole discretion, whether with or without Cause, at any time upon written notice to Executive.

 

 

(d)            Termination Without Cause .  If, prior to the end of the term of this Agreement, the Company terminates Executive’s employment with the Company without Cause, Executive shall be entitled to receive, as damages payable as a result of, and arising from, the Company’s breach of this Agreement, the compensation and benefits set forth in clauses (i) through (vi) below.  The time periods for which compensation and benefits will be provided with respect to clauses (i) through (v) below is referred to herein as the “Continuation Period,” which means the time period remaining from the date of Executive’s termination of employment to the end of the remaining term of this Agreement as provided in Section 4 above.  Executive shall have no duty to mitigate any of the damages payable hereunder. The fact that Executive is eligible for retirement, including early retirement, under applicable retirement plans or agreements at the time of Executive’s termination shall not make Executive ineligible to receive benefits under this Section 5(d).

 

(i)            Salary .  Executive will continue to receive an amount equal to his current salary (the “Continued Salary Payments”), subject to the withholding of all applicable taxes, for the Continuation Period.  For purposes hereof, Executive’s “current salary” shall be the highest rate in effect during the six-month period prior to Executive’s termination of employment.  Executive will receive the Continued Salary Payments on a semi-monthly basis, payable on the fifteenth day and last day of each calendar month, in substantially equal installments, beginning on the earliest such payment date following the date of Executive’s termination of employment.  Notwithstanding the foregoing, the payment of any portion of the Continued Salary Payments that (A) is not exempt from Code Section 409A, and (B) is payable (based on the payment schedule hereinabove) before, or within the six-month period immediately following, the date of Executive’s Section 409A Separation from Service, will be delayed and will be made in a single lump-sum cash payment upon the day after the six-month anniversary of Executive’s Section 409A Separation from Service.

 

(ii)            Bonuses and Incentives .  Executive shall receive cash bonus payments from the Company for each calendar month during the Continuation Period in an amount equal to one-twelfth of the average of the bonuses paid to Executive under the executive bonus program(s) for the two calendar years immediately preceding the year in which his termination of employment occurs (“Average Bonus”).  Executive will receive these payments (the “Average Bonus Payments”) on a semi-monthly basis, payable on the fifteenth day and the last day of each calendar month, in substantially equal installments, beginning on the earliest such payment date following the date of Executive’s termination of employment.  Notwithstanding the foregoing, the payment of any portion of the Average Bonus Payments that (A) is not exempt from Code Section 409A, and (B) is payable (based on the payment schedule hereinabove) before, or within the six-month period immediately following, the date of Executive’s Section 409A Separation from Service, will be delayed and will be made in a single lump-sum cash payment upon the day after the six-month anniversary of Executive’s Section 409A Separation from Service.

 

 

Executive also shall receive a prorated bonus for the year in which Executive’s employment terminates.  Such bonus shall be equal to (A) the Average Bonus multiplied by the number of days Executive worked in the year of his employment termination, (B) divided by 365 days (“Prorated Bonus”).  The Prorated Bonus shall be paid in a lump sum in cash within 30 days after the date of Executive’s termination of employment.  Notwithstanding the foregoing, if the Prorated Bonus (or any portion thereof) is not exempt from Code Section 409A, the Prorated Bonus (or such portion) will be paid in a single lump-sum cash payment upon the day after the six-month anniversary of Executive’s Section 409A Separation from Service.

Any bonus amounts that Executive had previously earned from the Company but which may not yet have been paid as of the date of termination shall not be affected by this provision; provided, however, if the amount of the bonus for such prior year has not yet been determined, the bonus shall be an amount not less than the Average Bonus.

(iii)            Health Insurance Coverages .  The health insurance benefit coverages, whether self insured or commercially insured by the Company (including any executive medical plans), provided to Executive at Executive’s date of termination shall be continued for and during the Continuation Period by the Company at the same level and in the same manner as if Executive’s employment had not terminated (subject to the customary changes in such coverages upon Executive’s retirement, reaching age 65 or similar events).  Any additional health benefit coverages Executive had at termination, including spousal and/or dependent coverage, will also be continued for and during the Continuation Period on the same terms, to the extent permitted by the applicable policies or contracts.  The expense of all such health insurance benefit coverages shall be paid by the Company and/or Executive in the same respective amounts as each would pay if Executive’s employment had not terminated.  Executive shall pay his portion of such expenses by separate check payable to the Company each month in advance (or in such other manner, such as withholding a portion of monthly payments otherwise payable to Executive hereunder, as the Company may agree).  If the terms of any benefit plan referred to in this subsection do not permit continued participation by Executive, then the Company will arrange for other coverage at its expense providing substantially similar benefits.  Unless Executive has satisfied the eligibility requirements for retiree health coverage under the Company’s retiree medical plan (if any) as of the date of his termination of employment (and enrolled within 30 days after such termination date), the coverages provided for in this subsection shall be applied against and reduce the period for which COBRA benefits will be provided.

 

 

(iv)            Life and Long-Term Care Insurance Coverages .  The life and long-term care insurance benefit coverages (including any executive life and long-term care insurance plans) provided to Executive at Executive’s date of termination shall be continued for and during the Continuation Period by the Company at the same level and in the same manner as if Executive’s employment had not terminated (subject to the customary changes in such coverages upon Executive’s retirement, reaching age 65 or similar events).  Any additional life and long-term care coverages Executive had at termination, including spousal and/or dependent coverage, will also be continued for and during the Continuation Period on the same terms, to the extent permitted by the applicable policies or contracts.  The expense of all such life and long-term care benefit coverages shall be paid by the Company and/or Executive in the same respective amounts as each would pay if Executive’s employment had not terminated.  Executive shall pay his portion of such expenses by separate check payable to the Company each month in advance (or in such other manner, such as withholding a portion of monthly payments otherwise payable to Executive hereunder, as the Company may agree).  If the terms of any benefit plan referred to in this subsection do not permit continued participation by Executive, then the Company will arrange for other coverage at its expense providing substantially similar benefits.  If Executive is covered by a split-dollar or similar life insurance program as of the date of termination, Executive shall have the option, in Executive’s sole discretion, to have such policy transferred to Executive upon termination, provided that, except as may otherwise be provided in a separate agreement, the Company is paid for its interest (i.e., the cash surrender value) in the policy upon such transfer.

 

(v)            Employee Retirement Plans .  Upon the termination of Executive’s employment, Executive shall no longer actively participate in the tax-qualified employee retirement plans maintained by the Company.   However, with respect to any such plans, the Company shall pay to Executive the following amounts:

 

(A)            Savings Plan Company Match .  The Company shall pay to Executive an amount equal to the dollar amount of matching contributions, if any, that would have been made to Executive’s account(s) under the Interface, Inc. Savings and Investment Plan or any successor Code Section 401(k) plan (the “Savings Plan”) if Executive had continued to actively participate in the Savings Plan and had made deferrals at the maximum permissible level (in effect on the date of his termination of employment) throughout the Continuation Period.

 

(B)            Savings Plan Vesting .  To the extent that Executive is not fully vested under the Savings Plan on the date of his termination of employment, the Company shall pay to him an amount equal to (1) the value of his Savings Plan account on the date of his termination of employment had he been fully vested on such date, minus (2) the actual value of his vested Savings Plan account on such date.

 

 

(C)            Retirement Plan .  If, at the time of his employment termination, Executive participates in a tax-qualified defined benefit pension plan, the Company shall pay to Executive an amount equal to the present value on the date of termination of employment (calculated as provided in such tax-qualified pension plan) of the excess of (1) the benefit Executive would have been paid under such plan if Executive had continued to be covered for the Continuation Period (less any amounts Executive would have been required to contribute) and had been fully vested, over (2) the benefit actually payable under such plan.  Such amount shall be calculated, for the period after Executive’s employment termination, on the basis of the compensation payable to Executive under subsections (d)(i) and (ii) above.

 

(D)            Timing of Payment .  All amounts payable pursuant to this clause (v) shall be paid to Executive, or, if applicable, Executive’s spouse, estate or other beneficiary, in one lump-sum cash payment within 30 days after the date of Executive’s termination of employment, with any portion of such amount that is not exempt from Code Section 409A to be paid upon the day after the six-month anniversary of Executive’s Section 409A Separation from Service.

 

(E)            Salary Continuation Agreement .  For the avoidance of doubt, from and after Executive’s date of termination, Executive shall continue to be covered by, and entitled to the benefits under, Executive’s Salary Continuation Agreement dated as of January 1, 2008, payable in accordance with the terms of said agreement.

(vi)            Stock Awards .

 

(A)            Stock Options .  As of Executive’s date of termination, all outstanding stock options granted to Executive under the Interface, Inc. Omnibus Stock Incentive Plan (Amended and Restated effective February 22, 2006), the Interface, Inc. Omnibus Stock Incentive Plan (dated January 20, 1997), and the Interface, Inc. Key Employee Stock Option Plan (1993), and any similar plan(s) in effect at the time of Executive’s termination of employment   (collectively, the “Stock Plans”), shall become 100% vested and thus immediately exercisable.  To the extent inconsistent with this immediate vesting requirement, the provisions of this clause (vi) shall constitute an amendment of Executive’s stock option agreements under the Stock Plans.

 

(B)            Restricted Stock, etc .  In addition, but only to the extent expressly provided in any restricted stock or other award agreement associated with a Stock Plan, restrictions on all shares of restricted stock (and other performance shares, performance units or deferred shares) awarded to Executive under the Stock Plans shall lapse, and the affected shares shall become 100% vested.

 

 

(vii)            Cessation Upon Death .  The continuation benefits payable or to be provided under clauses (i), (ii), (iii), (iv) and (v) of this Section 5(d) shall cease in the event of Executive’s death.  (The foregoing shall not operate or be construed to negate the benefits payable to Executive and Executive’s estate under the plans and policies referenced in clauses (iii), (iv) and (v) of this Section 5(d) or under any other plans and policies referenced in this Agreement.  Furthermore, in the event of Executive’s death following a Change in Control, the provisions of Section 7(c)(iv) shall govern.)

 

(viii)                       Additional Consideration .  To be entitled to receive the foregoing compensation, Executive shall sign such additional release of claims, confidentiality agreements and other documents the Company may reasonably request of Executive at the time of payment; and, for so long as Executive is entitled to the benefits of such compensation, Executive shall cooperate fully with and devote Executive’s reasonable best efforts to providing assistance requested by the Company.  Such assistance shall not require Executive to be active in the Company’s day-to-day activities or engage in any substantial travel, and Executive shall be reimbursed for all reasonable and necessary out-of-pocket business expenses incurred in providing such assistance. Any reimbursements made pursuant to the preceding sentence shall be made as soon as practicable, but not later than 30 days after Executive submits evidence of such expenses to the Company.

 

6.               Effect of Other Termination Events .  If Executive is terminated for Cause prior to the end of the term of this Agreement, then Executive shall be entitled to no payment or compensation whatsoever from the Company under this Agreement, other than such salary, reimbursable expenses  and other amounts as may properly be due Executive through Executive’s last day of employment.  If Executive voluntarily resigns from employment (other than a Separation from Service for Good Reason, as defined in Section 7(a)(iv) below), then Executive shall be entitled to an amount equal to: (a) Executive’s salary, reimbursable expenses and other amounts as may be due Executive through the last day of Executive’s employment, and (b) the annual bonus for the calendar year in which Executive’s employment terminates, prorated through the last day of Executive’s employment (the amount of such bonus to be determined by the Company based on the audited year-end financial results of the Company).  If Executive’s employment is terminated due to Executive’s disability (as defined in the Company’s long-term disability plan or insurance policy) or death, Executive shall be entitled to the amounts described in the preceding sentence, as well as any amounts that may be due under the Company’s short and long-term disability plans or, in the case of death, the Company’s life insurance payment policy or plan in effect for executives of Executive’s level or pursuant to the terms of any separate agreement concerning split-dollar or similar life insurance; provided, Executive or Executive’s estate, as the case may be, shall not by operation of this provision forfeit any rights in which Executive is vested (or becomes vested) at the time of Executive’s disability or death (including, without limitation, the rights and benefits provided under the Stock Plans, Executive’s Salary Continuation Agreement or other applicable retirement plans).

Executive or, if appropriate, Executive’s spouse, estate or other beneficiary (as applicable) shall receive the amounts due under the first sentence of this Section 6 and clause (a) of the second sentence of this Section 6 in a single lump-sum cash payment within 30 days after the date of Executive’s termination of employment.

Executive or, if appropriate, Executive’s spouse, estate or other beneficiary, shall receive the amounts due under clause (b) of the second sentence of this Section 6 in a single lump-sum cash payment between January 1 and March 15, inclusive, of the calendar year immediately following the calendar year in which his employment terminates under this Section 6.

7.            Change in Control .

 

(a)            Definitions .  In addition to the terms defined elsewhere in this Agreement, the following terms shall have the meanings ascribed to them below.

 

(i)            “ Cause ” shall mean, with respect to any Section 409A Separation from Service following a Change in Control:  (A) an act that constitutes, on the part of Executive, fraud, dishonesty, gross negligence or willful misconduct and which directly results in injury to the Company, or (B) Executive’s conviction of a felony or other crime involving moral turpitude.  A termination of Executive for Cause based on clause (A) of the preceding sentence shall take effect 30 days after the Company gives written notice of such termination to Executive specifying the conduct deemed to qualify as Cause, unless Executive shall, during such 30-day period, remedy the events or circumstances constituting Cause to the reasonable satisfaction of the Company.  A termination for Cause based on clause (B) above shall take effect immediately upon the Company’s delivery of the termination notice.

 

(ii)            “ Change in Control ” shall mean a change of ownership or effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company, all within the meaning of Code Section 409A and guidance issued thereunder.  As a general overview, Code Section 409A defines “change in control” as any of the following:

 

 

(A)            Change in the Ownership of the Company .  A change in ownership of the Company occurs on the date that any one person, or more than one person acting as a group, acquires ownership of stock of the Company that, together with stock then held by such person or group constitutes more than 50 percent of the total fair market value or total voting power of the stock of the Company.  However, if any one person, or more than one person acting as a group, is considered to own more than 50 percent of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same person or persons is not considered to cause a change in the ownership of the Company or to cause a change in the effective control of the Company.  An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the Company acquires its stock in exchange for property will be treated as an acquisition of stock for purposes of this clause (A).  This clause (A) applies only when there is a transfer of stock of the Company (or issuance of stock of the Company) and stock in the Company   remains outstanding after the transaction.

 

           (B)            Change in the Effective Control of the Company .  A change in the effective control of the Company will occur on either of the following dates:

 

(1)            The date any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 30 percent or more of the total voting power of the stock of the Company; or

 

(2)            The date a majority of members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board before the date of the appointment or election.

 

(C)            Change in the Ownership of a Substantial Portion of the Company’s Assets .  A change in the ownership of a substantial portion of the Company’s assets occurs on the date that any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions.

 

 

(iii)            “ Involuntary Separation from Service ” (and “Involuntarily Separated from Service” and other similar terms) shall mean a Section 409A Separation from Service brought about as a direct result of the independent exercise of the unilateral authority of the Company to terminate Executive’s services (other than at Executive’s request) at a time when Executive is willing and able to continue services, for any reason other than for Cause.

 

(iv)            “ Separation from Service for Good Reason ” (and “Separates from Service for Good Reason” and other similar terms) shall mean a Section 409A Separation from Service that is voluntary on the part of Executive and that occurs within two years after the initial existence of one or more of the following conditions that occur without Executive’s consent, to the extent that there is, or would be if not corrected, a material negative change in Executive’s employment relationship with the Company:

 

(A)            A material reduction of Executive’s responsibilities, title or status resulting from a formal change in such title or status, or from the assignment to Executive of any duties inconsistent with Executive’s title, duties or responsibilities in effect within the year prior to the Change in Control;

 

(B)            A material reduction in Executive’s compensation or benefits (a reduction in value of five percent or more will be deemed material, however, whether a reduction of less than five percent is or is not material will be determined at the time of such reduction based on all of the facts and circumstances at that time); or

 

(C)            A Company-required, material, involuntary relocation of Executive’s place of residence or a material increase in Executive’s travel requirements (such a relocation outside of the city of Atlanta and the five core counties (Fulton, Dekalb, Gwinnett, Cobb and Clayton) comprising the metropolitan Atlanta, Georgia area will be deemed material, however, whether such a relocation within the metropolitan Atlanta area (as described above) is or is not material will be determined at the time of such relocation based on all of the facts and circumstances at that time).

 

In order to Separate from Service for Good Reason hereunder, Executive must provide notice to the Company of the existence of one of the above conditions within 90 days of the initial existence of the condition, and such termination for Good Reason shall not take effect unless the Company does not cure the condition within 30 days of such notice.

(b)            Vesting Upon Change in Control .  Upon the occurrence of a Change in Control during the term of this Agreement, (i) all outstanding stock options (and stock appreciation rights, if any) granted to Executive under the Stock Plans shall become 100% vested and thus immediately exercisable, and (ii) all restrictions on, and vesting requirements for, all shares of restricted stock (or other performance shares, performance units or deferred shares) awarded to Executive under the Stock Plans shall lapse, and such shares and awards shall become 100% vested and immediately payable to Executive.  To the extent inconsistent with this immediate vesting requirement, the provisions of this subsection (b) shall constitute an amendment of Executive’s stock option agreements, restricted stock agreements and other award agreements issued under the Stock Plans.

 

(c)            Certain Separations from Service within 24 Months Following a Change in Control .  If a Change in Control occurs during the term of this Agreement and, within 24 months following the date of such Change in Control, Executive is Involuntarily Separated from Service or Separates from Service for Good Reason, Executive shall be entitled to all of the benefits described in clauses (i) through (v) of Section 5(d) of this Agreement, for a period of 24 months following Executive’s termination of employment, with the following modifications:

 

(i)            Salary .  Instead of the Continued Salary Payments described in Section 5(d)(i) of this Agreement, Executive shall receive an amount equal to (A) the amount of such Continued Salary Payments payable during each month (B) multiplied by 24.  Such amount shall be paid to Executive in a lump-sum payment in cash (without discounting or any other adjustment for the time value of money) within 30 days after the date of Executive’s Section 409A Separation from Service.

 

(ii)            Bonuses and Incentives .  Instead of the Average Bonus Payments described in Section 5(d)(ii) of this Agreement, Executive shall receive an amount equal to (A) the amount of such Average Bonus Payments payable each month (B) multiplied by 24.  Such amount shall be paid to Executive in a lump-sum payment in cash (without discounting or any other adjustment for the time value of money) within 30 days after the date of Executive’s Section 409A Separation from Service.  This Section 7(c)(ii) shall not affect any other provision of Section 5(d)(ii), including, without limitation, the terms of such provision relating to the Prorated Bonus.

 

(iii)            Payments to Cover Excise Taxes .

 

(A)            Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined (as hereafter provided) that any payment or distribution to or for Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or pursuant to or by reason of any other agreement, policy, plan, program or arrangement (including, without limitation, any Stock Plan or salary continuation agreement), or similar right (a “Payment” or “Payment(s)”), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provisions thereto), or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereafter collectively referred to as the “Excise Tax”), then Executive shall be entitled to receive an additional payment or payments (a “Gross-Up Payment”) from the Company.  The total amount of the Gross-Up Payment shall be an amount such that, after payment by (or on behalf of) Executive of any Excise Tax and all federal, state and other taxes (including any interest or penalties imposed with respect to such taxes) imposed upon the Gross-Up Payment, the remaining amount of the Gross-Up Payment is equal to the Excise Tax imposed upon the Payment(s).  For purposes of clarity, the amount of the Gross-Up Payment shall be that amount necessary to pay the Excise Tax in full and all taxes assessed upon the Gross-Up Payment.

 

(B)            An initial determination as to whether a Gross-Up Payment is required pursuant to this subsection (c)(iii) and the amount of such Gross-Up Payment shall be made by an accounting firm selected by the Company, and reasonably acceptable to Executive, which is then designated as one of the four largest accounting firms in the United States (the “Accounting Firm”).  The Company shall cause the Accounting Firm to provide its determination (the “Determination”), together with detailed supporting calculations and documentation to the Company and Executive, as promptly as practicable after such calculation is requested by the Company or by Executive with respect to any Payment(s), and if the Accounting Firm determines that no Excise Tax is payable by Executive with respect to such Payment(s), the Company shall cause it to furnish Executive with an opinion reasonably acceptable to Executive that no Excise Tax will be imposed with respect to any such Payment(s).  Within 15 days of the delivery of the Determination to Executive, Executive shall have the right to dispute the Determination (the “Dispute”).  The Gross-Up Payment, if any, as determined pursuant to this subsection (c)(iii) shall be paid by the Company to Executive within 15 days of the receipt of the Accounting Firm’s Determination.   The existence of the Dispute shall not in any way affect the right of Executive to receive the Gross-Up Payment in accordance with the Determination.  If there is no Dispute, the Determination shall be binding, final and conclusive upon the Company and Executive, subject to the application of Section 7(c)(iii)(C).

 

(C)            As a result of the uncertainty in the application of Sections 4999 and 280G of the Code, it is possible that a Gross-Up Payment (or a portion thereof) will be paid which should not have been paid (an “Excess Payment”) or a Gross-Up Payment (or a portion thereof) which should have been paid will not have been paid (an “Underpayment”).  An Underpayment shall be deemed to have occurred upon the earliest to occur of the following events:  (1) upon notice (formal or informal) to Executive from any governmental taxing authority that the tax liability of Executive (whether in respect of the then current taxable year of Executive or in respect of any prior taxable year of Executive) may be increased by reason of the imposition of the Excise Tax on any Payment(s) with respect to which the Company has failed to make a sufficient Gross-Up Payment, (2) upon a determination by a court, (3) by reason of a determination by the Company (which shall include the position taken by the Company, or its consolidated group, on its federal income tax return), or (4) upon the resolution to the satisfaction of Executive of his Dispute.  If any Underpayment occurs, Executive shall promptly notify the Company, and the Company shall pay to Executive within 15 days of the date the Underpayment is deemed to have occurred under clauses (1), (2), (3) or (4) above, but in no event less than five days prior to the date on which the applicable government taxing authority has requested payment, an additional Gross-Up Payment equal to the amount of the Underpayment plus any interest and penalties imposed on the Underpayment.

 

An Excess Payment shall be deemed to have occurred upon a “Final  Determination” (as hereinafter defined) that the Excise Tax shall not be imposed upon any Payment(s) (or portion of a Payment) with respect to which Executive had previously received a Gross-Up Payment.  A Final  Determination shall be deemed to have occurred when Executive has received from the applicable governmental taxing authority a refund of taxes or other reduction in his tax liability by reason of the Excess Payment and upon either (1) the date a determination is made by, or an agreement is entered into with, the applicable governmental taxing authority which finally and conclusively binds Executive and such taxing authority, or in the event that a claim is brought before a court of competent jurisdiction, the date upon which a final determination has been made by such court and either all appeals have been taken and finally resolved or the time for all appeals has expired, or (2) the statute of limitations with respect to Executive’s applicable tax return has expired.  If an Excess Payment is determined to have been made, the amount of the Excess Payment shall be treated as a loan by the Company to Executive, and Executive shall pay to the Company within 15 days following demand (but not less than 30 days after the determination of such Excess Payment) the amount of the Excess Payment plus interest at an annual rate equal to the rate provided for in Section 1274(b)(2)(B) of the Code from the date the Gross-Up Payment (to which the Excess Payment relates) was paid to Executive until the date of repayment to the Company.

(D)            Notwithstanding anything contained in this Agreement to the contrary, in the event that, according to the Determination, an Excise Tax will be imposed on any Payment(s), the Company shall pay to the applicable government taxing authorities, as Excise Tax withholding, the amount of any Excise Tax that the Company has actually withheld from the Payment(s); provided, that the Company’s payment of withheld Excise Tax shall not alter the Company’s obligation to pay the Gross-Up Payment required under this subsection (c)(iii).

 

(E)            Executive and the Company shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the Determination contemplated by subsection (c)(iii)(B) hereof.

 

(F)            The fees and expenses of the Accounting Firm for its services in connection with the Determination and calculations contemplated by subsection (c)(iii)(B) hereof shall be paid by the Company. Any payments made pursuant to the preceding sentence shall be made as soon as practicable, but not later than 30 days after Executive submits evidence of such expenses to the Company.

 

(iv)            Executive’s Death .  In the event Executive shall die within 24 months following a Change in Control, all amounts and benefits which would have been payable or due to Executive if Executive had continued to live (including, in the event Executive dies after being Involuntarily Separated from Service or after having Separated from Service for Good Reason, the amounts and benefits described in Section 7 hereof) shall be paid and provided in accordance with the terms of this Agreement to the executors, administrators, heirs or personal representatives of Executive’s estate.

 

8.            Compensation and Benefits .  During the term of Executive’s employment with the Company hereunder:

 

(a)            Continuity . Executive’s salary, current perquisites (including, but not limited to, company car) and bonus opportunity (currently expressed as a percentage of Executive’s base salary) may be increased from time to time as determined by the CEO or the Board (or Committee of the Board), but shall not be reduced or eliminated.

 

(b)            Other Benefits .  Executive shall be entitled to vacation with pay, life insurance, health insurance, long-term care insurance, and such other employee benefits as Executive may be eligible to receive in accordance with the established plans and policies of the Company, as in effect from time to time.

 

 

(c)            Short-Term Disability Benefits .  For purposes of this subsection (c), “Disability” and “Disabled” shall mean Executive’s inability, as a result of physical or mental incapacity, to substantially perform Executive’s duties for the Company on a full-time basis for a continuous period of six months.  Upon the Company being made aware of Executive’s Disability, Executive shall be entitled to receive, for a period of six months (the “Short-Term Disability Period”), the following:

 

(i)            Salary Continuation .  An amount equal to his current salary (subject to withholding of all applicable taxes) for the shorter of (A) his Short-Term Disability Period, or (B) the period he remains Disabled.  For purposes hereof, Executive’s “current salary” shall be the rate in effect on the day immediately prior to the date upon which the Company is made aware of Executive’s Disability.  Executive will receive such salary payments in accordance with the Company’s normal executive payroll processes.

(ii)            Bonus and Incentives .  Executive shall continue to participate in each applicable bonus and incentive plan of the Company during the Short-Term Disability Period.  Executive will receive bonus and incentive payments, if any, in accordance with the normal processes and timing for payment of such amounts to executives who are actively at work.

(d)            Tax Equalization .  In the event of Executive’s relocation, the Company and Executive will cooperate in good faith to agree on such adjustments to Executive’s compensation and benefits package as are appropriate to provide consistent after-tax income to Executive equivalent to that of a person receiving Executive’s pay and benefits taxable under the terms of the Code, while also acting in the best interests of the Company.

 

9.            Restrictive Covenants .

 

(a)            Definitions   In addition to the terms defined elsewhere in this Agreement, the following terms shall have the meanings ascribed to them as set forth below.

 

(i)            “ Company ” shall mean, for the purposes of, and as used in, this Section 9, Interface, Inc. and its direct and indirect subsidiaries and affiliated entities throughout the world.

 

(ii)            “ Confidential Information ” shall mean information relating to the Company’s customers, operations, finances, and business in any form that derives value from not being generally known to other persons or entities, including, but not limited to, technical or nontechnical data, formulas, patterns (including future carpet patterns), customer purchasing practices and preferences, compilations (including compilations of customer information), programs (including computer programs and models), devices (including carpet manufacturing equipment), methods (including aesthetic and functional design and manufacturing methods), techniques (including style and design technology and plans), drawings (including product or equipment drawings), processes, financial data (including sales forecasts, sales histories, business plans, budgets and other forecasts), or lists of actual or potential customers or suppliers (including identifying information about those customers), whether or not reduced to writing. Confidential Information subject to this Agreement may include information that is not a trade secret under applicable law, but such information not constituting a trade secret shall be treated as Confidential Information under this Agreement for only a two-year period after termination of Executive’s employment.

 

(iii)            “ Customers ” shall mean customers of the Company that Executive, during the two-year period before termination of Executive’s employment, (A) solicited or serviced or (B) about whom Executive had Confidential Information.  The parties acknowledge that a two-year period for defining Customers (as well as “Suppliers,” below) is reasonable based on the Company’s typical sales cycle, budgetary requirements and procurement procedures.

 

(iv)            “ Products ” shall mean carpet tile, modular carpet, broadloom carpet (whether 12-foot, six-foot or other competitive widths) and resilient textile flooring for contract, commercial, institutional (including, but not limited to, government and education), and residential markets and customers.

 

(v)            “ Services ” shall mean the services of an administrative and managerial nature that Executive shall provide as a Company executive, and that Executive shall be prohibited from providing (whether as an owner, partner, employee, consultant or in any other capacity) in competition with the Company, in accordance with the terms of this Agreement, which are to manage and supervise, and to have responsibility for, the following aspects of the Company’s business:  (A) employee benefit plans and programs, (B) compensation, human resources and personnel matters, (C) business development and expansion, including expansion by merger, acquisition, joint venture and other combinations and affiliations, (D) purchasing of non-strategic supplies and materials, and (E) acquisition, development and disposal of real estate and interests in real estate.  Executive acknowledges that he has been informed of and had an opportunity to discuss with the Company the specific activities Executive will perform as Services and that Executive understands the scope of the activities constituting Services.  Notwithstanding anything herein to the contrary, Services shall not include any of the legal services provided by Executive to the Company during his employment.

 

(vi)            “ Supplier ” shall mean a supplier of the Company that Executive, during the two-year period before termination of Executive’s employment, (A) had contact with on behalf of the Company, or (B) about whom Executive had Confidential Information.

 

(vii)            “ Territory ” shall mean North America, which is the geographic area where Executive performs Services for the Company and in which the Company continues to conduct business. Executive has been informed of and had an opportunity to discuss with the Company the specific territory in which Executive will perform Services.  Executive acknowledges that the market for the Company Products is worldwide, and that the Territory is the area in which Executive’s provision of Services in violation of this Agreement would cause harm to the Company.

 

(b)            Non-disclosure and Restricted Use .  Executive shall use best efforts to protect Confidential Information.  Furthermore, Executive will not use, except in connection with work for the Company, and will not disclose during or after Executive’s employment, the Company’s Confidential Information.

 

(c)            Return of Materials .  Upon the expiration of this Agreement or termination for any reason of Executive’s employment, or at any time upon the Company’s request, Executive will deliver promptly to the Company all materials, documents, plans, records, notes or other papers and any copies in Executive’s possession or control relating in any way to the Company’s business, which at all times shall be the property of the Company.

 

(d)            Non-solicitation of Customers .  During employment with the Company and for two years after the termination for any reason of Executive’s employment, Executive will not solicit Customers for the purpose of providing or selling any Products.

 

(e)            Non-solicitation of Suppliers .  During employment with the Company and for two years after the termination for any reason of Executive’s employment, Executive will not solicit any Supplier for the purpose of obtaining goods or services that the Company obtained from that Supplier and that are used in or relate to any Products.

 

(f)            Non-solicitation of Company Employees .  During employment with the Company and for two years after the termination for any reason of Executive’s employment, Executive will not solicit for employment with another person or entity, anyone who is, or was at any time during the year prior to such termination of Executive’s employment, a Company employee.

 

(g)            Limitations on Post-Termination Competition .  During employment with the Company and for two years after the termination for any reason of Executive’s employment, Executive will not provide any Services within the Territory to any person or entity developing, manufacturing, marketing, selling, distributing or installing any Products.

 

(h)            Disparagement .  Executive shall not at any time make false or misleading statements about the Company, including its Products, management, employees, Customers and Suppliers.

 

 

(i)            Future Employment Opportunities .  At any time before, and for two years after, the termination for any reason of Executive’s employment, Executive shall, before accepting employment with another employer, provide such prospective employer with a copy of this Agreement and, upon accepting any employment with another employer, provide the Company with such employer’s name and a description of the services Executive will provide to such employer.

 

(j)            Work For Hire Acknowledgment; Assignment .  Executive acknowledges that Executive’s work on and contributions to documents, programs, and other expressions in any tangible medium (collectively, “Works”) are within the scope of Executive’s employment and part of Executive’s duties and responsibilities.  Executive’s work on and contributions to the Works will be rendered and made by Executive for, at the instigation of, and under the overall direction of, the Company, and are and at all times shall be regarded, together with the Works, as “work made for hire” as that term is used in the United States Copyright Laws.  Without limiting this acknowledgment, Executive assigns, grants, and delivers exclusively to the Company all rights, titles, and interests in and to any such Works, and all copies and versions, including all copyrights and renewals.  Executive will execute and deliver to the Company, its successors and assigns, any assignments and documents the Company requests for the purpose of establishing, evidencing, and enforcing or defending its complete, exclusive, perpetual and worldwide ownership of all rights, titles and interests of every kind and nature, including all copyrights, in and to the Works, and Executive constitutes and appoints the Company as Executive’s agent to execute and deliver any assignments or related documents Executive fails or refuses promptly to execute and deliver, this power and agency being coupled with an interest and being irrevocable.  The foregoing shall not operate to preclude Executive from retaining ownership and control of his personal “retrieval file” of sample and form legal documents, provided that Executive does not violate the confidentiality undertaking set forth in subsection (b) above.

 

(k)            Inventions, Ideas and Patents .  Executive shall disclose promptly to the Company (which shall receive it in confidence), and only to the Company, any invention or idea of Executive (developed alone or with others) conceived or made during Executive’s employment by the Company or within six months of the date of expiration of this Agreement or termination of employment.  Executive assigns to the Company any such invention or idea in any way connected with Executive’s employment with the Company or related to the Company’s business, research or development, or demonstrably anticipated research or development, and will cooperate with the Company and sign all documents deemed necessary by the Company to enable it to obtain, maintain, protect and defend patents covering such inventions and ideas and to confirm the Company’s exclusive ownership of all rights in such inventions, ideas and patents. Executive irrevocably appoints the Company as Executive’s agent to execute and deliver any assignments or related documents Executive fails or refuses to execute and deliver promptly, this power and agency being coupled with an interest and being irrevocable. This constitutes the Company’s written notification that this assignment does not apply to an invention for which no equipment, supplies, facility or trade secret information of the Company was used and which was developed entirely on Executive’s own time, unless (i) the invention relates (A) directly to the business of the Company or (B) to the Company’s actual or demonstrably anticipated research or development, or (ii) the invention results from any work performed by Executive for the Company.

 

 

(l)            Survival of Provisions .  Upon termination of Executive’s employment for any reason whatsoever (whether voluntary on the part of Executive, for Cause, or other reasons), the obligations of Executive pursuant to this Section 9 shall survive and remain in effect.

 

(m)            Injunctive Relief .  Executive acknowledges that any breach of the terms of this Section 9 would result in material damage to the Company, although it might be difficult to establish the monetary value of the damage.  Executive therefore agrees that the Company, in addition to any other rights and remedies available to it, shall be entitled to obtain an immediate injunction (whether temporary or permanent) from any court of appropriate jurisdiction in the event of any such breach thereof by Executive, or threatened breach which the Company in good faith believes will or is likely to result in irreparable harm to the Company.

 

10.            Governing Law .  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Georgia and the federal laws of the United States of America, without regard to rules relating to the conflict of laws.  Executive hereby consents to the exclusive jurisdiction of the Superior Court of Cobb County, Georgia and the U.S. District Court in Atlanta, Georgia, and hereby waives any objection Executive might otherwise have to jurisdiction and venue in such courts in the event either court is requested to resolve a dispute between the parties.

 

11.            Dispute Resolution; Expenses .  All claims by Executive for any unpaid compensation and benefits under this Agreement shall be directed to the Board and shall be in writing. Any denial by the Board of a claim for compensation or benefits under this Agreement shall be delivered to Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon.  The Board shall afford a reasonable opportunity to Executive for a review of a decision denying a claim and shall further allow Executive to appeal to the Board a decision of the Board within 60 days after notification by the Board that Executive’s claim has been denied.  In the event Executive incurs legal fees and other expenses in seeking to obtain or to enforce any rights or benefits provided by this Agreement and is successful, in whole or in part, in obtaining or enforcing any such rights or benefits through litigation, settlement, arbitration, mediation or otherwise, the Company shall pay or reimburse Executive’s reasonable legal fees and expenses incurred in enforcing this Agreement.  Except to the extent provided in the preceding sentence, each party shall pay his or its own legal fees and other expenses associated with any dispute. Any of Executive’s legal fees or expenses to be paid by the Company shall be paid as soon as practicable, but not later than 30 days after Executive submits evidence of such expenses to the Company.

 

 

12.            Code Section 409A .  This Agreement is intended to comply with the requirements of Code Section 409A and shall be construed accordingly.  Any payments or distributions to be made to Executive under this Agreement upon a separation from service of amounts classified as “nonqualified deferred compensation” for purposes of Code Section 409A, and not exempt from Code Section 409A, shall in no event be made or commence until six months after Executive’s Section 409A Separation from Service.  Any reference to a payment being exempt (or not exempt) from Code Section 409A refers to any applicable exemption available under Section 409A, including, without limitation, the short-term deferral rule and severance pay exemptions as provided in Code Section 409A and the Treasury Regulations.  Each payment under this Agreement (whether of cash, property or benefits) shall be treated as a separate payment for purposes of Code Section 409A.  Where this Agreement provides that a payment will be made upon a specified date or during a specified period, such date or period, as required by Code Section 409(A), but in no way to detract from or excuse the payment deadlines set forth in the operative provisions above in this Agreement, will be the Code Section 409A “payment date” or “payment period”, and actual payment will be made no later than the latest date permitted under Code Section 409A and the regulations thereunder (generally, by the later of the end of the calendar year in which the payment date falls, or the fifteenth day of the third calendar month after the payment date occurs).  To the extent that any payments made pursuant to this Agreement are reimbursements exempt from Code Section 409A, the amount of such payments during any calendar year shall not affect the benefits provided in any other calendar year, and the right to any such payments shall not be subject to liquidation or exchange for another benefit or payment.  As required by Code Section 409A, but in no way to detract from or excuse the payment deadlines set forth in the operative provisions above in this Agreement, the payment date for any reimbursements shall in no event be later than the last day of the calendar year immediately following the calendar year in which the reimbursed expense was incurred or, for purposes of Sections 7(c)(iii)(B) and (C) above, the calendar year in which the Excise Tax must be remitted to the applicable governmental taxing authority.

 

13.            Notices .  All notices, consents and other communications required or authorized to be given by either party to the other under this Agreement shall be in writing and shall be deemed to have been given or submitted (a) upon actual receipt if delivered in person or by facsimile transmission with receipt confirmation, (b) upon the earlier of actual receipt or the expiration of two business days after sending by express courier (such as UPS or Federal Express), and (c) upon the earlier of actual receipt or the expiration of seven days after mailing if sent by registered or certified express mail, postage prepaid, to the parties at the following addresses:

 

To the Company:                                            Interface, Inc. 2859 Paces Ferry Road, Suite 2000 Atlanta, Georgia 30339 Fax No.: 770-437-6822 Attn: Chief Executive Officer

With a copy to:                                 Interface, Inc. 2859 Paces Ferry Road, Suite 2000 Atlanta, Georgia 30339 Fax No.: 770-319-6270 Attn: General Counsel

To Executive:                                            Raymond S. Willoch at the last address and fax number shown on the records of the Company

Executive shall be responsible for providing the Company with a current address. Either party may change its address (and facsimile number) for purposes of notices under this Agreement by providing notice to the other party in the manner set forth above.

14.            Failure to Enforce .  The failure of either party hereto at any time, or for any period of time, to enforce any of the provisions of this Agreement shall not be construed as a waiver of such provision(s) or of the right of such party thereafter to enforce each and every such provision.

 

15.            Binding Effect; Assignment .  This Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns, and Executive and his heirs and personal representatives, but, except as hereinafter provided, neither this Agreement nor any right hereunder may be assigned or transferred by either party hereto (or by any beneficiary or any other person), nor shall this Agreement or any right hereunder be subject to alienation, anticipation, sale, pledge, encumbrance, execution, levy or other legal process of any kind against Executive, Executive’s beneficiary or any other person.  Notwithstanding the foregoing, any person or business entity succeeding to all or substantially all of the business of the Company by stock purchase, merger, consolidation, purchase of assets, or otherwise, shall be bound by and shall adopt and assume this Agreement, and the Company shall obtain the express assumption of this Agreement by such successor and provide evidence of same to Executive.

 

16.            Nature of Obligation .  The agreement of the Company (or its successor) to make payments to Executive hereunder shall represent the unsecured obligation of the Company (and its successor), except to the extent (a) the terms of any other agreement, plan or arrangement pertaining to the parties provide for funding, or (b) the Company (or its successor), in its sole discretion, elects in whole or in part to fund the Company’s obligations under this Agreement pursuant to a trust arrangement or otherwise.

 

17.            Entire Agreement .  This Agreement supersedes all prior discussions and agreements between the parties (including, without limitation, the Prior Agreements) and constitutes the sole and entire agreement between the Company and Executive with respect to the subject matter hereof.  This Agreement shall not be modified or amended except pursuant to a written document signed by the parties hereto, which makes specific reference to this Agreement and the fact that it is modifying or amending this Agreement.

 

 

18.            Preservation of Benefits .  Nothing in this Agreement shall limit or replace the compensation or benefits payable to Executive, or otherwise affect Executive’s rights, under any other benefit plan, program or agreement in which Executive participates or to which Executive is a party.

 

19.            Severability .  If any provision of this Agreement shall be held to be illegal, invalid or unenforceable by a court of competent jurisdiction, it is the intention of the parties that the remaining provisions shall constitute their agreement with respect to the subject matter hereof, and all such remaining provisions shall continue in full force and effect.

 

20.            Counterparts .  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its duly authorized officers, and Executive has hereunder set his hand, as of the date first above written.

	INTERFACE, INC.
	By:            /s/ Daniel T. Hendrix
	Daniel T. Hendrix
	President and CEO
	Attest:                       /s/ David B. Foshee
	David B. Foshee
	Assistant Secretary
	EXECUTIVE:
	/s/ Raymond S. Willoch
	Raymond S. Willoch

---

REGULATION S-K SCHEDULE TO

FORM OF SALARY CONTINUATION AGREEMENT

The following Form of Salary Continuation Agreement has been used by the Company to enter into individual agreements with each of the following employees:

1.               Daniel T. Hendrix, President and Chief Executive Officer.

2.               Raymond S. Willoch, Senior Vice President-Administration, General Counsel and Secretary.

3.               John R. Wells, Senior Vice President (and a subsidiary President).

SALARY CONTINUATION AGREEMENT

THIS SALARY CONTINUATION AGREEMENT (this “Agreement”) is made and entered into as of the 1st day of January, 2008, by and between Interface, Inc. , a Georgia corporation (the “Company”), and _______________ , a resident of _________________ (“Employee”).

W I T N E S S E T H:

WHEREAS, Employee is currently employed by the Company in the capacity of ______________________________;

WHEREAS, Employee has performed his duties in a capable and efficient manner;

WHEREAS, the experience of Employee is such that assurance of his continued service to the Company is considered essential to its future growth and profits, and the Company desires to retain the valuable services and business counsel of Employee and to induce Employee to remain in his managerial and supervisory capacity with the Company;

WHEREAS, the Company further wishes to retain Employee so as to prevent a substantial financial loss which the Company would incur if Employee left the employment of the Company and entered the employment of a competitor;

WHEREAS, Employee is willing to continue in the employ of the Company, provided the Company will agree to provide to Employee and his beneficiaries an additional benefit in the form of certain payments in the event of Employee’s retirement, disability or death;

WHEREAS, Employee is considered a highly compensated employee or member of a select management group of the Company;

WHEREAS, the Company and Employee entered into a salary continuation agreement effective as of ________________, which was previously amended and restated several times, most recently pursuant to an agreement dated October 1, 2002 (the “Prior Agreement”);

WHEREAS, the Compensation Committee of the Company’s Board of Directors approved, on October 24, 2007, certain changes to the Prior Agreement (to be effective January 1, 2008), including changes to bring the Prior Agreement into compliance with Section 409A of the Internal Revenue Code of 1986, as amended (“Code Section 409A”), and the Company and Employee now desire to amend and restate the Prior Agreement in certain respects; and

WHEREAS, this Agreement, which continues, amends and restates the Prior Agreement in its entirety and was approved by the Compensation Committee on December 13, 2007, shall be deemed effective as of January 1, 2008;

NOW, THEREFORE, in consideration of the respective covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.            Definitions .  In addition to the terms defined elsewhere in this Agreement, the following terms, when used with an initial capital letter, shall have the meanings ascribed to them below:

 

(a)            Annual Compensation means salary and cash bonus paid by the Company to Employee for a particular calendar year, and excludes compensation from stock options, restricted stock and any other benefit or compensation program.  (For purposes of clarity, and based on the method in which the Company currently operates its annual bonus program, the cash bonus applicable to a particular calendar year is the aggregate of the bonus paid typically on a quarterly basis during the year and within the first calendar quarter of the following year).

 

(b)            Authorized Leave of Absence means any period not to exceed one year during which the Company, in its sole discretion, permits Employee to be away from work and which the Company designates as an “authorized leave of absence.”

 

(c)            Beneficiary means the person or persons (which may be Employee’s estate) designated (or deemed designated) by Employee in accordance with the terms of Section 6(a) hereof to receive any death benefit payable under this Agreement upon Employee’s death.

 

(d)            Cause means the reason for termination of Employee's employment is (i) Employee's fraud, dishonesty, gross negligence or willful misconduct with respect to business affairs of the Company, (ii) Employee's refusal or repeated failure to follow the established lawful policies of the Company applicable to persons occupying the same or similar positions, or (iii) Employee's conviction of a felony or other crime involving moral turpitude; provided, however, that following a Change in Control, “Cause” means the reason for termination of Employee’s employment is (x) an act that constitutes, on the part of Employee, fraud, dishonesty, gross negligence or willful misconduct and which directly results in injury to the Company, or (y) Employee’s conviction of a felony or other crime involving moral turpitude.

 

(e)            Change in Control means, and a “Change in Control” shall be deemed to occur on the earliest of (and upon any subsequent occurrence of), the following:

 

 

       (i)            A change of ownership or effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company, all within the meaning of Code Section 409A and guidance issued thereunder. As a general overview, Code Section 409A defines “change in control” as any of the following:

 

(A)            Change in the Ownership of the Company .  A change in ownership of the Company occurs on the date that any one person, or more than one person acting as a group, acquires ownership of stock of the Company that, together with stock then held by such person or group constitutes more than 50 percent of the total fair market value or total voting power of the stock of the Company.  However, if any one person, or more than one person acting as a group, is considered to own more than 50 percent of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same person or persons is not considered to cause a change in the ownership of the Company or to cause a change in the effective control of the Company.  An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the Company acquires its stock in exchange for property will be treated as an acquisition of stock for purposes of this clause (A).  This clause (A) applies only when there is a transfer of stock of the Company (or issuance of stock of the Company) and stock in the Company   remains outstanding after the transaction.

 

(B)            Change in the Effective Control of the Company . A change in the effective control of the Company will occur on either of the following dates:

 

(1)            The date any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 30 percent or more of the total voting power of the stock of the Company; or

 

(2)            The date a majority of members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board before the date of the appointment or election.

 

(C)            Change in the Ownership of a Substantial Portion of the Company’s Assets .  A change in the ownership of a substantial portion of the Company’s assets occurs on the date that any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions.

 

 

     (ii)            The effective time of (A) a merger, consolidation or other business combination of the Company with one or more corporations as a result of which the holders of the outstanding voting stock of the Company immediately prior to such merger or consolidation hold less than 51 percent of the voting stock of the surviving or resulting corporation, or (B) a plan of complete liquidation of the Company.

     

     (iii)            During such period as the holders of the Company’s Class B common stock are entitled to elect a majority of the Company’s Board of Directors, (A) the date the Permitted Holders (defined below) shall at any time fail to be the “beneficial owners” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934) of a majority of the issued and outstanding shares of the Company’s Class B common stock, or (B) the date of  the election to the Board of Directors of the Company, without the recommendation or approval of Ray C. Anderson if he is then serving on the Board of Directors, or, if he is not then serving, of the incumbent Board of Directors of the Company, of the lesser of (1) four directors, or (2) directors constituting a majority of the number of directors of the Company then in office.

 

(f)            Claims Manager means the Chief Financial Officer of the Company or such other executive officer of the Company as may be designated by the Company’s Chief Executive Officer or Board of Directors to serve in such capacity (which designation shall be communicated to Employee by written notice). In the absence of a designated Claims Manager, the Board of Directors shall function as Claims Manager.

 

(g)            Code means the Internal Revenue Code of 1986, as amended.

 

(h)            Disability or Disabled means (i) with respect to the first 60 months of the period in which Employee claims he is unable to work, Employee's mental or physical condition that has lasted for at least six continuous months, that appears to be permanent or indefinite in nature and that prevents Employee from performing all of the substantial and material duties of his regular occupation; and (ii) with respect to the continuous, succeeding period (after such initial 60 months) in which Employee claims he is unable to work, Employee's mental or physical condition resulting from an injury or sickness that prevents Employee from performing all of the substantial and material duties of any occupation for which he is reasonably fitted by education, training or experience.

 

(i)            Earliest Retirement Date means the first date on which Employee both has attained age 55 (but is not yet age 65) and completed 15 Years of Employment.

 

(j)            Early Retirement Date means (i) the date, on or after Employee’s Earliest Retirement Date but before his Normal Retirement Date, on which Employee actually Separates from Service; or (ii) under certain circumstances where Employee’s actual employment has terminated prior to the Earliest Retirement Date but Employee is deemed to be continuously employed, the Earliest Retirement Date.

 

(k)            Early Retirement Payments means the early retirement salary continuation payments that will become payable to Employee if he retires on his Early Retirement Date, as described in Section 3 hereof.

 

(l)            Normal Retirement Date means the first date on which Employee both has attained age 65 and completed 15 Years of Employment.

 

(m)            Permitted Holders means Ray C. Anderson, Daniel T. Hendrix, John R. Wells, Raymond S. Willoch, Robert A. Coombs, Patrick C. Lynch, Lindsey K. Parnell, Carl I. Gable, and J. Smith Lanier, II; provided that, for purposes of this definition, the reference to each such individual shall be deemed to include the members of such individual’s immediate family, such individual’s estate, and any trusts created by such individual for the benefit of members of such individual’s immediate family.

 

(n)            Salary Continuation Payments means the salary continuation payments that will become payable to Employee if he Separates from Service on or after his Normal Retirement Date, as described in Section 2 hereof.

 

(o)            Separation from Service (and Separates from Service)   means separation from service with the Company and its affiliated entities as defined in Code Section 409A and guidance issued thereunder.  As a general overview, under Code Section 409A, an employee separates from service if the employee dies, retires, or otherwise has a termination of employment determined in accordance with the following:

 

            (i)            Leaves of Absence. The employment relationship is treated as continuing intact while Employee is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or, if longer, so long as Employee retains a right to reemployment with the Company under an applicable statute or by contract. A leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that Employee will return to perform services for the Company. If the period of leave exceeds six months and Employee does not retain a right to reemployment under an applicable statute or by contract, the employment relationship is deemed to terminate on the first day immediately following such six-month period.

 

         (ii)            Status Change. Generally, if Employee performs services both as an employee and an independent contractor, Employee must separate from service both as an employee, and as an independent contractor pursuant to standards set forth in Treasury Regulations, to be treated as having a Separation from Service. However, if Employee provides services to the Company as an employee and as a member of the Board of Directors, the services provided as a director are not taken into account in determining whether Employee has a Separation from Service as an employee for purposes of this Agreement.

 

           (iii)            Termination of Employment. Whether a termination of employment has occurred is determined based on whether the facts and circumstances indicate that the Company and Employee reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services Employee would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than 49 percent of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services to the Company if Employee has been providing services to the Company less than 36 months). Facts and circumstances to be considered in making this determination include, but are not limited to, whether Employee continues to be treated as an employee for other purposes (such as continuation of salary and participation in employee benefit programs), and whether similarly-situated service providers have been treated consistently. For periods during which Employee is on a paid bona fide leave of absence and has not otherwise terminated employment as described in clause (i) above, for purposes of this clause (iii) Employee is treated as providing bona fide services at a level equal to the level of services that Employee would have been required to perform to receive the compensation paid with respect to such leave of absence.  Periods during which Employee is on an unpaid bona fide leave of absence and has not otherwise terminated employment are disregarded for purposes of this clause (iii) (including for purposes of determining the applicable 36-month (or shorter) period).  The Company and Employee reasonably anticipate, as of the date of this Agreement, that the level of Employee’s post-employment services for the Company, if any, will be no more than 49% of the historical level of services (as described hereinabove) that Employee has provided (such that he will have a Section 409A Separation from Service as of the date of his termination of employment).  Notwithstanding the foregoing, the parties acknowledge that they should reassess the anticipated level of services as of the date of Employee’s termination of employment to confirm that it is sufficiently limited so that such termination date will be the date of Employee’s Section 409A Separation from Service.  While it is anticipated Employee’s Section 409A Separation from Service will occur on the date that his employment terminates, this Agreement is drafted to take into account the chance that it will not.

 

           (iv)            Service with Affiliates. For purposes of determining whether a Separation from Service has occurred under the above provisions, the “Company” shall include the Company and all entities that would be treated as a single employer with the Company under Code Section 414(b) or (c), but substituting “at least 50 percent” instead of “at least 80 percent” each place it appears in applying such rules.

 

(p)            Schedule A means “Schedule A – Schedule of Benefit Amounts,” a copy of which is attached to this Agreement and incorporated herein by this reference.

 

(q)            Schedule B means “Schedule B – Beneficiary Designation Form,” a copy of which is attached hereto and incorporated herein by this reference.

 

(r)            Spouse means the spouse of Employee to whom Employee is married, pursuant to a religious or civil ceremony recognized by the laws of the State where the marriage was contracted, on the date such status is being determined.

 

(s)            Treasury Regulations means the applicable regulations promulgated by the Secretary of Treasury under Code Section 409A.

 

(t)            Voluntary Termination means a termination of employment   that is voluntary on the part of Employee and, in the judgment of Employee, is due to (i) a reduction of Employee's responsibilities, title or status resulting from a formal change in such title or status, or from the assignment to Employee of any duties inconsistent with Employee's title, duties or responsibilities in effect within the year prior to the Change in Control; (ii) a reduction in Employee's compensation or benefits; or (iii) a Company-required involuntary relocation of Employee's place of residence or a significant increase in Employee's travel requirements.

 

(u)            Year of Employment means each 12-month period, beginning on ________________ (that is, the date Employee first became employed by the Company or one of its affiliates) and each anniversary thereof, during which Employee is, or has been or is deemed to be continuously employed by the Company or one of its affiliates. For purposes hereof, Employee shall be deemed to be employed by the Company during any Authorized Leave of Absence and any period of Disability. Furthermore, if Employee’s employment is terminated by the Company without Cause, or if a Voluntary Termination occurs within six months prior to, or within 24 months following, the date of a Change in Control, Employee shall be deemed for purposes of this Agreement as continuing to be actively employed by the Company until his Earliest Retirement Date, and his Years of Employment shall include such period after any such termination.

 

2.            Normal Retirement Benefit .

 

(a)            Salary Continuation Payments .  If Employee Separates from Service on or after his Normal Retirement Date, the Company shall make Salary Continuation Payments to Employee in the amount described under the heading entitled “Salary Continuation Payments” in Schedule A hereto.

 

(b)            Commencement .  Employee’s Salary Continuation Payments shall commence on the day after the six-month anniversary of Employee’s Separation from Service and such Salary Continuation Payments shall be made on the first day of each calendar month thereafter for and during the lifetime of Employee (provided, however, that specified payments may continue after Employee’s death pursuant to subsection (c) or (d) below).  The first such Salary Continuation Payment shall be equal to one Salary Continuation Payment multiplied by seven (i.e., to include a “catch-up” lump sum payment for the six-month delay in payments required by Code Section 409A).

 

 

(c)            Post-Retirement Death Benefit .  Unless Employee has elected a Joint and Survivor Annuity pursuant to subsection (d) below, in the event Employee should die after his Salary Continuation Payments have commenced, but before 120 payments have been made to or for his benefit, then the unpaid balance of such 120 payments shall continue to be paid by the Company to Employee’s Beneficiary.  If Employee’s Beneficiary (in this instance, a named person or persons) dies before a total of 120 monthly payments have been made to Employee and such Beneficiary, then the unpaid balance of such 120 payments shall continue to be paid by the Company to Employee’s estate.

 

(d)            Optional Forms of Salary Continuation Payments .  If Employee has a Spouse, he may waive the normal form of payment of Salary Continuation Payments described in Section 2(b) above and elect an optional form of payment in accordance with the following:

 

     (i)            Such waiver and election must be made by Employee at least six months prior to the date the Salary Continuation Payments are to commence to Employee (unless the Company establishes a shorter time period, which must be no less than at least one day prior to the date on which Employee’s Salary Continuation Payments are scheduled to commence).

 

     (ii)            Employee may elect from the following optional forms of payment: a monthly annuity for the life of Employee, with a survivor monthly income for the life of Employee’s Spouse in an amount equal to either 50% or 100% of the monthly annuity payable during the life of Employee (the “Joint and Survivor Annuity”).  If Employee elects the 50% Joint and Survivor Annuity, his Salary Continuation Payments (the monthly annuity) will be reduced to 92.5% of the amount otherwise payable (and his Spouse would receive, after Employee’s death, 46.25% of the amount otherwise payable); if he elects the 100% Joint and Survivor Annuity, his Salary Continuation Payments will be reduced to 83.33% of the amount otherwise payable (and his Spouse would continue to receive, after Employee’s death, 41.67% of the amount otherwise payable).  Notwithstanding the foregoing, if such early retirement reduction factors are determined not to be “actuarially equivalent” to the normal form of payment, within the meaning of Section 1.409A-2(b)(2)(ii) of the Treasury Regulations, then the Salary Continuation Payments (and derived Joint and Survivor Annuity) shall be in an amount calculated using either (A) the reduction factors specified above, or (B) reasonable actuarial methods and assumptions designed to ensure such Salary Continuation Payments are “actuarially equivalent” within the meaning of such regulation, whichever provides the larger monthly annuity benefit payable during the life of Employee.

 

           (iii)            If Employee elects the Joint and Survivor Annuity and he or his Spouse dies or they are divorced before the date Salary Continuation Payments are to commence, his election of the Joint and Survivor Annuity shall be revoked automatically. If Employee elects the Joint and Survivor Annuity and Salary Continuation Payments (the monthly annuity) commence to Employee, his Salary Continuation Payments thereafter shall not be changed by reason of the death of his Spouse during his own lifetime. If the person who was Employee’s Spouse at the date Salary Continuation Payments commence to Employee ceases to be his Spouse prior to his date of death, such person shall continue to be entitled to the survivor annuity provided for in clause (ii) above.

 

 

           (iv)            If Employee’s Spouse is receiving Joint and Survivor Annuity payments and the Spouse dies before a total of 120 monthly payments have been made to Employee and his Spouse, then the unpaid balance of such 120 monthly payments (in the monthly amount the Spouse was receiving) shall continue to be paid by the Company to Employee’s estate.

 

3.            Early Retirement Benefit .

 

(a)            General Eligibility for Benefit .  If either (i) on or after his Earliest Retirement Date, Employee Separates from Service for any reason, or (ii) before Employee’s Earliest Retirement Date, Employee Separates from Service as a result of Company’s termination of Employee’s employment without Cause (or as a result of a Voluntary Termination within six months prior to, or within 24 months following, the date of a Change in Control), the Company shall make Early Retirement Payments to Employee, in accordance with the terms of this Section 3.

 

(b)            Amount of Early Retirement Payments .  The amount of Employee’s Early Retirement Payments will be the respective percentage (set forth below opposite Employee’s age on his Early Retirement Date) of the Salary Continuation Payments that he would have otherwise received if he was retiring on his Normal Retirement Date, as follows:

 

(c)            Commencement .  Upon Separation from Service on or after his Earliest Retirement Date (per Section 3(a)(i) above), Employee’s Early Retirement Payments shall commence beginning on the day after the six-month anniversary of Employee’s Early Retirement Date and shall be made on the first day of each calendar month thereafter for and during the lifetime of Employee (provided, however, that specified payments may continue after Employee’s death pursuant to subsection (d) or (e) below).  The first Early Retirement Payment shall be equal to the amount of one Early Retirement Payment multiplied by seven (i.e., to include a “catch-up” lump sum payment for the six-month delay in payments required by Code Section 409A).  Upon a Separation from Service before Employee’s Earliest Retirement Date (under circumstances described in Section 3(a)(ii) above), Employee’s Early Retirement Payments shall commence beginning on the later of (x) Employee’s Earliest Retirement Date, or (y) the day after the six-month anniversary of Employee’s Separation from Service, and shall be made on the first day of each calendar month thereafter for and during the lifetime of Employee (provided, however, that specified payments may continue after Employee’s death pursuant to subsection (d) or (e) below).  The first such Early Retirement Payment will be equal to (A) one Early Retirement Payment multiplied by (B) one plus the number of months (if any) since Employee’s Earliest Retirement Date during which no Early Retirement Payment was made (i.e., to include a “catch-up” lump sum payment for any delay in payments required by Code Section 409A).

 

(d)            Post-Retirement Death Benefit .  Unless Employee has elected a Joint and Survivor Annuity pursuant to subsection (e) below, in the event Employee should die after his Early Retirement Payments have commenced, but before 120 payments have been made to or for his benefit, then the unpaid balance of such 120 payments shall continue to be paid by the Company to Employee’s Beneficiary.  If Employee’s Beneficiary (in this instance, a named person or persons) dies before a total of 120 payments have been made to Employee and such Beneficiary, then the unpaid balance of such 120 payments shall continue to be paid by the Company to Employee’s estate.

 

(e)            Optional Forms of Early Retirement Payments .  If Employee has a Spouse, he may waive the normal form of payment of Early Retirement Payments described in Section 3(c) above and elect an optional form of payment in accordance with the following:

 

           (i)            Such waiver and election must be made by Employee at least six months prior to the date Early Retirement Payments are to commence to Employee (unless the Company establishes a shorter time period, which must be no less than at least one day prior to the date on which Employee’s Early Retirement Payments are scheduled to commence).

 

           (ii)            Employee may elect from the following optional forms of payment: a monthly annuity for the life of Employee, with a survivor monthly income for the life of Employee’s Spouse in an amount equal to either a 50% or 100% Joint and Survivor Annuity.  If Employee elects the 50% Joint and Survivor Annuity, his Early Retirement Payments (the monthly annuity) will be reduced to 92.5% of the amount otherwise payable (and his Spouse would receive, after Employee’s death, 46.25% of the amount otherwise payable); if he elects the 100% Joint and Survivor Annuity, his Early Retirement Payments will be reduced to 83.33% of the amount otherwise payable (and his Spouse would continue to receive, after Employee’s death, 41.67% of the amount otherwise payable).  Notwithstanding the foregoing, if such early retirement reduction factors are determined not to be “actuarially equivalent” to the normal form of payment, within the meaning of Section 1.409A-2(b)(2)(ii) of the Treasury Regulations, then the Early Retirement Payments (and derived Joint and Survivor Annuity) shall be calculated in an amount using either (A) the reduction factors specified above, or (B) reasonable actuarial methods and assumptions designed to ensure such Early Retirement Payments are “actuarially equivalent” within the meaning of such regulation, whichever provides the larger monthly annuity benefit payable during the life of Employee.

 

   (iii)            If Employee elects the Joint and Survivor Annuity and he or his Spouse dies or they are divorced before the date the Early Retirement Payments are to commence, his election of the Joint and Survivor Annuity shall be revoked automatically. If Employee elects the Joint and Survivor Annuity and Early Retirement Payments (the monthly annuity) commence to Employee, his Early Retirement payments thereafter shall not be changed by reason of the death of his Spouse during his own lifetime. If the person who was Employee’s Spouse at the date Early Retirement Payments commence to Employee ceases to be his Spouse prior to his date of death, such person shall continue to be entitled to the survivor annuity provided for in clause (ii) above.

 

   (iv)            If Employee’s Spouse is receiving Joint and Survivor Annuity payments and the Spouse dies before a total of 120 monthly payments have been made to Employee and his Spouse, then the unpaid balance of such 120 monthly payments (in the monthly amount the Spouse was receiving) shall continue to be paid by the Company to Employee’s estate.

 

4.            Pre-Retirement Death Benefit .  If Employee dies (i) while actively employed by the Company, (ii) during a Disability, (iii) at any time after his termination by the Company without Cause, or after a Voluntary Termination which occurred within six months prior to, or within 24 months following, the date of a Change in Control, or (iv) after his Early Retirement Date but before Salary Continuation Payments or Early Retirement Payments have commenced (in accordance with Sections 2 and 3 above), then in lieu of the amounts payable under said Sections, the amount described under the heading entitled “Death Benefit” in Schedule A shall be paid monthly, commencing within 30 days after Employee’s death, in 120 payments over a 10-year period to Employee’s Beneficiary.  If Employee’s Beneficiary (in this instance, a named person or persons) dies before a total of 120 monthly payments have been made to such Beneficiary, then the unpaid balance of such 120 payments shall continue to be paid by the Company to Employee’s estate.  Notwithstanding anything in this Agreement to the contrary, once Employee commences receiving Salary Continuation Payments or Early Retirement Payments pursuant to the terms of Section 2 or Section 3 hereof, no payments shall be due or payable under this Section 4, and the death benefit payable to Employee’s Beneficiary under this Agreement shall be solely as described in Section 2 or Section 3, as applicable.

5.            Disability Benefit .  If Employee becomes Disabled while actively employed by the Company or following his termination by the Company without Cause (or following a Voluntary Termination which occurred within six months prior to, or within 24 months following, the date of a Change in Control), the Company will provide disability benefits to Employee as provided herein.

 

(a)            Amount of Disability Benefits .  After the Disability has lasted six continuous months, the Company shall pay to Employee monthly payments, for a period of 60 months, in the amount described under the heading entitled “Monthly Disability Benefit” in Schedule A.  (If Employee’s Disability ends within such 60-month period, the Company’s obligation to make benefit payments under this Section 5 with respect to the just-ended episode of Disability shall cease immediately, whether or not Employee returns to work with the Company.)  If, after the expiration of such 60-month period of Disability during which such monthly payments are made, Employee’s Disability (as defined in Section 1(h)(ii) hereof) continues, the Company will continue the monthly disability payments until the occurrence of circumstances described under subsection (c) below.  Notwithstanding anything herein to the contrary, if Employee becomes eligible to begin receiving Early Retirement Benefits pursuant to Section 3 while Employee is receiving such monthly disability benefits, Employee’s monthly disability benefits shall be reduced by the amount of Employee’s Early Retirement Benefit.

 

(b)            Commencement .

 

(i)            To the extent that   the monthly disability benefits are welfare benefits exempt from Code Section 409A (which is consistent with the Company’s interpretation of Section 1.409A-1(a)(5) of the Treasury Regulations), such monthly disability benefits shall commence beginning on the day after the six-month anniversary of the first day of Employee’s Disability.

 

(ii)            To the extent that the monthly disability benefits are not exempt from Code Section 409A, such monthly disability benefits shall commence beginning on the day after the six-month anniversary of Employee’s Separation from Service; provided, that the first such monthly payment shall include an additional amount equal to the aggregate amount of monthly disability benefits, if any, that would have been payable under clause (i) hereinabove (but for such amounts not being exempt from Code Section 409A).

 

(c)            Cessation of Disability Benefits .  Employee’s disability benefit pursuant to this Section 5 (with respect to each incidence of Disability) shall cease upon the earlier of (i) Employee’s attainment of age 65 or (ii) the cessation of Employee’s Disability.

 

6.            Other Provisions Relating to Benefits .

 

(a)            Beneficiary Designation .  For purposes of Section 4 above, Employee shall designate, and from time to time may redesignate, his Beneficiary by completing the Beneficiary Designation Form attached hereto as Schedule B, or by notifying the Company in such other form and manner as the Company may determine.  If, at the time of Employee’s death, (i) Employee has not designated a Beneficiary, (ii) all designated Beneficiaries shall have predeceased Employee, or (iii) the Beneficiary designated by Employee cannot be located by the Company within one year from the date benefits are to be paid to such person, then, in any of such events, the Beneficiary of such Employee with respect to any benefits and amounts that remain payable under this Agreement shall be Employee’s surviving Spouse, if there be one and she can be located within the one-year period, and if not, Employee’s estate.

 

(b)            Independence of Benefits . The benefits payable under this Agreement shall be independent of, and in addition to, any other benefits or compensation payable by the Company to Employee, whether as salary, bonus, severance payments pursuant to the terms of an employment agreement, or otherwise.  This Agreement does not involve a reduction in salary or a foregoing of an increase in future salary by Employee, nor does it in any way affect or reduce the existing or future compensation or other benefits of Employee.

 

(c)            Special Provisions Relating to Change in Control .  Notwithstanding anything in this Agreement to the contrary, in the event of a Change in Control, the benefit payable to Employee under this Agreement (whether associated with or following a termination without Cause; a Voluntary Termination which occurred within six months prior to, or 24 months following, the date of the Change in Control; death; Disability; or retirement, including early retirement – as used herein, a “triggering event”) shall be based on the greater of (i) the average Annual Compensation paid by the Company for the four individual calendar years of Employee’s highest compensation during the last eight full calendar years preceding the date of the particular triggering event, or (ii) the average Annual Compensation paid by the Company for the four individual calendar years of Employee’s highest compensation during the last eight full calendar years preceding the date of the Change in Control.  The intent of this provision is to establish a minimum or “floor” benefit level for Employee as of the date of the Change in Control.  In addition, in the event Employee is terminated without Cause at any time following a Change in Control (or a Voluntary Termination occurs within six months prior to, or within 24 months following, the date of a Change in Control), the benefit otherwise payable to Employee (or his Beneficiary) pursuant to any triggering event shall be increased by a percentage equal to the aggregate percentage increases in the U.S. consumer price index - all cities - urban consumers, published by the U.S. Department of Labor (or if no longer published, such other index selected by the Company as a fair and reasonable substitute), between the date of such termination and the actual commencement of benefits.

7.            Conditions to Payment of Benefits .  The benefits payable under this Agreement to Employee or his Beneficiary shall be conditioned upon Employee complying with the following provisions of this Section 7. In the event Employee fails to comply with any such provision, only the future benefits (payable after the date of such non-compliance) shall be subject to risk of forfeiture for breach of this Agreement. Prior to terminating benefits for an actual or alleged violation of subsection (b) or (c) below, the Company must have first provided Employee with written notice of the violation and Employee shall have failed to cure or cease such violation within 30 days after his receipt of such notice.

 

(a)            Continuation of Employment .  Employee shall be continuously employed by the Company until Employee’s Earliest Retirement Date or his death, whichever first occurs. During any Authorized Leave of Absence, any period of Disability and any period following the Company’s termination of Employee’s employment without Cause (or a Voluntary Termination by Employee within six months prior to, or within 24 months following, the date of a Change in Control), Employee will still be considered to be in the continuous employment of the Company for purposes of this Agreement.

 

(b)            Consultation Services .  Employee shall render such reasonable business consulting and advisory services as the Board of Directors of the Company by written request may call upon him to provide, and as his health (in the opinion of Employee) may permit, from time to time during the period from his retirement (meaning, the date Employee begins to receive Salary Continuation Payments or Early Retirement Payments) to the earlier of the date of his death or Disability. In this regard, it is understood that (i) such consulting and advisory services shall in no event exceed 49 percent of the average level of bona fide services historically performed by Employee while employed, such that the provision of such post-employment services will not delay Employee’s Separation from Service under Code Section 409A; (ii) such consulting and advisory services shall not preclude, or be requested in a fashion that would inhibit, Employee from engaging in other full-time employment not competitive with the Company, nor shall they require Employee to be active in the Company’s day-to-day activities or require Employee to engage in any substantial travel; (iii) Employee shall perform such services as an independent contractor; and (iv) Employee shall be reimbursed for all ordinary and necessary business expenses incurred in performing such services.

 

(c)            Conflict of Interest .  During his employment with the Company, Employee shall not engage in any other business enterprise without the prior written consent of the Company. (The foregoing shall not be construed to preclude Employee from serving on the Board of Directors of any other company or entity not competitive with the Company or from performing services for civic, social, religious or charitable purposes.) After his retirement from the Company or after his Disability and while he is receiving benefits hereunder, he shall not, without the Company’s prior written consent, engage in any business activity which is in competition with the Company.

 

8.            Nature of Obligations .

 

(a)            Currently Unfunded .  Except as provided in subsection (b) below, or in any other agreement between the Company and Employee (or resolutions adopted by the Board of Directors or Compensation Committee of the Board), or by the terms of any plan sponsored by the Company, the Company shall not be obligated to fund its obligations under this Agreement, and such obligations are unsecured promises to pay the benefits provided for hereunder; provided, however, that even if not otherwise required to do so, the Company, in its sole discretion, may elect to fund its obligations under this Agreement in whole or in part.  To the extent the Company uses an irrevocable grantor trust (generally referred to as a “rabbi trust”), if the assets of such trust are not sufficient to make payments of all required benefits in accordance with the terms of this Agreement, the Company shall make the balance of each such payment as it is due.

 

(b)            Funding Upon a Change in Control . Notwithstanding anything to the contrary contained in this Agreement, immediately upon and coincident with a Change in Control, the Company shall contribute to a rabbi trust, for which an independent bank or financial institution serves as the trustee, an amount of cash equal to the current single sum present value of the Company’s obligation hereunder to Employee, assuming Employee were to remain actively employed until age 65. Such single sum present value amount shall be measured as of the date the Change in Control occurs and shall be determined by applying the mortality tables prescribed in Code Section 417(e) and an interest rate that is the lesser of (i) six percent or (ii) the interest rate used by the Pension Benefit Guaranty Corporation (or its successor organization) as of the first day of the calendar year in which the Change in Control occurs to value immediate annuities on termination of a Code Section 401(a) qualified defined benefit pension plan. The terms of such rabbi trust shall require the trustee thereof to make payments in accordance with the terms of this Agreement and shall prohibit the trustee from permitting a reversion to the Company of any trust assets until the Company’s obligations under this Agreement shall be satisfied in full. The terms of the trust also shall prohibit the investment in any equity interests of the Company with any cash (or investment earnings attributable thereto) contributed with respect to the obligations hereunder. Notwithstanding this mandatory funding of the rabbi trust, if the assets of the trust are insufficient or the trustee for any reason is unable or unwilling to make the payments required under this Agreement, the Company shall make such payments.

 

(c)            Investments .  It is understood that the Company may make investments so that it will have segregated assets to help pay its obligations hereunder, and, in this regard, Employee hereby agrees to submit to appropriate medical examinations, supply such information and execute such documents as the Company may reasonably require with respect to such investments. It is understood and agreed that Employee shall have no beneficial or other interest in any such investment, which, subject to Sections 8(a) and (b) above, shall remain a part of the Company’s general assets accessible to its creditors in the event of the Company’s insolvency. Accordingly, subject to Sections 8(a) and (b) above, the rights of Employee, Employee’s Beneficiary or any other person claiming through Employee under this Agreement shall be those of an unsecured general creditor of the Company; Employee, his Beneficiary or any other person claiming through Employee, shall only have the right to receive from the Company those payments that are specified under this Agreement. Except as provided in Sections 8(a) and (b) above, no asset used or acquired by the Company in connection with its obligations and liabilities hereunder shall be deemed to be held under any trust for the benefit of Employee or his Beneficiary, nor shall any such asset be considered as security for the performance of the obligations and liabilities of the Company hereunder.

 

9.            Employment Rights .  This Agreement shall not itself be deemed to constitute a contract of employment between the Company and Employee, and shall not create any rights in Employee to continue in the Company’s employ for any specific period of time or any other rights in Employee or obligations on the part of the Company, except as are expressly set forth herein. No provision hereof shall restrict the right of the Company to discharge Employee or restrict the right of Employee to terminate his employment with the Company.

 

10.            Nonalienation of Benefits .  No right or benefit under this Agreement shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities or torts of Employee or his Beneficiary.  Notwithstanding the foregoing, the Company shall have the right, exercisable solely in its discretion, to offset against any benefits payable hereunder, at the time same become payable to Employee (or to his Beneficiary in the event of his death), any then existing indebtedness of any kind of Employee to the Company, whether or not such indebtedness is otherwise deemed due and payable. This right of offset shall be void and of no effect in the event of a Change in Control, in which event the Company shall pay to Employee (or his Beneficiary, as applicable) all of the benefits due and owing under this Agreement, but without prejudice to the right of the Company to take separate action to collect payment of any indebtedness owed by Employee to the Company.

 

11.            Agreement Binding on Successors . This Agreement is solely between the Company and Employee, and Employee and his Beneficiary shall have recourse only against the Company and its successors and assigns for enforcement hereof (together with rights against and with respect to the rabbi trust, if any, established pursuant to Section 8(a) or (b) hereof). This Agreement will be binding upon Employee’s Beneficiary, heirs and personal representatives and upon the successors and assigns of the Company. Any person or business entity succeeding to all or substantially all of the business of the Company by stock purchase, merger, consolidation, purchase of assets or otherwise, shall be bound by and shall adopt and assume this Agreement (which assumption shall not negate the obligation of the Company to immediately fund its obligations hereunder in the event of a Change in Control, as provided in Section 8(b) hereof), and the Company shall obtain the express assumption of this Agreement by any such successor and provide evidence of same to Employee.

 

12.            Claims Manager and Claims Procedure .

 

(a)            General Claims Procedure .  Benefits shall be paid in accordance with the provisions of this Agreement. The Claims Manager shall be the Company’s representative for purposes of making all determinations as to the right of Employee or any other person to a benefit under this Agreement, and any requests for such a benefit must be made in a writing delivered to the Claims Manager. If such a request is wholly or partially denied, notice of the decision shall be delivered to the claiming person no later than 45 days after the receipt of the request by the Claims Manager. Such a notice of denial shall include the following:

 

(i)            The specific reason or reasons for such denial;

 

(ii)            The specific reference to pertinent provisions of this Agreement on which the denial is based;

           

           (iii)            A description of any additional material or information necessary for the claimant to submit in order to perfect the claim and an explanation of why such material or information is necessary;

 

(iv)            A description of this Agreement’s claim review procedure; and

 

 

(v)            A statement of the claimant’s right to bring a civil action under Section 502(a) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), following an adverse determination on review.

 

(b)            General Claim Review Procedure .  The claim review procedure is available upon written request by the claimant to the Claims Manager within 60 days after receipt by the claimant of written notice of the denial of the claim, and includes the right to examine pertinent documents and Company data and submit issues and comments in writing to the Claims Manager. The decision on review will be in writing and written in a manner calculated to be understood by the claimant, will be made within 30 days after receipt of the request for review (unless special circumstances warrant an extension of time not to exceed an additional 30 days), and will include specific reasons for the decision with references to the specific Agreement provisions on which the decision is based.

 

(c)            Claims Based on Determination of Disability .

 

           (i)            Disability Claims Procedure .  Notwithstanding anything herein to the contrary, with respect to a claim for benefits under this Agreement based on Disability (other than approval for payment of benefits, directly or indirectly, under any long-term disability plan maintained by the Company), the Claims Manager shall furnish to the claimant written notice of the disposition of a claim within 45 days after the application therefore is submitted; provided, if matters beyond the control of the Claims Manager require an extension of time for processing the claim, the Claims Manager shall furnish written notice of the extension to the claimant prior to the end of the initial 45-day period; and, provided further, if matters beyond the control of the Claims Manager require an additional extension of time for processing the claim, the Claims Manager shall furnish written notice of the second extension to the claimant prior to the end of the initial 30-day extension period, and such extension shall not exceed an additional, consecutive 30-day period.  Notice of any extension under this Section 12(c)(i) shall specifically explain the standards on which entitlement to a benefit is based, the unresolved issues that prevent a decision on the claim, and the additional information needed to resolve those issues.  In the event the claim is denied, the notice of the disposition of the claim shall provide the specific reasons for the denial, citations of the pertinent provisions of this Agreement, explanation as to how the claimant can perfect the claim and/or submit the claim for review (where appropriate), and a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse determination on review.

 

           (ii)            Disability Claim Review Procedure. With respect to an appeal of a denial of benefits under this Agreement based on Disability (other than approval for payment of benefits, directly or indirectly, under any long-term disability plan maintained by the Company), the claimant or his duly authorized representative may review pertinent documents related to this Agreement and in the Claims Manager’s possession in order to prepare the appeal.  The form containing the request for review, together with a written statement of the claimant’s position, must be filed with the Claims Manager not later than 180 days after receipt of the written notification of denial of a claim provided for in subsection (i) hereof.  The Claims Manager’s decision shall be made within 45 days following the filing of the request for review and shall be communicated in writing to the claimant; provided, if special circumstances require an extension of time for processing the appeal, the Claims Manager shall furnish written notice to the claimant prior to the end of the initial 45-day period, and such an extension shall not exceed one additional 45-day period.  The Claims Manager’s review shall not afford deference to the initial adverse benefit determination and shall be conducted by an individual who is neither the individual who made the adverse benefit determination that is the subject of the appeal, nor the subordinate of any such individual.  If unfavorable, the notice of decision shall explain the reason or reasons for denial, indicate the provisions of this Agreement or other documents used to arrive at the decision, state the claimant’s right to bring a civil action under ERISA Section 502(a), and identify all medical or vocational experts whose advice was obtained by the deciding   Claims Manager in connection with a claimant’s adverse benefit determination.

 

13.            General Provisions .

 

(a)            Notices .  Except as may be otherwise specified herein, all notices, consents and other communications required or authorized to be given by either party to the other under this Agreement shall be in writing and shall be deemed to have been given or submitted (i) upon actual receipt if delivered in person or by facsimile transmission with receipt confirmation, (ii) upon the earlier of actual receipt or the expiration of two business days after sending by express courier (such as UPS or Federal Express), and (iii) upon the earlier of actual receipt or the expiration of seven days after mailing if sent by registered or certified express mail, postage prepaid, to the parties at the following addresses:

 

To the Company:	Interface, Inc.
	2859 Paces Ferry Road, Suite 2000
	Atlanta, Georgia 30339
	Fax No.: _____________
	Attn: ________________
With a copy to:	Interface, Inc.
	2859 Paces Ferry Road, Suite 2000
	Atlanta, Georgia 30339
	Fax No.: 770-319-6270
	Attn: General Counsel

To Employee:	_______________________
	at the last address and fax number
	shown on the records of the Company

Employee shall be responsible for providing the Company with a current address.  Either party may change its address (and facsimile number) for purposes of notices under this Agreement by providing notice to the other party in the manner set forth above.

(b)            Entire Agreement; Governing Law .  This Agreement contains the entire agreement between the parties hereto relating to the matters provided herein, and no representation or warranty not expressly contained or incorporated by reference herein is made by either party. This Agreement shall not be modified or amended in any manner except by an instrument in writing executed by the parties or their respective successors in interest, which makes specific reference to this Agreement and the fact that it is modifying or amending this Agreement. To the extent not controlled by the terms of ERISA, this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Georgia (without regard to rules relating to the conflict of laws). The provisions of this Agreement are severable, and the validity or invalidity of one or more of the provisions herein shall not have any effect upon the validity or enforceability of any other provision.

 

(c)            Affiliates .  For purposes of this Agreement, Employee shall be considered as being employed by the Company if he is employed by any corporation owned or controlled by the Company (such as a subsidiary, or a subsidiary of a subsidiary) or a corporation which is a successor of the Company.

 

(d)            Code Section 409A .  This Agreement is intended to comply with the requirements of Code Section 409A and shall be construed accordingly.  Any payments or distributions to be made to Employee under this Agreement upon a separation from service of amounts classified as “nonqualified deferred compensation” for purposes of Code Section 409A, and not exempt from Code Section 409A, shall in no event be made or commence until six  months after Employee’s Separation from Service.  Any reference to a payment being exempt (or not exempt) from Code Section 409A refers to any applicable exemption available under Section 409A, including, without limitation, the short-term deferral rule and severance pay exemptions as provided in Code Section 409A and the Treasury Regulations.  Each payment of nonqualified deferred compensation under this Agreement shall be treated as a separate payment for purposes of Code Section 409A.  Where this Agreement provides that a payment will be made upon a specified date or during a specified period, such date or period, as required by Code Section 409A, but in no way to detract from or excuse payment deadlines set forth in the operative provisions above in this Agreement, will be the Code Section 409A “payment date” or “payment period”, and actual payment shall in no event be made later than the latest date permitted under Code Section 409A and the regulations thereunder (generally, by the later of the end of the calendar year in which the payment date falls, or the fifteenth day of the third calendar month after the payment date occurs).  To the extent that any payments made pursuant to this Agreement are reimbursements exempt from Code Section 409A, the amount of such payments during any calendar year shall not affect the benefits provided in any other calendar year, and the right to any such payments shall not be subject to liquidation or exchange for another benefit or payment.  As required by Code Section 409A, but in no way to detract from or excuse the payment deadlines set forth in the operative provisions above in this Agreement, the payment date for any reimbursements shall in no event be later than the last day of the calendar year immediately following the calendar year in which the reimbursed expense was incurred.

 

IN WITNESS WHEREOF, the individual party has executed this Agreement, and the corporate party has caused this Agreement to be executed by its duly authorized officers, as of the date first written above.

	INTERFACE, INC.
	By:
	[ name]
	[ title]
	Attest:
	[ name]
	[ title]
	EMPLOYEE:
	[ name]

SCHEDULE A

SCHEDULE OF BENEFIT AMOUNTS

Salary Continuation Payments

A monthly payment equivalent to the amount which is 1/12th of 50% of the average Annual Compensation paid by the Company for the four individual calendar years of Employee’s highest compensation during the last eight full calendar years of Employee’s employment with the Company ending on or prior to the effective date of Employee’s retirement. (For the avoidance of doubt, in the event the Company terminates Employee’s employment without Cause, the benefit payable hereunder shall be based on the four years of highest compensation during the last eight full calendar years preceding the date of termination.)

Death Benefit

A monthly payment equivalent to the amount which is 1/12th of 50% of the average Annual Compensation paid by the Company for the four individual calendar years of Employee’s highest compensation during the last eight full calendar years of Employee’s employment with the Company ending on or prior to the date of Employee’s death. (For the avoidance of doubt, in the event the Company terminates Employee’s employment without Cause prior to Employee’s death, the benefit payable hereunder shall be based on the four years of highest compensation during the last eight full calendar years preceding the date of termination).

Monthly Disability Benefit

Employee’s monthly disability payment shall be that percentage of his compensation at the time of commencement of Disability which, combined with all other Company-sponsored disability security payments (excluding Social Security) then being paid to Employee (or to which he is entitled), equals 66⅔% of the compensation payable by the Company to Employee at the commencement of such Disability. For purposes of this section, “compensation” shall have the same meaning as in the Company’s disability insurance policy covering Employee at the time his Disability commenced (provided that such policy definition includes Employee’s full base salary and either (i) the current year or prior year bonus paid to Employee or (ii) an average of prior years’ bonuses paid to Employee), and if no such policy is then in effect or in the event the Company has terminated Employee’s employment without Cause prior to such Disability, shall be construed to be average Annual Compensation as described for the salary continuation and death benefits above (i.e., average of four years of highest compensation during the last eight full calendar years of employment).

Change in Control

Notwithstanding anything to the contrary contained herein, in the event of a Change in Control, the benefits described in this Schedule A are subject to certain protections and enhancements as described in, inter alia, Sections 1(d), 6(c), 8(b) and 10 of the Agreement.

SOCIAL SECURITY NO.:                                                                 ___________________________________________

B.            BENEFICIARY DESIGNATION

I hereby revoke all previously designated beneficiaries, if any, and hereby direct that, upon my death, any death benefit payable under the Salary Continuation Agreement between Interface, Inc. and me, dated as of January 1, 2008, to my survivor(s), shall be paid to the following person (persons) as my primary or secondary beneficiary (beneficiaries) in the following proportions:

C.            SIGNATURE OF EMPLOYEE

I hereby acknowledge that I have read the instructions attached to this form and that all of the information I have provided on this form is true to the best of my knowledge and correctly indicates my wishes.

________________________________

(Employee’s Signature)

________________________________

(Date)

INSTRUCTIONS

GENERAL INSTRUCTIONS

Under the terms of the Salary Continuation Agreement, you have the right to designate the person or persons who will be your beneficiary and receive your death benefit. To designate one or more beneficiaries, you should complete this form.  You may also designate your estate as the beneficiary.

EMPLOYEE INFORMATION

Fill in the requested information completely and accurately.

BENEFICIARY DESIGNATION

You may appoint one or more primary beneficiaries and one or more secondary beneficiaries. A secondary beneficiary will only receive your unpaid death benefit if your primary beneficiaries do not survive you. If you designate two or more primary beneficiaries and one of the primary beneficiaries does not survive you, the remaining primary beneficiary or beneficiaries will receive your unpaid death benefit. The secondary beneficiary will only receive benefits if no primary beneficiaries are surviving at your death.

You may designate the percentage of your unpaid death benefit each beneficiary should receive. If you do not so indicate, your death benefit will be divided equally among the named beneficiaries.  You are advised to consult with an attorney or estate planning professional in connection with completing this form.

SIGNATURE OF EMPLOYEE

The form will be rejected if you do not sign it.