Interface (TILE) DEF 14ADefinitive proxy

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A 

(RULE 14a-101)

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. _____)

Check the appropriate box: 

Payment of Filing Fee (Check the appropriate box):

Notice of Annual Meeting of Shareholders

WHEN

May 22, 2020

11:00 a.m. Eastern Time

WHERE

Interface, Inc.

1280 West Peachtree Street NW

Atlanta, Georgia 30309

CHANGES IN THE DATE, TIME OR LOCATION OF THE MEETING

On March 13, 2020, the staff of the Division of Corporation Finance and the Division of Investment Management of the U.S. Securities and Exchange Commission (“SEC”) released Staff Guidance to assist issuers’ compliance with federal proxy and annual meeting rules given the public health and economic effects of the coronavirus (COVID-19). Specifically, the guidance covers the procedure for changing the date, time, or location of an annual meeting; the process for holding virtual shareholder meetings; and guidance for shareholders that are unable to attend annual meetings to present proposals. In the event the Company changes the date, time or location of the Annual Meeting pursuant to the guidance, the Company will inform shareholders in a manner as prescribed by the guidance (or any subsequent updates thereto). If you plan to attend our meeting in person, we recommend you check our website (www.interface.com) the week before to see if we have provided any update on the meeting logistics.

ITEMS OF BUSINESS

RECORD DATE

The Board of Directors set March 13, 2020 as the record date for the meeting. This means that only shareholders of record at the close of business on March 13, 2020 will be entitled to receive notice of and to vote at the meeting or any adjournments of the meeting.

April 10, 2020

PLEASE PROMPTLY COMPLETE AND RETURN A PROXY CARD

OR USE TELEPHONE OR INTERNET VOTING PRIOR TO THE MEETING SO THAT YOUR VOTE

MAY BE RECORDED AT THE MEETING IF YOU DO NOT ATTEND PERSONALLY.

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TABLE OF CONTENTS

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PROXY STATEMENT SUMMARY

The Board of Directors ("Board") of Interface, Inc. (the "Company," "we," "us," "our" or "Interface") is furnishing this Proxy Statement and soliciting proxies in connection with the proposals to be voted on at the Interface, Inc. 2020 Annual Meeting of Shareholders ("Annual Meeting") and any postponements or adjournments thereof. This summary highlights certain information contained in this Proxy Statement, but does not contain all of the information you should consider when voting your shares. Please read the entire Proxy Statement carefully before voting.

In the event the Company changes the date, time or location of the Annual Meeting pursuant to the guidance issued by the SEC discussed above, the Company will inform shareholders in a manner as prescribed by such guidance.

Voting Items and Vote Recommendation

Vote in Advance of the Meeting				Vote in Person
Internet	Telephone	Mail
Using the Internet and voting at the website listed on the proxy card and the Notice.	Using the toll-free phone number listed on the proxy card and the Notice.	Signing, dating and mailing a proxy card.		See page 58 for details on attending the Annual Meeting in person.

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Our Company 

Who We Are

We are a worldwide leader in design, production and sales of commercial flooring such as carpet tile, luxury vinyl tile, and rubber tiles and sheet products. Our flooring systems help customers create beautiful interior spaces while positively impacting those who use them and our planet. We are committed to sustainability and minimizing our impact on the environment while enhancing shareholder value. This commitment is exemplified by Mission Zero®, which represents our mission to eliminate any negative impact our companies may have on the environment. Our mission also includes a bold new effort called Climate Take Back™, in which we seek to lead industry in designing and making products in ways that will maintain a climate fit for life.

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Our Global Sales and Manufacturing Platform

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 Our Growth and Value Creation Strategy

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Our Performance

We made significant progress in 2019 toward our ambition to become the world’s most valuable interior products and services company. In addition to the financial highlights shown below, the Compensation Discussion and Analysis section of this Proxy Statement contains important measures of our 2019 financial progress.

NET SALES ($ in millions)		ORGANIC SALES ($ in millions)
GROSS PROFIT and ADJUSTED GROSS PROFIT* ($ in millions)		OPERATING INCOME and ADJUSTED OPERATING INCOME* ($ in millions)

*Please see Appendix A for a reconciliation of non-GAAP measures to the most directly comparable GAAP measures and an explanation of why we believe non-GAAP measures provide useful information to shareholders and the additional purposes for which we use non-GAAP measures.

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Our Capital Structure

We believe we have a strong capital structure and the financial resources to deliver on our strategic initiatives.

YEAR END TOTAL DEBT ($ in millions)		YEAR END NET DEBT (NON-GAAP)* ($ in millions)
NET INCOME and ADJUSTED EBITDA (NON-GAAP)* ($ in millions)		YEAR END NET DEBT / ADJUSTED EBITDA (NON-GAAP)*

*See Appendix A for a reconciliation of non-GAAP measures to the most directly comparable GAAP measures.

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Our Corporate Responsibilities – Environmental, Social and Governance

We believe that sound corporate citizenship and environmental sustainability are critical to our long-term success. We are committed to operating in an ethical and sustainable manner that benefits all stakeholders including customers, employees, our communities and our planet. As good corporate citizens, Corporate Responsibility drives the Company’s business strategy. Integrity, environmental stewardship, diversity and inclusion, health and safety of our workforce, the recruitment, development and retention of our workforce, and community engagement are among our top priorities. We regularly consult with stakeholders and third-party experts to develop and improve our social and environmental sustainability initiatives. Through these engagements we have advanced our development of various projects and initiatives.

You can learn more about our sustainability commitment and current initiatives on our website at interface.com.  In addition, as part of our commitment to transparency and engagement with the investment community and all our stakeholders, we are developing a resource to communicate our ESG initiatives, targets and progress which we expect will be available on our website in the coming months. 

Our Environmental Sustainability Mission

We are a purpose-driven company that is galvanized around a common environmental sustainability mission. In 1994, we commenced a sustainability strategy within our business that we now call Mission Zero, in which we seek to eliminate any negative impact our Company may have on the environment. In 2016, we went even further by announcing our intent to go from doing no harm to having a positive impact through Climate Take Back, summarized in the graphic below. With this broader initiative, we seek to lead industry in designing and making products in ways that will maintain a climate fit for life. We also have called upon and influenced others to do the same, bringing a voice of aspiration and optimism to global warming. As part of Climate Take Back, in 2018 we launched an industry first: every flooring product that we sell globally is carbon neutral across the entire product lifecycle, a program we call Carbon Neutral Floors™.

CLIMATE TAKE BACK

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Measuring Our Progress

Our sustainability mission is made more focused by measuring our progress. In the 25+ years that we have been on our sustainability journey, we have made meaningful progress in eliminating our Company’s negative impact on the environment. Our EcoMetrics™ measurement system is designed to quantify the “metabolism” of our operations. In other words, measuring how much we take, in terms of materials and energy, how much we make, in terms of product, and how much we waste, in terms of wastes and emissions. Some of our sustainability highlights are described below. Additional detailed information including Total Energy Use and Scope 1 Emissions, and measurements of our progress on sustainability can be found in our Climate Disclosure document located on our corporate website, www.interface.com.

Our Governance Highlights

Our Board of Directors is committed to maintaining strong corporate governance, which promotes the long-term interests of shareholders, strengthens Board and management accountability, and helps build trust in the Company. The Corporate Governance section of this Proxy Statement describes several aspects of our governance framework, which includes the following highlights.

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Summary of Item 1 - Election of Directors

In this proposal, shareholders are asked to vote "FOR" each of the following eight nominees.

Summary of Item 2 - Advisory Vote to Approve Executive Compensation

We provide our shareholders with the opportunity to vote to approve, on a nonbinding, advisory basis, the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with the rules of the Securities and Exchange Commission ("SEC"). The vote on this resolution is not intended to address any specific element of compensation; rather, the advisory vote relates to the overall compensation of our named executive officers, as well as the philosophy, policies and practices, all as described in this Proxy Statement. The vote is advisory, and therefore it is not binding on the Company, the Compensation Committee or our Board of Directors. We recommend that our shareholders vote "FOR" approval of our executive compensation as described in this Proxy Statement.

Our executive compensation program is generally designed to:

We believe that motivating and rewarding exceptional performance is the overriding principle of our executive compensation program.

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The following sets forth the primary objectives addressed by each component of our executive compensation program:

Competitive base salary		Assists with attraction and retention of highly-qualified executives, and promotes management stability
Annual cash bonus opportunity based on achievement of established goals		Aligns individual interests with overall short term (typically annual) objectives, and reinforces “pay for performance” program goals
Long-term incentives		Aligns individual interests with the long-term investment interests of shareholders, and assists with retention of highly-qualified executives

For more information regarding our compensation, please see our Compensation Discussion and Analysis beginning on page 26.

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Summary of Item 3 – Approve Adoption of Interface, Inc. 2020 Omnibus Stock Incentive Plan

On April 1, 2020 (the “Effective Date”), the Compensation Committee of the Board of Directors voted to adopt the Interface, Inc. 2020 Omnibus Stock Incentive Plan, subject to shareholder approval. The primary purpose of the 2020 Omnibus Stock Incentive Plan is to continue, by making 3,700,000 shares available for such use, the original purpose of the existing stock plan, which is to attract and retain key employees and directors of the Company and its subsidiaries by providing such persons with stock-based incentives and rewards for performance. Like its predecessor, the 2020 Stock Incentive Plan is also designed to promote the loyalty and retention of senior management and strengthen the mutuality of interests between senior management and the Company’s shareholders. Thus, the Company believes that it is important to have the 2020 Omnibus Stock Incentive Plan as an element of the Company’s compensation program. Assuming the shareholders approve the 2020 Omnibus Stock Incentive Plan, no additional awards would be made in the future pursuant to the Company’s existing stock plan. The material features of the 2020 Omnibus Stock Incentive Plan are described below in Item 3.

Summary of Item 4 - Ratify Appointment of BDO USA, LLP as Independent Auditors

BDO USA, LLP, an independent registered public accounting firm, served as our auditors for 2019. Our Audit Committee has selected BDO USA, LLP to audit our financial statements for 2020. Although it is not required to do so, the Board is submitting the Audit Committee's selection of our independent registered public accounting firm for ratification by the shareholders at the Annual Meeting in order to ascertain the view of our shareholders regarding such selection. Below is summary information about BDO USA, LLP's fees for services during 2019 and 2018:

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NOMINATION AND ELECTION OF DIRECTORS

(ITEM 1)

The Bylaws of the Company provide that the Board of Directors shall consist of a maximum of 15 directors, with the exact number of directors being established by action of the Board taken from time to time. Commencing as of the 2020 Annual Meeting, the Board of Directors has set the number of directors at eight. The term of office for each director continues until the next annual meeting of shareholders and until his or her successor, if there is to be one, has been elected and has qualified.

In the event that any nominee for director withdraws or for any reason is not able to serve as a director, each Proxy that is properly executed and returned will be voted for such other person as may be designated as a substitute nominee by the Board of Directors. Each nominee is an incumbent director standing for re-election, and each nominee has consented to being named herein and to serve or continue serving as a director if elected or re-elected.

Certain information relating to each nominee proposed by the Board is set forth below. Directors are required to submit an offer of resignation upon experiencing a job change.

Nominees

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Vote Required and Recommendation of Board

Under the Company’s Bylaws, election of each of the nominees requires a plurality of the votes cast by the Company’s outstanding Common Stock entitled to vote and represented (in person or by proxy) at the meeting. As noted below, however, in an uncontested election, any nominee who does not receive a majority affirmative vote must submit a resignation (which may be conditional) to the Board or its Chair. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE NOMINEES LISTED ABOVE, AND PROXIES EXECUTED AND RETURNED OR VOTED BY TELEPHONE OR INTERNET WILL BE VOTED FOR EACH OF THE NOMINEES UNLESS CONTRARY INSTRUCTIONS ARE INDICATED.

DIRECTOR INDEPENDENCE

For each director, the Board makes a determination of whether the director is “independent” under the criteria established by the Nasdaq Stock Market and other governing laws and regulations. In its review of director independence, the Board considers all commercial, banking, consulting, legal, accounting, charitable or other business relationships any director may have with the Company. The current directors are John P. Burke, Dwight Gibson, Jay D. Gould, Daniel T. Hendrix, Christopher G. Kennedy, Joseph Keough, Catherine M. Kilbane, K. David Kohler, James B. Miller, Jr., and Sheryl D. Palmer. As a result of its review, the Board has determined that all the current directors, with the exceptions of Daniel T. Hendrix (who is an employee) and Jay D. Gould (who was an employee until January 2020), are independent.

CORPORATE GOVERNANCE

Board Leadership Structure

We currently have a Lead Independent Director, and a combined Chairman and Chief Executive Officer. Mr. Kennedy serves as Lead Independent Director, and Mr. Hendrix serves as Chairman and Chief Executive Officer. Because our Chairman and Chief Executive Officer is an employee of the Company and therefore not considered “independent” under applicable standards, the Board has appointed Mr. Kennedy to serve as Lead Independent Director. The Board considers it to be useful and appropriate at the current time to have an independent director serve in a lead capacity to promote corporate governance, coordinate the activities of the other independent directors, and perform such other duties and responsibilities as the Board may determine. The specific responsibilities of the Lead Independent Director are as follows:

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Meetings and Committees of the Board

The Board of Directors held five meetings during 2019. All the incumbent directors attended at least 75% of the total number of meetings of the Board and any committees of which he or she was a member.

The independent directors meet in regularly scheduled executive sessions without Messrs. Hendrix or Gould or other members of management present. In 2019, the independent directors met four times in executive session.

The Board of Directors has the following standing committees that assist the Board in carrying out its duties: the Executive Committee, the Audit Committee, the Compensation Committee, and the Nominating & Governance Committee. The following table lists the current members of each committee:

Executive Committee. The Executive Committee did not meet during 2019. Except for duties reserved to the other Board committees and for certain other exceptions, the Executive Committee may exercise all the power and authority of the Board of Directors in the management of the business and affairs of the Company.

Audit Committee. The Audit Committee met four times during 2019. The function of the Audit Committee is to (i) serve as an independent and objective party to review the Company’s financial statements, financial reporting process and internal control system, (ii) review and evaluate the performance of the Company’s independent auditors and internal financial management, and (iii) provide an open avenue of communication among the Company’s independent auditors, management (including internal financial management) and the Board. The Board of Directors has determined that all three members of the Audit Committee are “independent” in accordance with applicable law, including the rules and regulations of the Securities and Exchange Commission and the rules of the Nasdaq Stock Market, and that each of Ms. Palmer and Mr. Keough is an “audit committee financial expert” as defined by the rules and regulations of the Securities and Exchange Commission. The Audit Committee operates pursuant to an Audit Committee Charter which was adopted by the Board of Directors and may be viewed on the Investor Relations section of our website, https://investors.interface.com/investor-relations/default.aspx.

Compensation Committee. The Compensation Committee met four times during 2019. The function of the Compensation Committee is to (i) evaluate the performance of the Company’s Chief Executive Officer and other senior executives, (ii) determine compensation arrangements for such executives, (iii) administer the Company’s stock and other incentive plans for key employees, and (iv) review the administration of the Company’s employee benefit plans. The Board of Directors has determined that each member of the Compensation Committee is “independent” in accordance with applicable law, including the rules and regulations of the Securities and Exchange Commission and the rules of the Nasdaq Stock Market. The Compensation Committee operates pursuant to a Compensation Committee Charter that was adopted by the Board of Directors and may be viewed on the Investor Relations section of our website, https://investors.interface.com/investor-relations/default.aspx. The Compensation Committee’s policies and philosophy are described in more detail below in this Proxy Statement under the heading “Compensation Discussion and Analysis.”

Nominating & Governance Committee. The Nominating & Governance Committee met one time in 2019. The Nominating & Governance Committee assists the Board in establishing qualifications for Board membership and in identifying, evaluating and selecting qualified candidates to be nominated for election to the Board. The Nominating & Governance Committee also assists the Board in reviewing and analyzing, and makes recommendations regarding, corporate governance matters, and it also recommends committee assignments for Board members. The Board of Directors has determined that each member of the Nominating & Governance Committee is “independent” in accordance with applicable law, including the rules of the Nasdaq Stock Market. The Nominating & Governance Committee operates pursuant to a Nominating & Governance Committee Charter that was adopted by the Board of Directors and may be viewed on the Investor Relations section of our website, https://investors.interface.com/investor-relations/default.aspx.

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Nominations for Board Service

In the event of a vacancy on the Board, the Nominating & Governance Committee develops a pool of potential director candidates for consideration. The Nominating & Governance Committee seeks candidates for election and appointment with excellent decision-making ability, valuable and varied business experience and knowledge, and impeccable personal integrity and reputations. The Committee does not have a specific diversity policy, but considers diversity of race, ethnicity, gender, age, cultural background and professional experience in evaluating candidates for Board membership, in an effort to obtain a variety of viewpoints in the Board’s proceedings. The Nominating & Governance Committee considers whether candidates are free of constraints or conflicts which might interfere with the exercise of independent judgment regarding the types of matters likely to come before the Board, and have the time required for preparation, participation and attendance at Board and committee meetings. Other factors considered by the Nominating & Governance Committee in identifying and selecting candidates include the needs of the Company and the range of talent and experience already represented on the Board. The Nominating & Governance Committee solicits suggestions from other members of the Board, Company management, and occasionally outside search firms, regarding persons to be considered as possible nominees. Shareholders who wish the Nominating & Governance Committee to consider their recommendations for director candidates should submit their recommendations in writing to the Nominating & Governance Committee, in care of the office of the Chairman of the Board, Interface, Inc., 1280 West Peachtree Street NW, Atlanta, GA 30309. Recommendations should include the information which would be required for a “Shareholder Proposal” as set forth in Article II, Section 9 of the Company’s Bylaws. Director candidates who are recommended by shareholders in accordance with these procedures will be evaluated by the Nominating & Governance Committee in the same manner as director candidates recommended by the Company’s directors, management and outside search firms.

Shareholder Outreach Programs

In each of the past three years, we have conducted one or more shareholder outreach programs per year, with the most recent taking place in June 2019. In that program, we requested conference calls with 13 of our top 25 shareholders, representing approximately 53% of outstanding shares, and we held conference calls with each shareholder that accepted our request, representing 39% of outstanding shares. During the outreach program, which was led by the Company’s Chairman Dan Hendrix and Lead Independent Director Chris Kennedy, we focused on obtaining shareholder feedback regarding the May 2019 re-election of Andrew Cogan to the Board of Directors in which Mr. Cogan did not receive a majority affirmative vote. Pursuant to the Company’s Majority Vote Resignation Policy (discussed below), Mr. Cogan promptly submitted a resignation from the Board and Board Committees on which he served, subject to Board acceptance, and the Board desired to receive shareholder feedback on the conditional resignation before taking action on it. We also discussed with shareholders various other proxy and Company related issues and areas of shareholder interest – such as the Company’s corporate governance practices, executive compensation philosophy and practices, and environmental and social sustainability initiatives. Following the outreach program, our shareholders’ feedback was shared with Company management and the Board of Directors. Partially due to the shareholder feedback received during this outreach program, Mr. Cogan’s conditional resignation was accepted by the Board on a delayed basis effective February 28, 2020.

Majority Vote Resignation Policy for Director Elections

Pursuant to governing law and documents, including the Company’s Bylaws as noted above, in most cases the Company's directors are elected by a plurality of the votes cast. Although nominees who receive the most votes for the available positions will generally continue to be duly elected, on February 22, 2017, the Board of Directors adopted a resignation policy applicable to nominees who fail to receive the affirmative vote of a majority of the votes cast in an uncontested election for directors. (The adoption of this policy does not alter the applicable legal standards.) The policy requires that a nominee who does not receive a majority affirmative vote in an uncontested election promptly will tender, to the Board or its Chair, their resignation from the Board and committees on which the director serves. The resignation may be conditioned upon Board acceptance. If it is not so conditioned, the resignation must specify that it is effective immediately on delivery.

A “majority affirmative vote” means that the votes cast “for” a nominee’s election exceed those voted "withhold", with broker and other non-votes not being considered “votes cast.” You have been provided with options to vote “for” or “withhold” from each Director nominee. However, neither a “withhold” vote nor declining to vote for directors (assuming the presence of a quorum) affects whether a director nominee in an uncontested election is legally elected under the plurality vote standard (provided such nominee receives at least one “for” vote). But a “withhold” vote is considered in determining whether a director who is legally elected has received a “majority affirmative vote” for purposes of the resignation policy.

The Nominating & Governance Committee of the Board will consider any resignation conditioned upon Board acceptance, including any information provided by the Director, and within 60 days of the shareholder meeting at which the Director failed to receive a majority affirmative vote, will recommend to the full Board what action to take on the Director’s resignation. The Nominating & Governance Committee may recommend, among other things, acceptance or rejection of the resignation, delayed acceptance pending the recruitment and election of a new director or rejection of the resignation in order to address the underlying reasons for the Director’s failure to receive the majority affirmative vote of the shareholders. The policy provides for the Board to act on the Nominating & Governance Committee’s recommendation within 90 days following the shareholder meeting.

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In considering a conditional resignation, the Nominating & Governance Committee and the Board may consider those factors it deems relevant to its recommendation, including but not limited to the underlying reasons for the failure of the Director to receive a majority affirmative vote, the tenure and qualifications of the Director, the Director’s past and expected future contributions, other policies and the overall composition of the Board, including whether accepting the resignation would cause the Company to fail to meet legal or stock market requirements.

Following the Board’s decision, the Company will publicly announce the Board’s decision regarding any conditional resignation. A resigning Director cannot participate in committee or Board decisions regarding their resignations, except in certain cases where multiple directors have failed to receive majority affirmative votes, which circumstances are described in the full policy posted in the Investor Relations section of our website, https://investors.interface.com/investor-relations/default.aspx. The preceding summary of the policy is qualified in its entirety by reference to the full policy.

In 2019, Director Andrew Cogan did not receive a majority affirmative vote for re-election, and Mr. Cogan promptly submitted a resignation from the Board and Board Committees on which he served, subject to Board acceptance. After considering feedback from a shareholder outreach program (discussed above) as well as other factors, the Board accepted Mr. Cogan’s conditional resignation on a delayed basis, effective February 28, 2020.

Enterprise Risk Management

In 2019, the Company substantially enhanced and formalized its Enterprise Risk Management (“ERM”) program. The Company’s ERM program is based on the Enterprise Risk Management – Integrated Framework defined by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), although tailored to the Company’s specific risk profile and needs. The Company’s ERM program is managed by a risk committee comprised of executive officers and other senior managers, is administered by the Company’s Director of Internal Audit, and is overseen by the Audit Committee pursuant to authority delegated by the Board of Directors in the Audit Committee Charter. The Company’s program includes a continuous process of identifying, assessing, addressing, monitoring and reporting on the risks that pose the greatest threats to the Company. As part of that process, the management risk committee conducts an annual survey of the Company’s top global leaders to assess the likelihood, potential impact and velocity of a large number of potential risks and to help identify emerging risks. The management risk committee meets quarterly to monitor the key identified risks and how they are being addressed, which may include, depending on the circumstances, mitigating, sharing, accepting or avoiding the risk. The management risk committee and Director of Internal Audit report to the Audit Committee quarterly on significant developments and key elements of the program.

In addition, the Board receives quarterly reports on other elements of risk that may potentially affect the Company, as identified and presented by management. The Board also assists in the Company’s risk oversight through its various committees described above. For example, the Audit Committee assists in overseeing the specific risks that relate to the Company’s financial statements, financial reporting process and internal control system. In that regard, the Company’s Director of Internal Audit and outside auditors report directly to the Audit Committee. The Nominating & Governance Committee assists in overseeing risk related to the Company’s corporate governance practices as well as the performance of individual Board members and committees, while the Compensation Committee assists in overseeing risk as it relates to the Company’s executive compensation program and practices.

Environmental, Social and Governance Oversight

The full Board of Directors has the ultimate responsibility for risk oversight and oversees a Company-wide approach to risk management of environmental, social, and governance (ESG) issues. Management provides the board with quarterly updates on elements of the Company’s ESG ratings, programs, and initiatives.

Corporate Governance Guidelines

The Board has adopted Corporate Governance Guidelines that provide the framework for the governance of the Company. Our Corporate Governance Guidelines are available on the Investor Relations section of our website, https://investors.interface.com/investor-relations/default.aspx and will also be made available to shareholders without charge upon request in writing to our corporate Secretary at Interface, Inc., 1280 West Peachtree Street NW, Atlanta, Georgia 30309. The information contained on our website is not included as part of, or incorporated by reference into, this Proxy Statement.

Code of Business Conduct & Ethics

The Board has adopted a Code of Business Conduct & Ethics that applies to all of our directors, officers and employees, including our Chief Executive Officer and Chief Financial and Accounting Officers. The Code is publicly available on the Investor Relations section of our website, https://investors.interface.com/investor-relations/default.aspx and will also be made available without charge to any person upon request in writing to our corporate Secretary at Interface, Inc., 1280 West Peachtree Street NW, Atlanta, Georgia 30309. We intend to disclose amendments to, or waivers from, provisions of the Code that apply to any director or principal executive, financial or accounting officers on our website at www.interface.com, in lieu of disclosing such matters in Current Reports on Form 8-K.

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Principal Shareholders and Management Stock Ownership

The following table sets forth, as of March 13, 2020 (unless otherwise indicated), beneficial ownership of the Company’s Common Stock by: (i) each person, including any “group” as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, known by the Company to be the beneficial owner of more than 5% of any class of the Company’s voting securities, (ii) each director and nominee for director, (iii) each person who served as the Company’s Chief Executive Officer or Chief Financial Officer, and the next three most highly compensated executive officers, during 2019 (the “Named Executive Officers”), and (iv) all executive officers and directors of the Company as a group. Due to the nature of the awards, performance shares awarded to the Company’s executive officers are not included in beneficial ownership of Common Stock. Unless otherwise noted, the business address for each beneficial owner is the Company’s corporate headquarters located at 1280 West Peachtree Street NW, Atlanta, Georgia 30309.

__________

*     Less than 1%.

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APPROVAL oF Executive Compensation

(ITEM 2)

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), the Company is asking its shareholders to vote, on an advisory basis, to approve the compensation of its Named Executive Officers as described in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives the Company’s shareholders the opportunity to express their views on the compensation of the Company’s Named Executive Officers. At the 2017 annual meeting of shareholders, the Company’s shareholders voted, on an advisory basis, to hold a say on pay vote every year. The Board of Directors subsequently determined that the Company will hold say on pay votes every year until the next required advisory vote on the frequency of say on pay votes occurs or until the Board of Directors otherwise determines that a different frequency for say on pay votes is in the best interests of the shareholders.

Our executive compensation program is designed to attract, reward and retain key employees, including our Named Executive Officers, who are critical to the Company’s long-term success. Shareholders are urged to read the “Compensation Discussion and Analysis” and “Executive Compensation” sections of this Proxy Statement for greater detail about the Company’s executive compensation programs, including information about the fiscal year 2019 compensation of the Named Executive Officers.

The Company is asking the shareholders to indicate their support for the compensation of the Company’s Named Executive Officers as described in this Proxy Statement by voting in favor of the following resolution:

“RESOLVED, that the shareholders approve, on an advisory, non-binding basis, the compensation paid to the Company’s Named Executive Officers as disclosed in the “Compensation Discussion and Analysis” and “Executive Compensation” sections, and the related compensation tables, notes, and narrative in this Proxy Statement.”

Even though this say-on-pay vote is advisory and therefore will not be binding on the Company, the Compensation Committee and the Board value the opinions of the Company’s shareholders. Accordingly, to the extent there is a significant vote against the compensation of the Named Executive Officers, the Board will consider the shareholders’ concerns and the Compensation Committee will evaluate what actions may be necessary or appropriate to address those concerns.

You may vote “for,” “against,” or “abstain” from the proposal to approve on an advisory basis the compensation of our Named Executive Officers.

Vote Required and Recommendation of the Board

Under the Company’s Bylaws, the compensation of the Named Executive Officers is approved on an advisory basis if the affirmative votes cast by the holders of the Company’s outstanding shares of Common Stock entitled to vote and represented (in person or by proxy) at the meeting exceed the negative votes. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF EXECUTIVE COMPENSATION, AS DISCLOSED IN THIS PROXY STATEMENT, AND THE PROXY SUBMITTED BY TELEPHONE OR INTERNET OR PROXY CARD WILL BE VOTED IN THIS MANNER UNLESS THE SHAREHOLDER SUBMITTING THE PROXY SPECIFICALLY VOTES TO THE CONTRARY (OR ABSTAINS).

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Compensation Discussion and Analysis

This Compensation Discussion and Analysis describes the compensation program for the Company’s Named Executive Officers. For 2019, these individuals were:

Overall Philosophy and Objectives

The Company’s compensation program is designed in a manner intended to both attract and retain a highly-qualified, motivated and engaged management team whose focus is on enhancing shareholder value. The Company believes a straightforward program that is readily understood and endorsed by its participants best serves these goals, and has constructed a program that contains (1) multiple financial elements, (2) clear and definitive targets, (3) challenging but attainable objectives, and (4) specified performance metrics. More specifically, the objectives of the Company’s management compensation program include:

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Program Design and Administration

The Compensation Committee of the Board of Directors, which is composed entirely of independent directors, has developed and administers the Company’s executive pay program to provide compensation commensurate with the level of financial performance achieved, the responsibilities undertaken by the executives, and the compensation packages offered by comparable companies. The program currently consists of four principal components, each of which is designed to drive a specific behavioral focus, which in turn helps to provide specific benefits to the Company:

Program Component		Behavioral Focus		Ultimate Benefit to Company
Competitive base salary		Rewards individual competencies, performance and level of experience		Assists with attraction and retention of highly-qualified executives, and promotes management stability
Annual cash bonus opportunity based on achievement of established goals		Rewards operational results of specific business units and Company as a whole		Aligns individual interests with overall short term (typically annual) objectives, and reinforces “pay for performance” program goals
Long-term incentives		Rewards engagement, longevity, sustained performance and actions designed to enhance overall shareholder value		Aligns individual interests with the long-term investment interests of shareholders, and assists with retention of highly-qualified executives
Other elements such as retirement benefits, elective deferred compensation and special incentives		Rewards targeted operational results, engagement and longevity, and sustained performance		Focuses enhanced efforts on a particular key objective, aligns individual interests with the long-term investment interests of shareholders, assists with the attraction and retention of highly-qualified executives, and promotes management stability

The Company strives to structure various elements of these program components so that a large portion of executive compensation is directly linked to advancing the Company’s financial performance and the interests of shareholders. For 2019, those elements were mostly performance-based, as shown below (and based on target level achievement):

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Compensation Decision-Making

The Committee establishes base salaries for the executive officers, including the Named Executive Officers listed in the “Summary Compensation Table” included in this Proxy Statement. The Committee also administers the annual bonus program, the long-term incentive program, retirement benefits, deferred compensation arrangements, and, when applicable, special incentive programs.

The Company benchmarks its compensation practices against its peer group. Following completion of the shareholder outreach program in November 2017, the Committee directly engaged Pearl Meyer & Partners, a nationally recognized, independent compensation consultant, to provide input on compensation matters. Specifically, the core activities of the engagement included, among other things:

In 2018, the Committee reviewed a report from Pearl Meyer on the first phase of the engagement which involved reviewing and updating the Company's peer group. In the analysis of possible peer group companies, the Committee considered various factors including the potential peer's industry, business model, size and complexity. The Committee ultimately chose a peer group that provides a robust sample size with minimal revenue dispersion and includes companies with a significant international presence that are also focused on sustainability. The peer group selected by the Committee is comprised of:

In 2018-2019, Pearl Meyer and the Compensation Committee proceeded with the next phase of the engagement to benchmark the Company's compensation practices against the peer group. The Committee received Pearl Meyer's benchmark study in July 2018, and established the Company's compensation programs for 2019 considering the benchmark data. The work of Pearl Meyer to date has not raised any conflict of interest.

The Committee also seeks compensation input from the Company’s Chairman, Chief Executive Officer and Chief Human Resources Officer. In addition, the Committee takes into account publicly available data relating to the compensation practices and policies of other companies within and outside the Company’s industry. Furthermore, the policies and programs described below are subject to change as the Committee deems necessary from time to time to respond to economic conditions, meet competitive standards and serve the objectives of the Company and its shareholders.

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Compensation Risk Assessment

The Board, in conjunction with management, has reviewed our compensation policies and practices as generally applicable to our employees and determined that they do not encourage excessive risk or unnecessary risk taking and do not otherwise create risks that are reasonably likely to have a material adverse effect on the Company.

Clawback Policy

In February 2020, the Committee adopted a Clawback Policy which authorizes the Committee to recover from executive officers certain incentive-based compensation, including both cash and equity, due to a restatement of the Company’s financial statements. Pursuant to the Clawback Policy, in the event the Company is required to prepare an accounting restatement due to the Company’s material noncompliance with any financial reporting requirement under the U.S. federal securities laws (a “Restatement”), regardless of individual fault, the Committee may require the forfeiture or reimbursement, subject to the terms of the Clawback Policy, from any current or former “Covered Executive” (meaning, any officer of the Company covered by Section 16(a) of the Securities Exchange Act) of the Company any excess incentive-based compensation awarded during the thirty-six (36) months preceding the date on which the Company is required to prepare a Restatement. Excess incentive based compensation, as defined in the Clawback Policy, essentially means the amount or value of incentive-based compensation granted, earned or vested (“Awarded”) in excess of what would have been Awarded to that Covered Executive based on the Restatement.

Our Performance 

As described above in the Proxy Statement Summary, the Company achieved strong performance in 2019 compared with the prior year. Highlights appear below. The non-GAAP financial measures of adjusted operating income and adjusted EPS were utilized as 2019 performance criteria for our annual bonus plan and long-term equity incentives, respectively, as discussed further below.

(Note: Please see Appendix A for a reconciliation of non-GAAP measures to the most directly comparable GAAP measures and an explanation of why we believe non-GAAP measures provide useful information to shareholders and the additional purposes for which we use non-GAAP measures.)

Discussion of Principal Elements of Compensation Program

Base Salaries

The Committee generally strives to set base salaries at the market median (50^th percentile) of salaries offered by other employers in our industry and other publicly traded companies with characteristics similar to the Company (size, growth rate, etc.), based, by and large, on information provided by independent third party advisors while also considering internal equalization policies of the Company. Some of the companies considered from time to time are included in the list of companies comprising the “self-determined peer group” index used by our independent compensation consultant and used to create the stock performance graph included in the Company’s Annual Report on Form 10-K for the year ended December 29, 2019.

In addition, the Committee may consider other factors when setting individual salary levels, which may result in salaries somewhat above or below the targeted amount. These factors include the executive’s level of responsibility, achievement of goals and objectives, tenure with the Company, and specific background or experience, as well as external factors such as the availability of talent, the recruiting requirements of the particular situation, and general economic conditions and rates of inflation.

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Base salary adjustments for executive officers generally are made (if at all) annually and are dependent on the factors described above. The changes in base salaries for the Named Executive Officers, and the rationale for those changes, is set forth below.

Please see the “Summary Compensation Table” included in this Proxy Statement for the salaries paid to the Named Executive Officers in 2019.

Annual Bonus Opportunities

The Committee administers the shareholder-approved Executive Bonus Plan, which provides bonus opportunities for Company executives. The bonus opportunities provide an incentive for executives to earn cash compensation based on the achievement of important corporate or business unit (division or subsidiary) financial performance. In determining the appropriate bonus opportunities, the Committee seeks to establish potential awards that, when combined with annual salary, place the total overall cash compensation opportunity for the Company’s executives at the market 50^th percentile for comparable companies, provided that the performance objectives are substantially achieved.

For 2019, each executive officer of the Company was assigned a bonus potential, expressed as a percentage of base salary. The 2019 bonus potential for each Named Executive Officer was as follows:

Actual awards could range from 0% to 150% of the bonus potential, depending on the degree to which the established financial objectives were achieved, and (except for Mr. Gould, who was paid no bonus for 2019 as a result of his termination for cause) were paid on an annual basis approximately 60 days following the end of the year.

In 2019, 100% of the bonus potential for the Chief Executive Officer, Chief Financial Officer and each of the other Named Executive Officers was based on measurable financial objectives. For Messrs. Gould, Foshee and Hausmann, these objectives consisted of operating income and cash flow, and the relative weights assigned to these financial objectives were 75% and 25%, respectively. For Messrs. Miller and Stansfield (who managed the Company’s Americas and EAAA divisions, respectively), the objectives and relative weights assigned were divisional operating income (50%), consolidated operating income (25%) and divisional cash flow (25%).

For each financial objective, the Committee establishes a threshold amount, a goal amount, and a maximum amount. The threshold amount must be achieved in order for any bonus amount to be earned with respect to that objective (and no bonus is payable whatsoever if the threshold amount for operating income is not exceeded). A pro rata bonus amount is earned based upon (i) the degree to which the threshold amount (resulting in a “cut in” payout equal to 25% of the bonus potential for that criterion) is exceeded, up to the goal amount (resulting in a payout equal to 100% of the bonus potential for that criterion), or (ii) the degree to which the goal amount (resulting in a payout equal to 100% of the bonus potential for that criterion) is exceeded, up to the maximum amount (resulting in a payout equal to 150% of the bonus potential for that criterion). The approach to goal setting involves a process of reviewing, among other things, our prior year’s financial performance, our annual operating plan, and our short-term and long-term strategic objectives. We also take into account the need for setting goals that are challenging yet reasonably achievable so as to provide a competitive pay package necessary for the retention of our talent. With respect to cash flow in particular, the Committee sets the targets, in its discretion, taking into account anticipated growth initiatives, capital expenditures, research and development costs, debt maturities, and other cash uses that the Committee deems relevant. Consideration of these factors may result in a cash flow target that is above or below the previous year's cash flow target. Given this methodology, the Committee believes that the threshold level, while challenging, is reasonably likely to be achieved in normalized market conditions, the goal amount is achievable with strong management performance, and the maximum amount would encourage and reward outstanding performance.

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For example, the Company’s 2019 annual thresholds, goals and maximums that were applicable for Messrs. Gould, Foshee and Hausmann, adjusted as discussed below, were as follows:

For 2019, adjusted operating income (see Appendix A) excluded: (1) restructuring and other charges; and (2) purchase accounting in connection with the Company’s acquisition of nora systems. For compensation purposes, the Committee also excluded certain other nonrecurring expenses. As so calculated: (i) the Company’s 2019 adjusted operating income grew to approximately $155 million, thus exceeding the established threshold amount and resulting in a payout of 83.55% for this criterion (62.66% of the executive’s bonus potential after applying the 75% weighting), and (ii) the Company’s 2019 cash flow was approximately $67 million, thus exceeding the established maximum amount and resulting in a payout of 150% for this criterion (37.5% of the executive’s bonus potential after applying the 25% weighting).

Strong operating income and cash flow also were achieved during 2019 in the Company’s Americas division (managed by Mr. Miller) and EAAA division (managed by Mr. Stansfield). Based on the Company’s performance, overall 2019 bonus achievement (except for Mr. Gould who was paid no bonus for 2019 as a result of his termination for cause) was approximately 100% of bonus opportunity for Messrs. Foshee and Hausmann, 112% of bonus opportunity for Mr. Miller, and 47% of bonus opportunity for Mr. Stansfield, resulting in the following cash payouts:

Long-Term Incentives

The Committee administers the shareholder-approved Interface, Inc. Omnibus Stock Incentive Plan (the “Omnibus Stock Plan”), which is an equity-based plan that allows for long-term incentive awards such as restricted stock, performance shares and stock options. The Omnibus Stock Plan provides for the grant to key employees and directors of the Company and its subsidiaries of restricted stock, incentive stock options (which qualify for certain favorable tax treatment), nonqualified stock options, stock appreciation rights, deferred shares, performance shares and performance units. The size of the awards made to individual officers is based on an evaluation of several factors, including the officer’s level of responsibility, the officer’s base salary, benchmark data and the Company’s overall compensation objectives. The amount and nature of prior equity incentive awards also are generally considered in determining new Omnibus Stock Plan awards for executive officers.

Long-term incentives are intended to attract and retain outstanding executive talent, create a direct link between shareholder and executive interests by focusing executive attention on increasing shareholder value, and motivate executives to achieve specific performance objectives. For instance, stock options (when granted) have an exercise price equal to at least 100% of the market price of the underlying Common Stock on the date of grant. Thus, the stock options only have value if the market price of the Company’s stock rises after the grant date. Additionally, restricted stock and performance share awards generally vest, in whole or in part, over a period of multiple years (three years for grants made in recent years), giving the executive an incentive to remain employed with the Company for a significant time period to have the opportunity to vest in an award. Moreover, awards of restricted stock and performance shares that were granted in 2019 and prior years may vest earlier if specific performance criteria designed to drive shareholder value are met. All equity awards (whether restricted stock, performance shares or otherwise) will have a minimum vesting period or minimum performance period of at least one year.

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Description of Available Awards

Restricted Shares

Awards of restricted shares under the Omnibus Stock Plan generally vest over a period of multiple years following the date of award. The Committee may, in its discretion, also establish performance criteria for these awards, and the restricted shares may vest earlier if such performance criteria are satisfied. Unvested awards are also subject to forfeiture under certain circumstances. All restricted shares awarded to date have been made without consideration from the participant (although the Omnibus Stock Plan authorizes the Committee, in connection with any award, to require payment by the participant of consideration, which can be less than the fair market value of the award on the date of grant). Awards of restricted stock generally will not be transferable by the participant other than by will or applicable laws of descent and distribution.

Performance Shares 

Performance shares are awards reflected in a bookkeeping entry that records the equivalent of one share of Common Stock that may subsequently be earned and payable (and issued) to the participant if specified performance criteria established by the Committee are satisfied. Awards of performance shares may be settled in Common Stock, cash, or a combination thereof, at the Company’s election. Grants of performance shares may provide for the payment to the participant of dividend equivalents on a current, deferred or contingent basis; provided, in all of our past awards of performance shares, we have accrued dividend equivalents that are paid only if and when the underlying performance shares vest. Awards of performance shares generally will not be transferable by the participant other than by will or applicable laws of descent and distribution.

Stock Options

Options granted under the Omnibus Stock Plan may be incentive stock options (as defined in Section 422 of the Internal Revenue Code of 1986, as amended), nonqualified stock options or a combination of the foregoing, although only employees are eligible to receive incentive stock options. All options under the Omnibus Stock Plan will be granted at an exercise price per share equal to not less than 100% of the fair market value of the Common Stock on the date the option is granted. Options may be structured to vest over a period of multiple years. Options granted under the Omnibus Stock Plan expire following a pre-determined period of time after the date of grant (which may not be more than 10 years after the grant date), and generally will terminate on the date three months following the date that a participant’s employment with the Company terminates.

The Company receives no consideration upon the granting of an option. Full payment of the option exercise price must be made when an option is exercised. The exercise price may be paid in cash or in such other form as the Committee may approve, including shares of Common Stock valued at their fair market value on the date of option exercise. Options generally will not be transferable by the holder thereof other than by will or applicable laws of descent and distribution.

The Committee has not granted stock options to any executive officer in the past three years.

Other Potential Awards

The Omnibus Stock Plan also provides for the award of stock appreciation rights, deferred shares and performance units. The Committee has not granted any of these other types of awards to any executive officer.

Omnibus Stock Plan Awards in 2017

One-third of the 2017 awards were granted as time-based restricted stock, and the shares would vest 100% on the third anniversary of the grant date, if the executive remained employed with the Company until that date. The executive also had the right to receive any cash dividends paid on this time-based restricted stock, throughout the three-year term.

The other two-thirds were granted in a single award of performance shares with two separate, independent vesting criteria: adjusted earnings per share (“EPS”) and Total Shareholder Return (“TSR") during the years 2017 to 2019. The first one-third of this subpart was eligible to vest based on the Company’s adjusted EPS in 2017, the second one-third of this subpart was eligible to vest based on the Company’s adjusted EPS in 2018, and all shares (to the extent not previously vested) were eligible to vest based on the Company’s adjusted EPS in 2019. The amount of performance shares that vested based on adjusted EPS was determined pro rata based upon (i) the degree to which an applicable EPS threshold level was achieved (at which point 25% of the performance shares would vest) or exceeded up to an applicable EPS target level (at which point 100% of the performance shares would vest), or (ii) the degree to which the applicable EPS target level was exceeded up to an applicable EPS maximum level (at which point two times the nominal performance shares would vest). There was no “time vesting” opportunity for this subpart. The Company does not pay dividends on unvested performance shares. Rather, “dividend equivalents” accrue on these awards of performance shares and are paid only if and when the related performance shares vest. The second vesting criterion for this portion of the 2017 awards was based on the Company’s TSR compared with its peer group during the three-year performance period of 2017 to 2019 with the following vesting opportunities (less any shares vested under the EPS criteria described above):

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The 2017 time-based restricted stock awards also included a “double trigger” change-in-control vesting provision. In other words, these awards would not vest based solely on the occurrence of a change in control alone; rather, there must be “second trigger” of either (i) an involuntary separation from service or (ii) a separation from service for “Good Reason” (essentially, resignation in the face of negative changes in executive’s employment relationship with the Company).

For the 2017 awards of performance shares, the Compensation Committee retained authority in the event of a change-in-control to alter or amend the terms in any manner it deemed equitable and necessary or advisable to take into account the effect of the change-in-control. Such modifications may include, without limitation, (i) providing for payment in the form of cash or other securities in lieu of shares, (ii) vesting of all or a portion of the performance shares based on the attainment of the performance criteria determined as of the date of the change-in-control, (iii) accelerating the vesting of the performance shares in full or on a pro rata basis, (iv) converting some or all of the shares to time-based vesting, or (v) making appropriate adjustments to the performance criteria. However, in the event of a “double trigger” change-in-control and termination of employment as described above, the employee would vest in the nominal number of outstanding performance shares reduced by the number of performance shares previously vested under the performance criteria.

The threshold, goal and maximum achievement levels for this award required approximately 6%, 12% and 18% compound growth, respectively, each year, which yielded the following targets for the portion of this award that was eligible to vest based on 2019 EPS:

For 2019, adjusted EPS (see Appendix A) excluded: (1) restructuring and other charges; and (2) purchase accounting in connection with the Company’s acquisition of nora systems. For compensation purposes, the Compensation Committee also excluded certain other nonrecurring expenses and items such as the effects from the enactment of the federal Tax Cuts and Jobs Act in December 2017. As so calculated, the Company’s 2019 adjusted EPS grew to $1.52, thus exceeding the established goal amount. Based on this performance, the Named Executive Officers (other than Mr. Gould, due to his termination for cause) vested in approximately 129% of the portion of this award that was based on 2019 adjusted EPS.

Omnibus Stock Plan Awards in 2018

The 2018 equity awards were structured in a manner similar to the 2017 awards. One-third of the 2018 awards were granted as time-based restricted stock with the same vesting and dividend provisions described above. The other two-thirds were granted in a single award of performance shares with two separate, independent vesting criteria. The first vesting criterion is the Company’s EPS during the years 2018 to 2020, structured in the same way described above with respect to the 2017 awards. The second vesting criterion is based on the Company’s TSR compared with its peer group during the three-year performance period of 2018 to 2020, structured in the same way described above with respect to the 2017 awards. The 2018 awards also include change-in-control vesting provisions in the same way as the 2017 awards.

The threshold, goal and maximum achievement levels for this award required approximately 6%, 12% and 18% compound growth, respectively, each year, which yielded the following targets for the portion of this award that was eligible to vest based on 2019 EPS:

The Company’s 2019 EPS performance for the 2018 equity awards was calculated for compensation purposes in the same manner as for the 2017 equity awards, thus exceeding the established goal amount. As so calculated, the Company’s 2019 adjusted EPS grew to $1.52, thus exceeding the established goal amount. Based on this performance, the Named Executive Officers (other than Mr. Gould, due to his termination for cause) vested in approximately 131% of the portion of this award that was based on 2019 adjusted EPS.

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Omnibus Stock Plan Awards in 2019

The 2019 equity awards were structured in a manner similar to the 2017 awards. The threshold, goal and maximum achievement levels for this award required approximately 5%, 10% and 18% compound growth, respectively, each year, which yielded the following targets for the portion of this award that was eligible to vest based on 2019 EPS:

The Company’s 2019 EPS performance for the 2019 equity awards was calculated for compensation purposes in the same manner as for the 2017 and 2018 equity awards, except that the 2019 targets and achievement included the acquired nora business and had no adjustments for the Tax Cuts and Jobs Act . As so calculated, the Company’s 2019 adjusted EPS grew to $1.61, thus exceeding the established goal amount. Based on this performance, the Named Executive Officers (other than Mr. Gould, due to his termination for cause) vested in approximately 106% of the portion of this award that was based on 2019 adjusted EPS.

As demonstrated above, the Committee believes the structure of the performance-based equity awards is appropriately designed to pay for performance, and that the structure strikes a proper balance among motivating management, rewarding strong management performance, and accounting for the regular cyclicality of our industry that is outside of management’s control.

Changes in Executive Compensation in 2020

The Committee has made several changes in the features of the Omnibus Stock Incentive Plan awards that have been granted in 2020. After reviewing peer and benchmark data compiled by its independent consultant, the Committee has (i) eliminated the alternative TSR vesting criteria described above (which some shareholders had viewed negatively as a “catch up” feature), (ii) eliminated the opportunity in the third year of the performance period to vest in shares that had not previously vested in the first two years of the performance period (which some shareholders had viewed negatively as a “catch up” feature); (iii) maintained the mix of 1/3 time-based and 2/3 performance-based awards but changed from having one performance metric (adjusted EPS) to two performance metrics – adjusted EBITDA (75% weighting) and three-year cumulative return on invested capital (25% weighting), and (iv) eliminated the opportunity to vest in performance-based shares prior to the end of the three-year performance period. Regarding item (iv) in the preceding sentence, the 2020 awards provide an opportunity for grantees to earn shares based on adjusted EBITDA achievement during each year of the three-year performance plan, but the vesting of those earned shares is deferred until the Committee’s certification of attainment of all performance measures following the end of the three-year performance period.

In addition, the Committee has changed one of the 2020 bonus potential criteria, from cash flow (25% weighting for the CEO, CFO and other corporate employees) to cash flow from operations. The Committee believes this change is appropriate because it eliminates capital expenditures from the targets and achievement calculations.

Other Elements of Compensation Program

In addition to the principal compensation program elements described above, the Company has adopted a number of other elements to further its compensation program goals. They are as follows:

401(k) Plan and Other Defined Contribution Plans

The Company maintains the Interface, Inc. Savings and Investment Plan (the “401(k) Plan”), a tax-qualified 401(k) plan which provides its U.S.-based employees a convenient and tax-advantaged opportunity to save for retirement. The Company’s Named Executive Officers who are based in the United States are eligible to participate in the 401(k) Plan on the same terms as other executive and non-executive employees based in the United States, and receive the same benefits afforded all other participants. Under the 401(k) Plan, all participating employees are eligible to receive matching contributions that are subject to vesting over time. The Company periodically evaluates the level of matching contributions afforded participant employees to ensure competitiveness in the marketplace. The Company matches 50% of the first 6% of the employee’s eligible compensation (capped by statutory limitations) that the employee contributed to the 401(k) Plan.

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Elective Deferred Compensation Program

The Company also maintains the Interface, Inc. Nonqualified Savings Plan II (the “Nonqualified Plan”) for certain U.S.-based “highly compensated employees” (as such term is defined in applicable IRS regulations), including the Named Executive Officers who are based in the United States. The compensation level required to participate in the Nonqualified Plan was $120,000 in total annual compensation, and the Company had 103 participants in the plan (including both current and former employees) at the end of 2019. As with the Company’s 401(k) Plan, the Named Executive Officers who are based in the United States are eligible to participate in the Nonqualified Plan on the same terms as other executive and non-executive eligible employees based in the United States, and receive the same benefits afforded all other participants. Under the Nonqualified Plan, all eligible employees can elect to defer, on a pre-tax basis, a portion of their salary and/or annual bonus compensation. The Company matches 50% of the first 6% of the employee’s eligible salary and bonus (and sales commissions, if applicable) that was deferred, less any potential Company matching amounts under the 401(k) Plan.

Please see the “Non-Qualified Deferred Compensation” table included in this Proxy Statement for further details regarding the Nonqualified Plan, as well as the Company’s Named Executive Officers’ contributions, earnings and account balances applicable to the Nonqualified Plan for fiscal year 2019.

Pension/Salary Continuation Programs

Foreign Defined Benefit Plans

The Company has trustee-administered defined benefit retirement plans (“Pension Plans”) which cover certain of its overseas employees. The benefits are generally based on years of service and the employee’s average monthly compensation. As determined by their respective trustees, the investment objectives of the Pension Plans are to maximize the return on the investments without exceeding the limits of prudent pension fund investment and to ensure that the assets ultimately will be sufficient to exceed minimum funding requirements. The goal is to optimize the long-term return on plan assets at a moderate level of risk, by balancing higher-returning assets, such as equity securities, with less volatile assets, such as fixed income securities. The assets are managed by professional investment firms and performance is evaluated periodically against specific benchmarks. The Pension Plans’ net assets did not include any shares of the Company’s own stock at the end of fiscal year 2019. None of our Named Executive Officers are participants in these plans.

Employment and Severance Agreements

The Company has an employment agreement in effect with Mr. Stansfield, and had an employment agreement in effect with Mr. Gould until his termination in January 2020. These agreements generally provide for certain benefits (salary, bonus, medical benefits, etc.) in the event of a termination of employment without “cause” (as may be defined in the agreements), as well as certain benefits upon his resignation or a termination due to death or disability. These agreements also contain provisions placing restrictions on the individual’s ability to compete with the Company, or solicit its customers or employees, for a specified period of time following termination of employment. For Mr. Gould, the agreement also provided for certain benefits in the event of a termination of employment in connection with a “Change in Control” (as defined in the agreements) of the Company.

The Company also has a Severance Protection and Change in Control Agreement with Mr. Foshee, and previously had such an agreement with Mr. Miller, that provides for certain severance benefits if the individual’s employment is terminated involuntarily without cause or in connection with a change in control. The agreement also contains provisions placing restrictions on the individual’s ability to compete with the Company for a period of 12 or 24 months following termination of employment, depending on the circumstances of termination.

Mr. Hausmann does not have an employment agreement. In the event of a termination, he is entitled to receive only those benefits outlined in (i) his employment offer letter, (ii) the Company’s policies (including, without limitation, severance and benefits) applicable to similarly situated employees in the U.S., and (iii) the terms of his individual equity award agreements in effect at the time.

Please see the further discussion below in the “Potential Payments Upon Termination or Change of Control” section of this Proxy Statement regarding the respective employment and change in control agreements of the Company’s Named Executive Officers.

Perquisites

In order to provide a market competitive total compensation package to certain of the Company’s executive officers, including the Named Executive Officers, the Company provides a limited set of perquisites that it believes enable its Named Executive Officers to perform their responsibilities efficiently and with minimal distractions. The perquisites provided to one or more Named Executive Officers in 2019 included the following:

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Please see the “Summary Compensation Table” included in this Proxy Statement (and the notes thereto) for a more detailed discussion of these perquisites and their valuation.

Special Incentive Programs

From time to time, in its discretion, the Committee may implement special incentive programs which provide executives an opportunity to earn additional compensation if specific performance objectives (such as stock price appreciation, debt reduction, cash accumulation, or attainment of a specified financial ratio) are met. No special incentive programs have been used in the past several years.

Stock Ownership and Retention Guidelines

To further tie the financial interests of Company executives to those of shareholders, the Committee has established stock ownership and retention guidelines. Pursuant to the stock ownership and retention guidelines, executives are expected to accumulate a number of shares (unrestricted) of the Company’s Common Stock having a value equaling three times base salary in the case of the Chief Executive Officer and two times base salary in the case of the other executive officers (based on salaries and the stock price at the time the new guidelines were adopted in 2016). The expectation is for executives to reach this ownership level by March 2020 (or within four years of joining the Company). As of the end of 2019, all Named Executive Officers had met this target. To facilitate accomplishing the ownership targets, executive officers generally are expected to retain at least one-half of the net after-tax shares (i.e., the net shares remaining after first selling or the withholding of sufficient shares to cover the anticipated tax liability and, in the case of stock options, the exercise price) obtained upon the vesting of equity awards and the exercise of stock options.

Directors also are subject to stock ownership requirements. Directors are required to hold 2,000 unrestricted shares. Any new director is required to accumulate these shares by the second anniversary of his or her election. As a guideline, non-employee directors also are expected to retain during their tenure all of the net after-tax shares obtained upon the vesting of restricted stock and at least one-half of the net after-tax shares obtained upon the exercise of stock options. All current directors (with the exceptions of Ms. Kilbane, who joined the Board in July 2018, and Messrs. Gibson and Keough, who joined the Board in September 2019) have met this stock ownership standard.

The Company has a policy that generally prohibits all of its employees, officers and directors from engaging in short sales or trading in puts, calls and other options or derivatives with respect to the securities of the Company.

Compensation Deductibility

Prior to enactment of The U.S. Tax Cuts and Jobs Act (the “Tax Act”), an income tax deduction under U.S. federal law was generally available for annual compensation in excess of $1 million paid to certain “covered employees” of a public corporation if that compensation qualified as “performance-based” compensation under Section 162(m) of the U.S. tax code. Prior to the Act, “covered employees” included the chief executive officer and the next three highest paid executive officers (excluding the chief financial officer), determined as of the end of a taxable year.  Executive compensation under the Company’s Executive Bonus Plan, described above, met these requirements and qualified for an income tax deduction under U.S. federal law prior to the Tax Act.

The Tax Act eliminated the “performance-based” deduction beginning January 1, 2018, expanded the definition of “covered employees” to include the chief financial officer, and made “covered employee” status permanent for any executive who was a “covered employee” for any taxable year beginning after December 31, 2016. However, the Tax Act provided a transition rule with respect to remuneration which was paid pursuant to a written binding contract which was in effect on November 2, 2017, and which was not materially modified after that date. As a result of the Tax Act, the Company currently expects that any compensation amounts paid in excess of $1 million to any “covered employee” in respect of and after fiscal 2018 will no longer be deductible. The Company’s expectation is that this change will not have a material effect on its operating results or financial condition

Although the Committee considers deductibility issues when approving executive compensation elements, the Company and the Committee believe that other compensation objectives, such as attracting, retaining and providing incentives to qualified managers, are important and may supersede the goal of maintaining deductibility. Consequently, the Company and the Committee may make compensation decisions without regard to deductibility when it is deemed to be in the best interests of the Company and its shareholders to do so.

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Impact of COVID-19 on our 2020 Executive Compensation Program

Given the numerous uncertainties in the global business environment that have been created by the COVID-19 worldwide pandemic, the Committee continues to review various aspects of our compensation programs for 2020, especially with respect to performance metrics and targets, which were established prior to the onset of the COVID-19 pandemic and its macroeconomic consequences.   In light of the foregoing, the Committee will carefully consider the unique set of challenges created by COVID-19 in connection with our 2020 compensation programs so that we can continue to retain and incentivize our leadership team during this unprecedented time. The health and safety of our employees and the communities in which we operate continues to be the Company’s paramount concern, and our Board of Directors, Compensation Committee and executive leadership team will continue to monitor the impacts of COVID-19 on our business.

COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Board of Directors has reviewed and discussed with management the “Compensation Discussion and Analysis” section of this Proxy Statement. Based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the “Compensation Discussion and Analysis” section be included in this 2020 Proxy Statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the year ended December 29, 2019, filed with the Securities and Exchange Commission.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the executive officers of the Company served as either (1) a member of the Compensation Committee or (2) a director of any entity of which any member of the Compensation Committee is an executive officer. In addition, none of the executive officers of the Company served as a member of the compensation committee of any entity of which any member of the Board of Directors is an executive officer.

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EXECUTIVE COMPENSATION AND RELATED ITEMS

Summary Compensation Table

The following table provides information about the compensation paid by the Company and its subsidiaries to the Company’s Named Executive Officers for each of the past three fiscal years. As previously disclosed, Messrs. Gould and Miller are no longer employed by the Company.

______

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The following table outlines those perquisites and all other compensation required by SEC rules to be separately quantified that were provided to the Company’s Named Executive Officers during 2019.

Automobile/Automobile Allowance. Each of the Named Executive Officers were provided with use of a company-provided automobile, or an automobile allowance, plus fuel and maintenance.

Telephone. The Company paid certain fees associated with the Named Executive Officers’ use of company-provided cellular telephones.

Long-Term Care and Life Insurance. The Company paid certain premiums associated with long-term care and life insurance policies.

Other. For Mr. Gould, the amount represents reimbursement of tax advisory and return preparation services. For Mr. Miller, the amount represents unused vacation payout received pursuant to his separation agreement with the Company.

Dividends and Dividend Equivalents. In 2019, the Company paid on all outstanding Common Stock of the Company (including time-based awards of restricted stock, but not on unvested performance shares) dividends of $0.065 per share in each quarter. Dividend equivalents accrue on awards of performance shares and are paid out only if, and to the extent, the performance shares actually vest. The amounts in the “Dividends and Dividend Equivalents” column reflect dividends paid on the time-based restricted shares, and dividend equivalents paid out on performance shares that vested, of each Named Executive Officer in 2019.

Contributions to Retirement Plans. The Company makes matching contributions, on the same terms and using the same formulas as for other participating employees, to each U.S.-based Named Executive Officer’s account under the 401(k) Plan and the Nonqualified Plan, as applicable.

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The amounts reflected below represent the contributions by the Company:

As a non-U.S. employee, Mr. Stansfield is ineligible to participate in the 401(k) Plan and the Nonqualified Plan.

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Grants of Plan-Based Awards in 2019

The following table provides information about awards granted to the Company’s Named Executive Officers in 2019, as well as potential future payments associated therewith.

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Outstanding Equity Awards at 2019 Fiscal Year-End

The following table provides information about the number of shares covered by exercisable and unexercisable options and unvested stock awards outstanding and held by the Company’s Named Executive Officers as of the end of fiscal year 2019.

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Option Exercises and Stock Vested in 2019

The following table provides information about the number and corresponding value realized during 2019 with respect to (i) the exercise of stock options, and (ii) the vesting of restricted stock and performance shares for each of the Company’s Named Executive Officers.

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2019 Non-Qualified Deferred Compensation

The following table provides information about the contributions, earnings and account balances of the Company’s applicable deferred compensation plans for each of the Company’s Named Executive Officers.

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Under the Nonqualified Plan, all eligible employees can elect to defer, on a pre-tax basis, a portion of their salary and/or annual bonus compensation. Each participant elects when the deferred amounts will be paid out, which can be during or after employment, subject to the provisions of Section 409A of the Internal Revenue Code. The employee earns a deferred return based on deemed investments in mutual funds selected by the employee from a list provided by the Company. The investment risk is borne entirely by the employee participant. Gains and losses are credited based on the participant’s election of a variety of deemed investment choices. Participants’ accounts may or may not appreciate, and may even depreciate, depending on the performance of their deemed investment choices. None of the deemed investment choices provide interest at above-market rates (or any guaranteed interest rate). The Company has established an irrevocable grantor (“rabbi”) trust to hold, invest and reinvest deferrals and contributions under the Nonqualified Plan, and all deferrals are paid out in cash upon distribution.

CEO Pay Ratio

As required by SEC rules, we are disclosing the median of the annual total compensation of all employees of Interface (excluding the CEO), the annual total compensation of the CEO, and the ratio of the median of the annual total compensation of all employees to the annual total compensation of the chief executive officer.

The Company reviewed its global employee population as of December 29, 2019, to prepare the analysis. As of December 29, 2019, the date selected by the Company for purposes of choosing the median employee, the global employee population consisted of approximately 4,306 individuals, with 43% of these individuals located in the United States. The median employee was selected using data for the following elements of compensation: salary, equity awards, incentive compensation, and non-equity incentive compensation, over a trailing 12-month period from payroll records.

For purposes of reporting annual total compensation and the ratio of annual total compensation of the CEO to the median employee, both the CEO and median employee’s annual total compensation are calculated consistent with the disclosure requirements of executive compensation under Item 402(c)(2)(x) of Regulation S-K.

For 2019, the median employee’s annual total compensation was $59,960, and the total annual compensation of our CEO was $3,399,801. Based on this information, the ratio of the total annual compensation of our CEO to the total annual compensation of our median employee for fiscal 2019 was 57:1. The median employee was located in the United States.

The Company used the average exchange rate as of December 29, 2019 to convert international total compensation. There were no other adjustments permissible by the SEC, nor have any material assumptions or estimates been made to identify the median employee or to determine total annual compensation.

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2019 Director Compensation

The following table provides information about the compensation paid to the Company’s directors in 2019 (excluding Mr. Gould, who was a Named Executive Officer and did not receive additional compensation for Board or Committee service and whose compensation is presented in the Summary Compensation Table included above).

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The Company maintains a defined benefit Salary Continuation Agreement with Mr. Hendrix dated as of January 1, 2008 (although earlier versions of the agreement date back to 1998). The amount reported in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column relates to Mr. Hendrix’s accumulated benefit thereunder. In 2019, the value increased due a combination of $832,752 of cash payments under Salary Continuation Agreement plus an increase of $1,305,607 in the present value of the accumulated benefits (primarily due to a decrease in the discount rate used for determining present value), for an aggregate increase of $2,138,359.

The Company also is a party to a split dollar insurance agreement (the “Hendrix Split Dollar Agreement”) with Mr. Hendrix. Pursuant to the Hendrix Split Dollar Agreement, Mr. Hendrix has obtained an insurance policy on his life, and the Company pays the premiums on such policy as an additional employment benefit for Mr. Hendrix. The annual premium is $72,032. Mr. Hendrix is the owner of the policy, and has assigned to the Company a portion of the death benefit that is equal to the greater of (i) the total amount of the unreimbursed premiums paid by the Company with respect to the policy, or (ii) the death benefit under the policy in excess of $2,000,000. The Company’s portion of the death benefit totaled $2,973,664 as of December 29, 2019; the balance of the death benefits ($2,000,000) will be payable to the beneficiaries of the policy designated by Mr. Hendrix. The total of unreimbursed premiums paid by the Company with respect to the policy as of December 29, 2019 was $1,656,736.

The amount reported in column (g) for Mr. Hendrix reflects the incremental cost to the Company of all perquisites and other personal benefits, and is comprised of $72,032 for the Hendrix Split Dollar Agreement insurance premium, $4,500 for Company contributions to retirement plans, $2,372 for life and long-term care insurance premiums, and $2,574 for a Company provided cellular telephone.

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth information concerning the Company’s equity compensation plans as of December 29, 2019.

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

The Company is generally obligated to provide its Named Executive Officers with certain payments or other forms of compensation when their employment with the Company is terminated. The actual amount of compensation due each of the Named Executive Officers, as well as the duration of any periodic payments, depends on both the circumstances surrounding the termination, as well as the particulars of any employment-related agreements to which the Company and the Named Executive Officer are party.

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Jay D. Gould

The Company had with Mr. Gould (prior to his termination in January 2020) an employment and change in control agreement, which generally described the benefits payable at, following, or in connection with various termination scenarios. The employment and change in control agreement was for a rolling two-year term, such that the remaining term was always two years until a specified retirement age or notice from the Company that ceased the rolling renewal. The Company had the right to terminate the agreement at any time, with or without cause, and the executive had the right to voluntarily terminate his employment upon 90 days notice. The agreement provided for certain benefits in the event of various termination scenarios, including termination without cause, termination with cause, voluntary retirement or resignation, termination due to death or disability, and termination in connection with a “change in control” (as defined in the agreement) of the Company. The agreement also contained provisions placing restrictions on the executive’s ability to compete with the Company for a period of two years following the termination of his employment. The agreement did not contain any tax “gross up” provisions.

In the event that Mr. Gould (i) retired or voluntarily resigned, (ii) died or was terminated in connection with a disability, (iii) was terminated by the Company (x) with “cause”, (y) without “cause” or (z) experienced certain terminations (without cause) in connection with a “change in control” (as applicable, and as such terms are defined in the agreement) on December 27, 2019 (the last business day of fiscal year 2019), he would have been entitled to receive the following types of payments and benefits, and would have been subject to the various restrictive covenants, described below.

Upon Retirement or Voluntary Resignation: